BIOSIG TECHNOLOGIES, INC. BioSig Technologies, Inc.'s primary efforts are principally devoted to improving the standard care of electrophysiology with its PURE EP System's enhanced signal acquisition, digital signal processing, and analysis during ablation of cardiac arrhythmias; NeuroClear's and ViralClear's efforts are in developing additional applications of the PURE EP™ signal processing technology outside of cardiac electrophysiology. 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 generated minimal 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 commercially viable. We expect to incur losses from operations for the near future. Additionally, we expect to incur increasing marketing and commercialization expenses related to our PURE EP system in addition to research and development costs relating to PURE EP and other product candidates, including expenses related to clinical trials. We expect that our general and administrative expenses will increase in the future as we expand our business development, add infrastructure and incur additional costs related to being a public company, including incremental audit fees, investor relations programs and increased professional services.
If additional financing is not available or is not available on acceptable terms, we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization efforts or obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently.
AtSeptember 30, 2021 , the Company had working capital of approximately$17.4 million . During the nine months endedSeptember 30, 2021 , the Company raised approximately$9.0 million , net of expenses, through the sale of common stock and$1.3 million , net of expenses, through an At-the-market offering. The Company has begun its commercial operations generating revenues with the sale of the PURE EP device. AtSeptember 30, 2021 the Company has effective Forms S-3, shelf registration statements for an aggregate of$107.0 million . AtSeptember 30, 2021 , the Company had cash of approximately$17.5 million through the date of the filing of this report and with the expected commercial growth, constitutes sufficient funds for the Company to meet its commercialization efforts, research and development and other funding requirements for at least the next 12 months from the date of issuance of these unaudited financial statements.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates The preparation of these unaudited condensed 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 unaudited condensed 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, fair value of acquired assets, the fair value of the Company's stock, stock-based compensation, fair values relating to warrant and other derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates. Revenue Recognition The Company derives its revenue primarily from the sale of its medical device, the PURE EP™ System, and well as related support and maintenance services and software upgrades in connection with the system.
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers ("ASC 606"). The core principle of ASC 606 is that an entity recognizes revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
The Company determines revenue recognition through the following five steps:
? Identify the contract with the customer; ? Identify the performance obligations in the contract; ? Determine the transaction price;
? Allocate the transaction price to the performance obligation in the contract;
and
? Recognize revenue when, or as, the performance obligations are satisfied.
Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer. If the Company determines that it has not satisfied a performance obligation, it will defer recognition of the revenue until the performance obligation is deemed to be satisfied. Support, maintenance, and software upgrades are performance obligations over a defined period and are recognized ratably over the contractual service period. Customers typically purchase these services with the initial sale of the PURE EP System and do not have the right to terminate their contracts unless we fail to perform material obligations. The Company may execute more than one contract with a single customer. If so, it is evaluated whether the agreements were negotiated as a package with a single objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement, or whether the goods or services promised in the agreements represent a single performance obligation. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements. The Company records accounts receivable for amounts invoiced to customers for which the Company has an unconditional right to consideration as provided under the contractual arrangement. Unbilled receivables, if any, include amounts related to the Company's contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenue includes payments received in advance of performance under the contract. Our unbilled receivables and deferred revenue are reported on an individual contract basis at the end of each reporting period. Unbilled receivables are classified as current or noncurrent based on the timing of when we expect to bill the customer. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue.
The Company's unconditional right to consideration for goods and services transferred to the customer is included in accounts receivable, net (if any) in the Company's unaudited condensed consolidated balance sheet.
A reconciliation of contract liabilities with customers is presented below:
Balance at Consideration Recognized in Balance at
December 31, 2020 Received Revenue September 30, 2021
(000's) (000's) (000's) (000's)
Product revenue $ - $ 414 $ (414 ) $ -
Service revenue - 64 (19 ) 45
Total $ - $ 478 $ (433 ) $ 45
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
The table below summarizes our deferred revenue as of September 30, 2021 and
December 31, 2020 :
September 30, December 31,
2021 2020
(000's) (000's)
Deferred revenue-current $ 32 $ -
Deferred revenue-noncurrent 13 -
Total deferred revenue $ 45 $ -
We had one customer which accounted for approximately 93% of our revenue in the
three months ended September 30, 2021 and two customers which accounted for
approximately 69% and 31% of our revenue in the nine months ended September 30,
2021 .
At
Cost of Goods Sold
Cost of goods sold consists primarily of the delivered cost of our medical device(s) sold.
Allowance for Doubtful Accounts
The Company adjusts accounts receivable down to net realizable value with its allowance methodology. In determining the allowance for doubtful accounts for estimated losses, aged receivables are analyzed periodically by management. Each identified receivable is reviewed based upon historical collection experience, financial condition of the client and the status of any open or unresolved issues with the client preventing the payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables. The allowance for doubtful accounts was$0 atSeptember 30, 2021 . The Company believes that its reserve is adequate, however results may differ in future periods. For the nine months endedSeptember 30, 2021 and 2020, bad debt expense totaled$0 .
Fair Value of Financial Instruments
Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC
825-10") requires disclosure of the fair value of certain financial instruments.
The carrying value of cash and cash equivalents, accounts payable and accrued
liabilities as reflected in the balance sheets, approximate fair value because
of the short-term maturity of these instruments. All other significant financial
assets, financial liabilities and equity instruments of the Company are either
recognized or disclosed in the financial statements together with other
information relevant for making a reasonable assessment of future cash flows,
interest rate risk and credit risk. Where practicable the fair values of
financial assets and financial liabilities have been determined and disclosed;
otherwise only available information pertinent to fair value has been disclosed.
The Company follows Accounting Standards Codification subtopic 820-10, Fair
Value Measurements and Disclosures ("ASC 820-10") and ASC 825-10, which permits
entities to choose to measure many financial instruments and certain other items
at fair value.
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 theFDIC insurance limit. AtSeptember 30, 2021 andDecember 31, 2020 , deposits in excess ofFDIC limits were$17.0 million and$27.8 million , respectively. 11
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
Inventory
The inventory is comprised of work in process and finished goods available for
sale and are stated at the lower of cost or net realizable value using specific
identification method for serial numbered inventory and first-in, first-out
method for all other inventory for valuation. The inventory at September 30,
2021 and December 31, 2020 were $1,881,007 and $768,319 , respectively, comprised
of finished goods.
Prepaid Expenses and Vendor Deposits
Prepaid expenses and vendor deposits are comprised of prepaid insurance, operating expenses and other prepayments.
Leases
The Company determines if a contractual arrangement is a lease at inception.
Operating leases are included in operating lease right-of-use ("ROU") assets,
current operating lease liabilities, and noncurrent operating lease liabilities
on the Company's unaudited condensed consolidated balance sheet. The Company
evaluates and classifies leases as operating or finance leases for financial
reporting purposes. The classification evaluation begins at the commencement
date and the lease term used in the evaluation includes the non-cancellable
period for which the Company has the right to use the underlying asset, together
with renewal option periods when the exercise of the renewal option is
reasonably certain and failure to exercise such option which result in an
economic penalty. All the Company's real estate leases are classified as
operating leases. ROU assets represent the Company's right to use an underlying
asset for the lease term and lease liabilities represent the Company's
obligation to make lease payments arising from the lease. Operating lease ROU
assets and liabilities are recognized at the commencement date of the lease
based on the present value of lease payments over the lease term.
The lease payments included in the present value are fixed lease payments. As
most of the Company's leases do not provide an implicit rate, the Company
estimates its collateralized incremental borrowing rate, based on information
available at the commencement date, in determining the present value of lease
payments. The Company applies the portfolio approach in applying discount rates
to its classes of leases. The operating lease ROU assets include any payments
made before the commencement date. Lease expense for lease payments is
recognized on a straight-line basis over the lease term. The Company does not
currently have subleases. The Company does not currently have residual value
guarantees or restrictive covenants in its leases.
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.
Impairment of Long-lived Assets
The Company recognizes an impairment of long-lived assets used in operations, other than goodwill, when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method. The Company did not recognize and record any impairments of long-lived assets used in operations during the three and nine months endedSeptember 30, 2021 and 2020. 12
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
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 development costs are
expensed when the contracted work has been performed or as milestone results
have been achieved. Company-sponsored research and development costs related to
both present and future products are expensed in the period incurred. The
Company incurred research and development expenses of $1.3 million and $4.2
million for the three and nine months ended September 30, 2021 , and $4.9 million
and $15.6 million for the three and nine months ended September 30, 2020 ,
respectively.
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 period. 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 September 30, 2021 and
2020 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:
September 30 ,September 30, 2021 2020 Series C convertible preferred stock 64,292
44,194
Options to purchase common stock 4,037,122
3,509,956
Warrants to purchase common stock 818,910
1,604,668
Restricted stock units to acquire common stock 182,500 168,334
Totals 5,102,824 5,327,152
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.
