SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of the occurrence or the expected timing of future performance or results. Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
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inability to manufacture our product candidates on a commercial scale on our own, or in collaboration with third parties;
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difficulties in obtaining financing on commercially reasonable terms;
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changes in the size and nature of our competition;
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loss of one or more key executives or scientists; and
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difficulties in securing regulatory approval to market our product candidates.
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You should review carefully the section entitled “Risk Factors” beginning on page 3 of this prospectus for a discussion of these and other risks that relate to our business and investing in shares of our common stock. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
All shares of our common stock offered by this prospectus are being registered for the accounts of the selling stockholders and we will not receive any proceeds from the sale of these shares. However, we will receive proceeds from the exercise price of the warrants if the warrants are exercised for cash. We intend to use those proceeds, if any, for general corporate purposes.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
On October 29, 2014, our common stock commenced trading on OTCQB under the symbol “BSGM.” Prior to October 29, 2014, there was no established trading price for our common stock. The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock as reported by the OTCQB. The quotations reflect inter-dealer prices, without retail markup, markdown or commissions, and may not represent actual transactions.
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Fiscal Year 2015
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Low
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Fiscal Year 2014
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High
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Low
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Fourth Quarter
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$
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3.50
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$
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2.56
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Third Quarter
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$
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-
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$
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Second Quarter
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$
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-
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$
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First Quarter
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$
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$
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Fiscal Year 2013
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High
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Low
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Fourth Quarter
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$
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-
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$
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Third Quarter
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$
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-
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$
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Second Quarter
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$
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-
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$
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We have never paid cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future, but intend to retain our capital resources for reinvestment in our business. In addition, the terms of our Series C Preferred Stock prohibit us from paying dividends in the future on our common stock, absent consent from the holders representing a super-majority of the outstanding shares of our Series C Preferred Stock and a certain investor.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and the related notes thereto that are included in this prospectus. In addition to historical information, the following discussion and analysis includes forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in the section entitled “Risk Factors.” See “Special Note Regarding Forward-Looking Statements.”
Our Business
We are a development stage medical device company that is developing a proprietary technology platform to minimize noise and artifacts from cardiac recordings during electrophysiology studies and ablation. Our product under development, the PURE EP System, is a surface electrocardiogram and intracardiac multichannel recording and analysis system that acquires, processes and displays electrocardiogram and electrograms required during electrophysiology studies and ablation procedures.
We have not generated any revenue to date and consequently our operations are subject to all risks inherent in the establishment of a new business enterprise.
Critical Accounting Policies and Estimates
The following discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. requires us to make estimates and assumptions that affect the amounts reported in our financial statements. The financial statements include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. Significant estimates in these financial statements include allowance for doubtful accounts and accruals for inventory claims. Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the financial statements and actual results could differ from the estimates and assumptions.
Among the significant judgments made by management in the preparation of our financial statements are the following:
Research and Development.
We account for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.
Stock Based Compensation.
All stock-based payments to employees and to nonemployee directors for their services as directors consisted of grants of restricted stock and stock options, which are measured at fair value on the grant date and recognized in the statements of operations as compensation expense over the relevant vesting period. Restricted stock payments and stock-based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable, the measurement date is the date the award is issued.
On October 29, 2014, our common stock commenced trading on OTCQB under the symbol “BSGM.” Fair value is typically determined by the closing price of our common stock on the date of the award.
Income Taxes.
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. We record an estimated valuation allowance on our deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized. We recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
Results of Operations
We anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the progress of our research and development efforts and the timing and outcome of regulatory submissions. Due to these uncertainties, accurate predictions of future operations are difficult or impossible to make.
Three Months Ended March 31, 2015 Compared to Three Months Ended March 31, 2014
Revenues and Cost of Goods Sold. We had no revenues or cost of goods sold during the three months ended March 31, 2015 and 2014.
Research and Development Expenses. Research and development expenses for the three months ended March 31, 2015 were $302,079, an increase of $179,928, or 147.3%, from $122,151 for the three months ended March 31, 2014. This increase is primarily due to increase in activity level and increased personnel and consulting expenses.
General and Administrative Expenses. General and administrative expenses for the three months ended March 31, 2015 were $2,746,853, an increase of 2,145,288, or 357%, from $601,565 incurred in the three months ended March 31, 2014. This increase is primarily due to stock based compensation issued to employees and consultants in the current period as compared to the same period, last year.
Payroll related expenses increased to $323,617 in the current period from $83,586 for the three months ended March 31, 2014, an increase of $240,031. The increase is due to added personnel and bonus compensation paid. We incurred $2,054,475 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 ended March 31, 2015 as compared to $343,837 stock based compensation for the same period in 2014.
Professional services for the three months ended March 31, 2015 totaled $73,350, a decrease of $36,565, or 33.3%, over the $109,915 recognized for the three months ended March 31, 2014. Of professional services, legal fees totaled $34,850 for the three months ended March 31, 2015, a decrease of $40,435, or 53.7%, from $75,285 incurred for the three months ended March 31, 2014. Accounting fees incurred in the three months ended March 31, 2015 amounted to $38,500, an increase of $3,870, or 11.2%, from $34,630 incurred in same period last year. The net decrease in professional service fees was primarily related to legal and auditing fees incurred associated with our efforts to become a publicly traded entity and our capital raising activities beginning in 2014.
Consulting and investor relations fees for the three months ended March 31, 2015 was $155,790 as compared to none incurred for the three months ended March 31, 2014. During the three months ended March 31, 2015, we incurred services relating to us becoming public company.
Travel, meals and entertainment costs for the three months ended March 31, 2015 were $53,436, an increase of $35,656, or 200.5%, from $17,780 incurred in the three months ended March 31, 2014. Travel, meals and entertainment costs include travel related to business development and financing. Rent for the three months ended March 31, 2015 totaled $22,514, an increase of $4,584 or 25.6%, from $17,930 incurred in the three months ended March 31, 2014, primarily due to changing common area maintenance fees incurred and lease renewal.
Depreciation Expense. Depreciation expense for the three months ended March 31, 2015 totaled $2,860, a decrease of $1,575, or 35.5%, over the expense of $4,435 incurred in the three months ended March 31, 2014, as a result of the aging of office computers and other equipment.
Interest Expense. Interest expense for the three months ended March 31, 2015 totaled $1,114, an increase of $16 from interest expense of $1,098 incurred during the same period last year. In the three months ended March 31, 2015 and 2014, our interest costs were comprised primarily related to credit card financing charges.
Financing Costs. Financing costs for the three months ended March 31, 2015 totaled $0 from $388,285 incurred during the three months ended March 31, 2014. Financing costs were primarily related to the fees paid related to the issuance of our Series A and Series B Preferred Stock in 2011 and 2012 and a beneficial conversion feature in our Series C Preferred Stock. During 2014, the remaining financing costs were amortized to operations.
Preferred Stock Dividend. Our preferred stock dividend for the three months ended March 31, 2015 totaled $79,395, a decrease of $4,629, or 5.5% from $84,024 incurred during the three months ended March 31, 2014. Preferred stock dividends are primarily related to the issuance of our Series A, Series B and Series C Preferred Stock from 2011 through 2013. In the second quarter of 2014, the Series A and Series B Preferred Stock was converted to common.
Net Loss. As a result of the foregoing, net loss for the three months ended March 31, 2015 was $3,090,801, compared to a net loss of $1,201,558 for the three months ended March 31, 2014.
Twelve Months Ended December 31, 2014 Compared to Twelve Months Ended December 31, 2013
Revenues and Cost of Goods Sold. We had no revenues or cost of goods sold during the twelve months ended December 31, 2014 and 2013.
Research and Development Expenses. Research and development expenses for the twelve months ended December 31, 2014 were $547,996, a decrease of $444,211, or 45%, from $992,207 for the twelve months ended December 31, 2013. This decrease is primarily due to a reduction in the costs paid to both personnel and research and development consulting services as we develop our proprietary technology platform. Research and development expenses were comprised of $366,362 of personnel costs and $115,692 consulting services for the twelve months ended December 31, 2014 as compared to $632,881 and $359,326 for the same period the previous year, respectively. This decrease is primarily due to salary and fee reductions in both personnel and research and development consulting services expenses, including accounting for payments to our scientists as personnel costs, as we develop our proprietary technology platform.
General and Administrative Expenses. General and administrative expenses for the twelve months ended December 31, 2014 were $7,304,440, an increase of $2,557,242, or 49%, from $5,229,252 incurred in the twelve months ended December 31, 2013. This increase is primarily due to increases in payroll related expenses and professional services and, to a lesser extent, due to increases in consulting fees and travel, meals and entertainment costs.
Payroll related expenses increased to $5,938,442 in the twelve months ended December 31, 2014 from $3,465,680 for the twelve months ended December 31, 2013, an increase of $2,472,762, or 71%. This increase is due to the value of the stock based compensation increasing to $5,693,425 in 2014, as a result of the vesting of stock and stock options issued to board members, officers and employees, as compared to $3,247,187 of stock based compensation in 2013.
Professional services for the twelve months ended December 31, 2014 totaled $585,472, an increase of $32,991, or 6%, over the $552,481 recognized for the twelve months ended December 31, 2013. Of professional services, legal fees totaled $284,787 for the twelve months ended December 31, 2014, a decrease of $24,406, or 8%, from $309,193 incurred for the twelve months ended December 31, 2013. Accounting fees incurred in the twelve months ended December 31, 2014 amounted to $64,380, a decrease of $29,178, or 32%, from $93,558 incurred for the same period in 2013. The increase in professional fees was primarily related to an increase in legal requirements as we continue to develop our operations, including legal fees associated with our capital raising transactions and the filing of our initial registration statement.
Consulting fees totaled $246,754 for the twelve months ended December 31, 2014, a decrease of $608,902 or 71%, from $855,656 for the twelve months ended December 31, 2013. The consulting fees for the year ended December 31, 2013 included $800,823 in stock based compensation for investment and finance consultants to assist in our fund raising and investor relations efforts to support our increased efforts in market research and potential investor identification.
Travel, meals and entertainment costs for the twelve months ended December 31, 2014 were $125,923, an increase of $35,144, or 39%, from $90,779 incurred during the twelve months ended December 31, 2013. During 2014, more travel was required than in 2013. Rent for the twelve months ended December 31, 2014 totaled $77,063, an increase of $3,058, or 4%, from $74,005 incurred during the same period in 2013.
Depreciation Expense. Depreciation expense for the twelve months ended 2014 totaled $15,809, a decrease of $1,250, or 7%, from the expense of $17,059 incurred during the same period in 2013, as a result of the aging of office computers and other equipment.
Interest Expense. Interest expense for the twelve months ended December 31, 2014 totaled $11,025, a decrease of $59,036 from the expense of $70,061 incurred during the twelve months ended December 31, 2013. For 2014, interest costs were comprised of finance costs and estimated liquidated damages of $6,953. During the twelve months ended December 31, 2013, we accrued estimated liquidated damages of $48,668 relating to our registration rights obligations in connection to the issuance of our Series C Preferred Stock. In addition, other interest costs were comprised primarily of bridge and related party notes issued in late 2012.
Financing Costs. Financing costs for the year ended December 31, 2014 totaled $593,770, a decrease of $2,902,282, or 83%, from $3,496,052 incurred during the year ended December 31, 2013. Financing costs are primarily related to the fees paid related to the issuance of our Series A and Series B Preferred Stock in 2011 and 2012 and a beneficial conversion feature in and the fees paid related to the issuance of our Series C Preferred Stock issued in 2013. The beneficial conversion feature associated with the Series C Preferred Stock is comprised of the allocated fair value of the conversion feature and the allocated fair value of warrants issued in connection with the sale of the Series C Preferred Stock.
Preferred Stock Dividend. Our preferred stock dividend for the twelve months ended December 31, 2014 totaled $300,359, an increase of $3,144, or 3%, from $297,215 incurred during the twelve months ended December 31, 2013. Preferred stock dividends are related to the issuance of our Series A, Series B and C Preferred Stock in 2011, 2012 and 2013.
Net Loss Available to Common Stockholders. Net loss Available to Common Stockholders for the twelve months ended December 31, 2014 was $8,773,399, compared to a net loss of $10,101,846 for the twelve months ended December 31, 2013, a decrease of $1,328,447 or 13%. The primary reasons for the decrease, as described above, is the reduction in financing costs net with the increase in stock based compensation incurred in general and administrative expenses.
Liquidity and Capital Resources
Three Months Ended March 31, 2015 Compared to Three Months Ended March 31, 2014
As of March 31, 2015, we had a working capital deficit of $4,544,839, comprised of cash of $2,059,328 and prepaid expenses of $159,768, which was offset by $320,871 of accounts payable and accrued expenses, stock based payable of $646,066, accrued dividends on preferred stock issuances of $456,964 and an aggregate of $5,340,034 of warrant and derivative liabilities. For the three months ended March 31, 2015, we used $1,219,982 of cash in operating activities and $2,684 of cash in investing activities. Cash provided by financing activities totaled $3,042,213, comprised of proceeds from the sale of our common stock. In the comparable period in 2014, $229,222 was raised through the sale of our common stock, net with repayments of related party advances of $20,281. At March 31, 2015, we had cash of $2,059,328 compared to $5,365 at March 31, 2014. Our cash is held in bank deposit accounts. At March 31, 2015 and December 31, 2014, we had no convertible debentures outstanding.
Cash used in operations for the three months ended March 31, 2015 and 2014 was $1,219,982 and $505,763, respectively, which represent cash outlays for research and development and general and administrative expenses in such periods. Increase in cash outlays principally resulted from increased research and development and general and administrative expenses due to the continued development of our operations, and reduction of our outstanding accounts payable by $274,655.
We used $2,684 cash for investing activities for the three months ended March 31, 2015, compared to $0 for the three months ended March 31, 2014. During the three months ended March 31, 2015, we purchased office furniture and computer equipment.
Twelve Months Ended December 31, 2014 Compared to Twelve Months Ended December 31, 2013
As of December 31, 2014, we had a working capital deficit of $910,082, comprised of cash of $239,781 and prepaid expenses of $75,537, which was offset by $554,026 of accounts payable and accrued expenses, stock based payable of $226,305 and accrued dividends on preferred stock issuances of $445,069. For the twelve months ended December 31, 2014, we used $1,997,072 of cash in operating activities. Cash provided by financing activities totaled $1,938,629, comprised of proceeds from the sale of our common stock of $1,969,410, net with repayments of related party advances of $30,781. In the comparable period in 2013, $1,768,410 was raised from the sale of our Series C Preferred Stock, $299,974 was raised through the sale of our common stock, $13,741 through related party advances, net with $30,000 repayments of related party loans. At December 31, 2014, we had cash of $239,781 compared to $302,187 at December 31, 2013. Our cash is held in bank deposit accounts. At December 31, 2014 and 2013, we had no convertible debentures outstanding as compared to $613,812 at December 31, 2012.
Cash used in operations for the twelve months ended December 31, 2014 and 2013 was $1,997,072 and $1,762,459, respectively, which represent cash outlays for research and development and general and administrative expenses in such periods. Increase in cash outlays principally resulted from increased research and development and general and administrative expenses due to the continued development of our operations.
Cash used in investing activities for the twelve months ended December 31, 2014 was $3,963, compared to $11,716 for the twelve months ended December 31, 2013. During both the twelve months ended December 31, 2014 and the twelve months ended December 31, 2013, we purchased office furniture and computer equipment.
December 2014 Private Placement
On December 19, 2014, we entered into a unit purchase agreement with certain accredited investors, pursuant to which we issued and sold, in multiple closings occurring on each of December 19, 2014, December 30, 2014, January 23, 2015, February 10, 2015, February 27, 2015 and March 31, 2015, an aggregate of 40.09 units, which consisted of, in the aggregate, 1,603,600 shares of our common stock, “A” warrants to purchase 1,603,600 shares of our common stock at an exercise price of $2.50 and “B” warrants to purchase 801,800 shares of our common stock at an exercise price of $3.75 per share, in exchange for aggregate gross proceeds of $4,009,000. As consideration for serving as our placement agent in connection with the private placement, we issued to Laidlaw & Company (UK) Ltd. “B” warrants to purchase an aggregate of 400,900 shares of common stock at an exercise price of $3.75 per share and paid cash fees equal to $481,080.
In their report dated February 20, 2015, our independent registered public accounting firm stated at December 31, 2014, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is an issue raised due to our net losses and negative cash flows from operations since inception and our expectation that these conditions will continue for the foreseeable future. In addition, we will require additional financing to fund future operations. Further, we do not have any commercial products available for sale and have not generated revenues to date, and there is no assurance that, if approval of our products is received, we will be able to generate cash flow to fund operations. In addition, there can be no assurance that our research and development will be successfully completed or that any product will be approved or commercially viable. Our ability to continue as a going concern is subject to our ability to obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities, obtaining loans from various financial institutions or being awarded grants from government agencies, where possible. Our continued net operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.
Our Series C Preferred Stock contains triggering events which would, among other things, require redemption (i) in cash, at the greater of (a) 120% of the stated value of $1,000 or (b) the product of (I) the variable weighted average price of our common stock on the trading day immediately preceding the date of the triggering event and (II) the stated value divided by the then conversion price or (ii) in shares of our common stock, equal to a number of shares equal to the amount set forth in (i) above divided by 75%. The triggering events include our being subject to a judgment of greater than $100,000 or our initiation of bankruptcy proceedings. If any of the triggering events contained in our Series C Preferred Stock occur, the holders of our Series C Preferred Stock may demand redemption, an obligation we may not have the ability to meet at the time of such demand. We will be required to pay interest on any amounts remaining unpaid after the required redemption of our Series C Preferred Stock at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law.
We expect to incur losses from operations for the near future. We expect to incur increasing research and development expenses, including expenses related to clinical trials. We expect that our general and administrative expenses will increase in the future as we expand our business development, add infrastructure and incur additional costs related to being a public company, including incremental audit fees, investor relations programs and increased professional services.
Our future capital requirements will depend on a number of factors, including the progress of our research and development of product candidates, the timing and outcome of regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, the status of competitive products, the availability of financing and our success in developing markets for our product candidates. We believe our existing cash will not be sufficient to fund our operating expenses and capital equipment requirements. We anticipate we will need approximately $2 million in addition to our current cash on hand to fund our operating expenses and capital equipment requirements for the next 12 months. We will have to raise additional funds to continue our operations and, while we have been successful in doing so in the past, there can be no assurance that we will be able to do so in the future. Our continuation as a going concern is dependent upon our ability to obtain necessary additional funds to continue operations and the attainment of profitable operations.
Future financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, existing holders of our securities may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our securities.
If additional financing is not available or is not available on acceptable terms, we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization efforts or obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
History
We were formed as BioSig Technologies, Inc., a Nevada corporation, in February 2009 and in April 2011 we merged with our wholly-owned subsidiary, BioSig Technologies Inc., a Delaware corporation, with the Delaware corporation continuing as the surviving entity. We are principally devoted to improving the quality of cardiac recordings obtained during ablation of atrial fibrillation (AF) and ventricular tachycardia (VT). We have not generated any revenue to date and consequently our operations are subject to all risks inherent in the establishment of a new business enterprise.
Overview
We are a development stage medical device company that is developing a proprietary technology platform to minimize noise and artifacts from cardiac recordings during electrophysiology studies and ablation. We are developing the PURE (Precise Uninterrupted Real-time evaluation of Electrograms) EP System, a surface electrocardiogram and intracardiac multichannel recording and analysis system that acquires, processes and displays electrocardiogram and electrograms required during electrophysiology studies and ablation procedures.
The PURE EP System is designed to assist electrophysiologists in making clinical decisions in real-time by providing information that, we believe, is not always easily obtained, if at all, from any other equipment presently used in electrophysiology labs. The PURE EP System’s ability to acquire high fidelity cardiac signals will potentially increase these signals’ diagnostic value, and therefore offer improved accuracy and efficiency of the EP studies and related procedures. We are developing signal processing tools within the PURE EP System. We believe that these will assist electrophysiologists in further differentiating true signals from noise, and will provide guidance in identifying ablation targets.
Since June 2011, we have collaborated with physicians affiliated with the Texas Cardiac Arrhythmia Institute at St. David’s Medical Center in Austin, Texas for initial technology validation. The physicians affiliated with the Texas Cardiac Arrhythmia Institute has provided us with digital recordings obtained with conventional electrophysiology recording systems during different stages of electrophysiology studies. Using our proprietary signal processing tools that are part of the PURE EP System, we analyzed these recordings and successfully removed baseline wander, noise and artifacts from the data thereby providing better diagnostic quality signals.
We are focused on improving the quality of cardiac recordings obtained during ablation of atrial fibrillation, the most common cardiac arrhythmia, and ventricular tachycardia, an arrhythmia evidenced by a fast heart rhythm originating from the lower chambers of the heart, which can be life-threatening. Cardiac ablation is a procedure that corrects conduction of electrical impulses in the heart that cause arrhythmias. During this invasive procedure, a catheter is usually inserted using a venous access into a specific area of the heart. A special radiofrequency generator delivers energy through the catheter to small areas of the heart muscle that cause the abnormal heart rhythm. According to a 2009 article in Circulation: Arrhythmia and Electrophysiology, ablation is superior to pharmacological treatments and is becoming a first line of therapy for certain patients with arrhythmias (“Treatment of Atrial Fibrillation With Antiarrhythmic Drugs or Radiofrequency Ablation,” Circulation: Arrhythmia and Electrophysiology (2009) 2: 349-361).
Our overall goal is to establish our proprietary technology as a new platform that will have the following advantages over the electrophysiology recording systems currently available on the market:
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Higher quality cardiac signal acquisition for accurate and more efficient electrophysiology studies;
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Precise, uninterrupted, real time evaluations of electrograms;
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Reliable cardiac recordings to better determine precise ablation targets, strategy and end point of procedures; and
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A portable device that can be fully integrated into existing electrophysiology lab environments.
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If we are able to develop our product as designed, we believe that the PURE EP System and its signal processing tools will contribute to an increase in the number of procedures performed in each electrophysiology lab and possibly improved patient outcomes.
Our significant scientific achievements to date include:
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Initial system concept validation has been performed in collaboration with physicians at the Texas Cardiac Arrhythmia Institute at St. David’s Medical Center in Austin, Texas in June 2011. The Texas Cardiac Arrhythmia Institute provided challenging recordings obtained with electrophysiology recording systems presently in use at the institute during various electrophysiology studies. Our technology team successfully imported the data into the PURE EP System software and using proprietary signal processing, the PURE EP System software was able to reduce baseline wander, noise, and artifacts from the data and therefore provide better diagnostic quality signals.
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We have established clinical and/or advisory relationships for both technology development and validation studies with physicians and researchers affiliated with the following medical centers: Texas Cardiac Arrhythmia Institute, Austin, TX; Cardiac Arrhythmia Center at the University of California at Los Angeles, Los Angeles, CA; Mount Sinai Medical Center, New York, NY; Beaumont Medical Center, Detroit, MI; University Hospitals Case Medical Center, Cleveland, OH; The Heart Rhythm Institute, University of Oklahoma Health Sciences Center, Oklahoma City, OK; and Mayo Clinic, Rochester, MN.
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The Cardiac Arrhythmia Center at the University of California at Los Angeles and Dr. Kalyanam Shivkumar, a former member of our board of directors, have played a significant role in the initial functional testing of our hardware. Dr. Shivkumar and his team have enabled us to learn the connectivity of the lab and its devices that pertain to where our PURE EP System will fit in. In June 2013, we commenced our first proof of concept pre-clinical study with the assistance of Dr. Shivkumar in order to further test the components of the PURE EP System hardware, as further explained below.
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We are developing signal processing tools within the PURE EP System that will assist electrophysiologists in further differentiating true signals from noise, which may potentially provide guidance in identifying ablation targets. The signal processing tools are expected to be an integral part of the software of the PURE EP System, which we believe will significantly facilitate the locating of ablation targets.
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In the second and third quarters of 2013, we performed and finalized testing of our proof of concept unit by initially using an electrocardiogram/intracardiac simulator at our lab, and subsequently by obtaining pre-clinical recordings from the lab at the University of California at Los Angeles. As part of the testing, we simultaneously recorded electrocardiogram and intracardiac signals on our proof of concept unit and GE’s CardioLab recording system. An identical signal was applied to the input of both systems and the monitor of our proof of concept unit was positioned next to the monitor of GE’s CardioLab recording system to allow for visual comparison. We believe that our proof of concept unit performed well as compared to GE’s CardioLab recording system, in that the electrocardiogram and intracardiac signals displayed on our proof of concept unit showed less baseline wander, noise and artifacts compared to signals displayed on GE’s CardioLab recording system. However, because this was a proof of concept test, without any clearly established protocols, we cannot present this data for publication and we do not have any independent verification or peer review of these findings.
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In the third quarter of 2013, we analyzed the results of our proof of concept unit to determine the final design of the PURE EP System prototype, which has since been completed.
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In the fourth quarter of 2014, we appointed Dr. Samuel J. Asirvatham from Mayo Clinic as a member of our Scientific Advisory Board and initiated plans for pre-clinical studies at Mayo Clinic. We expect to perform our initial study there in April 2015.
