As filed with the Securities and Exchange Commission on  August 30 , 2017


SEC File No. 333-218583

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


 
AMENDMENT NO. 2
TO
FORM S-1


REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933


BioSig Technologies, Inc.
(Exact name of registrant as specified in its charter)

Delaware
 
3845
 
26-4333375
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer Identification No.)

8441 Wayzata Blvd., Suite 240
Minneapolis, Minnesota 55426
(763) 999-7330
(Address, including zip code, and telephone number,
 including area code, of registrant’s principal executive offices)

Kenneth Londoner
Chief Executive Officer
8441 Wayzata Blvd., Suite 240
Minneapolis, Minnesota 55426
(763) 999-7330
(Name, address, including zip code, and telephone number,
 including area code, of agent for service)

Copies of all communications, including communications sent to agent for service, should be sent to:

Rick A. Werner, Esq.
Haynes and Boone, LLP
30 Rockefeller Plaza, 26th Floor
New York, New York 10112
Tel. (212) 659-7300
Fax (212) 884-8234





Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

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

Large accelerated filer  
Accelerated filer  
   
Non-accelerated filer  
Smaller reporting company  
(Do not check if a 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 7(a)(2)(B) of the Securities Act.
 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.





The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED August 30, 2017


PRELIMINARY PROSPECTUS

BioSig Technologies, Inc.

Up to 3,365,002 Shares of Common Stock and up to 2,102,422 Shares of Common Stock Underlying Warrants


This prospectus relates to the resale of up to (i) 3,365,002 shares of our common stock to be offered by the selling stockholders and (ii) 2,102,422 shares of our common stock to be offered by the selling stockholders upon the exercise of outstanding common stock purchase warrants.

Our common stock trades in the over-the-counter market and is quoted on the OTCQB tier of the OTC Markets Group, Inc. under the symbol “BSGM.” Only a limited public market currently exists for our common stock. On August 24 , 2017, the last reported sale price of our shares of common stock on the OTCQB was $1. 36 per share. 

We will not receive any of the proceeds from the sale of common stock by the selling stockholders. However, we will receive proceeds from the exercise of the warrants if the warrants are exercised for cash. We intend to use those proceeds, if any, for general corporate purposes. All expenses of registration incurred in connection with this offering are being borne by us, but all selling and other expenses incurred by the selling stockholders will be borne by the selling stockholders.

We qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or JOBS Act, and have elected to comply with certain reduced public company reporting requirements in this and future filings.

Investing in our common stock is highly speculative and involves a high degree of risk. You should carefully consider the risks and uncertainties in the section entitled “Risk Factors” beginning on page 3 of this prospectus before making a decision to purchase our stock.

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                              , 2017







TABLE OF CONTENTS

 
Page
1
3
17
17
18
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27
41
44
47
48
50
59
71
72
72
72
72
73


You should rely only on the information contained in this prospectus.  We have not authorized any other person to provide you with different information.  If anyone provides you with different or inconsistent information, you should not rely on it.  We are not making an offer to sell these securities in any jurisdiction where offer or sale is not permitted.  You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus.  Our business, financial condition, results of operations and prospects may have changed since that date.

Information contained on our website is not part of this prospectus.


 

PROSPECTUS SUMMARY
 
The following summary highlights information contained elsewhere in this prospectus. It may not contain all the information that may be important to you. You should read this entire prospectus carefully, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our historical financial statements and related notes included elsewhere in this prospectus, or any accompanying prospectus supplement before making an investment decision. In this prospectus, unless the context requires otherwise, all references to “we,” “our,” “us” and the “Company” refer to BioSig Technologies, Inc.

Overview

We are a development stage medical device company that is developing a proprietary technology platform to minimize noise and artifacts from cardiac recordings during electrophysiology studies, where signals that measure electrical activity of the heart, such as electrocardiograms and electrograms, are measured. These signals are also evaluated during ablation, a procedure that involves delivery of energy through the tip of a catheter that scars or destroys heart tissue in order to correct heart rhythm disturbances. Our product under development, the PURE (Precise Uninterrupted Real-time evaluation of Electrograms) EP System, is a surface electrocardiogram and intracardiac multichannel recording and analysis system that acquires, processes and displays electrocardiogram and electrograms required during electrophysiology studies and ablation procedures. The PURE EP System is intended to be used in addition to existing electrophysiology recorders. We believe that data provided by the PURE EP System will increase the workload ability and enhance the capabilities of the typical electrophysiology laboratory.

We were formed as BioSig Technologies, Inc., a Nevada corporation, in February 2009. In April 2011, we merged with our wholly-owned subsidiary, BioSig Technologies Inc., a Delaware corporation, with the Delaware corporation continuing as the surviving entity. We have not generated any revenue to date and consequently our operations are subject to all risks inherent in the establishment of a new business enterprise.

Our principal executive offices are located at 8441 Wayzata Blvd., Suite 240, Minneapolis, Minnesota 55426, telephone number (763) 999-7330. Our website address is www.biosigtech.com. Information accessed through our website is not incorporated into this prospectus and is not a part of this prospectus.

1


The Offering

Common stock offered by the selling stockholders:
 
 
Up to 3,365,002 shares of our common stock to be offered by the selling stockholders and up to 2,102,422 shares of our common stock to be offered by the selling stockholders upon the exercise of outstanding common stock purchase warrants.
     
Common stock outstanding prior to the offering:
 
  26,295 ,411
       
Common stock outstanding after this offering:
 
28, 397 ,833 (1)
         
Use of proceeds:
 
We will not receive any proceeds from the sale of the common stock offered by the selling stockholders. However, we will receive proceeds from the exercise price of the warrants if the warrants are exercised for cash. We intend to use those proceeds, if any, for general corporate purposes.
         
OTCQB trading symbol: 
 
“BSGM”
Risk factors:
 
 
You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 3 of this prospectus before deciding whether or not to invest in shares of our common stock.

(1)
The number of shares of common stock outstanding after the offering is based upon 26,295 ,411 shares outstanding as of August 24 , 2017, and assumes the exercise of all warrants with respect to those shares being registered for resale pursuant to the registration statement of which this prospectus forms a part.

The number of shares of common stock outstanding after this offering excludes:

8,245,190 shares of common stock issuable upon the exercise of currently outstanding options with a weighted average exercise price of $2.24 per share;

3,277,638 shares of common stock available for future issuance under the BioSig Technologies, Inc. 2012 Equity Incentive Plan;

290,626 shares of common stock issuable for accrued dividends on our Series C Preferred Stock as of June 30, 2017;

656,676 shares of common stock issuable upon the conversion of our Series C Preferred Stock; and

9, 226,491 shares of common stock issuable upon exercise of warrants with a weighted average exercise price of $1.79 per share.


2


 
RISK FACTORS
 
Investing in our common stock involves a high degree of risk. You should carefully consider the following factors and other information in this prospectus or any accompanying prospectus supplement before making a decision to invest in our common stock. If any of the risks actually occur, our business, financial conditions and operating results may be materially and adversely affected. In that event, the trading price of our common stock may decline, and you could lose all or part of your investment.

Risks Related to Our Business and Industry

Because our condition as a going concern is in doubt, we will be forced to cease our business operations unless we can raise sufficient funds to satisfy our working capital needs.

As shown in the accompanying financial statements during years ended December 31, 2016 and 2015, we incurred net losses attributable to common stockholders of $11,697,210 and $9,812,974, respectively and used $5,107,452 in cash for operating activities for the year ended December 31, 2016. As of August 24 , 2017, we had cash on hand of approximately $ 515 ,000. These factors, among others, raise substantial doubt that we will be able to continue as a going concern for a reasonable period of time.

Our existence is dependent upon management’s ability to develop profitable operations. We are devoting substantially all of our efforts to developing product candidates and there can be no assurance that our efforts will be successful. There is no assurance that can be given that our actions will result in profitable operations or the resolution of our liquidity problems.

Because we are an early development stage company with no products near commercialization, we expect to incur significant additional operating losses.

We are an early development stage company and we expect to incur substantial additional operating expenses over the next several years as our research, development, pre-clinical testing, regulatory approval and clinical trial activities increase. The amount of our future losses and when, if ever, we will achieve profitability are uncertain. We have no products that have generated any commercial revenue and do not expect to generate revenues from the commercial sale of our products in the near future, if ever. Our ability to generate revenue and achieve profitability will depend on, among other things, the following:

successful completion of the pre-clinical and clinical development of our products;

obtaining necessary regulatory approvals from the U.S. Food and Drug Administration or other regulatory authorities;

establishing manufacturing, sales, and marketing arrangements, either alone or with third parties; and

raising sufficient funds to finance our activities.

We might not succeed at all, or at any, of these undertakings. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely affected.

Our product candidates are at an early stage of development and may not be successfully developed or commercialized.

Our main product candidate, the PURE EP System, is in the early stage of development and will require substantial further capital expenditures, development, testing, and regulatory clearances prior to commercialization, especially given that we have not yet completed pre-clinical testing on this product. The development and regulatory approval process takes several years and it is not likely that the PURE EP System, even if successfully developed and approved by the U.S. Food and Drug Administration, may not be commercially available for a number of years. In addition, due to budgetary constraints, we have not been able to devote the level of resources that we desired to our research and development efforts. The continued development of our product candidates is dependent upon our ability to obtain sufficient financing. However, even if we are able to obtain the requisite financing to fund our development program, we cannot assure you that our product candidates will be successfully developed or commercialized. Our failure to develop, manufacture or receive regulatory approval for or successfully commercialize any of our product candidates could result in the failure of our business and a loss of all of your investment in our company.

3


We expect to derive our revenue from sales of our PURE EP System and other products we may develop. If we fail to generate revenue from these sources, our results of operations and the value of our business will be materially and adversely affected.

We expect our revenue to be generated from sales of our PURE EP System and other products we may develop. Future sales of these products, if any, will be subject to, among other things, the receipt of regulatory approvals and commercial and market uncertainties that may be outside our control. If we fail to generate our intended revenues from these products, our results of operations and the value of our business and securities would be materially and adversely affected.

We may need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. Any additional funds that we obtain may not be on terms favorable to us or our stockholders and may require us to relinquish valuable rights.

Until and unless we receive approval from the U.S. Food and Drug Administration and other regulatory authorities for our products, we will not generate revenues from our products. Therefore, for the foreseeable future, we will have to fund all of our operations and capital expenditures from cash on hand, public or private equity offerings, debt financings, bank credit facilities or corporate collaboration and licensing arrangements. We believe that our existing cash on hand will be sufficient to enable us to fund our projected operating requirements for approximately the next two months. However, we may need to raise additional funds more quickly if one or more of our assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we presently anticipate. We also may decide to raise additional funds before we require them if we are presented with favorable terms for raising capital.

If we seek to sell additional equity or debt securities, obtain a bank credit facility or enter into a corporate collaboration or licensing arrangement, we may not obtain favorable terms for us and/or our stockholders or be able to raise any capital at all, all of which could result in a material adverse effect on our business and results of operations. The sale of additional equity or debt securities, if convertible, could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also result in covenants that would restrict our operations. Raising additional funds through collaboration or licensing arrangements with third parties may require us to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant licenses on terms that may not be favorable to us or our stockholders. In addition, we could be forced to discontinue product development, reduce or forego sales and marketing efforts and forego attractive business opportunities, all of which could have an adverse impact on our business and results of operations.

We may be unable to develop our existing or future technology.

Our product, the PURE EP System, may not deliver the levels of accuracy and reliability needed to make it a successful product in the marketplace, and the development of such accuracy and reliability may be indefinitely delayed or may never be achieved.  In addition, we may experience delays in the development of our technology for other reasons, including failure to obtain necessary funding and failure to obtain regulatory approvals.  Failure to develop this or other technology could have an adverse material effect on our business, financial condition, results of operations and future prospects.

The results of clinical studies may not support the usefulness of our technology.

Conducting clinical trials is a long, expensive and uncertain process that is subject to delays and failure at any stage. Clinical trials can take months or years. The commencement or completion of any of our clinical trials may be delayed or halted for numerous reasons, including:

the U.S. Food and Drug Administration may not approve a clinical trial protocol or a clinical trial, or may place a clinical trial on hold;

subjects may not enroll in clinical trials at the rate we expect or we may not follow up on subjects at the rate we expect;

subjects may experience events unrelated to our products;

third-party clinical investigators may not perform our clinical trials consistent with our anticipated schedule or the clinical trial protocol and good clinical practices, or other third-party organizations may not perform data collection and analysis in a timely or accurate manner;

interim results of any of our clinical trials may be inconclusive or negative;

regulatory inspections of our clinical trials may require us to undertake corrective action or suspend or terminate the clinical trials if investigators find us not to be in compliance with regulatory requirements; or

governmental regulations or administrative actions may change and impose new requirements, particularly with respect to reimbursement.
4


Results of pre-clinical studies do not necessarily predict future clinical trial results and previous clinical trial results may not be repeated in subsequent medical trials. We may experience delays, cost overruns and project terminations despite achieving promising results in pre-clinical testing or early clinical testing. In addition, the data obtained from clinical trials may be inadequate to support approval or clearance of a submission. The U.S. Food and Drug Administration may disagree with our interpretation of the data from our clinical trials, or may find the clinical trial design, conduct or results inadequate to demonstrate the safety and effectiveness of the product candidate. The U.S. Food and Drug Administration may also require us to conduct additional pre-clinical studies or clinical trials that could further delay approval of our products. If we are unsuccessful in receiving U.S. Food and Drug Administration approval of a product, we would not be able to commercialize the product in the U.S., which could seriously harm our business. Moreover, we face similar risks in other jurisdictions in which we may sell or propose to sell our products.

The medical device industry is subject to stringent regulation and failure to obtain regulatory approval will prevent commercialization of our products.

Medical devices are subject to extensive and rigorous regulation by the U.S. Food and Drug Administration pursuant to the Federal Food, Drug, and Cosmetic Act, by comparable agencies in foreign countries and by other regulatory agencies and governing bodies. Under the Federal Food, Drug, and Cosmetic Act and associated regulations, manufacturers of medical devices must comply with certain regulations that cover the composition, labeling, testing, clinical study, manufacturing, packaging and distribution of medical devices. In addition, medical devices must receive U.S. Food and Drug Administration clearance or approval before they can be commercially marketed in the U.S., and the U.S. Food and Drug Administration may require testing and surveillance programs to monitor the effects of approved products that have been commercialized and can prevent or limit further marketing of a product based on the results of these post-market evaluation programs. The process of obtaining marketing clearance from the U.S. Food and Drug Administration for new products could take a significant period of time, require the expenditure of substantial resources, involve rigorous pre-clinical and clinical testing, require changes to the products and result in limitations on the indicated uses of the product.  In addition, if we seek regulatory approval in non-U.S. markets, we will be subject to further regulatory approvals that may require additional costs and resources.  There is no assurance that we will obtain necessary regulatory approvals in a timely manner, or at all.

Our product, the PURE EP System, will need to receive 510(k) marketing clearance from the U.S. Food and Drug Administration in order permit us to market this product in the U.S. In addition, if we intend to market our product for additional medical uses or indications, we will need to submit additional 510(k) applications to the U.S. Food and Drug Administration that are supported by satisfactory clinical trial results specifically for the additional indication. The results of our initial clinical trials may not provide sufficient evidence to allow the U.S. Food and Drug Administration to grant us such additional marketing clearances and even additional trials requested by the U.S. Food and Drug Administration may not result in our obtaining 510(k) marketing clearance for our product. The failure to obtain U.S. Food and Drug Administration marketing clearance for the PURE EP System, any additional indications for the PURE EP System or any other of our future products would have a material adverse effect on our business.

Even if regulatory approval is obtained, our products will be subject to extensive post-approval regulation.

Once a product is approved by the relevant regulatory body for our targeted commercialization market, numerous post-approval requirements apply, including but not limited to requirements relating to manufacturing, labeling, packaging, advertising and record keeping.  Even if regulatory approval of a product is obtained, the approval may be subject to limitations on the uses for which the product may be marketed, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. Any such post-approval requirement could reduce our revenues, increase our expenses and render the approved product candidate not commercially viable.  If we fail to comply with the regulatory requirements of the applicable regulatory authorities, or if previously unknown problems with any approved commercial products, manufacturers or manufacturing processes are discovered, we could be subject to administrative or judicially imposed sanctions or other negative consequences, including:

restrictions on our products, manufacturers or manufacturing processes;

warning letters and untitled letters;

civil penalties and criminal prosecutions and penalties;

fines;

injunctions;

product seizures or detentions;

import or export bans or restrictions;

voluntary or mandatory product recalls and related publicity requirements;

suspension or withdrawal of regulatory approvals;

total or partial suspension of production; and

refusal to approve pending applications for marketing approval of new products or of supplements to approved applications.
5


 
Regulations are constantly changing, and in the future our business may be subject to additional regulations that increase our compliance costs.

We believe we understand the current laws and regulations to which our products will be subject in the future.  However, federal, state and foreign laws and regulations relating to the sale of our products are subject to future changes, as are administrative interpretations of regulatory agencies. If we fail to comply with such federal, state or foreign laws or regulations, we may fail to obtain regulatory approval for our products and, if we have already obtained regulatory approval, we could be subject to enforcement actions, including injunctions preventing us from conducting our business, withdrawal of clearances or approvals and civil and criminal penalties. In the event that federal, state, and foreign laws and regulations change, we may incur additional costs to seek government approvals, in addition to the clearance we intend to seek from the U.S. Food and Drug Administration in order to sell or market our products. If we are slow or unable to adapt to changes in existing regulatory requirements or the promulgation of new regulatory requirements or policies, we or our licensees may, following approval, lose marketing approval for our products which will impact our ability to conduct business in the future.

The market for our technology and revenue generation avenues for our products may be slow to develop, if at all.

The market for our products may be slower to develop or smaller than estimated or it may be more difficult to build the market than anticipated.  The medical community may resist our products or be slower to accept them than we anticipate.  Revenues from our products may be delayed or costs may be higher than anticipated which may result in our need for additional funding.  We anticipate that our principal route to market will be through commercial distribution partners.  These arrangements are generally non-exclusive and have no guaranteed sales volumes or commitments.  The partners may be slower to sell our products than anticipated.  Any financial, operational or regulatory risks that affect our partners could also affect the sales of our products.  In the current economic environment, hospitals and clinical purchasing budgets may exercise greater restraint with respect to purchases, which may result in purchasing decisions being delayed or denied.  If any of these situations were to occur this could have a material adverse effect on our business, financial condition, results of operations and future prospects.

If we seek to market our products in foreign jurisdictions, we may need to obtain regulatory approval in these jurisdictions.

In order to market our products in the European Union and many other foreign jurisdictions, we may need to obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. Approval procedures vary among countries (except with respect to the countries that are part of the European Economic Area) and can involve additional clinical testing. The time required to obtain approval may differ from that required to obtain U.S. Food and Drug Administration approval. Should we decide to market our products abroad, we may fail to obtain foreign regulatory approvals on a timely basis, if at all. Approval by the U.S. Food and Drug Administration does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority, including obtaining CE Mark approval, does not ensure approval by regulatory authorities in other foreign countries or by the U.S. Food and Drug Administration. We may be unable to file for, and may not receive, necessary regulatory approvals to commercialize our products in any foreign market, which could adversely affect our business prospects.

The electrophysiology market is highly competitive.

There are a number of groups and organizations, such as healthcare, medical device and software companies in the electrophysiology market that may develop a competitive offering to our products.  The largest companies in the electrophysiology market are GE, Johnson & Johnson, Boston Scientific, Siemens and St. Jude Medical.  All of these companies have significantly greater resources, experience and name recognition than we possess. There is no assurance that they will not attempt to develop similar or superior products, that they will not be successful in developing such products or that any products they may develop will not have a competitive advantage over our products. If we experience delayed regulatory approvals or disputed clinical claims, we may not have a commercial or clinical advantage over competitors’ products that we believe we currently possess.  Should a superior offering come to market, this could have a material adverse effect on our business, financial condition, results of operations and future prospects.


6


We rely on key officers, consultants and scientific and medical advisors, and their knowledge of our business and technical expertise would be difficult to replace.

We are highly dependent on our officers, consultants and scientific and medical advisors because of their expertise and experience in medical device development.  We do not have “key person” life insurance policies for any of our officers.  Moreover, if we are unable to obtain additional funding, we will be unable to meet our current and future compensation obligations to such employees and consultants. In light of the foregoing, we are at risk that one or more of our consultants or employees may leave our company for other opportunities where there is no concern about such employers fulfilling their compensation obligations, or for other reasons.  The loss of the technical knowledge and management and industry expertise of any of our key personnel could result in delays in product development, loss of customers and sales and diversion of management resources, which could adversely affect our results of operations.

We may fail to attract and retain qualified personnel.

We expect to rapidly expand our operations and grow our sales, research and development and administrative operations.  This expansion is expected to place a significant strain on our management and will require hiring a significant number of qualified personnel.  Accordingly, recruiting and retaining such personnel in the future will be critical to our success.  There is intense competition from other companies, research and academic institutions, government entities and other organizations for qualified personnel in the areas of our activities.  Many of these companies, institutions and organizations have greater resources than we do, along with more prestige associated with their names. If we fail to identify, attract, retain and motivate these highly skilled personnel, we may be unable to continue our marketing and development activities, and this could have a material adverse effect on our business, financial condition, results of operations and future prospects.

If we do not effectively manage changes in our business, these changes could place a significant strain on our management and operations.

Our ability to grow successfully requires an effective planning and management process. The expansion and growth of our business could place a significant strain on our management systems, infrastructure and other resources. To manage our growth successfully, we must continue to improve and expand our systems and infrastructure in a timely and efficient manner. Our controls, systems, procedures and resources may not be adequate to support a changing and growing company. If our management fails to respond effectively to changes and growth in our business, including acquisitions, there could be a material adverse effect on our business, financial condition, results of operations and future prospects.

Our strategic business plan may not produce the intended growth in revenue and operating income.

Our strategies ultimately include making significant investments in sales and marketing programs to achieve revenue growth and margin improvement targets. If we do not achieve the expected benefits from these investments or otherwise fail to execute on our strategic initiatives, we may not achieve the growth improvement we are targeting and our results of operations may be adversely affected. We may also fail to secure the capital necessary to make these investments, which will hinder our growth.

In addition, as part of our strategy for growth, we may make acquisitions and enter into strategic alliances such as joint ventures and joint development agreements. However, we may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully, and our strategic alliances may not prove to be successful. In this regard, acquisitions involve numerous risks, including difficulties in the integration of the operations, technologies, services and products of the acquired companies and the diversion of management’s attention from other business concerns. Although we will endeavor to evaluate the risks inherent in any particular transaction, there can be no assurance that we will properly ascertain all such risks. In addition, acquisitions could result in the incurrence of substantial additional indebtedness and other expenses or in potentially dilutive issuances of equity securities. There can be no assurance that difficulties encountered with acquisitions will not have a material adverse effect on our business, financial condition and results of operations.

We currently have no sales, marketing or distribution operations and will need to expand our expertise in these areas.

We currently have no sales, marketing or distribution operations and, in connection with the expected commercialization of our planned products, will need to expand our expertise in these areas. To increase internal sales, distribution and marketing expertise and be able to conduct these operations, we would have to invest significant amounts of financial and management resources. In developing these functions ourselves, we could face a number of risks, including:

we may not be able to attract and build an effective marketing or sales force;

the cost of establishing, training and providing regulatory oversight for a marketing or sales force may be substantial; and

there are significant legal and regulatory risks in medical device marketing and sales that we have never faced, and any failure to comply with applicable legal and regulatory requirements for sales, marketing and distribution could result in an enforcement action by the U.S. Food and Drug Administration, European regulators or other authorities that could jeopardize our ability to market our planned products or could subject us to substantial liability.
7



The liability of our directors and officers is limited.

The applicable provisions of the Delaware General Corporation Law and our Amended and Restated Certificate of Incorporation and By-laws limit the liability of our directors to us and our stockholders for monetary damages for breaches of their fiduciary duties, with certain exceptions, and for other specified acts or omissions of such persons. In addition, the applicable provisions of the Delaware General Corporation Law and of our Amended and Restated Certificate of Incorporation and By-laws provide for indemnification of such persons under certain circumstances. In the event we are required to indemnify any of our directors or any other person, our financial strength may be harmed.

Our product development program depends upon third-party researchers who are outside our control and whose negative performance could materially hinder or delay our pre-clinical testing or clinical trials.

We do not have the ability to conduct all aspects of pre-clinical testing or clinical trials ourselves. We depend upon independent investigators and collaborators, such as commercial third-parties, government, universities and medical institutions, to conduct our pre-clinical and clinical trials under agreements with us. These collaborators are not our employees and we cannot control the amount or timing of resources that they devote to our programs.  These investigators may not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such programs ourselves.  The failure of any of these outside collaborators to perform in an acceptable and timely manner in the future, including in accordance with any applicable regulatory requirements, such as good clinical and laboratory practices, or pre-clinical testing or clinical trial protocols, could cause a delay or otherwise adversely affect our pre-clinical testing or clinical trials, our success in obtaining regulatory approvals and, ultimately, the timely advancement of our development programs. In addition, these collaborators may also have relationships with other commercial entities, some of whom may compete with us.  If our collaborators assist our competitors at our expense, our competitive position would be harmed.

Negative publicity or unfavorable media coverage could damage our reputation and harm our operations.