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.
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
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 three and nine
months ended September 30, 2021 , the Company recorded amortization of $4,751 and
$14,254 ; and $4,752 and $14,254 for the three and nine months ended September
30, 2020 to current period operations, respectively.
Warranty
The Company generally warrants its products to be free from material defects and
to conform to material specifications for a period of up to two (2) years.
Warranty expense is estimated based primarily on historical experience and is
reflected in the financial statements.
Non-controlling Interest
The Company's non-controlling interest represents the non-controlling
shareholders ownership interests related to the Company's subsidiary,
ViralClear. The Company reports its non-controlling interest in subsidiaries as
a separate component of equity in the unaudited condensed consolidated balance
sheets and reports both net loss attributable to the non-controlling interest
and net loss attributable to the Company's common shareholders on the face of
the unaudited condensed consolidated statements of operations. The Company's
equity interest in ViralClear is 68.44% and the non-controlling stockholders'
interest is 31.56% as of September 30, 2021 . This is reflected in the unaudited
condensed consolidated statements of changes in equity.
Segment Information
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
represents all of the material financial information related to the Company's
principal operating segments. (See Note 12 - Segment Reporting).
Reclassifications
Certain reclassifications have been made to prior periods' data to conform with the current year's presentation. These reclassifications had no effect on reported income or losses.
Recent Accounting Pronouncements
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.
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment as ofSeptember 30, 2021 andDecember 31, 2020 is summarized as follows: September 30, December 31, 2021 2020 (000's) (000's) Computer equipment $ 377 $ 234 Furniture and fixtures 83 75 Manufacturing equipment 153 34 Testing/Demo equipment 145 96 Leasehold improvements 77 - Total 835 439 Less accumulated depreciation (278 ) (150 ) Property and equipment, net $ 557 $ 289 Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Leasehold improvements are depreciated over the related expected lease term. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Depreciation expense was$46,205 and$128,152 for three and nine months endedSeptember 30, 2021 and$19,117 and$52,838 for the three and nine months endedSeptember 30, 2020 , respectively.
NOTE 5 - RIGHT TO USE ASSETS AND LEASE LIABILITY
Operating leases: OnFebruary 10, 2021 the Company entered into a Sixth Amendment to the Office Lease at12424 Wilshire Blvd inLos Angeles datedAugust 9, 2011 - it is the Fourth Extended Term with respect to Suite 745 and the Expansion Term with respect to Suite 740 which is fromJuly 1, 2021 untilJune 30, 2022 with a fixed monthly rent equal to$13,702 (down from$16,289 ); and the security deposit will be reduced by$5,448 so that the balance remaining shall be$27,404 . The Company determined that the Sixth Amendment was a lease modification and accordingly reassessed the lease classification, remeasured the lease liability and adjusted the right-to-use asset. AtFebruary 10, 2021 the Company removed the remaining right-to-use net assets of$60,881 and related lease liability of$63,076 and recorded right-to-use assets and related lease liability of$217,903 .
On
The Company determined that the lease option exercised was a lease modification and accordingly reassessed the lease classification, remeasured the lease liability and adjusted the right-to-use asset. OnAugust 2, 2021 the Company removed the remaining right-to-use net assets of$10,247 and related lease liability of$10,400 and recorded right-to-use assets and related lease liability of$89,629 . At the lease modification 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 6.5%. OnAugust 3, 2021 , the Company entered into a sublease agreement whereby the Company leased approximately 6,590 square feet of office space at55 Greens Farms Road ,Westport, Connecticut commencingSeptember 1, 2021 and expiringDecember 31, 2024 (40 months) at the initial rate beginningJanuary 1, 2022 of$14,828 with escalating payments. In connection with the lease, the Company paid a security deposit of$14,232 . There is no option to extend the lease past its initial term. At the lease commencement date, the Company estimated the lease liability and right-to-use assets at present value using the Company's incremental borrowing rate of 6.5% and determined their initial present values, at inception, of$492,876 . In conjunction with the lease, the Company terminated, without penalty, the sublease at54 Wilton Road ,Westport, CT effectiveSeptember 4, 2021 and removed the remaining right-to-use assets of$36,756 and related lease liability of$37,625 with a credit to rent expense of$868 relating to the lease termination. 15
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
As of
Right to use assets is summarized below:
September 30, December 31,
2021 2020
(000's) (000's)
Right to use assets, net $ 803 $ 1,087
Less accumulated amortization (110 ) (781 )
Right to use assets, net $ 693 $ 306
During the three and nine months ended September 30, 2021 , the Company recorded
$120,127 and $365,366 and $124,437 and $370,656 for the three and nine months
ended September 30, 2020 as lease expense to current period operations,
respectively.
Lease liability is summarized below:
September 30, December 31,
2021 2020
(000's) (000's)
Total lease liability $ 700 $ 314
Less: short term portion (291 ) (313 )
Long term portion $ 409 $ 1
Maturity analysis under these lease agreements are as follows (000's):
Remainder of 2021$ 52 Year endedDecember 31, 2022 304 Year endedDecember 31, 2023 220 Year endedDecember 31, 2024 191 Total 767 Less: Present value discount (67 ) Lease liability$ 700
Lease expense for the three months ended
September 30, September 30,
2021 2020
(000's) (000's)
Operating lease expense $ 105 $ 115
Short-term lease expense 15 9
Total $ 120 $ 124
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
Lease expense for the nine months ended
September 30, September 30,
2021 2020
(000's) (000's)
Operating lease expense $ 334 $ 342
Short-term lease expense 31 28
Variable lease expense - 1
Total $ 365 $ 371
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at
September 30, December 31,
2021 2020
(000's) (000's)
Accrued accounting and legal $ 163 $ 177
Accrued reimbursements and travel 47 56
Accrued consulting 84
256
Accrued research and development expenses 221 3,127
Accrued product purchases 68 30
Accrued marketing 49 -
Accrued office and other 25 127
Accrued payroll 499 936
Accrued settlement related to arbitration 1,013 13
$ 2,169 $ 4,722 NOTE 7 - SERIES C 9% CONVERTIBLE PREFERRED STOCK
Series C 9% Convertible Preferred Stock
On
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 onSeptember 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. As a result of an amendment to the conversion price of our Series C Preferred Stock, the conversion price effective as ofDecember 31, 2020 was$3.75 per share, subject to certain reset provisions. OnAugust 17, 2021 , the conversion price was reset to$2.98 per share. The effect was de minimis. 17
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
The Series C Preferred Stock contains triggering events which would, among other
things, require redemption (i) in cash, at the greater of (a) 120% of the stated
value of $1,000 or (b) the product of (I) the variable weighted average price of
our common stock on the trading day immediately preceding the date of the
triggering event and (II) the stated value divided by the then conversion price
or (ii) in shares of our common stock, equal to a number of shares equal to the
amount set forth in (i) above divided by 75%. As of September 30, 2021 , the
aggregate stated value of our Series C Preferred Stock was $105,000 . The
triggering events include our being subject to a judgment of greater than
$100,000 or our initiation of bankruptcy proceedings. If any of the triggering
events contained in our Series C Preferred Stock occur, the holders of our
Series C Preferred Stock may demand redemption, an obligation the Company may
not have the ability to meet at the time of such demand. The Company will be
required to pay interest on any amounts remaining unpaid after the required
redemption of our Series C Preferred Stock, at a rate equal to the lesser of 18%
per annum or the maximum rate permitted by applicable law. Accordingly, the
Company has classified the Series C Preferred Stock as a mezzanine obligation in
the accompanying consolidated balance sheets.
Series C Preferred Stock issued and outstanding totaled 105 as of September 30,
2021 and December 31, 2020 . As of September 30, 2021 and December 31, 2020 , the
Company has accrued $79,285 and $72,517 dividends payable on the Series C
Preferred Stock.
NOTE 8 - STOCKHOLDER EQUITY
Shareholder rights plan
On July 14, 2020 , our board of directors adopted a stockholder rights plan (the
"Rights Plan") and declared a dividend of one preferred share purchase right for
each outstanding share of BioSig's common stock to stockholders of record on
July 27, 2020 , and one right will be issued for each new share of common stock
issued thereafter. Each right will initially trade with common stock, and will
allow its holder to purchase from BioSig one one-thousandth of a share of Series
F Junior Participating Preferred stock, par value $0.001 per share, for an
exercise price of $50.00 , once the rights become exercisable. In the event that
a person or group acquires beneficial ownership of 12% or more of BioSig's then
outstanding common stock, subject to certain exceptions, each right would
entitle its holder (other than such person or members of such group) to purchase
additional shares of BioSig's common stock having a market value of two times
the exercise price of the right. In addition, at any time after a person or
group acquires 12% or more of BioSig's outstanding common stock (unless such
person or group acquires 50% or more), the Board may exchange one share of
BioSig's common stock for each outstanding right (other than rights owned by
such person or group, which would have become void). The Rights Plan could make
it more difficult for a third party to acquire control of BioSig or a large
block of our common stock without the approval of our board of directors. The
rights expired on July 13, 2021 , unless terminated earlier by our board of
directors.