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In the first quarter of 2015, we appointed Dr. K.L. Venkatachalam from Mayo Clinic as a member of our Scientific Advisory Board. On March 31, 2015, Drs. Asirvatham and Venkatachalam performed our first pre-clinical study at the Mayo Clinic in Rochester, Minnesota.
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On June 10, 2015, Drs. Asirvatham and Venkatachalam performed our second pre-clinical study at the Mayo Clinic in Rochester, Minnesota.
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We recently completed testing of the assembled components of the PURE EP System prototype in order to validate the design of the prototype. We conducted our first and second pre-clinical studies on March 31, 2015 and June 10, 2015, respectively, at the Mayo Clinic in Rochester, Minnesota with the PURE EP System prototype. We intend to conduct our third pre-clinical study at the Cardiac Arrhythmia Center at the University of California at Los Angeles. We intend to conduct further pre-clinical studies, end-user preference studies, and research studies. The main objective of these studies is to demonstrate the clinical potential of the PURE EP System and show its advantages as compared to electrophysiology recorders currently on the market. We have also begun planning and implementing steps for obtaining 510(k) approval from the U.S. Food and Drug Administration for the PURE EP System.
We believe that by the first half of 2016, we will have obtained 510(k) marketing clearance from the FDA and will be able to commence marketing and commercialization of the PURE EP System. Our ability to achieve the aforementioned milestones will be principally determined by our ability to obtain necessary financing and regulatory approvals, among other factors.
Because we are a development stage company, with our initial product under development, we currently do not have any customers. We anticipate that our initial customers will be hospitals and other health care facilities that operate electrophysiology labs.
Our Industry
Electrophysiology is the study of the propagation of electrical impulses throughout the heart. Electrophysiology studies are focused on the diagnosis and treatment of arrhythmias, a medical condition in which conduction of electrical impulses within the heart vary from the normal. Such conditions may be associated with significant health risks to patients. The invasive cardiac electrophysiology study for the evaluation of cardiac conduction disorders has evolved rapidly from a research tool to an established clinical treatment. This technique permits detailed analyses of the mechanism underlying cardiac arrhythmias and determines precise locations of the sites of origin of these arrhythmias, thereby aiding in treatment strategies.
Pharmacological, or medicine-based, therapies have traditionally been used as initial treatments, but they often fail to adequately control the arrhythmia and may have significant side effects. Catheter ablation is now often recommended for an arrhythmia that medicine cannot control. Catheter ablation involves advancing several flexible catheters into the patient’s blood vessels, usually either in the femoral vein, internal jugular vein or subclavian vein. The catheters are then advanced towards the heart. Electrical impulses are then used to induce the arrhythmia and local heating or freezing is used to ablate (destroy) the abnormal tissue that is causing it. Catheter ablation of most arrhythmias has a high success rate and multiple procedures per patient have been found to be more successful.
One study found that arrhythmia-free survival rates after a single catheter ablation procedure were 40%, 37%, and 29% at one, two and five years, respectively, with most recurrences over the first six months (“Catheter Ablation for Atrial Fibrillation - Are Results Maintained at 5 Years of Follow-Up?” J Am Coll Cardiol. (2011) 57(2):160-166). Another study stated that catheter ablation of atrial fibrillation has been shown to be effective in approximately 80% of patients after 1.3 procedures per patient, with approximately 70% of such patients requiring no further antiarrhythmic drugs during intermediate follow-up (Updated Worldwide Survey on the Methods, Efficacy, and Safety of Catheter Ablation for Human Atrial Fibrillation Circulation: Arrhythmia and Electrophysiology (2010) 3: 32-38).
Catheter ablation is usually performed by an electrophysiologist (a specially trained cardiologist) in a catheterization lab or a specialized electrophysiology lab. It is estimated that there are about 2,000 electrophysiology labs in the U.S. and 2,000 electrophysiology labs outside the U.S., each with an electrophysiology recording system costing an average of $250,000. We believe that the current value of the electrophysiology recording device market in the U.S. is approximately $500 million, based upon the number of electrophysiology labs in U.S. and the average cost of the recording system in each lab. With the potential of 12 million atrial fibrillation patients by the year 2050 (according to the Atrial Fibrillation Fact Sheet, February 2010, published by the Centers for Disease Control and Prevention) and improvements in technology for atrial fibrillation ablation therapy, significant growth is predicted for the number of hospitals building electrophysiology labs. A July 2012 report published by the Millennium Research Group predicted rapid growth in the U.S. market for electrophysiology mapping and ablation devices from 2012 to 2016, due to the medical community’s growing focus on treating atrial fibrillation. The report further predicts that even with advances in drug treatments and management devices to treat or manage arrhythmias, the electrophysiology mapping and ablation device market will be sustained by the continued development of advanced technologies that decrease ablation procedure times and improve success rates. According to the report, Electrophysiology Devices Market - Global Industry Analysis, Size, Share, Growth, Trends and Forecast, 2013 – 2019, analysts forecast the global market for EP devices will grow at a 12.1 percent compound annual growth rate, from $2.5 billion in 2012 to $5.5 billion by 2019.
Treatment of Atrial Fibrillation and Ventricular Tachycardia
We believe that the clearer recordings and additional information provided by the PURE EP System may improve outcomes during electrophysiology studies and ablation procedures for a variety of arrhythmias. For patients who are candidates for ablation, an electrophysiology study is necessary to define the targeted sites for the ablation procedure. Two common, yet complex, conditions for which ablation procedures are performed are atrial fibrillation and ventricular tachycardia. We believe that in the near future, the PURE EP System may have a great impact on assisting ablation strategies for these conditions.
Most cardiac arrhythmias are well understood and ablation simply requires destroying a small area of heart tissue possessing electrical abnormality. In contrast, complex arrythmias, such as atrial fibrillation and ventricular tachycardia, have complex pathophysiology and because knowledge of their origins and mechanisms are incomplete, ablation treatments for these arrhythmias are largely empirical. Catheter ablation is now an important option to control recurrent ventricular tachycardias (“EHRA/HRS Expert Consensus on Catheter Ablation of Ventricular Arrhythmias,” Europace (2009) 11 (6): 771-817). Catheter ablation of ventricular tachycardia in nonischemic heart diseases can be challenging, and outcomes across different diseases are incompletely defined (“Catheter Ablation of Ventricular Tachycardia in Nonischemic Heart Disease,” Circulation: Arrhythmia and Electrophysiology (2012) 5: 992-1000). In addition, limitations of atrial fibrillation ablation include the use of catheters designed for pinpoint lesions to perform large area ablations in a point-by-point fashion, and the dexterity required to perform the procedure (“New Technologies in Atrial Fibrillation Ablation,” Circulation (2009)). Furthermore, the length of these procedures exposes the physician and staff to extensive radiation, requiring them to wear heavy lead vests. Consequently, ablating atrial fibrillation and ventricular tachycardia have been regarded as being extremely difficult. Therefore, access to these procedures has been limited to being performed by only especially well-trained cardiologists; however, advancements in new technologies and techniques show a strong growth rate for these procedures.
According to the National Institute of Health National Heart Lung and Blood Institute, there are more than 3 million Americans suffering with atrial fibrillation and about 850,000 patients are hospitalized annually. As many as 600,000 new cases of atrial fibrillation are diagnosed each year. Despite the fact that physicians have been performing radiofrequency ablations since the 1990s, catheter-based treatment is offered to less than 3% of the atrial fibrillation patient population in the U.S. and Europe. According to Millenium Research Group (MRG), an increasing proportion of diagnosed atrial fibrillation cases are now being treated via ablation, as both physician confidence and the devices used in these procedures improve. A growing amount of positive clinical data has been demonstrating the efficacy of AF ablation when compared to the traditional first-line treatment of anti-arrhythmic drugs. As a result, AF ablation is becoming the fastest growing procedure type in this market, increasing at an average annual rate of 16 percent from 2012 to 2016. The American College of Cardiology Foundation/American Heart Association Task Force reported that catheter-directed ablation of atrial fibrillation represents a substantial achievement that promises better therapy for a large number of patients presently resistant to pharmacological or electrical conversion to sinus rhythm (“2011 ACCF/AHA/HRS Focused Update on the Management of Patients With Atrial Fibrillation (Updating the 2006 Guideline)”). However, rates of success and complications may vary, sometimes considerably.
According to the Heart Rhythm Society, ventricular tachycardia is the most dangerous arrhythmia since it may result in ventricular fibrillation, a rapid chaotic heartbeat in the lower chambers of the heart. Because the fibrillating muscle cannot contract and pump blood to the brain and vital organs, ventricular fibrillation is the number one cause of sudden cardiac death accounting for more than 350,000 deaths in the U.S. each year. Ventricular tachycardia is typically treated with implantable cardioverter defibrillators, or ICDs, or a combination of ablation along with an ICD. The American College of Cardiology/American Heart Association Task Force on Practice Guidelines/European Society of Cardiology Committee for Practice Guidelines, or ACC/AHA/ESC, 2009 guidelines recommend ablation in patients who either have sustained predominantly monomorphic ventricular tachycardia that is drug resistant, are drug intolerant or do not wish for long-term drug therapy. According to a recent study, catheter ablation has been found to reduce ventricular tachycardia/ventricular fibrillation recurrences and thereby ICD interventions, including ICD shocks, by approximately 75% in patients that have undergone multiple ICD shocks (Kuck, “Should Catheter Ablation be the Preferred Therapy for Reducing ICD Shocks? Ventricular Tachycardia in Patients With an Implantable Defibrillator Warrants Catheter Ablation,” Circulation: Arrhythmia and Electrophysiology (2009) 2: 713-720). More importantly, according to Kuck, catheter ablation is the only treatment that can terminate and eliminate incessant ventricular tachycardia and acutely abolish electrical storm in ICD patients. Typically, patients who receive ICDs are at high risk for recurrent arrhythmia; hence, most patients receive one or more ICD therapies for spontaneous arrhythmias after implantation. Despite the technological evolution of ICD systems, more than 20% of shocks are due to supraventricular arrhythmia and hence are inappropriate. Although the ICD aborts ventricular tachycardia/ventricular fibrillation, many patients continue to have symptoms. These shocks are physically and emotionally painful and lead to poor quality of life and adverse psychological outcomes in patients and their families.
According to Dr. Srijoy Mahapatra, the status of ventricular tachycardia ablation is growing at a 14-17% compound annual growth rate due to the fact that ablation of ventricular tachycardia may help patients feel better and live longer, despite the risks, including the occurrence of stroke, and the modest success rates. The success of ventricular tachycardia ablation varies, depending on the patient’s specific heart condition that caused ventricular tachycardia. The procedure is most effective in patients with otherwise normal hearts, in whom the success rate exceeds 90%. In patients with structural heart disease resulting from scar or cardiomyopathy, success rates range between 50% and 75% at six to 12 months. In cases in which a patient experiences a recurrence, two of three patients will still have less ventricular tachycardia than before the initial ablation (Circulation (2010) 122: e389-e391). Therefore, we believe that ablation will continue to become a preferred treatment for ventricular tachycardia, especially in light of the challenges presented by ICD therapies; this increase in demand for ablation procedures will likely also increase the demand for technological advances in medical devices essential to ablation procedures, including electrophysiology recorders, in order to better support and ablation procedures.
Electrophysiology Lab Environment and Electrophysiology Recording Systems
The electrophysiology lab environment and recording systems create significant amounts of noise and artifacts during electrophysiology procedures. Current surface and intracardiac recording systems typically consist of large workstations interconnected by a complex set of cables that contribute to significant amounts of noise during signal acquisition. Additional noise and artifacts generated from the electrophysiology lab equipment further hamper recordings of small electrophysiological potentials. Preserving spaciotemporal (space and time) characteristics of the signal in a very challenging electrophysiology recording environment is a difficult task. To remove noise and artifacts, recorders that are currently on the market offer a family of low pass, high pass and notch filters, but these filters alter signal information context.
The shape and amplitude of electrocardiograms, unipolar and bipolar electrograms, and, consequently, reconstructed endocardial and epicardial maps, are influenced not only by electrophysiological and structural characteristics of the myocardial tissue involved, but with characteristics of the recording system. Amplitude and morphology of electrocardiogram and intracardiac signals are significantly affected by filters used to remove noise. Because of the number of amplitude and interval measurements made during an electrophysiology study, it is imperative that the recording system faithfully acquires surface electrocardiogram and intracardiac electrograms. We believe that the recording systems that are currently available on the market are ineffective in preserving the optimal amount of original information contained in the cardiac signals.
In addition, the electrophysiology lab consists of sophisticated equipment that requires an electrophysiologist to mentally integrate information from a number of sources during procedures. There are numerous monitors in an electrophysiology lab that provide and display this variety of information. An electrophysiologist needs to evaluate the acquired cardiac signals and the patient’s responses to any induced arrhythmias during the procedure. However, it is difficult for an electrophysiologist to synthesize the disparate information produced by the numerous monitors in the lab and calculate the real-time, three-dimensional orientation of the anatomy and the location of the recording and ablation catheters. As the number of electrophysiology procedures increase, a variety of diagnostic and therapeutic ablation catheters are becoming more widely available and new highly specialized catheters are being developed. In addition, remote robotic and magnetic navigation systems are being developed to address limitations of dexterity in controlling the catheter tip, especially during complex arrhythmia ablation procedures. We believe that, considering the improvements being made with respect to other equipment used in the electrophysiology lab and the continual increase of ablation procedures, the electrophysiology recorders currently available on the market are not sufficiently advanced with respect to the quality of their recordings to deliver adequate results. We believe that the PURE EP System will be able to deliver superior quality of recordings that will allow it to successfully integrate with the other advanced equipment found in the electrophysiology lab.
The requirement for optimal signal integrity is further amplified during ablation treatments of atrial fibrillation and ventricular tachycardia. Presently, one of the main objectives of the atrial fibrillation ablation procedure is to precisely identify, ablate and eliminate pulmonary vein potentials and one of the main objectives of the ventricular tachycardia procedure is to map the arrhythmia substrate and precisely identify, ablate and eliminate small abnormal potentials. The information provided by recorders is essential for an electrophysiologist to determine ablation strategy during termination of both pulmonary vein potentials and ventricular tachycardia. Therefore, it is important that the recording system’s noise removal technique does not alter appearance and fidelity of these potentials. As a result, it is necessary that any new signal processing preserves signal fidelity as much as possible during electrophysiology recordings; otherwise, the signals that are needed to guide the ablation procedures will be difficult to distinguish due to noise interference.
Our Products
We intend to bring to the electrophysiology market the PURE EP System, an electrocardiogram/intracardiac recorder that will be coupled with an array of software tools intended for electrophysiology studies and procedures ranging from simple diagnostic tests to ablation for the most complex cases of arrhythmias. We believe that this system will provide unique recording capabilities because we are developing it to allow precise, uninterrupted, real-time evaluations of electrocardiograms and electrograms, and allow electrophysiologists to obtain data that cannot be acquired from present day recorders.
The PURE EP System uses a combination of analog and digital signal processing to acquire and display cardiac data. Because our technology consists of proprietary hardware, software and algorithms, the original cardiac data is not distorted. In addition, we are developing a library of software tools that are designed to be configured to fit the needs of electrophysiologists in different settings and/or for different arrhythmia treatments. With the software, the PURE EP System can be positioned to provide information that can be used by electrophysiologists to help guide the ablation catheter; shorten procedure times; and can reduce the complexity of maneuvers necessary for identifying ablation targets for various arrhythmias, including atrial fibrillation and ventricular tachycardia. The PURE EP System is intended to be used in addition to existing electrophysiology recorders. We believe that the less distorted cardiac data provided by the PURE EP System will increase the workload ability and enhance the capabilities of the typical electrophysiology laboratory.
Initial Analysis
According to S. J. Asirvatham, MD, et. al. (“Signals and Signal Processing for the Electrophysiologist,” Circ Arrhythm Electrophysiol. (2011) 4:965-973), recording environments in a typical electrophysiology laboratory presents challenging situations. S. J. Asirvatham, MD, et. al., state, “Successful mapping and ablation in the electrophysiology laboratory is critically dependent on acquiring multiple, low-amplitude, intracardiac signals in the presence of numerous sources of electric noise and interference and displaying these signals in an uncomplicated and clinically relevant fashion, with minimal artifacts. This represents a significant engineering challenge and, in real-life electrophysiology laboratory, is not always successful.”
To determine and validate the state of present electrophysiology recording technology in the field, we completed a detailed analysis of the effect of filters used by existing EP recorders to reduce noise on spaciotemporal characteristics of electrocardiograms and intracardiac electrograms. We used a custom built electrocardiogram/intracardiac simulator with a database of various electrocardiogram signals combined with electrophysiology signals, along with waveforms from publicly available databases. The ability to faithfully reproduce database waveforms generated by an electrocardiogram/intracardiac simulator was tested using the PURE EP System and conventional electrophysiology recorders, the GE CardioLab and St. Jude EP-WorkMate.
We evaluated the signal quality (amplitude, morphology and duration) of the different recorders, along with the ability of the recorders to reduce noise level and remove baseline wander, which are the cardiac signals that have shifted from the isoelectric line (the base line of the signal tracing). The electrocardiogram and intracardiac signals subjected to the PURE EP System’s signal processing showed less baseline wander, noise and artifacts compared to the conventional electrophysiology recorders. Further, spaciotemporal characteristics of signals were greatly distorted by the conventional electrophysiology system, particularly when a notch filter was used, as compared to the recording of the same spaciotemporal characteristics by the PURE EP System. A notch filter is used to remove a specific frequency from the signal, especially either 60Hz in the U.S. and 50Hz in Europe, and can be implemented in hardware or software.
To date, we have not conducted any studies of the data produced by our technology that have been subjected to any third-party review, as would be required for the publication of a formal study. If we are able to demonstrate a similar level of success in removing baseline wander and reducing noise level for our planned pre-clinical and clinical studies and trials, we believe that the PURE EP System’s signal processing will become a vital part of electrophysiology labs and will greatly assist in the ablation treatment for complex arrhythmias, including atrial fibrillation and ventricular tachycardia.
Proof of Concept Testing
We developed the PURE EP System’s proof of concept unit, which is the version of the product prior to prototype. The proof of concept unit was designed using separate analog and digital boards to allow for easier debugging and to demonstrate single channel electrocardiogram and intracardiac acquisition capabilities. The proof of concept unit was built to (i) verify that the PURE EP System performs in line with our intended design of the product, (ii) validate a portion of the hardware design that we intend to use in the prototype, and (iii) verify the software used by the PURE EP System. The main objectives of the proof of concept unit were to demonstrate that the system’s hardware and software have the ability to faithfully records small cardiac signals in an electrophysiology laboratory environment and to obtain initial performance results.
In the second and third quarters of 2013, we performed and finalized testing of our proof of concept unit by initially using an electrocardiogram/intracardiac simulator at our lab, and subsequently by obtaining pre-clinical recordings from the lab at the University of California at Los Angeles. As part of the testing, we simultaneously recorded electrocardiogram and intracardiac signals on our proof of concept unit and GE’s CardioLab recording system. An identical signal was applied to the input of both systems and the monitor of our proof of concept unit was positioned next to the monitor of GE’s CardioLab recording system to allow for visual comparison. We believe that our proof of concept unit performed well as compared to GE’s CardioLab recording system, in that the electrocardiogram and intracardiac signals displayed on our proof of concept unit showed less baseline wander, noise and artifacts compared to signals displayed on GE’s CardioLab recording system. However, because this was a proof of concept test, without any clearly established protocols, we cannot present this data for publication and we do not have any independent verification or peer review of these findings.
Subsequently, in the third quarter of 2013, we analyzed the results of our proof of concept unit to determine the final design of the PURE EP System prototype. Because the proof of concept unit was designed to verify the capabilities of the main components of the PURE EP System, we established a list of tasks necessary to complete the prototype (which we intend to use for end-user preference studies, additional pre-clinical studies and research studies), which has since been completed.
Proof of Concept Testing at UCLA’s EP Lab
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Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assume the exercise of all options and other securities convertible into common stock beneficially owned by such person or entity currently exercisable or exercisable within 60 days of June 29, 2015, except as otherwise noted. Shares issuable pursuant to the exercise of stock options and other securities convertible into common stock exercisable within 60 days are deemed outstanding and held by the holder of such options or other securities for computing the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person.
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These percentages have been calculated based on 14,203,202 shares of common stock outstanding as of June 29, 2015.
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Comprised of (i) 100,000 shares of common stock, (ii) 4,216 shares of common stock issued in lieu of cash payments on the interest accrued on his bridge notes, (iii) 169,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iv) 166,508 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (v) 83,256 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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Comprised of (i) 4,216 shares of common stock issued in lieu of cash payments on the interest accrued on his bridge notes, (ii) 133,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 208,136 shares of common stock issuable upon the exercise of warrants.
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Comprised of (i) 100,000 shares of common stock, (ii) 36,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 41,628 shares of common stock issuable upon the exercise of warrants.
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S7 Capital, the general partner of Lau Family Fund LP, has voting and dispositive power over the securities held for the account of this selling stockholder. S7 Capital is controlled by Steven Lau, its manager, and accordingly, Mr. Lau may be deemed to have sole voting and dispositive power over the securities owned by Lau Family Fund LP.
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Comprised of (i) 913 shares of common stock issued in lieu of cash payments on the interest accrued on his bridge notes, (ii) 42,334 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (iii) 41,628 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 20,818 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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Comprised of (i) 913 shares of common stock issued in lieu of cash payments on the interest accrued on his bridge notes, (ii) 33,334 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (iii) 52,037 shares of common stock issuable upon the exercise of warrants.
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Comprised of (i) 9,000 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (ii) 10,409 shares of common stock issuable upon the exercise of warrants.
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Comprised of (i) 202,870 shares of common stock, (ii) 383 shares of common stock issued in lieu of cash payments on the interest accrued on his bridge notes, (iii) 21,167 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (iv) 26,937 shares of common stock issuable upon the exercise of warrants purchased in two private placement transactions, (v) 10,408 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement and (vi) options to purchase 175,000 shares of common stock that are currently exercisable or exercisable within 60 days of June 29, 2015.
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Comprised of (i) 383 shares of common stock issued in lieu of cash payments on the interest accrued on his bridge notes, (ii) 16,667 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (iii) 26,018 shares of common stock issuable upon the exercise of warrants.
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Comprised of (i) 202,870 shares of common stock, (ii) 4,500 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (iii) 11,327 shares of common stock issuable upon the exercise of warrants and (iv) options to purchase 175,000 shares of common stock that are currently exercisable or exercisable within 60 days of June 29, 2015.
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Kenneth L Londoner is our executive chairman.
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Comprised of (i) 552,132 shares of common stock directly held by Mr. Londoner and 2,579 shares of common stock issued in lieu of cash payments on the interest accrued on his bridge notes, (ii) 3,334,974 shares of common stock held by Endicott Management Partners, LLC, an entity for which Mr. Londoner is deemed the beneficial owner, (iii) 169,334 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (iv) 213,039 shares of common stock issuable upon the exercise of warrants purchased in two private placement transactions, (v) 83,256 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement and (vi) options to purchase 250,000 shares of common stock that are currently exercisable or exercisable within 60 days of June 29, 2015.
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(15)
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Comprised of (i) 2,579 shares of common stock issued in lieu of cash payments on the interest accrued on his bridge notes, (ii) 133,334 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (iii) 208,136 shares of common stock issuable upon the exercise of warrants.
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(16)
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Comprised of (i) 552,132 shares of common stock directly held by Mr. Londoner, (ii) 3,334,974 shares of common stock held by Endicott Management Partners, LLC, an entity for which Mr. Londoner is deemed the beneficial owner, (iii) 36,000 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (iv) 88,159 shares of common stock issuable upon the exercise of warrants and (v) options to purchase 250,000 shares of common stock that are currently exercisable or exercisable within 60 days of June 29, 2015.
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Comprised of (i) 25,000 shares of common stock, (ii) 315 shares of common stock issued in lieu of cash payments on the interest accrued on the bridge notes, (iii) 21,167 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iv) 20,814 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 10,408 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(18)
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Comprised of (i) 315 shares of common stock issued in lieu of cash payments on the interest accrued on the bridge notes, (ii) 16,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 26,018 shares of common stock issuable upon the exercise of warrants.
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Comprised of (i) 25,000 shares of common stock, (ii) 4,500 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 5,204 shares of common stock issuable upon the exercise of warrants.
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(20)
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Comprised of (i) 535 shares of common stock issued in lieu of cash payments on the interest accrued on his bridge notes, (ii) 84,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 83,254 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 41,628 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(21)
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Comprised of (i) 535 shares of common stock issued in lieu of cash payments on the interest accrued on his bridge notes, (ii) 66,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 104,068 shares of common stock issuable upon the exercise of warrants.
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(22)
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Comprised of (i) 18,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 20,814 shares of common stock issuable upon the exercise of warrants.
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Jerome B. Zeldis is a member of our board of directors.
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Comprised of (i) 12,245 shares of common stock, (ii) 42,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 47,751 shares of common stock issuable upon the exercise of warrants purchased in two private placement transactions, (iv) 20,818 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement and (v) options to purchase 308,334 shares of common stock that are currently exercisable or exercisable within 60 days of June 29, 2015.
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(25)
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Comprised of (i) 33,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 52,037 shares of common stock issuable upon the exercise of warrants.
