UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 10-Q
 

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

For the Quarterly Period Ended September 30, 2015
 
or

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

For the Transition Period from _________ to _________

Commission file number: 000-55473

BIOSIG TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware
 
26-4333375
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

8441 Wayzata Blvd, Suite 240
Minneapolis, MN 55426
(Address of principal executive offices) (zip code)

(763) 999-7331
(Registrant’s telephone number, including area code)

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 o   No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large accelerated filer o
 Accelerated filer o
 Non-accelerated filer o
 Smaller reporting company x
(Do not check if a smaller reporting company)
 
                                                                                    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No x

As of November 13, 2015, there were 15,488,033 shares of registrant’s common stock outstanding.  
 
 
 

  
BIOSIG TECHNOLOGIES, INC.
 
INDEX

PART I.
FINANCIAL INFORMATION
   
         
 
ITEM 1.
   
         
     
3
         
     
4
         
     
5
         
     
6
         
     
7-22
         
 
ITEM 2.
 
23-30
 
ITEM 3.
 
30
 
ITEM 4.
 
30
         
PART II.
OTHER INFORMATION
   
         
 
ITEM 1.
 
31
 
ITEM 1A.
 
31
 
ITEM 2.
 
31
 
ITEM 3.
 
31
 
ITEM 4.
 
31
 
ITEM 5.
 
31
 
ITEM 6.
 
31
         
   
32


 
 

 
PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
 
BIOSIG TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
 
   
September 30,
   
December 31,
 
   
2015
   
2014
 
   
(unaudited)
       
             
ASSETS
           
Current assets:
           
Cash
  $ 334,559     $ 239,781  
Prepaid expenses
    201,242       75,537  
Total current assets
    535,801       315,318  
                 
Property and equipment, net
    14,043       13,020  
                 
Other assets:
               
Deposits
    27,612       25,000  
                 
Total assets
  $ 577,456     $ 353,338  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities:
               
Accounts payable and accrued expenses, including $27,499 and $40,293 to related parties as of September 30, 2015 and December 31, 2014 respectively
  $ 342,985     $ 554,026  
Stock based payable
    -       226,305  
Dividends payable
    337,775       445,069  
Warrant liability
    1,816,317       -  
Derivative liability
    220,333       -  
Total current liabilities
    2,717,410       1,225,400  
                 
Series C Preferred Stock, 1,858 and 2,711 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively,, liquidation preference of $1,858,000 and $2,711,000 as of September 30, 2015 and December 31, 2014, respectively
    1,858,000       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, 15,026,368 and 11,179,266 issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
    15,026       11,179  
Additional paid in capital
    26,204,047       19,186,163  
Accumulated deficit
    (30,217,027 )     (22,780,404 )
Total stockholders' deficit
    (3,997,954 )     (3,583,062 )
                 
Total liabilities and stockholders' deficit
  $ 577,456     $ 353,338  
 
See the accompanying notes to the unaudited condensed financial statements
 
 
3

 
BIOSIG TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
 
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
   
2015
   
2014
   
2015
   
2014
 
Operating expenses:
                       
Research and development
  $ 300,783     $ 144,231     $ 931,360     $ 366,275  
General and administrative
    2,170,698       3,796,263       9,016,631       4,882,330  
Depreciation
    2,607       3,893       7,948       12,462  
Total operating expenses
    2,474,088       3,944,387       9,955,939       5,261,067  
                                 
Loss from operations
    (2,474,088 )     (3,944,387 )     (9,955,939 )     (5,261,067 )
                                 
Other income (expense):
                               
Gain on change in fair value of derivatives
    2,851,755       -       3,050,318       -  
Interest income (expense)
    -       (862 )     (1,298 )     (9,918 )
Financing costs
    -       (14,754 )     (529,704 )     (593,770 )
Total other income (expense)
    2,851,755       (15,616 )     2,519,316       (603,688 )
                                 
Income (loss) before income taxes
    377,667       (3,960,003 )     (7,436,623 )     (5,864,755 )
                                 
Income taxes (benefit)
    -       -       -       -  
                                 
Net income (loss)
    377,667       (3,960,003 )     (7,436,623 )     (5,864,755 )
                                 
Preferred stock dividend
    (53,048 )     (63,087 )     (244,516 )     (230,334 )
                                 
NET INCOME  (LOSS) AVAILABLE TO COMMON STOCKHOLDERS
  $ 324,619     $ (4,023,090 )   $ (7,681,139 )   $ (6,095,089 )
                                 
Net income (loss) per common share, basic and diluted
  $ 0.02     $ (0.39 )   $ (0.57 )   $ (0.66 )
                                 
Weighted average number of common shares outstanding, basic and diluted
    14,849,127       10,218,160       13,565,453       9,167,441  
 
See the accompanying notes to the unaudited condensed financial statements
 
 
4

 
BIOSIG TECHNOLOGIES, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT
NINE MONTHS ENDED SEPTEMBER 30, 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
    1,103,208       1,103       1,653,707       -       1,654,811  
Common stock issued for services
    1,227,500       1,227       2,948,022       -       2,949,249  
Common stock issued in exchange for 156,102 warrants exercised on a cashless basis
    99,552       100       (100 )     -       -  
Common stock issued in exchange for exercise of options at $2.09 per share
    10,000       10       20,890       -       20,900  
Common stock issued in exchange for exercise of warrants at $3.67 per share
    4,082       4       14,977       -       14,981  
Common stock issued in exchange for exercise of warrants at $2.50 per share
    4,000       4       9,996       -       10,000  
Reclassify fair value of warrant liability from equity
    -       -       (4,097,444 )     -       (4,097,444 )
Reclassify fair value of derivative liability from equity
    -       -       (1,242,590 )     -       (1,242,590 )
Reclassify fair value of warrant liability to equity upon  warrant exercise
    -       -       265,955       -       265,955  
Reclassify fair value of derivative liability to equity upon conversion of Series C Preferred Stock to common shares
    -       -       572,435       -       572,435  
Stock based compensation
    -       -       4,075,737       -       4,075,737  
Preferred Stock dividend
    -       -       (244,516 )     -       (244,516 )
Net loss
    -       -       -       (7,436,623 )     (7,436,623 )
Balance, September 30, 2015
    15,026,368     $ 15,026     $ 26,204,047     $ (30,217,027 )   $ (3,997,954 )
 