In the event that the marketplace perceives our products as not offering the benefits which we believe they offer, we may receive negative publicity. This publicity may result in litigation and increased regulation and governmental review. If we were to receive such negative publicity or unfavorable media attention, whether warranted or unwarranted, our ability to market our products would be adversely affected. We may be required to change our products and services and become subject to increased regulatory burdens, and we may be required to pay large judgments or fines and incur significant legal expenses. Any combination of these factors could further increase our cost of doing business and adversely affect our financial position, results of operations and cash flows.

We may face risks associated with future litigation and claims.

We may, in the future, be involved in one or more lawsuits, claims or other proceedings. These suits could concern issues including contract disputes, employment actions, employee benefits, taxes, environmental, health and safety, personal injury and product liability matters. Due to the uncertainties of litigation, we can give no assurance that we will prevail on any claims made against us in any such lawsuit. Also, we can give no assurance that any other lawsuits or claims brought in the future will not have an adverse effect on our financial condition, liquidity or operating results.

Specifically, we believe we will be subject to product liability claims or product recalls, particularly in the event of false positive or false negative reports, because we plan to develop and manufacture medical diagnostic products.  We intend to obtain appropriate insurance coverage once we reach a manufacturing stage. A product recall or a successful product liability claim or claims that exceed our planned insurance coverage could have a material adverse effect on us.  In addition, product liability insurance is expensive. In the future we may not be able to obtain coverage on acceptable terms, if at all.  Moreover, our insurance coverage may not adequately protect us from liability that we incur in connection with clinical trials or sales of our products. In the event of an award against us during a time when we have no available insurance or insufficient insurance, we may sustain significant losses of our operating capital.  In addition, any products liability litigation, regardless of outcome or strength of claims, may divert time and resources away from the day-to-day operation of our business and product development efforts.  Any of these outcomes could adversely impact our business and results of operations, as well as impair our reputation in the medical and investment communities.

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We may be subject, directly or indirectly, to U.S. federal and state health care fraud and abuse and false claims laws and regulations. Prosecutions under such laws have increased in recent years and we may become subject to such litigation. If we are unable to, or have not fully complied with such laws, we could face substantial penalties.

If we are successful in achieving regulatory approval to market our PURE EP System, our operations will be directly, or indirectly through our customers and health care professionals, subject to various U.S. federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, federal False Claims Act, and federal Foreign Corrupt Practices Act. These laws may impact, among other things, our proposed sales, and marketing and education programs.

The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal health care program such as the Medicare and Medicaid programs. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal health care covered business, the statute has been violated. The federal Anti-Kickback Statute is broad and, despite a series of narrow safe harbors, prohibits many arrangements and practices that are lawful in businesses outside of the health care industry. Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil and administrative sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal health care programs. An alleged violation of the federal Anti-Kickback Statute may be used as a predicate offense to establish liability pursuant to other federal laws and regulations such as the federal False Claims Act. Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for health care items or services reimbursed by any source, not only the Medicare and Medicaid programs.

The federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from, the federal government. Suits filed under the federal False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “relators” or “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. The frequency of filing qui tam actions has increased significantly in recent years, causing greater numbers of medical device and health care companies to have to defend a federal False Claim Act action. The federal Patient Protection and Affordable Care Act includes provisions expanding the ability of certain relators to bring actions that would have been previously dismissed under prior law. When an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. The Deficit Reduction Act of 2005 encouraged states to enact or modify their state false claims act to be at least as effective as the federal False Claims Act by granting states a portion of any federal Medicaid funds recovered through Medicaid-related actions. Most states have enacted state false claims laws, and many of those states included laws including qui tam provisions.

The federal Patient Protection and Affordable Care Act includes provisions known as the Physician Payments Sunshine Act, which requires manufacturers of drugs, biologics, devices and medical supplies covered under Medicare and Medicaid starting in 2012 to record any transfers of value to physicians and teaching hospitals and to report this data beginning in 2013 to the Centers for Medicare and Medicaid Services for subsequent public disclosure. Manufacturers must also disclose investment interests held by physicians and their family members. Failure to submit the required information may result in civil monetary penalties of up to $1 million per year for knowing violations and may result in liability under other federal laws or regulations. Similar reporting requirements have also been enacted on the state level in the U.S., and an increasing number of countries worldwide either have adopted or are considering similar laws requiring transparency of interactions with health care professionals. In addition, some states such as Massachusetts and Vermont impose an outright ban on certain gifts to physicians. If we receive U.S. Food and Drug Administration clearance to market our system in the U.S., these laws could affect our promotional activities by limiting the kinds of interactions we could have with hospitals, physicians or other potential purchasers or users of our system. Both the disclosure laws and gift bans will impose administrative, cost and compliance burdens on us.

We are unable to predict whether we could be subject to actions under any of these laws, or the impact of such actions. If we are found to be in violation of any of the laws described above and other applicable state and federal fraud and abuse laws, we may be subject to penalties, including civil and criminal penalties, damages, fines, or an administrative action of suspension or exclusion from government health care reimbursement programs and the curtailment or restructuring of our operations.


9

 

In addition, to the extent we commence commercial operations overseas, we will be subject to the federal Foreign Corrupt Practices Act and other countries’ anti-corruption/anti-bribery regimes, such as the U.K. Bribery Act. The federal Foreign Corrupt Practices Act prohibits improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. Safeguards we implement to discourage improper payments or offers of payments by our employees, consultants, sales agents or distributors may be ineffective, and violations of the federal Foreign Corrupt Practices Act and similar laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, any of which would likely harm our reputation, business, financial condition and results of operations.

We have identified a material weakness in our internal control over financial reporting which, if not remediated, could adversely affect our reputation, business or stock price.

As disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2017 and amended on April 11, 2017, we have identified a material weakness in our internal control over financial reporting related to the segregation of duties in the initiating and recording of transactions.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.  Management has evaluated, and continues to evaluate, avenues for mitigating our internal controls weaknesses, but mitigating controls to completely mitigate internal control weaknesses have been deemed to be impractical and prohibitively costly, due to the size of our organization. While management expects to continue to use reasonable care in following and seeking improvements to effective internal control processes that have been and continue to be in use by us, we cannot assure you that our remedial measures will be sufficient to address the material weakness.  Moreover, we cannot assure you that we will not identify additional material weaknesses in our internal control over financial reporting in the future. If we are unable to remediate the material weakness, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the Securities and Exchange Commission, could be adversely affected. The occurrence of or failure to remediate the material weakness may adversely affect our reputation and business and the market price of our common stock and any other securities we may issue.

Risks Related to Our Intellectual Property

If we do not obtain protection for our intellectual property rights, our competitors may be able to take advantage of our research and development efforts to develop competing products.

We intend to rely on a combination of patents, trade secrets, and nondisclosure and non-competition agreements to protect our proprietary intellectual property.  We have filed a patent application with the U.S. Patent and Trademark Office, and we have filed this patent application under the Patent Cooperation Treaty (PCT) with the U.S. Receiving Office.  We plan to file additional patent applications in the U.S. and in other countries as we deem appropriate for our products.  Our applications have and will include claims intended to provide market exclusivity for certain commercial aspects of the products, including the methods of production, the methods of usage and the commercial packaging of the products. However, we cannot predict:

the degree and range of protection any patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents;

if and when such patents will be issued, and, if granted, whether patents will be challenged and held invalid or unenforceable;

whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; or

whether we will need to initiate litigation or administrative proceedings which may be costly regardless of outcome.


10


 
Our success also depends upon the skills, knowledge and experience of our scientific and technical personnel, our consultants and advisors as well as our licensors and contractors.  To help protect our proprietary know-how and our inventions for which patents may be unobtainable or difficult to obtain, we rely on trade secret protection and confidentiality agreements.  To this end, it is our policy to require all of our employees, consultants, advisors and contractors to enter into agreements which prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.  These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure or the lawful development by others of such information.  If any of our trade secrets, know-how or other proprietary information is disclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired and our business and competitive position would suffer.

Given the fact that we may pose a competitive threat, competitors, especially large and well-capitalized companies that own or control patents relating to electrophysiology recording systems, may successfully challenge our current and planned patent applications, produce similar products or products that do not infringe our future patents, or produce products in countries where we have not applied for patent protection or that do not respect our patents.

If any of these events occurs, or we otherwise lose protection for our trade secrets or proprietary know-how, the value of our intellectual property may be greatly reduced.  Patent protection and other intellectual property protection are important to the success of our business and prospects, and there is a substantial risk that such protections will prove inadequate.

If we infringe upon the rights of third parties, we could be prevented from selling products and forced to pay damages and defend against litigation.

If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and we may be required to:

obtain licenses, which may not be available on commercially reasonable terms, if at all;

abandon an infringing product candidate;

redesign our product candidates or processes to avoid infringement;

cease usage of the subject matter claimed in the patents held by others;

pay damages; and/or

defend litigation or administrative proceedings which may be costly regardless of outcome, and which could result in a substantial diversion of our financial and management resources.

Any of these events could substantially harm our earnings, financial condition and operations.


11

 
Risks Related to our Common Stock

The public trading market for our common stock is volatile and may result in higher spreads in stock prices, which may limit the ability of our investors to sell their shares of our common stock at a profit, if at all.

Our common stock trades in the over-the-counter market and is quoted on the OTCQB tier of the OTC Markets Group, Inc. The over-the-counter market for securities has historically experienced extreme price and volume fluctuations during certain periods. These broad market fluctuations may adversely affect the market price of our common stock and result in substantial losses to our investors. In addition, the spreads on stock traded through the over-the-counter market are generally unregulated and higher than on national stock exchanges, which means that the difference between the price at which shares could be purchased by investors in the over-the-counter market compared to the price at which they could be subsequently sold would be greater than on these exchanges. Significant spreads between the bid and asked prices of the stock could continue during any period in which a sufficient volume of trading is unavailable or if the stock is quoted by an insignificant number of market makers. Historically, our trading volume has been insufficient to significantly reduce this spread and we have had a limited number of market makers insufficient to affect this spread. These higher spreads could adversely affect investors who purchase the shares at the higher price at which the shares are sold, but subsequently sell the shares at the lower bid prices quoted by the brokers. Unless the bid price for the stock exceeds the price paid for the shares by the investor, plus brokerage commissions or charges, the investor could lose money on the sale. For higher spreads such as those on over-the-counter stocks, this is likely a much greater percentage of the price of the stock than for exchange listed stocks. There is no assurance that at the time an investor in our common stock wishes to sell the shares, the bid price will have sufficiently increased to create a profit on the sale. 

We do not know whether a market for our common stock will be sustained or what the market price of our common stock will be and as a result it may be difficult for you to sell your shares of our common stock.

Although our common stock now trades on the OTCQB, an active trading market for our shares may not be sustained. It may be difficult for our stockholders to sell their shares without depressing the market price for our shares or at all. As a result of these and other factors, our stockholders may not be able to sell their shares. Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration. If an active market for our common stock does not develop or is not sustained, it may be difficult for our stockholders to sell shares of our common stock.

The market price for our common stock may fluctuate significantly, which could result in substantial losses by our investors.

The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:

the outcomes of potential future patent litigation;

our ability to monetize our future patents;

changes in our industry;

announcements of technological innovations, new products or product enhancements by us or others;

announcements by us of significant strategic partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments;


12

 

changes in earnings estimates or recommendations by security analysts, if our common stock is covered by analysts;

investors’ general perception of us;

future issuances of common stock;

the addition or departure of key personnel;

general market conditions, including the volatility of market prices for shares of technology companies, generally, and other factors, including factors unrelated to our operating performance; and

the other factors described in this “Risk Factors” section.

These factors and any corresponding price fluctuations may materially and adversely affect the market price of our common stock and result in substantial losses by our investors.

Further, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations in the past. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock.

Price volatility of our common stock might be worse if the trading volume of our common stock is low. In the past, following periods of market volatility, stockholders have often instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and attention of management from our business, even if we are successful. Future sales of our common stock could also reduce the market price of such stock.

Moreover, the liquidity of our common stock is limited, not only in terms of the number of shares that can be bought and sold at a given price, but by delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us, if any. These factors may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and ask prices for our common stock. In addition, without a large float, our common stock is less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate its investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger. We cannot predict the prices at which our common stock will trade in the future.

Our common stock is a “penny stock,” which makes it more difficult for our investors to sell their shares.

Our common stock is subject to the “penny stock” rules adopted under Section 15(g) of the Securities Exchange Act of 1934, as amended. The penny stock rules generally apply to companies whose common stock is not listed on The NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share, other than companies that have had average revenue of at least $6,000,000 for the last three years or that have tangible net worth of at least $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market, it could create a circumstance commonly referred to as an “overhang,” in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.


13

 
Our stockholders may experience substantial dilution as a result of the conversion of outstanding convertible preferred stock or the exercise of options and warrants to purchase shares of our common stock.

As of August 24 , 2017, we have granted options to purchase 8,245,190 shares of common stock and have reserved 3,277,638 shares of our common stock for further issuances pursuant to our 2012 Equity Incentive Plan. In addition, as of August 24 , 2017, we may be required to issue 947,302 shares of our common stock for issuance upon conversion of outstanding convertible preferred stock which includes accrued dividends as of June 30, 2017 and 11,153,413 shares of our common stock for issuance upon exercise of outstanding warrants.  Should all of these shares be issued, you would experience dilution in ownership of our common stock and the price of our common stock will decrease unless the value of our company increases by a corresponding amount.

The interests of our controlling stockholders may not coincide with yours and such controlling stockholders may make decisions with which you may disagree.

As of August 24 , 2017, two of our stockholders beneficially owned over 27. 55 % of our common stock. As a result, these stockholders may be able to influence the outcome of matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, this concentration of ownership may delay or prevent a change in control of our company and make some future transactions more difficult or impossible without the support of our controlling stockholders. The interests of our controlling stockholders may not coincide with our interests or the interests of other stockholders.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We currently have new research coverage by securities and industry analysts. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

We are subject to financial reporting and other requirements that place significant demands on our resources.

We are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires us to conduct an annual management assessment of the effectiveness of our internal controls over financial reporting. These reporting and other obligations place significant demands on our management, administrative, operational, internal audit and accounting resources. Any failure to maintain effective internal controls could have a material adverse effect on our business, operating results and stock price. Moreover, effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed.

We are an “emerging growth company” and we cannot be certain that the reduced disclosure requirements applicable to emerging growth companies will not make our common stock less attractive to investors.

The JOBS Act permits “emerging growth companies” like us to rely on some of the reduced disclosure requirements that are already available to smaller reporting companies. As long as we qualify as an emerging growth company or a smaller reporting company, we would be permitted to omit the auditor’s attestation on internal control over financial reporting that would otherwise be required by the Sarbanes-Oxley Act, as described above, and are also exempt from the requirement to submit “say-on-pay”, “say-on-pay frequency” and “say-on-parachute” votes to our stockholders and may avail ourselves of reduced executive compensation disclosure that is already available to smaller reporting companies.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

14

 
We will cease to be an emerging growth company upon the earliest to occur of (i) the last day of the fiscal year during which we had total annual gross revenues of $1 billion (as indexed for inflation); (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of common stock under our registration statement on Form S-1 that became effective on June 23, 2014; (iii) the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer,” as defined by the Securities and Exchange Commission, which would generally occur upon our attaining a public float of at least $700 million. Once we lose emerging growth company status, we expect the costs and demands placed upon our management to increase, as we would have to comply with additional disclosure and accounting requirements, particularly if we would also not qualify as a smaller reporting company.  In addition, until such time, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile and could cause our stock price to decline.

Delaware law and our Amended and Restated Certificate of Incorporation and By-laws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.

Our board of directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences and other rights and limitations of the preferred stock. Accordingly, we may issue shares of preferred stock with a preference over our common stock with respect to dividends or distributions on liquidation or dissolution, or that may otherwise adversely affect the voting or other rights of the holders of common stock. Issuances of preferred stock, depending upon the rights, preferences and designations of the preferred stock, may have the effect of delaying, deterring or preventing a change of control, even if that change of control might benefit our stockholders. In addition, we are subject to Section 203 of the Delaware General Corporation Law. Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless (i) prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (ii) the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers and (b) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (iii) on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.

Section 203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

The terms of our Series C Preferred Stock prohibit us from paying dividends in the future on our common stock. As a result, any return on investment may be limited to the value of our common stock.

The terms of our Series C Preferred Stock prohibit us from paying dividends in the future on our common stock, absent consent from the holders representing a super-majority of the outstanding shares of our Series C Preferred Stock and a certain investor. Because we will likely not pay dividends, our common stock may be less valuable because a return on an investment in our common stock will only occur if our stock price appreciates.


15

 
Risks Related to our Series C Preferred Stock

Our Series C Preferred Stock contains covenants that could limit our financing options and liquidity position, which would limit our ability to grow our business.

Covenants in the certificate of designation for our Series C Preferred Stock impose operating and financial restrictions on us. These restrictions prohibit or limit our ability to, among other things:

incur additional indebtedness;

permit liens on assets;

repay, repurchase or otherwise acquire more than a de minimis number of shares of capital stock;

pay cash dividends to our stockholders; and

engage in transactions with affiliates.

These restrictions may limit our ability to obtain financing, withstand downturns in our business or take advantage of business opportunities. Moreover, debt financing we may seek may contain terms that include more restrictive covenants, may require repayment on an accelerated schedule or may impose other obligations that limit our ability to grow our business, acquire needed assets, or take other actions we might otherwise consider appropriate or desirable.

In addition, the certificate of designation for our Series C Preferred Stock requires us to redeem shares of our Series C Preferred Stock, at each holder’s option and for an amount greater than their stated value, upon the occurrence of certain events, including our being subject to a judgment of greater than $100,000 or our initiation of bankruptcy proceedings.

The holders of our Series C Preferred Stock are entitled to receive a dividend, which may be increased if we do not comply with certain covenants.

The holders of the Series C Preferred Stock are entitled to a 9% annual dividend on the $1,000 per share stated value of our Series C Preferred Stock, which is payable in cash or, subject to the satisfaction of certain conditions, in pay-in-kind shares.  The dividend may be increased to a 18% annual dividend if we fail to comply with certain covenants, including our being subject to a judgment of greater than $100,000 or our initiation of bankruptcy proceedings.   As a result of the payment of dividends related to our Series C Preferred Stock, we may be obligated to pay significant sums of money or issue a significant number of shares of our common stock, which could negatively affect our operations or result in the dilution of the holders of our common stock, respectively.

Our Series C Preferred Stock and certain of our warrants contain anti-dilution provisions that may result in the reduction of their conversion prices or exercise prices in the future.

Our Series C Preferred Stock and certain of our warrants contain anti-dilution provisions, which provisions require the lowering of the conversion price or exercise price, as applicable, to the purchase price of future offerings. Furthermore, with respect to such warrants, if we complete an offering below the exercise price of such warrants, the number of shares issuable under such warrants will be proportionately increased such that the aggregate exercise price payable after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price prior to such adjustment. If in the future we issue securities for less than the conversion or exercise price of our Series C Preferred Stock and such warrants, respectively, we will be required to further reduce the relevant conversion or exercise prices, and the number of shares underlying such warrants will be increased.  We may find it more difficult to raise additional equity capital while our Series C Preferred Stock and such warrants are outstanding.


16

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This prospectus contains “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of the occurrence or the expected timing of future performance or results. Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.  Important factors that could cause such differences include, but are not limited to:

inability to manufacture our product candidates on a commercial scale on our own, or in collaboration with third parties;

difficulties in obtaining financing on commercially reasonable terms;

changes in the size and nature of our competition;

loss of one or more key executives or scientists; and

difficulties in securing regulatory approval to market our product candidates.

You should review carefully the section entitled “Risk Factors” beginning on page 3 of this prospectus for a discussion of these and other risks that relate to our business and investing in shares of our common stock.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

USE OF PROCEEDS
 
All shares of our common stock offered by this prospectus are being registered for the accounts of the selling stockholders and we will not receive any proceeds from the sale of these shares. However, we will receive proceeds from the exercise price of the warrants if the warrants are exercised for cash. We intend to use those proceeds, if any, for general corporate purposes.

17


 
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
 
On October 29, 2014, our common stock commenced trading on OTCQB under the symbol “BSGM.” Prior to October 29, 2014, there was no established trading price for our common stock. The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock as reported by the OTCQB. The quotations reflect inter-dealer prices, without retail markup, markdown or commissions, and may not represent actual transactions.

 
Fiscal Year 2017
 
 
High
 
Low
 
First Quarter
 
$
2.00
   
$
1.20
 
Second Quarter
 
$
1.76
   
$
1.23
 


 
Fiscal Year 2016
 
 
High
 
Low
 
First Quarter
 
$
1.59
   
$
0.90
 
Second Quarter
 
$
2.15
   
$
1.33
 
Third Quarter
 
$
1.60
   
$
1.05
 
Fourth Quarter
 
$
1.59
   
$
1.25
 
     
 
Fiscal Year 2015
 
 
High
 
Low
 
First Quarter
 
$
2.85
   
$
1.31
 
Second Quarter
 
$
4.80
   
$
2.00
 
Third Quarter
 
$
2.30
   
$
1.13
 
Fourth Quarter
 
$
1.90
   
$
1.08
 
 
We have never paid cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future, but intend to retain our capital resources for reinvestment in our business.  In addition, the terms of our Series C Preferred Stock prohibit us from paying dividends in the future on our common stock, absent consent from the holders representing a super-majority of the outstanding shares of our Series C Preferred Stock and a certain investor.

18



MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and the related notes thereto that are included in this prospectus. In addition to historical information, the following discussion and analysis includes forward-looking statements that reflect our plans, estimates and beliefs.  Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in the section entitled “Risk Factors.” See “Special Note Regarding Forward-Looking Statements.”

Our Business

We are a development stage medical device company that is developing a proprietary technology platform to minimize noise and artifacts from cardiac recordings during electrophysiology studies and ablation.  Our product under development, the PURE EP System, is a surface electrocardiogram and intracardiac multichannel recording and analysis system that acquires, processes and displays electrocardiogram and electrograms required during electrophysiology studies and ablation procedures.

We have not generated any revenue to date and consequently our operations are subject to all risks inherent in the establishment of a new business enterprise.

Critical Accounting Policies and Estimates

The following discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. requires us to make estimates and assumptions that affect the amounts reported in our financial statements. The financial statements include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. Significant estimates in these financial statements include allowance for doubtful accounts and accruals for inventory claims. Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the financial statements and actual results could differ from the estimates and assumptions.

Among the significant judgments made by management in the preparation of our financial statements are the following:

Research and Development.

We account 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 developments 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.

Stock Based Compensation.

All stock-based payments to employees and to nonemployee directors for their services as directors consisted of grants of restricted stock and stock options, which are measured at fair value on the grant date and recognized in the statements of operations as compensation expense over the relevant vesting period. Restricted stock payments and stock-based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable, the measurement date is the date the award is issued.

On October 29, 2014, our common stock commenced trading on OTCQB under the symbol “BSGM.”  Fair value is typically determined by the closing price of our common stock on the date of the award.
19

 
Derivative Instrument Liability

We account for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. On December 31, 2016 and 2015, the Company did not have any derivative instruments that were designated as hedges.

On December 31, 2016 and 2015, we had outstanding preferred stock and warrants that contained embedded derivatives. These embedded derivatives include certain conversion features and reset provisions.

Income Taxes.

Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. We record an estimated valuation allowance on our deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized. We recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

Results of Operations
We anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the progress of our research and development efforts and the timing and outcome of regulatory submissions. Due to these uncertainties, accurate predictions of future operations are difficult or impossible to make.
 
Three Months Ended June 30 , 2017 Compared to Three Months Ended June 30 , 2016
 
Revenues and Cost of Goods Sold. We had no revenues or cost of goods sold during the three months ended June 30 , 2017 and 2016.
 
Research and Development Expenses. Research and development expenses for the three months ended June 30 , 2017 were $1, 339,039 , an increase of $ 185,996 , or 16 %, from $ 1,153,043 for the three months ended June 30 , 2016. This increase is primarily due additional personnel, outside design costs and current year acquired research and development as we develop our proprietary technology platform. Research and development expenses were comprised of the following:
Three months ended:
 
 
 
June 30,
2017
   
June 30,
2016
 
Salaries and equity compensation
 
$
291,320
   
$
944,978
 
Consulting expenses
   
157,140
     
78,264
 
Clinical studies and design work
   
845,294
     
53,074
 
Acquired research and development
   
-
         
Travel, supplies, other
   
45,285
     
76,727
 
  Total
 
$
1, 339,039
   
$
1,153,043
 

Stock based compensation for research and development personnel was $8,020 and $53,688 for the three months ended June 30, 2017 and 2016, respectively.

20

General and Administrative Expenses. General and administrative expenses for the three months ended June 30, 2017 were $1,676,336, a decrease of $2,704,204, or 61.7%, from $4,380,540 incurred in the three months ended June 30, 2016. This decrease is primarily due to a decrease in stock based compensation issued to employees and consultants in the current period as compared to the same period in the prior year and less service provider fees paid.
 
Payroll related expenses increased to $465,012 in the current period from $307,018 for the three months ended June 30, 2016, an increase of $157,994.  The increase was due to bonuses paid in 2017 in second quarter of 2017.   We incurred $514,093 in stock based compensation in connection with the vesting of stock and stock options issued to board members, officers, employees and consultants for the three months ended June 30, 2017 as compared to $3,337,055 in stock based compensation for the same period in 2016.

Professional services for the three months ended June 30, 2017 totaled $147,799, an increase of $15,888, or 12.0%, over the $131,911 recognized for the three months ended June 30, 2016. Of professional services, legal fees totaled $133,049 for the three months ended June 30, 2017, an increase of $14,498, or 12.2%, from $118,911 incurred for the six months ended June 30, 2016.  Accounting fees incurred in the three months ended June 30, 2017 amounted to $14,750, an increase of $1,750, or 13.5%, from $13,000 incurred in same period last year.  The increase in legal fees was primarily due registration statements filed in 2017. 

