UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

(Mark One)

 

 

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

 

For the quarterly period ended September 30, 2021

 

 

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

 

For the transition period from                           to                           

 

Commission file number: 001-38659

 

BIOSIG TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

     

Delaware

 

26-4333375

(State or other jurisdiction of incorporation

or organization)

 

(IRS Employer Identification No.)

     

55 Greens Farms Road, 1st Floor

Westport, CT

 

06880

(Address of principal executive office)

 

(Zip Code)

     

(203) 409-5444

(Registrant’s telephone number, including area code)

 

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

BSGM

The NASDAQ Capital Market  

 

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

 

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

 

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

     

 

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

 

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

 

As of November 15, 2021, there were 35,310,627 shares of registrant’s common stock outstanding.  

 

 

 

 

TABLE OF CONTENTS

 

PART I.          FINANCIAL INFORMATION

   
         
 

ITEM 1.

Financial Statements

   
         
   

Condensed consolidated balance sheets as of September 30, 2021 (unaudited) and December 31, 2020

 

3

         
   

Condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 (unaudited)

 

4

         
   

Condensed consolidated statement of changes in equity for the three and nine months ended September 30, 2021 (unaudited)

 

5

         
   

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

 

6

         
   

Condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 (unaudited)

 

7

         
   

Notes to condensed consolidated financial statements (unaudited)

 

8-33

         
 

ITEM 2.

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

 

34-44

 

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

 

45

 

ITEM 4.

Controls and Procedures

 

45

         

PART II.          OTHER INFORMATION

   
         
 

ITEM 1.

Legal Proceedings

 

46

 

ITEM 1A.

Risk Factors

 

46

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

47

 

ITEM 3.

Defaults Upon Senior Securities

 

47

 

ITEM 4.

Mine Safety Disclosures

 

47

 

ITEM 5.

Other Information

 

47

 

ITEM 6.

Exhibits

 

48

         
 

SIGNATURES

 

49

 

 

 

 

PART I FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Par Value and Share Amounts)

 

   

September 30,

   

December 31,

 
   

2021

   

2020

 
   

(unaudited)

         

ASSETS

               

Current assets:

               

Cash

  $ 17,535     $ 28,268  

Accounts receivable, net

    100       -  

Employee advances

    50       -  

Inventory

    1,881       768  

Prepaid expenses and vendor deposits

    433       301  

  Total current assets

    19,999       29,337  
                 

Property and equipment, net

    557       289  
                 

Right-to-use assets, net

    693       306  
                 

Other assets:

               

Patents, net

    331       346  

Trademarks

    1       1  

Prepaid expenses, long term

    -       5  

Deposits

    92       102  
                 

  Total assets

  $ 21,673     $ 30,386  
                 

LIABILITIES AND EQUITY

               

Current liabilities:

               

Accounts payable and accrued expenses, including $80 and $317 to related parties as of September 30, 2021 and December 31, 2020, respectively

  $ 2,169     $ 4,722  

Deferred revenue, short term

    32       -  

Dividends payable

    79       73  

Lease liability, short term

    291       313  

  Total current liabilities

    2,571       5,108  
                 

Deferred revenue, long term

    13       -  

Lease liability, long term

    409       1  

  Total long-term debt

    422       1  
                 

Total liabilities

    2,993       5,109  
                 

Commitments and contingencies (Note 11)

               
                 

Series C 9% Convertible Preferred Stock, $0.001 par value, $1,000 stated value, authorized 4,200 shares, 105 shares issued and outstanding; liquidation preference of $105 as of September 30, 2021 and December 31, 2020

    105       105  
                 

Equity:

               

Preferred stock, $0.001 par value, authorized 1,000,000 shares, designated 200 shares of Series A, 600 shares of Series B, 4,200 shares of Series C, 1,400 shares of Series D, 1,000 shares of Series E, 200,000 shares of Series F Preferred Stock, none issued of Series F Preferred Stock

    -       -  

Common stock, $0.001 par value, authorized 200,000,000 shares, 35,254,860 and 30,764,792 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

    35       31  

Additional paid in capital

    198,380       181,344  

Accumulated deficit

    (180,278 )     (157,005 )

Total stockholders' equity attributable to BioSig Technologies, Inc.

    18,137       24,370  

Non-controlling interest

    438       802  

  Total equity

    18,575       25,172  
                 

Total liabilities and equity

  $ 21,673     $ 30,386  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

3

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Par Value and Share Amounts)

(unaudited)

 

   

Three months ended September 30,

   

Nine months ended September 30,

 
   

2021

   

2020

   

2021

   

2020

 

Revenue:

                               

Product sales

  $ 100     $ -     $ 414     $ -  

Service

    8       -       19       -  

  Total revenue

    108       -       433       -  
                                 

Cost of goods sold

    38       -       199       -  
                                 

Gross profit

    70       -       234       -  
                                 

Operating expenses:

                               

Research and development

    1,315       4,911       4,248       15,556  

General and administrative

    6,505       8,165       20,256       32,629  

Depreciation and amortization

    51       24       142       67  

  Total operating expenses

    7,871       13,100       24,646       48,252  
                                 

Loss from operations

    (7,801 )     (13,100 )     (24,412 )     (48,252 )
                                 

Other income (expense):

                               

Interest income, net

    1       2       2       45  

Gain on settlement of debt

    553       -       553       -  

Loss on foreign currency translation

    -       -       -       (1 )
                                 

Loss before income taxes

    (7,247 )     (13,098 )     (23,857 )     (48,208 )
                                 

Income taxes (benefit)

    -       -       -       -  
                                 

Net loss

    (7,247 )     (13,098 )     (23,857 )     (48,208 )
                                 

Non-controlling interest

    (6 )     1,696       584       6,282  
                                 

Net loss attributable to BioSig Technologies, Inc.