See the accompanying notes to the unaudited condensed financial statements
 
 
5

 
BIOSIG TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
 
   
Nine Months Ended September 30,
 
   
2015
   
2014
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (7,436,623 )   $ (5,864,755 )
Adjustments to reconcile net loss to cash used in operating activities:
               
Depreciation
    7,948       12,462  
Amortization of debt discount
    585,324       593,770  
Change in derivative liabilities
    (3,050,318 )     -  
Equity based compensation
    6,907,423       3,962,001  
Changes in operating assets and liabilities:
               
Prepaid expenses
    (8,141 )     (15,700 )
Accounts payable
    (213,754 )     (222,424 )
Stock based payable
    (226,305 )     -  
Deferred rent payable
    2,713       (1,212 )
Net cash used in operating activities
    (3,431,733 )     (1,535,858 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of property and equipment
    (8,971 )     (3,963 )
Payment of long term deposit
    (2,612 )     -  
Net cash used in investing activity
    (11,583 )     (3,963 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from sale of common stock
    3,042,213       1,537,292  
Proceeds from sale of Series C Preferred Stock
    450,000       -  
Proceeds from exercise of options
    20,900       -  
Proceeds from exercise of warrants
    24,981       -  
Net repayments of related party advances
    -       (30,781 )
  Net cash provided by financing activities
    3,538,094       1,506,511  
                 
Net increase (decrease) in cash and cash equivalents
    94,778       (33,310 )
                 
Cash and cash equivalents, beginning of the period
    239,781       302,187  
Cash and cash equivalents, end of the period
  $ 334,559     $ 268,877  
                 
Supplemental disclosures of cash flow information:
               
Cash paid during the period for interest
  $ 1,298     $ -  
Cash paid during the period for income taxes
  $ -     $ -  
                 
Non-cash investing and financing activities:
               
Common stock issued upon conversion of Series A preferred stock and accrued dividends
  $ -     $ 1,063,331  
Common stock issued upon conversion of Series B preferred stock and accrued dividends
  $ -     $ 997,526  
Common stock issued for future services, related party
  $ -     $ 85,000  
Common stock issued in settlement of accounts payable, related party
  $ -     $ 65,000  
Common stock issued upon conversion of Series C Preferred Stock and accrued dividends
  $ 1,654,811     $ -  
 
See the accompanying notes to the unaudited condensed financial statements
 
 
6

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 and nine months ended September 30, 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 September 30, 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.
 
 
7

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 September 30, 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 $300,783  and $931,360 for the three and nine months ended September 30, 2015, respectively; and $144,231 and $366,275 for the three and nine months ended September 30, 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.
 
 
8

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)
 
The computation of basic and diluted income (loss) per share as of September 30, 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. The Company’s diluted loss per share is the same as the basic loss per share for the three months ended September 30, 2015, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
 
Potentially dilutive securities excluded from the computation of basic and diluted net income (loss) per share are as follows:
 
  
 
September 30,
2015
   
September 30,
2014
 
Series C convertible preferred stock
   
1,238,667
     
1,854,019
 
Options to purchase common stock
   
7,405,190
     
5,136,746
 
Warrants to purchase common stock
   
6,372,677
     
4,731,179
 
Totals
   
15,016,534
     
11,721,944
 

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 September 30, 2015, the Company had 7,405,190 options outstanding to purchase shares of common stock, of which 5,382,134 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. During the nine months ended September 30, 2015, the Company estimated the liability at $-0- and therefore recorded the change to current period operations.
 
Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) Number 2015-3 entitled “Simplifying the Presentation of Debt Issuance Costs.” The new guidance specifies that debt issuance costs under the new standard are to be netted against the carrying value of the financial liability. Under current guidance, debt issuance costs are recognized as a deferred charge and reported as a separate asset on the balance sheet. The new guidance aligns the treatment of debt issuance costs and debt discounts in that both reduce the carrying value of the liability. It is important to note that neither the recognition nor measurement of debt issuance costs is changed as a result of the ASU. Amortization of debt issuance costs is to be recorded as interest expense on the income statement.  The effective date of the new guidance is for fiscal years beginning after December 15, 2015, for public business entities and interim periods within those fiscal years.  Early adoption is permitted for financial statements that have not been issued previously. The Company does not believe the effect of the adoption of this standard will have a material impact on the Company’s condensed consolidated financial statements.
 
 
9

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)
 
There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows.
 
Subsequent Events
 
The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.  Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed.

NOTE 2 – PROPERTY AND EQUIPMENT
 
Property and equipment as of September 30, 2015 and December 31, 2014 is summarized as follows:
 
   
September 30,
2015
   
December 31,
2014
 
Computer equipment
 
$
62,072
   
$
54,900
 
Furniture and fixtures
   
9,602
     
7,803
 
Subtotal
   
71,674
     
62,703
 
Less accumulated depreciation
   
(57,631
)
   
(49,683
)
Property and equipment, net
 
$
14,043
   
$
13,020
 
 
Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
 
Depreciation expense was $2,607 and $7,948 for the three and nine months ended September 30, 2015, respectively; and $3,893 and $12,462 for the three and nine months ended September 30, 2014, respectively.

NOTE 3 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
 
Accounts payable and accrued expenses at September 30, 2015 and December 31, 2014 consist of the following:
 
   
September 30,
2015
   
December 31,
2014
 
Accrued accounting and legal
 
$
187,119
   
$
190,767
 
Accrued reimbursements
   
29,965
     
26,792
 
Accrued consulting
   
57,527
     
16,334
 
Accrued research and development expenses
   
37,396
     
93,407
 
Accrued credit card obligations
   
-
     
13,278
 
Accrued payroll
   
-
     
62,068
 
Accrued liquidated damages
   
-
     
55,620
 
Accrued office and other
   
14,932
     
29,093
 
Deferred rent
   
2,713
     
-
 
Accrued settlement related to arbitration
   
13,333
     
66,667
 
   
$
342,985
   
$
554,026
 
 
 
10

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)

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 9% Series C Convertible Preferred Stock (the “Series C Preferred Stock”).