Consulting, public and investor relations fees for the three months ended June 30, 2017 were $364,144 as compared to $451,478 incurred for the three months ended June 30, 2016. The decrease in consulting and investor relations fees during the three months ended June 30, 2017 relate to our continued efforts to develop our recognition throughout the medical industry in an effective manner.
 
Travel, meals and entertainment costs for the three months ended June 30, 2017 were $100,640, an increase of $24,252, or 31.7%, from $76,388 incurred in the three months ended June 30, 2016. Travel, meals and entertainment costs include travel related to business development and financing. Rent for the three months ended June 30, 2017 totaled $31,759, a decrease of $574 or 1.8%, from $32,333 incurred in three months ended June 30, 2016. 

Depreciation Expense. Depreciation expense for the three months ended June 30, 2017 totaled $2,997 an increase of $664, or 28.5%, over the expense of $2,333 incurred in the three months ended June 30, 2016, as a result of the replacement of aging office computers and other equipment.
Loss on change in fair values of derivatives.  Beginning in March 2015, we are required to estimate the fair value of the embedded beneficial conversion features of our issued Series C Preferred Stock and certain warrants with reset (anti-dilution) provisions.  During the three months ended June 30, 2017, we incurred a loss on change in fair values of these derivatives of $60,244 as compared to a loss of $556,433 for the same period during the prior year.
 
Preferred Stock Dividend. Preferred stock dividend for the three months ended June 30, 2017 totaled $22,863, a decrease of $5,634, or 19.8% from $28,497 incurred during the three months ended June 30, 2016. Preferred stock dividends are primarily related to the issuance of our Series C Preferred Stock from 2013 through 2015.  The reduction in 2017 as compared to 2016 is the result of conversions of the Series C Preferred Stock.  
 
Net Loss available to common shareholders. As a result of the foregoing, net loss available to common shareholders for the three months ended June 30, 2017 was $3,101,425 compared to a net loss of $6,120,845 for the three months ended June 30, 2016.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
 
Revenues and Cost of Goods Sold. We had no revenues or cost of goods sold during the six months ended June 30, 2017 and 2016.
 
Research and Development Expenses. Research and development expenses for the six months ended June 30, 2017 were $2,677,643, an increase of $1,098,486, or 70%, from $1,579,157 for the six months ended June 30, 2016. This increase is primarily due additional personnel, outside design costs and current year acquired research and development as we develop our proprietary technology platform. Research and development expenses were comprised of the following:

Six months ended:

 
 
June 30,
2017
   
June 30,
2016
 
Salaries and equity compensation
 
$
552,042
   
$
1,229,221
 
Consulting expenses
   
248,685
     
164,364
 
Clinical studies and design work
   
1,241,595
     
59,012
 
Acquired research and development
   
543,927
     
-
 
Travel, supplies, other
   
91,394
     
126,560
 
  Total
 
$
2,677,643
   
$
1,579,157
 

Stock based compensation for research and development personnel was $21,124 and $735,782 for the six months ended June 30, 2017 and 2016, respectively.

21

On March 15, 2017, we entered into a know-how license agreement with Mayo Foundation for Medical Education and Research whereby we were granted an exclusive license, with the right to sublicense, certain know how and patent applications in the field of signal processing, physiologic recording, electrophysiology recording, electrophysiology software and autonomics to develop, make and offer for sale.  The agreement expires in ten years from the effective date.  As such, we are obligated to pay to Mayo Foundation a 1% or 2% royalty payment on net sales of licensed products, as defined.
 
In consideration, we issued 630,000 warrants to acquire the Company’s common stock at an exercise price of $1.50, expiring on March 15, 2020.  The estimated fair value of $543,927 was charged to operations as acquired research and development.
General and Administrative Expenses.   General and administrative expenses for the six months ended June 30 , 2017 were $ 3,233,677 , a decrease of $ 3,032,323 , or 48.4 %, from $ 6,266,000 incurred in the six months ended June 30 , 2016. This decrease is primarily due to a decrease in stock based compensation issued to employees and consultants in the current period as compared to the same period in the prior year and less service provider fees paid.
 
Payroll related expenses increased to $ 744,592 in the current period from $ 602,720 for the six months ended June 30 , 2016, an increase of $ 141,872 .  The increase was due to added personnel and bonuses paid in 2017 .   We incurred $ 1,061,735 in stock based compensation in connection with the vesting of stock and stock options issued to board members, officers, employees and consultants for the six months ended June 30 , 2017 as compared to $ 4,400,789 in stock based compensation for the same period in 2016.

Professional services for the six months ended June 30 , 2017 totaled $ 230,350 , an increase of $ 18,533 , or 8.7 %, over the $ 211,817 recognized for the six months ended June 30 , 2016. Of professional services, legal fees totaled $ 175,600 for the six months ended June 30 , 2017, an increase of $ 18,283 , or 11.6 %, from $ 157,317 incurred for the six months ended June 30 , 2016.  Accounting fees incurred in the six months ended June 30 , 2017 amounted to $ 54,750, an increase of $ 250 , or 0.5 %, from $ 54 ,500 incurred in same period last year.  The increase in legal fees was primarily due to filing of registration statements in 2017 relating to our equity private placements and assistance with our know how agreements entered into in 2017. 

Consulting, public and investor relations fees for the six months ended June 30 , 2017 were $ 857,810 as compared to $ 745,867 incurred for the six months ended June 30 , 2016. The increase in consulting and investor relations fees during the six months ended June 30 , 2017 relate to our continued efforts to develop our recognition throughout the medical industry.
 
Travel, meals and entertainment costs for the six months ended June 30 , 2017 were $ 164,900, an increase of $ 17,622 , or 12.0 %, from $ 147,278 incurred in the six months ended June 30 , 2016. Travel, meals and entertainment costs include travel related to business development and financing. Rent for the six months ended June 30 , 2017 totaled $ 63,409 , a decrease of $ 626 or 1. 0%, from $ 64,035 incurred in six months ended June 30 , 2016. 

Depreciation Expense.   Depreciation expense for the six months ended June 30 , 2017 totaled $ 6,066, an increase of $ 825 , or 15.7 %, over the expense of $ 5,241 incurred in the six months ended June 30 , 2016, as a result of the replacement of aging of office computers and other equipment.

Loss on change in fair values of derivatives.  Beginning in March 2015, we are required to estimate the fair value of the embedded beneficial conversion features of our issued Series C Preferred Stock and certain warrants with reset (anti-dilution) provisions.  During the six months ended June 30 , 2017, we incurred a loss on change in fair values of these derivatives of $ 433,855 as compared to a loss of $ 824,858 for the same period during the prior year.
 
Preferred Stock Dividend. Preferred stock dividend for the six months ended June 30 , 2017 totaled $ 46,608 , a decrease of $ 14,133 , or 23.3 % from $ 60,741 incurred during the six months ended June 30 , 2016. Preferred stock dividends are primarily related to the issuance of our Series C Preferred Stock from 2013 through 2015.  The reduction in 2017 as compared to 2016 is the result of conversions of the Series C Preferred Stock.  
 
Net Loss available to common shareholders. As a result of the foregoing, net loss available to common shareholders for the six months ended June 30 , 2017 was $ 6,397,795 compared to a net loss of $ 8,735,996 for the six months ended June 30 , 2016.

Twelve Months Ended December 31, 2016 Compared to Twelve Months Ended December 31, 2015

Revenues and Cost of Goods Sold. We had no revenues or cost of goods sold during the twelve months ended December 31, 2016 and 2015.

22

 
Research and Development Expenses. Research and development expenses for the twelve months ended December 31, 2016 were $2,654,501, an increase of $1,147,512, or 76%, from $1,506,989 for the twelve months ended December 31, 2015. This increase is primarily due additional personnel and outside design costs as we develop our proprietary technology platform. Research and development expenses were comprised of the following:

   
2016
   
2015
 
Salaries and equity compensation
 
$
1,744,780
   
$
977,297
 
Consulting expenses
   
322,520
     
359,842
 
Clinical studies and design work
   
388,447
     
40,731
 
Travel, supplies, other
   
198,754
     
129,119
 
  Total
 
$
2,654,501
   
$
1,506,989
 

General and Administrative Expenses. General and administrative expenses for the twelve months ended December 31, 2016 were $8,499,304, a decrease of $2,027,262, or 19%, from $10,526,566 incurred in the twelve months ended December 31, 2015. This decrease is primarily due to decrease in equity compensation increases in payroll related expenses, equity based compensation and professional services and, to a lesser extent, due to increases in consulting fees and travel, meals and entertainment costs.

Payroll related expenses (including equity compensation) decreased to $6,381,610 in the twelve months ended December 31, 2016 from $8,592,539 for the twelve months ended December 31, 2015, a decrease of $2,210,929, or 26%. This decrease is due to the value of the stock based compensation decreasing to $5,233,818 in 2016, as a result of the vesting of stock and stock options issued to board members, officers and employees, as compared to $7,478,491 of stock based compensation in 2015, net with added additional personnel.

Professional services for the twelve months ended December 31, 2016 totaled $359,695, a decrease of $19,771, or 5%, over the $379,466 recognized for the twelve months ended December 31, 2015. Of professional services, legal fees totaled $286,195 for the twelve months ended December 31, 2016, a decrease of $17,271, or 6%, from $303,466 incurred for the twelve months ended December 31, 2015. Accounting fees incurred in the twelve months ended December 31, 2016 amounted to $73,500, a decrease of $2,500, or 3%, from $76,000 incurred for the same period in 2015.  The decreases in professional fees was primarily related to a decrease in legal and audit requirements in 2016 as compared to 2015 as we continue to develop our operations, including legal fees associated with our capital raising transactions and the filing of our registration statements.

Consulting fees totaled $1,167,420 for the twelve months ended December 31, 2016, an increase of $352,856 or 43%, from $814,564 for the twelve months ended December 31, 2015.  The increase primarily relates to our fund raising and investor relations to support our increased efforts in market research and potential investor identification.

Travel, meals and entertainment costs for the twelve months ended December 31, 2016 were $274,962, a decrease of $11,203, or 4%, from $286,165 incurred during the twelve months ended December 31, 2016. During 2016, less travel was required than in 2015 due to our marketing and fund - raising efforts.  Rent for the twelve months ended December 31, 2016 totaled $128,556, a decrease of $36,958, or 22%, from $165,514 incurred during the same period in 2015.  In 2015, we relocated our corporate headquarters to Minneapolis, Minnesota while continuing to maintain our engineering/research office in Los Angeles, California.  In addition, we provided temporary housing for interns in the summer of 2015, not incurred in 2016.

Depreciation Expense. Depreciation expense for the twelve months ended 2016 totaled $10,475, no change from the expense of $10,475 incurred during the same period in 2015.

(Loss) gain on change in fair values of derivatives.  Beginning in March 2015, we are required to estimate the fair value of the embedded beneficial conversion features of our issued Series C Preferred stock and certain warrants with reset (anti-dilution) provisions.  During the year ended December 31, 2016, we incurred a loss on change in fair values of these derivatives of $(422,908) as compared to a gain of $3,113,580 or the same period in the year.

Interest Income (expense).  Interest income for the twelve months ended December 31, 2016 totaled $1 as compared to income expense of $(1,298) incurred during the twelve months ended December 31, 2015. For 2015, interest costs were comprised of vendor finance costs.

23

 

Financing Costs.  Financing costs for the year ended December 31, 2015 totaled $529,704 as compared to $-0- for the year ended December 31, 2016. Financing costs are primarily related to the beneficial conversion feature in and the fees paid related to the issuance of our Series C Preferred Stock issued in 2015.  The beneficial conversion feature associated with the Series C Preferred Stock is comprised of the allocated fair value of the conversion feature and the allocated fair value of warrants issued in connection with the sale of the Series C Preferred Stock.

Preferred Stock Dividend. Our preferred stock dividend for the twelve months ended December 31, 2016 totaled $110,023, a decrease of $241,499, or 69% from $351,522 incurred during the twelve months ended December 31, 2015. The reduction in dividends is a result of conversions of the Series C Preferred Stock to common reducing the number of preferred shares outstanding. Preferred stock dividends are related to our Series C Preferred Stock issued in 2013 and 2015.

Net Loss Available to Common Stockholders. Net loss available to common stockholders for the twelve months ended December 31, 2016 was $11,697,210, compared to a net loss of $9,812,974 for the twelve months ended December 31, 2015, an increase of $1,884,236 or 19%.  The primary reasons for the increase, as described above, are the increases in research and development expenses and changes in in fair values of derivatives from 2015 to 2016.
 
Liquidity and Capital Resources
 
Six Months Ended June 30 , 2017 Compared to six Months Ended June 30 , 2016
 
As of June 30 , 2017, we had a working capital deficit (current liabilities in excess of current assets) of $ 3,213,349 , comprised of cash of $ 880,659 and prepaid expenses of $ 175,022 , which was offset by $ 1,242,173 of accounts payable and accrued expenses, accrued dividends on preferred stock issuances of $ 382,510 and an aggregate of $2, 644,347 of warrant and derivative liabilities. Excluding the warrant and derivative liabilities, the Company’s working capital deficit would have been $ 569,002 .  For the six months ended June 30 , 2017, we used $ 3,452,958 of cash in operating activities and $1,620 of cash in investing activities. Cash provided by financing activities totaled $ 3,279,342 , comprised of proceeds from the sale of our common stock and receipt of common stock subscriptions. In the comparable period in 2016, our aggregate cash provided by financing activities totaled $ 2,523,787 comprised proceeds from the sale of our common stock. At June 30 , 2017, we had cash of $ 880,659 compared to $1,055,895 at December 31, 2016. Our cash is held in bank deposit accounts. At June 30 , 2017 and December 31, 2016, we had no convertible debentures outstanding.

Cash used in operations for the six months ended June 30 , 2017 and 2016 was $ 3,452,958 and $ 2,766,125 , respectively, which represent cash outlays for research and development and general and administrative expenses in such periods. The increase in cash outlays principally resulted from additional in operating costs and general and administrative expenses net with an increase of our outstanding accounts payable by $ 870,186 .

We used $1,620 cash for investing activities for the six months ended June 30 , 2017, compared to $5,555 for the three months ended June 30 , 2016.   For both periods , we purchased computer and other equipment.
Twelve Months Ended December 31, 2016 Compared to Twelve Months Ended December 31, 2015

As of December 31, 2016, we had a working capital deficit (current liabilities in excess of current assets) of $1,769,004, comprised of cash of $1,055,895 and prepaid expenses of $134,263, which was offset by $373,103 of accounts payable and accrued expenses, accrued dividends on preferred stock issuances of $359,891, warrant liability of $1,937,234 and derivative liability of $288,934.  Excluding the derivative and warrant liabilities, our working capital would have been $457,164. For the twelve months ended December 31, 2016, cash provided by financing activities totaled $5,226,368, comprised of proceeds from the sale of our common stock.  In the comparable period in 2015, $4,759,798 was raised through the sale of our common stock, $450,000 from the sale of our Series C Preferred Stock and $45,881 from the exercise of options and warrants. At December 31, 2016, we had cash of $1,055,895 compared to $953,234 at December 31, 2015. Our cash is held in bank deposit accounts. At December 31, 2016 and 2015, we had no convertible debentures outstanding.

Cash used in operations for the twelve months ended December 31, 2016 and 2015 was $5,107,452 and $4,523,751, respectively, which represent cash outlays for research and development and general and administrative expenses in such periods. Increase in cash outlays principally resulted from increased research and development and general and administrative expenses due to the continued development of our operations.

24

 
Cash used in investing activities for the twelve months ended December 31, 2016 was $16,255, compared to $18,475 for the twelve months ended December 31, 2015.  During both the twelve months ended December 31, 2016 and the twelve months ended December 31, 2015, we purchased office furniture and computer equipment.  In addition, we paid a long term lease deposit for our corporate location of $2,612 in 2015.

October 2015 Private Placement

On October 23, 2015, we entered into a unit purchase agreement with certain accredited investors, pursuant to which we issued and sold, in multiple closings occurring on each of October 23, 2015, October 29, 2015, November 18, 2015, December 18, 2015, December 22, 2015, February 9, 2016, March 9, 2016, April 1, 2016, April 19, 2016 and April 29, 2016, an aggregate of 3,003,016 units, which consisted of, in the aggregate, 3,003,016 shares of our common stock and warrants to purchase up to 1,501,513 shares of our common stock at an exercise price of $1.95, in exchange for aggregate gross proceeds of approximately $4,504,516. As consideration for serving as our placement agent in connection with the private placement, we issued to Laidlaw & Company (UK) Ltd. warrants to purchase an aggregate of 232,960 shares of common stock at an exercise price of $1.50 per share and paid cash fees equal to approximately $257,959.

May 2016 Private Placement

On May 26, 2016, we entered into a unit purchase agreement with certain accredited investors, pursuant to which we issued and sold, in a closing occurring on June 1, 2016, an aggregate of 77,144 units, which consisted of, in the aggregate, 77,144 shares of our common stock and warrants to purchase up to 38,572 shares of our common stock at an exercise price of $2.10, in exchange for aggregate gross proceeds of approximately $135,000.

October 2016 Private Placement

On October 28, 2016, we entered into a unit purchase agreement with certain accredited investors, pursuant to which we issued and sold,  in multiple closings occurring on each of October 28, 2016, November 23, 2016, December 16, 2016, December 22, 2016, February 10, 2017 and March 10, 2017 an aggregate of 2,585,474 units, which consisted of, in the aggregate, 2,585,474 shares of our common stock and warrants to purchase 794,954 shares of our common stock at an exercise price of $1.50 per share, in exchange for aggregate gross proceeds of $3,531,262, after financing costs of $346,949. As consideration for serving as our placement agent in connection with this private placement, we issued to certain designees of Laidlaw & Company (UK) Ltd., our placement agent in connection with this private placement, warrants to purchase an aggregate of 186,957 shares of common stock at an exercise price of $1.50 per share.

April 2017 Private Placement

In April 2017, we entered into securities purchase agreements with certain accredited investors, pursuant to which we issued and sold, in multiple closing occurring on each of April 6, 2017, April 17, 2017, May 5, 2017, June 20, 2017, June 30, 2017 , July 13, and August 18, 2017 an aggregate of 1, 444 ,602 shares of the Company’s common stock and warrants to purchase 722,302 shares of our common stock at $1.50, expiring three years from issuance, for aggregate net cash proceeds of $ 2,166,898 .

In their report dated March 30, 2017, our independent registered public accounting firm stated at December 31, 2016, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is an issue raised due to our net losses and negative cash flows from operations since inception and our expectation that these conditions will continue for the foreseeable future. In addition, we will require additional financing to fund future operations. Further, we do not have any commercial products available for sale and have not generated revenues to date, and there is no assurance that, if approval of our products is received, we will be able to generate cash flow to fund operations. In addition, there can be no assurance that our research and development will be successfully completed or that any product will be approved or commercially viable. Our ability to continue as a going concern is subject to our ability to obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities, obtaining loans from various financial institutions or being awarded grants from government agencies, where possible. Our continued net operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.

25

 

Our 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 December 31, 2016, the aggregate stated value of our Series C Preferred Stock was $1,070,000. 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 we may not have the ability to meet at the time of such demand.  We 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.

We expect to incur losses from operations for the near future. We expect to incur increasing research and development expenses, 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.

Our future capital requirements will depend on a number of factors, including the progress of our research and development of product candidates, the timing and outcome of regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, the status of competitive products, the availability of financing and our success in developing markets for our product candidates. We believe our existing cash will not be sufficient to fund our operating expenses and capital equipment requirements. We anticipate we will need approximately $6 million in addition to our current cash on hand to fund our operating expenses and capital equipment requirements for the next 12 months. We will have to raise additional funds to continue our operations and, while we have been successful in doing so in the past, there can be no assurance that we will be able to do so in the future. Our continuation as a going concern is dependent upon our ability to obtain necessary additional funds to continue operations and the attainment of profitable operations.

Future financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, existing holders of our securities may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our securities.

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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

26



BUSINESS
History

We were formed as BioSig Technologies, Inc., a Nevada corporation, in February 2009 and in April 2011 we merged with our wholly-owned subsidiary, BioSig Technologies Inc., a Delaware corporation, with the Delaware corporation continuing as the surviving entity. We are principally devoted to improving the quality of cardiac recordings obtained during ablation of atrial fibrillation (AF) and ventricular tachycardia (VT). We have not generated any revenue to date and consequently our operations are subject to all risks inherent in the establishment of a new business enterprise.

Overview

We are a development stage medical device company that is developing a proprietary technology platform to minimize noise and artifacts from cardiac recordings during electrophysiology studies and ablation.  We are developing the PURE (Precise Uninterrupted Real-time evaluation of Electrograms) EP System, a surface electrocardiogram and intracardiac multichannel recording and analysis system that acquires, processes and displays electrocardiogram and electrograms required during electrophysiology studies and ablation procedures.

The PURE EP System is designed to assist electrophysiologists in making clinical decisions in real-time by providing information that, we believe, is not always easily obtained, if at all, from any other equipment presently used in electrophysiology labs.  The PURE EP System’s ability to acquire high fidelity cardiac signals will potentially increase these signals’ diagnostic value, and therefore offer improved accuracy and efficiency of the EP studies and related procedures.  We are developing signal processing tools within the PURE EP System. We believe that these will assist electrophysiologists in further differentiating true signals from noise, and will provide guidance in identifying ablation targets.

Since June 2011, we have collaborated with physicians affiliated with the Texas Cardiac Arrhythmia Institute at St. David’s Medical Center in Austin, Texas for initial technology validation.  The physicians affiliated with the Texas Cardiac Arrhythmia Institute have provided us with digital recordings obtained with conventional electrophysiology recording systems during different stages of electrophysiology studies.  Using our proprietary signal processing tools that are part of the PURE EP System, we analyzed these recordings and successfully removed baseline wander, noise and artifacts from the data thereby providing better diagnostic quality signals.

We are focused on improving the quality of cardiac recordings obtained during ablation of atrial fibrillation, the most common cardiac arrhythmia, and ventricular tachycardia, an arrhythmia evidenced by a fast heart rhythm originating from the lower chambers of the heart, which can be life-threatening. Cardiac ablation is a procedure that corrects conduction of electrical impulses in the heart that cause arrhythmias.  During this invasive procedure, a catheter is usually inserted using a venous access into a specific area of the heart. A special radiofrequency generator delivers energy through the catheter to small areas of the heart muscle that cause the abnormal heart rhythm.  According to a 2009 article in Circulation: Arrhythmia and Electrophysiology, ablation is superior to pharmacological treatments and is becoming a first line of therapy for certain patients with arrhythmias (“Treatment of Atrial Fibrillation With Antiarrhythmic Drugs or Radiofrequency Ablation,” Circulation: Arrhythmia and Electrophysiology (2009) 2: 349-361).

Our overall goal is to establish our proprietary technology as a new platform that will have the following advantages over the electrophysiology recording systems currently available on the market:

Higher quality cardiac signal acquisition for accurate and more efficient electrophysiology studies;

Precise, uninterrupted, real time evaluations of electrograms;

Reliable cardiac recordings to better determine precise ablation targets, strategy and end point of procedures; and

A portable device that can be fully integrated into existing electrophysiology lab environments.


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If we are able to develop our product as designed, we believe that the PURE EP System and its signal processing tools will contribute to an increase in the number of procedures performed in each electrophysiology lab and possibly improved patient outcomes.

Our significant scientific achievements to date include:

Initial system concept validation has been performed in collaboration with physicians at the Texas Cardiac Arrhythmia Institute at St. David’s Medical Center in Austin, Texas in June 2011.  The Texas Cardiac Arrhythmia Institute provided challenging recordings obtained with electrophysiology recording systems presently in use at the institute during various electrophysiology studies. Our technology team successfully imported the data into the PURE EP System software and using proprietary signal processing, the PURE EP System software was able to reduce baseline wander, noise, and artifacts from the data and therefore provide better diagnostic quality signals.

We have established clinical and/or advisory relationships for both technology development and validation studies with physicians and researchers affiliated with the following medical centers: Texas Cardiac Arrhythmia Institute, Austin, TX; Cardiac Arrhythmia Center at the University of California at Los Angeles, Los Angeles, CA; Mount Sinai Medical Center, New York, NY; Beaumont Medical Center, Detroit, MI; University Hospitals Case Medical Center, Cleveland, OH; The Heart Rhythm Institute, University of Oklahoma Health Sciences Center, Oklahoma City, OK; and Mayo Clinic, Rochester, MN.

The Cardiac Arrhythmia Center at the University of California at Los Angeles and Dr. Kalyanam Shivkumar, a former member of our board of directors, have played a significant role in the initial functional testing of our hardware.  Dr. Shivkumar and his team have enabled us to learn the connectivity of the lab and its devices that pertain to where our PURE EP System will fit in. In June 2013, we commenced our first proof of concept pre-clinical study with the assistance of Dr. Shivkumar in order to further test the components of the PURE EP System hardware, as further explained below.

We are developing signal processing tools within the PURE EP System that will assist electrophysiologists in further differentiating true signals from noise, which may potentially provide guidance in identifying ablation targets.  The signal processing tools are expected to be an integral part of the software of the PURE EP System, which we believe will significantly facilitate the locating of ablation targets.

