UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

(Mark One)

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                          to                       

 

Commission file number: 001-38659

 

BIOSIG TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

 Delaware

 

26-4333375

(State or other jurisdiction of incorporation

or organization)

 

(IRS Employer Identification No.)

 

 

 

54 Wilton Road, 2nd Floor

Westport, CT

06880

(203) 409-5444

(Address of principal executive office)

(Zip Code)

(Registrant’s telephone number, Including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

BSGM

The NASDAQ Capital Market  

  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐   No ☒

 

As of November 5, 2020, there were 30,248,713 shares of registrant’s common stock outstanding. 

 

 

 

 

TABLE OF CONTENTS

 

PART I.          FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

ITEM 1.

Financial Statements

 

 

 

 

 

 

 

 

 

Condensed consolidated balance sheets as of September 30, 2020 (unaudited) and December 31, 2019

 

3

 

 

 

 

 

 

 

Condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019 (unaudited)

 

4

 

 

 

 

 

 

 

Condensed consolidated statement of changes in equity for the three months ended September 30, 2020 (unaudited)

 

5

 

 

 

 

 

 

 

Condensed consolidated statement of changes in equity for the three months ended September 30, 2019 (unaudited)

 

6

 

 

 

 

 

 

 

Condensed consolidated statement of changes in equity for the nine months ended September 30, 2020 (unaudited)

 

7

 

 

 

 

 

 

 

Condensed consolidated statement of changes in equity for the nine months ended September 30, 2019 (unaudited)

 

8

 

 

 

 

 

 

 

Condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 (unaudited)

 

9

 

 

 

 

 

 

 

Notes to condensed consolidated financial statements (unaudited)

 

10-33

 

 

 

 

 

 

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

34-44

 

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

 

45

 

ITEM 4.

Controls and Procedures

 

45

 

 

 

 

 

PART II.          OTHER INFORMATION

 

 

 

 

 

 

 

 

ITEM 1.

Legal Proceedings

 

46

 

ITEM 1A.

Risk Factors

 

46

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

48

 

ITEM 3.

Defaults Upon Senior Securities

 

48

 

ITEM 4.

Mine Safety Disclosures

 

48

 

ITEM 5.

Other Information

 

48

 

ITEM 6.

Exhibits

 

48

 

 

 

 

 

 

SIGNATURES

 

50

 

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   

September 30,

   

December 31,

 
   

2020

   

2019

 
   

(unaudited)

         

ASSETS

               

Current assets:

               

Cash

  $ 32,748,337     $ 12,108,582  

Inventory

    806,407       577,690  

Prepaid expenses and vendor deposits

    338,108       141,221  

Total current assets

    33,892,852       12,827,493  
                 

Property and equipment, net

    187,674       180,368  
                 

Right-to-use assets, net

    409,982       714,342  
                 

Other assets:

               

Patents, net

    350,282       364,536  

Trademarks

    1,125       1,125  

Prepaid expenses, long term

    9,736       27,410  

Deposits

    101,839       101,839  
                 

Total assets

  $ 34,953,490     $ 14,217,113  
                 

LIABILITIES AND EQUITY

               

Current liabilities:

               

Accounts payable and accrued expenses, including $154,500 and $39,674 to related parties as of September 30, 2020 and December 31, 2019, respectively

  $ 4,493,691     $ 1,488,776  

Dividends payable

    69,835       128,478  

Lease liability, short term

    396,308       412,288  

Total current liabilities

    4,959,834       2,029,542  
                 

Lease liability, long term

    22,365       311,131  

Total debt

    4,982,199       2,340,673  
                 

Commitments and contingencies (Note 11)

   
 
     
 
 
                 

Series C 9% Convertible Preferred Stock, $0.001 par value, $1,000 stated value, authorized 4,200 shares, 105 and 215 shares issued and outstanding; liquidation preference of $105,000 and $215,000 as of September 30, 2020 and December 31, 2019, respectively

    105,000       215,000  
                 

Equity:

               

Preferred stock, $0.001 par value, authorized 1,000,000 shares, designated 200 shares of Series A, 600 shares of Series B, 4,200 shares of Series C, 1,400 shares of Series D, 1,000 shares of Series E, 200,000 shares of Series F Preferred Stock

    -       -  

Common stock, $0.001 par value, authorized 200,000,000 shares, 30,118,196 and 23,323,087 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

    30,118       23,323  

Additional paid in capital

    175,228,334       115,910,058  

Accumulated deficit

    (146,712,473 )     (104,786,769 )

Total stockholders' equity attributable to BioSig Technologies, Inc.

    28,545,979       11,146,612  

Non-controlling interest

    1,320,312       514,828  

Total equity

    29,866,291       11,661,440  
                 

Total liabilities and equity

  $ 34,953,490     $ 14,217,113  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

3

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

   

Three months ended September 30,

   

Nine months ended September 30,

 
   

2020

   

2019

   

2020

   

2019

 

Operating expenses:

                               

Research and development

  $ 4,910,827     $ 1,643,659     $ 15,555,725     $ 4,950,457  

General and administrative

    8,165,488       3,841,189       32,628,919       14,380,898  

Depreciation and amortization

    23,869       18,510       67,092       36,424  

Total operating expenses

    13,100,184       5,503,358       48,251,736       19,367,779  
                                 

Loss from operations

    (13,100,184 )     (5,503,358 )     (48,251,736 )     (19,367,779 )
                                 

Other income (expense):

                               

Interest income, net

    1,743       39,354       44,773       84,623  

Loss on foreign currency translation

    -       -       (1,161 )     -  
                                 

Loss before income taxes

    (13,098,441 )     (5,464,004 )     (48,208,124 )     (19,283,156 )
                                 

Income taxes (benefit)

    -       -       -       -  
                                 

Net loss

    (13,098,441 )     (5,464,004 )     (48,208,124 )     (19,283,156 )
                                 

Non-controlling interest

    1,696,582       20,538       6,282,420       20,538  
                                 

Net loss attributable to BioSig Technologies, Inc.

    (11,401,859 )     (5,443,466 )     (41,925,704 )     (19,262,618 )
                                 

Preferred stock dividend

    (2,381 )     (4,877 )     (11,698 )     (20,286 )
                                 

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

  $ (11,404,240 )   $ (5,448,343 )   $ (41,937,402 )   $ (19,282,904 )
                                 

Net loss per common share, basic and diluted

  $ (0.38 )   $ (0.25 )   $ (1.56 )   $ (0.96 )
                                 

Weighted average number of common shares outstanding, basic and diluted

    29,750,378       21,809,998       26,900,383       20,124,322  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

 

4

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

THREE MONTHS ENDED SEPTEMBER 30, 2020

 

                   

Additional

                         
   

Common stock

   

Paid in

   

Accumulated

   

Non-controlling

         
   

Shares

   

Amount

   

Capital

   

Deficit

   

Interest

   

Total

 

Balance, June 30, 2020 (unaudited) 

    29,126,663     $ 29,127     $ 168,499,417     $ (135,310,614 )   $ 2,793,950     $ 36,011,880  