The Series C Preferred Stock is entitled to preference over holders of junior stock upon liquidation in the amount of $1,000 plus any accrued and unpaid dividends; entitled to dividends as a preference to holders of junior stock at a rate of 9% per annum of the stated value of $1,000 per share, payable quarterly beginning on September 30, 2013 and are cumulative.  The holders of the Series C Preferred Stock vote together with the holders of our common stock on an as-converted basis, but may not vote the Series C Preferred Stock in excess of the beneficial ownership limitation of the Series C Preferred Stock.  The beneficial ownership limitation is 4.99% of our then outstanding shares of common stock following such conversion or exercise, which may be increased to up to 9.99% of our then outstanding shares of common stock following such conversion or exercise upon the request of an individual holder.  The beneficial ownership limitation is determined on an individual holder basis, such that the as-converted number of shares of one holder is not included in the shares outstanding when calculating the limitation for a different holder. In addition, absent the approval of holders representing at least 67% of the outstanding shares of the Series C Preferred Stock, which holders must include Alpha Capital Anstalt, so long as Alpha Capital Anstalt holds not less than $100,000 of Series C Preferred Stock, we may not (i) increase the number of authorized shares of preferred stock, (ii) amend our charter documents, including the terms of the Series C Preferred Stock, in any manner adverse to the holders of the Series C Preferred Stock, including authorizing or creating any class of stock ranking senior to, or otherwise pari passu with, the shares of Series C Preferred Stock as to dividends, redemption or distribution of assets upon a liquidation, or (iii) perform certain covenants, including:

 
incur additional indebtedness;
 
 
permit liens on assets;
 
 
repay, repurchase or otherwise acquire more than a de minimis number of shares of capital stock;
 
 
pay cash dividends to our stockholders; and
     
 
engage in transactions with affiliates.

Any holder of Series C Preferred Stock is entitled at any time to convert any whole or partial number of shares of Series C Preferred Stock into shares of our common stock at a price of $1.50 per share. The Series C Preferred Stock is subject to full ratchet anti-dilution price protection upon the issuance of equity or equity-linked securities at an effective common stock purchase price of less than $1.50 per share as well as other customary anti-dilution protection.
  
In the event that
 
(i)  
we fail to, or announce our intention not to, deliver common stock share certificates upon conversion of our Series C Preferred Stock prior to the seventh trading day after such shares are required to be delivered,

(ii)  
we fail for any reason to pay in full the amount of cash due pursuant to our failure to deliver common stock share certificates upon conversion of our Series C Preferred Stock within five calendar days after notice therefor is delivered,

(iii)  
we fail to have available a sufficient number of authorized and unreserved shares of common stock to issue upon a conversion of our Series C Preferred Stock,
 
 
11

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)

(iv)  
we fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of our obligations under, the securities purchase agreement, the registration rights agreement, the certificate of designation or the warrants entered into pursuant to the private placement transaction for our Series C Preferred Stock, which failure or breach could have a material adverse effect, and such failure or breach is not cured within 30 calendar days after written notice was delivered,

(v)  
we are party to a change of control transaction,

(vi)  
we file for bankruptcy or a similar arrangement or are adjudicated insolvent,

(vii)  
we are subject to a judgment, including an arbitration award against us, of greater than $100,000, and such judgment remains unvacated, unbonded or unstayed for a period of 45 calendar days,
 
the holders of the Series C Preferred Stock are entitled, among other rights, to redeem their shares of Series C Preferred Stock at any time for greater than their stated value or increase the dividend rate on their shares of Series C Preferred Stock to 18%.   The Company determined that certain of the defined triggering events were outside the Company’s control and therefore classified the Series C Preferred Stock outside of equity.
 
In connection with the sale of the Series C preferred stock, the Company issued an aggregate of 1,330,627 warrants to purchase the Company’s common stock at $2.61 per share expiring five years from the initial exercise date.  The warrants contain full ratchet anti-dilution price protection upon the issuance of equity or equity-linked securities at an effective common stock purchase price of less than $2.61 per share as well as other customary anti-dilution protection. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”.  As a result of an amendment to the conversion price of our Series C Preferred Stock, the full-ratchet anti-dilution protection provision of the warrants decreased the exercise price of the warrants from $2.61 per share to $1.50 per share and increased the aggregate number of shares issuable under the warrants to 2,315,301.
 
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 of the conversion option ($1,303,671), the relative fair value of the warrants ($1,064,739), and the issuance costs ($412,590), for a total of $2,781,000, is amortized over one year as interest expense, the date a possible redemption feature outside of the Company’s control would be available to the holders of the Series C Preferred Stock.

During the month of February 2013, the holders of previously issued convertible bridge notes converted into 600 shares of the Company’s Series C Preferred Stock.
 
During the months of February, March, May, and July 2013, the Company sold an aggregate of 2,181 shares of the Company’s Series C Preferred Stock for net proceeds of $1,814,910.
 
At the time of issuance and until March 31, 2015, the Company determined that the anti-dilutive provisions embedded in the Series C Preferred Stock and related issued warrants did not meet the defined criteria of a derivative in such that the net settlement requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and therefore bifurcation is not required.  There was no established market for the Company’s common stock.  As described in Note 5, as of March 31, 2015, the Company determined a market had been established for the Company’s common stock and accordingly, reclassified the fair value of the embedded reset provisions of the Series C Preferred Stock and warrants of $1,242,590 and $4,097,444, respectively, from equity to liabilities.
 
 
12

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)

At March 31, 2015, the Company valued the reset provisions of the Series C Preferred Stock and warrants in accordance with ASC 470-20 using the Multinomial Lattice pricing model and the following assumptions: contractual terms of 2.78 to 3.50 years, a risk free interest rate of 0.56% to 0.89%, a dividend yield of 0%, and volatility of 141.00%.

During January 2015, the Company issued an aggregate of 42,334 shares of its common stock in exchange for 50 shares of the Company’s Series C Preferred Stock and accrued dividends.

During March 2015, the Company issued an aggregate of 169,334 shares of its common stock in exchange for 200 shares of the Company’s Series C Preferred Stock and accrued dividends.

In April 2015, the Company issued an aggregate of 152,401 shares of its common stock in exchange for 180 shares of the Company’s Series C Preferred Stock and accrued dividends.

In May 2015, the Company issued an aggregate of 273,473 shares of its common stock in exchange for 323 shares of the Company’s Series C Preferred Stock and accrued dividends.
 
In June 2015, the Company issued an aggregate of 296,333 shares of its common stock in exchange for 350 shares of the Company’s Series C Preferred Stock and accrued dividends.

In July 2015, the Company issued an aggregate of 169,333 shares of its common stock in exchange for 200 shares of the Company’s Series C Preferred Stock and accrued dividends.

For the nine months ended September 30, 2015, at the time of conversions, the Company reclassified the fair value of the embedded beneficial conversion feature of the Series C Preferred Stock of $572,435 from liability to equity. The fair values were determined using a Multinomial Lattice pricing model and the following assumptions: estimated contractual terms of 2.00 years, a risk free interest rate of 0.23% to 0.27%, a dividend yield of 0%, and volatility from 139% to 143.00%.