    (7,253 )     (11,402 )     (23,273 )     (41,926 )
                                 

Preferred stock dividend

    (2 )     (2 )     (7 )     (11 )
                                 

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

  $ (7,255 )   $ (11,404 )   $ (23,280 )   $ (41,937 )
                                 

Net loss per common share, basic and diluted

  $ (0.21 )   $ (0.38 )   $ (0.71 )   $ (1.56 )
                                 

Weighted average number of common shares outstanding, basic and diluted

    34,856,502       29,750,378       32,881,932       26,900,383  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

4

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

(In Thousands, Except Par Value and Share Amounts)

 

   

Common stock

   

Additional

Paid in

   

Accumulated

   

Non-controlling

         
   

Shares

   

Amount

   

Capital

   

Deficit

   

Interest

   

Total

 

Balance, December 31, 2020

    30,764,792     $ 31     $ 181,344     $ (157,005 )   $ 802     $ 25,172  

Common stock issued for services

    406,692       -       1,777       -       -       1,777  

Common stock issued upon exercise of options at $2.96 per share

    9,375       -       28       -       -       28  

Sale of common stock under At-the-market offering, net of transaction expenses of $40

    251,720       -       1,300       -       -       1,300  

Stock based compensation

    682,202       1       721       -       20       742  

Preferred stock dividend

    -       -       (2 )     -       -       (2 )

Net loss

    -       -       -       (8,319 )     (240 )     (8,559 )

Balance, March 31, 2021 (unaudited)

    32,114,781       32       185,168       (165,324 )     582       20,458  

Common stock for services

    36,948       -       140       -       -       140  

Change in fair value of modified options

    -       -       313       -       8       321  

Stock based compensation

    53,750       -       1,518       -       134       1,652  

Preferred stock dividend

    -       -       (3 )     -       -       (3 )

Net loss

    -       -       -       (7,701 )     (350 )     (8,051 )

Balance, June 30, 2021 (unaudited)

    32,205,479       32       187,136       (173,025 )     374       14,517  

Sale of common stock, net transactional costs of $995

    2,500,000       3       9,002       -       -       9,005  

Common stock issued for services

    409,631       -       1,354       -       -       1,354  

Stock based compensation

    139,750       -       890       -       58       948  

Preferred stock dividend

                    (2 )     -       -       (2 )

Net loss

    -       -       -       (7,253 )     6       (7,247 )

Balance, September 30, 2021 (unaudited)

    35,254,860     $ 35     $ 198,380     $ (180,278 )   $ 438     $ 18,575  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

5

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020

(In Thousands, Except Par Value and Share Amounts)

 

   

Common stock

   

Additional

Paid in

   

Accumulated

   

Non-controlling

         
   

Shares

   

Amount

   

Capital

   

Deficit

   

Interest

   

Total

 

Balance, December 31, 2019

    23,323,087     $ 23     $ 115,910     $ (104,786 )   $ 515     $ 11,662  

Sale of common stock

    2,500,000       2       9,050       -       -       9,052  

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

    2,667       -       10       -       -       10  

Common stock issued settlement of Series C Preferred Stock accrued dividends at $5.39 per share

    1,083       -       6       -       -       6  

Common stock issued upon cashless exercise of warrants

    10,574       -       -       -       -       -  

Common stock issued upon cashless exercise of options

    11,141       -       -       -       -       -  

Common stock issued upon exercise of warrants at an average of $3.75 per share

    80,432       1       301       -       -       302  

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

    -       -       2,440       -       735       3,175  

Stock based compensation

    81,334       -       3,628       -       785       4,413  

Preferred stock dividend

    -       -       (5 )     -       -       (5 )

Net loss

    -       -       -       (11,336 )     (1,428 )     (12,764 )

  Balance, March 31, 2020 (unaudited)

    26,010,318       26       131,340       (116,122 )     607       15,851  

Sale of common stock

    2,187,500       2       16,160       -       -       16,162  

Sale of subsidiary shares to non-controlling interest

    -       -       7,124       -       3,468       10,592  

Common stock issued for services

    15,038       -       108       -       -       108  

Fair value of subsidiary shares issued to acquire research and development

    -       -       1,051       -       249       1,300  

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

    26,667       -       100       -       -       100  

Common stock issued for settlement of Series C Preferred Stock accrued dividends at $4.47 per share

    14,433       -       65       -       -       65  

Common stock issued upon cashless exercise of warrants

    2,266       -       -       -       -       -  

Common stock issued upon cashless exercise of options

    149,602       -       -       -       -       -  

Common stock issued upon exercise of options at an average of $4.66 per share

    478,451       1       2,228       -       -       2,229  

Common stock issued upon exercise of warrants at an average of $3.87 per share

    189,388       -       733       -       -       733  

Stock based compensation

    53,000       -       9,595       -       1,628       11,223  

Preferred stock dividend

    -       -       (5 )     -       -       (5 )

Net loss

    -       -       -       (19,188 )     (3,158 )     (22,346 )

  Balance, June 30, 2020 (unaudited)

    29,126,663       29       168,499       (135,310 )     2,794       36,012  

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

    150,000       -       1,002       -       -       1,002  

Common stock for services

    488,000       1       3,442       -       -       3,443  

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

    108,374       -       492       -       -       492  

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

    160,159       -       632       -       -       632  

Stock based compensation

    85,000       -       1,163       -       222       1,385  

Preferred stock dividend

    -       -       (2 )     -       -       (2 )

Net loss

    -       -       -       (11,402 )     (1,696 )     (13,098 )

  Balance, September 30, 2020 (unaudited)

    30,118,196     $ 30     $ 175,228     $ (146,712 )   $ 1,320     $ 29,866  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

6

 

BIOSIG TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, Except Par Value and Share Amounts)

(unaudited)

 

   

Nine months ended September 30,

 
   

2021

   

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (23,857 )   $ (48,208 )

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

               

Depreciation and amortization

    142       67  

Amortization of right to use assets

    334       342  

Equity based compensation

    6,613       20,573  

Gain on settlement of debt

    (553 )     -  

Change in fair value of modified options

    321       -  

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

    -       3,175  

Fair value of subsidiary stock issued to acquire research and development

            1,300  

Changes in operating assets and liabilities:

               

Accounts receivable

    (100 )     -  

Employee advances

    (50 )     -  

Inventory

    (1,113 )     (229 )

Prepaid expenses and other

    (117 )     (180 )

Deferred revenue

    45       -  

Accounts payable and accrued expenses

    (1,999 )     3,005  

Operating lease liabilities

    (334 )     (342 )

 Net cash used in operating activities

    (20,668 )     (20,497 )
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Purchase of property and equipment

    (398 )     (60 )

 Net cash used in investing activity

    (398 )     (60 )
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Proceeds from sale of common stock, net of issuance costs