Preferred stock
The Company is authorized to issue 1,000,000 shares of $0.001 par value
preferred stock. As of September 30, 2021 , and December 31, 2020 , the Company
has designated 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, 1,000 shares of Series E Preferred Stock and 200,000
shares of Series F Preferred Stock. As of September 30, 2021 , and December 31,
2020 , there were no outstanding shares of Series A, Series B, Series D, Series E
and Series F preferred stock.
Common stock
BioSig Technologies, Inc. The Company is authorized to issue 200,000,000 shares of
In
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
During the nine months ended
During the nine months ended
During the nine months ended
Sale of common stock OnJuly 2, 2021 , the Company entered into an underwriting agreement (the "Underwriting Agreement") withLaidlaw & Company (UK) Ltd. (the "Underwriter"), relating to an underwritten public offering of 2,500,000 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 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, offering and other related expenses, the Company received net proceeds from the offering of approximately$9.0 million . Pursuant to the Underwriting Agreement, the Company also granted the Underwriter an option to purchase up to 375,000 additional shares of common stock, or 15% of the number of shares sold in the offering, at a price of$3.68 per share, for a period of 30 days from the date of the Underwriting Agreement, of which none were exercised. 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"). The Underwriter Warrants are exercisable following the date of issuance,July 7, 2021 and ending five years from the date of the execution of the Underwriting Agreement,July 2, 2026 , at a price per share equal to$4.80 per share (120% of the public offering price per share) and are exercisable on a "cashless" basis. Open Market Sale Agreement OnAugust 28, 2020 , the Company entered into an Open Market Sale Agreement (the "Sales Agreement") withJefferies LLC to act as the Company's sales agent and/or principal ("Jefferies" or the "Agent"), with respect to the issuance and sale of up to$45.0 million of the Company's shares of common stock from time to time in an at-the-market offering. Upon delivery of a placement notice and subject to the terms and conditions of the Sales Agreement, Jefferies may sell the Shares by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. The Company may sell the common stock in amounts and at times to be determined by the Company from time to time subject to the terms and conditions of the Sales Agreement, but it has no obligation to sell any of the shares under the Sales Agreement. The Company or Jefferies may suspend or terminate the offering of shares upon notice to the other party and subject to other conditions. Jefferies will act as sales agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of Nasdaq. The Company paid Agent a commission equal to 3.0% of the gross proceeds from the sale of the shares pursuant to the Sales Agreement. The Company has also agreed to provide Jefferies with customary indemnification and contribution rights. The offering of shares pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with its terms.
The common stock was sold and issued pursuant the Company's shelf registration
statement on Form S-3 (File No. 333-230448), which was previously declared
effective by the
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
From January 15, 2021 through February 16, 2021 , the Company sold 251,720 shares
of its common stock through the Open Market Sales Agreement for net proceeds of
$1,300,135 , after transactional costs of $40,365 .
On
NOTE 9 - OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS
BioSig Technologies, Inc. 2012 Equity Incentive Plan OnOctober 19, 2012 , the Board of Directors ofBioSig Technologies, Inc. approved the 2012 Equity Incentive Plan (the "Plan") and terminated the Long-Term Incentive Plan (the "2011 Plan"). The Plan (as amended) provides for the issuance of options, stock appreciation rights, restricted stock and restricted stock units to purchase up to 14,474,450 shares of the Company's common stock to officers, directors, employees and consultants of the Company. 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 granteewho 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. There are 3,606,901 shares remaining available for future issuance of awards under the terms of the Plan as ofSeptember 30, 2021 . Options Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities until sufficient data exists to estimate the volatility using the Company's own historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the "simplified" method, which is used for "plain-vanilla" options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields ofU.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 three and nine months endedSeptember 30, 2021 was estimated using the Black-Scholes pricing model.
During the nine months ended
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
The following table presents information related to stock options at September
30, 2021 :
Options Outstanding Options Exercisable
Weighted
Average Exercisable
Exercise Number of Remaining Life Number of
Price Options In Years Options
$ 2.51-5.00 2,539,757 7.2 1,579,427
5.01-7.50 1,229,032 4.7 997,757
7.51-10.00 203,333 8.0 138,326
10.01-12.50 65,000 8.6 50,415
4,037,122 6.5 2,765,925
A summary of the stock option activity and related information for the Plan for
the nine months ended
Weighted-Average Aggregate
Weighted-Average Remaining Intrinsic
Shares Exercise Price Contractual Term Value
Outstanding at December 31, 2020 3,568,497 $ 5.59 7.0 $ 110,961
Grants 917,000 3.39 10.0 $ -
Exercised (9,375 ) $ 2.96 -
Forfeited/expired (439,000 ) $ 6.68 -
Outstanding at September 30, 2021 4,037,122 $ 5.20 6.5 $ 938
Exercisable at September 30, 2021 2,765,925 $ 5.35 5.3 $ 563
The aggregate intrinsic value in the preceding tables represents the total
pretax intrinsic value, based on options with an exercise price less than the
stock price of BioSig Technologies, Inc. of $2.98 as of September 30, 2021 ,
which would have been received by the option holders had those option holders
exercised their options as of that date.
On
On
OnApril 9, 2021 ,BioSig Technologies, Inc. granted 90,000 options to purchase the company stock in connection with the services rendered at the exercise price of$4.38 per share for a term of ten years with one-third vesting on the one-year anniversary and two-thirds vesting quarterly thereafter beginningApril 9, 2022 for two years. OnApril 13, 2021 ,BioSig Technologies, Inc. granted 25,000 options to purchase the company stock in connection with the services rendered at the exercise price of$4.42 per share for a term of ten years with one-third vesting on the one-year anniversary and two-thirds vesting quarterly thereafter beginningApril 13, 2022 for two years. OnMay 18, 2021 ,BioSig Technologies, Inc. granted 150,000 options to purchase the company stock in connection with the services rendered at the exercise price of$3.20 per share for a term of ten years with one-third vesting on the one year anniversary and two-thirds vesting quarterly thereafter beginningMay 18, 2022 for two years. 21
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
On August 3, 2021 , BioSig Technologies, Inc. granted an aggregated of 75,000
options to purchase shares of its common stock to three employees. The options
are exercisable at $3.61 per share for ten years with one-third vesting on the
first anniversary of the date of grant, and the remaining two-thirds vesting in
substantially equal quarterly installments over the following two years.
On August 31, 2021 , BioSig Technologies, Inc. granted an aggregated of 47,500
options to purchase shares of its common stock to three employees. The options
are exercisable at $2.98 per share for ten years with immediate vesting.
On September 17, 2021 , BioSig Technologies, Inc. granted an aggregated of 40,000
options to purchase shares of its common stock to two employees. The options are
exercisable at $2.99 per share for ten years with one-third vesting on the first
anniversary of the date of grant, and the remaining two-thirds vesting in
substantially equal quarterly installments over the following two years.
The following assumptions were used in determining the fair value of options
during the nine months ended
Risk-free interest rate 0.77% - 1.30 % Dividend yield 0 % Stock price volatility 83.70% to 95.98 % Expected life 5 to 6 years Weighted average grant date fair value $ 3.39 OnJune 28, 2021 , in connection with the exit of two members of the Company's board of directors, the Company extended the life of 145,000 previously issued director options from the contractual 90 days from termination of service to the earlier of the initial life orJune 28, 2023 . The change in estimated fair value of the modified options of$182,514 was charged to current period operations.
The following assumptions were used in determining the change in fair value of
the modified options at
Risk-free interest rate 0.05% - 0.25 % Dividend yield 0 % Stock price volatility 88.57 % Expected life 0.25 - 2 years OnJune 30, 2021 , in connection with the resignation of a member of the Company's board of directors, the Company entered into a one-year consulting contract and extended the life of 221,240 previously issued director options from the contractual 90 days from termination of service to the earlier of the initial life or two years after service contract completion. The change in estimated fair value of the modified options of$111,402 was charged to current period operations.
The following assumptions were used in determining the change in fair value of
the modified options on
Risk-free interest rate 0.06% - 0.46 % Dividend yield 0 % Stock price volatility 88.59 % Expected life 0.59 - 3 years The fair value of all options vesting during the three and nine months endedSeptember 30, 2021 of$759,931 and$1,950,623 and$483,110 and$4,734,983 for the three and nine months endedSeptember 30, 2020 , respectively, was charged to current period operations. Unrecognized compensation expense of$3,720,260 atSeptember 30, 2021 will be expensed in future periods. 22
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
Warrants
The following table summarizes information with respect to outstanding warrants
to purchase common stock of BioSig Technologies, Inc. at September 30, 2021 :
Exercise Number Expiration
Price Outstanding Date
$ 4.80 250,000 February 2025 to July 2026
$ 6.16 568,910 November 2027
818,910
On July 7, 2021 , BioSig Technologies, Inc. issued warrants to purchase 125,000
shares of its common stock at $4.80 per share, expiring on July 2, 2026 , for
placement agent services in connection with the sale of the company's common
stock.