In the second and third quarters of 2013, we performed and finalized testing of our proof of concept unit by initially using an electrocardiogram/intracardiac simulator at our lab, and subsequently by obtaining pre-clinical recordings from the lab at the University of California at Los Angeles.  As part of the testing, we simultaneously recorded electrocardiogram and intracardiac signals on our proof of concept unit and GE’s CardioLab recording system. An identical signal was applied to the input of both systems and the monitor of our proof of concept unit was positioned next to the monitor of GE’s CardioLab recording system to allow for visual comparison. We believe that our proof of concept unit performed well as compared to GE’s CardioLab recording system, in that the electrocardiogram and intracardiac signals displayed on our proof of concept unit showed less baseline wander, noise and artifacts compared to signals displayed on GE’s CardioLab recording system.  However, because this was a proof of concept test, without any clearly established protocols, we cannot present this data for publication and we do not have any independent verification or peer review of these findings.

In the third quarter of 2013, we analyzed the results of our proof of concept unit to determine the final design of the PURE EP System prototype, which has since been completed.  

In September 2014, we performed additional tests on the PURE EP System prototype at the University of California at Los Angeles.  

In the fourth quarter of 2014, we appointed Dr. Samuel J. Asirvatham from the Mayo Clinic as a member of our Scientific Advisory Board and initiated plans for pre-clinical studies at the Mayo Clinic.

In the first quarter of 2015, we appointed Dr. K. L. Venkatachalam from the Mayo Clinic as a member of our Scientific Advisory Board.  On March 31, 2015 Drs. Asirvatham and Venkatachalam performed our first pre-clinical study at the Mayo Clinic in Rochester, Minnesota.

On June 10, 2015, Dr. Asirvatham performed our second pre-clinical study at the Mayo Clinic in Rochester, Minnesota.

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On November 17, 2015, Dr. Asirvatham performed our third pre-clinical study at the Mayo Clinic in Rochester, Minnesota.

On February 22, 2016, we signed an agreement to initiate development of its PURE EP System with Minnetronix and are taking steps toward its 510(k) submission.
 
On March 8, 2016 , Dr. Ammar Killu from Mayo Clinic presented our preclinical data at the 13th Annual Dead Sea Symposium on Innovations in Cardiac Arrhythmias and Device Therapy in Tel Aviv, Israel entitled “Enhanced Electrophysiology Recording Improves Signal Acquisition and Differentiation”.

On March 28, 2016, we announced an Advanced Research Program with Dr. Asirvatham at the Mayo Clinic beginning June 2016.

On June 2, 2016, Dr. Asirvatham performed our fourth pre-clinical study at Mayo Clinic in Rochester, Minnesota.

On June 23 and August 25 and 26, 2016, Dr. Vivek Reddy performed our pre-clinical study on a ventricular scar model at the Mount Sinai Hospital in New York, NY.

On July 27, 2016, Dr. Asirvatham performed our fifth pre-clinical study at Mayo Clinic in Rochester, Minnesota.
 
On August 19, 2016, we presented a poster at the IEEE Engineering in Medicine and Biology Society annual conference (IEEE EMBC 2016) entitled “Enhanced Electrophysiology Recording System.”
 
On September 14, 2016, Dr. Asirvatham performed our sixth pre-clinical study at Mayo Clinic in Rochester, Minnesota.

In December 2016, the Journal of the American College of Cardiology (JACC): Clinical Electrophysiology (Vol.2, No.7, pp.850) published the article entitled, “Novel Electrophysiology Signal Recording System Enables Specific Visualization of the Purkinje Network and Other High-Frequency Signals”, submitted by the Mayo Clinic team.

On December 9, 2016, we filed a provisional patent application entitled “Assessment of Catheter Position by Local Electrogram.”

On December 9, 2016, we filed a provisional patent application entitled “Visualization of Conduction Tissue Signals.”

On February 14, 2017, Dr. Asirvatham performed our seventh pre-clinical study at Mayo Clinic in Rochester, Minnesota.

On March 15, 2017, Dr. Asirvatham performed our eighth pre-clinical study at Mayo Clinic in Rochester, Minnesota.

In April, 2017 , the PURE EP System was featured in The Journal of Innovations in Cardiac Rhythm Management with the manuscript entitled, “Initial Experience with the BioSig PURE EP™ Signal Recording System: An Animal Laboratory Experience” co-authored by physicians from Mayo Clinic and Harvard Brigham & Women’s Hospital.

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On May 2, 2017, Dr. Asirvatham performed our ninth pre-clinical study at Mayo Clinic in Rochester, Minnesota.
 
On May 11, 2017, the PURE EP System was featured in a poster presentation entitled, “Use of Terminal Unipolar Electrogram Current of Injury as a Novel Marker to Estimate Contact: An Acute Canine Study.”

On July 10, 2017, the PURE EP System was featured in a poster presentation at the American Heart Association’s 13th Annual Basic Cardiovascular Sciences (BCVS) 2017 Scientific Sessions: Pathways to Cardiovascular Therapeutics entitled, “Use of a Novel Electrogram Filtering Algorithm to Visualize Conduction Tissue Signals in the Ventricle in Sinus Rhythm and Arrhythmia: An Acute Canine Study.”

On July 11, 2017, the Company announced that it has engaged Health Research International (HRI) to compile essential market data and help perform strategic planning for its PURE EP™ platform technology.

On July 12, 2017, the PURE EP System was featured in a poster presentation at the American Heart Association’s 13th Annual Basic Cardiovascular Sciences (BCVS) 2017 Scientific Sessions: Pathways to Cardiovascular Therapeutics entitled, “Assessment of Catheter Position above or below the Aortic Valve by Evaluation of Characteristics of the Local Electro gram: An Acute Canine Study.”

On August 9, 2017, Dr. Asirvatham performed our tenth pre-clinical study at Mayo Clinic in Rochester, Minnesota.

We conducted our first, second and third pre-clinical studies on March 31, 2015, June 10, 2015, and November 17, 2015 respectively, and began additional pre-clinical studies as part of an advanced research program in June 2016, at Mayo Clinic in Rochester, Minnesota with the PURE EP System prototype. We also conducted a pre-clinical study at the Mount Sinai Hospital in New York, NY with emphasis on the ventricular tachycardia (VT) model.

We intend to conduct a pre-clinical study at the Cardiac Arrhythmia Center at the University of California at Los Angeles with emphasis on the ventricular tachycardia (VT) model. We intend to conduct further pre-clinical studies, end-user preference studies, and research studies. The main objective of these studies is to demonstrate the clinical potential of the PURE EP System.

We have initiated technology development with Minnetronix, a medical technology and innovation company, and are implementing steps for obtaining 510(k) clearance from the U.S. Food and Drug Administration for the PURE EP System.

We believe that by the first half of 2018 , we will have obtained 510(k) marketing clearance from the FDA and will be able to commence marketing and commercialization of the PURE EP System. Our ability to achieve the aforementioned milestones will be principally determined by our ability to obtain necessary financing and regulatory approvals, among other factors.

We have chosen and are working with the National Standards Authority of Ireland (NSAI) as our Notified Body to obtain the CE Mark. CE marking is a mandatory approval for medical devices sold in Europe and Canada.  We plan on submitting for CE Mark in 2018 .

Because we are a development stage company, with our initial product under development, we currently do not have any customers. We anticipate that our initial customers will be hospitals and other health care facilities that operate electrophysiology labs.

Our Industry

Electrophysiology is the study of the propagation of electrical impulses throughout the heart. Electrophysiology studies are focused on the diagnosis and treatment of arrhythmias, a medical condition in which conduction of electrical impulses within the heart vary from the normal. Such conditions may be associated with significant health risks to patients. The invasive cardiac electrophysiology study for the evaluation of cardiac conduction disorders has evolved rapidly from a research tool to an established clinical treatment. This technique permits detailed analyses of the mechanism underlying cardiac arrhythmias and determines precise locations of the sites of origin of these arrhythmias, thereby aiding in treatment strategies.

Pharmacological, or medicine-based, therapies have traditionally been used as initial treatments, but they often fail to adequately control the arrhythmia and may have significant side effects. Catheter ablation is now often recommended for an arrhythmia that medicine cannot control. Catheter ablation involves advancing several flexible catheters into the patient’s blood vessels, usually either in the femoral vein, internal jugular vein or subclavian vein. The catheters are then advanced towards the heart. Electrical impulses are then used to induce the arrhythmia and local heating or freezing is used to ablate (destroy) the abnormal tissue that is causing it. Catheter ablation of most arrhythmias has a high success rate and multiple procedures per patient have been found to be more successful.

One study found that arrhythmia-free survival rates after a single catheter ablation procedure were 40%, 37%, and 29% at one, two and five years, respectively, with most recurrences over the first six months (“Catheter Ablation for Atrial Fibrillation - Are Results Maintained at 5 Years of Follow-Up?” J Am Coll Cardiol. (2011) 57(2):160-166). Another study stated that catheter ablation of atrial fibrillation has been shown to be effective in approximately 80% of patients after 1.3 procedures per patient, with approximately 70% of such patients requiring no further antiarrhythmic drugs during intermediate follow-up (Updated Worldwide Survey on the Methods, Efficacy, and Safety of Catheter Ablation for Human Atrial Fibrillation Circulation: Arrhythmia and Electrophysiology (2010) 3: 32-38).
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Catheter ablation is usually performed by an electrophysiologist (a specially trained cardiologist) in a catheterization lab or a specialized electrophysiology lab. It is estimated that there are about 3,000 electrophysiology labs in the U.S. and 1,500 electrophysiology labs outside the U.S., each with an electrophysiology recording system costing an average of $250,000. We believe that the current value of the electrophysiology recording device market in the U.S. is approximately $500 million, based upon the number of electrophysiology labs in U.S. and the average cost of the recording system in each lab. With the potential of 12 million atrial fibrillation patients by the year 2050 (according to the Atrial Fibrillation Fact Sheet, February 2010, published by the Centers for Disease Control and Prevention) and improvements in technology for atrial fibrillation ablation therapy, significant growth is predicted for the number of hospitals building electrophysiology labs. A July 2012 report published by the Millennium Research Group predicted rapid growth in the U.S. market for electrophysiology mapping and ablation devices from 2012 to 2016, due to the medical community’s growing focus on treating atrial fibrillation. The report further predicts that even with advances in drug treatments and management devices to treat or manage arrhythmias, the electrophysiology mapping and ablation device market will be sustained by the continued development of advanced technologies that decrease ablation procedure times and improve success rates. According to the 2016 HRI Global Opportunities in Medical Devices & Diagnostics report, analysts forecast the global market for electrophysiology devices will grow at a 10.3 percent compound annual growth rate, from $3.68 billion in 2015 to $6.015 billion in 2020.

Treatment of Atrial Fibrillation and Ventricular Tachycardia

We believe that the clearer recordings and additional information provided by the PURE EP System may improve outcomes during electrophysiology studies and ablation procedures for a variety of arrhythmias. For patients who are candidates for ablation, an electrophysiology study is necessary to define the targeted sites for the ablation procedure. Two common, yet complex, conditions for which ablation procedures are performed are atrial fibrillation and ventricular tachycardia. We believe that in the near future, the PURE EP System may have a meaningful impact on assisting ablation strategies for these conditions.

Most cardiac arrhythmias are well understood and ablation simply requires destroying a small area of heart tissue possessing electrical abnormality. In contrast, complex arrythmias, such as atrial fibrillation and ventricular tachycardia, have complex pathophysiology and, because knowledge of their origins and mechanisms are incomplete, ablation treatments for these arrhythmias are largely empirical. Catheter ablation is now an important option to control recurrent ventricular tachycardias (“EHRA/HRS Expert Consensus on Catheter Ablation of Ventricular Arrhythmias,” Europace (2009) 11 (6): 771-817). Catheter ablation of ventricular tachycardia in nonischemic heart diseases can be challenging, and outcomes across different diseases are incompletely defined (“Catheter Ablation of Ventricular Tachycardia in Nonischemic Heart Disease,” Circulation: Arrhythmia and Electrophysiology (2012) 5: 992-1000). In addition, limitations of atrial fibrillation ablation include the use of catheters designed for pinpoint lesions to perform large area ablations in a point-by-point fashion, and the dexterity required to perform the procedure (“New Technologies in Atrial Fibrillation Ablation,” Circulation (2009)). Furthermore, the length of these procedures exposes the physician and staff to extensive radiation, requiring them to wear heavy lead vests. Consequently, ablating atrial fibrillation and ventricular tachycardia has been regarded as being extremely difficult. Therefore, access to these procedures has traditionally been limited to being performed by only especially well-trained cardiologists; however, advancements in new technologies and techniques show a strong growth rate for these procedures.

According to the National Institute of Health National Heart Lung and Blood Institute, there are more than 3 million Americans suffering with atrial fibrillation and about 850,000 patients are hospitalized annually. As many as 600,000 new cases of atrial fibrillation are diagnosed each year. Despite the fact that physicians have been performing radiofrequency ablations since the 1990s, catheter-based treatment is offered to less than 3% of the atrial fibrillation patient population in the U.S. and Europe. According to Millennium Research Group (MRG), an increasing proportion of diagnosed atrial fibrillation cases are now being treated via ablation, as both physician confidence and the devices used in these procedures improve. A growing amount of positive clinical data has demonstrated the efficacy of AF ablation when compared to the traditional first-line treatment of anti-arrhythmic drugs. As a result, AF ablation is becoming the fastest growing procedure type in this market, increasing at an average annual rate of 16 percent from 2012 to 2016. The American College of Cardiology Foundation/American Heart Association Task Force reported that catheter-directed ablation of atrial fibrillation represents a substantial achievement that promises better therapy for a large number of patients presently resistant to pharmacological or electrical conversion to sinus rhythm (“2011 ACCF/AHA/HRS Focused Update on the Management of Patients With Atrial Fibrillation (Updating the 2006 Guideline)”). However, rates of success and complications may vary, sometimes considerably.

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According to the Heart Rhythm Society, ventricular tachycardia is the most dangerous arrhythmia since it may result in ventricular fibrillation, a rapid chaotic heartbeat in the lower chambers of the heart. Because the fibrillating muscle cannot contract and pump blood to the brain and vital organs, ventricular fibrillation is the number one cause of sudden cardiac death accounting for more than 350,000 deaths in the U.S. each year. Ventricular tachycardia is typically treated with implantable cardioverter defibrillators, or ICDs, or a combination of ablation along with an ICD. The American College of Cardiology/American Heart Association Task Force on Practice Guidelines/European Society of Cardiology Committee for Practice Guidelines, or ACC/AHA/ESC, 2009 guidelines recommend ablation in patients who either have sustained predominantly monomorphic ventricular tachycardia that is drug resistant, are drug intolerant or do not wish for long-term drug therapy. According to a recent study, catheter ablation has been found to reduce ventricular tachycardia/ventricular fibrillation recurrences and thereby ICD interventions, including ICD shocks, by approximately 75% in patients that have undergone multiple ICD shocks (Kuck, “Should Catheter Ablation be the Preferred Therapy for Reducing ICD Shocks? Ventricular Tachycardia in Patients With an Implantable Defibrillator Warrants Catheter Ablation,” Circulation: Arrhythmia and Electrophysiology (2009) 2: 713-720). More importantly, according to Kuck, catheter ablation is the only treatment that can terminate and eliminate incessant ventricular tachycardia and acutely abolish electrical storm in ICD patients. Typically, patients who receive ICDs are at high risk for recurrent arrhythmia; hence, most patients receive one or more ICD therapies for spontaneous arrhythmias after implantation. Despite the technological evolution of ICD systems, more than 20% of shocks are due to supraventricular arrhythmia and hence are inappropriate. Although the ICD aborts ventricular tachycardia/ventricular fibrillation, many patients continue to have symptoms. These shocks are physically and emotionally painful and lead to poor quality of life and adverse psychological outcomes in patients and their families.

According to Dr. Srijoy Mahapatra, the status of ventricular tachycardia ablation is growing at a 14-17% compound annual growth rate due to the fact that ablation of ventricular tachycardia may help patients feel better and live longer, despite the risks, including the occurrence of stroke, and the modest success rates. The success of ventricular tachycardia ablation varies, depending on the patient’s specific heart condition that caused ventricular tachycardia. The procedure is most effective in patients with otherwise normal hearts, in whom the success rate exceeds 90%. In patients with structural heart disease resulting from scar or cardiomyopathy, success rates range between 50% and 75% at six to 12 months. In cases in which a patient experiences a recurrence, two of three patients will still have less ventricular tachycardia than before the initial ablation (Circulation (2010) 122: e389-e391). Therefore, we believe that ablation will continue to become a preferred treatment for ventricular tachycardia, especially in light of the challenges presented by ICD therapies; this increase in demand for ablation procedures will likely also increase the demand for technological advances in medical devices essential to ablation procedures, including electrophysiology recorders, in order to better support and ablation procedures.

Electrophysiology Lab Environment and Electrophysiology Recording Systems

The electrophysiology lab environment and recording systems create significant amounts of noise and artifacts during electrophysiology procedures.  Current surface and intracardiac recording systems typically consist of large workstations interconnected by a complex set of cables that contribute to significant amounts of noise during signal acquisition. Additional noise and artifacts generated from the electrophysiology lab equipment further hamper recordings of small electrophysiological potentials.  Preserving spaciotemporal (space and time) characteristics of the signal in a very challenging electrophysiology recording environment is a difficult task. To remove noise and artifacts, recorders that are currently on the market offer a family of low pass, high pass and notch filters, but these filters alter signal information context.

The shape and amplitude of electrocardiograms, unipolar and bipolar electrograms, and, consequently, reconstructed endocardial and epicardial maps, are influenced not only by electrophysiological and structural characteristics of the myocardial tissue involved, but with characteristics of the recording system.  Amplitude and morphology of electrocardiogram and intracardiac signals are significantly affected by filters used to remove noise.  Because of the number of amplitude and interval measurements made during an electrophysiology study, it is imperative that the recording system faithfully acquires surface electrocardiogram and intracardiac electrograms.  We believe that the recording systems that are currently available on the market are ineffective in preserving the optimal amount of original information contained in the cardiac signals.

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In addition, the electrophysiology lab consists of sophisticated equipment that requires an electrophysiologist to mentally integrate information from a number of sources during procedures. There are numerous monitors in an electrophysiology lab that provide and display this variety of information. An electrophysiologist needs to evaluate the acquired cardiac signals and the patient’s responses to any induced arrhythmias during the procedure.  However, it is difficult for an electrophysiologist to synthesize the disparate information produced by the numerous monitors in the lab and calculate the real-time, three-dimensional orientation of the anatomy and the location of the recording and ablation catheters.  As the number of electrophysiology procedures increase, a variety of diagnostic and therapeutic ablation catheters are becoming more widely available and new highly specialized catheters are being developed.  In addition, remote robotic and magnetic navigation systems are being developed to address limitations of dexterity in controlling the catheter tip, especially during complex arrhythmia ablation procedures. We believe that, considering the improvements being made with respect to other equipment used in the electrophysiology lab and the continual increase of ablation procedures, the electrophysiology recorders currently available on the market are not sufficiently advanced with respect to the quality of their recordings to deliver adequate results.  We believe that the PURE EP System will be able to deliver superior quality of recordings that will allow it to successfully integrate with the other advanced equipment found in the electrophysiology lab.

The requirement for optimal signal integrity is further amplified during ablation treatments of atrial fibrillation and ventricular tachycardia. Presently, one of the main objectives of the atrial fibrillation ablation procedure is to precisely identify, ablate and eliminate pulmonary vein potentials and one of the main objectives of the ventricular tachycardia procedure is to map the arrhythmia substrate and precisely identify, ablate and eliminate small abnormal potentials. The information provided by recorders is essential for an electrophysiologist to determine ablation strategy during termination of both pulmonary vein potentials and ventricular tachycardia.  Therefore, it is important that the recording system’s noise removal technique does not alter appearance and fidelity of these potentials. As a result, it is necessary that any new signal processing preserves signal fidelity as much as possible during electrophysiology recordings; otherwise, the signals that are needed to guide the ablation procedures will be difficult to distinguish due to noise interference.

Our Products

We intend to bring to the electrophysiology market the PURE EP System, an electrocardiogram/intracardiac recorder that will be coupled with an array of software tools intended for electrophysiology studies and procedures ranging from simple diagnostic tests to ablation for the most complex cases of arrhythmias.  We believe that this system will provide unique recording capabilities because we are developing it to allow precise, uninterrupted, real-time evaluations of electrocardiograms and electrograms, and allow electrophysiologists to obtain data that cannot be acquired from present day recorders.

The PURE EP System uses a combination of analog and digital signal processing to acquire and display cardiac data. Because our technology consists of proprietary hardware, software and algorithms, the original cardiac data is not distorted.  In addition, we are developing a library of software tools that are designed to be configured to fit the needs of electrophysiologists in different settings and/or for different arrhythmia treatments. With the software, the PURE EP System can be positioned to provide information that can be used by electrophysiologists to help guide the ablation catheter; shorten procedure times; and can reduce the complexity of maneuvers necessary for identifying ablation targets for various arrhythmias, including atrial fibrillation and ventricular tachycardia.  The PURE EP System is intended to be used in addition to existing electrophysiology recorders.  We believe that the less distorted cardiac data provided by the PURE EP System will increase the workload ability and enhance the capabilities of the typical electrophysiology laboratory.

Initial Analysis

According to S. J. Asirvatham, MD, et. al. (“Signals and Signal Processing for the Electrophysiologist,” Circ Arrhythm Electrophysiol. (2011) 4:965-973), recording environments in a typical electrophysiology laboratory presents challenging situations.  S. J. Asirvatham, MD, et. al., state, “Successful mapping and ablation in the electrophysiology laboratory is critically dependent on acquiring multiple, low-amplitude, intracardiac signals in the presence of numerous sources of electric noise and interference and displaying these signals in an uncomplicated and clinically relevant fashion, with minimal artifacts. This represents a significant engineering challenge and, in real-life electrophysiology laboratory, is not always successful.”
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To determine and validate the state of present electrophysiology recording technology in the field, we completed a detailed analysis of the effect of filters used by existing EP recorders to reduce noise on spaciotemporal characteristics of electrocardiograms and intracardiac electrograms. We used a custom built electrocardiogram/intracardiac simulator with a database of various electrocardiogram signals combined with electrophysiology signals, along with waveforms from publicly available databases. The ability to faithfully reproduce database waveforms generated by an electrocardiogram/intracardiac simulator was tested using the PURE EP System and conventional electrophysiology recorders, the GE CardioLab and St. Jude EP-WorkMate.

We evaluated the signal quality (amplitude, morphology and duration) of the different recorders, along with the ability of the recorders to reduce noise level and remove baseline wander, which are the cardiac signals that have shifted from the isoelectric line (the base line of the signal tracing). The electrocardiogram and intracardiac signals subjected to the PURE EP System’s signal processing showed less baseline wander, noise and artifacts compared to the conventional electrophysiology recorders.  Further, spaciotemporal characteristics of signals were greatly distorted by the conventional electrophysiology system, particularly when a notch filter was used, as compared to the recording of the same spaciotemporal characteristics by the PURE EP System.  A notch filter is used to remove a specific frequency from the signal, especially either 60Hz in the U.S. and 50Hz in Europe, and can be implemented in hardware or software.

During our initial analysis, we did not subject the evaluation of the data produced by our technology to any third-party review, as would be required for the publication of a formal study.  

Proof of Concept Testing

We developed the PURE EP System’s proof of concept unit, which is the version of the product prior to prototype. The proof of concept unit was designed using separate analog and digital boards to allow for easier debugging and to demonstrate single channel electrocardiogram and intracardiac acquisition capabilities. The proof of concept unit was built to (i) verify that the PURE EP System performs in line with our intended design of the product, (ii) validate a portion of the hardware design that we intend to use in the prototype, and (iii) verify the software used by the PURE EP System.  The main objectives of the proof of concept unit were to demonstrate that the system’s hardware and software have the ability to faithfully records small cardiac signals in an electrophysiology laboratory environment and to obtain initial performance results.

In the second and third quarters of 2013, we performed and finalized testing of our proof of concept unit by initially using an electrocardiogram/intracardiac simulator at our lab, and subsequently by obtaining pre-clinical recordings from the lab at the University of California at Los Angeles.  As part of the testing, we simultaneously recorded electrocardiogram and intracardiac signals on our proof of concept unit and GE’s CardioLab recording system. An identical signal was applied to the input of both systems and the monitor of our proof of concept unit was positioned next to the monitor of GE’s CardioLab recording system to allow for visual comparison. We believe that our proof of concept unit performed well as compared to GE’s CardioLab recording system, in that the electrocardiogram and intracardiac signals displayed on our proof of concept unit showed less baseline wander, noise and artifacts compared to signals displayed on GE’s CardioLab recording system.  However, because this was a proof of concept test, without any clearly established protocols, we cannot present this data for publication and we do not have any independent verification or peer review of these findings.

Subsequently, in the third quarter of 2013, we analyzed the results of our proof of concept unit to determine the final design of the PURE EP System prototype.  Because the proof of concept unit was designed to verify the capabilities of the main components of the PURE EP System, we established a list of tasks necessary to complete the prototype (which we intend to use for end-user preference studies, additional pre-clinical studies and research studies), which has since been completed.  
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Proof of Concept Testing at UCLA’s EP Lab


The current PURE EP System prototype


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Technology and Development Plan

Our technology team consists of six engineers with expertise in digital signal processing, low power analog and digital circuit design, software development, embedded system development, electromechanical design, testing and system integration, and the regulatory requirements for medical devices. We have also entered into collaboration agreements with advisors and medical institutions in the fields of cardiology and electrophysiology, including Mayo Clinic, Mount Sinai Hospital in New York, NY and the Texas Cardiac Arrhythmia Institute in Austin, TX (see “–Strategic Alliances”).  We envision outsourcing manufacturing of the complete PURE EP System to Minnetronix and identify a second medical device manufacturer in California.