    9,005       25,214  

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

    -       10,592  

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

    1,300       1,002  

Proceeds from exercise of options

    28       2,722  

Proceeds from exercise of warrants

    -       1,667  

 Net cash provided by financing activities

    10,333       41,197  
                 

Net (decrease) increase in cash and cash equivalents

    (10,733 )     20,640  
                 

Cash and cash equivalents, beginning of the period

    28,268       12,108  

Cash and cash equivalents, end of the period

  $ 17,535     $ 32,748  
                 

Supplemental disclosures of cash flow information:

               

Cash paid during the period for interest

  $ -     $ -  

Cash paid during the period for income taxes

  $ -     $ -  
                 

Noncash investing and financing activities:

               

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

  $ -     $ 180  

Dividend payable on preferred stock charged to additional paid in capital

  $ 7     $ 12  

Record right-to-use assets and related lease liability

  $ 800     $ -  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

7

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

BioSig Technologies, Inc. was initially incorporated on February 24, 2009 under the laws of the State of Nevada and subsequently re-incorporated in the state of Delaware in 2011. The Company is principally devoted to improving the standard of care in electrophysiology with its initial product offering, the PURE EP™ System, designed for enhanced cardiac signal acquisition, digital signal processing, and analysis during ablation of cardiac arrhythmias. The Company has generated minimal revenue to date and consequently its operations are subject to all risks inherent in business enterprises in early commercialization stage.

 

On November 7, 2018, the Company formed a subsidiary under the laws of the State of Delaware originally under the name of NeuroClear Technologies, Inc. which was renamed to ViralClear Pharmaceuticals, Inc. (“ViralClear”) in March 2020. The subsidiary was established to pursue additional applications of the PURE EP™ signal processing technology outside of cardiac electrophysiology, and subsequently in 2020, was repurposed to develop merimepodib, a broad-spectrum anti-viral agent that showed potential for the treatment of COVID-19. Since late 2020, ViralClear has been realigned with its original objective of pursuing additional applications of the PURE EP™ signal processing technology outside of cardiac electrophysiology.

 

In 2019 and 2020, ViralClear sold an aggregate of 1,965,240 shares of its common stock to investors for net proceeds of $15.6 million and issued an aggregate of 894,869 shares of its common stock in connection with acquiring assets and with know-how agreements. As of September 30, 2021, the Company had a majority interest in ViralClear of 68.44%.  

 

On July 2, 2020, the Company formed an additional subsidiary, NeuroClear Technologies, Inc., a Delaware corporation.  

 

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

 

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

 

The condensed consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements.

 

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of results that may be expected for the year ending December 31, 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020 filed with the Company’s Form 10-K with the Securities and Exchange Commission on March 15, 2021.

 

COVID-19

 

On March 11, 2020, the World Health Organization declared a pandemic related to the rapidly spreading coronavirus (COVID-19) outbreak, which has led to a global health emergency.  The full public-health impact of the ongoing pandemic is currently indeterminable and rapidly evolving, and the related health crisis has adversely affected and may continue to adversely affect the global economy, resulting in delaying to our commercialization objectives of the PURE EP Systems into 2022.

 

8

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

NOTE 2 MANAGEMENTS LIQUIDITY PLANS

 

BioSig Technologies, Inc.’s primary efforts are principally devoted to improving the standard care of electrophysiology with its PURE EP System’s enhanced signal acquisition, digital signal processing, and analysis during ablation of cardiac arrhythmias; NeuroClear’s and ViralClear’s efforts are in developing additional applications of the PURE EP™ signal processing technology outside of cardiac electrophysiology. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. Further, the Company has generated minimal revenues and there is no assurance that the Company will be able to generate cash flow to fund operations. In addition, there can be no assurance that the Company's ongoing research and development will be successfully completed or that any product will be commercially viable.

 

We expect to incur losses from operations for the near future. Additionally, we expect to incur increasing marketing and commercialization expenses related to our PURE EP system in addition to research and development costs relating to PURE EP and other product candidates, including expenses related to clinical trials. We expect that our general and administrative expenses will increase in the future as we expand our business development, add infrastructure and incur additional costs related to being a public company, including incremental audit fees, investor relations programs and increased professional services.

 

If additional financing is not available or is not available on acceptable terms, we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization efforts or obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently.

 

At September 30, 2021, the Company had working capital of approximately $17.4 million. During the nine months ended September 30, 2021, the Company raised approximately $9.0 million, net of expenses, through the sale of common stock and  $1.3 million, net of expenses, through an At-the-market offering. The Company has begun its commercial operations generating revenues with the sale of the PURE EP device. At September 30, 2021 the Company has effective Forms S-3, shelf registration statements for an aggregate of $107.0 million.

 

At September 30, 2021, the Company had cash of approximately $17.5 million through the date of the filing of this report and with the expected commercial growth, constitutes sufficient funds for the Company to meet its commercialization efforts, research and development and other funding requirements for at least the next 12 months from the date of issuance of these unaudited financial statements.

 

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

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

 

Revenue Recognition

 

The Company derives its revenue primarily from the sale of its medical device, the PURE EP™ System, and well as related support and maintenance services and software upgrades in connection with the system.

 

The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that an entity recognizes revenue to depict

the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

 

9

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

The Company determines revenue recognition through the following five steps:

 

 

Identify the contract with the customer;

 

 

Identify the performance obligations in the contract;

 

 

Determine the transaction price;

 

 

Allocate the transaction price to the performance obligation in the contract; and

 

 

Recognize revenue when, or as, the performance obligations are satisfied.

 

Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer. If the Company determines that it has not satisfied a performance obligation, it will defer recognition of the revenue until the performance obligation is deemed to be satisfied. Support, maintenance, and software upgrades are performance obligations over a defined period and are recognized ratably over the contractual service period. Customers typically purchase these services with the initial sale of the PURE EP System and do not have the right to terminate their contracts unless we fail to perform material obligations.

 

The Company may execute more than one contract with a single customer. If so, it is evaluated whether the agreements were negotiated as a package with a single objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement, or whether the goods or services promised in the agreements represent a single performance obligation. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements.

 

The Company records accounts receivable for amounts invoiced to customers for which the Company has an unconditional right to consideration as provided under the contractual arrangement. Unbilled receivables, if any, include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenue includes payments received in advance of performance under the contract. Our unbilled receivables and deferred revenue are reported on an individual contract basis at the end of each reporting period. Unbilled receivables are classified as current or noncurrent based on the timing of when we expect to bill the customer. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue.