A summary of the warrant activity for the nine months ended September 30, 2021
is as follows:
Weighted-Average
Remaining
Weighted-Average Contractual Aggregate
Shares Exercise Price Term Intrinsic Value
Outstanding at December 31, 2020 1,446,200 $ 5.44 3.3 $ 1,500
Grants 125,000 $ 4.80 5.0
Expired (752,290 ) $ 5.00 - -
Outstanding at September 30,
2021 818,910 $ 5.74 5.5 $ -
Vested and expected to vest at
September 30, 2021 818,910 $ 5.74 5.5 $ -
Exercisable at September 30,
2021 818,910 $ 5.74 5.5 $ -
The aggregate intrinsic value in the preceding tables represents the total
pretax intrinsic value, based on options with an exercise price less than the
company's stock price of $2.98 of September 30, 2021 , which would have been
received by the option holders had those option holders exercised their options
as of that date.
Restricted Stock Units
The following table summarizes the restricted stock activity for the nine months
ended
Restricted shares issued as ofDecember 31, 2020 218,334 Granted 301,000 Vested and issued (216,834 ) Forfeited (120,000 ) Total 182,500 Comprised of: Vested restricted shares as ofSeptember 30, 2021 - Unvested restricted shares as ofSeptember 30, 2021 182,500 Total 182,500 23
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
On
On
OnJune 1, 2021 , in connection with the termination of an employee, the Company accelerated vesting of 30,000 previously granted restricted stock units from a three-year period to fully vested. The change in vesting of the modified restricted stock unit resulted in a$109,725 charge to current period operations.
On
On
Stock based compensation expense related to restricted stock grants was$63,266 and$773,381 for the three and nine months endedSeptember 30, 2021 and$174,945 and$1,005,243 for the three and nine months endedSeptember 30, 2020 , respectively. As ofSeptember 30, 2021 , the stock-based compensation relating to restricted stock of$463,317 remains unamortized.
2019 Long-Term Incentive Plan OnSeptember 24, 2019 , ViralClear's Board of Directors approved the 2019 Long-Term Incentive Plan (as subsequently amended, the "ViralClear Plan"). The ViralClear Plan was approved byBioSig as ViralClear's majority stockholder. The ViralClear Plan provides for the issuance of options, stock appreciation rights, restricted stock and restricted stock units to purchase up to 4,000,000 shares of ViralClear's common stock to officers, directors, employees and consultants of the ViralClear. Under the terms of the ViralClear Plan, ViralClear may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of ViralClear only and nonstatutory options. The Board of Directors of ViralClear or a committee thereof administers the ViralClear Plan and determines the exercise price, vesting and expiration period of the grants under the ViralClear 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 granteewho 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.
Additionally, the vesting period of the grants under the ViralClear Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years. There are 2,330,750 shares remaining available for future issuance of awards under the terms of the ViralClear Plan.
24
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
ViralClear Options
A summary of the stock option activity and related information for the
ViralClear Plan for the nine months ended
Weighted-Average
Remaining
Weighted-Average Contractual
Shares Exercise Price Term
Outstanding at December 31, 2020 1,527,666 $ 5.00 3.96
Grants -
Exercised (550,000 ) $ 5.00
Forfeited/expired (852,666 ) $ 5.00
Outstanding at September 30, 2021 125,000 $ 5.00 7.40
Exercisable at September 30, 2021 74,998 $ 5.00 6.62
The following table presents information related to stock options at September
30, 2021 :
Options Outstanding Options Exercisable
Weighted
Average Exercisable
Exercise Number of Remaining Life Number of
Price Options In Years Options
$ 5.00 125,000 6.12 74,998
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.
On
OnJune 30, 2021 , in connection with the resignation of a member of the Company's board of directors, the Company entered into a one-year consulting contract and extended the life of 25,000 previously issued director options from the contractual 90 days from termination of service to the earlier of the initial life or two years after service contract completion. The change in estimated fair value of the modified options of$26,577 was charged to current period operations.
The following assumptions were used in determining the change in fair value of
the modified options at
Risk-free interest rate 0.07% - 0.46 % Dividend yield 0 % Stock price volatility 88.59 % Expected life 1.25 - 3 years The fair value of all options vesting during the three and nine months endedSeptember 30, 2021 of$36,521 and$109,562 and$242,703 and$5,836,855 for the three and nine months endedSeptember 30, 2020 , respectively, was charged to current period operations. Unrecognized compensation expense of$219,124 atSeptember 30, 2021 will be expensed in future periods. 25
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
Warrants (ViralClear)
The following table presents information related to warrants (ViralClear) at
Exercise Number Expiration
Price Outstanding Date
$ 5.00 473,772 November 2027
10.00 6,575 May 2025
480,347
Restricted stock units (ViralClear)
The following table summarizes the restricted stock activity for the nine months
ended
Restricted shares issued as ofDecember 31, 2020 1,420,716 Granted - Issued (40,000 ) Forfeited (82,716 ) Total 1,298,000
Comprised of:
Vested restricted shares as of
1,298,000
Stock based compensation expense related to restricted stock unit grants of
ViralClear was
NOTE 10 - NON-CONTROLLING INTEREST
OnNovember 7, 2018 , the Company formed a subsidiary, now known as ViralClear, to pursue additional applications of the PURE EP™ signal processing technology outside of cardiac electrophysiology, and subsequently in 2020, was repurposed to develop merimepodib, a broad-spectrum anti-viral agent that showed potential for the treatment of COVID-19. Since late 2020, ViralClear has been realigned with its original objective of pursuing additional applications of the PURE EP™ signal processing technology outside of cardiac electrophysiology.
As of
A reconciliation of the
Net profit attributable to the non-controlling interest for the three months
ended
Net Income$ 19
Average Non-controlling interest percentage of profit/losses 31.6 %
Net income attributable to the non-controlling interest
Net loss attributable to the non-controlling interest for the three months endedSeptember 30, 2020 (000's): Net loss$ (5,540 )
Average Non-controlling interest percentage of profit/losses 30.6 %
Net loss attributable to the non-controlling interest
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
Net loss attributable to the non-controlling interest for the nine months ended
September 30, 2021 (000's):
Net loss $ (1,953 )
Average Non-controlling interest percentage of profit/losses 29.9 %
Net loss attributable to the non-controlling interest
Net loss attributable to the non-controlling interest for the nine months endedSeptember 30, 2020 (000's): Net loss$ (26,272 )
Average Non-controlling interest percentage of profit/losses 23.9 %
Net loss attributable to the non-controlling interest
The following table summarizes the changes in non-controlling interest for the
nine months ended
Balance,December 31, 2020 $
802
Allocation of equity to non-controlling interest due to equity-based compensation issued
220
Net loss attributable to non-controlling interest (584 ) Balance, September 30, 2021 $ 438
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Licensing agreements
2017 Know-How License Agreement
OnMarch 15, 2017 , the Company entered into a know-how license agreement withMayo 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
Patent and Know-How License Agreement - EP Software Agreement
OnNovember 20, 2019 , the Company entered into a patent and know-how license agreement (the "EP Software Agreement") withMayo 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. 27
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
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 - Tools Agreement
OnNovember 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. InJune 2021 , patent rights were issued ("Valid Claim") as defined whereby the Company paid milestone one of$75,000 .
ViralClear Patent and Know-How License Agreement
OnNovember 20, 2019 , the Company's majority-owned subsidiary, ViralClear, entered into a patent and know-how license agreement (the "ViralClear Agreement") with Mayo. The ViralClear 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 ViralClear Agreement, ViralClear issued to Mayo an 8-year warrant (the "ViralClear Warrant") to purchase 473,772 shares of ViralClear's common stock at an exercise price of$5.00 per share. The ViralClear 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 ViralClear Warrant. ViralClear agreed to pay Mayo an upfront consideration of$50,000 . ViralClear also agreed to make earned royalty payments to Mayo in connection with ViralClear'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. InJune 2021 , patent rights were issued ("Valid Claim") as defined whereby the Company paid milestone one of$75,000 .Trek Therapeutics , PBC
In the event of sublicensing, sale, transfer, assignment or similar transaction, ViralClear agreed to pay Trek 10% of the consideration received.