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Comprised of (i) 12,245 shares of common stock, (ii) 9,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 16,532 shares of common stock issuable upon the exercise of warrants and (iv) options to purchase 308,334 shares of common stock that are currently exercisable or exercisable within 60 days of June 29, 2015.
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Shaye Hirsch, director of Brio Capital Master Fund Ltd., has sole voting and dispositive power over the securities held for the account of this selling stockholder.
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Comprised of (i) 15,519 shares of common stock, (ii) 105,833 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (iii) 63,500 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iv) 166,508 shares of common stock issuable upon the exercise of warrants purchased in two private placement transactions and (iv) 26,018 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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Comprised of (i) 83,333 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (ii) 130,086 shares of common stock issuable upon the exercise of warrants.
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(30)
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Comprised of (i) 15,519 shares of common stock, (ii) 22,500 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (iii) 63,500 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iv) 62,440 shares of common stock issuable upon the exercise of warrants.
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(31)
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Konrad Ackermann has sole voting and dispositive power over the securities held for the account of this selling stockholder.
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(32)
|
Comprised of (i) 634,034 shares of common stock, (ii) 190,500 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (iii) 656,167 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iv) 893,761 shares of common stock issuable upon the exercise of warrants purchased in three private placement transactions and (v) 130,084 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(33)
|
Comprised of (i) 150,000 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (ii) 266,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 650,419 shares of common stock issuable upon the exercise of warrants.
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(34)
|
Comprised of (i) 634,034 shares of common stock, (ii) 40,500 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (iii) 389,500 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 373,426 shares of common stock issuable upon the exercise of warrants.
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(35)
|
Comprised of (i) 21,167 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 20,814 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 10,408 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(36)
|
Comprised of (i) 16,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 26,018 shares of common stock issuable upon the exercise of warrants.
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(37)
|
Comprised of (i) 4,500 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 5,204 shares of common stock issuable upon the exercise of warrants.
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(38)
|
Comprised of (i) 27,821 shares of common stock, (ii) 82,973 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (iii) 81,589 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 30,809 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(39)
|
Comprised of (i) 65,333 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (ii) 91,998 shares of common stock issuable upon the exercise of warrants.
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(40)
|
Comprised of (i) 27,821 shares of common stock (ii) 17,640 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (iii) 20,400 shares of common stock issuable upon the exercise of warrants.
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(41)
|
Comprised of (i) 29,634 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 29,140 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 12,491 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(42)
|
Comprised of (i) 23,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 34,344 shares of common stock issuable upon the exercise of warrants.
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(43)
|
Comprised of (i) 6,300 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 7,287 shares of common stock issuable upon the exercise of warrants.
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(44)
|
Comprised of (i) 127,600 shares of common stock, (ii) 127,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 247,080 shares of common stock issuable upon the exercise of warrants purchased in three private placement transactions and (iv) 62,442 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(45)
|
Comprised of (i) 100,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 156,101 shares of common stock issuable upon the exercise of warrants.
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(46)
|
Comprised of (i) 127,600 shares of common stock, (ii) 27,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 153,421 shares of common stock issuable upon the exercise of warrants.
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(47)
|
Comprised of (i) 27,821 shares of common stock, (ii) 42,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 41,626 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 20,818 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(48)
|
Comprised of (i) 33,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 52,035 shares of common stock issuable upon the exercise of warrants.
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(49)
|
Comprised of (i) 27,821 shares of common stock, (ii) 9,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 10,409 shares of common stock issuable upon the exercise of warrants.
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(50)
|
Comprised of (i) 62,679 shares of common stock, (ii) 84,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 83,254 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 41,628 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(51)
|
Comprised of (i) 66,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 104,068 shares of common stock issuable upon the exercise of warrants.
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(52)
|
Comprised of (i) 62,679 shares of common stock, (ii) 18,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 20,814 shares of common stock issuable upon the exercise of warrants.
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(53)
|
Comprised of (i) 120,816 shares of common stock, (ii) 16,934 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 16,650 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 8,328 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(54)
|
Comprised of (i) 13,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 20,814 shares of common stock issuable upon the exercise of warrants.
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(55)
|
Comprised of (i) 120,816 shares of common stock, (ii) 3,600 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 4,164 shares of common stock issuable upon the exercise of warrants.
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(56)
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Portofino Management, Inc., the general partner of Portofino Ventures LP, has voting and dispositive power over the securities held for the account of this selling stockholder. Portofino Management, Inc. is controlled by Michael Knudsen, its president, and accordingly, Mr. Knudsen may be deemed to have sole voting and dispositive power over the securities owned by Portofino Management, Inc.
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(57)
|
Comprised of (i) 16,934 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 16,650 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 8,328 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(58)
|
Comprised of (i) 13,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 20,814 shares of common stock issuable upon the exercise of warrants.
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(59)
|
Comprised of (i) 3,600 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 4,164 shares of common stock issuable upon the exercise of warrants.
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(60)
|
Comprised of (i) 8,347 shares of common stock, (ii) 21,167 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (iii) 20,814 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 10,408 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(61)
|
Comprised of (i) 16,667 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (ii) 26,018 shares of common stock issuable upon the exercise of warrants.
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(62)
|
Comprised of (i) 8,347 shares of common stock, (ii) 4,500 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (iii) 5,204 shares of common stock issuable upon the exercise of warrants.
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(63)
|
Comprised of (i) 10,000 shares of common stock, (ii) 25,401 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 29,978 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 11,450 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(64)
|
Comprised of (i) 20,001 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 30,182 shares of common stock issuable upon the exercise of warrants.
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(65)
|
Comprised of (i) 10,000 shares of common stock, (ii) 5,400 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 11,246 shares of common stock issuable upon the exercise of warrants.
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(66)
|
Comprised of (i) 31,339 shares of common stock, (ii) 21,167 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 20,814 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 10,408 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(67)
|
Comprised of (i) 16,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 26,018 shares of common stock issuable upon the exercise of warrants.
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(68)
|
Comprised of (i) 31,339 shares of common stock, (ii) 4,500 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 5,204 shares of common stock issuable upon the exercise of warrants.
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(69)
|
Comprised of (i) 38,101 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 37,464 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 16,653 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(70)
|
Comprised of (i) 30,001 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 44,749 shares of common stock issuable upon the exercise of warrants.
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(71)
|
Comprised of (i) 8,100 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 9,368 shares of common stock issuable upon the exercise of warrants.
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(72)
|
Comprised of (i) 29,634 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 29,138 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 14,570 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(73)
|
Comprised of (i) 23,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 36,423 shares of common stock issuable upon the exercise of warrants.
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(74)
|
Comprised of (i) 6,300 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 7,285 shares of common stock issuable upon the exercise of warrants.
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(75)
|
Brian Miller, manager of Fourfathom Capital, LLC, has sole voting and dispositive power over the securities held for the account of this selling stockholder.
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(76)
|
Comprised of (i) 84,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 83,254 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 41,628 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(77)
|
Comprised of (i) 66,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 104,068 shares of common stock issuable upon the exercise of warrants.
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(78)
|
Comprised of (i) 18,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 20,814 shares of common stock issuable upon the exercise of warrants.
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(79)
|
Comprised of (i) 127,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 124,880 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 62,442 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(80)
|
Comprised of (i) 100,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 156,101 shares of common stock issuable upon the exercise of warrants.
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(81)
|
Comprised of (i) 27,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 31,221 shares of common stock issuable upon the exercise of warrants.
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(82)
|
Comprised of (i) 84,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 83,254 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 41,628 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(83)
|
Comprised of (i) 66,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 104,068 shares of common stock issuable upon the exercise of warrants.
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(84)
|
Comprised of (i) 18,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 20,814 shares of common stock issuable upon the exercise of warrants.
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(85)
|
Comprised of (i) 27,821 shares of common stock, (ii) 42,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 41,626 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 20,818 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(86)
|
Comprised of (i) 33,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 52,035 shares of common stock issuable upon the exercise of warrants.
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(87)
|
Comprised of (i) 27,821 shares of common stock, (ii) 9,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 10,409 shares of common stock issuable upon the exercise of warrants.
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(88)
|
Comprised of (i) 16,934 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 16,650 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 8,328 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(89)
|
Comprised of (i) 13,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 20,814 shares of common stock issuable upon the exercise of warrants.
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(90)
|
Comprised of (i) 3,600 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 4,164 shares of common stock issuable upon the exercise of warrants.
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(91)
|
Comprised of (i) 4,000 shares of common stock, (ii) 14,394 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 16,153 shares of common stock issuable upon the exercise of warrants purchased in two private placement transactions and (iv) 7,078 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(92)
|
Comprised of (i) 11,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 17,692 shares of common stock issuable upon the exercise of warrants.
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(93)
|
Comprised of (i) 4,000 shares of common stock, (ii) 3,060 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 5,539 shares of common stock issuable upon the exercise of warrants.
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(94)
|
Comprised of (i) 15,670 shares of common stock, (ii) 4,234 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 4,164 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 1,042 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(95)
|
Comprised of (i) 3,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 4,164 shares of common stock issuable upon the exercise of warrants.
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|
(96)
|
Comprised of (i) 15,670 shares of common stock, (ii) 900 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 1,042 shares of common stock issuable upon the exercise of warrants.
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(97)
|
Comprised of (i) 35,670 shares of common stock, (ii) 4,234 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 34,164 shares of common stock issuable upon the exercise of warrants purchased in two private placement transactions and (iv) 1,042 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(98)
|
Comprised of (i) 3,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 4,164 shares of common stock issuable upon the exercise of warrants.
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(99)
|
Comprised of (i) 35,670 shares of common stock, (ii) 900 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 31,042 shares of common stock issuable upon the exercise of warrants.
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(100)
|
Comprised of (i) 55,642 shares of common stock, (ii) 8,467 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 8,326 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 2,083 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(101)
|
Comprised of (i) 6,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 8,326 shares of common stock issuable upon the exercise of warrants.
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|
(102)
|
Comprised of (i) 55,642 shares of common stock, (ii) 1,800 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 2,083 shares of common stock issuable upon the exercise of warrants.
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|
(103)
|
Comprised of (i) 25,600 shares of common stock, (ii) 5,080 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 17,796 shares of common stock issuable upon the exercise of warrants purchased in two private placement transactions and (iv) 1,249 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(104)
|
Comprised of (i) 4,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 4,996 shares of common stock issuable upon the exercise of warrants.
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|
(105)
|
Comprised of (i) 25,600 shares of common stock, (ii) 1,080 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 14,049 shares of common stock issuable upon the exercise of warrants.
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(106)
|
Comprised of (i) 8,467 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 8,326 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 2,083 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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|
(107)
|
Comprised of (i) 6,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 8,326 shares of common stock issuable upon the exercise of warrants.
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|
(108)
|
Comprised of (i) 1,800 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 2,083 shares of common stock issuable upon the exercise of warrants.
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|
(109)
|
Comprised of (i) 12,800 shares of common stock, (ii) 8,467 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 27,526 shares of common stock issuable upon the exercise of warrants purchased in two private placement transactions and (iv) 2,083 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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|
(110)
|
Comprised of (i) 6,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 8,326 shares of common stock issuable upon the exercise of warrants.
|
|
|
(111)
|
Comprised of (i) 12,800 shares of common stock, (ii) 1,800 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 21,283 shares of common stock issuable upon the exercise of warrants.
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|
|
(112)
|
Comprised of (i) 13,910 shares of common stock, (ii) 8,467 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 8,326 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iv) 2,083 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
|
|
|
(113)
|
Comprised of (i) 6,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 8,326 shares of common stock issuable upon the exercise of warrants.
|
|
|
(114)
|
Comprised of (i) 13,910 shares of common stock, (ii) 1,800 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 2,083 shares of common stock issuable upon the exercise of warrants.
|
(115)
|
Comprised of (i) 16,934 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 16,652 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 4,164 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
|
|
|
(116)
|
Comprised of (i) 13,334 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 16,652 shares of common stock issuable upon the exercise of warrants.
|
|
|
(117)
|
Comprised of (i) 3,600 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 4,164 shares of common stock issuable upon the exercise of warrants.
|
|
|
(118)
|
Comprised of (i) 25,670 shares of common stock, (ii) 21,167 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (iii) 35,814 shares of common stock issuable upon the exercise of warrants purchased in two private placement transactions and (iv) 5,204 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
|
|
|
(119)
|
Comprised of (i) 16,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 20,814 shares of common stock issuable upon the exercise of warrants.
|
|
|
(120)
|
Comprised of (i) 25,670 shares of common stock, (ii) 4,500 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (iii) 20,204 shares of common stock issuable upon the exercise of warrants.
|
(121)
|
Comprised of (i) 21,167 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (ii) 20,814 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 5,204 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
|
|
|
(122)
|
Comprised of (i) 16,667 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (ii) 20,814 shares of common stock issuable upon the exercise of warrants.
|
(123)
|
Comprised of (i) 4,500 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (ii) 5,204 shares of common stock issuable upon the exercise of warrants.
|
|
|
(124)
|
Comprised of (i) 42,334 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock, (ii) 41,628 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 10,407 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
|
|
|
(125)
|
Comprised of (i) 33,334 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (ii) 41,628 shares of common stock issuable upon the exercise of warrants.
|
|
|
(126)
|
Comprised of (i) 9,000 shares of common stock issued upon the conversion of shares of our Series C Preferred Stock and (ii) 10,407 shares of common stock issuable upon the exercise of warrants.
|
|
|
(127)
|
Comprised of (i) 84,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 83,254 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 20,814 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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|
|
(128)
|
Comprised of (i) 66,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 83,254 shares of common stock issuable upon the exercise of warrants.
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(129)
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Comprised of (i) 18,000 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 20,814 shares of common stock issuable upon the exercise of warrants.
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(130)
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Comprised of (i) 8,467 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock, (ii) 8,326 shares of common stock issuable upon the exercise of warrants purchased in a private placement transaction and (iii) 2,083 shares of common stock issuable upon the exercise of warrants issued in consideration of certain amendments made to our Securities Purchase Agreement and Registration Rights Agreement.
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(131)
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Comprised of (i) 6,667 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 8,326 shares of common stock issuable upon the exercise of warrants.
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(132)
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Comprised of (i) 1,800 shares of common stock issuable upon the conversion of shares of our Series C Preferred Stock and (ii) 2,083 shares of common stock issuable upon the exercise of warrants.
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(133)
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Laidlaw & Co (UK) Ltd is a registered broker-dealer. Matthew Eitner is the chief executive officer of Laidlaw & Co (UK) Ltd and, in such capacity, he may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder. As consideration for serving as our placement agent in connection with the private placement of our Series C Preferred Stock and the related warrants, we issued Laidlaw & Co (UK) Ltd a five-year warrant to purchase up to 177,057 shares of our common stock, at an initial exercise price of $2.61 per share. As a result of the amendment to our Series C Preferred Stock, the full-ratchet anti-dilution protection provision of such warrant decreased the exercise price to $1.50 per share and increased the number of shares issuable to 308,079.
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(134)
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Comprised of shares of common stock issuable upon the exercise of warrants.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On August 1, 2012, we entered into a consulting agreement with Asher Holzer, Ph.D., a member of our board of directors. Pursuant to the consulting agreement, Dr. Holzer was to serve as our chief scientific officer and assist in the development of our technology and our PURE EP System, in exchange for monthly payments of $10,000. We have paid Dr. Holzer an initial payment of $7,500 pursuant to the consulting agreement. In the first quarter of 2014, we agreed to an oral amendment to our consulting agreement with Dr. Holzer, which resulted in Dr. Holzer agreeing to receive (i) a payment of $65,000, which will be paid by us upon our closing of a capital raising transaction that results in proceeds to us of at least $5 million, and (ii) a future option grant to purchase 125,000 shares of our common stock, in exchange for acknowledging that no other payments are due by us to Dr. Holzer pursuant to the consulting agreement.
On September 1, 2014, we entered into a letter agreement and release with Dr. Holzer, pursuant to which Dr. Holzer agreed to cancel, extinguish and terminate all amounts due or owed by us for services performed by Dr. Holzer pursuant to that certain consulting agreement, dated as of August 1, 2012, as amended. In connection with the cancellation of all payment obligations and in exchange for Dr. Holzer waiving and releasing us from all possible claims related to such obligations under the consulting agreement, Dr. Holzer received 26,000 shares of our common stock. Dr. Holzer also agreed to provide us with one additional year of consulting services in exchange for 34,000 shares of common stock.
On November 21, 2012, we issued an unsecured promissory note for $218,000 to Kenneth L. Londoner, our then chairman and chief executive officer, for previously advanced funds with interest payable annually, in arrears, on each anniversary at the short term “Applicable Federal Rate” within the meaning of Section 1274(d) of the Internal Revenue Code of 1986, as amended, which was 0.22% in November 2012, and which will be adjusted each anniversary date. The promissory note matures November 21, 2021 and may be prepaid, without premium or penalty, at any time. In connection with the private placement of our Series C Preferred Stock and warrants, on February 6, 2013, Mr. Londoner agreed not to receive payments (by voluntary prepayment, acceleration, set-off or otherwise) associated with the unsecured promissory note absent the prior written consent of the purchasers holding at least 67% interest of our Series C Preferred Stock outstanding, which purchasers must include Alpha Capital Anstalt so long as Alpha Capital Anstalt holds not less than $100,000 of our Series C Preferred Stock. As of June 30, 2013, aggregate interest of $277.19 had accrued on this unsecured promissory note. The unsecured promissory note was converted into our equity securities, pursuant to a private placement transaction on December 31, 2013, as described below.
On December 6, 2012, we issued an unsecured promissory note for $30,000 to a company under the control of Mr. Londoner for previously advanced funds, interest free and due the earlier of (i) the next financing of not less than $300,000; (ii) February 28, 2013 or (iii) occurrence of an event of default, as defined. The promissory note has been paid in full.
In the fourth quarter of 2012, we sold $600,000 principal amount of certain bridge notes and related warrants in a private placement to selected accredited investors. These bridge notes and related warrants were converted into shares of our Series C Preferred Stock and warrants on February 6, 2013. Kenneth L. Londoner, our then chairman and chief executive officer, purchased $200,000 principal amount of notes, which were converted into 200 shares of Series C Preferred Stock and a warrant to purchase 95,694 shares of our common stock; and Jonathan Steinhouse, a member of our board of directors, purchased $25,000 principal amount of notes, which were converted into 25 shares of Series C Preferred Stock and a warrant to purchase 11,962 shares of our common stock. We also issued to Mr. Londoner and Mr. Steinhouse, in lieu of cash payments on the interest accrued on their respective bridge notes, 2,579 and 383 shares of common stock, respectively. The terms of the Series C Preferred Stock were amended on March 27, 2014 to provide for a decrease of the conversion price of the Series C Preferred Stock from $2.09 per share to $1.50 per share. As a result of the amendment, the full-ratchet anti-dilution protection provision of the related warrants decreased the exercise price of the warrants from $2.61 per share to $1.50 per share and the number of shares issuable under each warrant was increased such that the aggregate exercise price payable under such warrant, after taking into account the decrease in the exercise price, is equal to the aggregate exercise price prior to such adjustment. As such, the number of shares of common stock issuable upon exercise of the warrants increased to 166,508 shares for Mr. Londoner and 20,814 shares for Mr. Steinhouse. In addition, in connection with amendments to the terms of the Series C Preferred Stock, we issued to (i) Mr. Londoner warrants to purchase an aggregate of 83,256 shares of common stock and (ii) Mr. Steinhouse warrants to purchase an aggregate of 10,408 shares of common stock, which such figures reflect the triggering of the full-ratchet anti-dilution protection provision of the warrants.
From 2010 to 2013, Mr. Londoner made four different advances of funds to us in the aggregate amount of $22,000, of which $12,000 has been repaid. In the first quarter of 2013, Mr. Steinhouse made an advance of funds to us in the amount of $20,000, which has been repaid in full. These advances were interest-free and not made on condition of any specific terms. The remaining $10,000 owed to Mr. Londoner was converted into our equity securities, pursuant to a private placement transaction on December 31, 2013, as described below.
On February 12, 2013, as part of a private placement transaction, we issued to Alpha Capital Anstalt 625 shares of Series C Preferred Stock and a warrant to purchase 520,335 shares of our common stock for a purchase price of $625,000. In addition, in connection with amendments to the terms of the Series C Preferred Stock, we issued to Alpha Capital Anstalt warrants to purchase an aggregate of 260,168 shares of common stock. The number of shares of common stock issuable upon exercise of the warrants reflect the triggering of the full-ratchet anti-dilution protection provision of the warrants.
In the fourth quarter of 2013, Steve Chaussy, our chief financial officer, made three different advances of funds to us in the aggregate amount of $21,545, which was repaid in 2014. Also in the fourth quarter of 2013, Mr. Steinhouse made an advance of funds to us in the amount of $6,000, which was repaid in 2014. In addition, in the fourth quarter of 2013, Lora Mikolaitis, who controls Miko Consulting Group, Inc., made an advance of funds to us in the amount of approximately $2,700. These advances were interest-free and not made on condition of any specific terms. Each of these advances was repaid in full in the first quarter of 2014.
On December 31, 2013, as part of a private placement transaction of our common stock and warrants, (i) $228,000 of our outstanding indebtedness that was due to Mr. Londoner was converted into 93,061 shares of common stock and a warrant to purchase 46,531 shares of our common stock; and (ii) we issued to Alpha Capital Anstalt 122,448 shares of our common stock and a warrant to purchase 61,225 shares of our common stock for a purchase price of $300,000.
On January 31, 2014, as part of a private placement transaction of our common stock and warrants, Mr. Steinhouse purchased an aggregate of 24,490 shares of common stock and a warrant to purchase 12,246 shares of common stock for an aggregate purchase price of $60,000.
On March 5, 2014, Mr. Steinhouse made an advance of funds to us in the aggregate amount of $10,000, which was repaid in full on April 3, 2014. The advance was interest-free and not made on condition of any specific terms.
On September 12, 2014, Sterne Agee & Leach Inc. C/F Jonathan Steinhouse R/O IRA, as part of a private placement transaction of our common stock and warrants, purchased an aggregate of 4,000 shares of common stock and a warrant to purchase 2,000 shares of common stock for an aggregate purchase price of $10,000.
On October 22, 2014, the Company issued an aggregate of 21,167 shares of its common stock to Mr. Steinhouse in exchange for 25 shares of the Company’s Series C Preferred Stock and accrued dividends, at a conversion price of $1.50 per share.
On March 23, 2015, the Company issued an aggregate of 169,334 shares of its common stock to Mr. Londoner in exchange for 200 shares of the Company’s Series C Preferred Stock and accrued dividends, at a conversion price of $1.50 per share.
On May 11, 2015, we entered into a securities purchase agreement with Alpha Capital Anstalt, pursuant to which we issued 375 shares of our Series C Preferred Stock and five-year warrants to purchase 312,201 shares of our common stock for aggregate cash proceeds of $375,000.
On May 21, 2015, the Company issued an aggregate of 190,500 shares of its common stock to Alpha Capital Anstalt in exchange for 225 shares of the Company’s Series C Preferred Stock and accrued dividends, at a conversion price of $1.50 per share.
DESCRIPTION OF SECURITIES
We have authorized 51,000,000 shares of capital stock, par value $0.001 per share, of which 50,000,000 are shares of common stock and 1,000,000 are shares of “blank check” preferred stock, of which 200 are authorized as Series A Preferred Stock, 600 are authorized as Series B Preferred Stock and 4,200 are authorized as Series C Preferred Stock. On June 29, 2015, there were 14,203,202 shares of common stock issued and outstanding, 2,408 shares of Series C Preferred Stock issued and outstanding and no shares of Series A Preferred Stock or Series B Preferred Stock issued and outstanding.
A portion of the shares of common stock offered by this prospectus are issuable upon the exercise of common stock purchase warrants. As such, if a selling stockholder exercises all or any portion of its warrants on a cash basis, we will receive the aggregate exercise price paid by such selling stockholder in connection with any such warrant exercise. The maximum amount of proceeds we would receive upon the exercise of all the warrants on a cash basis would be approximately $4.23 million. However, certain of the selling stockholders may also exercise their warrants through a cashless exercise. In the event a selling stockholder exercises a warrant through a cashless exercise, we will not receive any proceeds from such exercise. We expect to use the proceeds received from the exercise of the warrants, if any, for general working capital purposes.
Holders of Capital Stock
As of June 29, 2015, we had 245 holders of our common stock, no holders of our Series A Preferred Stock or Series B Preferred Stock, and 34 holders of our Series C Preferred Stock.
Common Stock
The holders of common stock are entitled to one vote per share on all matters to be voted upon by stockholders. Holders of our common stock are entitled to receive ratably dividends as may be declared by the board of directors out of funds legally available for that purpose. In the event of our liquidation, dissolution, or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities. The common stock has no preemptive or conversion rights, other subscription rights, or redemption or sinking fund provisions.
Each share of common stock entitles the holder to one vote, either in person or by proxy, at meetings of stockholders. The holders are not permitted to vote their shares cumulatively. Accordingly, the stockholders of our common stock who hold, in the aggregate, more than fifty percent of the total voting rights can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding shares of common stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.