Sale of common stock in September 2020 under At-the-market offering, net of transaction expenses of $182,332

    150,000       150       1,001,613       -       -       1,001,763  

Common stock issued for services

    488,000       488       3,442,142       -       -       3,442,630  

Common stock issued upon exercise of options at an average of $4.54 per share

    108,374       108       492,424       -       -       492,532  

Common stock issued upon exercise of warrants at an average of $3.95 per share

    160,159       160       632,039       -       -       632,199  

Stock based compensation

    85,000       85       1,163,080       -       222,944       1,386,109  

Preferred stock dividend

    -       -       (2,381 )     -       -       (2,381 )

Net loss

    -       -       -       (11,401,859 )     (1,696,582 )     (13,098,441 )

Balance, September 30, 2020 (unaudited)

    30,118,196     $ 30,118     $ 175,228,334     $ (146,712,473 )   $ 1,320,312     $ 29,866,291  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

5

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

THREE MONTHS ENDED SEPTEMBER 30, 2019

 

                   

Additional

                                 
   

Common stock

   

Paid in

           

Accumulated

   

Non-controlling

         
   

Shares

   

Amount

   

Capital

   

Subscription

   

Deficit

   

Interest

   

Total

 

Balance, June 30, 2019 (unaudited)

    21,151,134     $ 21,151     $ 94,494,972     $ -     $ (84,551,093 )   $ -     $ 9,965,030  

Common stock issued for services

    413,317       413       1,196,215       -       -       -       1,196,628  

Sale of subsidiary shares to non-controlling interest

    -       -       3,268,434       -       -       426,212       3,694,646  

Common stock issued upon exercise of warrants at an average of $4.01 per share

    432,867       433       1,735,950       -       -       -       1,736,383  

Common stock issued upon exercise of options at $5.09 per share

    4,000       4       20,356       -       -       -       20,360  

Common stock issued upon cashless exercise of warrants

    1,024       1       (1 )     -       -       -       -  

Subscription received from sale of subsidiary shares to non-controlling interest

    -       -       -       501,000       -       -       501,000  

Stock based compensation

    30,000       30       772,563       -       -               772,593  

Preferred stock dividend

    -       -       (4,877 )     -       -               (4,877 )

Net loss

    -       -       -       -       (5,443,466 )     (20,538 )     (5,464,004 )

Balance, September 30, 2019 (unaudited)

    22,032,342     $ 22,032     $ 101,483,612     $ 501,000     $ (89,994,559 )   $ 405,674     $ 12,417,759  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

6

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2020

 

                   

Additional

                         
   

Common stock

   

Paid in

   

Accumulated

   

Non-controlling

         
   

Shares

   

Amount

   

Capital

   

Deficit

   

Interest

   

Total

 

Balance, December 31, 2019

    23,323,087     $ 23,323     $ 115,910,058     $ (104,786,769 )   $ 514,828     $ 11,661,440  

Sale of common stock, net of transaction costs

    4,687,500       4,688       25,209,623       -       -       25,214,311  

Sale of common stock in September 2020 under At-the-market offering, net of transaction expenses of $182,332

    150,000       150       1,001,613       -       -       1,001,763  

Sale of subsidiary shares to non-controlling interest

    -       -       7,124,366       -       3,467,709       10,592,075  

Common stock issued for services

    503,038       503       3,550,401       -       -       3,550,904  

Fair value of subsidiary shares issued to acquire research and development

    -       -       1,051,309       -       248,486       1,299,795  

Common stock issued upon conversion of Series C Preferred Stock at $3.75 per share

    29,334       29       109,971       -       -       110,000  

Common stock issued settlement of Series C Preferred Stock accrued dividends at $4.53 per share

    15,516       16       70,325       -       -       70,341  

Common stock issued upon cashless exercise of warrants

    12,840       13       (13 )     -       -       -  

Common stock issued upon cashless exercise of options

    160,743       161       (161 )     -       -       -  

Common stock issued upon exercise of options at an average of $4.64 per share

    586,825       586       2,721,426       -       -       2,722,012  

Common stock issued upon exercise of warrants at an average of $3.88 per share

    429,979       430       1,666,065       -       -       1,666,495  

Fair value of subsidiary shares issued to acquire research and development from Trek Therapeutics, PBC

    -       -       2,439,139       -       735,411       3,174,550  

Stock based compensation

    219,334       219       14,385,910       -       2,636,298       17,022,427  

Preferred stock dividend

    -       -       (11,698 )     -       -       (11,698 )

Net loss

    -       -       -       (41,925,704 )     (6,282,420 )     (48,208,124 )

Balance, September 30, 2020 (unaudited)

    30,118,196     $ 30,118     $ 175,228,334     $ (146,712,473 )   $ 1,320,312     $ 29,866,291  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

7

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2019

 

                   

Additional

                                 
   

Common stock

   

Paid in

           

Accumulated

   

Non-controlling

         
   

Shares

   

Amount

   

Capital

   

Subscription

   

Deficit

   

Interest

   

Total

 

Balance, December 31, 2018

    16,868,783     $ 16,869     $ 74,039,341     $ -     $ (70,731,941 )   $ -     $ 3,324,269  

Common stock issued for services

    973,317       973       5,802,455       -       -       -       5,803,428  

Sale of common stock, net of transaction costs

    2,155,127       2,155       8,617,123       -       -       -       8,619,278  

Sale of subsidiary shares to non-controlling interest

    -       -       3,268,434       -       -       426,212       3,694,646  

Common stock issued upon exercise of warrants at an average of $4.07 per share

    1,562,896       1,563       6,353,307       -       -       -       6,354,870  

Common stock issued upon exercise of options at an average of $4.77 per share

    97,500       98       465,100       -       -       -       465,198  

Common stock issued upon cashless exercise of warrants

    161,986       162       (162 )     -       -       -       -  

Common stock issued upon cashless exercise of options

    38,687       39       (39 )     -       -       -       -  

Common stock issued upon conversion of Series C Preferred Stock at $3.75 per share

    69,335       69       259,931       -       -       -       260,000  

Common stock issued settlement of Series C Preferred Stock accrued dividends at $6.53 per share

    21,379       21       139,571       -       -       -       139,592  

Subscription received from sale of subsidiary shares to non-controlling interest

    -       -       -       501,000       -       -       501,000  

Change in fair value of modified options

    -       -       666,062       -       -       -       666,062  

Stock based compensation

    83,332       83       1,892,775       -       -       -       1,892,858  

Preferred stock dividend

    -       -       (20,286 )     -       -       -       (20,286 )

Net loss

    -       -       -       -       (19,262,618 )     (20,538 )     (19,283,156 )

Balance, September 30, 2019 (unaudited)

    22,032,342     $ 22,032     $ 101,483,612     $ 501,000     $ (89,994,559 )   $ 405,674     $ 12,417,759  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

 

8

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

   

Nine months ended September 30,

 
   

2020

   

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (48,208,124 )   $ (19,283,156 )

Adjustments to reconcile net loss to cash used in operating activities:

               