 

The Company’s unconditional right to consideration for goods and services transferred to the customer is included in accounts receivable, net (if any) in the Company’s unaudited condensed consolidated balance sheet.

 

A reconciliation of contract liabilities with customers is presented below:

 

   

Balance at

December 31, 2020

(000’s)

   

Consideration Received

(000’s)

   

Recognized in Revenue

(000’s)

   

Balance at

September 30, 2021

(000’s)

 

Product revenue

  $ -     $ 414     $ (414

)

  $ -  

Service revenue

    -       64       (19

)

    45  

Total

  $ -     $ 478     $ (433

)

  $ 45  

 

10

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

The table below summarizes our deferred revenue as of September 30, 2021 and December 31, 2020:

 

   

September 30,

2021

(000’s)

   

December 31,

2020

(000’s)

 

Deferred revenue-current

  $ 32     $ -  

Deferred revenue-noncurrent

    13       -  

Total deferred revenue

  $ 45     $ -  

 

We had one customer which accounted for approximately 93% of our revenue in the three months ended September 30, 2021 and two customers which accounted for approximately 69% and 31% of our revenue in the nine months ended September 30, 2021.

 

At September 30, 2021, the Company had one customer representing 100% of the outstanding accounts receivable.

 

Cost of Goods Sold

 

Cost of goods sold consists primarily of the delivered cost of our medical device(s) sold.

 

Allowance for Doubtful Accounts

 

The Company adjusts accounts receivable down to net realizable value with its allowance methodology. In determining the allowance for doubtful accounts for estimated losses, aged receivables are analyzed periodically by management. Each identified receivable is reviewed based upon historical collection experience, financial condition of the client and the status of any open or unresolved issues with the client preventing the payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables. The allowance for doubtful accounts was $0 at September 30, 2021. The Company believes that its reserve is adequate, however results may differ in future periods. For the nine months ended September 30, 2021 and 2020, bad debt expense totaled $0.

 

Fair Value of Financial Instruments

 

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

 

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

 

Concentrations of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit.  At September 30, 2021 and December 31, 2020, deposits in excess of FDIC limits were $17.0 million and $27.8 million, respectively.

 

11

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

Inventory

 

The inventory is comprised of work in process and finished goods available for sale and are stated at the lower of cost or net realizable value using specific identification method for serial numbered inventory and first-in, first-out method for all other inventory for valuation. The inventory at September 30, 2021 and December 31, 2020 were $1,881,007 and $768,319, respectively, comprised of finished goods.

 

Prepaid Expenses and Vendor Deposits

 

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

 

Leases

 

The Company determines if a contractual arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and noncurrent operating lease liabilities on the Company’s unaudited condensed consolidated balance sheet. The Company evaluates and classifies leases as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty. All the Company’s real estate leases are classified as operating leases. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.

 

The lease payments included in the present value are fixed lease payments. As most of the Company’s leases do not provide an implicit rate, the Company estimates its collateralized incremental borrowing rate, based on information available at the commencement date, in determining the present value of lease payments. The Company applies the portfolio approach in applying discount rates to its classes of leases. The operating lease ROU assets include any payments made before the commencement date. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company does not currently have subleases. The Company does not currently have residual value guarantees or restrictive covenants in its leases.

 

Property and Equipment

 

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

 

Impairment of Long-lived Assets

 

The Company recognizes an impairment of long-lived assets used in operations, other than goodwill, when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method. The Company did not recognize and record any impairments of long-lived assets used in operations during the three and nine months ended September 30, 2021 and 2020.

 

12

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

Research and Development Costs

 

The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses of $1.3 million and $4.2 million for the three and nine months ended September 30, 2021, and $4.9 million and $15.6 million for the three and nine months ended September 30, 2020, respectively.

 

Net Income (loss) Per Common Share

 

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

 

The computation of basic and diluted loss per share as of September 30, 2021 and 2020 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

 

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

 

   

September 30,

2021

   

September 30,

2020

 

Series C convertible preferred stock

    64,292       44,194  

Options to purchase common stock

    4,037,122       3,509,956  

Warrants to purchase common stock

    818,910       1,604,668  

Restricted stock units to acquire common stock

    182,500       168,334  

Totals

    5,102,824       5,327,152  

 

Stock Based Compensation

 

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

 

Income Taxes

 

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

 

13

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

Patents, Net

 

The Company capitalizes certain initial asset costs in connection with patent applications including registration, documentation and other professional fees associated with the application. Patent costs incurred prior to the Company’s U.S. Food and Drug Administration (“FDA”) 510(k) application on March 28, 2018 were charged to research and development expense as incurred. Commencing upon first in-man trials on February 18 and 19, 2019, capitalized costs are amortized to expense using the straight-line method over the lesser of the legal patent term or the estimated life of the product of 20 years. During the three and nine months ended September 30, 2021, the Company recorded amortization of $4,751 and $14,254; and $4,752 and $14,254 for the three and nine months ended September 30, 2020 to current period operations, respectively.

 

Warranty

 

The Company generally warrants its products to be free from material defects and to conform to material specifications for a period of up to two (2) years. Warranty expense is estimated based primarily on historical experience and is reflected in the financial statements.

 

Non-controlling Interest

 

The Company’s non-controlling interest represents the non-controlling shareholders ownership interests related to the Company’s subsidiary, ViralClear. The Company reports its non-controlling interest in subsidiaries as a separate component of equity in the unaudited condensed consolidated balance sheets and reports both net loss attributable to the non-controlling interest and net loss attributable to the Company’s common shareholders on the face of the unaudited condensed consolidated statements of operations. The Company’s equity interest in ViralClear is 68.44% and the non-controlling stockholders’ interest is 31.56% as of September 30, 2021. This is reflected in the unaudited condensed consolidated statements of changes in equity.

 

Segment Information

 

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

 

Reclassifications

 

Certain reclassifications have been made to prior periods’ data to conform with the current year’s presentation. These reclassifications had no effect on reported income or losses.