As part of the acquired assets, ViralClear received an assignment and licensing rights agreement from Trek with a third-party vendor regarding certain formulas and compounds usage. The agreement calls for milestone payments upon marketing authorization (as amended and defined with respect of product in a particular jurisdiction in the territory, the receipt of all approvals from the relevant regulatory authority necessary to market and sell such product in any such jurisdiction, excluding any pricing approval or reimbursement authorization) in any first and second country of$10 million and$5 million , respectively, in addition to 6% royalty payments. 28
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
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 three and nine months ended September 30,
2021 , the Company charged operations $61,313 and $189,740 and $49,342 and
$131,025 for the three and nine months ended September 30, 2020 , respectively,
for contributions under the 401(k) Plan.
Purchase commitments
As of
Litigation
OnJanuary 8, 2021 ,Aurigene Pharmaceutical Services, LTD ("Aurigene") filed a complaint with theUnited States District Court for the District of Connecticut claiming the Company is in default of certain milestone payments for manufacturing and services under contracts datedJune 23, 2020 andJuly 16, 2020 in aggregate amount of$1,530,000 .
On
In connection with the settlement, the Company recognized
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. NOTE 12 - SEGMENT REPORTING In accordance with ASC 280-10, the Company reports segment information based on the "management" approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company's reportable segments. The Company has three reportable segments:BioSig Technologies, Inc. (parent),NeuroClear Technologies, Inc. andViralClear Pharmaceuticals, Inc. 29
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
Information concerning the operations of the Company's reportable segments is as follows:
Summary unaudited condensed consolidated Statement of Operations for the three
months ended
NeuroClear
BioSig ViralClear Technologies,
Technologies, Inc. Pharmaceuticals, Inc. Inc. Total
Revenue:
Product sales $ 100 $ - $ - $ 100
Service 8 - - 8
Total revenue 108 - - 108
Cost of goods sold 38 - - 38
Gross profit 70 - - 70
Operating expenses:
Research and development 1,311 4 - 1,315
General and administrative 5,975 529 1 6,505
Depreciation and amortization 50 1 - 51
Total operating expenses 7,336 534 1 7,871
Loss from operations (7,266 ) (534 ) (1 ) (7,801 )
Other income:
Interest income and other income, net 1 - - 1
Gain on settlement of debt - 553 - 553
Net loss $ (7,265 ) $ 19 $ (1 ) $ (7,247 ) Summary unaudited condensed consolidated Statement of Operations for the three
months ended
NeuroClear
BioSig ViralClear Technologies,
Technologies, Inc. Pharmaceuticals, Inc. Inc. Total
Operating expenses:
Research and development $ 698 $ 4,183 $ 30 $ 4,911
General and administrative 6,807 1,358 - 8,165
Depreciation and amortization 24 - - 24
Total operating expenses 7,529 5,541 30 13,100
Loss from operations (7,529 ) (5,541 ) (30 ) (13,100 )
Other income:
Interest income and other income, net 2 - - 2
Net loss $ (7,527 ) $ (5,541 ) $ (30 ) $ (13,098 )
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
Summary unaudited condensed consolidated Statement of Operations for the nine
months ended
NeuroClear
BioSig ViralClear Technologies,
Technologies, Inc. Pharmaceuticals, Inc. Inc. Total
Revenue:
Product sales $ 414 $ - $ - $ 414
Service 19 - - 19
Total revenue 433 - - 433
Cost of goods sold 199 - - 199
Gross profit 234 - - 234
Operating expenses:
Research and development 4,042 206 - 4,248
General and administrative 17,954 2,297 5 20,256
Depreciation and amortization 139 3 - 142
Total operating expenses 22,135 2,506 5 24,646
Loss from operations (21,901 ) (2,506 ) (5 ) (24,412 )
Other income:
Interest income and other income, net 2 - - 2
Gain on settlement of debt - 553 - 553
Net loss $ (21,899 ) $ (1,953 ) $ (5 ) $ (23,857 ) Summary unaudited condensed consolidated Statement of Operations for the nine
months ended
NeuroClear
BioSig ViralClear Technologies,
Technologies, Inc. Pharmaceuticals, Inc. Inc. Total
Operating expenses:
Research and development $ 3,112 $ 12,414 $ 30 $ 15,556
General and administrative 18,756 13,873 - 32,629
Depreciation and amortization 66 - 1 67
Total operating expenses 21,934 26,287 31 48,252
Loss from operations (21,934 ) (26,287 ) (31 ) (48,252 )
Other income (expense):
Interest income and other income, net 30 15 - 45
Loss on foreign currency translation - (1 ) - (1 )
Net loss $ (21,904 ) $ (26,273 ) $ (31 ) $ (48,208 )
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
Summary of assets at
NeuroClear
BioSig ViralClear Technologies,
Technologies, Inc. Pharmaceuticals, Inc. Inc. Total
Cash $ 15,138 $ 2,397 $ - $ 17,535
Accounts receivable 100 - - 100
Inventory 1,881 - - 1,881
Employee advances 50 - - 50
Other current assets 431 2 - 433
Total operating assets 17,600 2,399 - 19,999
Property and equipment, net 551 6 - 557
Right-to-use assets, net 693 - - 693
Other assets 424 - - 424
Total assets $ 19,268 $ 2,405 $ - $ 21,673 NOTE 13 - RELATED PARTY TRANSACTIONS
At
On
NOTE 14 - 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 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
All items required to be recorded or measured on a recurring basis are based upon level 3 inputs.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement. 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
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BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
As of
There were no derivative and warrant liability as of
NOTE 15 - SUBSEQUENT EVENTS Equity issuances OnOctober 4, 2021 , the Company granted 50,000 options to purchase shares of its common stock to a new member of the board. The options are exercisable at$2.98 per share for ten years with 50% vesting at date of grant and 50% vesting on the first anniversary of his appointment date,September 20, 2022 .
On
On
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue," or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with theSecurities and Exchange Commission . Important factors currently known to Management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing for materials, and competition. Business OverviewBioSig Technologies, Inc. We are a medical technology company that is commercializing our PURE EP™ System which is an advanced signal acquisition and processing platform designed to provide essential diagnostic signals with high clinical value in all types of cardiac catheter ablations. PURE EP™ is designed to address long-standing limitations that slow and disrupt cardiac catheter ablation procedures, such as environmental lab noise, signal saturation, slow signal recovery, and inaccurate display of fractionated potentials. Cardiac catheter ablation is a procedure that involves delivery of energy through the tip of a catheter that scars or destroys heart tissue to correct heart rhythm disturbances. InAugust 2018 , we received 510(k) clearance from theU.S. Food and Drug Administration (the "FDA") to market our PURE (Precise Uninterrupted Real-time evaluation of Electrograms) EP™ System. PURE EP™ is a signal processing platform that combines advanced hardware and software to address known challenges associated to signal acquisition, to enable electrophysiologists to see more signals and analyze them in real-time. The device aims to minimize noise and artifacts from cardiac recordings and acquire high-fidelity cardiac signals. Improving fidelity of acquired cardiac signals may potentially increase the diagnostic value of these signals, thereby possibly improving accuracy and efficiency of the EP studies and ablation procedures. Our initial focus is on improving intracardiac signal acquisition and enhancing diagnostic information for catheter ablation procedures for complex arrhythmias like ventricular tachycardia ("VT"), a potentially life-threatening arrhythmia, and atrial fibrillation ("AF"), the most common cardiac arrhythmia associated with a fivefold risk of stroke. During 2019, we began conducting our first clinical observational patient cases using the PURE EP™ System atTexas Cardiac Arrhythmia Institute atSt. David's Medical Center inAustin, Texas ;Prisma Health atGreenville Health System inSouth Carolina ;Indiana University ; andSanta Barbara Cottage Hospital inCalifornia . 34
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The initial experience across these early evaluation centers showed that the PURE EP™ System functions as designed: we received positive feedback from the EP users about the improved signal detection and fidelity during ablation procedures on patients with various arrhythmias, such as ischemic ventricular tachycardia, AF, atypical flutter, atrioventricular nodal reentry tachycardia (AVNRT), supraventricular tachycardia, premature ventricular contractions (PVC), and a rare case of dual septal pathway. InNovember 2019 , we commenced our first clinical study for the PURE EP™ System titled, "Novel Cardiac Signal Processing System for Electrophysiology Procedures (PURE EP 2.0 Study)." The PURE EP 2.0 Study was conducted at threeU.S. hospitals:Texas Cardiac Arrhythmia Institute atSt. David's Medical Center ,Mayo Clinic Jacksonville , andMassachusetts General Hospital . OnApril 13, 2021 , we announced the completion of the enrollment in the PURE EP 2.0 Study. Intracardiac signal data of clinical interest were collected during 51 cardiac ablation procedures using the PURE EP™ System, the signal recording system, and the 3D mapping system at the same time stamps. The samples were randomized and subjected to blinded, head-to-head evaluation by three independent electrophysiologists to determine the overall quality and clinical utility of PURE EP™ signals when compared to conventional sources. Each reviewer responded to the same 235 signal comparisons using a 10-point rating scale. Results showed 93% consensus across the blinded reviewers with a 75% overall improvement in intracardiac signal quality and confidence in interpreting PURE EP signals over the signals from conventional sources. Further analysis of the responses from the blinded reviewers showed an 83% (p-value <0.001) improved confidence when interpreting complex multi-component signals, leading to a better understanding of the catheter position in relation to the ablation target. Additionally, there was a 73% (p-value <0.001) improved visualization of small, fractionated potentials increasing the proper analysis of scar and abnormal conduction tissue characteristics. The study manuscript, "Evaluation of a novel cardiac signal processing system for electrophysiology procedures: the PURE EP 2.0 study" has been published in theJournal of Cardiovascular Electrophysiology and is available electronically with open access via theWiley Online Library . The manuscript is co-authored byAmin Al-Ahmad , M.D., FHRS,Bradley Knight , M.D., FHRS,Wendy Tzou , M.D., FHRS,Robert Schaller , D.O., FHRS,Omar Yasin , M.D,Deepak Padmanabhan , M.D., Jason Zagrodsky, M.D., FHRS,Mohammed Bassiouny , M.D., J David Burkhardt, M.D., FHRS,Joseph Gallinghouse Jr ., M.D., FHRS,Moussa Mansour , M.D., FHRS,Christopher McLeod , MBChB, Ph.D., FHRS andAndrea Natale , M.D., FHRS, the Principal Investigator of the study. The independent, blinded reviewers wereBradley P. Knight , M.D. (Northwestern University ),Wendy Tzou , M.D. (University of Colorado ), andRobert Schaller , M.D. (University of Pennsylvania ). We continue to install PURE EP™ Systems at centers of excellence for clinical evaluation under our market development plan. The PURE EP™ System has been utilized at numerous institutions, including theUniversity of Pennsylvania Hospital inPhiladelphia, Pennsylvania ;Overland Park Regional Medical System inOverland Park, Kansas ;Deborah Heart and Lung Center inBrowns Mills, New Jersey ; Houston Methodist inHouston, Texas ; andMedical City North Hills inNorth Richland Hills, Texas . To date, more than 1,600 patient procedures have been conducted with the PURE EP System by more than 71 electrophysiologists across thirteen different clinical sites inthe United States . In addition to clinical evaluation, we have conducted pre-clinical evaluation under several study protocols with the PURE EP™ System. AtMayo Clinic inRochester, Minnesota , we have performed twenty-five experiments in various animal models; we also conducted a pre-clinical study at theMount Sinai Hospital inNew York, New York , with an emphasis on the VT model; and six experiments to date during a study at theUniversity of Pennsylvania . We intend to continue additional research and development studies with our technology atMayo Clinic and theUniversity of Pennsylvania .