Depreciation and amortization

    67,092       36,424  

Equity based compensation

    20,573,331       7,696,286  

Change in fair value of modified options

    -       666,062  

Fair value of subsidiary stock issued to acquire research and development from Trek Therapeutics, PBC

    3,174,550       -  

Fair value of subsidiary stock issued to acquire research and development

    1,299,795       -  

Changes in operating assets and liabilities:

               

Inventory

    (228,717 )     -  

Vendor deposits

    (8,826 )     (330,444 )

Prepaid expenses

    (170,387 )     (97,158 )

Security deposit

    -       (47,601 )

Accounts payable and accrued expenses

    3,004,915       (226,829 )

Lease liability, net

    (386 )     4,730  

Net cash used in operating activities

    (20,496,757 )     (11,581,686 )
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Payments of patent costs

    -       (111,316 )

Payment of trademark costs

    -       (275 )

Purchase of property and equipment

    (60,144 )     (83,297 )

Net cash used in investing activity

    (60,144 )     (194,888 )
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Proceeds from sale of common stock, net of issuance costs

    25,214,311       8,619,278  

Proceeds from sale of common stock under a At-the-market offering, net of issuance costs

    1,001,763       -  

Proceeds from sale of subsidiary stock to non-controlling interest, net of issuance costs

    10,592,075       3,694,646  

Subscription received from subsidiary stock subscription from non-controlling interest

    -       501,000  

Proceeds from exercise of options

    2,722,012       465,198  

Proceeds from exercise of warrants

    1,666,495       6,354,870  

Net cash provided by financing activities

    41,196,656       19,634,992  
                 

Net increase in cash and cash equivalents

    20,639,755       7,858,418  
                 

Cash and cash equivalents, beginning of the period

    12,108,582       4,450,160  

Cash and cash equivalents, end of the period

  $ 32,748,337     $ 12,308,578  
                 

Supplemental disclosures of cash flow information:

               

Cash paid during the period for interest

  $ -     $ -  

Cash paid during the period for income taxes

  $ -     $ -  
                 

Noncash investing and financing activities:

               

Common stock issued upon conversion of Series C Preferred Stock and accrued dividends

  $ 180,341     $ 399,592  

Dividend payable on preferred stock charged to additional paid in capital

  $ 11,698     $ 20,286  

Right-to-use assets and lease liability recorded upon adoption of ASC 842

  $ -     $ 422,215  

Record right-to-use assets and related lease liability

  $ -     $ 511,236  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

9

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

BioSig Technologies, Inc. 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.

 

On November 7, 2018, the Company formed ViralClear Pharmaceuticals, Inc. (“ViralClear”), under the laws of the State of Delaware formerly under the name of NeuroClear Technologies, Inc. The subsidiary was established to pursue additional applications of the PURE EP™ signal processing technology outside of electrophysiology, and subsequently in 2020, was repurposed to develop merimepodib, a broad-spectrum anti-viral agent that had potential against the COVID-19 virus (see below). In 2019, the company sold 896,690 shares of its common stock for net proceeds of $5,011,310 to fund initial operations. As of December 31, 2019, the company had a majority interest in ViralClear of 87.8%.

 

On March 30, 2020, ViralClear amended its Certificate of Incorporation to change its name to ViralClear Pharmaceuticals, Inc. from NeuroClear Technologies, Inc.

 

On March 24, 2020, ViralClear entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Trek Therapeutics, PBC (“Trek”), a related party; an entity controlled by a member of the Company’s board of directors.  Pursuant to the Asset Purchase Agreement, Trek sold to ViralClear all right, title and interest of Trek and its affiliates to certain assets (the “Purchased Assets”). As consideration for the Purchased Assets, ViralClear agreed to pay Trek in upfront and milestone payments a combination of cash, shares of ViralClear’s common stock, which common stock may equal up to 10% of ViralClear’s outstanding equity, and sublicense fees in the event ViralClear sublicenses the Purchased Assets. On March 30, 2020, pursuant to the Asset Purchase Agreement, ViralClear paid $350,000 in cash and issued 634,910 shares of ViralClear’s common stock valued at $3,174,550 to Trek. The purchased assets were accounted for as acquired research and development.

 

On April 8, 2020, ViralClear entered into an Agreement with Mayo (the “Agreement”). The Agreement grants to ViralClear (i) an exclusive worldwide license, with the right to sublicense, within the field of anti-viral agents to target COVID-19 (the “Field”) to certain patent rights for the development and commercialization of products, methods, and processes for public use and benefit (the “Licensed Products”) and (ii) a non-exclusive worldwide license, with the right to sublicense, within the Field, to use the know-how of Mayo that is necessary to develop the Licensed Products. The Agreement will expire upon the later of either (a) the expiration of the licensed patent rights or (b) the 7th anniversary of the date of the first commercial sale of a Licensed Product, unless earlier terminated by Mayo for ViralClear’s failure to cure a material breach of the Agreement, ViralClear’s or a sublicensee’s commencement of any action or proceedings against Mayo or its affiliates other than for an uncured material breach of the Agreement by Mayo, or insolvency ViralClear.

 

In connection with the Agreement, ViralClear issued to Mayo 259,959 shares of ViralClear’s common stock, par value $0.001 per share. ViralClear also agreed to make earned royalty payments to Mayo in connection with ViralClear’s sales of the Licensed Products along with certain milestone payments up to $200,000 in the aggregate. The common stock issued, and cash paid was accounted for as acquired research and development.

 

In May 2020, ViralClear sold 1,068,550 shares of its common stock to investors at $10.00 per share for net proceeds of $10,592,075 to fund product development. As of September 30, 2020, the Company had a majority interest in ViralClear of 69.4%.  

 

On July 2, 2020, the Company formed an additional subsidiary, NeuroClear Technologies, Inc. (“NeuroClear”), a Delaware corporation, to pursue additional applications of the PURE EP™ signal processing technology outside of electrophysiology. 

 

10

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

On October 26, 2020, BioSig Technologies, Inc. halted ViralClear’s signal finding Phase 2 trial, “A Phase 2, Randomized, Double-Blind, Placebo-Controlled Study of the Efficacy and Safety of Oral Merimepodib in Combination with Intravenous Remdesivir in Adult Patients with Advanced Coronavirus Disease 2019 (COVID-19),” as described in Note 15-Subsequent Events. and is reviewing repurposing ViralClear.

 

The unaudited condensed consolidated financial statements include the accounts of BioSig Technologies, Inc., its wholly owned subsidiary, NeuroClear Technologies, Inc. and its majority owned subsidiary, ViralClear Pharmaceuticals, Inc. to as the “Company” or “BioSig”.

 

The unaudited condensed consolidated 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 consolidated balance sheet as of December 31, 2019 has been derived from audited financial statements.

 

Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2019 filed with the Company’s Form 10-K with the Securities and Exchange Commission on March 13, 2020.

 

COVID-19

 

On March 11, 2020, the World Health Organization declared a pandemic related to the rapidly spreading coronavirus (COVID-19) outbreak, which has led to a global health emergency.  The full public-health impact of the ongoing pandemic is currently indeterminable and rapidly evolving, and the related health crisis has adversely affected and may continue to adversely affect the global economy, resulting in delaying to our commercialization objectives of the PURE EP Systems.