On May 11, 2015, the Company sold an aggregate of 450 shares of its Series C Preferred Stock for net proceeds of $450,000.  In connection with the sale, the Company issued 374,641 warrants to purchase the Company’s common stock at an exercise price of $1.50 per share for five years with certain reset provisions as described above. The Company determined the initial fair values of the embedded beneficial conversion feature of the Series C Preferred Stock and the reset provisions of the related issued warrants $506,348 and $334,784, respectively, using a Multinomial Lattice pricing model and the following assumptions: estimated contractual terms of 2.00 years, a risk free interest rate of 0.25%, a dividend yield of 0%, and volatility of 140.00%.  The determined fair values were recorded as liabilities and a charge to current period operations.

Series C Preferred Stock issued and outstanding totaled 1,858 and 2,711 as of September 30, 2015 and December 31, 2014, respectively.  As of September 30, 2015 and December 31, 2014, the Company has accrued $337,775 and $445,069 dividends payable on the Series C Preferred Stock.

Registration Rights Agreement
 
In connection with the Company’s private placement of Series C Preferred Stock and warrants, the Company entered into a registration rights agreement with the purchasers pursuant to which the Company agreed to provide certain registration rights with respect to the common stock issuable upon conversion of Series C Preferred Stock and exercise of the warrants issued to holders of Series C Preferred Stock. Specifically, the Company agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the common stock issuable upon conversion of the Series C Preferred Stock and exercise of the warrants on or before July 22, 2013 and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within five trading days after the Company is notified that registration statement is not being reviewed by the Securities and Exchange Commission, and by November 22, 2013 in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments.
 
 
13

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)
 
If (i) the registration statement is not filed by July 22, 2013, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within five trading days after the Company is notified that the registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission by November 22, 2013 in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 20 consecutive calendar days or more than an aggregate of 45 calendar days during any 12-month period after its first effective date, then the Company is subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 0.25% of the aggregate purchase price paid by such purchasers per month of delinquency.
 
Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreement shall be 3% of the aggregate purchase price paid by the purchasers, and (ii) if any partial amount of liquidated damages remains unpaid for more than seven days, the Company shall pay interest of 18% per annum, accruing daily, on such unpaid amount.
 
Pursuant to the registration rights agreement, the Company must maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions, subject to the right to suspend or defer the use of the registration statement in certain events.
 
The Company filed a registration statement on July 22, 2013, which was originally declared effective on June 23, 2014.  As a result, the Company accrued $55,620 as interest expense for liquidating damages due under the registration rights agreement as of December 31, 2014. At September 30, 2015, the Company estimated the liability at $-0- and therefore recorded the change to current period operations.

NOTE 5 – WARRANT AND DERIVATIVE LIABILITIES

At the time of issuance and until March 31, 2015, the Company determined that the anti-dilutive provisions embedded in the Series C Preferred Stock and related warrants (see Note 4) did not meet the defined criteria of a derivative in such that the net settlement requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and therefore bifurcation was not required.  There was no established market for the Company’s common stock.   As of March 31, 2015, the Company determined a market had been established for the Company’s common stock and accordingly, reclassified from equity to liability treatment the fair value of the embedded reset provisions of the Series C Preferred Stock and warrants of $1,242,590 and $4,097,444, respectively.

The Company valued the reset provisions of the Series C Preferred Stock and warrants in accordance with ASC 470-20 using the Multinomial Lattice pricing model and the following assumptions: estimated contractual terms, a risk free interest rate of 0.56% to 0.89, a dividend yield of 0%, and volatility of 141.00%.

At September 30, 2015, the Company marked to market the fair value of the reset provisions of the Series C Preferred Stock and warrants and determined fair values of $220,333 and $1,816,317, respectively. The Company recorded a gain from change in fair value of derivatives of $2,851,755 and $3,050,318 for the three and nine months ended September 30, 2015, respectively. The fair values of the embedded derivatives were determined using the Multinomial Lattice pricing model and the following assumptions: estimated contractual term of 2.00 years, a risk free interest rate of 1.01%, a dividend yield of 0%, and volatility of 147.00%.
 
 
14

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)

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 September 30, 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 September 30, 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 common stock in exchange for 50 shares of the Company’s Series C Preferred Stock and accrued dividends.

During March 2015, the Company issued an aggregate of 169,334 shares of its commons stock in exchange for 200 shares of the Company’s Series C Preferred Stock and accrued dividends.
 
In April 2015, the Company issued an aggregate of 152,401 shares of its common stock in exchange for 180 shares of the Company’s Series C Preferred Stock and accrued dividends.

On May 11, 2015, the Company sold an aggregate of 450 shares of its Series C Preferred Stock for net proceeds of $450,000.  In connection with the sale, the Company issued 374,641 warrants to purchase the Company’s common stock at a $1.50 per share for five years with certain reset provisions.

In May 2015, the Company issued an aggregate of 273,473 shares of its common stock in exchange for 323 shares of the Company’s Series C Preferred Stock and accrued dividends.

In June 2015, the Company issued an aggregate of 296,333 shares of its common stock in exchange for 350 shares of the Company’s Series C Preferred Stock and accrued dividends.
 
In July 2015, the Company issued an aggregate of 169,333 shares of its common stock in exchange for 200 shares of the Company’s Series C Preferred Stock and accrued dividends.

Cumulatively from January 1, 2015 to September 30, 2015, the Company exchanged 1,303 shares of the Company’s Series C Preferred Stock and dividends with a recorded value of $1,654,811 for 1,103,208 shares of common stock.

As of September 30, 2015 and December 31, 2014, the Company has 1,858 and 2,711 Series C Preferred Stock issued and outstanding.

Common stock
 
The Company is authorized to issue 50,000,000 shares of $0.001 par value common stock. As of September 30, 2015 and December 31, 2014, the Company has 15,026,368 and 11,179,266 shares issued and outstanding, respectively.
 
During the nine months ended September 30, 2015, the Company issued an aggregate of 1,227,500 shares of common stock under the terms of its 2012 Equity Plan for services rendered totaling $2,949,249 ($2.40 average per share).

During the nine months ended September 30, 2015, the Company issued 10,000 shares of common stock in exchange for options exercised at $2.09 per share.

During the nine months ended September 30, 2015, the Company issued an aggregate of 8,082 shares of common stock in exchange for warrants exercised at an average price of $3.09 per share.

