BioSig Technologies, Inc. — 2016 Form 10-K Summary
Filing identity and period: The supplied filing is for BioSig Technologies, Inc., not Streamex Corp. It covers the fiscal year ended December 31, 2016, rather than a standalone 2016 fourth quarter. The filing was signed March 30, 2017.
Business context
BioSig was a development-stage medical-device company developing the PURE EP System, a cardiac signal recording and analysis platform for electrophysiology studies and ablation procedures. The company had no commercial products, customers, or revenue. Development, testing, and the anticipated FDA 510(k) submission depended on additional financing and regulatory progress.
Financial results and liquidity
| Metric | FY 2016 | FY 2015 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.65 million | $1.51 million |
| General and administrative expense | $8.50 million | $10.53 million |
| Operating loss | $11.16 million | $12.04 million |
| Net loss | $11.59 million | $9.46 million |
| Net loss available to common stockholders | $11.70 million | $9.81 million |
| Basic and diluted loss per share | $0.60 | $0.70 |
| Cash used in operating activities | $5.11 million | $4.52 million |
| Cash at year-end | $1.06 million | $0.95 million |
Gross margin and other revenue-based margins are not meaningful because the company had no revenue. R&D expense rose 76%, reflecting added personnel and outside design work. G&A expense fell 19%, mainly due to lower stock-based compensation and payroll-related costs. Despite lower operating expenses, net loss increased 23%, principally because 2015 included a $3.11 million derivative fair-value gain while 2016 recorded a $0.42 million loss.
At December 31, 2016, total current assets were $1.19 million and current liabilities were $2.96 million, producing a $1.77 million working-capital deficit. The filing says the deficit would instead be $457,164 excluding warrant and derivative liabilities. These liabilities included a $1.94 million warrant liability and a $289,000 derivative liability. The company reported no convertible debentures outstanding. Series C preferred stock had a $1.07 million stated liquidation preference and accrued dividends payable of $360,000.
Financing activities provided $5.23 million in 2016, primarily from common-stock sales. Subsequent to year-end, the company reported $1.36 million of net proceeds from February and March 2017 unit sales. It anticipated needing approximately $4 million in additional funding for the next 12 months.
Material changes and notable items
- R&D spending increased substantially as product development advanced, including work with Minnetronix and continued pre-clinical research.
- Common shares outstanding increased from 16.83 million at year-end 2015 to 22.59 million at year-end 2016. The filing also disclosed significant outstanding options, warrants, and convertible preferred stock, creating potential dilution.
- In 2016, the company converted 401 Series C preferred shares and accrued dividends into 325,519 common shares. Preferred-stock dividends were $110,023, down from $351,522 in 2015.
- Derivative and warrant liabilities are measured using Level 3 valuation inputs; changes in their fair values materially affected reported results.
Outlook, risks, and contingencies
- Going concern: The auditor and management stated that substantial doubt existed about the company’s ability to continue as a going concern. The auditor’s opinion was unqualified, but included a going-concern emphasis. The company had recurring losses, negative operating cash flow, no revenue, and a need for further financing.
- Runway: The filing gives differing estimates: management said funds were sufficient for at least four months in the financial-statement note; a risk disclosure said year-end cash was expected to cover approximately two and a half months, and reported about $0.8 million on hand as of March 30, 2017. Management also said additional financing was needed for the next 12 months.
- Product and regulatory milestones: Management expected to obtain FDA 510(k) clearance in the second half of 2017 and planned a 2017 CE Mark submission. These were expectations, not achieved approvals. The filing elsewhere suggested commercial sales might begin in 2018; both timing and commercialization depended on financing, development, and regulatory outcomes.
- Preferred-stock terms: Series C shares carry a 9% annual dividend, potentially increasing to 18% upon specified covenant failures. Certain triggering events may permit holders to demand redemption at more than stated value, which the company said it might be unable to fund. Covenants and anti-dilution provisions may constrain financing and increase dilution.
- Controls: Management concluded disclosure controls and internal control over financial reporting were ineffective due to a material weakness in segregation of duties. Management said practical remediation was limited by the company’s size and cost constraints.
- Other risks: Product development and clinical evidence may fail or be delayed; FDA or foreign approvals may not be obtained; competitors have greater resources; financing may be unavailable or dilutive; and the OTCQB stock may be volatile and illiquid. No material litigation was reported as outstanding at year-end.
Important facts for investors to verify
- Confirm the issuer and reporting period: this document is BioSig Technologies’ FY 2016 Form 10-K, not a Streamex Corp. filing or a quarterly report.
- Check current cash, subsequent financing, and actual cash runway against the filing’s differing runway estimates and stated $4 million funding need.
- Verify FDA and CE Mark progress, product development milestones, and whether any commercial revenue or sales have since begun.
- Review the terms, redemption triggers, dividends, and anti-dilution effects of Series C preferred stock and warrants, along with fully diluted share exposure.
- Assess remediation of the material weakness and the status of the late Section 16 filings disclosed for directors and officers.