 

NOTE 2 – MANAGEMENT’S LIQUIDITY PLANS

 

The BioSig Technologies, Inc.’s primary efforts are principally devoted to improving the quality of cardiac recordings obtained during ablation of atrial fibrillation (AF) and ventricular tachycardia (VT) and ViralClear’s efforts are devoted to developing a broad-spectrum, anti-viral candidate acquired from Trek. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. Further, the Company has not generated revenues and there is no assurance that the Company will be able to generate cash flow to fund operations. In addition, there can be no assurance that the Company's ongoing research and development will be successfully completed or that any product will be approved or commercially viable.

 

At September 30, 2020, the Company had working capital of approximately $28.9 million. During the nine months ended September 30, 2020, the Company raised approximately $25.2 million, net of expenses, through the sale of common stock, $10.6 million, net of expenses, through the sale of ViralClear’s common stock, $1.0 million through an At-the-market offering, net of expenses and $4.4 million from the exercise of warrants and options. In addition, the Company has in place a $45.0 million At-the-market offering, of which $43.9 million remains available at September 30, 2020.

 

At September 30, 2020, the Company had cash of approximately $32.7 million, which together with approximately $200,000 from option and warrant exercises subsequent to September 30, 2020 and together with the potential additional proceeds we may be able to receive from selling our common stock in an At-the-market offering, assuming we sell all of the shares registered for the At-the-market offering (See Note 8), constitutes sufficient funds for the Company to meet its research and development and other funding requirements for at least the next 12 months from the date of issuance of these financial statements.

 

11

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability and useful lives of long-lived assets, the fair value of long-term operating leases, patent capitalization, fair value of acquired assets, the fair value of the Company’s stock, stock-based compensation, fair values relating to warrant and other derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

 

Acquisition of Intellectual Property

 

Intellectual property acquired are accounted for under the acquisition method of accounting. This method requires the recording of acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition date fair values. The method records any excess purchase price over the fair value of acquired net assets as goodwill.

 

The acquired intellectual property from the Trek acquisition was considered unproven compounds, the success of which was uncertain at the time of the acquisition. Accordingly, the fair value of the consideration paid was charged as acquired research and development to current period operations.

 

Fair Value of Financial Instruments

 

Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

 

The Company follows Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to measure many financial instruments and certain other items at fair value.

 

Concentrations of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit.  At September 30, 2020 and December 31, 2019, deposits in excess of FDIC limits were $32,248,337 and $11,608,582, respectively.

  

Inventory

 

The inventory is comprised of finished goods available for sale and are stated at the lower of cost or net realizable value using the first-in, first-out method of valuation. The inventory at September 30, 2020 and December 31, 2019 were $806,407 and $577,690, respectively.

 

12

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

Prepaid Expenses and Vendor Deposits

 

Prepaid expenses and vendor deposits are comprised of prepaid insurance and operating expense and other prepayments.

 

Leases

 

The Company determines if a contractual arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and noncurrent operating lease liabilities on the Company’s unaudited condensed consolidated balance sheet. The Company evaluates and classifies leases as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty. All the Company’s real estate leases are classified as operating leases. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. The lease payments included in the present value are fixed lease payments. As most of the Company’s leases do not provide an implicit rate, the Company estimates its collateralized incremental borrowing rate, based on information available at the commencement date, in determining the present value of lease payments. The Company applies the portfolio approach in applying discount rates to its classes of leases. The operating lease ROU assets include any payments made before the commencement date. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company does not currently have subleases. The Company does not currently have residual value guarantees or restrictive covenants in its leases.

 

Research and Development Costs

 

The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses of $4,910,827 and $15,555,725 for the three and nine months ended September 30, 2020 and $1,643,659 and $4,950,457 for the three and nine months ended September 30, 2019, respectively.

 

Net Income (loss) Per Common Share

 

The Company computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.  Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.

 

The computation of basic and diluted loss per share as of September 30, 2020 and 2019 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.

 

13

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

Potentially dilutive securities excluded from the computation of basic and diluted net income (loss) per share are as follows: 

 

   

September 30,

2020

   

September 30,

2019

 

Series C convertible preferred stock

    44,194       71,962  

Options to purchase common stock

    3,509,956       3,667,238  

Warrants to purchase common stock

    1,604,668       2,477,245  

Totals

    5,158,818       6,216,445  

 

Stock Based Compensation

 

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award as measured on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.

 

As of September 30, 2020, BioSig Technologies, Inc. had options to purchase 3,509,956 shares of common stock outstanding, of which options to purchase 2,627,631 shares of common stock were vested.

 

As of December 31, 2019, there were BioSig Technologies, Inc. options to purchase 3,980,804 shares of common stock outstanding, of which options to purchase 2,874,017 shares of common stock were vested.

 

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.

 

Patents, Net

 

The Company capitalizes certain initial asset costs in connection with patent applications including registration, documentation and other professional fees associated with the application. Patent costs incurred prior to the Company’s U.S. Food and Drug Administration (“FDA”) 510(k) application on March 28, 2018 were charged to research and development expense as incurred. Commencing upon first in-man trials on February 18 and 19, 2019, capitalized costs are amortized to expense using the straight-line method over the lesser of the legal patent term or the estimated life of the product of 20 years. During the three and nine months ended September 30, 2020, the Company recorded amortization of $4,752 and $14,254; and $4,751 and $10,824 for the three and nine months ended September 30, 2019 to current period operations, respectively.

 

Impairment of Long-lived Assets

 

The Company recognizes an impairment of long-lived assets used in operations, other than goodwill, when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method. The Company did not recognize and record any impairments of long-lived assets used in operations during the three- and nine-month periods ended September 30, 2020 and 2019.

 

14

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

Non-controlling Interest

 

The Company’s non-controlling interest represents the non-controlling shareholders ownership interests related to the Company’s subsidiary, ViralClear Pharmaceuticals, Inc. The Company reports its non-controlling interest in subsidiaries as a separate component of equity in the consolidated balance sheets and reports both net loss attributable to the non-controlling interest and net loss attributable to the Company’s common shareholders on the face of the consolidated statements of operations. The Company’s equity interest in ViralClear is 69.4% and the non-controlling stockholders’ interest is 30.6% as of September 30, 2020. This is reflected in the consolidated statements of equity.

 

Segment Information

 

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein represents all of the material financial information related to the Company’s principal operating segments. (See Note 12 – Segment Reporting).

 

Recent Accounting Pronouncements

 

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment as of September 30, 2020 and December 31, 2019 is summarized as follows:

 

   

September 30,

2020

   

December 31,

2019

 

Computer equipment

  $ 206,326     $ 155,126  

Furniture and fixtures

    75,127       71,463  

Manufacturing equipment

    34,377       29,098  

Total

    315,830       255,687  

Less accumulated depreciation

    (128,156

)

    (75,319

)

Property and equipment, net

  $ 187,674     $ 180,368  

 

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 $19,117 and $52,838 for three and nine months ended September 30, 2020; and $13,759 and $25,600 for the three and nine months ended September 30, 2019, respectively.