During the nine months ended September 30, 2015, the Company issued 99,552 shares of common stock in exchange for 156,102 warrants exercised on a cashless basis.
 
 
15

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)

During the nine months ended September 30, 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 proceeds of $3,042,213, net of $454,687 in expenses.
 
In connection with the securities purchase agreements described above, the Company entered into registration rights agreements with the purchasers in such private placements pursuant to which the Company agreed to provide certain registration rights with respect to the common stock issued to the investors participating in such private placements and the common stock issuable upon exercise of the related warrants issued such investors. Specifically, the Company agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the shares of common stock issued pursuant to the private placement and issuable upon the exercise of the warrants within 45 days of the termination date of such private placement and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within 30 calendar days after the Company is notified that registration statement is not being reviewed by the Securities and Exchange Commission, and within 180 calendar days of the initial filing date of the registration statement in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments.
 
If (i) the registration statement is not filed within 45 days of the applicable termination date, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within 30 calendar days after the Company is notified that registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission within 180 calendar days of the initial filing date of the registration statement in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 10 consecutive calendar days or more than an aggregate of 15 calendar days during any 12-month period after its first effective date, then the Company is subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 1.0% of the aggregate purchase price paid by such purchasers per month of delinquency, provided, however, that the Company will not be required to make any payments any of the foregoing events occurred at such time that all securities registered or to be registered in the registration statement are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and provided, further, that the Company will not be required to make any liquidated damage payments with respect to any securities registered or to be registered in the registration statement that the Company is unable to register due to limits imposed by the Securities and Exchange Commission’s interpretation of Rule 415 under the Securities Act of 1933, as amended. Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreements dated December 31, 2013, April 4, 2014 and August 15, 2014 shall be 3% of the aggregate purchase price paid by the purchasers, (ii) the maximum aggregate liquidated damages due under the registration rights agreement dated December 19, 2014 shall be 6% of the aggregate purchase price paid by the purchasers and (iii) if any partial amount of liquidated damages remains unpaid for more than seven days, the Company shall pay interest of 18% per annum, accruing daily, on such unpaid amount.

Pursuant to the registration rights agreements, the Company must maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions, subject to the right to suspend or defer the use of the registration statement in certain events.
 
The Company filed a registration statement on May 20, 2015, which was declared effective on June 12, 2015 to satisfy the requirements under the registration rights agreements with the purchasers of its common stock and warrants.

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 September 30, 2015 and December 31, 2014 of $-0- and $226,305 was determined based on services rendered for past services as of September 30, 2015 and December 31, 2014, respectively.
 
 
16

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)
 
NOTE 7 – OPTIONS, RESTRICTED STOCK UNITS 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 2012 Plan provides for the issuance of options to purchase up to 11,686,123 (as amended) shares of the Company’s common stock to officers, directors, employees and consultants of the Company (as amended). Under the terms of the 2012 Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of the Company only. The Board of Directors of the Company or a committee thereof administers the 2012 Plan and determines the exercise price, vesting and expiration period of the grants under the 2012 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 any other grantee. The fair value of the common stock is determined based on (i) if the common stock is listed on an established stock exchange or national market system, the arithmetic mean of the sales prices (or the closing bids, if no sales were reported) for the ten trading days immediately preceding the day of determination, (ii) if the common stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the mean between the high bid and low asked prices on the day of determination (or if none were reported on that date, on the last trading date such bids and asks were reported) or (iii) in the absence of an established market, by the administrator in good faith.

Additionally, the vesting period of the grants under the 2012 Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years. The Company reserved 1,250,000 shares of its common stock for future issuance under the terms of the 2012 Plan.

During the nine months ended September 30, 2015, the Company granted an aggregate of 1,425,000 options to purchase the Company’s common stock to officers, directors and key consultants.

The following table presents information related to stock options at September 30, 2015:

Options Outstanding
   
Options Exercisable
 
           
Weighted
       
           
Average
   
Exercisable
 
Exercise
   
Number of
   
Remaining Life
   
Number of
 
Price
   
Options
   
In Years
   
Options
 
$
1.01-2.00
     
1,169,642
     
5.4
     
877,642
 
 
2.01-3.00
     
5,935,548
     
6.6
     
4,204,492
 
 
3.01-4.00
     
300,000
     
9.5
     
300,000
 
         
7,405,190
     
6.5
     
5,382,134
 
 
A summary of the stock option activity and related information for the 2012 Plan for the nine months ended September 30, 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
   
1,425,000
     
2.70
     
10.0
     
-
 
Exercised
   
  (10,000
)
   
2.09
                 
Canceled
   
  -
                         
Outstanding at September 30, 2015
   
7,405,190
   
$
2.34
     
6.5
   
$
-
 
Exercisable at September  30, 2015
   
5,382,134
   
$
2.35
     
6.5
   
$
-
 
 
 
17

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $1.40 as of September 30, 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 nine months ended September 30, 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.  

During the nine months ended September 30, 2015, the Company granted an aggregate of 1,425,000 options to purchase the Company’s common stock in connection with the services rendered at exercise prices from $1.74 to $3.99 per share for a term of seven years.  Vesting is as follows:
 
  450,000  
50% immediately, 50% at first year anniversary
  130,000  
1/4 per quarter, over one year
  65,000  
50%, immediately, 50% performance contingent
  300,000  
1/12 per month beginning first month anniversary
  480,000  
Exercisable immediately
  1,425,000    
 
The fair value of the granted options for the nine months ended September 30, 2015 was determined using the Black Scholes option pricing model with the following assumptions:
 
Dividend yield:
   
-0-
%
Volatility
 
118.56% to 130.30
%
Risk free rate:
 
1.19% to 2.37
%
Expected life:
 
7 to 10 years
 
Estimated fair value of the Company’s common stock
 
$
1.40 to $3.99
 
Estimated forfeiture rate
   
0
%

On April 22, 2015, the Company issued 10,000 shares of common stock in exchange for options exercised at $2.09 per share.

The fair value of all options vesting during the three and nine months ended September 30, 2015 of $836,425 and $3,793,152, respectively, and during the three and nine months ended September 30, 2014 of $1,543,162 and $2,099,501, respectively, was charged to current period operations.  Unrecognized compensation expense of $1,947,139 at September 30, 2015 will be expensed in future periods.
 