We conducted our first, second and third pre-clinical studies on March 31, 2015, June 10, 2015 and November 17, 2015 respectively, and began additional pre-clinical studies as part of an advanced research program in June 2016, at Mayo Clinic with the PURE EP System prototype. We also conducted a pre-clinical study at the Mount Sinai Hospital in New York, NY with emphasis on the ventricular tachycardia (VT) model.

We intend to conduct a pre-clinical study at the Cardiac Arrhythmia Center at the University of California at Los Angeles with emphasis on the ventricular tachycardia (VT) model. We intend to conduct further pre-clinical studies, end-user preference studies, and research studies. The main objective of these studies is to demonstrate the clinical potential of the PURE EP System.

We have initiated technology development with Minnetronix, a medical technology and innovation company, and are implementing steps for obtaining 510(k) clearance from the FDA for the PURE EP System.

We believe that by the first half of 2018 , we will have obtained 510(k) marketing clearance from the FDA and will be able to commence marketing and commercialization of the PURE EP System. Our ability to achieve the aforementioned milestones will be principally determined by our ability to obtain necessary financing and regulatory approvals, among other factors.

We have chosen and are working with the NSAI as our Notified Body to obtain the CE Mark. CE marking is a mandatory approval for medical devices sold in Europe and Canada.  We plan on submitting for CE Mark in 2018 .

Because we are a development stage company, with our initial product under development, we currently do not have any customers. We anticipate that our initial customers will be hospitals and other health care facilities that operate electrophysiology labs.

 Competition

The electrophysiology market is characterized by intense competition and rapid technological advances. There are currently four large companies that share the majority of the electrophysiological recording market share. They produce the following electrophysiology recording systems, each with a unit price of approximately $250,000 per unit:

GE Healthcare’s family of CardioLab Recording Systems were initially developed in the early 1990s by Prucka Engineering, which was acquired by General Electric Company in 1999.
The LabSystem PRO EP Recording System was originally designed in the late 1980s by C.R. Bard. C.R. Bard’s electrophysiology business was acquired by Boston Scientific Corporation in 2013.
Siemens AG developed the Axiom Sensis XP in 2002.
St. Jude Medical, Inc.’s EP-WorkMate Recording System was acquired from EP MedSystems, Inc. in 2008, which had received clearance for the product from the FDA in 2003. In January 2017, Abbott Laboratories acquired St Jude Medical, Inc.

Based upon our analysis of data taken from patent applications filed with the U.S. Patent and Trademark Office (“USPTO”) and 510(k) approval applications filed with the FDA, we believe that the above recording systems are built on relatively old technologies and all use the identical approach in applying digital filters to remove noise and artifacts. We are of the opinion that such an approach sacrifices cardiac signal fidelity and, in the case of ablation, the filters have a direct impact on the ablation strategy of an electrophysiologist. The imprecise method to remove noise and artifacts used by the old recorders could be a contributing factor to the multiple (or repeated) ablation procedures that are frequently required in order to completely cure patients from atrial fibrillation and ventricular tachycardia. We are not currently aware of any other companies that are developing new recording technology for electrophysiology recorders.

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Suppliers

The PURE EP System contains proprietary hardware and software modules that are assembled into the system. Hardware boards contain components that are available from different distributors. The parts used to manufacture analog and digital boards are readily available from a number of distributors or manufacturers. We obtained components from various suppliers and have assembled our first prototype in-house. We envision outsourcing manufacturing of the complete PURE EP System to Minnetronix and to identify a second medical device manufacturer in California.

Research and Development Expenses

Research and development expenses for the fiscal years ended December 31, 2016, 2015 were $2,654,501 and $1,506,989, respectively.

Sales, Marketing and Customer Service

We plan to implement a market development program prior to launch of our PURE EP System. As the product progresses through development and testing, we intend to gather the data produced by the PURE EP System’s processing and presenting electrocardiogram and intracardiac signals and use such data for posters, presentations at cardiology conferences, and, if appropriate, submissions to scientific journals. We believe that as we gather additional data from our existing proof of concept tests and our planned pre-clinical and clinical studies and user preference studies, we will be able to better determine the focus of our marketing efforts. We also plan to leverage our relationships with cardiac research and treatment centers to gain early product evaluation and validation. We believe that through these efforts, we may be able to gain preliminary acceptance of our PURE EP product by experienced professionals and academics in the electrophysiology field.

We also intend to simultaneously develop a branding strategy to introduce and support the PURE EP System. The strategy may include our presence at major relevant cardiology meetings on a national and regional basis to engage and educate physicians concerning the PURE EP System and any of our other products, as well as engaging in a variety of other direct marketing methods. We also intend to develop a small direct sales force together with a distribution network that has existing relationships with hospitals and electrophysiologists. We believe that we may be able to begin commercial sales of the PURE EP System in 2018.

Intellectual Property

Patents

Our success depends in large part on our ability to establish and maintain the proprietary nature of our technology. Our co-founder and former chief technology officer, Budimir S. Drakulic, Ph.D., conceived of the proprietary elements of the PURE EP System in 2009 and 2010. We filed a patent application with the USPTO in December 2013 directed at systems and methods for the evaluation of electrophysiology systems. In March 2014, the inventors listed on the patent application filed in December 2013 assigned all of their rights to the patent application to us. In December 2014, we filed this patent application under the Patent Cooperation Treaty (PCT) with the U.S. Receiving Office.  Our patent application filed in December 2013 represents a significant portion of our core proprietary intellectual property. Our patent application filed in December 2013 describes a system that can show comparative output of any two cardiac signal systems—such as the PURE EP System as compared to a competitor system, thus showing the value of the PURE EP System.

This patent application describes signal processing evaluators that assess how well a cardiac signal system reading a cardiac signal (such as the PURE EP System or another system) filters out noise, such as non-cardiac signals or other body-generated artifacts. Such noise is filtered by such systems with varying success, thus, an evaluator such as described in the patent application may be used to provide comparison data for a particular system versus another given the same or similar input. The patent application also describes a simulator that can send a simulated signal to a cardiac signal system (the PURE EP System or another system) in order to challenge such cardiac signal system to filter out typical noise. These are adjunct technologies that can be used to show the value of the PURE EP System as compared to other systems existing in the market. The additional patent applications that we intend to file in the U.S. in the future are expected to represent portions of the hardware and software technology associated with our PURE EP System, which technology includes a cardiac signal system that reads cardiac signals and filters such cardiac signals from noise such as non-cardiac signals or other body-generated artifacts. Upon filing of such patent applications, we believe that the novel aspects of our PURE EP System should be subject to pending patent application; however, we cannot be assured that all of the patents related to our patent applications, if any, will be granted.

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On December 9, 2016, we filed two provisional patent applications: “Assessment of Catheter Position by Local Electrogram” and “Visualization of Conduction Tissue Signals”.

Trademarks

In December 2015, our trademark for “PURE EP” went live in the U.S. On February 7, 2017, the USPTO published the trademark for “BioSig Technologies”.

Government Regulation

Our solutions include software and hardware which will be used for patient diagnosis and, accordingly, are subject to regulation by the U.S. Food and Drug Administration and other regulatory agencies.  U.S. Food and Drug Administration regulations govern, among other things, the following activities that we perform and will continue to perform in connection with:

Product design and development;
Product testing;
Product manufacturing;
Product labeling and packaging;
Product handling, storage, and installation;
Pre-market clearance or approval;
Advertising and promotion; and
Product sales, distribution, and servicing.

U.S. Food and Drug Administration’s Pre-market Clearance and Approval Requirements

The U.S. Food and Drug Administration classifies all medical devices into one of three classes.  Devices deemed to pose lower risks are placed in either Class I or II, which requires the manufacturer to submit to the U.S. Food and Drug Administration a pre-market notification, known as a PMN, and a 510(k) approval, requesting clearance of the device for commercial distribution in the U.S.  Class III devices are devices which must be approved by the pre-market approval process.  These tend to be devices that are permanently implanted into a human body or that may be necessary to sustain life.  For example, an artificial heart meets both these criteria.  Based on analysis of predicate devices, we believe that our products will be classified as Class II. Pursuant to U.S. Food and Drug Administration guidelines, Class II devices include a programmable diagnostic computer, which is a device that can be programmed to compute various physiologic or blood flow parameters based on the output from one or more electrodes, transducers, or measuring devices; this device includes any associated commercially supplied programs.  Because the PURE EP System is a surface electrocardiogram and intracardiac multichannel recording and analysis system that acquires, processes and displays electrocardiogram and electrograms, we believe it will be classified as a Class II device.  We must, therefore, first receive a 510(k) clearance from the U.S. Food and Drug Administration for our PURE EP System before we can commercially distribute it in the U.S.  In the event that our PURE EP System is classified as a Class III device, which we believe is unlikely to occur, the U.S. Food and Drug Administration regulatory approval process and the subsequent commercialization of our product will require significantly greater time and resources than if it is classified as a Class II device, which would require us to reassess our strategic business plan of operations.

510(k) Clearance Process

For our PURE EP System, we must submit a pre-market notification to the U.S. Food and Drug Administration demonstrating that the proposed device is substantially equivalent to a previously cleared 510(k) device, a device that was in commercial distribution before May 28, 1976 for which the U.S. Food and Drug Administration has not yet called for the submission of pre-market approval applications, or is a device that has been reclassified from Class III to either Class II or I.

The U.S. Food and Drug Administration’s 510(k) clearance process usually takes three to six months from the date the application is submitted and filed with the U.S. Food and Drug Administration, but it can take significantly longer. A device that reaches market through the 510(k) process is not considered to be “approved” by the U.S. Food and Drug Administration. They are generally referred to as “cleared” or “510(k) cleared” devices.  Nevertheless, it can be marketed and sold in the U.S.

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After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new 510(k) clearance or could require a pre-market approval, which requires more data and is generally a significantly longer process than the 510(k) clearance process.  The U.S. Food and Drug Administration requires each manufacturer to make this determination initially, but the U.S. Food and Drug Administration can review any such decision and can disagree with a manufacturer’s determination. If the U.S. Food and Drug Administration disagrees with a manufacturer’s determination, the U.S. Food and Drug Administration can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or a pre-market approval is obtained.

Pervasive and continuing U.S. Food and Drug Administration regulation

After a medical device is placed on the market, numerous U.S. Food and Drug Administration regulatory requirements apply, including, but not limited to the following:

Quality System regulation, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures during the manufacturing process;
Establishment Registration, which requires establishments involved in the production and distribution of medical devices intended for commercial distribution in the U.S. to register with the U.S. Food and Drug Administration;
Medical Device Listing, which requires manufacturers to list the devices they have in commercial distribution with the U.S. Food and Drug Administration;
Labeling regulations, which prohibit “misbranded” devices from entering the market, as well as prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; and
Medical Device Reporting regulations, which require that manufacturers report to the U.S. Food and Drug Administration if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur.

Failure to comply with applicable regulatory requirements can result in enforcement action by the U.S. Food and Drug Administration, which may include one or more of the following sanctions:

Fines, injunctions, and civil penalties;
Mandatory recall or seizure of our products;
Administrative detention or banning of our products;
Operating restrictions, partial suspension or total shutdown of production;
Refusing our request for 510(k) clearance or pre-market approval of new product versions;
Revocation of 510(k) clearance or pre-market approvals previously granted; and
Criminal penalties.

International Regulation

International sales of medical devices are subject to foreign government regulations, which vary substantially from country to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for U.S. Food and Drug Administration approval, and the requirements may differ significantly.

The European Union has adopted legislation, in the form of directives to be implemented in each member state, concerning the regulation of medical devices within the European Union. The directives include, among others, the Medical Device Directive that establishes standards for regulating the design, manufacture, clinical trials, labeling, and vigilance reporting for medical devices. Our PURE EP system may be affected by this legislation. Under the European Union Medical Device Directive, medical devices are classified into four classes, I, IIa, IIb, and III, with class I being the lowest risk and class III being the highest risk. Under the Medical Device Directive, a competent authority is nominated by the government of each member state to monitor and ensure compliance with the Medical Device Directive. The competent authority of each member state then designates a notified body to oversee the conformity assessment procedures set forth in the Medical Device Directive, whereby manufacturers demonstrate that their devices comply with the requirements of the Medical Device Directive and are entitled to bear the CE mark. CE is an abbreviation for Conformité Européenne (or European Conformity) and the CE mark, when placed on a product, indicates compliance with the requirements of the applicable directive. Medical devices properly bearing the CE mark may be commercially distributed throughout the European Union. Failure to obtain the CE mark will preclude us from selling the PURE EP System and related products in the European Union.

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Employees

As of August 24 , 2017, we had 12 full-time employees. Additionally, we use consultants as needed to perform various specialized services. None of our employees are represented under a collective bargaining agreement.

Properties

Our headquarters are located in Minneapolis, Minnesota and our research and development offices are in Los Angeles, California. We lease our office space in both locations.  Because we do not have any manufacturing requirements at this time, we believe our current space is sufficient to meet our current needs.

Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating result.

There are no material proceedings in which any of our directors, officers or affiliates or any registered or beneficial shareholder of more than 5% of our common stock is an adverse party or has a material interest adverse to our interest.


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EXECUTIVE OFFICERS AND DIRECTORS
 
The following table sets forth information regarding our executive officers and the members of our board of directors. 
 
Name
 
Age
 
Position with the Company
Kenneth L. Londoner
 
50
 
Chief Executive Officer, Executive Chairman and Director
Steve Chaussy
 
63
 
Chief Financial Officer
Donald E. Foley
 
65
 
Director
Roy T. Tanaka
 
69
 
Director
Jerome Zeldis, M.D, Ph.D.
 
67
 
Director
Patrick J. Gallagher
 
52
 
Director
Seth H. Z. Fischer
 
61
 
Director
Jeffrey F. O’Donnell, Sr.
 
57
 
Director
David Weild IV
 
60
 
Director
 
Directors are elected at each annual meeting of our stockholders and hold office until their successors are elected and qualified or until their earlier resignation or removal. Officers are appointed by our board of directors and serve at the discretion of the board of directors.
 
Biographical Information

Kenneth L. Londoner. Mr. Londoner has served as our director since February 2009,   as our executive chairman since November 2013 and our chief executive officer since July 2017. He previously served as our chairman and chief executive officer from February 2009 to September 2013. Mr. Londoner has served as the managing partner of Endicott Management Partners, LLC, a firm dedicated to assisting emerging growth companies in their corporate development, since February 2010. From April 2007 to October 2009, he served as executive vice president – corporate business development and senior director of business development and, from November 2009 to December 2010, he served as a consultant to NewCardio, Inc., a medical device designer and developer. Mr. Londoner also served as a director of chatAND Inc. from January 2012 to April 2015. Mr. Londoner is a co-founder and board member of Safe Ports Holdings, Charleston, South Carolina. Mr. Londoner also served as a director of MedClean Technologies, Inc. from November 2008 to September 2010. Mr. Londoner was an investment officer and co-manager of the Seligman Growth Fund, Seligman Capital Fund, and approximately $2 billion of pension assets at J & W Seligman & Co, Inc. in New York from 1991 to 1997. Mr. Londoner graduated from Lafayette College in 1989 with a degree in economics and finance and received his MBA from New York University’s Leonard N. Stern School of Business in 1994.We believe that Mr. Londoner’s extensive experience in financial and venture capital matters, as well as his intimate knowledge of our company as its co-founder make him an asset to our board of directors.

Steve Chaussy. Mr. Chaussy has served as our chief financial officer on a part time basis since May 2011. Since 2005, Mr. Chaussy has been the sole proprietor of Anna & Co., Inc., a consulting company that offers services to small publicly traded companies. Anna & Co., Inc. provides general financial and accounting services, with a special emphasis towards SEC reporting and compliance, to companies that lack sufficient resources to hire full-time employees to provide such services. From 2001 to 2005, Mr. Chaussy provided services as both a chief financial officer and as a consultant to small publicly traded companies. Prior to 2001, Mr. Chaussy served as chief financial officer for a large private distribution and wholesaling company, where he gained international experience. Mr. Chaussy is a graduate of Virginia Polytechnic Institute and State University and is a licensed certified public accountant in Virginia, California and Florida.

Donald E. Foley. Mr. Foley has served as our director since October 2015. Mr. Foley was chairman of the board and chief executive officer of Wilmington Trust Corporation from 2010-2011. Prior to Wilmington Trust Corporation, Mr. Foley was senior vice president, treasurer and director of tax for ITT Corporation, a supplier of advanced technology products and services. Mr. Foley currently serves on the board of directors of AXA Equitable EQAT Mutual Funds and is an advisory board member of M&T Corporation Trust and Investment Committee. In addition, Mr. Foley served on the boards of directors of M&T Corporation from 2011-2012 and of Wilmington Trust Company and Wilmington Trust Corporation from 2007-2011. Mr. Foley holds an M.B.A. from New York University and a B.A. from Union College. He is also a member of the board of trustees of Burke Rehabilitation Hospital and Burke Medical Research Institute, as well as the W. Burke Foundation. Mr. Foley brings extensive financial, economic, capital markets and executive leadership expertise to our board gained through his successful career on Wall Street and the Fortune 500.
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Roy T. Tanaka. Mr. Tanaka has served as our director since July 2012. From 2004 until his retirement in September 2008, Mr. Tanaka served as the worldwide president of Biosense Webster, Inc., a Johnson & Johnson company, a market and technology leader in the field of electrophysiology. He joined Biosense Webster, Inc. as its U.S. president in 1997. Previously he held a variety of senior management positions at Sorin Biomedical, Inc., including president and chief executive officer, and leadership roles at CooperVision Surgical and Shiley, a division of Pfizer, Inc. He currently serves on the boards of directors of Coherex Medical, Inc. and Advanced Cardiac Therapeutics Inc., a company using electrophysiology to develop technology to measure the temperature in a lesion during cardiac ablation procedures, and VytronUS Inc. In addition, Mr. Tanaka served as a director of Volcano Corporation until May 2014 and Tomo Therapy until its acquisition in June 2011. Mr. Tanaka brings broad experience in executive leadership in the medical device field. His operational expertise and knowledge of the regulatory environment, both in the U.S. and globally, also bring a valuable perspective.

Jerome B. Zeldis, M.D., Ph.D. Dr. Zeldis has served as a director since April 2015. Dr. Zeldis is the chief executive officer of Celgene Global Health and the chief medical officer of Celgene Corporation. Dr. Zeldis has been with Celgene since 1997; prior to his current role, he served as senior vice president of clinical research and medical affairs. Prior to Celgene, Dr. Zeldis worked at Sandoz Research Institute and Janssen Research Institute in both clinical research and medical development. He is currently on the board of the Semorex Corporation, Bionor Pharma, Inc., Mali Health and PTC Corporation and serves as the chairman of the board of directors of Alliqua BioMedical, Inc. Dr. Zeldis attended Brown University for a B.A., M.S., followed by Yale University for a M.Phil., M.D., and Ph.D. in molecular biophysics and biochemistry (immunochemistry). He trained in internal medicine at the UCLA Center for the Health Sciences and Gastroenterology at the Massachusetts General Hospital and Harvard Medical School. He was assistant professor of medicine at the Harvard Medical School, associate professor of medicine at University of California, Davis, clinical associate professor of Medicine at Cornell Medical School and professor of clinical medicine at the Robert Wood Johnson Medical School in New Brunswick, New Jersey. Dr. Zeldis has published 122 peer reviewed articles and 24 reviews, book chapters, and editorials. Dr. Zeldis brings his extensive background in the healthcare industry, as well as his experience in emerging growth companies, which will make him a valuable resource on our board of directors.

Patrick J. Gallagher. Mr. Gallagher has served as our director since July 2014. Mr. Gallagher, MBA, CFA, is an accomplished capital markets executive, advisor, and investor with a distinguished record of success in both the public and private markets. He has nearly 20 years of experience on Wall Street and extensive expertise in alternative investments, capital markets, and marketing. Since September 2014, Mr. Gallagher has served as managing director and head of healthcare sales at Laidlaw & Co. (UK) Ltd. Mr. Gallagher serves as a strategic consultant for Kinex Pharmaceuticals, LLC, a biotechnology firm focused on next-generation therapies in oncology and immunology and was the vice president of business development and investor relations from September 2012 to October 2013. In November 2010, he was appointed by broker Concept Capital, a division of Sanders Morris Harris, as a Managing Director and the head of institutional sales. In 2001, Mr. Gallagher co-founded BDR Research Group, LLC, an independent sell-side research firm specializing in healthcare investing, financing and operations, and served as its chief executive officer until November 2010. Prior to 2001, he held various sales positions at investment and research firms Kidder Peabody, PaineWebber and New Vernon Associates. Mr. Gallagher is a CFA charter holder, received his MBA from Pennsylvania State University and holds a B.S. degree in finance from the University of Vermont. We believe that Mr. Gallagher’s experience in capital markets and marketing, with extensive expertise concentrated in the life sciences space, make him a valuable resource on our board.

Seth H. Z. Fischer. Mr. Fischer has served as our director since May 2013. Since September 2013, Mr. Fischer has served as the chief executive officer and director of Vivus, Inc., a biopharmaceutical company focusing on the treatment of obesity, sleep apnea, diabetes and sexual health. Prior to that, Mr. Fischer served in positions of increasing responsibility with Johnson & Johnson from 1983 until his retirement in 2012. Most recently Mr. Fischer served as Company Group Chairman Johnson & Johnson and Worldwide Franchise Chairman Cordis Corporation from 2008 to 2012, which included responsibility for Cordis and Biosense Webster, and as Company Group Chairman North America Pharmaceuticals from 2004 to 2007, which included responsibility for Ortho-McNeil Pharmaceuticals, Janssen and Scios. Since 2013, Mr. Fischer has served as an advisor of MedHab, LLC, a medical device limited liability company. From April 2013 to September 2013, Mr. Fischer served on the board of directors of Trius Therapeutics, Inc., a public pharmaceutical company, until it was acquired by Cubist Pharmaceuticals, now a wholly owned subsidiary of Merck & Co., Inc. We believe that Mr. Fischer’s extensive executive experience in a major health care company and his specific experience in launching and growing new pharmaceutical products make him an ideal member of our board.
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Jeffrey F. O’Donnell, Sr. Mr. O’Donnell has served as our director since February 2015; he had previously served as a director from October 2011 until February 2014. Mr. O’Donnell has extensive experience in the Healthcare industry, merging a solid, traditional corporate background with emerging growth experience. Jeff brings more than 20 years of Board and Chief Executive experience running emerging medical device firms. Businesses under his direct leadership have achieved over $1.5 Billion in value creation from initial public offering of stock or mergers and acquisitions. Currently, Jeff is the President and CEO of Trice Medical. Trice is an emerging growth medical device company developing optical needles used by orthopedic surgeons to diagnose soft tissue damage of joints. In 2008, Jeff started and ran Embrella Cardiovascular, a medical device startup company, which was sold in 2011 to Edwards Lifesciences (NYSE: EW). Prior to Embrella Cardiovascular, Jeff served as President and CEO of PhotoMedex (NASDAQ: PHMD) from 1999 to 2009. Prior to PhotoMedex, Jeff was the President and CEO of Cardiovascular Dynamics. His team took CCVD public on NASDAQ in June of 1996 and purchased Radiance Medical Systems and Endologix (NASDAQ: ELGX). From 1994 to 1995 Jeff held the position of President and CEO of Kensey Nash Corporation (NASDAQ: KNSY). Additionally, he has held several senior sales and marketing management positions at Boston Scientific Corporation, Guidant Corporation and with Johnson & Johnson’s Orthopedic Division. In 2005, Jeff was named LifeSciences CEO of the Year by Price Waterhouse Coopers. In 2011, Jeff was named the Greater Philadelphia Emerging Entrepreneur Of The Year by Ernst & Young. Jeff is a previous director for Cardiac Science (7 yrs.) and Endologix (12 yrs.); he also serves as Chairman of the Board of Strata Skin Sciences (NASDAQ: SSKN). In 2016 he joined the Accel Board of AdvaMed; he is an observer on the Membership, Ethics, and Technology and Regulatory committees of the AdvaMed Board. Jeff is a graduate of LaSalle University in Philadelphia earning a B.S. in Business Administration. Mr. O’Donnell brings his experience in the healthcare industry and cardiovascular space, along with his experience with emerging growth companies, which will make him a valuable member of our board of directors.

David Weild IV. Mr. Weild has served as a director since May 2015. Mr. Weild is founder, chairman and CEO of Weild & Co., Inc., parent company of the investment banking firm Weild Capital, LLC. Prior to Weild & Co., Mr. Weild was vice chairman of NASDAQ, president of PrudentialSecurities.com and head of corporate finance and equity capital markets at Prudential Securities, Inc. Mr. Weild holds an M.B.A. from the Stern School of Business and a B.A. from Wesleyan University. Mr. Weild is currently on the board of PAVmed. From September 2010 to June 2011, Mr. Weild served on the board of Helium.com, until it was acquired by R.R. Donnelly & Sons Co. Since 2003, Mr. Weild has been chairman of the board of the 9-11 charity Tuesday’s Children. Mr. Weild brings extensive financial, economic, stock exchange, capital markets, and small company expertise to the Company gained throughout his career on Wall Street.
 
Family Relationships
 
There are no family relationships among any of our officers or executive officers. 
 