 

NOTE 5 – RIGHT TO USE ASSETS AND LEASE LIABILITY

 

Operating leases:

 

On October 1, 2019, the Company entered into a lease agreement whereby the Company leased approximately 1,400 square feet of office space in Rochester, Minnesota commencing November 1, 2019 and expiring on October 31, 2021 at an initial rate of $3,411 per month with escalating payments. The lease agreement includes an option to extend the lease for two additional periods of two years each past its initial term.

 

15

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

On August 14, 2019, the Company entered into a lease agreement whereby the Company leased storage space in the same building as our Los Angeles, California facilities, commencing September 1, 2019, and expiring on June 30, 2021, at an initial rate of $235 per month with escalating payments.  In connection with the lease, the Company paid a security deposit of $250. There is no option to extend the lease past its initial term.

 

On April 12, 2019, the Company entered into a sublease agreement whereby the Company leased approximately 4,343 square feet of office space in Westport, Connecticut commencing May 1, 2019 and expiring on October 31, 2021 at an initial rate of $18,277 per month, inclusive of a fixed utility charge, with escalating payments.  In connection with the lease the Company paid a security deposit of $68,764, of which $34,382 represents the last two months of the term. There is no option to extend the lease past its initial term.

 

On May 22, 2018, the Company entered into a fifth lease amendment agreement, whereby the Company agreed to extend the lease for the original office space and expand with additional space in Los Angeles, California, commencing June 14, 2018 and expiring on June 30, 2021 at an initial rate of $14,731 per month with escalating payments.  

 

At lease commencement dates, the Company estimated the lease liability and the right of use assets at present value using the Company’s estimated incremental borrowing rate of 8% and determined their initial present values, at inception, of $1,084,715.

 

Right to use assets is summarized below:

 

   

September 30,

2020

   

December 31,

2019

 

Right to use assets, net

  $ 1,084,715     $ 1,084,715  

Less accumulated depreciation

    (674,733

)

    (370,373

)

Right to use assets, net

  $ 409,982     $ 714,342  

 

During the three and nine months ended September 30, 2020, the Company recorded $124,437 and $370,656; and $133,786 and $298,191 for the three and nine months ended September 30, 2019, as lease expense to current period operations.

 

Lease liability is summarized below:

 

   

September 30,

2020

   

December 31,

2019

 

Total lease liability

  $ 418,673     $ 723,419  

Less: short term portion

    (396,308

)

    (412,288

)

Long term portion

  $ 22,365     $ 311,131  

 

 

Maturity analysis under these lease agreements are as follows:

 

Year ended December 31, 2020

  $ 115,202  

Year ended December 31, 2021

    321,386  

 Total

    436,588  

Less: Present value discount

    (17,915

)

Lease liability

  $ 418,673  

 

16

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

Lease expense for the three months ended September 30, 2020 and 2019 was comprised of the following:

 

   

September 30,

2020

   

September 30,

2019

 

Operating lease expense

  $ 114,861     $ 102,394  

Short-term lease expense

    9,080       31,492  

Variable lease expense

    496       (100

)

Total

  $ 124,437     $ 133,786  

 

Lease expense for the nine months ended September 30, 2020 and 2019 was comprised of the following:

 

   

September 30,

2020

   

September 30,

2019

 

Operating lease expense

  $ 342,152     $ 232,427  

Short-term lease expense

    27,473       64,252  

Variable lease expense

    1,031       1,512  

Total

  $ 370,656     $ 298,191  

 

NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses at September 30, 2020 and December 31, 2019 consist of the following:

 

   

September 30,

2020

   

December 31,

2019

 

Accrued accounting and legal

  $ 294,085     $ 118,783  

Accrued reimbursements and travel

    32,381       58,566  

Accrued consulting

    118,113       170,284  

Accrued research and development expenses

    3,573,254       230,035  

Accrued product purchases

    -       346,206  

Accrued marketing

    12,750       11,181  

Accrued office and other

    10,164       17,885  

Accrued payroll

    439,611       522,503  

Accrued settlement related to arbitration

    13,333       13,333  
    $ 4,493,691     $ 1,488,776  

 

NOTE 7 – SERIES C 9% CONVERTIBLE PREFERRED STOCK

 

Series C 9% Convertible Preferred Stock

 

On January 9, 2013, the Board of Directors authorized the issuance of up to 4,200 shares of 9% Series C Convertible Preferred Stock (the “Series C Preferred Stock”).

 

The Series C Preferred Stock is entitled to preference over holders of junior stock upon liquidation in the amount of $1,000 plus any accrued and unpaid dividends; entitled to dividends as a preference to holders of junior stock at a rate of 9% per annum of the stated value of $1,000 per share, payable quarterly beginning on September 30, 2013 and are cumulative.  The holders of the Series C Preferred Stock vote together with the holders of our common stock on an as-converted basis but may not vote the Series C Preferred Stock in excess of the beneficial ownership limitation of the Series C Preferred Stock.  The beneficial ownership limitation is 4.99% of our then outstanding shares of common stock following such conversion or exercise, which may be increased to up to 9.99% of our then outstanding shares of common stock following such conversion or exercise upon the request of an individual holder.  The beneficial ownership limitation is determined on an individual holder basis, such that the as-converted number of shares of one holder is not included in the shares outstanding when calculating the limitation for a different holder.

 

17

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

As a result of an amendment to the conversion price of our Series C Preferred Stock, the conversion price effective as of September 30, 2020 and December 31, 2019 was $3.75 per share, subject to certain reset provisions.

 

The Series C Preferred Stock contains triggering events which would, among other things, require redemption (i) in cash, at the greater of (a) 120% of the stated value of $1,000 or (b) the product of (I) the variable weighted average price of our common stock on the trading day immediately preceding the date of the triggering event and (II) the stated value divided by the then conversion price or (ii) in shares of our common stock, equal to a number of shares equal to the amount set forth in (i) above divided by 75%. As of September 30, 2020, the aggregate stated value of our Series C Preferred Stock was $105,000. The triggering events include our being subject to a judgment of greater than $100,000 or our initiation of bankruptcy proceedings. If any of the triggering events contained in our Series C Preferred Stock occur, the holders of our Series C Preferred Stock may demand redemption, an obligation the Company may not have the ability to meet at the time of such demand.  The Company will be required to pay interest on any amounts remaining unpaid after the required redemption of our Series C Preferred Stock, at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law. Accordingly, the Company has classified the Series C Preferred Stock as a mezzanine obligation in the accompanying consolidated balance sheets.

 

In January 2020, the Company issued 3,750 shares of its common stock in exchange for 10 shares of the Company’s Series C Preferred Stock and accrued dividends.

 

In April 2020, the Company issued 41,100 shares of its common stock in exchange for 100 shares of the Company’s Series C Preferred Stock and accrued dividends.

