Streamex Corp. quarterly report, Q3 FY2015

Full document

Business context and reporting period

The filing is BioSig Technologies, Inc.'s unaudited Form 10-Q for the quarter and nine months ended September 30, 2015; despite the request metadata, the registrant named in the filing is BioSig, not Streamex. BioSig is a development-stage medical-device company developing the PURE EP System for cardiac signal recording and analysis. It had no commercial product, customers, or revenue during the periods.

Financial performance and condition

  • Revenue and margins: No revenue or cost of goods sold in either the three- or nine-month periods. Gross and operating margins are therefore not meaningful.
  • Third quarter: Operating expenses were $2.47 million, including $300,783 of R&D and $2.17 million of G&A. Operating loss was $2.47 million. A $2.85 million fair-value gain on derivative liabilities produced net income of $377,667; income available to common stockholders was $324,619, or $0.02 per share.
  • First nine months: Operating expenses totaled $9.96 million, including $931,360 of R&D and $9.02 million of G&A. Operating loss was $9.96 million. A $3.05 million derivative fair-value gain partially offset expenses, but net loss was $7.44 million and loss available to common stockholders was $7.68 million, or $0.57 per share.
  • Cash flow: Operating activities used $3.43 million, investing used $11,583, and financing provided $3.54 million in the first nine months. Cash rose by $94,778 to $334,559. Operating cash use more than doubled from $1.54 million in the comparable 2014 period.
  • Liquidity and liabilities: Working-capital deficit was $2.18 million. Current liabilities were $2.72 million, including $1.82 million of warrant liabilities, $220,333 of derivative liabilities, $342,985 of accounts payable and accrued expenses, and $337,775 of preferred dividends payable. The company reported no convertible debentures outstanding. Series C Preferred Stock had a $1.858 million liquidation preference.
  • Equity and dilution: Common shares outstanding were 15.03 million at quarter-end and 15.49 million as of November 13, 2015. Stock-based compensation was a significant expense and noncash item; the filing reports $6.91 million of equity-based compensation adjustments in the nine-month cash-flow reconciliation.

Material changes versus prior periods

Third-quarter R&D increased 108.5% year over year, while G&A fell 42.8%, largely because of lower stock-based compensation expense than in Q3 2014. For the first nine months, R&D increased 154.3% and G&A increased 84.7%, reflecting higher stock compensation, hiring, consulting and investor-relations costs, travel, and rent. Nine-month net loss widened from $5.86 million in 2014 to $7.44 million in 2015. The 2015 third-quarter profit was driven by a noncash derivative remeasurement gain, not operating revenue.

Outlook, risks and unusual items

  • Management said existing cash would not fund planned operations and capital needs and estimated approximately $2 million of additional funding would be required for the next 12 months. The filing states substantial doubt about the company's ability to continue as a going concern.
  • Management expected continued operating losses and higher R&D, including clinical-study costs. It targeted FDA 510(k) clearance and potential commercialization in the first half of 2017, subject to financing, development progress, and regulatory approval; this is a stated target, not assured guidance.
  • The company reported initial pre-clinical studies in March and June 2015 and scheduled another for November 17, 2015. It cautioned that earlier proof-of-concept results lacked established protocols and independent verification.
  • Series C conversion and warrant reset features generated Level 3 fair-value liabilities and volatile gains or losses. Preferred stock carries a 9% cumulative dividend, anti-dilution provisions, and potential redemption or an increased dividend rate upon specified trigger events.
  • Subsequent to quarter-end, BioSig disclosed $455,000 of common-stock-and-warrant financing in October, as well as additional Series C conversions. These events do not change the September 30 balance sheet.

Important facts for investors to verify

  1. Confirm the registrant identity and filing status: the document names BioSig Technologies, Inc., and the cover-page checkbox indicates it had not filed all required reports during the preceding 12 months.
  2. Assess cash runway, the stated $2 million funding need, and the status and terms of subsequent financing.
  3. Separate operating performance from the $2.85 million quarterly derivative gain and review the valuation assumptions and potential volatility of Level 3 liabilities.
  4. Review the terms, conversion activity, accrued dividends, and dilution associated with Series C preferred stock, warrants, options, and other equity awards.
  5. Track pre-clinical and FDA milestones, financing dependencies, and the going-concern uncertainty; no revenue or commercial product had been achieved by the reporting date.