Independent Directors

Our board of directors has determined that each of Roy T. Tanaka, David Weild IV, Patrick J. Gallagher, Donald E. Foley, Seth H. Z. Fischer, Jerome B. Zeldis and Jeffrey F. O’Donnell, Sr. is independent within the meaning of Rule 5605(a)(2) of the NASDAQ Listing Rules and the rules and regulations promulgated by the Securities and Exchange Commission.

Committees of the Board of Directors

Our board of directors has established an audit committee, a nominating and corporate governance committee and a compensation committee, each of which has the composition and responsibilities described below.

Audit Committee

Our audit committee is currently comprised of Messrs. Weild, Gallagher and O’Donnell, each of whom our board has determined to be financially literate and qualifies as an independent director under Section 5605(a)(2) and Section 5605(c)(2) of the rules of the NASDAQ Stock Market.  Mr. Weild is the chairman of our audit committee.  In addition, Mr. Weild qualifies as a financial expert, as defined in Item 407(d)(5)(ii) of Regulation S-K.
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Nominating and Corporate Governance Committee

Our nominating and corporate governance committee is currently comprised of Dr. Zeldis and Messrs. Foley and Tanaka, each of whom qualifies as an independent director under Section 5605(a)(2) of the rules of the NASDAQ Stock Market.  Dr. Zeldis is the chairman of our nominating and corporate governance committee.

Compensation Committee

Our compensation committee is currently comprised of Messrs. O’Donnell, Tanaka and Fischer, each of whom qualifies as an independent director under Section 5605(a)(2) of the rules of the NASDAQ Stock Market, an “outside director” for purposes of Section 162(m) of the Internal Revenue Code and a “non-employee director” for purposes of Section 16b-3 under the Securities Exchange Act of 1934, as amended, and does not have a relationship to us which is material to his ability to be independent from management in connection with the duties of a compensation committee member, as described in Section 5605(d)(2) of the rules of the NASDAQ Stock Market.  Mr. O’Donnell is the chairman of our compensation committee.

Code of Ethics

We have adopted a code of business conduct and ethics that applies to our officers, directors and employees, including our principal executive officer, principal financial officer and principal accounting officer. The full text of our Code of Business Conduct and Ethics is published on the Investors section of our website at www.biosigtech.com.  We intend to disclose any future amendments to certain provisions of the Code of Business Conduct and Ethics, or waivers of such provisions granted to executive officers and directors, on this website within four business days following the date of any such amendment or waiver.

EXECUTIVE COMPENSATION
Summary Compensation Table

The following table provides certain summary information concerning compensation, for our last two fiscal years awarded to, earned by or paid to our named executive officers: (i) Kenneth L. Londoner, our chief executive officer, executive chairman and member of our board, (ii) Gregory D. Cash, our former chief executive officer and former member of our board and (iii) Steven Chaussy, our chief financial officer.

Name and principal position
 
Year
 
Salary
($)
   
Bonus
($)
   
Stock Awards
($) (1)
   
Option
Awards ($)
   
Nonequity Incentive Plan Compensation ($)
   
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)
   
All Other
Compensation
($)
   
Total
($)
 
Kenneth L. Londoner, Chief Executive Officer, Executive Chairman and Director (6)
 
2016
   
315,000
     
-
     
538,940
     
(1)
     
-
     
-
     
-
     
853,940
 
   
2015
   
368,052
     
-
     
56,000
     
(2)
     
-
     
-
     
-
     
424,052
 
Gregory D. Cash, President, Former Chief Executive Officer and Director
 
2016
   
325,000
             
259,221
     
(3)
     
-
     
-
     
-
     
555,413
 
   
2015
   
385,834
             
56,000
     
(2)
     
-
     
-
     
-
     
441,834
 
Steven Chaussy, Chief Financial Officer
 
2016
   
110,000
             
386,000
     
(4)
     
-
     
-
     
-
     
496,000
 
   
2015
   
102,500
             
336,000
     
(5)
     
-
     
-
     
-
     
438,500
 

(1)
Represents (i) a common stock award of 250,000 shares granted May 4, 2016 and (ii) a common stock award of 41,500 shares granted December 8, 2016.
(2)
Represents a common stock award of 25,000 shares granted on February 24, 2015.
(3)
Represents (i) a stock option granted May 18, 2016 for the purchase of 150,000 shares of common stock at $1.84 for ten years, exercisable immediately and (ii) a common stock award of 20,875 shares granted December 8, 2016.
(4)
Represents a common stock award of 200,000 shares granted May 4, 2016.
(5)
Represents a restricted stock award of 150,000 shares granted on February 24, 2015.
(6)
Mr. Londoner served as our Executive Chairman and Director through the entirety of our last two fiscal years.  Mr. Londoner has served as our Chief Executive Officer since July 31, 2017.
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Agreements with Executive Officers and Change-In-Control Arrangements
 
Kenneth L. Londoner
 
We entered into an employment agreement with Kenneth Londoner on March 1, 2013.  The employment agreement terminated on March 1, 2015, after which Mr. Londoner’s employment became on an at-will basis.  Prior to its termination, Mr. Londoner’s employment agreement required that Mr. Londoner receive an annual base salary of $225,000 and be eligible for annual discretionary bonuses and equity-based incentives, as our board may determine.  Mr. Londoner was also subject to non-competition and non-solicitation obligations, whereby, for a period lasting until one year after the termination of his employment with us, Mr. Londoner was not permitted to, directly or indirectly, (i) in any state in the U.S. or country that we conduct business and for which Mr. Londoner had responsibility, work for, invest in, provide financing to or establish a business that competes with our business, other than an exception that permits limited investment in publicly-traded competitors, (ii) solicit business from or do business with any customer, client, manufacturer or vendor with whom we did business or who we solicited within the preceding two years, and (iii) solicit, engage or hire any person employed by or who served as a consultant to us within the preceding twelve months. In September 2013, Mr. Londoner resigned as our chief executive officer, but remained with us in an executive role.  In November 2013, Mr. Londoner became our executive chairman.  While Mr. Londoner’s employment agreement expired on March 1, 2015, we intend to continue to compensate Mr. Londoner pursuant to the terms of his former employment agreement for his contributions with respect to corporate finance, investor relations, and business development.
 
Prior to entering into his employment agreement, Mr. Londoner was an at-will employee.
 
Gregory D. Cash
 
On July 15, 2014, we entered into an employment agreement with Gregory Cash. The employment agreement has an initial term of three years that expires on July 15, 2017. Under the employment agreement, Mr. Cash is entitled to an annual base salary of $275,000. On March 31, 2015, upon our closing an equity or equity-linked financing with proceeds of at least $3.5 million (a “Qualified Financing”), Mr. Cash’s annual base salary automatically increased to $325,000 and he received (i) a one-time payment equal to the difference between the amount he would have earned if his base salary was $325,000 and the amount he actually earned at his base salary of $275,000 for the time period from the effective date of the agreement until the closing of such Qualified Financing and (ii) a one-time cash bonus of $30,000. Mr. Cash is also eligible to receive an annual bonus equal to at least 50% of the sum of his base salary and one-time payment, based on the achievement of reasonable performance criteria to be determined by the board in consultation with Mr. Cash within 90 days of the effective date.
 
In accordance with Mr. Cash’s employment agreement, on July 15, 2014, we granted Mr. Cash an incentive stock option to purchase 1,265,769 shares of common stock, made pursuant to an Incentive Stock Option Agreement. The option has an exercise price of $2.21, which was the fair market value of our common stock on the date of grant, and a term that expires ten years from the date of grant. The option will vest as follows (i) 542,473 shares of common stock will vest in eleven equal installments of 45,206 shares of common stock and one final installment of 45,207 shares of common stock on a quarterly basis with the first installment vesting on the effective date of his employment agreement and subsequent installments vesting every three months thereafter; (ii) 180,824 shares of common stock will vest immediately upon completion of a Qualified Financing; (iii) 180,824 shares of common stock will vest upon the listing of our common stock on a recognized U.S. national securities exchange (i.e., NYSE, MKT LLC, The Nasdaq Stock Market LLC or the New York Stock Exchange); (iv) 180,824 shares of common stock will vest upon the 510(k) clearance or any other type of clearance deemed necessary by the FDA of our PURE EP technology platform; and (v) 180,824 shares of common stock will vest upon our achieving a market capitalization of $150,000,000 and maintaining such market capitalization for at least 90 consecutive calendar days. 

45




In connection with the termination of Mr. Cash’s employment with the Company, we entered into a General Release and Severance Agreement (the “Severance Agreement”) with Mr. Cash, pursuant to which Mr. Cash’s employment with the Company was terminated effective as of June 1, 2017.  Pursuant to the Severance Agreement, the Company agreed, among other things, to: (i) make severance payments in an amount equal to Mr. Cash’s base salary, less applicable taxes and other withholdings, through July 14, 2017, payable in equal installments in accordance with the normal payroll policies of the Company, with the first installment being paid on the Company’s first regular pay date on or after the fortieth (40th) day following the Separation Date, which initial payment shall include all installment amounts that would have been paid during the first forty (40) days following the Separation Date had installments commenced immediately following the Separation Date; (ii) provide through December 31, 2017, or until Mr. Cash becomes eligible for comparable employer sponsored health plan benefits, whichever is sooner, all health plan benefits to which Mr. Cash was entitled prior to the Separation Date, pursuant to Mr. Cash’s election of COBRA with the Company and Mr. Cash paying the relative costs therefor in the same proportion as existed while Mr. Cash was an active employee of the Company; (iii) issue 100,000 shares of restricted stock to Mr. Cash, subject to the terms and conditions of the BioSig Technologies, Inc. 2012 Equity Incentive Plan and the Award Agreement (as described below); and (iv) transfer to Mr. Cash title to certain equipment previously issued to him.
 
In connection with the termination of Mr. Cash’s employment with the Company, on May 31, 2017, the Company also entered into a Restricted Stock Award Agreement (the “Award Agreement”) with Mr. Cash, pursuant to which the Company issued 100,000 shares of restricted stock (the “Severance Shares”) to Mr. Cash, subject to the terms of the Award Agreement.
 
Pursuant to the Award Agreement, the Severance Shares will: (i) vest 100% as of the date of grant; (ii) be subject to forfeiture immediately upon any revocation by Mr. Cash of his release of claims against the Company under the Severance Agreement; and (iii) be subject to a one-year lock-up period, during which Mr. Cash will not be permitted to sell, transfer, pledge, hypothecate, margin, assign or otherwise encumber any of the Severance Shares.
 
Outstanding Equity Awards at Fiscal Year End
 
The following table sets forth information regarding equity awards that have been previously awarded to each of the named executive officers and which remained outstanding as of December 31, 2016.

Name
 
Number of Securities underlying Unexercised Options (#) Exercisable
   
Number of Securities underlying Unexercised Options (#) Unexercisable
   
Option Exercise Price ($/Sh)
 
Option Expiration Date
 
Number of Shares or Units of Stock that have not Vested (#)
   
Market Value of Shares of Units That Have Not Vested ($)
   
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#)
   
Equity Incentive Plan Awards: Market of Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($)
 
Gregory D
   
632,884
     
632,885
   
$
2.21
 
7/24/2024
   
-
   
$
-
     
-
   
$
-
 
Cash(1)
   
150,000
     
-
   
$
1.84
 
5/18/2016
   
-
   
$
-
     
-
   
$
-
 
                                                           
Kenneth
   
250,000
     
-
   
$
2.09
 
1/16/2020
   
-
   
$
-
     
-
   
$
-
 
Londoner
                                                         
                                                           
Steven
   
30,000
     
-
   
$
2.09
 
1/16/2020
   
-
   
$
-
     
-
   
$
-
 
Chaussy
   
30,000
     
-
   
$
2.09
 
6/11/2023
   
-
   
$
-
     
-
   
$
-
 


(1)
Mr. Cash’s employment with the Company was terminated effective June 1, 2017.


46

 
 
BioSig Technologies, Inc. 2012 Equity Incentive Plan
 
On October 19, 2012, our board of directors adopted the BioSig Technologies, Inc. 2012 Equity Incentive Plan, which provides for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants, to be granted from time to time as determined by our board of directors or its designees. An aggregate of 15,186,123 shares of common stock are reserved for issuance under the BioSig Technologies, Inc. 2012 Equity Incentive Plan.  As of August 24 , 2017, the number of options and restricted stock awards granted under the BioSig Technologies, Inc. 2012 Equity Incentive Plan are 11,908,485.

Equity Compensation Plan Information
As of December 31, 2016

Plan category
 
Number of
securities to
be issued
upon
exercise of
outstanding
options
(a)
   
Weighted-
average
exercise
price of
outstanding
options
(b)
   
Securities remaining
available for future
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
 
Equity compensation plans approved by security holders
   
8,245,190
   
$
2.24
     
3,318,513
 
Equity compensation plans not approved by security holders
   
-
     
-
     
-
 
Total
   
8,245,190
     
2.24
     
3,318,513
 

DIRECTOR COMPENSATION
 
The following table sets forth summary information concerning the total compensation paid to our non-employee directors during the fiscal year ended December 31, 2016 for services to our company.
 
Name
 
Fees Earned
or Paid in
Cash ($)
   
Equity
Awards ($)
   
Total ($)
 
Donald E. Foley
 
$
-
   
$
27,556
 (1)  
$
27,556
 
Roy T. Tanaka
 
$
-
   
$
28,390
 (2)  
$
28,390
 
Jerome Zeldis, M.D. Ph.D.
 
$
-
   
$
56,112
 (3)  
$
56,112
 
Patrick J Gallagher
 
$
-
   
$
27,556
 (1)  
$
27,556
 
Jeffrey F O’Donnell, Sr
 
$
-
   
$
56,440
 (4)  
$
56,440
 
David Weild, IV
 
$
-
   
$
56,112
 (3)  
$
56,112
 
Total:
 
$
-
   
$
252,166
   
$
252,166
 

(1)
Represents (i) a stock option granted December 22, 2016 for the purchase of 25,000 shares of common stock, vesting immediately, at an exercise price of $1.36 per share and termination date of December 22, 2026
(2)
Represents (i) a common stock award of 20,875 shares granted on December 8, 2016.
(3)
Represents (i) a stock option granted December 22, 2016 for the purchase of 50,000 shares of common stock, vesting immediately, at an exercise price of $1.36 per share and termination date of December 22, 2026
(4)
Represents (i) a common stock award of 41,500 shares granted on December 8, 2016.


47



SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Common Stock

The following table sets forth information with respect to the beneficial ownership of our common stock as of August 24 , 2017:

by each person who is known by us to beneficially own more than 5.0% of our common stock;

by each of our named executive officers and directors; and

by all of our named executive officers and directors as a group.

The percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security.  With respect to the Series C Preferred Stock and warrants held by the beneficial owners listed below, there exist contractual provisions limiting conversion and exercise to the extent such conversion or exercise would cause such beneficial owner, together with its affiliates or members of a “group,” to beneficially own a number of shares of common stock which would exceed from 4.99% to 9.99% of our then outstanding shares of common stock following such conversion or exercise. The shares and percentage ownership of our outstanding shares indicated in the table below do not give effect to these limitations.  Except as indicated in the footnotes to this table, to our knowledge and subject to community property laws where applicable, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned and each person’s address is c/o BioSig Technologies, Inc., 8441 Wayzata Blvd., Suite 240, Minneapolis, Minnesota 55426.

Name of Beneficial Owner
 
Number of Shares
Beneficially Owned (1)
   
Percentage of Common Stock Owned (1)(2)
 
             
5% Owners
           
Lora Mikolaitis
   
3,486,224
(3)
   
13.13
%
                 
David Cherry
   
1, 758 ,639
(4)
   
6. 60
%
                 
Ramachandra Malya
   
1,595,000
(5)
   
5.96
%
                 
Officers and Directors
               
Kenneth L. Londoner
   
3,874,360
( 6 )
   
14. 42
%
                 
Roy T. Tanaka
   
944,802
( 7 )
   
3. 47
%
                 
Seth H. Z. Fischer
   
550,944
( 8 )
   
2. 05
%
                 
Patrick J. Gallagher
   
256,224
( 9 )
   
*
 
                 
Jeffrey F. O’Donnell, Sr.
   
529,800
( 10 )
   
1.99
%
                 
Steve Chaussy
   
694,187
( 11 )
   
2.63
%
                 
Jerome B. Zeldis, M.D., Ph.D.
   
654,356
( 12 )
   
2. 44
%
                 
David Weild IV
   
350,000
( 13 )
   
1. 31
%
                 
Donald E. Foley
   
516,667
( 14 )
   
1. 94
%
                 
All directors and executive officers as a group (9 persons)
   
8, 371, 340
     
31. 23
%

* Less than 1%
48

 
(1)
Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assume the exercise of all options and other securities convertible into common stock beneficially owned by such person or entity currently exercisable or exercisable within 60 days of August 24 , 2017, except as otherwise noted. Shares issuable pursuant to the exercise of stock options and other securities convertible into common stock exercisable within 60 days are deemed outstanding and held by the holder of such options or other securities for computing the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person.

(2)
These percentages have been calculated based on 26,295 ,411 shares of common stock outstanding as of August 24 , 2017.

(3)
Comprised of (i) 43,750 shares of common stock, (ii) options to purchase 250,000 shares of common stock that are currently exercisable, and (iii) 3,192,474 shares of common stock held by Miko Consulting Group, Inc. Lora Mikolaitis has sole voting and dispositive power over the securities held for the account of Miko Consulting Group, Inc.

(4)
Comprised of (i) 10,000 shares of common stock and warrants to purchase 5,000 shares of common stock, (ii) 316,642 shares of common stock and warrants to purchase 158,321 shares of common stock held by Thomas David Cherry as Trustee of Cherry Family Trust, a trust for which David Cherry is deemed the beneficial owner, and (iii) 845 ,784 shares of common stock and warrants to purchase 422 ,892 shares of common stock held by Cherry Pipes Ltd., David Cherry has sole voting and dispositive power over the securities held for the account of Cherry Pipes Ltd.

(5)
Comprised of (i) 1,130,000 shares of common stock and (ii) warrants to purchase 465,000 shares of common stock.

(6 )
Comprised of (i) 370,501 shares of common stock directly held by Mr. Londoner, (ii) 2,924,230 shares of common stock held by Endicott Management Partners, LLC, an entity for which Mr. Londoner is deemed the beneficial owner, (iii) warrants to purchase 329,629 shares of common stock, and (v) options to purchase 250,000 shares of common stock that are currently exercisable.

( 7 )
Comprised of (i) 50,875 shares of common stock and (ii) options to purchase 893,927 shares of common stock that are currently exercisable.

( 8 )
Comprised of (i) 25,000 shares of common stock and (ii) options to purchase 525,944 shares of common stock that are currently exercisable.

( 9 )
Comprised of (i) 45,000 shares of common stock, (ii) options to purchase 200,000 shares of common stock that are currently exercisable, and (iii) warrants to purchase 11,224 shares of common stock.

( 10 )
Comprised of (i) 159,000 shares of common stock and (ii) options to purchase 370,800 shares of common stock that are currently exercisable.

( 11 )
Comprised of (i) 634,187 shares of common stock and (ii) options to purchase 60,000 shares of common stock that are currently exercisable.

( 12 )
Comprised of (i) 137,245 shares of common stock, (ii) options to purchase 400,000 shares of common stock that are currently exercisable, (iii) shares of Series C Preferred Stock that are convertible into approximately 48,542 shares of common stock including dividend shares, and (iv) warrants to purchase 68,569 shares of common stock.

( 13 )
Comprised of options to purchase 350,000 shares of common stock that is currently exercisable.

( 14 )
Comprised of (i) 200,000 shares of common stock, (ii) options to purchase 216,667 shares of common stock that are currently exercisable or exercisable within 60 days of August 24 , 2017 and (iii) warrants to purchase 100,000 shares of common stock.

49

 
SELLING STOCKHOLDERS
 
Up to 5,467,424 shares of our common stock are currently being offered by the selling stockholders under this prospectus. This reflects the sum of (a) shares of our common stock and (b) the number of shares of common stock into which the warrants are exercisable.   All of the shares of common stock and warrants were purchased by the selling stockholders in seven separate closings between October 2016 and March 2017 pursuant to the same unit purchase agreement (the “Private Placement”), except for (i) the warrants held by employees of Laidlaw & Co. (UK) Ltd., which were issued as part of the compensation payable to Laidlaw & Co. (UK) Ltd. for serving as our placement agent in connection with the Private Placement and (ii) the warrants held by employees of Laidlaw & Co. (UK) Ltd., which were issued as part of the compensation payable to Laidlaw & Co. (UK) Ltd. for serving as our placement agent in connection with ten separate closings between October 2015 and April 2016 pursuant to the same securities purchase agreement (collectively, the “Employee Warrants”).  The Employee Warrants were originally issuable to Laidlaw & Co. (UK) Ltd under the terms of Laidlaw & Co. (UK) Ltd.’s engagement letter with us.  However, prior to their issuance, Laidlaw & Co. (UK) Ltd. assigned its rights to the Employee Warrants to certain designated employees.  Rather than issue such Employee Warrants first to Laidlaw & Co. (UK) Ltd., and then immediately process an assignment to the designated Laidlaw & Co. (UK) Ltd. employees, for administrative convenience, we issued the Employee Warrants directly to Laidlaw & Co. (UK) Ltd.’s designated employees.

The selling stockholders that participated in the Private Placement paid a price per unit equivalent to $1.50 for one share of common stock and a three-year warrant to purchase up to 50% of a share of common stock. In addition, due to our failure to fulfill our obligations under the registration rights agreement entered into with the participants in the Private Placement, we owe such holders liquidated damages in an amount equal to 1.0% of the aggregate purchase price paid by such holders per month for each monthly period beginning on May 15, 2017, provided that the maximum aggregate liquidated damages due under the registration rights agreements in connection with the Private Placement shall be 6% of the aggregate purchase price paid by the purchasers. Because we have not paid such liquidated damages, we are also obligated to pay interest of 18% per annum, accruing daily, on such unpaid amounts.

The shares of common stock referred to above are being registered to permit public sales of the shares, and the selling stockholders may offer the shares for resale from time to time pursuant to this prospectus.  The selling stockholders may also sell, transfer or otherwise dispose of all or a portion of their shares in transactions exempt from the registration requirements of the Securities Act of 1933, as amended, or pursuant to another effective registration statement covering those shares.

The table below sets forth certain information regarding the selling stockholders and the shares of our common stock offered by them in this prospectus. The selling stockholders have not had a material relationship with us within the past three years other than as described in the footnotes to the table below or as a result of their acquisition of our shares or other securities. To our knowledge, subject to community property laws where applicable, each person named in the table has sole voting and investment power with respect to the shares of common stock set forth opposite such person’s name.  None of the selling stockholders are broker-dealers or affiliates of broker-dealers, unless otherwise noted.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission.   With respect to the warrants held by the selling stockholders, there exist contractual provisions limiting conversion and exercise to the extent such conversion or exercise would cause such selling stockholder, together with its affiliates or members of a “group,” to beneficially own a number of shares of common stock which would exceed from 4.99% to 9.99% of our then outstanding shares of common stock following such conversion or exercise. The shares and percentage ownership of our outstanding shares indicated in the table below do not give effect to these limitations. 