 

NOTE 8 – STOCKHOLDER EQUITY

 

Shareholder rights plan

 

On July 14, 2020, our board of directors adopted a stockholder rights plan (the “Rights Plan”) and declared a dividend of one preferred share purchase right for each outstanding share of BioSig’s common stock to stockholders of record on July 27, 2020, and one right will be issued for each new share of common stock issued thereafter. Each right will initially trade with common stock, and will allow its holder to purchase from BioSig one one-thousandth of a share of Series F Junior Participating Preferred stock, par value $0.001 per share, for an exercise price of $50.00, once the rights become exercisable. In the event that a person or group acquires beneficial ownership of 12% or more of BioSig’s then outstanding common stock, subject to certain exceptions, each right would entitle its holder (other than such person or members of such group) to purchase additional shares of BioSig’s common stock having a market value of two times the exercise price of the right. In addition, at any time after a person or group acquires 12% or more of BioSig’s outstanding common stock (unless such person or group acquires 50% or more), the Board may exchange one share of BioSig’s common stock for each outstanding right (other than rights owned by such person or group, which would have become void). The Rights Plan could make it more difficult for a third party to acquire control of BioSig or a large block of our common stock without the approval of our board of directors. The rights will expire on July 13, 2021, unless terminated earlier by our board of directors. 

 

Preferred stock

 

The Company is authorized to issue 1,000,000 shares of $0.001 par value preferred stock. As of September 30, 2020, and December 31, 2019, the Company has designated 200 shares of Series A preferred stock, 600 shares of Series B preferred stock, 4,200 shares of Series C Preferred Stock, 1,400 shares of Series D Preferred Stock, 1,000 shares of Series E Preferred Stock and 200,000 shares of Series F Preferred Stock. As of September 30, 2020, and December 31, 2019, there were no outstanding shares of Series A, Series B, Series D, Series E and Series F preferred stock.

 

18

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

Series F Preferred Stock

 

On July 14, 2020, the Board of Directors of BioSig authorized the issuance of up to 200,000 shares of Series F Junior Participating Preferred Stock (the “Series F Preferred Stock”) with a par value of $0.001 and accordingly, the Company filed the Certificate of Designations for the Series F Preferred Stock with the Secretary of State of the State of Delaware.  Pursuant to such Certificate of Designations, in the event of the Company’s liquidation or winding up of its affairs, no liquidating distribution shall be made to the holders of shares of capital stock ranking junior to the Series F Preferred Stock unless, prior thereto, the holders of shares of Series F Preferred Stock shall have received an amount per share of Series F Preferred Stock (the “Series F Liquidation Preference”) equal to the greater of (i) $1,000.00 plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, and (ii) the Adjustment Number (as defined in the Certificate of Designations) times the per share amount of all cash and other property to be distributed in respect of the Common Stock upon such liquidation, dissolution or winding up of the Corporation.

 

Voting Rights

 

Each share of Series F Preferred Stock shall entitle the holder thereof to a number of votes equal to the Adjustment Number (as defined in the Certificate of Designations) on all matters submitted to a vote of the stockholders of the Company, and shall vote collectively with the holders of common stock of the Company as one class on all matters submitted to a vote of stockholders of the Company, except as provided by law or expressly set forth in the Certificate of Designations

 

Dividends and Distributions

 

Subject to the prior and superior rights of the holders of any shares of any class or series of stock of the Company ranking prior and superior to the shares of Series F Preferred Stock with respect to dividends, the holders of shares of Series F Preferred Stock, in preference to the holders of shares of any class or series of stock of the Company ranking junior to the Series F Preferred Stock with respect to dividends, shall be entitled to receive, when, as and if declared by the Board of Directors an amount per share equal to the greater of (i) $0.001 and (ii) the sum of (A) the Adjustment Number (as defined in the Certificate of Designations) times the aggregate per share amount of all cash dividends, plus (B) the Adjustment Number times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of common stock of the Corporation, commencing on the first dividend payment date after the first issuance of a share (or fraction thereof) of Series F Preferred Stock. Dividends shall begin to accrue and be cumulative on outstanding shares of Series F Preferred Stock from the Payment Date (as defined in the Certificate of Designations) as set forth in the Certificate of Designations.

  

Redemption Rights

 

The shares of Series F Preferred Stock shall not be redeemable.

 

Common stock

 

In 2019, ViralClear sold 896,690 shares of its common stock for net proceeds of $5,011,310 to fund initial operations pursuant to securities purchase agreements with certain accredited investors (collectively, the “2019 purchase agreements”). In August and September of 2019, ViralClear sold an aggregate of 739,000 shares of its common stock at the purchase price of $5.00 per share, in two private placement transactions, pursuant to securities purchase agreements with certain accredited investors, to fund initial operations. ViralClear received an aggregate purchase price of $3,695,000 from the two private placements. In subsequent private placements closed from October 21, 2019, through December 19, 2019, ViralClear sold an aggregate of 157,690 shares of ViralClear’s common stock at $8.35 per share, for an aggregate consideration of $1,316,664, pursuant to a securities purchase agreement with certain accredited investors.

 

The Company is party to the 2019 purchase agreements between ViralClear and the private placement investors with respect to a provision in each securities purchase agreement which provides that in the event that (i) ViralClear common stock is not listed on a national securities exchange by October 31, 2020, or (ii) a change of control (as defined in each securities purchase agreement) of ViralClear occurs, whichever is earlier, at the option of the holder of ViralClear common stock, each share of ViralClear common stock may be exchanged into 0.9 of a share our common stock if the ViralClear common stock subject to the share exchange was purchased in the August or September 2019 private placements, or 1.1 shares of our common stock if the ViralClear common stock subject to the share exchange was purchased in the private placement closed in October 2019 through December 2019.

 

19

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

On May 20, 2020, ViralClear and the Company entered into a securities purchase agreement, pursuant to which ViralClear agreed to sell in a private placement transaction an aggregate of 1,068,550 shares of ViralClear’s common stock at $10.00 per share, for an aggregate consideration of $10,685,500. This private placement closed on May 20, 2020.

 

During the nine months ended September 30, 2020, the Company issued an aggregate of 219,334 shares of its common stock for vested restricted stock units as stock-based compensation.

 

On February 25, 2020, the Company entered into securities purchase agreements with investors pursuant to which the Company issued 2,500,000 shares of common stock for aggregate proceeds of $9,052,331, net of $947,669 in expenses.

 

On June 24, 2020, the Company entered into securities purchase agreements with investors pursuant to which the Company issued 2,187,500 shares of common stock for aggregate proceeds of $16,161,980, net of $1,338,020 in expenses.

 

During the nine months ended September 30, 2020, the Company issued 503,038 shares of common stock for services at a fair value of $3,550,904.

 

During the nine months ended September 30, 2020, the Company issued 429,979 shares of common stock in exchange for proceeds of $1,666,495 from the exercise of warrants.

 

During the nine months ended September 30, 2020, the Company issued 586,825 shares of common stock in exchange for proceeds of $2,722,012 from the exercise of options.

 

During the nine months ended September 30, 2020, the Company issued 12,840 shares of common stock in exchange for the exercise of 37,841 cashless exercises of warrants.