 
18

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)

Restricted Stock

The following table summarizes the restricted stock activity for the nine months ended September 30, 2015:
 
Restricted shares issued as of January 1, 2015
   
-
 
Granted
   
175,000
 
Total restricted shares issued as of September 30, 2015
   
175,000
 
Vested restricted shares as of September 30, 2015
   
(-
)
Unvested restricted shares as of September 30, 2015
   
175,000
 
 
Stock based compensation expense related to restricted stock grants was $100,492 and $238,122 for the three and nine months ended September 30, 2015; $-0- for the three and nine months ended September 30, 2014.  As of September 30, 2015, the stock-based compensation relating to restricted stock of $153,878 remains unamortized.

Warrants

The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at September 30, 2015: 
 
Exercise
   
Number
   
Expiration
 
Price
   
Outstanding
   
Date
 
$
0.001
     
383,320
   
January 2020
 
$
1.50
     
3,940,057
   
February 2018 to September 2018
 
$
1.84
     
35,076
   
January 2020
 
$
2.00
     
100,000
   
August 2018
 
$
2.02
     
30,755
   
January 2020
 
$
2.50
     
100,000
   
August 2018
 
$
2.75
     
228,720
   
August 2019 to September 2019
 
$
3.67
     
214,193
   
December 2018 to January 2019
 
$
3.75
     
1,340,556
   
April 2019 to March 2020
 
         
6,372,677
       
 
On January 23, 2015, the Company issued an aggregate of 428,400 and 321,300 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.

On February 10, 2015, the Company issued an aggregate of 337,000 and 252,750 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.

On February 27, 2015, the Company issued an aggregate of 223,000 and 167,250 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.

On March 31, 2015, the Company issued an aggregate of 410,360 and 307,770 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.

On April 15, 2015, the Company issued 99,552 shares of common stock in exchange for 156,102 warrants exercised on a cashless basis.
 
On May 5, 2015, the Company issued 4,082 shares of common stock in exchange for 4,082 warrants exercised at $3.67 per share.
 
 
19

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)

On May 8, 2015, the Company issued 4,000 shares of common stock in exchange for 4,000 warrants exercised at $2.50 per share.

On May 11, 2015, the Company issued an aggregate of 374,641 warrants to purchase the Company’s common stock at $1.50 per share expiring on May 11, 2020 in connection with the sale of the Company’s Series C Preferred stock.

On August 17, 2015, the Company issued 100,000 and 100,000 warrants to purchase the Company’s common stock at $2.00 and 2.50 per share, respectively, expiring on August 17, 2018 in connection with services provided.  Both warrants vest at 1/12 per month over one year.  The fair value of the vested portion of the issued warrants of $44,464 was charged to current period operations and was determined using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities of 118.80%, risk free rate of 0.92%, dividend yield of -0- and fair value of the Company’s common stock of $1.40.

A summary of the warrant activity for the nine months ended September 30, 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
   
3,022,471
     
2.79
     
2.2
     
-
 
Exercised
   
  (164,184
)
   
  1.58
                 
Canceled
   
  (1,599,600
 
$
  2.50
                 
Outstanding at September 30, 2015
   
6,372,677
   
$
2.03
     
3.0
   
$
536,265
 
                                 
Vested and expected to vest at September 30, 2015
   
6,372,677
   
$
2.03
     
2.8
   
$
536,265
 
Exercisable at September 30, 2015
   
6,189,345
   
$
2.02
     
2.8
   
$
536,265
 
 
The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on warrants with an exercise price less than the Company’s stock price of $1.40 as of September 30, 2015, which would have been received by the warrant holders had those warrant holders exercised their warrants 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.
 
 
20

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 September 30, 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 5. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 5 are that of volatility and market price of the underlying common stock of the Company.
 
As of September 30, 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 September 30, 2015, in the amount of $220,333 and $1,816,317, respectively, has a level 3 classification.
 
The following table provides a summary of changes in fair value of the Company’s level 3 financial liabilities as of September 30, 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
     
-
 
Initial fair value of derivative at date of issuance of Series C Preferred Stock
   
-
     
250,540
 
Initial fair value of warrant liability at the date of issuance
   
334,784
     
-
 
Transfers out due to conversion of Series C Preferred Stock
   
-
     
(572,435
)
Transfers out due to exercise of warrants
   
(265,955
)
   
-
 
Mark to market to September 30, 2015
   
(2,349,956
)
   
(700,362
)
Balance, September 30, 2015
 
$
1,816,317
   
$
220,333
 
Gain on change in warrant and derivative liabilities for the nine months ended September  30, 2015
 
$
2,349,956
   
$
700,362
 
 
Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price decreases for each of the related derivative instruments, the value to the holder of the instrument generally decreases, therefore decreasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.
 
 
21

 
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(unaudited)

NOTE 9 – SUBSEQUENT EVENTS

On October 9, 2015, the Company issued an aggregate of 42,334 shares of its common stock in exchange for 50 shares of the Company’s Series C Preferred Stock and accrued dividends.

On October 16, 2015, the Company issued an aggregate of 16,934 shares of its common stock in exchange for 20 shares of the Company’s Series C Preferred Stock and accrued dividends.

On October 20, 2015, the Company issued an aggregate of 84,667 shares of its common stock in exchange for 100 shares of the Company’s Series C Preferred Stock and accrued dividends.

On October 19, 2015, the Company issued options to purchase 100,000 shares of its common stock to a consultant for services at an exercise price of $1.56 per share; vesting annually over two years and expiring ten years from the date of issuance.

On October 20, 2015, the Company issued options to purchase an aggregate of 275,000 shares of its common stock to a board member for services at an exercise price of $1.56 per share with 25,000 options vesting over one year on a monthly basis and 250,000 vesting quarterly over three years .  All options expire ten years from the date of issuance.
 
On October 23, 2015, the Company entered into a securities purchase agreement with investors, pursuant to which we issued 216,669 shares of the Company’s common stock and warrants expiring October 23, 2018 to purchase 108,336 shares of our common stock for aggregate cash proceeds of $325,000. As part of this private placement transaction of our common stock and warrants, a related party had purchased an aggregate of 66,667 shares of common stock and a warrant to purchase 33,334 shares of common stock for an aggregate purchase price of $100,000.

In connection with the private placement, the Company issued 11,334 warrants to purchase our stock in connection with the placement services at the exercise price of $1.50 per share expiring October 23, 2018 for investment banking services.
 
On October 29, 2015, the Company entered into a securities purchase agreement with investors, pursuant to which we issued 86,667 shares of the Company’s common stock and warrants expiring October 29, 2018 to purchase 43,334 shares of our common stock for aggregate cash proceeds of $130,000.