 

Recent Accounting Pronouncements

 

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

 

 

14

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

NOTE 4 PROPERTY AND EQUIPMENT

 

Property and equipment as of September 30, 2021 and December 31, 2020 is summarized as follows:

 

   

September 30,

2021

(000’s)

   

December 31,

2020

(000’s)

 

Computer equipment

  $ 377     $ 234  

Furniture and fixtures

    83       75  

Manufacturing equipment

    153       34  

Testing/Demo equipment

    145       96  

Leasehold improvements

    77       -  

Total

    835       439  

Less accumulated depreciation

    (278

)

    (150

)

Property and equipment, net

  $ 557     $ 289  

 

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Leasehold improvements are depreciated over the related expected lease term. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

 

Depreciation expense was $46,205 and $128,152 for three and nine months ended September 30, 2021 and $19,117 and $52,838 for the three and nine months ended September 30, 2020, respectively.

 

NOTE 5 – RIGHT TO USE ASSETS AND LEASE LIABILITY

 

Operating leases:

 

On February 10, 2021 the Company entered into a Sixth Amendment to the Office Lease at 12424 Wilshire Blvd in Los Angeles dated August 9, 2011 – it is the Fourth Extended Term with respect to Suite 745 and the Expansion Term with respect to Suite 740 which is from July 1, 2021 until June 30, 2022 with a fixed monthly rent equal to $13,702 (down from $16,289); and the security deposit will be reduced by $5,448 so that the balance remaining shall be $27,404.

 

The Company determined that the Sixth Amendment was a lease modification and accordingly reassessed the lease classification, remeasured the lease liability and adjusted the right-to-use asset. At February 10, 2021 the Company removed the remaining right-to-use net assets of $60,881 and related lease liability of $63,076 and recorded right-to-use assets and related lease liability of $217,903.

 

On August 2, 2021, the Company exercised its option to extend its Rochester, Minnesota lease of approximately 1,400 square feet of office space for two additional years expiring on October 31, 2023 with a fixed monthly rate of $3,513, increasing to $3,618 for the second year.

 

The Company determined that the lease option exercised was a lease modification and accordingly reassessed the lease classification, remeasured the lease liability and adjusted the right-to-use asset. On August 2, 2021 the Company removed the remaining right-to-use net assets of $10,247 and related lease liability of $10,400 and recorded right-to-use assets and related lease liability of $89,629. At the lease modification date, the Company estimated the lease liability and the right of use assets at present value using the Company’s estimated incremental borrowing rate of 6.5%.

 

On August 3, 2021, the Company entered into a sublease agreement whereby the Company leased approximately 6,590 square feet of office space at 55 Greens Farms Road, Westport, Connecticut commencing September 1, 2021 and expiring December 31, 2024 (40 months) at the initial rate beginning January 1, 2022 of $14,828 with escalating payments. In connection with the lease, the Company paid a security deposit of $14,232. There is no option to extend the lease past its initial term. At the lease commencement date, the Company estimated the lease liability and right-to-use assets at present value using the Company’s incremental borrowing rate of 6.5% and determined their initial present values, at inception, of $492,876. In conjunction with the lease, the Company terminated, without penalty, the sublease at 54 Wilton Road, Westport, CT effective September 4, 2021 and removed the remaining right-to-use assets of $36,756 and related lease liability of $37,625 with a credit to rent expense of $868 relating to the lease termination.

 

15

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

As of September 30, 2021, the Company had outstanding five leases with aggregate payments of $17,315 per month, expiring through December 31, 2024.

 

Right to use assets is summarized below:

 

   

September 30,

2021

(000’s)

   

December 31,

2020

(000’s)

 

Right to use assets, net

  $ 803     $ 1,087  

Less accumulated amortization

    (110

)

    (781

)

Right to use assets, net

  $ 693     $ 306  

 

During the three and nine months ended September 30, 2021, the Company recorded $120,127 and $365,366 and $124,437 and $370,656 for the three and nine months ended September 30, 2020 as lease expense to current period operations, respectively.

 

Lease liability is summarized below:

 

   

September 30,

2021

(000’s)

   

December 31,

2020

(000’s)

 

Total lease liability

  $ 700     $ 314  

Less: short term portion

    (291

)

    (313

)

Long term portion

  $ 409     $ 1  

 

Maturity analysis under these lease agreements are as follows (000’s):

 

Remainder of 2021

  $ 52  

Year ended December 31, 2022

    304  

Year ended December 31, 2023

    220  

Year ended December 31, 2024

    191  

Total

    767  

Less: Present value discount

    (67

)

Lease liability

  $ 700  

 

Lease expense for the three months ended September 30, 2021 and 2020 was comprised of the following:

 

   

September 30,

2021

(000’s)

   

September 30,

2020

(000’s)

 

Operating lease expense

  $ 105     $ 115  

Short-term lease expense

    15       9  

Total

  $ 120     $ 124  

 

16

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

Lease expense for the nine months ended September 30, 2021 and 2020 was comprised of the following:

 

   

September 30,

2021

(000’s)

   

September 30,

2020

(000’s)

 

Operating lease expense

  $ 334     $ 342  

Short-term lease expense

    31       28  

Variable lease expense

    -       1  

Total

  $ 365     $ 371  

 

NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses at September 30, 2021 and December 31, 2020 consist of the following:

 

   

September 30,

2021

(000’s)

   

December 31,

2020

(000’s)

 

Accrued accounting and legal

  $ 163     $ 177  

Accrued reimbursements and travel

    47       56  

Accrued consulting

    84       256  

Accrued research and development expenses

    221       3,127  

Accrued product purchases

    68       30  

Accrued marketing

    49       -  

Accrued office and other

    25       127  

Accrued payroll

    499       936  

Accrued settlement related to arbitration

    1,013       13  
    $ 2,169     $ 4,722  

 

NOTE 7 – SERIES C 9% CONVERTIBLE PREFERRED STOCK

 

Series C 9% Convertible Preferred Stock

 

On 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.

 

As a result of an amendment to the conversion price of our Series C Preferred Stock, the conversion price effective as of December 31, 2020 was $3.75 per share, subject to certain reset provisions. On August 17, 2021, the conversion price was reset to $2.98 per share. The effect was de minimis.

 

17

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

The Series C Preferred Stock contains triggering events which would, among other things, require redemption (i) in cash, at the greater of (a) 120% of the stated value of $1,000 or (b) the product of (I) the variable weighted average price of our common stock on the trading day immediately preceding the date of the triggering event and (II) the stated value divided by the then conversion price or (ii) in shares of our common stock, equal to a number of shares equal to the amount set forth in (i) above divided by 75%. As of September 30, 2021, the aggregate stated value of our Series C Preferred Stock was $105,000. The triggering events include our being subject to a judgment of greater than $100,000 or our initiation of bankruptcy proceedings. If any of the triggering events contained in our Series C Preferred Stock occur, the holders of our Series C Preferred Stock may demand redemption, an obligation the Company may not have the ability to meet at the time of such demand.  The Company will be required to pay interest on any amounts remaining unpaid after the required redemption of our Series C Preferred Stock, at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law. Accordingly, the Company has classified the Series C Preferred Stock as a mezzanine obligation in the accompanying consolidated balance sheets.