 

During the nine months ended September 30, 2020, the Company issued 160,743 shares of common stock in exchange for the exercise of 616,398 cashless exercises of options.

 

Open Market Sale Agreement

 

On August 28, 2020, the Company entered into an Open Market Sale Agreement (the “Sales Agreement”) with Jefferies LLC to act as the Company’s sales agent and/or principal (“Jefferies” or the “Agent”), with respect to the issuance and sale of up to $45.0 million of the Company’s shares of common stock (the “Shares”) from time to time in an at-the-market offering.

 

Upon delivery of a placement notice and subject to the terms and conditions of the Sales Agreement, Jefferies may sell the Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. The Company may sell the common stock in amounts and at times to be determined by the Company from time to time subject to the terms and conditions of the Sales Agreement, but it has no obligation to sell any of the Shares under the Sales Agreement. The Company or Jefferies may suspend or terminate the offering of Shares upon notice to the other party and subject to other conditions. Jefferies will act as sales agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of Nasdaq.

 

The Company will pay Agent a commission equal to 3.0% of the gross proceeds from the sale of the Shares pursuant to the Sales Agreement. The Company has also agreed to provide Jefferies with customary indemnification and contribution rights.

 

The offering of Shares pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with its terms.

 

The common stock will be sold and issued pursuant the Company’s shelf registration statement on Form S-3 (File No. 333-230448), which was previously declared effective by the Securities and Exchange Commission, and a related prospectus.

 

From August 28, 2020 through September 30, 2020, the Company sold 150,000 shares of its common stock through the Sales Agreement for net proceeds of $1,001,763, after transactional costs of $182,332.

 

20

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

NOTE 9 – OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS

 

BioSig Technologies, Inc.

 

2012 Equity Incentive Plan

 

On October 19, 2012, the Board of Directors of BioSig Technologies, Inc. approved the 2012 Equity Incentive Plan (“the “Plan”) and terminated the Long-Term Incentive Plan (the “2011 Plan”). The Plan provides for the issuance of options, stock appreciation rights, restricted stock and restricted stock units to purchase up to 11,974,450 (as amended) shares of the Company’s common stock to officers, directors, employees and consultants of the Company. Under the terms of the Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of the Company only and nonstatutory options. The Board of Directors of the Company or a committee thereof administers the Plan and determines the exercise price, vesting and expiration period of the grants under the Plan.

 

However, the exercise price of an Incentive Stock Option should not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more stockholder and 100% of fair value for a grantee who is not 10% stockholder. The fair value of the common stock is determined based on the quoted market price or in absence of such quoted market price, by the administrator in good faith.

 

Additionally, the vesting period of the grants under the Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years. There are 2,924,230 shares remaining available for future issuance of awards under the terms of the Plan.

 

Options

 

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities until sufficient data exists to estimate the volatility using the Company’s own historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees.

 

For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields 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 nine months ended September 30, 2020 was estimated using the Black-Scholes pricing model.

 

During the nine months ended September 30, 2020, the Company granted an aggregate of 1,015,000 options to officers, directors and key consultants.

 

The following table presents information related to stock options at September 30, 2020:

 

 

Options Outstanding

 

 

Options Exercisable

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Exercisable

 

 

Exercise

 

 

Number of

 

 

Remaining Life

 

 

Number of

 

 

Price

 

 

Options

 

 

In Years

 

 

Options

 

 

$

2.51-5.00

 

 

 

1,799,216

 

 

 

8.1

 

 

 

1,468,384

 

 

 

5.01-7.50

 

 

 

1,322,407

 

 

 

6.7

 

 

 

926,611

 

 

 

7.51-10.00

 

 

 

323,333

 

 

 

7.3

 

 

 

190,533

 

 

 

10.01-12.50

 

 

 

65,000

 

 

 

9.6

 

 

 

42,083

 

 

 

 

 

 

 

3,509,956

 

 

 

7.5

 

 

 

2,627,631

 

 

21

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

A summary of the stock option activity and related information for the Plan for the nine months ended September 30, 2020 is as follows:

 

                   

Weighted-Average

         
           

Weighted-Average

   

Remaining

   

Aggregate

 
   

Shares

   

Exercise Price

   

Contractual Term

   

Intrinsic Value

 

Outstanding at December 31, 2019

    3,980,804     $ 5.58       6.3     $ 3,130,791  

Grants

    1,015,000       5.59       10.0     $ -  

Exercised

    (1,203,223

)

  $ 5.08                  

Forfeited/expired

    (282,625

)

  $ 5.23                  

Outstanding at September 30, 2020

    3,509,956     $ 5.60       7.53     $ 1,113,941  

Exercisable at September 30, 2020

    2,627,631     $ 5.54       7.07     $ 849,529  

 

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the stock price of BioSig Technologies, Inc. of $4.93 as of September 30, 2020, which would have been received by the option holders had those option holders exercised their options as of that date.

 

On January 10, 2020, BioSig Technologies, Inc. granted 60,000 options to purchase the company stock in connection with the services rendered at the exercise price of $6.00 per share for a term of ten years with quarterly vesting beginning March 31, 2020 for three years.

 

On March 24, 2020, BioSig Technologies, Inc. granted 100,000 options to purchase the company stock in connection with the services rendered at the exercise price of $2.96 per share for a term of ten years with 25,000 vesting immediately and 75,000 quarterly vesting beginning June 30, 2020 for two years.

 

On March 31, 2020, BioSig Technologies, Inc. granted 50,000 options to purchase the company stock in connection with the services rendered at the exercise price of $3.73 per share for a term of ten years with vesting quarterly vesting beginning June 30, 2020 for three years.

 

On April 14, 2020, BioSig Technologies, Inc. granted an aggregate of 625,000 options to purchase the company stock to directors and an employee. The options are exercisable at $4.66 per share for ten years and fully vested and exercisable at the date of grant. On April 14, 2020, BioSig Technologies, Inc. granted an aggregate of 90,000 options to purchase shares of its common stock to employees. The options are exercisable at $4.66 per share for ten years and vest quarterly over three years.

 

On May 20, 2020, BioSig Technologies, Inc. granted an aggregate of 65,000 options to purchase the company stock to consultants and an employee. The options are exercisable at $10.49 per share for ten years with 40,000 fully vested and exercisable at the date of grant and 25,000 options vesting quarterly over three years.

 

On August 26, 2020, BioSig Technologies, Inc. granted an aggregate of 25,000 options to purchase the company stock to three employees at the exercise price of $7.57 per share for a term of ten years with one-third vesting on the one year anniversary and two-thirds vesting quarterly thereafter beginning November 26, 2021 for two years.

 

The following assumptions were used in determining the fair value of options during the nine months ended September 30, 2020:

 

Risk-free interest rate

    0.42% - 1.83

%

Dividend yield

    0

%

Stock price volatility

    86.51% to 92.31

%

Expected life

 

5 – 10 years

 

Weighted average grant date fair value

  $ 4.02  

 

22

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

The fair value of all options vesting during the three and nine months ended September 30, 2020 of $483,110 and $4,734,983, and $354,976 and $854,420 for the three and nine months ended September 30, 2019, respectively was charged to current period operations.  Unrecognized compensation expense of $3,262,773 at September 30, 2020 will be expensed in future periods.