In
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We have made progress towards obtaining a European CE marking certificate for medical devices. We have concluded audit preparation for theInternational Organization for Standardization ("ISO") 13485 final certification audit with the expectation to proceed with the audit to obtain the ISO 13485 Certification in the first half of 2022 and CE Marking in the first half of 2023, subject to the guidance and availability from the European Notified Body. InDecember 2020 , we announced that three PURE EP™ Systems were contracted for purchase bySt. David's Healthcare inAustin, Texas and were subsequently sold inFebruary 2021 . These units were our first commercial sale. We also sold three PURE EP™ Systems toMayo Foundation for Medical Education and Research in year-to-date 2021 and we are in active discussions with several accounts about the acquisition of the PURE EP™ System. We anticipate our initial customers will be medical centers of excellence and other healthcare facilities that operate EP labs.
ViralClear Pharmaceuticals, Inc. ("ViralClear") is a majority-owned subsidiary of the Company originally known asNeuroClear Technologies, Inc. The subsidiary was establishedNovember 2018 to pursue additional applications of the PURE EP™ signal processing technology outside of EP. InMarch 2020 , it was renamed ViralClear to develop merimepodib, a broad-spectrum anti-viral agent that showed potential to treat COVID-19. We currently do not intend to further develop merimepodib. Since late 2020, ViralClear has been realigned with its original objective of pursuing additional applications of the PURE EP™ signal processing technology outside of cardiac electrophysiology. As ofSeptember 30, 2021 , the Company retains 68.44% ownership of ViralClear.
Results of Operations (000's)
We anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the progress of our research and development and commercialization efforts, the timing and outcome of future regulatory submissions and uncertainty around the current pandemic. Due to these uncertainties, accurate predictions of future operations are difficult or impossible to make.
Three Months Ended
Revenues and Cost of Goods Sold. Revenue for the three months endedSeptember 30, 2021 totaled$108 comprised of product sales of$100 and recognized service revenue of$8 as compared to nil for the three months endedSeptember 30, 2020 .
We derive our revenue primarily from the sale of our medical device, PURE EP system, as well as related support and maintenance services and software upgrades in connection with the system.
We recognize revenue in accordance with Accounting Standards Codification (ASC)
606, Revenue from Contracts with Customers ("ASC 606"). The core principle of
ASC 606 is that an entity recognizes revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or services.
Cost of sales for the three months ended September 30, 2021 was $38 comprised of
the delivered product as compared to nil for the three months ended September
30, 2020 .
Gross profit from the three months ended
Research and Development Expenses. Research and development expenses for the three months endedSeptember 30, 2021 were$1,315 , a decrease of$3,596 , or 73.2%, from$4,911 for the three months endedSeptember 30, 2020 . This decrease is primarily due to reduction in research and development costs incurred during the three months endedSeptember 30, 2020 of$4,183 in the ViralClear segment as compared to$4 for the current period and the ceasing of merimepodib development in 2020, net with an increase in theBioSig segment research and development from$698 for the three months endedSeptember 30, 2020 to$1,311 for the current period. Research and development expenses were comprised of the following: 36
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Three months ended:
September 30, September 30,
2021 2020
(000's) (000's)
Salaries and equity compensation $ 751 $ 574
Consulting expenses 177
805
Research and clinical studies and design work 190
1,020
Acquired Research and Development - (997 ) Data/AI development 84 127 Regulatory 68 1 Product development - 3,362 Formulation - 1 Travel, supplies, other 45 18 Total $ 1,315 $ 4,911 OnSeptember 2, 2020 , we entered into an amendment with a third-party assignment and licensing agreement acquired with the asset acquisition from Trek. The amendment eliminated clinical trial milestone payments, leaving only two milestone events and associated payments, and increasing possible royalty payments from 5% to 6%. During the three months endedSeptember 30, 2020 , we reversed previously record payment obligations.
Stock based compensation for research and development personnel was
General and Administrative Expenses. General and administrative expenses for the three months endedSeptember 30, 2021 were$6,505 , a decrease of$1,660 , or 20.3%, from$8,165 incurred in the three months endedSeptember 30, 2020 . This decrease is primarily due to reduction in the activities of our ViralClear segment, net with an increase in employee performance pay and staff in the current period as compared to the same period in the prior year and additional service provider fees paid. Payroll related expenses increased to$2,134 in the current period from$1,621 for the three months endedSeptember 30, 2020 , an increase of$513 , or 31.6%. The increase was primarily due to added staff in commercialization, sales and research and development in theBioSig segment, net with a reduction in 2021 of the ViralClear pharma operations. We incurred$1,931 in stock-based compensation in connection with the vesting of stock and stock options issued to board members, officers, employees and consultants for the three months endedSeptember 30, 2021 as compared to$4,786 in stock-based compensation for the same period in 2020. Professional services for the three months endedSeptember 30, 2021 totaled$271 , a decrease of$82 , or 23.2%, over the$353 recognized for the three months endedSeptember 30, 2020 . Of professional services, legal fees totaled$222 for the three months endedSeptember 30, 2021 ; a decrease of$115 , or 34.1%, from$337 incurred for the three months endedSeptember 30, 2020 . The decrease is primarily due to costs incurred in 2020 for financing, contract work and patent filings for the ViralClear segment not incurred in current period. Accounting fees incurred in the three months endedSeptember 30, 2021 amounted to$38 , an increase of$21 , or 123.5%, from$17 incurred in same period last year. In 2021, we incurred our yearly ViralClear audit in addition to our review requirements. Consulting, public and investor relations fees for the three months endedSeptember 30, 2021 were$1,005 as compared to$871 incurred for the three months endedSeptember 30, 2020 , an increase of$134 , or 15.4%. The increase in consulting, marketing and investor relations fees during the three months endedSeptember 30, 2021 related to our continued efforts to develop our recognition throughout the medical industry in an effective manner. Travel, meals and entertainment costs for the three months endedSeptember 30, 2021 were$312 , an increase of$271 , or 661.0%, from$41 incurred in the three months endedSeptember 30, 2020 . Travel, meals and entertainment costs include travel related to business development and financing. The increase in 2021 was due to the lifting of various restrictions imposed by the COVID-19 outbreak leading to increased commercialization effort in 2021 as compared to 2020. 37
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Rent for the three months endedSeptember 30, 2021 totaled$119 , a decrease of$5 , or 4.0%, from$124 incurred in three months endedSeptember 30, 2020 . The decrease in rent for 2021 as compared to 2020 is due primarily to a lower negotiated rent for ourLos Angeles offices beginningJuly 1, 2021 and reduction of our rent in ourConnecticut headquarters with our move to a larger facility inSeptember 2021 as compared to 2020. Depreciation and Amortization Expense. Depreciation and amortization expense for the three months endedSeptember 30, 2021 totaled$51 , an increase of$27 , or 112.5%, over the expense of$24 incurred in the three months endedSeptember 30, 2020 , as a result of the adding additional office computers and other equipment. Gain on Settlement of Debt. OnSeptember 23, 2021 the Company negotiated a lawsuit settlement withAurigene Pharmaceutical Services LTD relating to certain milestone payments for manufacturing and services under a contract with our ViralClear subsidiary. In connection with the settlement, the Company recognized a gain on settlement of debt of$553 during the three months endedSeptember 30, 2021 . Preferred Stock Dividend. Preferred stock dividend for the three months endedSeptember 30, 2021 and 2020 totaled$2 . Preferred stock dividends are related to the dividends accrued on our Series C Preferred Stock issued during the period from 2013 through 2015. Net Loss Attributable toBioSig Technologies, Inc. Common Shareholders. As a result of the foregoing, net loss attributable to common shareholders for the three months endedSeptember 30, 2021 was$7,255 compared to a net loss of$11,404 for the three months endedSeptember 30, 2020 .