 

Series C Preferred Stock issued and outstanding totaled 105 as of September 30, 2021 and December 31, 2020.  As of September 30, 2021 and December 31, 2020, the Company has accrued $79,285 and $72,517 dividends payable on the Series C Preferred Stock.

 

NOTE 8 – STOCKHOLDER EQUITY

 

Shareholder rights plan

 

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

 

Preferred stock

 

The Company is authorized to issue 1,000,000 shares of $0.001 par value preferred stock. As of September 30, 2021, and December 31, 2020, the Company has designated 200 shares of Series A preferred stock, 600 shares of Series B preferred stock, 4,200 shares of Series C Preferred Stock, 1,400 shares of Series D Preferred Stock, 1,000 shares of Series E Preferred Stock and 200,000 shares of Series F Preferred Stock. As of September 30, 2021, and December 31, 2020, there were no outstanding shares of Series A, Series B, Series D, Series E and Series F preferred stock.

 

Common stock

 

BioSig Technologies, Inc.

 

The Company is authorized to issue 200,000,000 shares of $0.001 par value common stock. As of September 30, 2021 and December 31, 2020, the Company had 35,254,860 and 30,764,792 shares issued and outstanding, respectively.

 

In January 2021, the Company issued an aggregate of 658,868 shares of its common stock for services at a fair value previously recorded in 2020 of $2,658,224

 

18

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

During the nine months ended September 30, 2021, the Company issued 853,271 shares of common stock for services at a fair value of $3,271,340.

 

During the nine months ended September 30, 2021, the Company issued 9,375 shares of common stock in exchange for proceeds of $27,750 from the exercise of options.

 

During the nine months ended September 30, 2021, the Company issued an aggregate of 216,834 shares of its common stock for vested restricted stock units.

 

Sale of common stock

 

On July 2, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Laidlaw & Company (UK) Ltd. (the “Underwriter”), relating to an underwritten public offering of 2,500,000 shares of the Company’s common stock, $0.001 par value per share. All of the shares were sold by the Company. The public offering price of the shares was $4.00 per share, and the Underwriter agreed to purchase the shares from the Company pursuant to the Underwriting Agreement at a price of $3.68 per share. After the underwriting discount, offering and other related expenses, the Company received net proceeds from the offering of approximately $9.0 million. Pursuant to the Underwriting Agreement, the Company also granted the Underwriter an option to purchase up to 375,000 additional shares of common stock, or 15% of the number of shares sold in the offering, at a price of $3.68 per share, for a period of 30 days from the date of the Underwriting Agreement, of which none were exercised.

 

Pursuant to the Underwriting Agreement, the Company issued to the Underwriter or its designees warrants to purchase up to an aggregate 125,000 shares of common stock, or 5% of the number of shares sold in the offering (the “Underwriter Warrants”). The Underwriter Warrants are exercisable following the date of issuance, July 7, 2021 and ending five years from the date of the execution of the Underwriting Agreement, July 2, 2026, at a price per share equal to $4.80 per share (120% of the public offering price per share) and are exercisable on a “cashless” basis.

 

Open Market Sale Agreement

 

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

 

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

 

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

 

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

 

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

 

19

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

From January 15, 2021 through February 16, 2021, the Company sold 251,720 shares of its common stock through the Open Market Sales Agreement for net proceeds of $1,300,135, after transactional costs of $40,365.

 

On March 25, 2021, the Company delivered written notice to Jefferies to terminate the Sales Agreement effective as of April 8, 2021, pursuant to Section 7(b)(i) thereof. The Company was not subject to any termination penalties related to the termination of the Sales Agreement.

 

NOTE 9 – OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS

 

BioSig Technologies, Inc.

 

2012 Equity Incentive Plan

 

On October 19, 2012, the Board of Directors of BioSig Technologies, Inc. approved the 2012 Equity Incentive Plan (the “Plan”) and terminated the Long-Term Incentive Plan (the “2011 Plan”). The Plan (as amended) provides for the issuance of options, stock appreciation rights, restricted stock and restricted stock units to purchase up to 14,474,450 shares of the Company’s common stock to officers, directors, employees and consultants of the Company. Under the terms of the Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of the Company only and nonstatutory options. The Board of Directors of the Company or a committee thereof administers the Plan and determines the exercise price, vesting and expiration period of the grants under the Plan.

 

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

 

Additionally, the vesting period of the grants under the Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years. There are 3,606,901 shares remaining available for future issuance of awards under the terms of the Plan as of September 30, 2021.

 

Options

 

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

 

For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options.  The fair value of stock-based payment awards during the three and nine months ended September 30, 2021 was estimated using the Black-Scholes pricing model.

 

During the nine months ended September 30, 2021, the Company granted an aggregate of 917,000 options to officers, directors and key consultants.

 

20

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

The following table presents information related to stock options at September 30, 2021:

 

Options Outstanding

   

Options Exercisable

 
               

Weighted

         
               

Average

   

Exercisable

 

Exercise

   

Number of

   

Remaining Life

   

Number of

 

Price

   

Options

   

In Years

   

Options

 
$ 2.51-5.00       2,539,757       7.2       1,579,427  
  5.01-7.50       1,229,032       4.7       997,757  
  7.51-10.00       203,333       8.0       138,326  
  10.01-12.50       65,000       8.6       50,415  
          4,037,122       6.5       2,765,925  

 

A summary of the stock option activity and related information for the Plan for the nine months ended September 30, 2021 is as follows:

 

   

Shares

   

Weighted-Average

Exercise Price

   

Weighted-Average

Remaining

Contractual Term

   

Aggregate

Intrinsic

Value

 

Outstanding at December 31, 2020

    3,568,497     $ 5.59       7.0     $ 110,961  

Grants

    917,000       3.39       10.0     $ -  

Exercised

    (9,375

)

  $ 2.96               -  

Forfeited/expired

    (439,000

)

  $ 6.68               -  

Outstanding at September 30, 2021

    4,037,122     $ 5.20       6.5     $ 938  

Exercisable at September 30, 2021

    2,765,925     $ 5.35       5.3     $ 563  

 

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the stock price of BioSig Technologies, Inc. of $2.98 as of September 30, 2021, which would have been received by the option holders had those option holders exercised their options as of that date.