In connection with the private placement, the Company issued 6,134 warrants to purchase our stock in connection with the placement services at the exercise price of $1.50 per share expiring October 29, 2018 for investment banking services.
 
On November 2, 2015, the Company issued an aggregate of 14,394 shares of its common stock in exchange for 17 shares of the Company’s Series C Preferred Stock and accrued dividends.

 
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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.
 
Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to Management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing for materials, and competition.
 
Business 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 (EP) 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 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 have 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 2: 349-361 (2009)).
 
 
23


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:
 
 
Higher quality cardiac signal acquisition  for accurate and more efficient electrophysiology studies;
 
 
Precise, uninterrupted, real time evaluations of electrograms;
 
 
Reliable cardiac recordings to better determine precise ablation targets, strategy and end point of procedures; and
 
 
A portable device that can be fully integrated into existing electrophysiology lab environments.
 
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:
 
 
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.
 
 
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 in Rochester, MN.
 
 
The Cardiac Arrhythmia Center at the University of California at Los Angeles and Dr. Kalyanam Shivkumar 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.
 
 
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.
 
 
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.
 
 
24

 
 
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.

 
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.

 
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, MN.
 
 
On June 10, 2015, Drs. Asirvatham and Venkatachalam performed our second pre-clinical study at the Mayo Clinic in Rochester, Minnesota.
 
 
Our third pre-clinical study at the Mayo Clinic in Rochester, Minnesota is scheduled for November 17, 2015.
 
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 also intend to conduct a pre-clinical study at the Cardiac Arrhythmia Center at the University of California at Los Angeles with emphasis on the ventricular tachycardia (VT) model. 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 2017, 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.

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 September 30, 2015 Compared to Three Months Ended September 30, 2014
 
Revenues and Cost of Goods Sold. We had no revenues or cost of goods sold during the three months ended September 30, 2015 and 2014.
 
Research and Development Expenses. Research and development expenses for the three months ended September 30, 2015 were $300,783, an increase of $156,552, or 108.5%, from $144,231 for the three months ended September 30, 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 September 30, 2015 were $2,170,698, a decrease of $1,625,565, or 42.8%, from $3,796,263 incurred in the three months ended September 30, 2014. This decrease is primarily due to less stock based compensation issued to employees and consultants in the current period as compared to the same period in the prior year.
 
Payroll related expenses increased to $178,212 in the current period from $105,975 for the three months ended September 30, 2014, an increase of $72,237.  The increase is due to added personnel in the current period.   We incurred $1,416,737 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 September 30, 2015 as compared to $3,404,924 in stock based compensation for the same period in 2014.
 
 
25

 
Professional services for the three months ended September 30, 2015 totaled $52,301, a decrease of $80,829, or 60.7%, over the $133,130 recognized for the three months ended September 30, 2014. Of professional services, legal fees totaled $46,301 for the three months ended September 30, 2015, a decrease of $79,929, or 63.3%, from $126,230 incurred for the three months ended September 30, 2014.  Accounting fees incurred in the three months ended September 30, 2015 amounted to $6,000, a decrease of $1,000, or 14.3%, from $7,000 incurred in same period last year.  The significant decrease in professional service fees was primarily related to legal and auditing fees incurred associated with our registration statements filed in the prior period.

Consulting and investor relations fees for the three months ended September 30, 2015 were $316,148 as compared to $-0- incurred for the three months ended September 30, 2014.  [The increase in consulting and investor relations fees during the three months ended September 30, 2015 relate to [us becoming a public company][NTD: Update as BioSig was also a public company during the three month period during the prior year].
 
Travel, meals and entertainment costs for the three months ended September 30, 2015 were $73,530, an increase of $44,914, or 157.0%, from $28,616 incurred in the three months ended September 30, 2014. Travel, meals and entertainment costs include travel related to business development and financing. Rent for the three months ended September 30, 2015 totaled $82,553, an increase of $63,056 or 323%, from $19,497 incurred in three months ended September 30, 2014, primarily due to expansion to our corporate office in Minnesota and temporary housing for interns during the current period.

Depreciation Expense. Depreciation expense for the three months ended September 30, 2015 totaled $2,607, a decrease of $1,286, or 33.0%, over the expense of $3,893 incurred in the three months ended September 30, 2014, as a result of the aging of office computers and other equipment.
 
Gain on change in fair values of derivatives.  Beginning in March 2015, we are required to estimate the fair value of the embedded beneficial conversion features of our issued Series C Preferred Stock and certain warrants with reset (anti-dilution) provisions.  During the three months ended September 30, 2015, we incurred a gain on change in fair values of these derivatives of $2,851,755 as compared to $-0- for the same period during the prior year.

Interest Expense.  Interest expense for the three months ended September 30, 2015 totaled $-0-, a decrease of $862 from interest expense of $862 incurred during the same period last year. In the three months ended September 30, 2014, our interest costs were primarily related to credit card financing charges.
 
Financing Costs.  Financing costs for the three months ended September 30, 2015 totaled $-0- from $14,754 incurred during the three months ended September 30, 2014. Financing costs during the three months ended September 30, 2014 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.
 
Preferred Stock Dividend. Preferred stock dividend for the three months ended September 30, 2015 totaled $53,048, a decrease of $10,039, or 15.9% from $63,087 incurred during the three months ended September 30, 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 second quarter of 2014, the Series A and Series B Preferred Stock was converted to common.  
 
Net Income (Loss). As a result of the foregoing, net income for the three months ended September 30, 2015 was $324,619, compared to a net loss of $4,023,090 for the three months ended September 30, 2014.
 
 
26


Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014
 
Revenues and Cost of Goods Sold. We had no revenues or cost of goods sold during the nine months ended September 30, 2015 and 2014.
 
Research and Development Expenses. Research and development expenses for the nine months ended September 30, 2015 were $931,360, an increase of $565,085, or 154.30%, from $366,275 for the nine months ended September 30, 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 nine months ended September 30, 2015 were $9,016,631, an increase of $4,134,301, or 84.7%, from $4,882,330 incurred in the nine months ended September 30, 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 in the prior year.
 
Payroll related expenses increased to $827,470 in the current period from $268,307 for the nine months ended September 30, 2014, an increase of $559,163.  The increase is due to additional hiring and bonus compensation paid in the current period.   We incurred $6,631,374 in stock based compensation in connection with the vesting of stock and stock options issued to board members, officers, employees and consultants for the nine months ended September 30, 2015 as compared to $3,962,000 stock based compensation for the same period in 2014.
 
