Streamex Corp. quarterly report, Q3 FY2014

Business context and reporting period

This is BioSig Technologies, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2014. The filing describes a medical-device company developing the PURE EP cardiac recording system. BioSig reported no revenue and had no commercial product available for sale.

Entity discrepancy: The request identifies Streamex Corp., but the filing is for BioSig Technologies, Inc.; verify the filing belongs to the intended company.

Financial results and liquidity

At September 30, cash was $268,877, current assets were $369,577, and current liabilities were $837,138, resulting in a reported working capital deficit of $467,561. Total assets were $410,944; stockholders’ deficit was $3.21 million. Current liabilities included $443,194 in accounts payable and accrued expenses and $393,944 in preferred dividends payable. Series C preferred stock, presented outside equity, was $2.78 million. The filing reported no convertible debentures outstanding.

For the nine months, operating cash use was $1.54 million, investing cash use $3,963, and financing cash provided $1.51 million, chiefly from common-stock sales. Cash declined by $33,310 from year-end 2013. No cash interest or income-tax payments were reported.

Material changes versus prior periods

• Third-quarter net loss increased to $3.96 million from $2.59 million, primarily as general and administrative expense rose to $3.80 million from $509,285. The company attributed the increase mainly to stock-based compensation; third-quarter stock compensation was $3.40 million.
• Nine-month net loss improved to $5.86 million from $8.14 million, largely reflecting lower financing costs ($593,770 versus $2.77 million) and lower research and development expense ($366,275 versus $774,810). Nine-month G&A rose to $4.88 million from $4.57 million.
• Series A and B preferred stock and accrued dividends converted into common stock in June 2014, with 1,071,719 common shares issued in total. Common shares outstanding increased to 11,007,488 from 8,412,101 at December 31, 2013.
• During the nine months, the company raised $1.54 million from common-stock sales and recorded $3.96 million in stock-based compensation. Options, warrants, and convertible Series C preferred stock create substantial potential dilution.

Outlook, risks, and unusual items

• Management said existing cash would not fund the next 12 months and estimated approximately $2 million of additional funding was needed for operating and capital requirements. The filing states that recurring losses, negative operating cash flow, and the need for financing raise substantial doubt about the company’s ability to continue as a going concern.
• Management expected continued operating losses and higher research and development costs, including clinical-trial costs. The development plan anticipated prototype testing by Q4 2014, animal and initial human studies by Q1 2015, and FDA 510(k) clearance in the second half of 2015; these were targets, dependent in part on financing and regulatory outcomes, not assurances.
• Series C preferred stock has redemption triggers that could create a significant payment obligation the company may be unable to meet. Unpaid redemption amounts may accrue interest, subject to contractual limits.
• Former CEO David Drachman’s arbitration claim sought approximately $612,000, stock-option vesting equivalent to 10% of common shares, and rights to a patent application. The company disputed the claims; the filing does not establish an outcome.
• Other notable items include $55,620 accrued for registration-rights liquidated damages and a renewed Los Angeles office lease with monthly payments of $6,530 beginning September 2014. A new CEO’s employment agreement and option award also included financing-, listing-, regulatory-, and market-capitalization-related terms.
• Management concluded disclosure controls were effective as of September 30, 2014 and reported no materially impactful changes to internal control over financial reporting during the quarter. The cover page marked “No” for having filed all required reports during the preceding 12 months; verify the reporting-compliance status.

Key facts investors should verify

• Confirm the registrant’s identity: this filing names BioSig Technologies, Inc., not Streamex Corp.
• Verify the company’s subsequent financing, cash runway, and ability to fund operations, given the going-concern warning and stated $2 million funding need.
• Check progress and actual outcomes for PURE EP prototype testing, clinical studies, and FDA clearance against management’s stated targets.
• Review the Series C redemption provisions, accrued dividends, and potential dilution from preferred stock, warrants, and options.
• Check the outcome and any financial or intellectual-property consequences of the former CEO’s arbitration.
• Confirm the status of SEC reporting compliance and the registration-rights obligations.