 

On January 12, 2021, BioSig Technologies, Inc. granted 387,500 options to purchase the company stock in connection with the services rendered at the exercise price of $4.23 per share for a term of ten years with one-third vesting on the one-year anniversary and two-thirds vesting quarterly thereafter beginning January 12, 2022 for two years.

 

On February 16, 2021, BioSig Technologies, Inc. granted 102,000 options to purchase the company stock in connection with the services rendered at the exercise price of $4.97 per share for a term of ten years with one-third vesting on the one year anniversary and two-thirds vesting quarterly thereafter beginning February 16, 2022 for two years.

 

On April 9, 2021, BioSig Technologies, Inc. granted 90,000 options to purchase the company stock in connection with the services rendered at the exercise price of $4.38 per share for a term of ten years with one-third vesting on the one-year anniversary and two-thirds vesting quarterly thereafter beginning April 9, 2022 for two years.

 

On April 13, 2021, BioSig Technologies, Inc. granted 25,000 options to purchase the company stock in connection with the services rendered at the exercise price of $4.42 per share for a term of ten years with one-third vesting on the one-year anniversary and two-thirds vesting quarterly thereafter beginning April 13, 2022 for two years.

 

On May 18, 2021, BioSig Technologies, Inc. granted 150,000 options to purchase the company stock in connection with the services rendered at the exercise price of $3.20 per share for a term of ten years with one-third vesting on the one year anniversary and two-thirds vesting quarterly thereafter beginning May 18, 2022 for two years.

 

21

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

On August 3, 2021, BioSig Technologies, Inc. granted an aggregated of 75,000 options to purchase shares of its common stock to three employees. The options are exercisable at $3.61 per share for ten years with one-third vesting on the first anniversary of the date of grant, and the remaining two-thirds vesting in substantially equal quarterly installments over the following two years.

 

On August 31, 2021, BioSig Technologies, Inc. granted an aggregated of 47,500 options to purchase shares of its common stock to three employees. The options are exercisable at $2.98 per share for ten years with immediate vesting.

 

On September 17, 2021, BioSig Technologies, Inc. granted an aggregated of 40,000 options to purchase shares of its common stock to two employees. The options are exercisable at $2.99 per share for ten years with one-third vesting on the first anniversary of the date of grant, and the remaining two-thirds vesting in substantially equal quarterly installments over the following two years.

 

The following assumptions were used in determining the fair value of options during the nine months ended September 30, 2021:

 

Risk-free interest rate

    0.77% - 1.30

%

Dividend yield

    0

%

Stock price volatility

    83.70% to 95.98

%

Expected life

 

5 to 6 years

 

Weighted average grant date fair value

  $ 3.39  

 

On June 28, 2021, in connection with the exit of two members of the Company’s board of directors, the Company extended the life of 145,000 previously issued director options from the contractual 90 days from termination of service to the earlier of the initial life or June 28, 2023. The change in estimated fair value of the modified options of $182,514 was charged to current period operations.

 

The following assumptions were used in determining the change in fair value of the modified options at June 28, 2021:

 

Risk-free interest rate

    0.05% - 0.25

%

Dividend yield

    0

%

Stock price volatility

    88.57

%

Expected life

 

0.25 – 2 years

 

 

On June 30, 2021, in connection with the resignation of a member of the Company’s board of directors, the Company entered into a one-year consulting contract and extended the life of 221,240 previously issued director options from the contractual 90 days from termination of service to the earlier of the initial life or two years after service contract completion. The change in estimated fair value of the modified options of $111,402 was charged to current period operations.

 

The following assumptions were used in determining the change in fair value of the modified options on June 30, 2021:

 

Risk-free interest rate

    0.06% - 0.46

%

Dividend yield

    0

%

Stock price volatility

    88.59

%

Expected life

 

0.59 – 3 years

 

 

The fair value of all options vesting during the three and nine months ended September 30, 2021 of $759,931 and $1,950,623 and $483,110 and $4,734,983 for the three and nine months ended September 30, 2020, respectively, was charged to current period operations.  Unrecognized compensation expense of $3,720,260 at September 30, 2021 will be expensed in future periods.

 

22

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

Warrants

 

The following table summarizes information with respect to outstanding warrants to purchase common stock of BioSig Technologies, Inc. at September 30, 2021: 

 

 

Exercise

   

Number

 

Expiration

 

Price

   

Outstanding

 

Date

  $ 4.80       250,000  

February 2025 to July 2026

  $ 6.16       568,910  

November 2027

            818,910    

 

On July 7, 2021, BioSig Technologies, Inc. issued warrants to purchase 125,000 shares of its common stock at $4.80 per share, expiring on July 2, 2026, for placement agent services in connection with the sale of the company’s common stock.

 

A summary of the warrant activity for the nine months ended September 30, 2021 is as follows:

 

   

Shares

   

 

Weighted-Average

Exercise Price

   

 

Weighted-Average

Remaining

Contractual

Term

   

 

Aggregate

Intrinsic Value

 

Outstanding at December 31, 2020

    1,446,200     $ 5.44       3.3     $ 1,500  

Grants

    125,000     $ 4.80       5.0          

Expired

    (752,290

)

  $ 5.00       -       -  

Outstanding at September 30, 2021

    818,910     $ 5.74       5.5     $ -  
                                 

Vested and expected to vest at September 30, 2021

    818,910     $ 5.74       5.5     $ -  

Exercisable at September 30, 2021

    818,910     $ 5.74       5.5     $ -  

 

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the company’s stock price of $2.98 of September 30, 2021, which would have been received by the option holders had those option holders exercised their options as of that date.

 

Restricted Stock Units

 

The following table summarizes the restricted stock activity for the nine months ended September 30, 2021:

 

Restricted shares issued as of December 31, 2020

    218,334  

Granted

    301,000  

Vested and issued

    (216,834

)

Forfeited

    (120,000

)

Total

    182,500  
         

Comprised of:

       

Vested restricted shares as of September 30, 2021

    -  

Unvested restricted shares as of September 30, 2021

    182,500  

Total

    182,500  

 

23

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

On January 4, 2021, the Company granted 220,000 restricted stock units for services with 105,000 vesting one-third on the one-year anniversary and two-thirds vesting quarterly thereafter beginning January 4, 2022 for two years and with 115,000 vesting quarterly for one year.