50


   
Ownership Before Offering
     
Ownership After Offering
 
Selling Stockholder
 
Number of shares of common stock
beneficially owned (1)
     
Number of
shares offered
     
Number of shares of
common stock beneficially owned (1)
   
Percentage of
common stock beneficially owned (1)
 
American European Insurance Co (2)
   
100,002
 
(3)
   
50,001
 
(4)
   
50,001
 
(4)
*
 
N&F 774 Trust (5)
   
25,001
 
(6)
   
25,001
 
(6)
   
-
   
*
 
Nachum & Feige Stein Foundation (7)
   
25,001
 
(8)
   
25,001
 
(8)
   
-
   
*
 
Nachum Stein
   
100,002
 
(9)
   
50,001
 
(10)
   
50,001
 
(10)
*
 
Anthony Leone
   
60,000
 
(11)
   
60,000
 
(11)
   
-
   
*
 
Brandon Huffman
   
30,000
 
(12)
   
30,000
 
(12)
   
-
   
*
 
Cherry Pipes Ltd (13)
   
1, 268 ,676
 
(14)
   
699,680
 
(15)
   
568 ,996
 
(16)
2.15
David Cherry
   
15,000
 
(17)
   
15,000
 
(17)
   
-
   
*
 
Thomas David Cherry as Trustee of Cherry Family Trust
   
474,963
 
(18)
   
149,982
 
(19)
   
324,981
 
(20)
1. 23
Brian Dvorak
   
45,000
 
(21)
   
45,000
 
(21)
   
-
   
*
 
Daniel Cassinelli
   
45,000
 
(22)
   
30,000
 
(23)
   
15,000
 
(24)
*
 
Darshan Anandu
   
45,000
 
(25)
   
45,000
 
(25)
   
-
   
*
 
David Buser
   
142,500
 
(26)
   
40,500
 
(27)
   
102,000
 
(28)
*
 
David Michael York & Gwendeline Teresa York JTWROS
   
50,001
 
(29)
   
50,001
 
(29)
   
-
   
*
 
David P. Lustig II
   
25,500
 
(30)
   
15,000
 
(31)
   
10,500
 
(32)
*
 
David William Taylor
   
49,980
 
(33)
   
49,980
 
(33)
   
-
   
*
 
Dustin & Carol Wilson JTWROS
   
25,001
 
(34)
   
25,001
 
(34)
   
-
   
*
 
Elliot Sabbagh
   
90,000
 
(35)
   
90,000
 
(35)
   
-
   
*
 
Emil Michaels
   
40,001
 
(36)
   
40,001
 
(36)
   
-
   
*
 
Ernest Wickham & Janie A. Wickham JTWROS
   
15,000
 
(37)
   
15,000
 
(37)
   
-
   
*
 
Flying Colors Painting Co (38)
   
215,001
 
(39)
   
65,001
 
(40)
   
150,000
 
(41)
*
 
Frank Costantino
   
15,000
 
(42)
   
15,000
 
(42)
   
-
   
*
 
Gary B. O’Neal
   
22,500
 
(43)
   
22,500
 
(43)
   
-
   
*
 
George F. Sandison and Maureen A. Sandison, as Trustees of the Sandison Family Trust dtd August 27, 2013
   
105,000
 
(44)
   
105,000
 
(44)
   
-
   
*
 
George P. Bancroft
   
45 ,000
 
(45)
   
30,000
 
( 46 )
   
15,000
 
  (47)
*
 
Harsadbhai D. Patel
   
300,000
 
( 48 )
   
300,000
 
( 48 )
   
-
   
*
 
James Bradley
   
15,000
 
( 49 )
   
15,000
 
( 49 )
   
-
   
*
 
James D. Wilson
   
15,000
 
( 50 )
   
15,000
 
( 50 )
         
*
 
James P. McGinley & Elizabeth L. McGinley JTWROS
   
105,000
 
( 51 )
   
105,000
 
( 51 )
   
-
   
*
 
Jeff Baggett
   
28,500
 
( 52 )
   
28,500
 
( 52 )
   
-
   
*
 
Jeff Silver & Andrea Silver JT
   
50,100
 
( 53 )
   
50,100
 
( 53 )
   
-
   
*
 
Johann Onfjord Karason
   
135,000
 
( 54 )
   
75,000
 
( 55 )
   
60,000
 
( 56 )
*
 
John Scelfo
   
100,001
 
( 57 )
   
100,001
 
( 57 )
   
-
   
*
 
Johnson Revocable Trust DTD Feb 13 2000, Todd Johnson & Luann Johnson
   
54,000
 
( 58 )
   
30,000
 
( 59 )
   
24,000
 
( 60 )
*
 
Jonathan Glen Buckley
   
15,000
 
( 61 )
   
15,000
 
( 61 )
   
-
   
*
 
Karen Kuhn
   
15,000
 
( 62 )
   
15,000
 
( 62 )
   
-
   
*
 
Kausthab Kumar
   
15,000
 
( 63 )
   
15,000
 
( 63 )
   
-
   
*
 
Kelly Francis
   
15,000
 
( 64 )
   
15,000
 
( 64 )
   
-
   
*
 
Kelly Smith
   
        30,000
 
( 65 )
   
30,000
 
( 65 )
   
-
   
*
 
Kevin Dvorak
   
45,000
 
( 66 )
   
45,000
 
( 66 )
   
-
   
*
 
Margus Ehatamm
   
24,000
 
( 67 )
   
24,000
 
( 67 )
   
-
   
*
 
Marmat, LLC ( 68 )
   
15,000
 
( 69 )
   
15,000
 
( 69 )
   
-
   
*
 
MFC of New York ( 70 )
   
50,001
 
( 71 )
   
50,001
 
( 71 )
   
-
   
*
 
Michael Engdall & Susan Engdall JTWROS
   
99,880
 
( 72 )
   
10,500
 
( 73 )
   
89,380
 
( 74 )
*
 

51



Michelle M. Herring
   
15,000
 
( 75 )
   
15,000
 
( 75 )
   
-
   
*
 
Mohammadreza Sadeghi & Shahrzad M. Montazeri JTWROS
   
45,000
 
( 76 )
   
45,000
 
( 76 )
   
-
   
*
 
Nicholas Horniman
   
22,461
 
( 77 )
   
22,461
 
( 77 )
         
*
 
Nirmal Roy
   
100,001
 
( 78 )
   
110,001
 
( 78 )
         
*
 
Patrick Bradley
   
30,000
 
( 79 )
   
30,000
 
( 79 )
         
*
 
Paul Stamatis, Jr.
   
150,026
 
( 80 )
   
150,026
 
( 80 )
         
*
 
Prakash Roy
   
37,500
 
( 81 )
   
37,500
 
( 81 )
         
*
 
Ramachandra Malya
   
1, 595 ,000
 
( 82 )
   
1,245,000
 
( 83 )
   
350,000
 
  (84)
1.33%
 
Richard Kim
   
99,990
 
( 85 )
   
99,990
 
( 85 )
         
*
 
Robert C Jamo
   
25,050
 
( 86 )
   
25,050
 
( 86 )
         
*
 
Robert Clinton Marsh
   
7,500
 
( 87 )
   
7,500
 
( 87 )
         
*
 
Rohith Malya & Niramin Malya JTWROS
   
15,000
 
( 88 )
   
15,000
 
( 88 )
         
*
 
Sanjay Naik & Nandini Anandu JTWROS
   
15,000
 
( 89 )
   
15,000
 
( 89 )
         
*
 
Saumya Sharma & Priyanka Sharma
   
90,000
 
( 90 )
   
90,000
 
( 90 )
         
*
 
Scott L. Byer
   
65,499
 
( 91 )
   
25,500
 
( 92 )
   
39,999
 
( 93 )
*
 
Stephen Card
   
15,000
 
( 94 )
   
15,000
 
( 94 )
         
*
 
Úlfar Haraldsson
   
124,945
 
( 95 )
   
49,976
 
( 96 )
   
74,969
 
( 97 )
*
 
William J. Solloway
   
50,001
 
( 98 )
   
50,001
 
( 98 )
         
*
 
William Rabetz
   
108 ,000
 
( 99 )
   
45,000
 
( 100 )
   
63 ,000
 
( 101 )
*
 
William V. Koch
   
151,251
 
( 102 )
   
101,250
 
( 103 )
   
50,001
 
( 104 )
*
 
Yamini N. Patel
   
90,000
 
( 105 )
   
90,000
 
( 105 )
         
*
 
Yaroslav Voznenko
   
22,500
 
( 106 )
   
22,500
 
( 106 )
         
*
 
Patrick Gallagher ( 107 )
   
256,224
 
( 108 )
   
1,224
 
( 109 )
   
255,000
 
( 110 )
*
 
James F Ahern ( 111 )
   
256,458
 
( 112 )
   
86,220
 
( 113 )
   
170,238
 
( 114 )
*
 
Matthew Eitner ( 115 )
   
254,790
 
( 116 )
   
82,500
 
( 117 )
   
172,290
 
( 118 )
*
 
Buff Trust ( 119 )
   
151,639
 
( 120 )
   
67,187
 
( 120 )
   
84,452
 
( 120 )
*
 
Garnet Trust ( 121 )
   
151,639
 
( 122 )
   
67,187
 
( 122 )
   
158,371
 
( 122 )
*
 
Laidlaw Holdings Ltd ( 123 )
   
        30,865
 
( 124 )
   
21,238
 
( 124 )
   
9,627
 
( 124 )
*
 
Brian M Robertson ( 125 )
   
8,718
 
( 126 )
   
4,800
 
( 126 )
   
3,918
 
( 126 )
*
 
Kevin R Wilson ( 127 )
   
20,093
 
( 128 )
   
720
 
( 128 )
   
19,373
 
( 128 )
*
 
Richard G Michalski ( 129 )
   
1,726
 
( 130 )
   
180
 
( 130 )
   
1,546
 
( 130 )
*
 
Michael J Murray ( 131 )
   
4,364
 
( 132 )
   
180
 
( 132 )
   
4,184
 
( 132 )
*
 
Michael J Ahern ( 133 )
   
5,320
 
( 134 )
   
3,720
 
( 134 )
   
1,600
 
( 134 )
*
 
James Provenzano ( 135 )
   
1,800
 
( 136 )
   
600
 
( 136 )
   
1,200
 
( 136 )
*
 
Hugh J Marasa Jr ( 137 )
   
12,824
 
( 138 )
   
7,344
 
( 138 )
   
5,480
 
( 138 )
*
 
Jeffrey R Glazer ( 139
   
1,079
 
( 140 )
   
1,079
 
( 140 )
   
-
   
*
 
Devin McCabe ( 141 )
   
3,000
 
( 142 )
   
2,400
 
( 142 )
   
600
 
( 142 )
*
 
Nicholas Sabellico ( 143 )
   
4,126
 
( 144 )
   
2,400
 
( 144 )
   
1,726
 
( 144 )
*
 
Hugh Regan ( 145 )
   
60,329
 
( 146 )
   
42,500
 
( 146 )
   
17,829
 
( 146 )
*
 
Luke Kottke ( 147 )
   
8,451
 
( 148 )
   
7,746
 
( 148 )
   
705
 
( 148 )
*
 
Francis R Smith ( 149 )
   
23,905
 
( 150 )
   
16,192
 
( 150 )
   
7,713
 
( 150 )
*
 
Stephen Hamilton ( 151 )
   
1,500
 
( 152 )
   
1,500
 
( 152 )
   
-
   
*
 
Jayson Russo ( 153 )
   
750
 
( 154 )
   
750
 
( 154 )
   
-
   
*
 
Todd Cirella ( 155 )
   
3,930
 
( 156 )
   
750
 
( 156 )
   
-
   
*
 
David Murray ( 157 )
   
1,500
 
( 158 )
   
1,500
 
( 158 )
   
-
   
*
 



52


* Less than 1%

(1)
In computing the percentage of our common stock beneficially owned by each selling stockholder after the offering, we have assumed the exercise by such selling stockholder of all warrants with respect to those shares being offered by such selling stockholder, and therefore the calculation is based on a number of shares of common stock outstanding comprised of (i)  26,295 ,411  shares of common stock outstanding as of August 24 , 2017 plus (ii) the number of shares offered by the selling stockholder in this offering underlying warrants held by such selling stockholder.  The shares offered by one selling stockholder underlying warrants held by such selling stockholder are not deemed outstanding for the purpose of computing the percentage ownership of any other selling stockholder.

(2)
Nachum Stein, chairman of American European Insurance Co, has sole voting and dispositive power over the securities held for the account of this selling stockholder.

(3)
Includes 33,334 shares of common stock issuable upon the exercise of warrants.

(4)
Includes 16,667 shares of common stock issuable upon the exercise of warrants.

(5)
Nachum Stein, trustee of N&F 774 Trust, has sole voting and dispositive power over the securities held for the account of this selling stockholder.

(6)
Includes 8,334 shares of common stock issuable upon the exercise of warrants.

(7)
Nachum Stein, manager of Nachum & Feige Stein Foundation, has sole voting and dispositive power over the securities held for the account of this selling stockholder.

(8)
Includes 8,334 shares of common stock issuable upon the exercise of warrants.

(9)
Includes 33,334 shares of common stock issuable upon the exercise of warrants.

(10)
Includes 16,667 shares of common stock issuable upon the exercise of warrants .

(11)
Includes 20,000 shares of common stock issuable upon the exercise of warrants.

(12)
Includes 10,000 shares of common stock issuable upon the exercise of warrants.

(13)
Thomas David Cherry, aka David Cherry, managing director of Cherry Pipes Ltd., has sole voting and dispositive power over the securities held for the account of this selling stockholder.

(14)
Includes 422 ,892 shares of common stock issuable upon the exercise of warrants.

(15)
Includes 233,227 shares of common stock issuable upon the exercise of warrants.

(16)
Includes 189 ,665 shares of common stock issuable upon the exercise of warrants.

(17)
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

(18)
Includes 158,321 shares of common stock issuable upon the exercise of warrants.

(19)
Includes 49,994 shares of common stock issuable upon the exercise of warrants.

(20)
Includes 108,327 shares of common stock issuable upon the exercise of warrants.

(21)
Includes 15,000 shares of common stock issuable upon the exercise of warrants.

(22)
Includes 15,000 shares of common stock issuable upon the exercise of warrants.

(23)
Includes 10,000 shares of common stock issuable upon the exercise of warrants.

(24)
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

53


(25)
Includes 15,000 shares of common stock issuable upon the exercise of warrants.

(26)
Includes 47,500 shares of common stock issuable upon the exercise of warrants.

(27)
Includes 13,500 shares of common stock issuable upon the exercise of warrants.

(28)
Includes 34,000 shares of common stock issuable upon the exercise of warrants.

(29)
Includes 16,667 shares of common stock issuable upon the exercise of warrants.

(30)
Includes 8,500 shares of common stock issuable upon the exercise of warrants.

(31)
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

(32)
Includes 3,500 shares of common stock issuable upon the exercise of warrants.

(33)
Includes 16,660 shares of common stock issuable upon the exercise of warrants.

(34)
Includes 8,334 shares of common stock issuable upon the exercise of warrants.

(35)
Includes 30,000 shares of common stock issuable upon the exercise of warrants.

(36)
Includes 13,334 shares of common stock issuable upon the exercise of warrants.

(37)
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

(38)
Dustin Wilson, president of Flying Colors Painting Co., has sole voting and dispositive power over the securities held for the account of this selling stockholder.

(39)
Includes 71,667 shares of common stock issuable upon the exercise of warrants.

(40)
Includes 21,667 shares of common stock issuable upon the exercise of warrants.

(41)
Includes 50,000 shares of common stock issuable upon the exercise of warrants.

(42)
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

(43)
Includes 7,500 shares of common stock issuable upon the exercise of warrants.

(44)
Includes 35,000 shares of common stock issuable upon the exercise of warrants.

(45)
Includes 15,000 shares of common stock issuable upon the exercise of warrants.

(46)
Includes 10,000 shares of common stock issuable upon the exercise of warrants.
 
(47
Includes 5000 shares of common stock issuable upon the exercise of warrants.
 
(48)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.

(49)
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

(50)
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

(51 )
Includes 35,000 shares of common stock issuable upon the exercise of warrants.

( 52 )
Includes 9,500 shares of common stock issuable upon the exercise of warrants.

( 53 )
Includes 16,700 shares of common stock issuable upon the exercise of warrants.

( 54 )
Includes 45,000 shares of common stock issuable upon the exercise of warrants.

( 55 )
Includes 25,000 shares of common stock issuable upon the exercise of warrants.

( 56 )
Includes 20,000 shares of common stock issuable upon the exercise of warrants.

( 57 )
Includes 33,334 shares of common stock issuable upon the exercise of warrants.

54


( 58 )
Includes 18,000 shares of common stock issuable upon the exercise of warrants.

( 59 )
Includes 10,000 shares of common stock issuable upon the exercise of warrants.
 
(60)
Includes 8 ,000 shares of common stock issuable upon the exercise of warrants.

(61)
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

(62)
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

(63)
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

(64)
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

(65)
Includes 10,000 shares of common stock issuable upon the exercise of warrants.

( 66 )
Includes 15,000 shares of common stock issuable upon the exercise of warrants.

( 67 )
Includes 8,000 shares of common stock issuable upon the exercise of warrants.

( 68 )
Anthony V. Milone, manager of Marmat, LLC has sole voting and dispositive power over the securities held for the account of this selling stockholder.

( 69 )
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

( 70 )
Nachum Stein, managing director of MFC of New York, has sole voting and dispositive power over the securities held for the account of this selling stockholder.

( 71 )
Includes 16,667 shares of common stock issuable upon the exercise of warrants.

( 72 )
Includes 50,131 shares of common stock issuable upon the exercise of warrants.

( 73 )
Includes 3,500 shares of common stock issuable upon the exercise of warrants.

( 74 )
Includes 46,631 shares of common stock issuable upon the exercise of warrants.

( 75 )
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

( 76 )
Includes 15,000 shares of common stock issuable upon the exercise of warrants.

( 77 )
Includes 7,487 shares of common stock issuable upon the exercise of warrants.

( 78 )
Includes 36,667 shares of common stock issuable upon the exercise of warrants.

( 79 )
Includes 10,000 shares of common stock issuable upon the exercise of warrants.

( 80 )
Includes 50,009 shares of common stock issuable upon the exercise of warrants.

( 81 )
Includes 12,500 shares of common stock issuable upon the exercise of warrants.

(82)
Includes 465,000 shares of common stock issuable upon the exercise of warrants.

(83 )
Includes 415,000 shares of common stock issuable upon the exercise of warrants.

(84)
Includes 50,000 shares of common stock issuable upon the exercise of warrants.
 
(85 )
Includes 33,330 shares of common stock issuable upon the exercise of warrants.

( 86 )
Includes 8,350 shares of common stock issuable upon the exercise of warrants.

( 87 )
Includes 2,500 shares of common stock issuable upon the exercise of warrants.

( 88 )
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

( 89 )
Includes 5,000 shares of common stock issuable upon the exercise of warrants.


55


( 90 )
Includes 30,000 shares of common stock issuable upon the exercise of warrants.

( 91 )
Includes 21,833 shares of common stock issuable upon the exercise of warrants.

( 92 )
Includes 8,500 shares of common stock issuable upon the exercise of warrants.

( 93 )
Includes 13,333 shares of common stock issuable upon the exercise of warrants.

( 94 )
Includes 5,000 shares of common stock issuable upon the exercise of warrants.

( 95 )
Includes 41,649 shares of common stock issuable upon the exercise of warrants.

( 96 )
Includes 16,659 shares of common stock issuable upon the exercise of warrants.

( 97 )
Includes 24,990 shares of common stock issuable upon the exercise of warrants.

( 98 )
Includes 16,667 shares of common stock issuable upon the exercise of warrants.

( 99 )
Includes 36 ,000 shares of common stock issuable upon the exercise of warrants.

( 100 )
Includes 15,000 shares of common stock issuable upon the exercise of warrants.

( 101 )
Includes 21 ,000 shares of common stock issuable upon the exercise of warrants.

( 102 )
Includes 50,417 shares of common stock issuable upon the exercise of warrants.

( 103 )
Includes 33,750 shares of common stock issuable upon the exercise of warrants.

( 104 )
Includes 16,667 shares of common stock issuable upon the exercise of warrants.

( 105 )
Includes 30,000 shares of common stock issuable upon the exercise of warrants.

( 106 )
Includes 7,500 shares of common stock issuable upon the exercise of warrants.

( 107 )
Patrick Gallagher is a member of our board of directors and is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

( 108 )
Includes (i) options to purchase 200,000 shares of common stock that are currently exercisable, and (ii) 11,224 shares of common stock issuable upon the exercise of warrants.

( 109 )
Includes shares of common stock issuable upon the exercise of warrants.

( 110 )
Includes (i) options to purchase 200,000 shares of common stock that are currently exercisable and (ii) 10,000 shares of common stock issuable upon the exercise of warrants.

( 111 )
James Ahern is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

( 112 )
Includes 189,791 shares of common stock issuable upon the exercise of warrants.

( 113 )
Includes shares of common stock issuable upon the exercise of warrants.

( 114 )
Includes 103,571 shares of common stock issuable upon the exercise of warrants.

( 115 )
Matthew Eitner is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

( 116 )
Includes 188,123 shares of common stock issuable upon the exercise of warrants.

( 117 )
Includes shares of common stock issuable upon the exercise of warrants.

( 118 )
Includes 105,623 shares of common stock issuable upon the exercise of warrants.


56


( 119 )
Buff Trust is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.
 
(120)
Includes shares of common stock issuable upon the exercise of warrants.

(121 )
Garnet Trust is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.
 
(122)
Includes shares of common stock issuable upon the exercise of warrants.

(123 )
Laidlaw Holdings Ltd is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(124)
Includes shares of common stock issuable upon the exercise of warrants.
 
(125
Brian M Robertson is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(126)
Includes shares of common stock issuable upon the exercise of warrants.
 
(127)
Kevin R Wilson is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(128)
Includes shares of common stock issuable upon the exercise of warrants.
 
(129)
Richard G Michalski is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(130)
Includes shares of common stock issuable upon the exercise of warrants.
 
(131)
Michael J Murray is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(132)
Includes shares of common stock issuable upon the exercise of warrants.
 
(133)
Michael J Ahern is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(134)
Includes shares of common stock issuable upon the exercise of warrants.
 
(135)
James Provenzano is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(136)
Includes shares of common stock issuable upon the exercise of warrants.
 
(137)
Hugh J Marasa Jr is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(138)
Includes shares of common stock issuable upon the exercise of warrants.
 
(139)
Jeffrey R Glazer is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(140)
Includes shares of common stock issuable upon the exercise of warrants.

(141)
Devin McCabe is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(142)
Includes shares of common stock issuable upon the exercise of warrants.
 
(143)
Nicholas Sabellico is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.


57


(144)
Includes shares of common stock issuable upon the exercise of warrants.
 
(145)
Hugh Regan is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(146)
Includes shares of common stock issuable upon the exercise of warrants.
 
(147)
Luke Kottke is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.
 
(148)
Includes shares of common stock issuable upon the exercise of warrants.

(149 )
Francis R Smith is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(150)
Includes shares of common stock issuable upon the exercise of warrants.
 
(151)
Stephen Hamilton is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(152)
Includes shares of common stock issuable upon the exercise of warrants.
 
(153)
Jayson Russo is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(154)
Includes shares of common stock issuable upon the exercise of warrants.
 
(155)
Todd Cirella is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

(156)
Includes shares of common stock issuable upon the exercise of warrants.

(157)
David Murray is an employee of Laidlaw & Co (UK) Ltd., the placement agent in connection with certain of our private placements.

( 158 )
Includes shares of common stock issuable upon the exercise of warrants.

58


 
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
 
On March 23, 2015, we issued Mr. Londoner an aggregate of 169,334 shares of common stock in exchange for 200 shares of our Series C 9% Convertible Preferred Stock and accrued dividends.
 
On October 23, 2015, as part of a private placement transaction of our common stock and warrants, Mr. Londoner purchased an aggregate of 66,667 shares of common stock and a warrant to purchase 33,334 shares of common stock for an aggregate purchase price of $100,000.
 
On April 30, 2015, Mr. Chaussy was granted 150,000 shares of common stock at a cost basis of $2.90 per share for his 2013-2015 performance. One half of the shares vested immediately; the second half vests on January 1, 2016.
 
On November 18, 2015, as part of a private placement transaction of our common stock and warrants, Donald E. Foley purchased an aggregate of 200,000 shares of common stock and a warrant to purchase 100,000 shares of common stock for an aggregate purchase price of $300,000.
 
On April 29, 2016, Patrick Gallagher, as part of a private placement transaction of our common stock and warrants, purchased an aggregate of 20,000 shares of common stock and a warrant to purchase 10,000 shares of common stock for an aggregate purchase price of $30,000.

DESCRIPTION OF SECURITIES 

We have authorized 201,000,000 shares of capital stock, par value $0.001 per share, of which 200,000,000 are shares of common stock and 1,000,000 are shares of “blank check” preferred stock, of which 200 are authorized as Series A Preferred Stock, 600 are authorized as Series B Preferred Stock and 4,200 are authorized as Series C Preferred Stock. On August 24 , 2017, there were 26,295 ,411 shares of common stock issued and outstanding, 985 shares of Series C Preferred Stock issued and outstanding and no shares of Series A Preferred Stock or Series B Preferred Stock issued and outstanding.

Holders of Capital Stock

As of August 24 , 2017, we had 230 shareholders of record of our common stock, no holders of our Series A Preferred Stock or Series B Preferred Stock, and 19 holders of our Series C Preferred Stock.

Common Stock

The holders of common stock are entitled to one vote per share on all matters to be voted upon by stockholders.  Holders of our common stock are entitled to receive ratably dividends as may be declared by the board of directors out of funds legally available for that purpose. The rights of the holders of our Series C Preferred Stock, as described below, prohibit us from paying cash dividends to our holders of common stock absent the approval of holders representing at least 67% of the outstanding shares of the Series C Preferred Stock, which holders must include Alpha Capital Anstalt, so long as Alpha Capital Anstalt holds not less than $100,000 of the Series C Preferred Stock. We have not paid any dividends since our inception, and, subject to our obligations to pay dividends to the holders of the Series C Preferred Stock, as described below, we presently anticipate that all earnings, if any, will be retained for development of our business. Even if we are permitted to pay cash dividends in the future, any future disposition of dividends will be at the discretion of our board of directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.

Each share of common stock entitles the holder to one vote, either in person or by proxy, at meetings of stockholders. The holders are not permitted to vote their shares cumulatively. Accordingly, the stockholders of our common stock who hold, in the aggregate, more than fifty percent of the total voting rights can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding shares of common stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.
59

 
Holders of our common stock have no preemptive rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Subject to the rights of the holders of our preferred stock, upon our liquidation, dissolution or winding up, the holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities. There are no provisions in our Amended and Restated Certificate of Incorporation or our By-laws that would prevent or delay a change in our control.

Preferred Stock

There are presently no issued and outstanding shares of Series A Preferred Stock or Series B Preferred Stock.

Each share of the Series C Preferred Stock is entitled to a nine percent (9%) annual dividend on the $1,000 per share stated value. Unless the Series C Preferred Stock is converted into shares of common stock, the dividends shall accrue and be payable in cash or, subject to the satisfaction of certain conditions, in pay-in-kind shares. Such cumulative dividends are payable quarterly, commencing on September 30, 2013 and on each conversion date.  The terms of the Series C Preferred Stock were amended on March 27, 2014 and August 15, 2014.  The description herein reflects such amended terms.