Professional services for the nine months ended September 30, 2015 totaled $309,865, an increase of $3,413, or 1.1%, over the $306,452 recognized for the nine months ended September 30, 2014. Of professional services, legal fees totaled $239,865 for the nine months ended September 30, 2015, a decrease of $7,207, or 2.9%, from $247,072 incurred for the nine months ended September 30, 2014. Accounting fees incurred in the nine months ended September 30, 2015 amounted to $70,000, an increase of $10,620, or 17.9%, from $59,380 incurred in same period last year.  

Consulting and investor relations fees for the nine months ended September 30, 2015 was $628,550 as compared to $-0- incurred for the nine months ended September 30, 2014.  The increase in consulting and investor relations fees relates to us being a public company for the full nine-month period ending September 30, 2015.
 
Travel, meals and entertainment costs for the nine months ended September 30, 2015 were $238,276, an increase of $167,291, or 235.7%, from $70,985 incurred in the nine months ended September 30, 2014. Travel, meals and entertainment costs include travel related to business development and financing. Rent for the nine months ended September 30, 2015 totaled $133,912, an increase of $78,862 or 143.3%, from $55,050 incurred in nine months ended September 30, 2014, primarily due to expansion to our corporate office in Minnesota and temporary housing for interns during the current period.
 
Depreciation Expense. Depreciation expense for the nine months ended September 30, 2015 totaled $7,948, a decrease of $4,514, or 36.2%, over the expense of $12,462 incurred in the nine months ended September 30, 2014, as a result of the aging of office computers and other equipment.

Gain on change in fair values of derivatives.  Beginning in March 2015, we are required to estimate the fair value of the embedded beneficial conversion features of our issued Series C Preferred stock and certain warrants with reset (anti-dilution) provisions.  During the nine months ended September 30, 2015, we incurred a gain on change in fair values of these derivatives of $3,050,318 as compared to $-0- for the same period, last year.

Interest Expense.  Interest expense for the nine months ended September 30, 2015 totaled $1,298, a decrease of $8,620 from interest expense of $9,918 incurred during the same period last year. In the nine months ended September 30, 2015 and 2014, our interest costs were comprised primarily related to credit card financing charges.  

Financing Costs.  Financing costs for the nine months ended September 30, 2015 totaled $529,704 from $593,770 incurred during the nine months ended September 30, 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 2015, upon issuance of additional Series C Preferred Stock and associated warrants, we incurred additional financing costs related to the conversion features.
 
 
27

 
Preferred Stock Dividend. Preferred stock dividend for the nine months ended September 30, 2015 totaled $244,516, an increase of $14,182, or 6.2% from $230,334 incurred during the nine months ended September 30, 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 second quarter of 2014, the Series A and Series B Preferred Stock was converted to common.  The increase in the current period is primarily due to our requirement of a “make whole” dividend payment upon the Series C conversions.

Net Loss. As a result of the foregoing, net loss for the nine months ended September 30, 2015 was $7,681,139, compared to a net loss of $6,095,089 for the nine months ended September 30, 2014.

Liquidity and Capital Resources
 
Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014
 
As of September 30, 2015, we had a working capital deficit of $2,181,609, comprised of cash of $334,559 and prepaid expenses of $201,242, which was offset by $342,985 of accounts payable and accrued expenses, accrued dividends on preferred stock issuances of $337,775 and an aggregate of $2,036,650 of warrant and derivative liabilities. For the nine months ended September 30, 2015, we used $3,431,733 of cash in operating activities and $11,583 of cash in investing activities. Cash provided by financing activities totaled $3,538,094, comprised of proceeds from the sale of our common stock of $3,042,213, proceeds from sale of our Series C Preferred stock of $450,000 and proceeds from exercise of options and warrants of $45,881. In the comparable period in 2014, $1,537,292 was raised through the sale of our common stock, with repayments of related party advances of $30,281. At September 30, 2015, we had cash of $334,559 compared to $268,877 at September 30, 2014. Our cash is held in bank deposit accounts. At September 30, 2015 and December 31, 2014, we had no convertible debentures outstanding.
 
Cash used in operations for the nine months ended September 30, 2015 and 2014 was $3,431,733 and $1,535,858, respectively, which represent cash outlays for research and development and general and administrative expenses in such periods. Increase in cash outlays principally resulted from 1) increased research and development and general and administrative expenses due to the continued development of our operations and 2) reduction of our outstanding accounts payable by $213,754.

We used $11,583 cash for investing activities for the nine months ended September 30, 2015, compared to $3,963 for the nine months ended September 30, 2014.  During the nine months ended September 30, 2015, we purchased office furniture and computer equipment of $8,971 and paid a long term lease deposit of $2,612.
 
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.

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.
 
 
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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.
 
Transactions with Related Parties

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 September 30, 2015 and December 31, 2014 was $-0-.

Critical Accounting Policies and Estimates
 
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
 
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

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.
 
 
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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.
 
Derivative and Warrant Liabilities.

We account 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 September 30, 2015 and December 31, 2014, we did not have any derivative instruments that were designated as hedges.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not required under Regulation S-K for “smaller reporting companies.”

ITEM 4.  CONTROLS AND PROCEDURES
 
(a) Evaluation of disclosure controls and procedures.
 
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
 
Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2015, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
 
(b) Changes in internal control over financial reporting.
 
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
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PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
 
None.
 
ITEM 1A.  RISK FACTORS
 
Not required under Regulation S-K for “smaller reporting companies.”
 
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 4.  MINE SAFETY DISCLOSURES
 
None.
 
ITEM 5.  OTHER INFORMATION
 
None.

ITEM 6.  EXHIBITS

31.01
   
31.02
   
32.01
   
101 INS
XBRL Instance Document
   
101 SCH
XBRL Taxonomy Extension Schema Document
   
101 CAL
XBRL Taxonomy Calculation Linkbase Document

101 LAB
XBRL Taxonomy Labels Linkbase Document
   
101 PRE
XBRL Taxonomy Presentation Linkbase Document
   
101 DEF
XBRL Taxonomy Extension Definition Linkbase Document

 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
BIOSIG TECHNOLOGIES, INC.
     
Date: November 13, 2015
By:
/s/ GREGORY D. CASH
 
   
Gregory D. Cash
   
Chief Executive Officer (Principal Executive Officer)
     
     
Date: November 13, 2015
By:
/s/ STEVEN CHAUSSY
 
   
Steven Chaussy
   
Chief Financial Officer (Principal Financial Officer
   
and Principal Accounting Officer)






 
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