 

On March 8, 2021 the Company granted 31,000 restricted stock units for services vesting on August 31, 2021.

 

On June 1, 2021, in connection with the termination of an employee, the Company accelerated vesting of 30,000 previously granted restricted stock units from a three-year period to fully vested. The change in vesting of the modified restricted stock unit resulted in a $109,725 charge to current period operations.

 

On June 30, 2021, in connection with the resignation of a member of the Company’s board of directors, the Company accelerated vesting of 50,000 previously granted restricted stock units from a three-year period to fully vested. The change in vesting of the modified restricted stock unit resulted in a $232,375 charge to current period operations.

 

On August 14, 2021 the Company granted 50,000 restricted stock units for services vesting quarterly for one year.

 

Stock based compensation expense related to restricted stock grants was $63,266 and $773,381 for the three and nine months ended September 30, 2021 and $174,945 and $1,005,243 for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021, the stock-based compensation relating to restricted stock of $463,317 remains unamortized. 

 

ViralClear Pharmaceuticals, Inc.

 

2019 Long-Term Incentive Plan

 

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

 

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

 

Additionally, the vesting period of the grants under the ViralClear Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years. There are 2,330,750 shares remaining available for future issuance of awards under the terms of the ViralClear Plan.

 

24

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

ViralClear Options

 

A summary of the stock option activity and related information for the ViralClear Plan for the nine months ended September 30, 2021 is as follows:

 

   

Shares

   

Weighted-Average

Exercise Price

   

Weighted-Average

Remaining

Contractual

Term

 

Outstanding at December 31, 2020

    1,527,666     $ 5.00       3.96  

Grants

    -                  

Exercised

    (550,000

)

  $ 5.00          

Forfeited/expired

    (852,666

)

  $ 5.00          

Outstanding at September 30, 2021

    125,000     $ 5.00       7.40  

Exercisable at September 30, 2021

    74,998     $ 5.00       6.62  

 

The following table presents information related to stock options at September 30, 2021:

 

Options Outstanding

   

Options Exercisable

 
               

Weighted

         
               

Average

   

Exercisable

 

Exercise

   

Number of

   

Remaining Life

   

Number of

 

Price

   

Options

   

In Years

   

Options

 
$ 5.00       125,000       6.12       74,998  

 

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

 

On July 1, 2021, ViralClear issued 206,250 shares of its common stock in exchange for the cashless exercise of 550,000 options previously granted on October 16, 2019.

 

On June 30, 2021, in connection with the resignation of a member of the Company’s board of directors, the Company entered into a one-year consulting contract and extended the life of 25,000 previously issued director options from the contractual 90 days from termination of service to the earlier of the initial life or two years after service contract completion. The change in estimated fair value of the modified options of $26,577 was charged to current period operations.

 

The following assumptions were used in determining the change in fair value of the modified options at June 30, 2021:

 

Risk-free interest rate

    0.07% - 0.46

%

Dividend yield

    0

%

Stock price volatility

    88.59

%

Expected life

 

1.253 years

 

 

The fair value of all options vesting during the three and nine months ended September 30, 2021 of $36,521 and $109,562 and $242,703 and $5,836,855 for the three and nine months ended September 30, 2020, respectively, was charged to current period operations.  Unrecognized compensation expense of $219,124 at September 30, 2021 will be expensed in future periods.

 

25

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

Warrants (ViralClear)

 

The following table presents information related to warrants (ViralClear) at September 30, 2021:

 

 

Exercise

   

Number

 

Expiration

 

Price

   

Outstanding

 

Date

  $ 5.00       473,772  

November 2027

    10.00       6,575  

May 2025

            480,347    

 

Restricted stock units (ViralClear)

 

The following table summarizes the restricted stock activity for the nine months ended September 30, 2021:

 

Restricted shares issued as of December 31, 2020

    1,420,716  

Granted

    -  

Issued

    (40,000

)

Forfeited

    (82,716

)

Total

    1,298,000  
         

Comprised of:

       

Vested restricted shares as of September 30, 2021

    658,000  

Unvested restricted shares as of September 30, 2021

    640,000  

Total

    1,298,000  

 

Stock based compensation expense related to restricted stock unit grants of ViralClear was $87,865 and $508,896 for the three and nine months ended September 30, 2021 and $485,352 and $5,445,346 for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021, the stock-based compensation relating to restricted stock of $372,093 remains unamortized. 

 

NOTE 10 NON-CONTROLLING INTEREST

 

On November 7, 2018, the Company formed a subsidiary, now known as ViralClear, to pursue additional applications of the PURE EP™ signal processing technology outside of cardiac electrophysiology, and subsequently in 2020, was repurposed to develop merimepodib, a broad-spectrum anti-viral agent that showed potential for the treatment of COVID-19. Since late 2020, ViralClear has been realigned with its original objective of pursuing additional applications of the PURE EP™ signal processing technology outside of cardiac electrophysiology.

 

As of September 30, 2021 and December 31, 2020, the Company had a majority interest in ViralClear of 68.44% and 70.21%, respectively.  

 

A reconciliation of the ViralClear Pharmaceuticals, Inc. non-controlling loss attributable to the Company:

 

Net profit attributable to the non-controlling interest for the three months ended September 30, 2021 (000’s):

 

Net Income

  $ 19  

Average Non-controlling interest percentage of profit/losses

    31.6

%

Net income attributable to the non-controlling interest

  $ 6  

 

Net loss attributable to the non-controlling interest for the three months ended September 30, 2020 (000’s):

 

Net loss

  $ (5,540

)

Average Non-controlling interest percentage of profit/losses

    30.6

%

Net loss attributable to the non-controlling interest

  $ (1,696

)

 

26

 

BIOSIG TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

 

Net loss attributable to the non-controlling interest for the nine months ended September 30, 2021 (000’s):

 

Net loss

  $ (1,953

)

Average Non-controlling interest percentage of profit/losses

    29.9

%

Net loss attributable to the non-controlling interest

  $ (584

)

 

Net loss attributable to the non-controlling interest for the nine months ended September 30, 2020 (000’s):