The rights of the holders of our Series C Preferred Stock, as described below, prohibit us from paying cash dividends to our holders of common stock absent the approval of holders representing at least 67% of the outstanding shares of the Series C Preferred Stock, which holders must include Alpha Capital Anstalt, so long as Alpha Capital Anstalt holds not less than $100,000 of the Series C Preferred Stock. We have not paid any dividends since our inception, and, subject to our obligations to pay dividends to the holders of the Series C Preferred Stock as described below, we presently anticipate that all earnings, if any, will be retained for development of our business. Even if we are permitted to pay cash dividends in the future, any future disposition of dividends will be at the discretion of our board of directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.
Holders of our common stock have no preemptive rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Subject to the rights of the holders of our preferred stock, upon our liquidation, dissolution or winding up, the holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities. There are no provisions in our Amended and Restated Certificate of Incorporation or our By-laws that would prevent or delay a change in our control.
Preferred Stock
On June 23, 2014, upon effectiveness of our registration statement on Form S-1, all outstanding shares of our Series A Preferred Stock and our Series B Preferred Stock, including dividends accrued on the shares of preferred stock, automatically converted into shares of our common stock. As a result, there are presently no issued and outstanding shares of Series A Preferred Stock or Series B Preferred Stock.
Each share of the Series C Preferred Stock is entitled to a nine percent (9%) annual dividend on the $1,000 per share stated value. Unless the Series C Preferred Stock is converted into shares of common stock, the dividends shall accrue and be payable in cash or, subject to the satisfaction of certain conditions, in pay-in-kind shares. Such cumulative dividends are payable quarterly, commencing on September 30, 2013 and on each conversion date; provided, however, that if a holder converts its shares of Series C Preferred Stock into shares of common stock any time prior to February 12, 2016, the holder will be deemed to have earned a make whole amount as if such shares of Series C Preferred Stock had been outstanding until such date. The terms of the Series C Preferred Stock were amended on March 27, 2014 and August 15, 2014. The description herein reflects such amended terms.
In the event that
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(i)
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we fail to, or announce our intention not to, deliver common stock share certificates upon conversion of our Series C Preferred Stock prior to the seventh trading day after such shares are required to be delivered,
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(ii)
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we fail for any reason to pay in full the amount of cash due pursuant to our failure to deliver common stock share certificates upon conversion of our Series C Preferred Stock within five calendar days after notice therefor is delivered,
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(iii)
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we fail to have available a sufficient number of authorized and unreserved shares of common stock to issue upon a conversion of our Series C Preferred Stock,
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(iv)
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we fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of our obligations under, the securities purchase agreement, the registration rights agreement, the certificate of designation or the warrants entered into pursuant to the private placement transaction for our Series C Preferred Stock, which failure or breach could have a material adverse effect, and such failure or breach is not cured within 30 calendar days after written notice was delivered,
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(v)
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we are party to a change of control transaction,
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(vi)
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we file for bankruptcy or a similar arrangement or are adjudicated insolvent,
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(vii)
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we are subject to a judgment, including an arbitration award against us, of greater than $100,000, and such judgment remains unvacated, unbonded or unstayed for a period of 45 calendar days,
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the holders of the Series C Preferred Stock are entitled, among other rights, to redeem their shares of Series C Preferred Stock at any time for greater than their stated value or increase the dividend rate on their shares of Series C Preferred Stock to 18%.
Because we failed to complete a financing or series of related financings by February 12, 2014 that resulted in gross proceeds to us of at least $3 million at a valuation of at least $30 million, and because we failed to maintain the listing of our common stock on a trading market for more than five trading days in any twelve month period at any time after February 12, 2014,the conversion price of the Series C Preferred Stock was reduced to $1.50 per share.
In the event of our liquidation or winding up of affairs, the holders of the Series C Preferred Stock will be entitled to a liquidation preference of the stated value plus any accrued but unpaid dividends or any other fees due the holder. The shares of the Series C Preferred Stock rank senior to the rights of the common stock and all other securities exercisable or convertible into shares of common stock.
Any holder of Series C Preferred Stock is entitled at any time to convert any whole or partial number of shares of Series C Preferred Stock into shares of our common stock at a price of $1.50 per share. The Series C Preferred Stock is subject to full ratchet anti-dilution price protection upon the issuance of equity or equity-linked securities at an effective common stock purchase price of less than $1.50 per share as well as other customary anti-dilution protection.
In the event we issue any equity or equity-linked securities with terms more favorable than those of the Series C Preferred Stock, any holder of the Series C Preferred Stock may request to amend the terms of such holder’s Series C Preferred Stock to be equivalent to the terms of such issued equity or equity-linked securities, subject to certain exempted issuances.
The holders of the Series C Preferred Stock vote together with the holders of our common stock on an as-converted basis, but may not vote the Series C Preferred Stock in excess of the beneficial ownership limitation of the Series C Preferred Stock. The beneficial ownership limitation is 4.99% of our then outstanding shares of common stock following such conversion or exercise, which may be increased to up to 9.99% of our then outstanding shares of common stock following such conversion or exercise upon the request of an individual holder. The beneficial ownership limitation is determined on an individual holder basis, such that the as-converted number of shares of one holder is not included in the shares outstanding when calculating the limitation for a different holder. In addition, absent the approval of holders representing at least 67% of the outstanding shares of the Series C Preferred Stock, which holders must include Alpha Capital Anstalt, so long as Alpha Capital Anstalt holds not less than $100,000 of Series C Preferred Stock, we may not (i) increase the number of authorized shares of preferred stock, (ii) amend our charter documents, including the terms of the Series C Preferred Stock, in any manner adverse to the holders of the Series C Preferred Stock, including authorizing or creating any class of stock ranking senior to, or otherwise pari passu with, the shares of Series C Preferred Stock as to dividends, redemption or distribution of assets upon a liquidation, or (iii) perform certain covenants, including:
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incur additional indebtedness;
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permit liens on assets;
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repay, repurchase or otherwise acquire more than a de minimis number of shares of capital stock;
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pay cash dividends to our stockholders; and
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engage in transactions with affiliates.
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Pursuant to the securities purchase agreement for the Series C Preferred Stock, each holder of Series C Preferred Stock has a right to participate in any of our financings, subject to certain exceptions, on a pro-rata basis, for a period expiring 12 months after the date our registration statement on Form S-1 became effective on June 23, 2014.
Warrant
Five-Year Warrants
In connection with the private placement of our Series C Preferred Stock, we issued to the holders of our Series C Preferred Stock warrants to purchase up to an aggregate of 1,330,629 shares of common stock at an exercise price of $2.61 per share. The warrants contain full ratchet anti-dilution price protection upon the issuance of equity or equity-linked securities at an effective common stock purchase price of less than $2.61 per share as well as other customary anti-dilution protection. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”. As a result of an amendment to the conversion price of our Series C Preferred Stock, the full-ratchet anti-dilution protection provision of the warrants decreased the exercise price of the warrants from $2.61 per share to $1.50 per share and increased the aggregate number of shares issuable under the warrants to 2,315,301.
Five-Year Amendment Warrants
As consideration for (i) extending the termination date of the securities purchase agreement and (ii) extending the filing and effectiveness dates for the filing of the registration statement pursuant to the registration rights agreement related to our Series C Preferred Stock, we issued to the holders of our Series C Preferred Stock that purchased shares of our Series C Preferred Stock prior to the July 15, 2013 closing warrants to purchase up to an aggregate of 289,730 shares of common stock. The terms of these warrants are identical to the Five-Year Warrants described above. As a result of an amendment to the conversion price or our Series C Preferred Stock, the full-ratchet anti-dilution protection provision of the warrants decreased the exercise price of the warrants from $2.61 per share to $1.50 per share and increased the aggregate number of shares issuable under the warrants to 504,130.
October 2013 Five-Year Amendment Warrants
As consideration for amending the terms of the securities purchase agreement to permit our private placement of our common stock and warrants in December 2013, we issued to the holders of our Series C Preferred Stock warrants to purchase up to an aggregate of 332,684 shares of common stock. The terms of these warrants are identical to the Five-Year Warrants described above. As a result of an amendment to the conversion price or our Series C Preferred Stock, the full-ratchet anti-dilution protection provision of the warrants decreased the exercise price of the warrants from $2.61 per share to $1.50 per share and increased the aggregate number of shares issuable under the warrants to 578,870.
December 2013 Five-Year Warrants
In connection with the private placement of our common stock in December 2013 and January 2014, we issued to the investors participating in the private placement warrants to purchase up to an aggregate of 177,948 shares of common stock at an exercise price of $3.67 per share. The warrants contain customary anti-dilution protections. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”.
April 2014 Five-Year Warrants
In connection with the private placement of our common stock in April 2014, we issued to the investors participating in the private placement warrants to purchase up to an aggregate of 114,880 shares of common stock at an exercise price of $3.75 per share. The warrants contain customary anti-dilution protections. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”.
August 2014 Five-Year Warrants
In connection with the private placement of our common stock in August and September 2014, we issued to the investors participating in the private placement warrants to purchase up to an aggregate of 190,600 shares of common stock at an exercise price of $2.75 per share. The warrants contain customary anti-dilution protections. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”.
December 2014 “A” and “B” Warrants
In connection with the private placement of our common stock in December 2014 and January, February and March 2015, we issued to the investors participating in the private placement warrants to purchase up to an aggregate of 2,405,400 shares of common stock. Of the warrants issued, 1,603,600 warrants are exercisable at $2.50 per share expiring July 31, 2015 (the “‘A’ Warrants”) and 801,800 warrants are exercisable at $3.75 per share expiring March 31, 2020 (the “‘B’ Warrants”). The warrants contain customary anti-dilution protections. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”.
Series A Placement Agent Warrant
As consideration for serving as our placement agent in connection with the private placement of Series A Preferred Stock, we issued to Laidlaw & Company (UK) Ltd. a seven-year warrant to purchase up to 35,076 shares of common stock at an exercise price of $1.84 per share. The terms of this warrant are otherwise identical to the Five-Year Warrants described above.
Series B Placement Agent Warrant
As consideration for serving as our placement agent in connection with the private placement of Series B Preferred Stock, we issued to Laidlaw & Company (UK) Ltd. a seven-year warrant to purchase up to 30,755 shares of common stock at an exercise price of $2.02 per share. The terms of this warrant are otherwise identical to the Five-Year Warrants described above.
Series C Placement Agent Warrant
As consideration for serving as our placement agent in connection with the private placement of Series C Preferred Stock, we issued to Laidlaw & Company (UK) Ltd. a warrant to purchase up to 177,057 shares of common stock. The terms of this warrant are identical to the Five-Year Warrants described above. As a result of an amendment to the conversion price or our Series C Preferred Stock, the full-ratchet anti-dilution protection provision of the warrants decreased the exercise price of the warrants from $2.61 per share to $1.50 per share and increased the aggregate number of shares issuable under the warrants to 308,079.
Par Value Warrant
As consideration for providing general financial advisory services, we issued to Jamess Capital Group LLC a seven-year warrant to purchase up to 383,320 shares of common stock at an exercise price of $0.001 per share. The terms of this warrant are otherwise identical to the Five-Year Warrants described above.
Common Stock Placement Agent Warrants
As consideration for serving as our placement agent in connection with a private placement of our common stock, we issued to Laidlaw & Company (UK) Ltd. a warrant to purchase up to 40,327 shares of common stock. The terms of this warrant are identical to the December 2013 Five-Year Warrants described above.
As consideration for serving as our placement agent in connection with a private placement of our common stock, we issued to Laidlaw & Company (UK) Ltd. a warrant to purchase up to 22,976 shares of common stock. The terms of this warrant are identical to the April 2014 Five-Year Warrants described above.
As consideration for serving as our placement agent in connection with a private placement of our common stock, we issued to Laidlaw & Company (UK) Ltd. a warrant to purchase up to 38,120 shares of common stock. The terms of this warrant are identical to the August 2014 Five-Year Warrants described above.
As consideration for serving as our placement agent in connection with a private placement of our common stock, we issued to Laidlaw & Company (UK) Ltd. a warrant to purchase up to 400,900 shares of common stock. The terms of this warrant are identical to the “B” Warrants described above.
Registration Rights
On February 6, 2013, in connection with our private placement of our Series C Preferred Stock and warrants, we entered into a registration rights agreement with the purchasers pursuant to which we agreed to provide certain registration rights with respect to the common stock issuable upon conversion of our Series C Preferred Stock and exercise of the warrants issued to holders of our Series C Preferred Stock. Specifically, we agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the common stock issuable upon conversion of the Series C Preferred Stock and exercise of the warrants on or before July 22, 2013 and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within five trading days after we are notified that registration statement is not being reviewed by the Securities and Exchange Commission, and by November 22, 2013 in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments.
If (i) the registration statement is not filed by July 22, 2013, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within five trading days after we are notified that registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission by November 22, 2013 in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 20 consecutive calendar days or more than an aggregate of 45 calendar days during any 12-month period after its first effective date, then we are subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 0.25% of the aggregate purchase price paid by such purchasers per month of delinquency. Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreement shall be 3% of the aggregate purchase price paid by the purchasers, and (ii) if any partial amount of liquidated damages remains unpaid for more than seven days, we shall pay interest of 18% per annum, accruing daily, on such unpaid amount.
Pursuant to the registration rights agreement, we must maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions, subject to the our right to suspend or defer the use of the registration statement in certain events.
We filed a registration statement on July 22, 2013, which was originally declared effective on June 23, 2014. The post-effective amendment to the registration statement of which this prospectus forms a part was filed to update the registration statement to include audited financial statements for the 2014 fiscal year to satisfy the requirements under the registration rights agreement with the purchasers of our Series C Preferred Stock and warrants.
On each of December 31, 2013, April 4, 2014, August 15, 2014, and December 19, 2014, in connection with concurrent private placements of our common stock and warrants, we entered into registration rights agreements with the purchasers in such private placements pursuant to which we agreed to provide certain registration rights with respect to the common stock issued to the investors participating in such private placements and the common stock issuable upon exercise of the related warrants issued such investors. Specifically, we agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the shares of common stock issued pursuant to the private placement and issuable upon the exercise of the warrants within 45 days of the termination date of such private placement and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within 30 calendar days after we are notified that registration statement is not being reviewed by the Securities and Exchange Commission, and within 180 calendar days of the initial filing date of the registration statement in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments.
If (i) the registration statement is not filed within 45 days of the applicable termination date, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within 30 calendar days after we are notified that registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission within 180 calendar days of the initial filing date of the registration statement in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 10 consecutive calendar days or more than an aggregate of 15 calendar days during any 12-month period after its first effective date, then we are subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 1.0% of the aggregate purchase price paid by such purchasers per month of delinquency, provided, however, that we will not be required to make any payments any of the foregoing events occurred at such time that all securities registered or to be registered in the registration statement are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and provided, further, that we will not be required to make any liquidated damage payments with respect to any securities registered or to be registered in the registration statement that we are unable to register due to limits imposed by the Securities and Exchange Commission’s interpretation of Rule 415 under the Securities Act of 1933, as amended. Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreements dated December 31, 2013, April 4, 2014 and August 15, 2014 shall be 3% of the aggregate purchase price paid by the purchasers, (ii) the maximum aggregate liquidated damages due under the registration rights agreement dated December 19, 2014 shall be 6% of the aggregate purchase price paid by the purchasers and (iii) if any partial amount of liquidated damages remains unpaid for more than seven days, we shall pay interest of 18% per annum, accruing daily, on such unpaid amount.
Pursuant to the registration rights agreements, we must maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions, subject to the our right to suspend or defer the use of the registration statement in certain events.
We filed a registration statement on May 20, 2015, which was declared effective on June 12, 2015 to satisfy the requirements under the registration rights agreements with the purchasers of our common stock and warrants.
Delaware Anti-Takeover Law and Provisions of our Amended and Restated Certificate of Incorporation and By-laws
Section 203 of the Delaware General Corporation Law, in general, prohibits a business combination between a corporation and an interested stockholder within three years of the time such stockholder became an interested stockholder, unless:
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prior to such time the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
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upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, exclusive of shares owned by directors who are also officers and by certain employee stock plans; or
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at or subsequent to such time, the business combination is approved by the board of directors and authorized by the affirmative vote at a stockholders’ meeting of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.
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The term “business combination” is defined to include, among other transactions between an interested stockholder and a corporation or any direct or indirect majority owned subsidiary thereof: a merger or consolidation; a sale, lease, exchange, mortgage, pledge, transfer or other disposition (including as part of a dissolution) of assets having an aggregate market value equal to 10% or more of either the aggregate market value of all assets of the corporation on a consolidated basis or the aggregate market value of all the outstanding stock of the corporation; certain transactions that would result in the issuance or transfer by the corporation of any of its stock to the interested stockholder; certain transactions that would increase the interested stockholder’s proportionate share ownership of the stock of any class or series of the corporation or such subsidiary; and any receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation or any such subsidiary.
In general, Section 203 defines an “interested stockholder” as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with, or controlling, or controlled by, the entity or person. The term “owner” is broadly defined to include any person that individually, with or through that person’s affiliates or associates, among other things, beneficially owns the stock, or has the right to acquire the stock, whether or not the right is immediately exercisable, under any agreement or understanding or upon the exercise of warrants or options or otherwise or has the right to vote the stock under any agreement or understanding, or has an agreement or understanding with the beneficial owner of the stock for the purpose of acquiring, holding, voting or disposing of the stock.
The restrictions in Section 203 do not apply to corporations that have elected, in the manner provided in Section 203, not to be subject to Section 203 of the Delaware General Corporation Law or, with certain exceptions, which do not have a class of voting stock that is listed on a national securities exchange or held of record by more than 2,000 stockholders. Our Amended and Restated Certificate of Incorporation and By-laws do not opt out of Section 203.
Section 203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.
Provisions of our Amended and Restated Certificate of Incorporation and By-laws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our Amended and Restated Certificate of Incorporation and By-laws:
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do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);
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provide that special meetings of our stockholders may be called only by our board of directors, chairman, chief executive officer, president or secretary; and
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provide advance notice provisions with which a stockholder who wishes to nominate a director or propose other business to be considered at a stockholder meeting must comply.
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Indemnification of Directors and Officers
Pursuant to Section 145 of the Delaware General Corporation Law, a corporation has the power to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a third-party action, other than a derivative action, and against expenses actually and reasonably incurred in the defense or settlement of a derivative action, provided that there is a determination that the individual acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe the individual’s conduct was unlawful. Such determination will be made, in the case of an individual who is a director or officer at the time of such determination:
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by a majority of the disinterested directors, even though less than a quorum;
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by a committee of such directors designated by a majority vote of such directors, even though less than a quorum;
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if there are no disinterested directors, or if such directors so direct, by independent legal counsel; or
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by a majority vote of the stockholders, at a meeting at which a quorum is present.
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Without court approval, however, no indemnification may be made in respect of any derivative action in which such individual is adjudged liable to the corporation.
The Delaware General Corporation Law requires indemnification of directors and officers for expenses relating to a successful defense on the merits or otherwise of a derivative or third-party action.
The Delaware General Corporation Law permits a corporation to advance expenses relating to the defense of any proceeding to directors and officers contingent upon such individuals’ commitment to repay any advances unless it is determined ultimately that such individuals are entitled to be indemnified.
Under the Delaware General Corporation Law, the rights to indemnification and advancement of expenses provided in the law are non-exclusive, in that, subject to public policy issues, indemnification and advancement of expenses beyond that provided by statute may be provided by law, agreement, vote of stockholders, disinterested directors or otherwise.
Limitation of Personal Liability of Directors
The Delaware General Corporation Law provides that a corporation’s certificate of incorporation may include a provision limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. However, no such provision can eliminate or limit the liability of a director for:
Our Amended and Restated Certificate of Incorporation provides that our directors will not be personally liable to us or any of our stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by the Delaware General Corporation Law.
Disclosure of Commission Position on Indemnification for Securities Act Liabilities
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to our directors, officers and persons controlling us, we have been advised that it is the Securities and Exchange Commission’s opinion that such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.
As used in this prospectus, “selling stockholders” includes the successors-in-interest, donees, transferees, pledgees or others who may later hold the selling stockholders’ interests. In all cases, the selling stockholders will act independently of us in making decisions with respect to the timing, manner, size and price of each sale.
The selling stockholders may sell some or all of their shares of common stock at a fixed price of $1.50 per share until our common stock is quoted on the OTC Bulletin Board, and thereafter, at prevailing market prices or privately negotiated prices. After the effective date of the registration statement relating to this prospectus, we hope to have a market maker file an application with the Financial Industry Regulatory Authority for our common stock to eligible for trading on the OTC Bulletin Board. There can be no assurance that a market maker will agree to file the necessary documents with the Financial Industry Regulatory Authority, nor can there be any assurance that such an application for quotation will be approved.
Once a market has developed for our common stock, each selling stockholder of the common stock may, from time to time, sell any or all of their shares of common stock on the OTC Bulletin Board or any other stock exchange, market or trading facility on which the shares are listed or quoted at the time of sale or in private transactions. These sales may be at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or negotiated prices. A selling stockholder may use any one or more of the following methods when selling shares:
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
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broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
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through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
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loan or pledge the shares to a broker-dealer, who may sell the loaned shares or, in the event of default, sell the pledged shares;
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through underwriters or dealers;
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directly to purchasers, including institutional investors;
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a combination of any such methods of sale; or
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any other method permitted pursuant to applicable law.
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In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act of 1933, as amended, may be sold under Rule 144 rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.
In connection with the sale of the common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of the common stock short after the effective date of the registration statement of which this prospectus is a part and deliver common stock registered hereby to close out their short positions and to return borrowed shares in connection with such short sales, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933, as amended. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of the shares of common stock will be paid by the selling stockholder and/or the purchasers. Each selling stockholder has represented and warranted to us that it acquired the securities subject to this registration statement solely for its own account and not with a view to, or for offer or sale in connection with, any distribution thereof. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent (8%).
We are required to pay certain fees and expenses incurred by us incident to the registration of the shares, but we will not receive any proceeds from the sale of the common stock. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act of 1933, as amended.
Because selling stockholders may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, they will be subject to the prospectus delivery requirements of the Securities Act of 1933, as amended, including Rule 172 thereunder. There is no underwriter or coordinating broker acting in connection with the proposed sale of the common stock by the selling stockholders.
We have agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the selling stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for us to be in compliance with the current public information under Rule 144 under the Securities Act of 1933, as amended, or any other rule of similar effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act of 1933, as amended, or any other rule of similar effect. The shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the shares covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act of 1934, as amended, any person engaged in the distribution of the common stock may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act of 1933, as amended).
Haynes and Boone, LLP, New York, New York, will pass upon the validity of the shares of our common stock offered by the selling stockholders under this prospectus.
Our financial statements as of December 31, 2014 and 2013 and for the years then ended included in this prospectus have been audited by Liggett, Vogt & Webb, P.A., an independent registered public accounting firm, as stated in its report appearing in the registration statement, and are included in reliance upon the report of such firm given upon its authority as experts in accounting and auditing.
Change in Our Public Accounting Firm
On May 28, 2013, we advised Rosenberg Rich Baker Berman & Company that it was dismissed as our independent registered public accounting firm. On June 11, 2013, we engaged Liggett, Vogt & Webb P.A., as our independent registered public accounting firm. The decision to dismiss Rosenberg Rich Baker Berman & Company as our independent registered public accounting firm was approved by our board of directors.
The report of Rosenberg Rich Baker Berman & Company on our financial statements for the fiscal years ended December 31, 2011 and December 31, 2012 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles, except that the report raised substantial doubt as to our ability to continue as a going concern.
From our inception through May 28, 2013, there was a disagreement with Rosenberg Rich Baker Berman & Company with regard to the application of accounting principles to certain anti-dilution provisions embedded within our Series C Preferred Stock and related warrants issued during the three months ended March 31, 2013. This disagreement was not discussed by our board of directors. We authorized Rosenberg Rich Baker Berman & Company to respond fully to the inquiries of Liggett, Vogt & Webb P.A. concerning the application of accounting principles with certain anti-dilution provisions embedded within our Series C Preferred Stock and related warrants issued during the three months ended March 31, 2013.
From our inception through date of engagement (June 11, 2013), we did not consult Liggett, Vogt & Webb P.A. regarding either: (i) the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on our financial statements; or (ii) any matter that was the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration statement on Form S-1, together with any amendments and related exhibits, under the Securities Act of 1933, as amended, with respect to our shares of common stock offered by this prospectus. The registration statement contains additional information about us and our shares of common stock that the selling stockholders are offering in this prospectus.
We are required to file annual, quarterly and current reports and other information with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Our Securities and Exchange Commission filings are available to the public over the Internet at the Securities and Exchange Commission’s website at http://www.sec.gov. You may also read and copy any document we file at the Securities and Exchange Commission’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. Access to those electronic filings is available as soon as practicable after filing with the Securities and Exchange Commission. You may also request a copy of those filings, excluding exhibits, from us at no cost. Any such request should be addressed to us at: 8441 Wayzata Blvd., Suite 240, Minneapolis, Minnesota 55426, Attention: Kenneth L. Londoner, Executive Chairman.
BIOSIG TECHNOLOGIES, INC.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
BioSig Technologies, Inc.