 

Warrants

 

The following table summarizes information with respect to outstanding warrants to purchase common stock of BioSig Technologies, Inc. at September 30, 2020: 

 

 

Exercise

 

 

Number

 

Expiration

 

Price

 

 

Outstanding

 

Date

 

$

3.75

 

 

 

168,468

 

October 2020 to January 2021

 

$

4.38

 

 

 

548,938

 

April 2021

 

$

4.80

 

 

 

125,000

 

February 2025

 

$

6.16

 

 

 

568,910

 

November 2027

 

$

6.85

 

 

 

193,352

 

July 2021 to August 2021

 

 

 

 

 

 

1,604,668

 

 

 

On February 25, 2020, BioSig Technologies, Inc. issued warrants to purchase 125,000 shares of its common stock at $4.80 per share, expiring on February 21, 2025, for placement agent services in connection with the sale of the company’s common stock.

 

A summary of the warrant activity for the nine months ended September 30, 2020 is as follows:

 

                   

Weighted-Average

         
           

Weighted-Average

   

Remaining

   

Aggregate

 
   

Shares

   

Exercise Price

   

Contractual Term

   

Intrinsic Value

 

Outstanding at December 31, 2019

    2,744,718     $ 5.40       2.2     $ 3,410,763  

Grants

    125,000       4.80       4.4          

Exercised

    (467,820

)

  $ 3.92                  

Expired

    (797,230

)

  $ 6.44       -       -  

Outstanding at September 30, 2020

    1,604,668     $ 5.27       3.2     $ 519,703  
                                 

Vested and expected to vest at September 30, 2020

    1,604,668     $ 5.27       3.2     $ 519,703  

Exercisable at September 30, 2020

    1,604,668     $ 5.27       3.2     $ 519,703  

 

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the company’s stock price of $4.93 of September 30, 2020, which would have been received by the option holders had those option holders exercised their options as of that date.

 

Restricted Stock Units

 

The following table summarizes the restricted stock activity for the nine months ended September 30, 2020:

 

Restricted shares issued as of December 31, 2019

    262,668  

Granted

    125,000  

Vested and issued

    (219,334

)

Vested restricted shares as of September 30, 2020

    -  

Unvested restricted shares as of September 30, 2020

    168,334  

 

On March 30, 2020, the Company granted 25,000 restricted stock units for services vesting at June 30, 2020.

 

23

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

On July 14, 2020, the Company granted an aggregate of 50,000 restricted stock units for services with one-third vesting at the one-year anniversary of the date of grant and two-thirds vesting quarterly thereafter beginning September 30, 2021 for two years with final vesting on July 14, 2023.

 

On August 11, 2020, the Company granted an aggregate of 50,000 restricted stock units for services with one-third vesting at the one-year anniversary of the date of grant and two-thirds vesting quarterly thereafter beginning September 30, 2021 for two years with final vesting on August 11, 2023.

 

Stock based compensation expense related to restricted stock grants was $174,945 and $1,005,243 for the three and nine months ended September 30, 2020 and $417,618 and $1,038,438 for the three and nine months ended September 30, 2019, respectively. As of September 30, 2020, the stock-based compensation relating to restricted stock of $857,740 remains unamortized. 

 

ViralClear Pharmaceuticals, Inc.

 

2019 Long-Term Incentive Plan

 

On September 24, 2019, ViralClear’s Board of Directors approved the 2019 Long-Term Incentive Plan (as subsequently amended, the “ViralClear Plan”). The ViralClear Plan was approved by BioSig as ViralClear’s majority stockholder. The ViralClear Plan provides for the issuance of options, stock appreciation rights, restricted stock and restricted stock units to purchase up to 4,000,000 shares of ViralClear’s common stock to officers, directors, employees and consultants of the ViralClear. Under the terms of the ViralClear Plan, ViralClear may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of ViralClear only and nonstatutory options. The Board of Directors of ViralClear or a committee thereof administers the ViralClear Plan and determines the exercise price, vesting and expiration period of the grants under the ViralClear Plan.

 

However, the exercise price of an Incentive Stock Option should not be less than 110% of fair market value of the common stock at the date of the grant for a 10% or more stockholder and 100% of fair market value for a grantee who is not 10% stockholder. The fair market value of the common stock is determined based on the quoted market price or in absence of such quoted market price, by the administrator in good faith.

 

Additionally, the vesting period of the grants under the ViralClear Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years. There are 578,576 shares remaining available for future issuance of awards under the terms of the ViralClear Plan.

 

ViralClear Options

 

A summary of the stock option activity and related information for the ViralClear Plan for the nine months ended September 30, 2020 is as follows:

 

                   

Weighted-Average

 
           

Weighted-Average

   

Remaining

 
   

Shares

   

Exercise Price

   

Contractual Term

 

Outstanding at December 31, 2019

    575,000     $ 5.00       9.29  

Grants

    1,599,173     $ 5.31       9.84  

Exercised

    -                  

Forfeited/expired

    (173,465

)

  $ 7.40          

Outstanding at September 30, 2020

    2,000,708     $ 5.04       7.17  

Exercisable at September 30, 2020

    1,917,374     $ 5.04       7.07  

 

24

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

The following table presents information related to stock options at September 30, 2020:

 

 

Options Outstanding

 

 

Options Exercisable

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Exercisable

 

 

Exercise

 

 

Number of

 

 

Remaining Life

 

 

Number of

 

 

Price

 

 

Options

 

 

In Years

 

 

Options

 

 

$

5.00

 

 

 

1,984,042

 

 

 

7.2

 

 

 

1,900,708

 

 

 

10.00

 

 

 

16,666

 

 

 

0.1

 

 

 

16,666

 

 

 

 

 

 

 

2,000,708

 

 

 

7.2

 

 

 

1,917,374

 

 

The fair value of the stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities with the market value of stock price based on recent sales. The Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. 

 

On April 21, 2020, ViralClear granted 100,000 options to purchase shares of its common stock to a director. The options are exercisable at $5.00 per share for ten years vest quarterly over three years.

 

On April 29, 2020, ViralClear granted an aggregate of 1,278,999 options to purchase shares of its common stock to directors and officers of the company. The options are exercisable at $5.00 per share for ten years and fully vested and exercisable at the date of grant.

 

On May 5, 2020, ViralClear granted 120,174 options to purchase shares of its common stock to a director. The options are exercisable at $5.00 for ten years vesting in 4 substantially equal installments on each of the three, six, nine- and twelve-month anniversaries of the date of grant.

  

On June 2, 2020, ViralClear granted 100,000 options to purchase shares of its common stock to a director. The options are exercisable at $10.00 for ten years vesting quarterly over three years beginning June 30, 2020 with final vesting June 2, 2023.

 

The following assumptions were used in determining the change in fair value of the ViralClear options for the nine months ended September 30, 2020:

 

Risk-free interest rate

    0.36% to 0.52

%

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