Nine Months Ended
Revenues and Cost of Goods Sold. Revenue for the nine months ended
We derive our revenue primarily from the sale of our medical device, PURE EP system, as well as related support and maintenance services and software upgrades in connection with the system.
We recognize revenue in accordance with Accounting Standards Codification (ASC)
606, Revenue from Contracts with Customers ("ASC 606"). The core principle of
ASC 606 is that an entity recognizes revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or services.
Cost of sales for the nine months ended September 30, 2021 was $199 comprised of
the delivered product as compared to nil for the nine months ended September 30,
2020 .
Gross profit for the nine months ended
Research and Development Expenses. Research and development expenses for the nine months endedSeptember 30, 2021 were$4,248 , a decrease of$11,308 , or 72.7%, from$15,556 for the nine months endedSeptember 30, 2020 . This decrease is primarily due to acquired research and development cost incurred during the nine months endedSeptember 30, 2020 of$12,414 in the ViralClear segment as compared to$206 for the current period and the ceasing of pharma development in 2020. Research and development expenses were comprised of the following: 38
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Nine months ended:
September 30, September 30,
2021 2020
(000's) (000's)
Salaries and equity compensation $ 2,026 $ 2,223
Consulting expenses 531
2,069
Research and clinical studies and design work 881
1,505
Acquired Research and Development 150 4,883 Data/AI development 295 379 Regulatory 136 32 Product development 15 4,195 Formulation - 116 Travel, supplies, other 214 154 Total $ 4,248$ 15,556
Stock based compensation for research and development personnel was
General and Administrative Expenses. General and administrative expenses for the nine months endedSeptember 30, 2021 were$20,256 , a decrease of$12,373 , or 37.9%, from$32,629 incurred in the nine months endedSeptember 30, 2020 . This decrease is primarily due to reduction in the activities of our ViralClear segment, net with an increase in employee performance pay and staff in the current period as compared to the same period in the prior year and additional service provider fees paid. Payroll related expenses increased to$6,107 in the current period from$5,109 for the nine months endedSeptember 30, 2020 , an increase of$998 , or 19.5%. The increase was due to performance pay and added staff in the later part of 2020 and 2021 for commercialization, sales and support personnel. We incurred$6,480 in stock-based compensation in connection with the vesting of stock and stock options issued to board members, officers, employees and consultants for the nine months endedSeptember 30, 2021 , as compared to$19,678 in stock-based compensation for the same period in 2020. Professional services for the nine months endedSeptember 30, 2021 totaled$1,035 , a decrease of$482 , or 31.8%, over the$1,517 recognized for the nine months endedSeptember 30, 2020 . Of professional services, legal fees totaled$778 for the nine months endedSeptember 30, 2021 ; a decrease of$513 , or 39.7%, from$1,291 incurred for the nine months endedSeptember 30, 2020 . The decrease is primarily due to costs incurred in 2020 for financing a non-consummated capital raise and legal costs incurred in our ViralClear subsidiary. Accounting fees incurred in the nine months endedSeptember 30, 2021 amounted to$149 , a decrease of$78 or 34.4%, from$227 incurred in same period last year. In 2020, we incurred additional audit costs associated with internal control and ViralClear audits in addition to our year-end requirements. Consulting, public and investor relations fees for the nine months endedSeptember 30, 2021 were$3,137 as compared to$3,685 incurred for the nine months endedSeptember 30, 2020 , a decrease of$548 , or 14.9%. The decrease in consulting, marketing and investor relations fees during the nine months endedSeptember 30, 2021 related to our continued efforts to develop our recognition throughout the medical industry in an effective manner. Travel, meals and entertainment costs for the nine months endedSeptember 30, 2021 were$730 , an increase of$436 , or 148.3%, from$294 incurred in the nine months endedSeptember 30, 2020 . Travel, meals and entertainment costs include travel related to business development and financing. The increase in 2021 was due to lifting of various restrictions imposed by the COVID-19 outbreak as compared to 2020. Rent for the nine months endedSeptember 30, 2021 totaled$353 , a decrease of$10 , or 2.8%, from$363 incurred in nine months endedSeptember 30, 2020 . The decrease in rent for 2021 as compared to 2020 is due primarily to a lower negotiated rent for ourLos Angeles offices beginningJuly 1, 2021 as compared to 2020. 39
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Depreciation and Amortization Expense. Depreciation and amortization expense for the nine months endedSeptember 30, 2021 totaled$142 , an increase of$75 , or 111.9%, over the expense of$67 incurred in the nine months endedSeptember 30, 2020 , as a result of the adding additional office computers and other equipment.
Gain on Settlement of Debt. On
Preferred Stock Dividend. Preferred stock dividend for the nine months endedSeptember 30, 2021 totaled$7 , a decrease of$4 , or 36.4% from$11 incurred during the nine months endedSeptember 30, 2020 . Preferred stock dividends are related to the dividends accrued on our Series C Preferred Stock issued during the period from 2013 through 2015. The decrease in 2021 as compared to 2020 is the result of conversions in 2020. Net Loss Attributable toBioSig Technologies, Inc. Common Shareholders. As a result of the foregoing, net loss attributable to common shareholders for the nine months endedSeptember 30, 2021 was$23,280 compared to a net loss of$41,937 for the nine months endedSeptember 30, 2020 . Segment Results The Company reports segment information based on the "management" approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company's reportable segments. Summary Statement of Operations for the three and nine months endedSeptember 30, 2021 as compared to the three and nine months endedSeptember 30, 2020 are detailed in Note 12 of the accompanying unaudited condensed consolidated financial statements. COVID-19 OnMarch 11, 2020 , theWorld Health Organization (the "WHO") declared a pandemic related to the rapidly spreading coronavirus (COVID-19) outbreak, which has led to a global health emergency. The full public-health impact of the ongoing pandemic is currently indeterminable and rapidly evolving, and the related health crisis has adversely affected and may continue to adversely affect the global economy, resulting in delaying to our commercialization objectives of the PURE EP Systems into 2022.
Liquidity and Capital Resources (
As ofSeptember 30, 2021 , we had a working capital of$17,428 , comprised of cash of$17,535 , accounts receivable of$100 , inventory of$1,881 and prepaid expenses, vendor deposits and employee advances of$483 , which was offset by$2,169 of accounts payable and accrued expenses, accrued dividends on preferred stock issuances of$79 and current portions of deferred revenue of$32 and of lease liability of$291 . For the nine months endedSeptember 30, 2021 , we used$20,668 of cash in operating activities and$398 of cash in investing activities.