We have audited the accompanying balance sheet of BioSig Technologies. Inc. (“the Company”) as of December 31, 2014 and 2013, and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of BioSig Technologies, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred losses from operations since its inception and has a net stockholders’ deficiency. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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/s/ Liggett, Vogt & Webb, P.A.
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Liggett, Vogt & Webb, P.A.
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February 20, 2015
New York, New York
BIOSIG TECHNOLOGIES, INC.
BALANCE SHEETS
DECEMBER 31, 2014 AND 2013
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2014
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2013
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ASSETS
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Current assets:
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Property and equipment, net
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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Accounts payable and accrued expenses, including $40,293 and $92,308 to related parties as of December 31, 2014 and 2013, respectively
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Liability to placement agent
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Redeemable Series A Preferred Stock, 184.4 shares issued and outstanding, liquidation preference of $922,000, net of debt discount of $37,399 as of December 31, 2013
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Redeemable Series B Preferred Stock, 177.5 shares issued and outstanding, liquidation preference of $887,500, net of debt discount of $72,478 as of December 31, 2013
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Total current liabilities
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Series C 9% Convertible Preferred stock, 2,711 and 2,781 shares issued and outstanding liquidation preference of $2,711,000 and $2,781,000, net of debt discount of $-0- and $483,893, respectively
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Preferred stock, $0.001 par value, authorized 1,000,000 shares, designated 200 shares of Series A, 600 shares of Series B and 4,200 shares of Series C Preferred Stock
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Common stock, $0.001 par value, authorized 50,000,000 shares, 11,179,266 and 8,412,101 issued and outstanding as of December 31, 2014 and 2013, respectively
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Additional paid in capital
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Total stockholders' deficit
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Total liabilities and stockholders' deficit
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See the accompanying notes to the financial statements
BIOSIG TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
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Year ended December 31,
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2014
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2013
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Operating expenses:
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Research and development
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$ |
547,996 |
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$ |
992,207 |
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General and administrative
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7,304,440 |
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5,229,252 |
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Depreciation
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15,809 |
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17,059 |
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Total operating expenses
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7,868,245 |
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6,238,518 |
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Loss from operations
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(7,868,245 |
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(6,238,518 |
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Other income (expense):
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Interest income (expense)
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(11,025 |
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(70,061 |
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Financing costs
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(593,770 |
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(3,496,052 |
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Loss before income taxes
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(8,473,040 |
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(9,804,631 |
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Income taxes (benefit)
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- |
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- |
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Net loss
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(8,473,040 |
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(9,804,631 |
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Preferred stock dividend
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(300,359 |
) |
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(297,215 |
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NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
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$ |
(8,773,399 |
) |
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$ |
(10,101,846 |
) |
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Net loss per common share, basic and diluted
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$ |
(0.91 |
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$ |
(1.23 |
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Weighted average number of common shares outstanding, basic and diluted
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9,650,275 |
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|
|
8,187,648 |
|
See the accompanying notes to the financial statements
BIOSIG TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
TWO YEARS ENDED DECEMBER 31, 2014
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance, December 31, 2012
|
|
|
8,166,238 |
|
|
$ |
8,166 |
|
|
$ |
833,647 |
|
|
$ |
(3,905,159 |
) |
|
$ |
(3,063,346 |
) |
Common stock issued for services rendered
|
|
|
21,412 |
|
|
|
22 |
|
|
|
44,729 |
|
|
|
- |
|
|
|
44,751 |
|
Common stock issued as payment for accrued interest to note holders at $2.09 per share
|
|
|
8,941 |
|
|
|
9 |
|
|
|
18,668 |
|
|
|
- |
|
|
|
18,677 |
|
Beneficial conversion feature in connection with note payable
|
|
|
- |
|
|
|
- |
|
|
|
20,000 |
|
|
|
- |
|
|
|
20,000 |
|
Beneficial conversion feature and warrants issued in connection with the Series C Preferred Stock
|
|
|
- |
|
|
|
- |
|
|
|
2,404,830 |
|
|
|
- |
|
|
|
2,404,830 |
|
Fair value of warrants issued to Series C investors for certificate of designation amendment
|
|
|
- |
|
|
|
- |
|
|
|
1,074,833 |
|
|
|
- |
|
|
|
1,074,833 |
|
Fair value of warrants issued for services
|
|
|
- |
|
|
|
- |
|
|
|
916,677 |
|
|
|
- |
|
|
|
916,677 |
|
Common stock issued in settlement of related party note and advances payable
|
|
|
93,061 |
|
|
|
93 |
|
|
|
228,415 |
|
|
|
- |
|
|
|
228,508 |
|
Sale of common stock
|
|
|
122,449 |
|
|
|
122 |
|
|
|
247,052 |
|
|
|
|
|
|
|
247,174 |
|
Fair value of vested options
|
|
|
- |
|
|
|
- |
|
|
|
3,247,187 |
|
|
|
- |
|
|
|
3,247,187 |
|
Preferred stock dividend
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(297,215 |
) |
|
|
(297,215 |
) |
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(9,804,631 |
) |
|
|
(9,804,631 |
) |
Balance, December 31, 2013
|
|
|
8,412,101 |
|
|
$ |
8,412 |
|
|
$ |
9,036,038 |
|
|
$ |
(14,007,005 |
) |
|
$ |
(4,962,555 |
) |
BIOSIG TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
TWO YEARS ENDED DECEMBER 31, 2014
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance, December 31, 2013
|
|
|
8,412,101 |
|
|
$ |
8,412 |
|
|
$ |
9,036,038 |
|
|
$ |
(14,007,005 |
) |
|
$ |
(4,962,555 |
) |
Sale of common stock
|
|
|
956,179 |
|
|
|
956 |
|
|
|
1,968,454 |
|
|
|
- |
|
|
|
1,969,410 |
|
Common stock issued for services
|
|
|
654,000 |
|
|
|
654 |
|
|
|
1,634,346 |
|
|
|
- |
|
|
|
1,635,000 |
|
Common stock issued in settlement of related party debt
|
|
|
26,000 |
|
|
|
26 |
|
|
|
64,974 |
|
|
|
- |
|
|
|
65,000 |
|
Common stock issued upon conversion of Series A preferred stock and accrued dividends at $1.84 per share
|
|
|
577,901 |
|
|
|
578 |
|
|
|
1,062,753 |
|
|
|
- |
|
|
|
1,063,331 |
|
Common stock issued upon conversion of Series B preferred stock and accrued dividends at $2.02 per share
|
|
|
493,818 |
|
|
|
494 |
|
|
|
997,032 |
|
|
|
- |
|
|
|
997,526 |
|
Common stock issued upon conversion of Series C preferred stock and accrued dividends at $1.50 per share
|
|
|
59,267 |
|
|
|
59 |
|
|
|
88,841 |
|
|
|
- |
|
|
|
88,900 |
|
Donated capital
|
|
|
- |
|
|
|
- |
|
|
|
87,500 |
|
|
|
- |
|
|
|
87,500 |
|
Equity warrants issued to placement agent for sale of common stock
|
|
|
- |
|
|
|
- |
|
|
|
52,800 |
|
|
|
- |
|
|
|
52,800 |
|
Fair value of vested options
|
|
|
- |
|
|
|
- |
|
|
|
4,193,425 |
|
|
|
- |
|
|
|
4,193,425 |
|
Preferred stock dividend
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(300,359 |
) |
|
|
(300,359 |
) |
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(8,473,040 |
) |
|
|
(8,473,040 |
) |
Balance, December 31, 2014
|
|
|
11,179,266 |
|
|
$ |
11,179 |
|
|
$ |
19,186,163 |
|
|
$ |
(22,780,404 |
) |
|
$ |
(3,583,062 |
) |
See the accompanying notes to the financial statements
BIOSIG TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2013
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants issued in connection with Series C preferred stock modifications
|
|
|
|
|
|
|
|
|
Fair value of warrants issued for services
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
|
|
Net cash used in investing activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net proceeds from the sale of Series C preferred stock and warrants
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
|
|
|
|
|
|
Payments of related party notes
|
|
|
|
|
|
|
|
|
Net repayments of related party advances
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of the period
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
|
|
|
|
|
|
|
Cash paid during the period for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of Series A preferred stock and accrued dividends
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of Series B preferred stock and accrued dividends
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of Series C preferred stock and accrued dividends
|
|
|
|
|
|
|
|
|
Common stock options for future services, related party
|
|
|
|
|
|
|
|
|
Common stock options in settlement of accounts payable, related party
|
|
|
|
|
|
|
|
|
Related party donated capital
|
|
|
|
|
|
|
|
|
Common stock issued in settlement of related party note and advances payable
|
|
|
|
|
|
|
|
|
Common stock issued in settlement of accrued interest
|
|
|
|
|
|
|
|
|
Convertible bridge notes payable exchanged for preferred shares
|
|
|
|
|
|
|
|
|
See the accompanying notes to the financial statements
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
Business and organization
BioSig Technologies Inc. (the “Company”) was initially incorporated on February 24, 2009 under the laws of the State of Nevada and subsequently re-incorporated in the state of Delaware in 2011. The Company and its efforts are principally devoted to improving the quality of cardiac recordings obtained during ablation of atrial fibrillation (AF) and ventricular tachycardia (VT). The Company has not generated any revenue to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.
Use of estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Significant estimates include the useful life of fixed assets and assumptions used in the fair value of stock-based compensation.
Concentrations of Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit.
Prepaid Expenses
From time to time, the Company issues shares of its common stock for services to be performed. The fair value of the common stock is determined at the date of the contract for services and is amortized ratably over the term of the contract. As of December 31, 2014 and 2013, prepaid expenses relating to stock based payments were $56,667 and $-0-, respectively.
Property and Equipment
Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
Long-Lived Assets
The Company follows Accounting Standards Codification 360-10-15-3, “Impairment or Disposal of Long-lived Assets,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Fair Value of Financial Instruments
The Company’s short-term financial instruments, including cash, prepaid expenses and other assets, accounts payable and accrued expenses and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of the Company’s convertible securities is based on management estimates and reasonably approximates their book value.
Research and development costs
The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses of $547,996 and $992,207 for the years ended December 31, 2014 and 2013, 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 year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.
The computation of basic and diluted loss per share as of December 31, 2014 and 2013 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:
|
|
2014
|
|
|
2013
|
|
Series A convertible preferred stock
|
|
|
-
|
|
|
|
501,089
|
|
Series B convertible preferred stock
|
|
|
-
|
|
|
|
451,726
|
|
Series C convertible preferred stock
|
|
|
1,807,333
|
|
|
|
1,330,627
|
|
Options to purchase common stock
|
|
|
5,990,190
|
|
|
|
2,990,977
|
|
Warrants to purchase common stock
|
|
|
5,113,990
|
|
|
|
2,717,258
|
|
Totals
|
|
|
12,911,513
|
|
|
|
7,991,667
|
|
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
Income Taxes
The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
Stock Based Compensation
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.
As of December 31, 2014, the Company had 5,990,190 options outstanding to purchase shares of common stock, of which 3,799,559 were vested.
As of December 31, 2013, the Company had 2,990,977 options outstanding to purchase shares of common stock, of which 1,675,658 were vested.
Registration Rights
The Company accounts for registration rights agreements in accordance with the Accounting Standards Codification subtopic 825-20, Registration Payment Arraignments (“ASC 825-20”). Under ASC 825-20, the Company is required to disclose the nature and terms of the arraignment, the maximum potential amount and to assess each reporting period the probable liability under these arraignments and, if exists, to record or adjust the liability to current period operations. On June 23, 2014, the Company filed Form S-1/A became effective with the Securities and Exchange Commission. As such, the Company determined that payments were due under its registration rights agreement and therefore accrued $55,620 as interest expense for the liability under the registration rights agreements.
Recent Accounting Pronouncements
There are 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.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 2 – GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements during the years ended December 31, 2014 and 2013, the Company incurred net losses attributable to common stockholders of $8,773,399 and $10,101,846, respectively and used $1,997,072 in cash for operating activities for the year ended December 31, 2014. These factors among others raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.
The Company's existence is dependent upon management's ability to develop profitable operations. The Company completed financing subsequent to the date of these financial statements (See Note 16). However additional capital will be needed to continue developing its products and services and there can be no assurance that the Company's efforts will be successful. There is no assurance that can be given that management's actions will result in profitable operations or the resolution of its liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
NOTE 3 – RELATED PARTY TRANSACTIONS
The Company’s President and shareholders have advanced funds to the Company for working capital purposes since the Company’s inception in February 2009. No formal repayment terms or arrangements exist and the Company is not accruing interest on these advances. The net amount outstanding at December 31, 2014 and 2013 was $-0- and $30,781, respectively.
On December 31, 2013, as part of a private placement transaction of our common stock and warrants, (i) $228,000 of our outstanding indebtedness that was due to a related party was converted into 93,061 shares of common stock and a warrant to purchase 46,531 shares of our common stock; and (ii) we issued to a related party 122,448 shares of our common stock and a warrant to purchase 61,225 shares of our common stock for a purchase price of $300,000
Accrued interest and expenses due related parties as of December 31, 2014 and 2013 was $40,293 and $123,089, respectively.
During 2014, one of the Company’s board of directors forgave an outstanding obligation of $87,500 for services. Accordingly, the Company reclassified the liability to equity as donated capital.
During 2014, the Company issued 34,000 shares of its common stock for future services to a board member totaling $85,000 ($2.50 per share), unrelated to his services as a board member. The fair value of the services is amortized over the service period. As of December 31, 2014, the unamortized portion of $56,667 is included in prepaid expenses in the accompanying balance sheet.
During 2014, the Company issued 26,000 shares of its common stock in settlement of $65,000 debt to a board of directors’ member ($2.50 per share).
During 2013, in connection with the amendments of the Series C 9% Convertible Preferred stock, the Company issued to Company’s president and a Director of the Company (Series C holders) an aggregate of 53,830 warrants to purchase the Company’s common stock at $2.61 per share for five years. See Note 9 below.
The Company has informal compensation and consulting agreements with employees and outside contractors, certain of whom are also Company stockholders. The Agreements are generally month to month. As of December 31, 2014 and 2013, total due under these agreements and related expenses were $11,250 and $-0-, respectively.
On January 31, 2014, as part of a private placement transaction of our common stock and warrants, a related party purchased an aggregate of 24,490 shares of common stock and a warrant to purchase 12,246 shares of common stock for an aggregate purchase price of $60,000.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2014 and 2013 is summarized as follows:
|
|
2014
|
|
|
2013
|
|
Computer equipment
|
|
$
|
54,900
|
|
|
$
|
50,937
|
|
Furniture and fixtures
|
|
|
7,803
|
|
|
|
7,803
|
|
Subtotal
|
|
|
62,703
|
|
|
|
58,740
|
|
Less accumulated depreciation
|
|
|
(49,683
|
)
|
|
|
(33,874
|
)
|
Property and equipment, net
|
|
$
|
13,020
|
|
|
$
|
24,866
|
|
Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
Depreciation expense was $15,809 and $17,059 at December 31, 2014 and 2013, respectively.
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 2014 and 2013 consist of the following:
|
|
2014
|
|
|
2013
|
|
Accrued accounting and legal
|
|
$
|
190,767
|
|
|
$
|
300,893
|
|
Accrued reimbursements
|
|
|
26,792
|
|
|
|
17,797
|
|
Accrued consulting
|
|
|
16,334
|
|
|
|
214,481
|
|
Accrued research and development expenses
|
|
|
93,407
|
|
|
|
64,670
|
|
Accrued credit card obligations
|
|
|
13,278
|
|
|
|
20,425
|
|
Accrued payroll
|
|
|
62,068
|
|
|
|
35,896
|
|
Accrued liquidated damages
|
|
|
55,620
|
|
|
|
48,668
|
|
Accrued office and other
|
|
|
29,093
|
|
|
|
16,500
|
|
Accrued settlement related to arbitration
|
|
|
66,667
|
|
|
|
100,000
|
|
|
|
$
|
554,026
|
|
|
$
|
819,330
|
|
NOTE 6 – NOTES PAYABLE, RELATED PARTY
On November 21, 2012, the Company issued an unsecured promissory note for $218,000 to the Company’s President for previously advanced funds with interest payable annually, in arrears, on each anniversary at the short term “Applicable Federal Rate” within the meaning of Section 1274(d) of the Internal Revenue Code of 1986, as amended adjusted each anniversary date. The promissory note matures November 21, 2021 and may be prepaid, without premium or penalty, at any time.
In connection with the issuance of the unsecured promissory note, the Company’s President agreed not to receive payments (by voluntary prepayment, acceleration, set-off or otherwise) associated with the unsecured promissory note absent the prior written consent of the purchasers holding at least 67% interest of the preferred stock outstanding, which purchasers must include Alpha Capital Anstalt so long as Alpha Capital Anstalt holds not less than $100,000 of preferred stock. On December 31, 2013, the Company converted the promissory note and accrued interest to 93,061 shares of the Company’s common stock and 46,531 warrants to purchase the Company’s common stock at $3.67 per share for five years.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
On December 6, 2012, the Company issued an unsecured promissory note for $30,000 to a company under the control of the Company’s President for previously advanced funds, interest free and due the earlier of (i) the next financing of not less than $300,000; (ii) February 28, 2013 or (iii) occurrence of an event of default, as defined.
During year ended December 31, 2013, the Company paid off the promissory note in full.
NOTE 7 – CONVERTIBLE BRIDGE NOTES
In 2012, the Company issued an aggregate of $600,000 unsecured Senior Convertible Promissory Notes ($225,000 related party) with interest due at maturity at 8% per annum and may be paid, at the Company’s discretion, in cash or the Company’s common stock. The Notes, together with unpaid accrued interest, if any, is due upon written notice by the majority in interest of the holders on or after February 15, 2014 or (ii) upon the occurrence of an event of default, as defined. The Notes may be prepaid in whole or in part prior to the maturity date at the Company’s discretion.
The Convertible Bridge Notes and any accrued and unpaid interest automatically converts at the earlier of (i) (A) a completion of a transaction whereby the Company merges or consolidates with another company that has its common stock approved for quotation on any domestic national stock exchange and (B) the new entity thereafter issues and sells shares for no less than $3.0 million aggregate gross proceeds or (ii) a qualified IPO. The Convertible Bridge Notes shall convert into the new securities issued at 95% of the purchase price of the Conversion Securities offered to investors.
In connection with the issuance of the Senior Convertible Promissory Notes, the Company issued the right to purchase at any time, on or after the Public Financing Closing Date,(as defined above) hereof until the fifth anniversary of the Public Financing Closing date, the number of fully paid and nonassessable shares (the “Warrant Shares”) of the Company’s common stock equal to the quotient of (a) the Warrant Coverage Amount (as defined below), divided by (b) the applicable Conversion Price of the Notes, at the per share exercise price (the “Exercise Price”), which shall initially be, as of the Public Financing Closing Date, equal to the Initial Exercise Price (as defined below), subject to further adjustments, as defined.
Initial Exercise Price” means one hundred twenty-five percent (125%) of the Conversion Price.
Warrant Coverage Amount” shall be the amount obtained by multiplying (x) the Warrant Coverage Percentage by (y) the principal amount outstanding (and not including any accrued and unpaid interest) of the Note, in connection with which this Warrant is concurrently issued.
“Warrant Coverage Percentage” shall be equal to fifty percent (50%) as defined in the Bridge Loan Agreement.
On February 6, 2013, the Convertible Bridge Notes and the above described contingent warrants previously issued as described above were converted into 600 shares of Series C Convertible Preferred Stock and an aggregate of 287,082 warrants to purchase the Company’s common stock at an exercise price of $2.09 per share for 5 years. On August 7, 2013, the Company issued an aggregate of 8,941 shares of its common stock in settlement of accrued interest of $18,677.
NOTE 8 – REDEEMABLE PREFERRED STOCK
Series A Preferred Stock
In May 2011, the Board of Directors authorized the issuance of up to 200 shares of Series A Preferred Stock (the “Series A preferred stock”).
The Series A preferred stock is entitled to preference over holders of junior stock upon liquidation in the amount of $5,000 plus any accrued and unpaid dividends; entitled to dividends as a preference to holders of junior stock at a rate of 5% per annum of the Stated Value of $5,000 per share, payable quarterly beginning on August 31, 2011 and are cumulative. The holders of Series A preferred stock have no voting rights, however without the affirmative vote of all the holders of then outstanding shares of the Series A preferred stock, the Company cannot, (a) alter or change adversely the powers, preferences or rights given to the Series A preferred stock or alter or amend the Certificate of Designation.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
The Series A preferred stock is mandatorily redeemable on December 31, 2014 (as modified) at a price equal to the Stated Value ($5,000) plus an amount equal to all accumulated and unpaid dividends. If the Company fails to redeem at redemption, the unpaid redemption price will accrue at 14% per annum until paid.
The Series A preferred stock is convertible (as amended), automatically, inclusive of any accrued and unpaid dividends, immediately into the Company’s common stock upon the Company becoming subject to the reporting requirements under Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended at conversion price of $1.84 per share.
On February 6, 2013, in connection with the amendment to the Series A preferred stock defining the conversion feature, the Company reclassified the associated financing costs as a debt discount against the carrying value of the preferred stock.
As of December 31, 2013, 184.4 shares of Series A preferred stock were issued and outstanding with accrued dividends of $119,355 payable on the Series A preferred stock.
On June 23, 2014, upon the effectiveness of the Company’s registration statement, the Company issued an aggregate of 577,901 shares of its common stock in exchange for all the outstanding Series A preferred stock and accrued dividends of $141,331.
Series B Preferred Stock
On November 28, 2011, the Board of Directors authorized the issuance of up to 600 shares of Series B Preferred Stock (the “Series B preferred stock”).
The Series B preferred stock is entitled to preference over holders of junior stock upon liquidation in the amount of $5,000 plus any accrued and unpaid dividends; entitled to dividends as a preference to holders of junior stock at a rate of 5% per annum of the Stated Value of $5,000 per share, payable quarterly beginning on December 31, 2011 and are cumulative. The holders of Series B preferred stock have no voting rights, however without the affirmative vote of all the holders of then outstanding shares of the Series B preferred stock, the Company cannot (a) alter or change adversely the powers, preferences or rights given to the Series A preferred stock or alter or amend the Certificate of Designation.
The Series B preferred stock is mandatorily redeemable on December 31, 2014 at a price equal to the Stated Value ($5,000) plus an amount equal to all accumulated and unpaid dividends. If the Company fails to redeem at redemption, the unpaid redemption price will accrue at 14% per annum until paid.
The Series B preferred stock is convertible (as amended), automatically, inclusive of any accrued and unpaid dividends, immediately into the Company’s common stock upon the Company becoming subject to the reporting requirements under Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended at conversion price of $2.02 per share.
On February 6, 2013, in connection with the amendment to the Series B preferred stock defining the conversion feature, the Company reclassified the associated financing costs as a debt discount against the carrying value of the preferred stock.
As of December 31, 2013, 177.5 shares of Series B preferred stock were issued and outstanding. With accrued dividends of $88,872 payable on the Series B preferred stock.
On June 23, 2014, upon the effectiveness of the Company’s registration statement, the Company issued an aggregate of 493,818 shares of its common stock in exchange for all the outstanding Series B preferred stock and accrued dividends of $110,026.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 9 – SERIES C 9% CONVERTIBLE PREFERRED STOCK
On January 9, 2013, the Board of Directors authorized the issuance of up to 4,200 shares of Series C Convertible Preferred Stock (the “Series C Convertible Preferred Stock”).
The Series C convertible preferred stock is entitled to preference over holders of junior stock upon liquidation in the amount of $1,000 plus any accrued and unpaid dividends; entitled to dividends as a preference to holders of junior stock at a rate of 9% per annum of the Stated Value of $1,000 per share, payable quarterly beginning on September 30, 2013 and are cumulative. The holders of Series C preferred stock have no voting rights, however without the affirmative vote of all the holders of then outstanding shares of the Series C preferred stock, the Company cannot (a) alter or change adversely the powers, preferences or rights given to the Series C preferred stock or alter or amend the Certificate of Designation.
Each share of Series C preferred stock is convertible, at the holder’s option, inclusive of any accrued and unpaid dividends, at conversion price of $1.50 (as reset).
If, at any time while the Series C preferred stock is outstanding, the Company sells or grants any option to purchase or sells or grants any right to re-price, or otherwise disposes of or issues any common stock or common stock equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then conversion price (“Base Conversion Price”), then the conversion price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. During the year ended December 31, 2014, the resets provisions as described above resulted in the conversion price reset to $1.50.
The Series C preferred stock contains triggering events which would require redemption at (i) the greater of 120% of the stated value of $1,000 or the product of the variable weighted average price of the Company’s common stock on the trading day immediately preceding the date of the triggering event and the stated value divided by the then conversion price or (ii) either (a) redeem each Series C preferred share for a redemption price, in shares of the Company’s common stock, equal to a number of shares equal to the (i) above divided by 75%. The Company determined that certain of the defined triggering events were outside the Company’s control and therefore classified the Series C preferred stock outside of equity.
In connection with the sale of the Series C preferred stock, the Company issued an aggregate of 1,330,627 warrants to purchase the Company’s common stock at $2.61 per share expiring five years from the initial exercise date. The warrant provides if, at any time while the warrant is outstanding, the Company sells or grants any option to purchase or sells or grants any right to re-price, or otherwise disposes of or issues any common stock or common stock equivalents entitling any person to acquire shares of common stock at an effective price per share that is lower than the then conversion price (“base conversion price”), then the warrants outstanding will be subject anti-dilution provisions.
Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. In addition, the warrants provides for at any time after the six month anniversary of the initial exercise date, there is no effective registration statement registering, or no current prospectus available for the resale of the warrant shares by the holder, then the warrant may only be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the holder shall be entitled to receive a number of Warrant Shares equal to defined formula. During the year ended December 31, 2014, the resets provisions as described above resulted in an additional 984,674 warrants issued with an exercise price reset to $1.50 all Series C warrants..
In accordance with ASC 470-20, the Company recognized an embedded beneficial conversion feature present in the Series C preferred stock when it was issued. The Company allocated the net proceeds between the intrinsic value of the conversion option ($1,303,671) and the warrants ($1,064,739) to additional paid-in capital. The aggregate debt discount, comprised of the relative intrinsic value the conversion option ($1,303,671), relative fair value of the warrants ($1,064,739), and the issuance costs ($412,590); total of $2,781,000, is amortized over one year as interest expense, the date a possible redemption feature, outside of the Company’s control, would be available to the Series C stockholders.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 5 years, an average risk free interest rate of 0.39% to 1.40%, a dividend yield of 0%, and volatility of 123.41% to 125.33%.
During the month of February 2013, the holders of the Convertible Bridge Notes (See Note 7) converted into 600 shares of the Company’s Series C 9% Convertible Preferred Stock.
During the months of February, March, May, and July 2013, the Company sold an aggregate of 2,181 shares of the Company’s Series C 9% Convertible Preferred Stock for net proceeds of $1,814,910.
During October 2014, the Company issued an aggregate of 59,267 shares of its commons stock in exchange for 70 shares of the Company’s Series C 9% Convertible Preferred Stock and accrued dividends.
The Company determined that the anti-dilutive provisions embedded in the Series C 9% Convertible Preferred Stock and related issued warrants did not meet the defined criteria of a derivative in such that the net settlement requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and therefore bifurcation is not required. As of December 31, 2014, the Company’ s common stock was thinly traded and there was no active trading market.
Series C preferred stock outstanding totaled 2,711 and 2,781 as of December 31, 2014 and 2013. As of December 31, 2014 and 2013, the Company has accrued $445,069 and $206,740 dividends payable on the Series C preferred stock.
Registration Rights Agreement
The Company entered into a Registration Rights Agreement in connection with the sale and issuance of the Series C preferred stock. The Company is required to file a registration statement registering for resale the (a) common stock issuable upon conversion in full of the Preferred Stock (assuming on such date the shares of Preferred Stock are converted in full without regard to any conversion limitations therein), (b) all shares of Common Stock issuable as dividends and “Make-Whole Payments” (as defined in the Certificate of Designation) on the Preferred Stock assuming all dividend and Make-Whole Payments are made in shares of Common Stock and the Preferred Stock is held for at least 3 years, (c) all warrant shares then issuable upon exercise of the Warrants (assuming on such date the warrants are exercised in full without regard to any exercise limitations therein), (d) any additional shares of Common Stock issuable in connection with any anti-dilution provisions in the Preferred Stock or the Warrants (in each case, without giving effect to any limitations on conversion set forth in the Certificate of Designation or limitations on exercise set forth in the Warrants) and (e) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing. The Company is required to file a registration statement and must be declared effective no later than 210 days from the date of termination of the sale the Series C preferred stock.
The Company is required to maintain the effectiveness of the registration statement from its effective date unless all securities registered under the registration statement have been sold or are otherwise able to be sold. If the Company fails to comply with the registration statement effective date requirements, the Company is required to pay the investors a fee equal to 0.25% of the Purchaser’s investment, for each 30-day period of delay, subject to a maximum payment of 3% to each Purchaser.
On June 23 2014, the Company became effective and met its required filing requirement. The Company did not meet the effectiveness obligation by November 22, 2013. As a result, the Company accrued $55,620 as interest expense for liquidating damages due under the registration rights agreement.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 10 – STOCKHOLDER EQUITY
There is not a viable market for the Company’s common stock to determine its fair value; therefore, management is required to estimate the fair value to be utilized in the determining stock based compensation costs. In estimating the fair value, management considers recent sales of its common stock to independent qualified investors, placement agents’ assessments of the underlying common shares relating to our sale of preferred stock and validation by independent fair value experts. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.
Preferred stock
The Company is authorized to issue 1,000,000 shares of $0.001 par value preferred stock. As of December 31, 2014 and 2013, the Company has designated and issued 200 and 184.4 shares of Series A preferred stock, respectively, designated and issued 600 and 177.5 shares of Series B preferred stock, respectively. See Note 8.
As of December 31, 2014 and 2013, the Company designated and issued 4,200 and 2,781 shares of Series C 9% convertible preferred stock, respectively. See Note 9.
On June 23, 2014, the Company issued an aggregate of 577,901 and 493,818 shares of its common stock in exchange of all the issued and outstanding Series A and Series B preferred stock.
During December 2014, the Company issued an aggregate of 59,267 shares of its commons stock in exchange for 70 shares of the Company’s Series C 9% Convertible Preferred Stock and accrued dividends.
Common stock
The Company is authorized to issue 50,000,000 shares of $0.001 par value common stock. As of December 31, 2014 and 2013, the Company has 11,179,266 and 8,412,101 shares issued and outstanding, respectively.
During the year ended December 31, 2013, the Company issued an aggregate of 21,412 shares of common stock for services rendered totaling $44,751 ($2.09 per share).
During the year ended December 31, 2013, the Company issued an aggregate of 122,449 shares of common stock for cash rendered totaling $247,174 ($2.45 per share).
During the year ended December 31, 2014, the Company issued 654,000 shares of its common stock (net of shares exchanged) under the terms of its 2012 Equity Plan for services rendered totaling $1,635,000 ($2.50 per share).
During the year ended December 31, 2014, the Company issued 26,000 shares of its common stock in settlement of $65,000 related party debt ($2.50 per share).
During the year ended December 31, 2014, the Company entered into a securities purchase agreement with investors pursuant to which the Company issued 956,179 shares of common stock and five-year warrants for aggregate net proceeds of $1,969,410.
Stock based payable
The Company is obligated to issue an aggregate of 417,500 shares of its common stock to consultants for past and future services. The estimated liability as of December 31, 2014 of $226,305 ($2.50 per share) was determined based on services rendered in 2014.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 11 – OPTIONS AND WARRANTS
There is not a viable market for the Company’s common stock to determine its fair value, therefore management is required to estimate the fair value to be utilized in the determining stock based compensation costs. In estimating the fair value, management considers recent sales of its common stock to independent qualified investors, placement agents’ assessments of the underlying common shares relating to our sale of preferred stock and validation by independent fair value experts. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates
On October 19, 2012, the Company’s Board of Directors approved the 2012 Equity Incentive Plan (“the “2012 Plan) and terminated the Long-Term Incentive Plan (the “2011 Plan”). The Plan provides for the issuance of options to purchase up to 8,806,123,( as amended) shares of the Company’s common stock to officers, directors, employees and consultants of the Company (as amended). Under the terms of the Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of the Company only and nonstatutory options. The Board of Directors of the Company determines the exercise price, vesting and expiration period of the grants under the Plan. However, the exercise price of an Incentive Stock Option should not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more stockholder and 100% of fair value for a grantee who is not 10% stockholder. The fair value of the common stock is determined based on quoted market price or in absence of such quoted market price, by the Board of Directors in good faith.
Additionally, the vesting period of the grants under the Plan will be determined by the Committee, in its sole discretion, and expiration period not more than ten years. The Company reserved 1,250,000 shares of its common stock for future issuance under the terms of the Plan.
During the year ended December 31, 2014, the Company granted an aggregate of 3,478,498 options and 654,000 stock grants (net of shares exchanged) to officers, directors and key consultants.
A summary of the stock option activity and related information for the 2012 Plan for the year ended December 31, 2014 and 2013 is as follows:
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Intrinsic Value
|
|
Outstanding at January 1, 2013
|
|
|
1,298,927
|
|
|
$
|
2.04
|
|
|
|
6.85
|
|
|
|
-
|
|
Grants
|
|
|
1,692,050
|
|
|
|
2.09
|
|
|
|
7.00
|
|
|
|
-
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
|
2,990,977
|
|
|
$
|
2.05
|
|
|
|
6.02
|
|
|
$
|
-
|
|
Grants
|
|
|
3,478,498
|
|
|
$
|
2.39
|
|
|
|
8.10
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(479,285
|
)
|
|
|
(2.00
|
)
|
|
|
|
|
|
|
|
|
Outstanding at December 31,2014
|
|
|
5,990,190
|
|
|
$
|
2.25
|
|
|
|
6.65
|
|
|
$
|
3,267,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2014
|
|
|
5,990,190
|
|
|
$
|
2.25
|
|
|
|
6.65
|
|
|
$
|
3,267,692
|
|
Exercisable at December 31, 2014
|
|
|
3,799,559
|
|
|
$
|
2.24
|
|
|
|
5.91
|
|
|
$
|
2,111,368
|
|
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 estimated market stock price of $2.80 as of December 31, 2014, which would have been received by the option holders had those option holders exercised their options as of that date.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities until sufficient data exists to estimate the volatility using the Company’s own historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. The fair value of stock-based payment awards during the years ended December 31, 2014 and 2014 was estimated using the Black-Scholes pricing model.
In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding.
If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.
The Company estimated forfeitures related to option grants at a weighted average annual rate of 0% per year, as the Company does not yet have adequate historical data, for options granted during the years ended December 31, 2014 and 2013.
During the year ended December 31, 2013, the Company granted an aggregate of 1,692,050 options to purchase the Company stock in connection with the services rendered at the exercise price of $2.09 per share for a term of seven to ten years with 1,095,000 vesting immediately, 145,833 vesting over three months, 30,000 vesting over nine months, 283,300 options vesting at ratably over one year and 137,917 vesting over two years.
The fair value of the granted options for year ended December 31, 2013 was determined using the Black Scholes option pricing model with the following assumptions:
Dividend yield:
|
|
-0-
|
%
|
Volatility
|
|
110.70% to 115.03
|
%
|
Risk free rate:
|
|
1.07% to 3.04
|
%
|
Expected life:
|
|
7 to 10 years
|
|
Estimated fair value of the Company’s common stock
|
|
$2.09
|
|
The following assumptions were used in determining the fair value of options during the year ended December 31, 2014:
Dividend yield:
|
|
-0-
|
%
|
Volatility
|
|
119.43% to 129.88
|
%
|
Risk free rate:
|
|
0.48% to 2.53
|
%
|
Expected life:
|
|
7 to 10 years
|
|
Estimated fair value of the Company’s common stock
|
|
$2.21 to $2.50
|
|
In July 2014, the Company awarded 1,265,769 of stock options to Company’s Chief Executive Officer. The stock options have exercise price of $2.21 per share, with 45,206 options vesting immediately and 497,267 options vesting quarterly over a two year period with the remainder contingent on performance, and have an approximate fair value of $2,383,443 using the Black Scholes model.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
In September 2014, the Company awarded an aggregate of 880,000 of stock options to certain employees and key consultants. The stock options have exercise price of $2.50 per share, with 605,000 vested immediately, 125,000 in one year and 150,000 over a two year period, and have an approximate fair value of $1,753,616 using the Black Scholes model.
In September 2014, the Company canceled an aggregate of 479,285 previously issued, unvested (contingent) options issued in July 2012 at an exercise price of $2.00 per share to a board member in exchange for issuance of 479,285 options at an exercise price of $2.50, vesting quarterly over two years and expiring 7 years from the date of issuance. The greater of the approximate fair value of the options exchanged of $981,798 was determined using the Black Scholes option model.
In October 2014, the Company awarded an aggregate of 853,444 stock options to certain employees and a key consultant. The stock options have an exercise price of $2.50 per share with 841,777 vested immediately and a remainder of 11,667 based on future performance conditions, and have an approximate fair value of $1,339,151.
In October 2014, one of the Company’s board of directors exchanged 125,000 common shares issued in September 2014 for services and debt repayment for 163,444 stock options. The stock options have an exercise price of $2.50, vesting immediately. The approximate fair value of the exchange was determined to be the same.
The following table presents information related to stock options at December 31, 2014:
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Exercisable
|
|
Exercise
|
|
|
Number of
|
|
|
Remaining Life
|
|
|
Number of
|
|
Price
|
|
|
Options
|
|
|
In Years
|
|
|
Options
|
|
$
|
1.01-2.00
|
|
|
|
819,642
|
|
|
|
4.7
|
|
|
|
526,642
|
|
|
2.01-2.50
|
|
|
|
5,170,548
|
|
|
|
7.0
|
|
|
|
3,272,917
|
|
|
|
|
|
|
5,990,190
|
|
|
|
6.7
|
|
|
|
3,799,559
|
|
The fair value of all options vesting during the year ended December 31, 2014 and 2013 of $4,193,425 and $3,247,187, respectively, was charged to current period operations. Unrecognized compensation expense of $3,778,589 and $862,066 at December 31, 2014 and 2013, respectively, will be expensed in future periods.
Warrants
The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at December 31, 2014:
Exercise
|
|
Number
|
|
Expiration
|
Price
|
|
Outstanding
|
|
Date
|
$
|
0.001
|
|
383,320
|
|
January 2020 |
$
|
1.50
|
|
3,721,518
|
|
February 2018 to September 2018 |
$
|
1.84
|
|
35,076
|
|
January 2020 |
$
|
2.02
|
|
30,755
|
|
January 2020 |
$
|
2.50
|
|
204,840
|
|
July 2015 |
$
|
2.75
|
|
228,720
|
|
August 2019 to September 2019 |
$
|
3.67
|
|
218,275
|
|
December 2018 to January 2019 |
$
|
3.75
|
|
291,486
|
|
April 2019 to March 2020 |
|
|
|
5,113,990
|
|
|
On January 13, 2013, the Company issued an aggregate of 65,831 warrants to purchase the Company stock in connection with the placement services at the exercise prices of $1.84 (35,076 warrants) and $2.02 (30,775 warrants) per share for a term of five years exercisable immediately.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
The fair value of the issued warrants were determined using the Black Scholes option pricing model with the following assumptions:
Dividend yield:
|
|
|
-0-
|
%
|
Volatility
|
|
|
123.30
|
%
|
Risk free rate:
|
|
|
0.72
|
%
|
Expected life:
|
|
5 years
|
|
Estimated fair value of the Company’s common stock
|
|
$
|
2.09
|
|
The fair value of $115,854 was charged to operations ratably as financing costs through December 31, 2014.
During the year ended December 31, 2013, the Company issued an aggregate of 1,516,386 warrants to purchase the Company stock in connection with the sale of the Series C 9% Convertible Preferred Stock at the exercise price of $2.61 per share for a term of five years exercisable immediately.
During the months of July and September, 2013, the Company issued an aggregate of 622,414 warrants to purchase the Company’s stock to holders of Series C preferred stock as an inducement to amend and waive certain defined provisions of the Series C preferred stock.
The fair value of the issued warrants were determined using the Black Scholes option pricing model with the following assumptions:
Dividend yield:
|
|
|
-0-
|
%
|
Volatility
|
|
|
125.33
|
%
|
Risk free rate:
|
|
|
1.40
|
%
|
Expected life:
|
|
5 years
|
|
Estimated fair value of the Company’s common stock
|
|
$
|
2.09
|
|
During the year ended December 31, 2013, the fair value of $1,074,833 was charged to current period operations
On December 31, 2013, the Company issued an aggregate of 129,307 warrants to purchase the Company’s common stock at $3.67 per share for five years in connection with the sale of the Company’s common stock.
On January 31, 2014, the Company issued an aggregate of 64,626 warrants to purchase the Company’s common stock at $3.67 per share for five years in connection with the sale of the Company’s common stock.
In February 2014, as described in the terms of the warrants issued in connection with the sale of the Series C preferred stock, the Company reset 2,138,800 previously issued warrants from a exercise price of $2.61 per share to $1.50. In addition, the Company was required to increase the number of issued warrants to an aggregate total of 3,721,518 warrants.
In April 2014, the Company issued an aggregate of 137,856 warrants to purchase the Company’s common stock at $3.75 per share for five years in connection with the sale of the Company’s common stock.
In August 2014, the Company issued an aggregate of 135,120 warrants to purchase the Company’s common stock at $2.75 per share for five years in connection with the sale of the Company’s common stock.
In September 2014, the Company issued an aggregate of 93,600 warrants to purchase the Company’s common stock at $2.75 per share for five years in connection with the sale of the Company’s common stock.
In December 2014, the Company issued an aggregate of 358,470 warrants to purchase the Company’s common stock in connection with the sale of the Company’s common stock. Of the aggregate issued, 204,840 warrants are exercisable at $2.50 expiring six months from the date of issuance and 153,630 warrants exercisable at $3.75 per share expiring March 31, 2020.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
A summary of the warrant activity for the years ended December 31, 2014 and 2013 is as follows:
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Intrinsic Value
|
|
Outstanding at January 1, 2013
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Grants
|
|
|
2,717,258
|
|
|
|
2.28
|
|
|
|
7.00
|
|
|
|
-
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
|
2,717,258
|
|
|
$
|
2.28
|
|
|
|
6.02
|
|
|
$
|
-
|
|
Grants
|
|
|
2,396,732
|
|
|
$
|
4.64
|
|
|
|
2.05
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,2014
|
|
|
5,113,990
|
|
|
$
|
1.71
|
|
|
|
3.6
|
|
|
$
|
6,041,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2014
|
|
|
5,113,990
|
|
|
$
|
1.71
|
|
|
|
3.6
|
|
|
$
|
6,041,436
|
|
Exercisable at December 31, 2014
|
|
|
5,113,990
|
|
|
$
|
1.71
|
|
|
|
3.6
|
|
|
$
|
6,041,436
|
|
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 estimated market stock price of $2.80 as of December 31, 2014, which would have been received by the option holders had those option holders exercised their options as of that date.
NOTE 12 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows the provisions of ASC 825-10. For financial assets and liabilities included within the scope of ASC 825-10, the Company was required to adopt the provisions of ASC 825-10 prospectively as of the beginning of Fiscal 2009. The adoption of ASC 825-10 did not have a material impact on our consolidated financial position or results of operations.
The Company determined that the anti-dilutive provisions embedded in the Series C 9% Convertible Preferred Stock and related issued warrants did not meet the defined criteria of a derivative in such that the net settlement requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and therefore bifurcation is not required. As of December 31, 2014, the Company’ s common stock was thinly traded and there was no active trading market.
The Company determined that there were no items required to be measured at fair value on a recurring basis in the consolidated financial statements as of December 31, 2014 and 2013.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Operating leases
On May 31, 2014, the Company extended its expiring three-year lease for office space in Los Angeles, California for one additional year, with monthly payments of $6,530 beginning September 1, 2014.
Employment agreements
On July 14, 2014, the Company’s Board Of Directors (the “Board”) increased the size of the Board to eight members and appointed Gregory D. Cash and Patrick J. Gallagher as members of the Board, effective as of July 15, 2014, to serve for a term expiring at the Company’s 2015 annual meeting of stockholders. In addition, the Board appointed Mr. Cash to serve as the Company’s president and chief executive officer.
In connection with the appointment of Mr. Cash, on July 15, 2014 (the “Effective Date”), the Company entered into an employment agreement with Mr. Cash (the “Employment Agreement”). The Employment Agreement has an initial term of three years that expires on July 15, 2017. Under the Employment Agreement, Mr. Cash is entitled to an annual base salary of $275,000. Upon the Company closing an equity or equity-linked financing with proceeds to the Company of at least $3.5 million (a “Qualified Financing”), Mr. Cash’s annual base salary will automatically increase to $325,000 and he will receive (i) a one-time payment equal to the difference between the amount he would have earned if his base salary was $325,000 and the amount he actually earned at his base salary of $275,000 for the time period from the Effective Date until the closing of such Qualified Financing and (ii) a one-time cash bonus of $30,000. If the Company does not complete a Qualified Financing within six months after the Effective Date, Mr. Cash’s annual base salary will nonetheless increase to $325,000 and he will receive the same one-time payment unless the Company reasonably determines that the failure to complete such Qualified Financing was within the reasonable control of Mr. Cash. Mr. Cash is also eligible to receive an annual bonus equal to at least 50% of the sum of his base salary and one-time payment, based on the achievement of reasonable performance criteria to be determined by the Board in consultation with Mr. Cash within 90 days of the Effective Date.
In accordance with the Employment Agreement, on July 15, 2014, the Company granted Mr. Cash an incentive stock option to purchase 1,265,769 shares of the Company’s common stock, made pursuant to an Incentive Stock Option Agreement. The option has an exercise price of $2.21, which was the fair market value of the Company’s common stock on the date of grant, and a term that expires ten years from the date of grant. The option will vest as follows (i) 542,473 shares of common stock will vest in eleven equal installments of 45,206 shares of common stock and one final installment of 45,207 shares of common stock on a quarterly basis with the first installment vesting on the Effective Date and subsequent installments vesting every three months thereafter; (ii) 180,824 shares of common stock will vest immediately upon completion of a Qualified Financing; (iii) 180,824 shares of common stock will vest upon the listing of the Company’s common stock on a recognized U.S. national securities exchange (i.e., NYSE, MKT LLC, The Nasdaq Stock Market LLC or the New York Stock Exchange); (iv) 180,824 shares of common stock will vest upon the 510(k) clearance or any other type of clearance deemed necessary by the U.S. Food and Drug Administration of the Company’s PURE (Precise Uninterrupted Real-time evaluations of Electrograms) EP technology platform; and (v) 180,824 shares of common stock will vest upon the Company achieving a market capitalization of $150,000,000 and maintaining such market capitalization for at least 90 consecutive calendar days.
Litigation
On January 7, 2014, David Drachman, the Company’s former chief executive officer and president, filed a statement of claim against the Company with the American Arbitration Association with respect to his resignation from his positions with us in November 2013. Mr. Drachman alleges, among other things, that (i) the Company misled him with respect to the status of our technology and required him to perform capital raising duties that had not been previously agreed upon, (ii) he resigned from his positions with us for good reason, as such term was defined in his employment agreement with the Company, and (iii) he, in his individual capacity, has full rights to the ownership and control of a patent application describing a combined ablation and recording unit directed at the use of electrocardiography sensing for control of radiofrequency renal denervation that we filed with the U.S. Patent and Trademark Office during the time Mr. Drachman served in his positions with the Company.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
During the year ended December 31, 2014, the Company settled the above claim for $100,000 with payments over six months. As of December 31, 2014, $66,667 was outstanding.
The Company is subject at times to other legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. There was no outstanding litigation as of December 31, 2014.
NOTE 14 – INCOME TAXES
At December 31, 2014, the Company has available for federal income tax purposes a net operating loss carry forward of approximately $6,800,000, expiring in the year 2034, that may be used to offset future taxable income. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized. Due to possible significant changes in the Company's ownership, the future use of its existing net operating losses may be limited. All or portion of the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits. During the year ended December 31, 2014, the Company has increased the valuation allowance from $1,400,000 to $2,300,000.
We have adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. Tax position that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no tax positions relating to open income tax returns that were considered to be uncertain.
The Company is required to file income tax returns in the U.S. Federal jurisdiction and in California. The Company is no longer subject to income tax examinations by tax authorities for tax years ending before December 31, 2010.
The effective rate differs from the statutory rate of 34% for due to the following:
|
|
|
|
|
|
|
Statutory rate on pre-tax book loss
|
|
|
(34.00 |
)% |
|
|
(34.00 |
)% |
|
|
|
23.0 |
% |
|
|
11.70 |
% |
|
|
|
2.4 |
% |
|
|
2.40 |
% |
|
|
|
8.6 |
% |
|
|
19.90 |
% |
|
|
|
0.00 |
% |
|
|
0.00 |
% |
The Company’s deferred taxes as of December 31, 2014 and 2013 consist of the following:
|
|
2014
|
|
|
2013
|
|
Non-Current deferred tax asset:
|
|
|
|
|
|
|
Net operating loss carry-forwards
|
|
$ |
2,300,000 |
|
|
$ |
1,400,000 |
|
|
|
|
(2,300,000 |
) |
|
|
(1,400,000 |
) |
Net non-current deferred tax asset
|
|
$ |
- |
|
|
$ |
- |
|
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 15 – SUBSEQUENT EVENTS
Common stock:
On January 13, 2015, the Company issued 42,334 shares of its Common stock upon conversion of 50 shares of Series C Preferred stock and accrued dividends.
In January, 2015, the Company issued an aggregate of 302,500 shares of its common stock to consultants for services . See Note 10.
January 2015 Private Placement
On January 23, 2015, the Company entered into a securities purchase agreement with investors, pursuant to which we issued 365,200 shares of the Company’s our common stock, and "A" warrants expiring July 31, 2015 to purchase 365,200 shares of our common stock for aggregate cash proceeds of $913,000, and "B" warrants expiring March 21, 2020 to purchase 182,600 shares of our common stock for aggregate net cash proceeds of $917,480. In connection with the private placement, the Company issued 91,300 warrants to purchase our stock in connection with the placement services at the exercise price of $3.75 per share expiring March 21, 2020 for investment banking services.
