BioSig Technologies, Inc. — FY2019 Form 10-K
Entity and period: The request identifies Streamex Corp., but the supplied filing is BioSig Technologies, Inc. (Nasdaq: BSGM), for the fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter report. Financial statements were audited; the auditor issued an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting.
Business context and reporting period
BioSig is an early-commercialization medical-device company developing the PURE EP System, a cardiac signal acquisition and processing system for electrophysiology procedures, including ablation for atrial fibrillation and ventricular tachycardia. The system received FDA 510(k) clearance in August 2018. BioSig had no paying customers and reported no revenue in 2019. Its 87.8%-owned subsidiary, NeuroClear, is pursuing signal-processing applications in neuromodulation and related fields.
Key financial metrics
| Metric | FY2019 / December 31, 2019 | FY2018 / December 31, 2018 |
|---|---|---|
| Revenue and cost of goods sold | $0 | $0 |
| Research and development expense | $9.74 million | $4.37 million |
| General and administrative expense | $24.81 million | $12.88 million |
| Total operating expenses | $34.60 million | $17.26 million |
| Net loss | $34.47 million | $17.25 million |
| Net loss attributable to BioSig | $34.08 million | $18.14 million |
| Basic and diluted loss per share | $1.65 | $1.25 |
| Cash used in operating activities | $15.48 million | $10.26 million |
| Cash and cash equivalents | $12.11 million | $4.45 million |
| Working capital | $10.80 million | Not stated here |
| Total assets | $14.22 million | $5.00 million |
| Total liabilities, including lease liabilities | $2.34 million | $1.20 million |
Liquidity and financing: 2019 financing cash inflow was $23.43 million, including common-stock proceeds, NeuroClear share sales and exercises of options and warrants. The company reported no convertible debentures outstanding. Its balance sheet included $723,419 of lease liabilities ($412,288 current; $311,131 long-term) and $215,000 stated value of Series C preferred stock. Subsequent to year-end, a February 2020 stock offering generated approximately $9.1 million in net proceeds; the filing also reports approximately $133,000 from subsequent warrant exercises. Management said cash on hand together with subsequent proceeds was expected to fund requirements for at least 12 months.
Margins: Gross and operating margins are not meaningful because the company had no revenue.
Material changes versus the prior comparable period
- Revenue remained zero, while operating expenses roughly doubled; R&D increased 123% and G&A increased 93% year over year.
- Net loss attributable to BioSig rose to $34.08 million from $18.14 million. The filing attributes higher costs chiefly to expanded staffing and development, commercialization activity, professional services, and stock-based compensation.
- Operating cash use increased to $15.48 million from $10.26 million. Year-end cash rose to $12.11 million, primarily reflecting financing activity.
- BioSig began consolidating NeuroClear after selling subsidiary shares to outside investors; it retained an 87.8% interest at year-end. NeuroClear’s investors have conditional exchange rights into BioSig shares if NeuroClear is not listed on a national exchange by October 31, 2020, or upon a qualifying change of control.
- BioSig recorded $577,690 of finished-goods inventory at year-end, compared with none in 2018.
Outlook, commentary, risks, contingencies, and unusual items
- Commercialization and clinical development: Management planned U.S. commercial placements in 2020 and anticipated expanding domestic sales efforts in 2021. It also expected to pursue ISO certification and a CE Mark in 2021. These are plans, not assured outcomes. The PURE EP 2.0 clinical trial began in November 2019; as of March 13, 2020, 53 patients were enrolled and the company reported more than 100 patient cases completed across its clinical and observational activity.
- Funding and going-forward losses: BioSig expected continued operating losses and negative operating cash flows, and stated that it might need additional capital sooner if assumptions changed. Failure to commercialize or raise funds could force reductions in development or operations.
- Clinical, market, and regulatory risk: The first clinical trial had not been completed, and clinical results, physician adoption, reimbursement, regulatory compliance, manufacturing execution, and competition could limit commercialization. The company relied on third-party manufacturers and research collaborators, including Mayo Clinic.
- Coronavirus risk: The filing warned that the outbreak could delay clinical studies, disrupt hospitals, staffing, supply, manufacturing, and delivery, and adversely affect operations.
- Internal controls: Management identified a material weakness involving inadequate segregation of duties and financial-system access controls. Management had hired a controller, upgraded systems, and engaged outside experts, but remediation was incomplete at filing. The independent auditor issued an adverse opinion on internal control effectiveness as of December 31, 2019.
- Equity compensation and dilution: Stock-based compensation was substantial, including $15.18 million of equity-based compensation in the cash-flow reconciliation. Outstanding options, warrants, preferred-stock conversion rights, NeuroClear exchange provisions, and the 2020 offering may further dilute shareholders.
- Mayo licensing costs: 2019 agreements included upfront payments, warrants, royalties, and aggregate milestone payments of up to $1.875 million across the two BioSig licenses and NeuroClear license. BioSig issued Mayo warrants for 568,910 BioSig shares; NeuroClear issued warrants for 473,772 NeuroClear shares.
- Other contingencies: Series C preferred stock carries a 9% annual dividend and redemption provisions under specified triggering events; the company disclosed that it might not be able to meet a redemption demand. No material litigation was reported as outstanding at year-end.
Most important facts for investors to verify
- Whether PURE EP placements convert into paying customers and recurring revenue, and how quickly sales ramp relative to the company’s cash burn.
- Clinical-trial enrollment, outcomes, safety, and evidence supporting the claimed signal-quality and procedural benefits.
- Actual cash runway and financing needs, including the effect of post-year-end offering proceeds and subsequent spending.
- Progress in remediating the material weakness, and whether future filings report effective internal controls.
- Potential dilution from outstanding securities and NeuroClear’s conditional exchange rights, along with preferred-stock dividend and redemption terms.
- Execution of manufacturing, regulatory, reimbursement, and international certification plans, including the stated 2021 ISO/CE Mark timeline.