Nine Months Ended
Cash provided by financing activities totaled$10,333 , comprised of proceeds from the sale of our common stock, net of expenses, of$9,005 and sale of our common stock under an at-the-market offering of$1,300 along with proceeds from exercise of options of$28 . In the comparable period in 2020, our aggregate cash provided by financing activities totaled$41,197 , comprised of proceeds from the sale of our common stock of$25,214 , proceeds from the sale of our common stock in an at-the-market offering of$1,002 , proceeds from the sale of our subsidiary common stock of$10,592 and proceeds from exercise of options and warrants of$4,389 . AtSeptember 30, 2021 , we had cash of$17,535 compared to$32,748 atSeptember 30, 2020 . Our cash is held in bank deposit accounts. AtSeptember 30, 2021 andSeptember 30, 2020 , we had no convertible debentures outstanding. 40
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Cash used in operations for the nine months endedSeptember 30, 2021 and 2020 was$20,668 and$20,497 , respectively, which represent cash outlays for research and development and general and administrative expenses in such periods. The increases in cash outlays principally resulted additional operating costs, general and administrative expenses in 2021 and with increases in our operating assets of$1,380 and a decrease in our operating liabilities of$3,393 , net with ceasing our ViralClear segment's pharma operations in 2020. We used$398 cash for investing activities for the nine months endedSeptember 30, 2021 , compared to$60 for the nine months endedSeptember 30, 2020 . For the current period and comparable period, we purchased computer and other equipment. We had an accumulated deficit as ofSeptember 30, 2021 of$180.3 million , as well as a net loss attributable toBioSig Technologies, Inc. of$23.3 and negative operating cash flows. We expect to continue incurring losses and negative cash flows from operations until our products (primarily PURE EP System) reach full commercial profitability. We believe that our existing cash on hand will be sufficient to enable us to fund our projected operating requirements for approximately one year and a day from the date of filing of this report. However, we may need to raise additional funds more quickly if one or more of our assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we presently anticipate. We also may decide to raise additional funds before we require them if we are presented with favorable terms for raising capital. Our plans include the continued commercialization of the PURE EP System and other applications of our core technology and raising capital through the sale of additional equity securities, debt or capital inflows from strategic partnerships. There are no assurances, however, that we will be successful in obtaining the level of financing needed for our operations. The ongoing COVID-19 pandemic has resulted and continues to result in significant financial market volatility and uncertainty in recent months. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital and on the market price of our common stock, and we may not be able to successfully raise capital through the sale of our securities. Our Series C Preferred Stock contains triggering events which would, among other things, require redemption (i) in cash, at the greater of (a) 120% of the stated value of$1 or (b) the product of (I) the variable weighted average price of our common stock on the trading day immediately preceding the date of the triggering event and (II) the stated value divided by the then conversion price or (ii) in shares of our common stock, equal to a number of shares equal to the amount set forth in (i) above divided by 75%. As ofSeptember 30, 2021 , the aggregate stated value of our Series C Preferred Stock was$105 . The triggering events include our being subject to a judgment of greater than$100 or our initiation of bankruptcy proceedings. If any of the triggering events contained in our Series C Preferred Stock occur, the holders of our Series C Preferred Stock may demand redemption, an obligation we may not have the ability to meet at the time of such demand. We will be required to pay interest on any amounts remaining unpaid after the required redemption of our Series C Preferred Stock, at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law. We expect to incur losses from operations for the near future. We expect to incur increasing marketing and commercialization expenses related to our PURE EP system in addition to additional research and development costs relating to the PURE EP and other product candidates, including expenses related to clinical trials. We expect that our general and administrative expenses will increase in the future as we expand our business development, add infrastructure and incur additional costs related to being a public company, including incremental audit fees, investor relations programs and increased professional services. 41
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Our future capital requirements will depend on a number of factors, including the progress of our research and development of product candidates, the timing and outcome of regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, the status of competitive products, the availability of financing and our success in developing markets for our product candidates. Future financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, existing holders of our securities may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our securities.
If additional financing is not available or is not available on acceptable terms, we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization efforts or obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently.
Equity Financing OnJuly 2, 2021 , we entered into an underwriting agreement (the "Underwriting Agreement") withLaidlaw & Company (UK) Ltd. (the "Underwriter"), relating to an underwritten public offering of 2,500,000 shares of the Company's common stock,$0.001 par value per share. All of the shares were sold by us. The public offering price of the shares was$4.00 per share, and the Underwriter agreed to purchase the shares from us pursuant to the Underwriting Agreement at a price of$3.68 per share. After the underwriting discount, offering and other related expenses, we received net proceeds from the offering of approximately$9.0 million . Pursuant to the Underwriting Agreement, we also granted the Underwriter an option to purchase up to 375,000 additional shares of common stock, or 15% of the number of Shares sold in the offering, at a price of$3.68 per share, for a period of 30 days from the date of the Underwriting Agreement, of which none were exercised. Pursuant to the Underwriting Agreement, we 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"). The Underwriter Warrants are exercisable following the date of issuance,July 7, 2021 and ending five years from the date of the execution of the Underwriting Agreement,July 2, 2026 , at a price per share equal to$4.80 per share (120% of the public offering price per share) and are exercisable on a "cashless" basis. The shares were sold and issued pursuant to our shelf registration statement on Form S-3 (Registration Statement No. 333-251859) previously filed with theSecurities and Exchange Commission and declared effective by theSecurities and Exchange Commission onJanuary 12, 2021 . A preliminary prospectus supplement and prospectus supplement and the accompanying prospectus relating to the offering were filed with theSecurities and Exchange Commission . The offering closed onJuly 7, 2021 .
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America . The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 42
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We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
We derive its revenue primarily from the sale of its medical device, the PURE
EP™ System, and well as related support and maintenance services and software
upgrades in connection with the system.
We recognize revenue in accordance with Accounting Standards Codification (ASC)
606, Revenue from Contracts with Customers ("ASC 606"). The core principle of
ASC 606 is that an entity recognizes revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or services.
We determine revenue recognition through the following five steps:
? Identify the contract with the customer; ? Identify the performance obligations in the contract; ? Determine the transaction price;
? Allocate the transaction price to the performance obligation in the contract;
and
? Recognize revenue when, or as, the performance obligations are satisfied.
Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer. If we determine that it has not satisfied a performance obligation, it will defer recognition of the revenue until the performance obligation is deemed to be satisfied. Support, maintenance, and software upgrades are performance obligations over a defined period and are recognized ratably over the contractual service period. Customers typically purchase these services with the initial sale of the PURE EP System and do not have the right to terminate their contracts unless we fail to perform material obligations. We may execute more than one contract with a single customer. If so, it is evaluated whether the agreements were negotiated as a package with a single objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement, or whether the goods or services promised in the agreements represent a single performance obligation. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements. We record accounts receivable for amounts invoiced to customers for which the Company has an unconditional right to consideration as provided under the contractual arrangement. Unbilled receivables, if any, include amounts related to our contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenue includes payments received in advance of performance under the contract. Our unbilled receivables and deferred revenue are reported on an individual contract basis at the end of each reporting period. Unbilled receivables are classified as current or noncurrent based on the timing of when we expect to bill the customer. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue.
Allowance for Doubtful Accounts
We adjust accounts receivable down to net realizable value with its allowance methodology. In determining the allowance for doubtful accounts for estimated losses, aged receivables are analyzed periodically by management. Each identified receivable is reviewed based upon historical collection experience, financial condition of the client and the status of any open or unresolved issues with the client preventing the payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables. The allowance for doubtful accounts was nil atSeptember 30, 2021 . The Company believes that its reserve is adequate, however results may differ in future periods. For the nine months endedSeptember 30, 2021 and 2020, bad debt expense totaled$0 . 43
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Research and Development
We account for research and development costs in accordance with the Accounting
Standards Codification subtopic 730-10, Research and Development ("ASC 730-10").
Under ASC 730-10, all research and development costs must be charged to expense
as incurred. Accordingly, internal research and development costs are expensed
as incurred. Third-party research and development 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.
Stock Based Compensation
All stock-based payments to employees and to nonemployee directors for their
services as directors consisted of grants of restricted stock and stock options,
which are measured at fair value on the grant date and recognized in the
statements of operations as compensation expense over the relevant vesting
period. Restricted stock payments and stock-based payments to nonemployees are
recognized as an expense over the period of performance.
Such payments are measured at fair value at the earlier of the date a performance commitment is reached, or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable, the measurement date is the date the award is issued.
On
Use of Estimates The preparation of these unaudited condensed 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 unaudited condensed 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, fair value of acquired assets, the fair value of the Company's stock, stock-based compensation, fair values relating to warrant and other derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.
Acquisition of Intellectual Property
Intellectual property acquired are accounted for under the acquisition method of accounting. This method requires the recording of acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition date fair values. The method records any excess purchase price over the fair value of acquired net assets as goodwill.
The acquired intellectual property from the Trek acquisition was considered unproven compounds, the success of which was uncertain at the time of the acquisition. Accordingly, the fair value of the consideration paid was charged as acquired research and development to current period operations.
Income Taxes
Deferred income tax assets and liabilities are determined based on the estimated
future tax effects of net operating loss and credit carryforwards and temporary
differences between the tax basis of assets and liabilities and their respective
financial reporting amounts measured at the current enacted tax rates. We record
an estimated valuation allowance on our deferred income tax assets if it is not
more likely than not that these deferred income tax assets will be realized. We
recognize a tax benefit from an uncertain tax position only if it is more likely
than not that the tax position will be sustained on examination by taxing
authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position are measured based
on the largest benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement.
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