February 2015 Private Placement
On February 10, 2015, the Company entered into a securities purchase agreement with investors, pursuant to which we issued 337,000 shares of the Company’s common stock, and "A" warrants expiring July 31, 2015 to purchase 337,000 shares of our common stock for aggregate cash proceeds of $842,500, and "B" warrants expiring March 21, 2020 to purchase 168,500 shares of our common stock for aggregate net cash proceeds of $731,400. In connection with the private placement, the Company issued 84,250 warrants to purchase our stock in connection with the placement services at the exercise price of $3.75 per share expiring March 21, 2020 for investment banking services.
BIOSIG TECHNOLOGIES, INC.
|
|
CONDENSED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$ |
2,059,328 |
|
|
$ |
239,781 |
|
Prepaid expenses
|
|
|
159,768 |
|
|
|
75,537 |
|
Total current assets
|
|
|
2,219,096 |
|
|
|
315,318 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
12,844 |
|
|
|
13,020 |
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
25,000 |
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
2,256,940 |
|
|
$ |
353,338 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses, including $14,605 and $40,293 to related parties as of March 31, 2015 and December 31, 2014 respectively
|
|
$ |
320,871 |
|
|
$ |
554,026 |
|
Stock based payable
|
|
|
646,066 |
|
|
|
226,305 |
|
Dividends payable
|
|
|
456,964 |
|
|
|
445,069 |
|
Warrant liability
|
|
|
4,097,444 |
|
|
|
- |
|
Derivative liability
|
|
|
1,242,590 |
|
|
|
- |
|
Total current liabilities
|
|
|
6,763,935 |
|
|
|
1,225,400 |
|
|
|
|
|
|
|
|
|
|
Series C 9% Convertible Preferred stock, 2,461 and 2,711 shares issued and outstanding, liquidation preference of $2,461,000 and $2,711,000, respectively
|
|
|
2,461,000 |
|
|
|
2,711,000 |
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, authorized 1,000,000 shares, designated 200 shares of Series A, 600 shares of Series B and 4,200 shares of Series C Preferred Stock
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, authorized 50,000,000 shares, 13,159,694 and 11,179,266 issued and outstanding as of March 31, 2015 and December 31, 2014, respectively
|
|
|
13,160 |
|
|
|
11,179 |
|
Additional paid in capital
|
|
|
18,852,156 |
|
|
|
19,186,163 |
|
Accumulated deficit
|
|
|
(25,833,311 |
) |
|
|
(22,780,404 |
) |
Total stockholders' deficit
|
|
|
(6,967,995 |
) |
|
|
(3,583,062 |
) |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$ |
2,256,940 |
|
|
$ |
353,338 |
|
See the accompanying notes to the unaudited condensed financial statements
BIOSIG TECHNOLOGIES, INC.
|
|
CONDENSED STATEMENTS OF OPERATIONS
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2015
|
|
|
2014
|
|
Operating expenses:
|
|
|
|
|
|
|
Research and development
|
|
$ |
302,079 |
|
|
$ |
122,151 |
|
General and administrative
|
|
|
2,746,853 |
|
|
|
601,565 |
|
Depreciation
|
|
|
2,860 |
|
|
|
4,435 |
|
Total operating expenses
|
|
|
3,051,792 |
|
|
|
728,151 |
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(3,051,792 |
) |
|
|
(728,151 |
) |
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest income (expense)
|
|
|
(1,114 |
) |
|
|
(1,098 |
) |
Financing costs
|
|
|
- |
|
|
|
(388,285 |
) |
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(3,052,906 |
) |
|
|
(1,117,534 |
) |
|
|
|
|
|
|
|
|
|
Income taxes (benefit)
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(3,052,906 |
) |
|
|
(1,117,534 |
) |
|
|
|
|
|
|
|
|
|
Preferred stock dividend
|
|
|
(79,395 |
) |
|
|
(84,024 |
) |
|
|
|
|
|
|
|
|
|
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
|
|
$ |
(3,132,301 |
) |
|
$ |
(1,201,558 |
) |
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted
|
|
$ |
(0.26 |
) |
|
$ |
(0.14 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic and diluted
|
|
|
12,256,418 |
|
|
|
8,482,710 |
|
See the accompanying notes to the unaudited condensed financial statements
BIOSIG TECHNOLOGIES, INC.
|
|
CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT
|
|
THREE MONTHS ENDED MARCH 31, 2015
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance, January 1, 2015
|
|
|
11,179,266 |
|
|
$ |
11,179 |
|
|
$ |
19,186,163 |
|
|
$ |
(22,780,404 |
) |
|
$ |
(3,583,062 |
) |
Sale of common stock
|
|
|
1,398,760 |
|
|
|
1,399 |
|
|
|
3,040,814 |
|
|
|
- |
|
|
|
3,042,213 |
|
Common stock issued upon conversion of Series C preferred stock and accrued dividends at $1.50 per share
|
|
|
211,668 |
|
|
|
212 |
|
|
|
317,288 |
|
|
|
- |
|
|
|
317,500 |
|
Common stock issued for services
|
|
|
370,000 |
|
|
|
370 |
|
|
|
928,530 |
|
|
|
- |
|
|
|
928,900 |
|
Reclassify fair value of warrant liability from equity
|
|
|
- |
|
|
|
- |
|
|
|
(4,097,444 |
) |
|
|
- |
|
|
|
(4,097,444 |
) |
Reclassify fair value of derivative liability from equity
|
|
|
- |
|
|
|
- |
|
|
|
(1,242,590 |
) |
|
|
- |
|
|
|
(1,242,590 |
) |
Fair value of vested options
|
|
|
- |
|
|
|
- |
|
|
|
798,789 |
|
|
|
- |
|
|
|
798,789 |
|
Preferred stock dividend
|
|
|
- |
|
|
|
- |
|
|
|
(79,395 |
) |
|
|
- |
|
|
|
(79,395 |
) |
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,052,906 |
) |
|
|
(3,052,906 |
) |
Balance, March 31, 2015
|
|
|
13,159,694 |
|
|
$ |
13,160 |
|
|
$ |
18,852,156 |
|
|
$ |
(25,833,311 |
) |
|
$ |
(6,967,995 |
) |
See the accompanying notes to the unaudited condensed financial statements
BIOSIG TECHNOLOGIES, INC.
|
|
CONDENSED STATEMENTS OF CASH FLOWS
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2015
|
|
|
2014
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,052,906 |
) |
|
$ |
(1,117,534 |
) |
Adjustments to reconcile net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,860 |
|
|
|
4,435 |
|
Amortization of debt discount
|
|
|
- |
|
|
|
388,285 |
|
Equity based compensation
|
|
|
1,634,714 |
|
|
|
343,837 |
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
8,744 |
|
|
|
(3,924 |
) |
Accounts payable
|
|
|
(233,155 |
) |
|
|
(119,856 |
) |
Stock based payable
|
|
|
419,761 |
|
|
|
- |
|
Deferred rent payable
|
|
|
- |
|
|
|
(1,006 |
) |
Net cash used in operating activities
|
|
|
(1,219,982 |
) |
|
|
(505,763 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(2,684 |
) |
|
|
- |
|
Net cash used in investing activity
|
|
|
(2,684 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
3,042,213 |
|
|
|
229,222 |
|
Net repayments of related party advances
|
|
|
- |
|
|
|
(20,281 |
) |
Net cash provided by financing activities
|
|
|
3,042,213 |
|
|
|
208,941 |
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
1,819,547 |
|
|
|
(296,822 |
) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of the period
|
|
|
239,781 |
|
|
|
302,187 |
|
Cash and cash equivalents, end of the period
|
|
$ |
2,059,328 |
|
|
$ |
5,365 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$ |
1,115 |
|
|
$ |
1,098 |
|
Cash paid during the period for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of Series C preferred stock and accrued dividends
|
|
$ |
317,500 |
|
|
$ |
- |
|
Reclassify fair value of derivative and warrant liability from equity
|
|
$ |
5,440,034 |
|
|
$ |
- |
|
See the accompanying notes to the unaudited condensed financial statements
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
Business and organization
BioSig Technologies Inc. (the “Company”) was initially incorporated on February 24, 2009 under the laws of the State of Nevada and subsequently re-incorporated in the state of Delaware in 2011. The Company is principally devoted to improving the quality of cardiac recordings obtained during EP studies and catheter ablation procedures. The Company has not generated any revenue to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise.
Interim Financial Statements
The unaudited condensed interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
The condensed balance sheet as of December 31, 2014 has been derived from audited financial statements.
Operating results for the three months ended March 31, 2015 are not necessarily indicative of results that may be expected for the year ending December 31, 2015. These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2014 filed with the Company’s Form 10-K with the Securities and Exchange Commission on February 20, 2015.
Basis of presentation
The Company's primary efforts are devoted to conducting research and development principally devoted to improving the quality of cardiac recordings obtained during EP studies and catheter ablation procedures. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. In addition, the Company has stockholders' deficiencies at March 31, 2015 and requires additional financing to fund future operations. Further, the Company does not have any commercial products available for sale and there is no assurance that if approval of their products is received that the Company will be able to generate cash flow to fund operations. In addition, there can be no assurance that the Company's research and development will be successfully completed or that any product will be approved or commercially viable.
The above factors raise substantial doubt as to the Company's ability to continue as a going concern. The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability and useful lives of long-lived assets, the fair value of the Company’s stock, stock-based compensation, fair values relating to warrant and other derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
Fair Value of Financial Instruments
The Company’s short-term financial instruments, including cash, prepaid expenses and other assets, accounts payable and accrued expenses and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of the Company’s convertible securities is based on management estimates and reasonably approximates their book value.
Derivative Instrument Liability
The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At March 31, 2015 and December 31, 2014, the Company did not have any derivative instruments that were designated as hedges.
Research and development costs
The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses of $302,079 and $122,151 for the three months ended March 31, 2015 and 2014, respectively.
Income Taxes
The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial.
Net Income (loss) Per Common Share
The Company computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.
The computation of basic and diluted loss per share as of March 31, 2015 and 2014 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
Potentially dilutive securities excluded from the computation of basic and diluted net income (loss) per share are as follows:
|
|
March 31,
2015
|
|
|
March 31,
2014
|
|
Series A convertible preferred stock
|
|
|
-
|
|
|
|
501,089
|
|
Series B convertible preferred stock
|
|
|
-
|
|
|
|
451,726
|
|
Series C convertible preferred stock
|
|
|
1,640,667
|
|
|
|
1,854,019
|
|
Options to purchase common stock
|
|
|
6,205,190
|
|
|
|
2,990,977
|
|
Warrants to purchase common stock
|
|
|
7,561,820
|
|
|
|
4,353,831
|
|
Totals
|
|
|
15,407,677
|
|
|
|
10,151,642
|
|
Stock Based Compensation
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.
As of March 31, 2015, the Company had 6,205,190 options outstanding to purchase shares of common stock, of which 4,130,240 were vested.
As of December 31, 2014, the Company had 5,990,190 options outstanding to purchase shares of common stock, of which 3,799,559 were vested.
Registration Rights
The Company accounts for registration rights agreements in accordance with the Accounting Standards Codification subtopic 825-20, Registration Payment Arraignments (“ASC 825-20”). Under ASC 825-20, the Company is required to disclose the nature and terms of the arraignment, the maximum potential amount and to assess each reporting period the probable liability under these arraignments and, if exists, to record or adjust the liability to current period operations. On June 23, 2014, the Company filed Form S-1/A became effective with the Securities and Exchange Commission. As such, the Company determined that payments were due under its registration rights agreement and therefore accrued $55,620 as interest expense during the year ended December 31, 2014 for the liability under the registration rights agreements.
Recent Accounting Pronouncements
There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows.
NOTE 2 – PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 2015 and December 31, 2014 is summarized as follows:
|
|
March 31,
2015
|
|
|
December 31,
2014
|
|
Computer equipment
|
|
$
|
57,584
|
|
|
$
|
54,900
|
|
Furniture and fixtures
|
|
|
7,803
|
|
|
|
7,803
|
|
Subtotal
|
|
|
65,387
|
|
|
|
62,703
|
|
Less accumulated depreciation
|
|
|
(52,543
|
)
|
|
|
(49,683
|
)
|
Property and equipment, net
|
|
$
|
12,844
|
|
|
$
|
13,020
|
|
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
Depreciation expense was $2,860 and $4,435 for the three months ended March 31, 2015 and 2014, respectively.
NOTE 3 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at March 31, 2015 and December 31, 2014 consist of the following:
|
|
March 31,
2015
|
|
|
December 31,
2014
|
|
Accrued accounting and legal
|
|
$
|
71,952
|
|
|
$
|
190,767
|
|
Accrued reimbursements
|
|
|
17,305
|
|
|
|
26,792
|
|
Accrued consulting
|
|
|
82,935
|
|
|
|
16,334
|
|
Accrued research and development expenses
|
|
|
42,409
|
|
|
|
93,407
|
|
Accrued credit card obligations
|
|
|
4,735
|
|
|
|
13,278
|
|
Accrued payroll
|
|
|
-
|
|
|
|
62,068
|
|
Accrued liquidated damages
|
|
|
55,620
|
|
|
|
55,620
|
|
Accrued office and other
|
|
|
5,915
|
|
|
|
29,093
|
|
Accrued settlement related to arbitration
|
|
|
40,000
|
|
|
|
66,667
|
|
|
|
$
|
320,871
|
|
|
$
|
554,026
|
|
NOTE 4 – SERIES C 9% CONVERTIBLE PREFERRED STOCK
On January 9, 2013, the Board of Directors authorized the issuance of up to 4,200 shares of Series C Convertible Preferred Stock (the “Series C Convertible Preferred Stock”).
The Series C convertible preferred stock is entitled to preference over holders of junior stock upon liquidation in the amount of $1,000 plus any accrued and unpaid dividends ; entitled to dividends as a preference to holders of junior stock at a rate of 9% per annum of the Stated Value of $1,000 per share, payable quarterly beginning on September 30, 2013 and are cumulative. The holders of Series C preferred stock have no voting rights, however without the affirmative vote of all the holders of then outstanding shares of the Series C preferred stock, the Company cannot (a) alter or change adversely the powers, preferences or rights given to the Series C preferred stock or alter or amend the Certificate of Designation.
Each share of Series C preferred stock is convertible, at the holder’s option, inclusive of any accrued and unpaid dividends, at conversion price of $1.50 (as reset).
If, at any time while the Series C preferred stock is outstanding, the Company sells or grants any option to purchase or sells or grants any right to re-price, or otherwise disposes of or issues any common stock or common stock equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then conversion price (“Base Conversion Price”), then the conversion price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. During 2014, the resets provisions as described above resulted in the conversion price reset to $1.50.
The Series C preferred stock contains triggering events which would require redemption at (i) the greater of 120% of the stated value of $1,000 or the product of the variable weighted average price of the Company’s common stock on the trading day immediately preceding the date of the triggering event and the stated value divided by the then conversion price or (ii) either (a) redeem each Series C preferred share for a redemption price, in shares of the Company’s common stock, equal to a number of shares equal to the (i) above divided by 75%. The Company determined that certain of the defined triggering events were outside the Company’s control and therefore classified the Series C preferred stock outside of equity.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
In connection with the sale of the Series C preferred stock, the Company issued an aggregate of 1,330,627 warrants to purchase the Company’s common stock at $2.61 per share expiring five years from the initial exercise date. The warrant provides if, at any time while the warrant is outstanding, the Company sells or grants any option to purchase or sells or grants any right to re-price, or otherwise disposes of or issues any common stock or common stock equivalents entitling any person to acquire shares of common stock at an effective price per share that is lower than the then conversion price (“base conversion price”), then the conversion price shall be reduced to equal the Base Conversion Price.
Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. In addition, the warrants provides for at any time after the six month anniversary of the initial exercise date, there is no effective registration statement registering, or no current prospectus available for the resale of the warrant shares by the holder, then the warrant may only be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the holder shall be entitled to receive a number of Warrant Shares equal to defined formula. During 2014, the resets provisions as described above resulted in an additional 984,674 warrants issued with an exercise price reset to $1.50 all Series C warrants.
In accordance with ASC 470-20, the Company recognized an embedded beneficial conversion feature present in the Series C preferred stock when it was issued. The Company allocated the net proceeds between the intrinsic value of the conversion option ($1,303,671) and the warrants ($1,064,739) to additional paid-in capital. The aggregate debt discount, comprised of the relative intrinsic value the conversion option ($1,303,671), relative fair value of the warrants ($1,064,739), and the issuance costs ($412,590); total of $2,781,000, is amortized over one year as interest expense, the date a possible redemption feature, outside of the Company’s control, would be available to the Series C stockholders
During the month of February 2013, the holders of previously issued convertible bridge notes converted into 600 shares of the Company’s Series C 9% Convertible Preferred Stock.
During the months of February, March, May, and July 2013, the Company sold an aggregate of 2,181 shares of the Company’s Series C 9% Convertible Preferred Stock for net proceeds of $1,814,910.
At the time of issuance and till March 31, 2015, the Company determined that the anti-dilutive provisions embedded in the Series C 9% Convertible Preferred Stock and related issued warrants did not meet the defined criteria of a derivative in such that the net settlement requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and therefore bifurcation is not required. There was no established market for the Company’s common stock. As described in Note 6, March 31, 2015, the Company determined a market has been established for the Company’s common stock and accordingly, reclassified the fair value of the embedded reset provisions of the Series C Preferred Stock and warrants of $1,242,590 and $4,097,444, respectively, from equity to liabilities.
As of March 31, 2015, the Company valued the reset provisions of the Series C Preferred Stock and warrants in accordance with ASC 470-20 using the Multinomial Lattice pricing model and the following assumptions: contractual terms of 2.78 to 3.50 years, a risk free interest rate of 0.56% to 0.89%, a dividend yield of 0%, and volatility of 141.00%.
During January 2015, the Company issued an aggregate of 42,334 shares of its commons stock in exchange for 50 shares of the Company’s Series C 9% Convertible Preferred Stock and accrued dividends.
During March 2015, the Company issued an aggregate of 169,334 shares of its commons stock in exchange for 200 shares of the Company’s Series C 9% Convertible Preferred Stock and accrued dividends.
Series C preferred stock issued and outstanding totaled 2,461 and 2,711 as of March 31, 2015 and December 31, 2014, respectively. As of March 31, 2015 and December 31, 2014, the Company has accrued $456,964 and $445,069 dividends payable on the Series C preferred stock.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
Registration Rights Agreement
The Company entered into a Registration Rights Agreement in connection with the sale and issuance of the Series C preferred stock. The Company is required to file a registration statement registering for resale the (a) common stock issuable upon conversion in full of the Preferred Stock (assuming on such date the shares of Preferred Stock are converted in full without regard to any conversion limitations therein), (b) all shares of Common Stock issuable as dividends and “Make-Whole Payments” (as defined in the Certificate of Designation) on the Preferred Stock assuming all dividend and Make-Whole Payments are made in shares of Common Stock and the Preferred Stock is held for at least 3 years, (c) all warrant shares then issuable upon exercise of the Warrants (assuming on such date the warrants are exercised in full without regard to any exercise limitations therein), (d) any additional shares of Common Stock issuable in connection with any anti-dilution provisions in the Preferred Stock or the Warrants (in each case, without giving effect to any limitations on conversion set forth in the Certificate of Designation or limitations on exercise set forth in the Warrants) and (e) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing. The Company is required to file a registration statement and must be declared effective no later than 210 days from the date of termination of the sale the Series C preferred stock.
The Company was required to maintain the effectiveness of the registration statement from its effective date unless all securities registered under the registration statement have been sold or are otherwise able to be sold. If the Company failed to comply with the registration statement effective date requirements, the Company is required to pay the investors a fee equal to 0.25% of the Purchaser’s investment, for each 30-day period of delay, subject to a maximum payment of 3% to each Purchaser.
On June 23 2014, the Company became effective and met its required filing requirement. The Company did not meet the effectiveness obligation by November 22, 2013. As a result, the Company accrued $55,620 as interest expense for liquidating damages due under the registration rights agreement.
NOTE 5 – WARRANT AND DERIVATIVE LIABILITIES
At the time of issuance and till March 31, 2015, the Company determined that the anti-dilutive provisions embedded in the Series C 9% Convertible Preferred Stock and related warrants (see Note 5) did not meet the defined criteria of a derivative in such that the net settlement requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and therefore bifurcation was not required. There was no established market for the Company’s common stock. As of March 31, 2015, the Company determined a market had been established for the Company’s common stock and accordingly, reclassified from equity to liability treatment the fair value of the embedded reset provisions of the Series C Preferred Stock and warrants of $1,242,590 and $4,097,444, respectively. .
The Company valued the reset provisions of the Series C Preferred Stock in accordance with ASC 470-20 using the Multinomial Lattice pricing model and the following assumptions: estimated contractual terms, a risk free interest rate of 0.56% to 0.89, a dividend yield of 0%, and volatility of 141.00%.
NOTE 6 – STOCKHOLDER EQUITY
Preferred stock
The Company is authorized to issue 1,000,000 shares of $0.001 par value preferred stock. As of March 31, 2015 and December 31, 2014, the Company has designated 200 shares of Series A preferred stock, 600 shares of Series B preferred stock and 4,200 , shares of Series C preferred stock. As of March 31, 2015 and December 31, 2014, there were no outstanding shares of Series A and Series B preferred stock.
During January 2015, the Company issued an aggregate of 42,334 shares of its commons stock in exchange for 50 shares of the Company’s Series C 9% Convertible preferred stock and accrued dividends.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
During March 2015, the Company issued an aggregate of 169,334 shares of its commons stock in exchange for 200 shares of the Company’s Series C 9% Convertible preferred stock and accrued dividends.
As of March 31, 2015 and December 31, 2014, the Company has 2,461 and 2,711 Series C 9% Convertible Preferred Stock issued and outstanding.
Common stock
The Company is authorized to issue 50,000,000 shares of $0.001 par value common stock. As of March 31, 2015 and December 31, 2014, the Company has 13,159,694 and 11,179,266 shares issued and outstanding, respectively.
During the three months ended March 31, 2015, the Company issued an aggregate of 370,000 shares of common stock under the terms of its 2012 Equity Plan for services rendered totaling $928,900 ($2.51 average per share).
During the three months ended March 31, 2015, the Company entered into securities purchase agreements with investors pursuant to which the Company issued 1,398,760 shares of common stock and warrants for aggregate net proceeds of $3,042,213.
In connection with the securities purchase agreements described above, the Company entered into a registration rights agreement whereas the Company is required to file a registration statement registering for resale the a) all of the purchase agreement Shares, (b) all investor warrant Shares then issuable upon exercise of the investor warrants, (c) the shares of common stock underlying the investment banker warrants; (d) any additional shares of Common Stock issuable in connection with any anti-dilution provisions in the investor warrants and the investment banker warrants (e) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing. The Company is required to file a registration statement the 45 days following the final closing date and must be declared effective no later than 180 days from the filing date.
The Company was required to maintain the effectiveness of the registration statement from its effective date unless all securities registered under the registration statement have been sold or are otherwise able to be sold. If the Company failed to comply with the registration statement filing and effective date requirements, the Company is required to pay the investors a fee equal to 1% of the Purchaser’s investment, for each 30-day period of delay, subject to a maximum payment of 6% to each Purchaser.
Stock based payable
The Company is obligated to issue shares of its common stock to board members and consultants for past and future services. The estimated liability as of March 31, 2015 and December 31, 2014 of $646,066 and $226,305 was determined based on services rendered for past services as of March 31, 2015 and December 31, 2014, respectively.
As of March 31, 2015, the Company is obligated to issue an aggregate of 352,500 shares of its common stock. These shares were considered issued as of the date of obligation in determining the weighted average number of outstanding shares used in the basic loss per common share calculation.
NOTE 7 – OPTIONS AND WARRANTS
On October 19, 2012, the Company’s Board of Directors approved the 2012 Equity Incentive Plan (“the “2012 Plan) and terminated the Long-Term Incentive Plan (the “2011 Plan”). The Plan provides for the issuance of options to purchase up to 8,806,123,( as amended) shares of the Company’s common stock to officers, directors, employees and consultants of the Company (as amended). Under the terms of the Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of the Company only and nonstatutory options. The Board of Directors of the Company determines the exercise price, vesting and expiration period of the grants under the Plan. However, the exercise price of an Incentive Stock Option should not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more stockholder and 100% of fair value for a grantee who is not 10% stockholder. The fair value of the common stock is determined based on quoted market price or in absence of such quoted market price, by the Board of Directors in good faith.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
Additionally, the vesting period of the grants under the Plan will be determined by the Committee, in its sole discretion, and expiration period not more than ten years. The Company reserved 1,250,000 shares of its common stock for future issuance under the terms of the Plan.
During the three months ended March 31, 2015, the Company granted an aggregate of 200,000 options and 370,000 stock grants to officers, directors and key consultants.
The following table presents information related to stock options at March 31, 2015:
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Exercisable
|
|
Exercise
|
|
|
Number of
|
|
|
Remaining Life
|
|
|
Number of
|
|
Price
|
|
|
Options
|
|
|
In Years
|
|
|
Options
|
|
$
|
1.01-2.00
|
|
|
|
834,642
|
|
|
|
4.5
|
|
|
|
541,642
|
|
|
2.01-2.50
|
|
|
|
5,370,548
|
|
|
|
6.7
|
|
|
|
3,588,598
|
|
|
|
|
|
|
6,205,190
|
|
|
|
6.4
|
|
|
|
4,130,240
|
|
A summary of the stock option activity and related information for the 2012 Plan for the three months ended March 31, 2015 is as follows:
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Intrinsic Value
|
|
Outstanding at January 1, 2015
|
|
|
5,990,190
|
|
|
$
|
2.25
|
|
|
|
6.7
|
|
|
|
3,267,692
|
|
Grants
|
|
|
215,000
|
|
|
|
2.47
|
|
|
|
7.0
|
|
|
|
-
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2015
|
|
|
6,205,190
|
|
|
$
|
2.26
|
|
|
|
6.4
|
|
|
$
|
1,098,888
|
|
Exercisable at March 31, 2015
|
|
|
4,130,240
|
|
|
$
|
2.25
|
|
|
|
5.9
|
|
|
$
|
797,753
|
|
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 estimated market stock price of $2.40 as of March 31, 2015, which would have been received by the option holders had those option holders exercised their options as of that date.
Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities until sufficient data exists to estimate the volatility using the Company’s own historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. The fair value of stock-based payment awards during the three months ended March 31, 2015 was estimated using the Black-Scholes pricing model.
In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.
The Company estimated forfeitures related to option grants at a weighted average annual rate of 0% per year, as the Company does not yet have adequate historical data, for options granted during the three months ended March 31, 2015.
During the months ended March 31, 2015, the Company granted an aggregate of 215,000 options to purchase the Company stock in connection with the services rendered at the exercise prices from $2.00 to $2.50 per share for a term of seven years with 15,000 vesting immediately and 200,000 over two years at 50% for the first and second anniversary.
The fair value of the granted options for three months ended March 31, 2015 was determined using the Black Scholes option pricing model with the following assumptions:
Dividend yield:
|
|
|
-0- |
% |
Volatility
|
|
129.54% to 130.30 |
% |
Risk free rate:
|
|
1.19% to 1.79 |
% |
Expected life:
|
|
7 years
|
|
Estimated fair value of the Company’s common stock
|
|
$ |
1.99 to $2.24 |
|
Estimated forfeiture rate
|
|
|
0 |
% |
The fair value of all options vesting during the three months ended March 31, 2015 and 2014 of $798,789 and $343,837, respectively, was charged to current period operations. Unrecognized compensation expense of $1,970,428 at March 31, 2015 will be expensed in future periods.
Warrants
The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at December 31, 2014:
Exercise
|
|
|
Number
|
|
Expiration
|
Price
|
|
|
Outstanding
|
|
Date
|
$ |
0.001 |
|
|
|
383,320 |
|
January 2020
|
$ |
1.50 |
|
|
|
3,721,518 |
|
February 2018 to September 2018
|
$ |
1.84 |
|
|
|
35,076 |
|
January 2020
|
$ |
2.02 |
|
|
|
30,755 |
|
January 2020
|
$ |
2.50 |
|
|
|
1,603,600 |
|
July 2015
|
$ |
2.75 |
|
|
|
228,720 |
|
August 2019 to September 2019
|
$ |
3.67 |
|
|
|
218,275 |
|
December 2018 to January 2019
|
$ |
3.75 |
|
|
|
1,340,556 |
|
April 2019 to March 2020
|
|
|
|
|
|
7,561,820 |
|
|
On January 23, 2015, the Company issued an aggregate of 428,400 and 321,300 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.
On February 10, 2015, the Company issued an aggregate of 337,000 and 252,750 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
On February 27, 2015, the Company issued an aggregate of 223,000 and 167,250 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.
On March 31, 2015, the Company issued an aggregate of 410,360 and 307,770 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.
A summary of the warrant activity for the three months ended March 31, 2015 is as follows:
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Intrinsic Value
|
|
Outstanding at January 1, 2015
|
|
|
5,113,990
|
|
|
$
|
1.71
|
|
|
|
3.6
|
|
|
|
6,041,436
|
|
Grants
|
|
|
2,447,830
|
|
|
|
3.04
|
|
|
|
2.4
|
|
|
|
-
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2015
|
|
|
7,561,820
|
|
|
$
|
2.14
|
|
|
|
3.0
|
|
|
$
|
4,300,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at March 31, 2015
|
|
|
7,561,820
|
|
|
$
|
2.14
|
|
|
|
3.0
|
|
|
$
|
4,300,280
|
|
Exercisable at March 31, 2015
|
|
|
7,561,820
|
|
|
$
|
2.14
|
|
|
|
3.0
|
|
|
$
|
4,300,280
|
|
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 estimated market stock price of $2.40 as of March 31, 2015, which would have been received by the option holders had those option holders exercised their options as of that date.
NOTE 8 – FAIR VALUE MEASUREMENT
The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”). ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
All items required to be recorded or measured on a recurring basis are based upon level 3 inputs.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the financial statements.
The carrying value of the Company’s cash and cash equivalents, accounts payable and other current assets and liabilities approximate fair value because of their short-term maturity.
As of March 31, 2015 or December 31, 2014, the Company did not have any items that would be classified as level 1 or 2 disclosures.
The Company recognizes its derivative and warrant liabilities as level 3 and values its derivatives using the methods discussed in Note 6. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 6 are that of volatility and market price of the underlying common stock of the Company.
As of March 31, 2015 and December 31, 2014, the Company did not have any derivative instruments that were designated as hedges.
The derivative and warrant liability as of March 31, 2015, in the amount of $1,242,590 and $4,097,444 has a level 3 classification, respectively.
The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of March 31, 2015:
|
|
Warrant
Liability
|
|
|
Derivative |
|
Balance, December 31, 2014
|
|
$
|
-
|
|
|
$
|
-
|
|
Total (gains) losses
|
|
|
|
|
|
|
|
|
Initial fair value of derivative at March 31, 2015, reclassified from equity
|
|
|
—
|
|
|
|
1,242,590
|
|
Initial fair value of warrant liability at March 31, 2015, reclassified from equity
|
|
|
4,097,444
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2015
|
|
$
|
4,097,444
|
|
|
$
|
1,242,590
|
|
Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
NOTE 9 – SUBSEQUENT EVENTS
On April 9, 2015, the Company granted options to acquire 300,000 shares of its common stock at an exercise price of $3.99 for seven years, vesting immediately upon appointment of a new board of directors member.
In April 2015, the Company issued an aggregate of 131,234 shares of its common stock in exchange for 155 shares of Series C 9% Convertible preferred stock and accrued dividends.
In April 2015, the Company issued 84,033 shares of its common stock in exchange for the exercise of 130,084 warrants exercisable at $1.50, on a cashless basis.
In April 2015, the Company issued an aggregate of 200,000 shares of its common stock to board of directors for services rendered.
In April 2015, the Company issued 50,000 shares of its common stock to a consultant for services rendered.
In April 2015, the Company issued an aggregate of 10,000 shares of its common stock for the exercise of previously issued options at $2.09 per share.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
We are paying all of the selling stockholders’ expenses related to this offering, except that the selling stockholders will pay any applicable underwriting discounts and commissions. The fees and expenses payable by us in connection with this Registration Statement are estimated as follows:
Securities and Exchange Commission Registration Fee
|
|
$
|
894.28
|
|
Accounting Fees and Expenses
|
|
$
|
12,500
|
|
Legal Fees and Expenses
|
|
|
50,000
|
|
Printing Expenses
|
|
$
|
6,000
|
|
Miscellaneous Fees and Expenses
|
|
|
2,605.72
|
|
Total
|
|
$
|
72,000
|
|
Item 14. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware provides, in general, that a corporation incorporated under the laws of the State of Delaware, as we are, may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than a derivative action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. In the case of a derivative action, a Delaware corporation may indemnify any such person against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification will be made in respect of any claim, issue or matter as to which such person will have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or any other court in which such action was brought determines such person is fairly and reasonably entitled to indemnity for such expenses.
We are also permitted to apply for, and currently maintain, insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the General Corporation Law of the State of Delaware would permit indemnification.
Item 15. Recent Sales of Unregistered Securities.
In August and December 2012, we issued an aggregate of 30,000 shares of our common stock as payment for services provided by a total of two service providers. The shares were valued at $2.00 per share. The securities issued were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) of the Securities Act of 1933, as amended.
On January 18, 2013, in connection with the previous private placement of our Series A Preferred Stock, we issued a seven-year warrant to purchase up to 35,076 shares of common stock at an exercise price of $1.84 per share, to Laidlaw & Company (UK) Ltd., our placement agent in the private placement. The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering.
On April 30, 2012, we entered into a securities purchase agreement with 24 accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant to which we issued 177.5 shares of our Series B Preferred Stock for aggregate cash proceeds of $877,500. The securities sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
On January 18, 2013, in connection the above described private placement, we issued a seven-year warrant to purchase up to 30,755 shares of common stock at an exercise price of $2.02 per share, to Laidlaw & Company (UK) Ltd., our placement agent in the private placement. The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering.
From July to December 2012, we entered into a securities purchase agreement with 6 accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant to which we issued bridge notes in the aggregate amount of $600,000 and related warrants. The securities sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) of the Securities Act of 1933, as amended.
On January 7, 2013, as consideration for providing general financial advisory services, we issued to Jamess Capital Group LLC a seven-year warrant to purchase up to 383,320 shares of common stock at an exercise price of $0.001 per share. The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering.
On February 6, 2013, we entered into a securities purchase agreement with 9 accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant to which we issued 1,400 shares of our Series C Preferred Stock and five-year warrants to purchase 669,857 shares of our common stock for aggregate cash proceeds of $800,000 and the conversion of $600,000 of our outstanding bridge notes. The securities sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
On February 7, 2013, as consideration for providing placement support services, we issued to Ellis International Ltd. 15,500 shares of common stock, with a value of $.001 per share. The shares of common stock were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and issued in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering.
On February 12, 2013, as consideration for providing placement support services, we issued to Ellis International Ltd. a five-year warrant to purchase up to 8,700 shares of common stock at an exercise price of $2.61 per share. The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and issued in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering.
On February 12, 2013, as consideration for consulting services, we granted 283,750 non-employee options to a consultant exercisable at a price equal to $2.09 per share. The options vest at 48,611 shares on each of the first, second and third month anniversaries, with the remainder of the shares vesting in equal amounts each monthly anniversary for the 24 months thereafter. The options and the underlying shares of common stock were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and issued in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering.
From February to July 2013, over four separate closings, we entered into a securities purchase agreement with 32 accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant to which we issued 1,381 shares of our Series C Preferred Stock and five-year warrants to purchase 1,330,629 shares of our common stock for aggregate cash proceeds of $1,381,000. The securities sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
On May 2, 2013, as consideration for providing advisory services, we issued to Mr. Chaussy, our chief financial officer, 5,862 shares of common stock, with a value of $2.09 per share. The shares of common stock were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and issued in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering.
On July 15, 2013, we issued five-year warrants to purchase 289,730 shares of our common stock to certain holders of our Series C Preferred Stock in consideration for amending certain provisions of the securities purchase agreement and registration rights agreement related to our Series C Preferred Stock. The warrants issued were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were issued in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
On July 15, 2013, in connection with the above described private placement, we issued a five-year warrant to purchase up to 177,057 shares of common stock at an exercise price of $2.61 per share, to Laidlaw & Company (UK) Ltd., our placement agent in the private placement. The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering. Laidlaw & Company (UK) Ltd. was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the private placement.
On August 7, 2013, we issued to the holders of our bridge notes in lieu of cash for payment of the interest accrued on the bridge notes that were exchanged for shares of our Series C Preferred Stock and the related warrants on February 6, 2013 an aggregate of 8,941 shares of common stock, with a value of $2.09 per share. The shares of common stock were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and issued in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering.
On October 14, 2013, we issued five-year warrants to purchase 332,684 shares of our common stock to certain holders of our Series C Preferred Stock in consideration for amending certain provisions of the securities purchase agreement related to our Series C Preferred Stock. The warrants issued were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were issued in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
On December 31, 2013 and January 31, 2014, in two separate closings, we entered into a securities purchase agreement with Mr. Londoner, Mr. Steinhouse and thirteen other accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant to which we issued 323,218 shares of our common stock and five-year warrants to purchase 161,611 shares of our common stock for aggregate cash proceeds of $791,885, including a conversion of debt of $228,000. The securities sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
On December 31, 2013 and January 31, 2014, in connection with the above described private placement, we issued five-year warrants to purchase up to 40,327 shares of common stock upon the same terms as the warrants in the above described private placement to Laidlaw & Company (UK) Ltd., our placement agent in the private placement. The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering. Laidlaw & Company (UK) Ltd. was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the private placement.
On April 4, 2014 and April 30, 2014, in two separate closings, we entered into a securities purchase agreement with twenty eight accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant to which we issued 229,760 shares of our common stock and five-year warrants to purchase 114,880 shares of our common stock for aggregate cash proceeds of $574,400. The securities sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
On April 30, 2014, in connection with the above described private placement, we issued a five-year warrant to purchase up to 22,976 shares of common stock upon the same terms as the warrants in the above described private placement to Laidlaw & Company (UK) Ltd., our placement agent in the private placement. The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering. Laidlaw & Company (UK) Ltd. was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the private placement.
On August 15, 2014 and September 12, 2014, in two separate closing, we entered into a securities purchase agreement with 23 accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant to which we issued 381,200 shares of our common stock and five-year warrants to purchase 190,600 shares of our common stock for aggregate cash proceeds of $953,000. The securities sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
On August 15, 2014 and September 12, 2014, in connection with the above described private placement, we issued a warrant to purchase up to an aggregate of 38,120 shares of common stock upon the same terms as the warrants in the above described private placement to Laidlaw & Company (UK) Ltd., our placement agent in the private placement. The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering. Laidlaw & Company (UK) Ltd. was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the private placement.
On December 19, 2014, December 30, 2014, January 23, 2015, February 10, 2015, February 27, 2015 and March 31, 2015, in six separate closing, we entered into a securities purchase agreement with 102 accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant to which we issued 1,603,600 shares of our common stock, “A” warrants expiring July 31, 2015 to purchase 1,603,600 shares of our common stock and “B” warrants expiring March 21, 2020 to purchase 801,800 shares of our common stock for aggregate cash proceeds of $4,009,000. The securities sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
On March 31, 2015, in connection with the above described private placement, we issued a warrant to purchase up to 400,900 shares of common stock upon the same terms as the “B” warrants in the above described private placement to Laidlaw & Company (UK) Ltd., our placement agent in the private placement. The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public offering. Laidlaw & Company (UK) Ltd. was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the private placement.
On May 11, 2015, we entered into a securities purchase agreement with Alpha Capital Anstalt and a securities purchase agreement with Brio Capital Master Fund Ltd., pursuant to which we issued 450 shares of our Series C Preferred Stock and five-year warrants to purchase 374,641 shares of our common stock for aggregate cash proceeds of $450,000. The securities sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit No.
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Description
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3.1
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Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Form S-1 filed on July 22, 2013)
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3.2
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Certificate of Amendment of the Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc. (incorporated by reference to Exhibit 3.2 to the Form S-1 filed on July 22, 2013)
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3.3
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Certificate of Second Amendment to the Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc. (incorporated by reference to Exhibit 3.3 to the Form S-1 filed on July 22, 2013)
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3.4
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Certificate of Third Amendment to the Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc. (incorporated by reference to Exhibit 3.5 to the Form S-1/A filed on January 21, 2014)
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3.5
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Certificate of Fourth Amendment to the Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc. (incorporated by reference to Exhibit 3.6 to the Form S-1/A filed on March 28, 2014)
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3.6
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Certificate of Fifth Amendment to the Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on August 21, 2014)
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3.7
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Bylaws of BioSig Technologies, Inc. (incorporated by reference to Exhibit 3.4 to the Form S-1 filed on July 22, 2013)
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5.1
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Opinion of Haynes and Boone, LLP (incorporated by reference to Exhibit 5.1 to the Form S-1/A filed on May 22, 2014)
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10.1
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BioSig Technologies, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Form S-1 filed on July 22, 2013)
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10.2
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Form of Stock Option Agreement under the 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Form S-1 filed on July 22, 2013)
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10.3
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Securities Purchase Agreement, dated September 19, 2011, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.3 to the Form S-1 filed on July 22, 2013)
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10.4
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Securities Purchase Agreement, dated December 27, 2011, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.4 to the Form S-1 filed on July 22, 2013)
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10.5
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Securities Purchase Agreement, dated February 6, 2013, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.5 to the Form S-1 filed on July 22, 2013)
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10.6
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Registration Rights Agreement, dated February 6, 2013, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.6 to the Form S-1 filed on July 22, 2013)
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10.7
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Form of Warrant used in connection with February 6, 2013 private placement (incorporated by reference to Exhibit 10.7 to the Form S-1 filed on July 22, 2013)
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10.8
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Amendment Agreement No. 1 to Securities Purchase Agreement and Registration Rights Agreement, dated February 25, 2013, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.8 to the Form S-1 filed on July 22, 2013)
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10.9
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Amendment Agreement No. 2 to Securities Purchase Agreement, dated April 12, 2013, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.9 to the Form S-1 filed on July 22, 2013)
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10.10
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Amendment Agreement No. 3 to Securities Purchase Agreement and Registration Rights Agreement, dated June 25, 2013, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.10 to the Form S-1 filed on July 22, 2013)
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10.11
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Office Lease Agreement, dated August 9, 2011, by and between BioSig Technologies, Inc. and Douglas Emmett 1993, LLC (incorporated by reference to Exhibit 10.11 to the Form S-1 filed on July 22, 2013)
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10.12
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Employment Agreement, dated March 1, 2013, by and between BioSig Technologies, Inc. and Kenneth Londoner (incorporated by reference to Exhibit 10.12 to the Form S-1 filed on July 22, 2013)
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10.13
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Indemnity Agreement, dated May 2, 2013 by and between BioSig Technologies, Inc. and Seth H. Z. Fischer (incorporated by reference to Exhibit 10.14 to the Form S-1 filed on July 22, 2013)
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10.14
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Consulting Agreement, dated August 1, 2012, by and between BioSig Technologies, Inc. and Asher Holzer (incorporated by reference to Exhibit 10.15 to the Form S-1 filed on July 22, 2013)
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10.15
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Unsecured Promissory Note made by BioSig Technologies, Inc. in favor of Kenneth Londoner, dated November 21, 2012 (incorporated by reference to Exhibit 10.19 to the Form S-1/A filed on September 11, 2013)
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10.16
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Form of 8% Senior Convertible Promissory Note issued pursuant to Bridge Loan Agreement, dated July 20, 2012 (incorporated by reference to Exhibit 10.20 to the Form S-1/A filed on September 11, 2013)
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10.17
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Promissory Note made by BioSig Technologies, Inc. in favor of Kenneth Londoner, dated December 6, 2012 (incorporated by reference to Exhibit 10.21 to the Form S-1/A filed on September 11, 2013)
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10.18
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Amendment Agreement No. 4 to Securities Purchase Agreement, dated October 14, 2013, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.23 to the Form S-1/A filed on January 21, 2014)
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10.19
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Securities Purchase Agreement, dated December 31, 2013, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.24 to the Form S-1/A filed on January 21, 2014)
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10.20
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Registration Rights Agreement, dated December 31, 2013, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.25 to the Form S-1/A filed on January 21, 2014)
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10.21
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Form of Warrant used in connection with December 31, 2013 private placement (incorporated by reference to Exhibit 10.26 to the Form S-1/A filed on January 21, 2014)
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10.22
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Amendment No. 1 to the BioSig Technologies, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.27 to the Form S-1/A filed on March 28, 2014)
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10.23
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Amendment Agreement No. 5 to Securities Purchase Agreement, dated March 24, 2014, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.28 to the Form S-1/A filed on March 28, 2014)
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10.24
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Patent Assignment, dated March 17, 2014, by and among Budimir Drakulic, Thomas Foxall, Sina Fakhar and Branislav Vlajinic and BioSig Technologies, Inc. (incorporated by reference to Exhibit 10.29 to the Form S-1/A filed on May 1, 2014)
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10.25
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Securities Purchase Agreement, dated April 4, 2014, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.30 to the Form S-1/A filed on May 1, 2014)
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10.26
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Registration Rights Agreement, dated April 4, 2014, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.31 to the Form S-1/A filed on May 1, 2014)
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10.27
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Form of Warrant used in connection with April 4, 2014 private placement (incorporated by reference to Exhibit 10.32 to the Form S-1/A filed on May 1, 2014)
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10.28
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Consulting Agreement, dated December 10, 2010, by and between BioSig Technologies, Inc. and Jonathan Steinhouse (incorporated by reference to Exhibit 10.33 to the Form S-1/A filed on May 22, 2014)
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10.29
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Executive Employment Agreement, dated July 15, 2014, by and between BioSig Technologies, Inc. and Gregory Cash (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on July 21, 2014)
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10.30
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Incentive Stock Option Agreement, dated July 15, 2014, by and between BioSig Technologies, Inc. and Gregory Cash (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on July 21, 2014)
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10.31
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Securities Purchase Agreement, dated as of August 15, 2014, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on August 21, 2014)
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10.32
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Registration Rights Agreement, dated as of August 15, 2014, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on August 21, 2014)
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10.33
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Form of Warrant used in connection with August 15, 2014 private placement (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on August 21, 2014)
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10.34
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Letter Agreement and Release, dated as of September 1, 2014, by and between BioSig Technologies, Inc. and Asher Holzer, Ph.D (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on September 5, 2014)
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10.35
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Form of Restricted Stock Award Agreement under the 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on September 5, 2014)
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10.36
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Settlement and Mutual Release Agreement, dated November 3, 2014, by and between BioSig Technologies, Inc. and David Drachman (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on November 5, 2014)
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10.37
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Composite of Unit Purchase Agreement, dated December 19, 2014, as amended by Supplement No. 1, dated December 17, 2014, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.37 to the Form 10-K filed on February 20, 2015)
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10.38
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Registration Rights Agreement, dated December 19, 2014, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.38 to the Form 10-K filed on February 20, 2015)
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10.39
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Form of “A” Warrant used in connection with December 19, 2014 private placement (incorporated by reference to Exhibit 10.37 to the Form 10-K filed on February 20, 2015)
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Form of “B” Warrant used in connection with December 19, 2014 private placement (incorporated by reference to Exhibit 10.37 to the Form 10-K filed on February 20, 2015)
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10.40
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Amendment No. 2 to the BioSig Technologies, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 99.3 to the Form S-8 filed on April 17, 2015)
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10.41
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Amendment No. 3 to the BioSig Technologies, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.41 to the Form S-1 filed on May 20, 2015)
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10.42
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Securities Purchase Agreement, dated as of May 11, 2015, by and between BioSig Technologies, Inc. and Alpha Capital Anstalt (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 15, 2015)
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10.43
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Securities Purchase Agreement, dated as of May 11, 2015, by and between BioSig Technologies, Inc. and Brio Capital Master Fund Ltd. (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on May 15, 2015
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10.44
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Amendment Agreement No. 6 to Securities Purchase Agreement, dated July 30, 2014, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.44 to the Form S-1/A filed on June 10, 2015)
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10.45
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Amendment No. 4 to the BioSig Technologies, Inc. 2012 Incentive Plan (incorporated by reference to Exhibit 99.1 to the Form 8-K filed on May 29, 2015)
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16.1
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Letter of Rosenberg Rich Baker Berman & Company, dated July 22, 2013 (incorporated by reference to Exhibit 16.1 to the Form S-1 filed on July 22, 2013)
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23.1
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23.2
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Consent of Haynes and Boone, LLP (included in Exhibit 5.1)
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24.1*
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Power of Attorney (included on signature page)
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* Previously filed.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1033, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the undersigned registrant under the Securities Act of 1033 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota on June 30, 2015.
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BIOSIG TECHNOLOGIES, INC.
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By:
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/s/ Kenneth L. Londoner
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Name: Kenneth L. Londoner
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Title: Executive Chairman
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In accordance with the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature
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Title
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Date
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/s/ Kenneth L. Londoner
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Executive Chairman and Director
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June 30, 2015
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Kenneth L. Londoner
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/s/ Gregory D. Cash
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President and Chief Executive Officer, Director
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June 30, 2015
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Gregory D. Cash
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/s/ Steve Chaussy
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Chief Financial Officer
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June 30, 2015
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Steve Chaussy
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/s/ Asher Holzer
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Chief Scientific Advisor and Director
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June 30, 2015
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Asher Holzer
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/s/ Roy T. Tanaka
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Director
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June 30, 2015
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Roy T. Tanaka
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/s/ Patrick J. Gallagher
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Director
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June 30, 2015
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Patrick J. Gallagher
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/s/ Seth H.Z. Fischer
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Director
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June 30, 2015
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Seth H.Z. Fischer
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/s/ Jeffrey F. O’Donnell, Sr.
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Director
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June 30, 2015
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Jeffrey F. O’Donnell, Sr.
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/s/ Jerome B. Zeldis
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Director
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June 30, 2015
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Jerome B. Zeldis
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/s/ David Weild IV
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Director
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June 30, 2015
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David Weild IV
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