In the event that

(i)
we fail to, or announce our intention not to, deliver common stock share certificates upon conversion of our Series C Preferred Stock prior to the seventh trading day after such shares are required to be delivered,
(ii)
we fail for any reason to pay in full the amount of cash due pursuant to our failure to deliver common stock share certificates upon conversion of our Series C Preferred Stock within five calendar days after notice therefor is delivered,
(iii)
we fail to have available a sufficient number of authorized and unreserved shares of common stock to issue upon a conversion of our Series C Preferred Stock,
(iv)
we fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of our obligations under, the securities purchase agreement, the registration rights agreement, the certificate of designation or the warrants entered into pursuant to the private placement transaction for our Series C Preferred Stock, which failure or breach could have a material adverse effect, and such failure or breach is not cured within 30 calendar days after written notice was delivered,
(v)
we are party to a change of control transaction,
(vi)
we file for bankruptcy or a similar arrangement or are adjudicated insolvent,
(vii)
we are subject to a judgment, including an arbitration award against us, of greater than $100,000, and such judgment remains unvacated, unbonded or unstayed for a period of 45 calendar days,

the holders of the Series C Preferred Stock are entitled, among other rights, to redeem their shares of Series C Preferred Stock at any time for greater than their stated value or increase the dividend rate on their shares of Series C Preferred Stock to 18%.

In the event of our liquidation or winding up of affairs, the holders of the Series C Preferred Stock will be entitled to a liquidation preference of the stated value plus any accrued but unpaid dividends or any other fees due the holder. The shares of the Series C Preferred Stock rank senior to the rights of the common stock and all other securities exercisable or convertible into shares of common stock.

Any holder of Series C Preferred Stock is entitled at any time to convert any whole or partial number of shares of Series C Preferred Stock into shares of our common stock at a price of $1.50 per share, subject to the beneficial ownership limitation described below. The Series C Preferred Stock is subject to full ratchet anti-dilution price protection upon the issuance of equity or equity-linked securities at an effective common stock purchase price of less than $1.50 per share as well as other customary anti-dilution protection.

In the event we issue any equity or equity-linked securities with terms more favorable than those of the Series C Preferred Stock, any holder of the Series C Preferred Stock may request to amend the terms of such holder’s Series C Preferred Stock to be equivalent to the terms of such issued equity or equity-linked securities, subject to certain exempted issuances.
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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. In addition, absent the approval of holders representing at least 67% of the outstanding shares of the Series C Preferred Stock, which holders must include Alpha Capital Anstalt, so long as Alpha Capital Anstalt holds not less than $100,000 of Series C Preferred Stock, we may not (i) increase the number of authorized shares of preferred stock, (ii) amend our charter documents, including the terms of the Series C Preferred Stock, in any manner adverse to the holders of the Series C Preferred Stock, including authorizing or creating any class of stock ranking senior to, or otherwise pari passu with, the shares of Series C Preferred Stock as to dividends, redemption or distribution of assets upon a liquidation, or (iii) perform certain covenants, including:

incur additional indebtedness;

permit liens on assets;

repay, repurchase or otherwise acquire more than a de minimis number of shares of capital stock;

pay cash dividends to our stockholders; and

engage in transactions with affiliates.

Warrant

Five-Year Warrants

In connection with the private placement of our Series C Preferred Stock, on February through July 2013, we issued to the holders of our Series C Preferred Stock five-year warrants to purchase up to an aggregate of 1,330,629 shares of common stock at an exercise price of $2.61 per share. The warrants contain full ratchet anti-dilution price protection upon the issuance of equity or equity-linked securities at an effective common stock purchase price of less than $2.61 per share as well as other customary anti-dilution protection. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”.  As a result of the full-ratchet anti-dilution protection provision of the warrants, the exercise price of the warrants was subsequently decreased from $2.61 per share to $1.50 per share and the aggregate number of shares issuable under the warrants was increased to 2,315,301.

Five-Year Amendment Warrants

As consideration for (i) extending the termination date of the securities purchase agreement and (ii) extending the filing and effectiveness dates for the filing of the registration statement pursuant to the registration rights agreement related to our Series C Preferred Stock, on July 15, 2013, we issued to the holders of our Series C Preferred Stock that purchased shares of our Series C Preferred Stock prior to the July 15, 2013 closing, five-year warrants to purchase up to an aggregate of 289,730 shares of common stock. The terms of these warrants are identical to the Five-Year Warrants described above.  As a result of the full-ratchet anti-dilution protection provision of the warrants, the exercise price of the warrants subsequently decreased from $2.61 per share to $1.50 per share and the aggregate number of shares issuable under the warrants was increased to 504,130.

October 2013 Five-Year Amendment Warrants

As consideration for amending the terms of the securities purchase agreement to permit our private placement of our common stock and warrants in December 2013, on October 14, 2013, we issued to the holders of our Series C Preferred Stock five-year warrants to purchase up to an aggregate of 332,684 shares of common stock. The terms of these warrants are identical to the Five-Year Warrants described above.  As a result of the full-ratchet anti-dilution protection provision of the warrants, the exercise price of the warrants was subsequently decreased from $2.61 per share to $1.50 per share and the aggregate number of shares issuable under the warrants was increased to 578,870.
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December 2013 Five-Year Warrants

In connection with the private placement of our common stock in December 2013 and January 2014, we issued to the investors participating in the private placement five-year warrants to purchase up to an aggregate of 177,947 shares of common stock at an exercise price of $3.67 per share. The warrants contain customary anti-dilution protections. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”.

April 2014 Five-Year Warrants

In connection with the private placement of our common stock in April 2014, we issued to the investors participating in the private placement five-year warrants to purchase up to an aggregate of 114,880 shares of common stock at an exercise price of $3.75 per share. The warrants contain customary anti-dilution protections. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”.

August 2014 Five-Year Warrants

In connection with the private placement of our common stock in August and September 2014, we issued to the investors participating in the private placement five-year warrants to purchase up to an aggregate of 190,600 shares of common stock at an exercise price of $2.75 per share. The warrants contain customary anti-dilution protections. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”.

December 2014 Warrants

In connection with the private placement of our common stock in December 2014 and January, February and March 2015, we issued to the investors participating in the private placement five-year warrants to purchase up to an aggregate of 801,800 shares of common stock. The warrants are exercisable at $3.75 per share and expire March 31, 2020. The warrants contain customary anti-dilution protections. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”.

October 2015 Three-Year Warrants

In connection with the private placement of our common stock in October, November and December 2015 and February, March and April 2016, we issued to the investors participating in the private placement three-year warrants to purchase up to an aggregate of 1,501,513 shares of common stock at an exercise price of $1.95 per share. The warrants contain customary anti-dilution protections and are exercisable for cash.

May 2016 Warrants

In connection with the private placement of our common stock in June 2016, we issued to the investors participating in the private placement three-year warrants to purchase up to an aggregate of 38,572 shares of common stock at an exercise price of $2.10 per share. The warrants contain customary anti-dilution protections and are exercisable for cash. In February 2017, we exchanged these warrants for warrants to purchase up to an aggregate of 45,001 shares of common stock at an exercise price of $1.50, with all other terms and conditions the same.

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August 2016 Warrants

In connection with the private placement of our common stock in August and September 2016, we issued to the investors participating in the private placement three-year warrants to purchase up to an aggregate of 187,513 shares of common stock at an exercise price of $1.95 per share. The warrants contain customary anti-dilution protections and are exercisable for cash.

October 2016 Warrants

In connection with the private placement of our common stock in October, November and December 2016 and February and March 2017, we issued to the investors participating in the private placement three-year warrants to purchase up to an aggregate of 1,449,991 shares of common stock at an exercise price of $1.50 per share. The warrants contain customary anti-dilution protections and are exercisable for cash.

April 2017 Warrants

In connection with the private placement of our common stock in April, May, June , July and August 2017, we issued to the investors participating in the private placement three-year warrants to purchase up to an aggregate of 722,302 shares of common stock at an exercise price of $1.50 per share. The warrants contain customary anti-dilution protections and are exercisable for cash.

Mayo Warrant

In March 2017, we issued to Mayo Clinic Ventures three-year warrants to purchase up to an aggregate of 630,000 shares of common stock at an exercise price of $1.50 per share in connection with a know-how licensing agreement with Mayo Foundation for Medical Education and Research. The warrants contain customary anti-dilution protections and are exercisable for cash.

Series A Placement Agent Warrant

As consideration for serving as our placement agent in connection with the private placement of Series A Preferred Stock, on January 18, 2013, we issued to Laidlaw & Company (UK) Ltd. a seven-year warrant to purchase up to 35,076 shares of common stock at an exercise price of $1.84 per share. The terms of this warrant are otherwise identical to the Five-Year Warrants described above.

Series B Placement Agent Warrant

As consideration for serving as our placement agent in connection with the private placement of Series B Preferred Stock, on January 18, 2013, we issued to Laidlaw & Company (UK) Ltd. a seven-year warrant to purchase up to 30,755 shares of common stock at an exercise price of $2.02 per share. The terms of this warrant are otherwise identical to the Five-Year Warrants described above.

Series C Placement Agent Warrant

As consideration for serving as our placement agent in connection with the private placement of Series C Preferred Stock, on July 15, 2013, we issued to Laidlaw & Company (UK) Ltd. a warrant to purchase up to 177,057 shares of common stock. The terms of this warrant are identical to the Five-Year Warrants described above. As a result of the full-ratchet anti-dilution protection provision of the warrants, the exercise price of the warrants subsequently decreased from $2.61 per share to $1.50 per share and the aggregate number of shares issuable under the warrants was increased to 308,079.

Par Value Warrant

As consideration for providing general financial advisory services, on January 7, 2013, we issued to Jamess Capital Group LLC a seven-year warrant to purchase up to 383,320 shares of common stock at an exercise price of $0.001 per share. The terms of this warrant are otherwise identical to the Five-Year Warrants described above.

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Consultant Warrant

As consideration for providing general financial advisory services, on August 17, 2015, we issued Alere Financial Partners, LLC a three-year warrant to purchase up to 100,000 shares of common stock each at an exercise price of $2.00 per share and a three-year warrant to purchase up to 100,000 shares of common stock each at an exercise price of $2.50 per share. The warrants contain customary anti-dilution protections and are exercisable for cash or may be exercised by means of a “cashless exercise”.

Common Stock Placement Agent Warrants

As consideration for serving as our placement agent in connection with a private placement of our common stock, on December 31, 2013 and January 31, 2014, we issued to Laidlaw & Company (UK) Ltd. warrants to purchase an aggregate of up to 40,327 shares of common stock. The terms of this warrant are identical to the December 2013 Five-Year Warrants described above.

As consideration for serving as our placement agent in connection with a private placement of our common stock, on April 4 and April 30, 2014, we issued to Laidlaw & Company (UK) Ltd. warrants to purchase an aggregate of up to 22,976 shares of common stock. The terms of this warrant are identical to the April 2014 Five-Year Warrants described above.
As consideration for serving as our placement agent in connection with a private placement of our common stock, on August 15 and September 12, 2014, we issued to Laidlaw & Company (UK) Ltd. warrants to purchase an aggregate of up to 38,120 shares of common stock. The terms of this warrant are identical to the August 2014 Five-Year Warrants described above.
As consideration for serving as our placement agent in connection with a private placement of our common stock, between December 2014 and March 2015, we issued to Laidlaw & Company (UK) Ltd. warrants to purchase an aggregate of up to 400,900 shares of common stock. The terms of this warrant are identical to the December 2014 Warrants described above.

As consideration for serving as our placement agent in connection with a private placement of our common stock, between October 2015 and April 2016, we issued to Laidlaw & Company (UK) Ltd. and certain designated employees of Laidlaw & Company (UK) Ltd., three-year warrants to purchase up to an aggregate of 232,960 shares of common stock at an exercise price of $1.50 per share. The warrants contain customary anti-dilution protections and are exercisable for cash or may be exercised by means of a “cashless exercise”.

As consideration for serving as our placement agent in connection with a private placement of our common stock, between October 2016 and March 2017, we issued to certain designated employees of Laidlaw & Company (UK) Ltd ., three-year warrants to purchase up to an aggregate of 186,957 shares of common stock at an exercise price of $1.50 per share. The warrants contain customary anti-dilution protections and are exercisable for cash or may be exercised by means of a “cashless exercise”.

Registration Rights

2013 Series C Private Placement

On February 6, 2013, in connection with our private placement of our Series C Preferred Stock and warrants, we entered into a registration rights agreement with the purchasers pursuant to which we agreed to provide certain registration rights with respect to the common stock issuable upon conversion of our Series C Preferred Stock and exercise of the warrants issued to holders of our Series C Preferred Stock. Specifically, we agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the common stock issuable upon conversion of the Series C Preferred Stock and exercise of the warrants on or before July 22, 2013 and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within five trading days after we are notified that registration statement is not being reviewed by the Securities and Exchange Commission, and by November 22, 2013 in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments.

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If (i) the registration statement is not filed by July 22, 2013, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within five trading days after we are notified that registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission by November 22, 2013 in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 20 consecutive calendar days or more than an aggregate of 45 calendar days during any 12-month period after its first effective date, then we are subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 0.25% of the aggregate purchase price paid by such purchasers per month of delinquency. Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreement shall be 3% of the aggregate purchase price paid by the purchasers, and (ii) if any partial amount of liquidated damages remains unpaid for more than seven days, we shall pay interest of 18% per annum, accruing daily, on such unpaid amount.

Pursuant to the registration rights agreement, we must maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions, subject to the our right to suspend or defer the use of the registration statement in certain events.

We filed a registration statement on July 22, 2013, which was originally declared effective on June 23, 2014. We (i) filed a post-effective amendment to the registration statement on June 30, 2015, which was declared effective on July 13, 2015, to update the registration statement to include audited financial statements for the 2014 fiscal year, (ii) filed a post-effective amendment to the registration statement on May 27, 2016, which was declared effective on June 13, 2016, to update the registration statement to include audited financial statements for the 2015 fiscal year, and (iii) filed a post-effective amendment to the registration statement on May 26, 2017, which was declared effective on June 5, 2017, to update the registration statement to incorporate by reference audited financials for the 2016 fiscal year, to satisfy the requirements under the registration rights agreement with the purchasers of our Series C Preferred Stock and warrants.  We intend to file additional post-effective amendments to such registration statement as may be required by law, rule or regulation.

2014 Private Placement

On each of December 31, 2013, April 4, 2014, August 15, 2014, and December 19, 2014, in connection with private placements of our common stock and warrants, we entered into registration rights agreements with the purchasers in such private placements pursuant to which we agreed to provide certain registration rights with respect to the common stock issued to the investors participating in such private placements and the common stock issuable upon exercise of the related warrants issued to such investors. Specifically, we agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the shares of common stock issued pursuant to the private placements and issuable upon the exercise of the warrants within 45 days of the termination date of such private placements and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within 30 calendar days after we are notified that the registration statement is not being reviewed by the Securities and Exchange Commission, and within 180 calendar days of the initial filing date of the registration statement in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments.

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If (i) the registration statement is not filed within 45 days of the applicable termination date, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within 30 calendar days after we are notified that the registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission within 180 calendar days of the initial filing date of the registration statement in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 10 consecutive calendar days or more than an aggregate of 15 calendar days during any 12-month period after its first effective date, then we are subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 1.0% of the aggregate purchase price paid by such purchasers per month of delinquency, provided, however, that we will not be required to make any payments if any of the foregoing events occurred at such time that all securities registered or to be registered in the registration statement are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and provided, further, that we will not be required to make any liquidated damage payments with respect to any securities registered or to be registered in the registration statement that we are unable to register due to limits imposed by the Securities and Exchange Commission’s interpretation of Rule 415 under the Securities Act of 1933, as amended. Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreements dated December 31, 2013, April 4, 2014 and August 15, 2014 shall be 3% of the aggregate purchase price paid by the purchasers, (ii) the maximum aggregate liquidated damages due under the registration rights agreement dated December 19, 2014 shall be 6% of the aggregate purchase price paid by the purchasers and (iii) if any partial amount of liquidated damages remains unpaid for more than seven days, we shall pay interest of 18% per annum, accruing daily, on such unpaid amount.

Pursuant to the registration rights agreements, we must maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions and without the requirement to be in compliance with the current public information requirement under Rule 144, subject to the our right to suspend or defer the use of the registration statement in certain events.

We filed a registration statement on May 20, 2015, which was originally declared effective on June 12, 2015. We filed a post-effective amendment to the registration statement on June 17, 2016, which was declared effective on July 1, 2016, to update the registration statement to include audited financial statements for the 2015 fiscal year, to satisfy the requirements under the registration rights agreement with the purchasers of our common stock and warrants. We filed a post-effective amendment to the registration statement on May 26, 2017, which was declared effective on June 5, 2017, to update the registration statement to incorporate by reference audited financial statements for the 2016 fiscal year, to satisfy the requirements under the registration rights agreement with the purchasers of our common stock and warrants.  We intend to file additional post-effective amendments to such registration statement as may be required by law, rule or regulation.

2015 Private Placement

On October 23, 2015, in connection concurrent and related private placements of our common stock and warrants, we entered into registration rights agreements with the purchasers in such private placements pursuant to which we agreed to provide certain registration rights with respect to the common stock issued to the investors participating in such private placements and the common stock issuable upon exercise of the related warrants issued such investors. Specifically, we agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the shares of common stock issued pursuant to the private placement and issuable upon the exercise of the warrants within 45 days of the final termination date of such private placements and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within 10 calendar days after we are notified that the registration statement is not being reviewed by the Securities and Exchange Commission, and within 120 calendar days of the initial filing date of the registration statement in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments.

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If (i) the registration statement is not filed within 45 days of the applicable termination date, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within 10 calendar days after we are notified that the registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission within 120 calendar days of the initial filing date of the registration statement in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 10 consecutive calendar days or more than an aggregate of 15 calendar days during any 12-month period after its first effective date, then we are subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 1.0% of the aggregate purchase price paid by such purchasers per month of delinquency, provided, however, that we will not be required to make any payments if any of the foregoing events occurred at such time that all securities registered or to be registered in the registration statement are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and provided, further, that we will not be required to make any liquidated damage payments with respect to any securities registered or to be registered in the registration statement that we are unable to register due to limits imposed by the Securities and Exchange Commission’s interpretation of Rule 415 under the Securities Act of 1933, as amended. Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreement dated October 23, 2015 shall be 6% of the aggregate purchase price paid by the purchasers and (ii) if any partial amount of liquidated damages remains unpaid for more than seven days, we shall pay interest of 18% per annum, accruing daily, on such unpaid amount.

Pursuant to the registration rights agreements, we must maintain the effectiveness of the registration statement from the effective date until the first to occur of (i) the date that is one year from the date the registration statement is declared effective by the Securities and Exchange Commission and (ii) the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions and without the requirement to be in compliance with the current public information requirement under Rule 144, subject to the our right to suspend or defer the use of the registration statement in certain events.

We filed a registration statement on August 2, 2016, which was originally declared effective on August 9, 2016. We filed a post-effective amendment to the registration statement on May 22, 2017, which was declared effective on May 31, 2017, to update the registration statement to incorporate by reference audited financial statements for the 2016 fiscal year, to satisfy the requirements under the registration rights agreement with the purchasers of our common stock and warrants.  We intend to file additional post-effective amendments to such registration statement as may be required by law, rule or regulation.

2016 Private Placement

On October 28, 2016 in connection concurrent and related private placements of our common stock and warrants, we entered into registration rights agreements with the purchasers in such private placements pursuant to which we agreed to provide certain registration rights with respect to the common stock issued to the investors participating in such private placements and the common stock issuable upon exercise of the related warrants issued to such investors. Specifically, we agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the shares of common stock issued pursuant to the private placement and issuable upon the exercise of the warrants within 45 days of the final termination date of such private placements and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within 10 calendar days after we are notified that the registration statement is not being reviewed by the Securities and Exchange Commission, and within 120 calendar days of the initial filing date of the registration statement in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments.

If (i) the registration statement is not filed within 45 days of the applicable termination date, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within 10 calendar days after we are notified that the registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission within 120 calendar days of the initial filing date of the registration statement in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 10 consecutive calendar days or more than an aggregate of 15 calendar days during any 12-month period after its first effective date, then we are subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 1.0% of the aggregate purchase price paid by such purchasers per month of delinquency, provided, however, that we will not be required to make any payments if any of the foregoing events occurred at such time that all securities registered or to be registered in the registration statement are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and provided, further, that we will not be required to make any liquidated damage payments with respect to any securities registered or to be registered in the registration statement that we are unable to register due to limits imposed by the Securities and Exchange Commission’s interpretation of Rule 415 under the Securities Act of 1933, as amended. Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreement dated October 28, 2016 shall be 6% of the aggregate purchase price paid by the purchasers and (ii) if any partial amount of liquidated damages remains unpaid for more than seven days, we shall pay interest of 18% per annum, accruing daily, on such unpaid amount.

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Pursuant to the registration rights agreements, we must maintain the effectiveness of the registration statement from the effective date until the first to occur of (i) the date that is one year from the date the registration statement is declared effective by the Securities and Exchange Commission and (ii) the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions and without the requirement to be in compliance with the current public information requirement under Rule 144, subject to the our right to suspend or defer the use of the registration statement in certain events.

2017 Private Placement

On April 6, 2017, in connection concurrent and related private placements of our common stock and warrants, we entered into registration rights agreements with the purchasers in such private placements pursuant to which we agreed to provide certain registration rights with respect to the common stock issued to the investors participating in such private placements and the common stock issuable upon exercise of the related warrants issued to such investors. Specifically, we agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the shares of common stock issued pursuant to the private placement and issuable upon the exercise of the warrants within 45 days of the final termination date of such private placements and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within 10 calendar days after we are notified that the registration statement is not being reviewed by the Securities and Exchange Commission, and within 120 calendar days of the initial filing date of the registration statement in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments.

If (i) the registration statement is not filed within 45 days of the applicable termination date, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within 10 calendar days after we are notified that registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission within 120 calendar days of the initial filing date of the registration statement in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 10 consecutive calendar days or more than an aggregate of 15 calendar days during any 12-month period after its first effective date, then we are subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 1.0% of the aggregate purchase price paid by such purchasers per month of delinquency, provided, however, that we will not be required to make any payments if any of the foregoing events occurred at such time that all securities registered or to be registered in the registration statement are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and provided, further, that we will not be required to make any liquidated damage payments with respect to any securities registered or to be registered in the registration statement that we are unable to register due to limits imposed by the Securities and Exchange Commission’s interpretation of Rule 415 under the Securities Act of 1933, as amended. Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreement dated April 6, 2017 shall be 6% of the aggregate purchase price paid by the purchasers and (ii) if any partial amount of liquidated damages remains unpaid for more than seven days, we shall pay interest of 18% per annum, accruing daily, on such unpaid amount.

Pursuant to the registration rights agreements, we must maintain the effectiveness of the registration statement from the effective date until the first to occur of (i) the date that is one year from the date the registration statement is declared effective by the Securities and Exchange Commission and (ii) the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions and without the requirement to be in compliance with the current public information requirement under Rule 144, subject to the our right to suspend or defer the use of the registration statement in certain events.

Delaware Anti-Takeover Law and Provisions of our Amended and Restated Certificate of Incorporation and By-laws

Section 203 of the Delaware General Corporation Law, in general, prohibits a business combination between a corporation and an interested stockholder within three years of the time such stockholder became an interested stockholder, unless:

prior to such time the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, exclusive of shares owned by directors who are also officers and by certain employee stock plans; or

at or subsequent to such time, the business combination is approved by the board of directors and authorized by the affirmative vote at a stockholders’ meeting of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.
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The term “business combination” is defined to include, among other transactions between an interested stockholder and a corporation or any direct or indirect majority owned subsidiary thereof: a merger or consolidation; a sale, lease, exchange, mortgage, pledge, transfer or other disposition (including as part of a dissolution) of assets having an aggregate market value equal to 10% or more of either the aggregate market value of all assets of the corporation on a consolidated basis or the aggregate market value of all the outstanding stock of the corporation; certain transactions that would result in the issuance or transfer by the corporation of any of its stock to the interested stockholder; certain transactions that would increase the interested stockholder’s proportionate share ownership of the stock of any class or series of the corporation or such subsidiary; and any receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation or any such subsidiary.

In general, Section 203 defines an “interested stockholder” as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with, or controlling, or controlled by, the entity or person. The term “owner” is broadly defined to include any person that individually, with or through that person’s affiliates or associates, among other things, beneficially owns the stock, or has the right to acquire the stock, whether or not the right is immediately exercisable, under any agreement or understanding or upon the exercise of warrants or options or otherwise or has the right to vote the stock under any agreement or understanding, or has an agreement or understanding with the beneficial owner of the stock for the purpose of acquiring, holding, voting or disposing of the stock.

The restrictions in Section 203 do not apply to corporations that have elected, in the manner provided in Section 203, not to be subject to Section 203 of the Delaware General Corporation Law or, with certain exceptions, which do not have a class of voting stock that is listed on a national securities exchange or held of record by more than 2,000 stockholders. Our Amended and Restated Certificate of Incorporation and By-laws do not opt out of Section 203.

Section 203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

Provisions of our Amended and Restated Certificate of Incorporation and By-laws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests.  Therefore, these provisions could adversely affect the price of our common stock.  Among other things, our Amended and Restated Certificate of Incorporation and By-laws:

do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);

provide that special meetings of our stockholders may be called only by our board of directors, chairman, chief executive officer, president or secretary; and

provide advance notice provisions with which a stockholder who wishes to nominate a director or propose other business to be considered at a stockholder meeting must comply.

Indemnification of Directors and Officers

Pursuant to Section 145 of the Delaware General Corporation Law, a corporation has the power to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a third-party action, other than a derivative action, and against expenses actually and reasonably incurred in the defense or settlement of a derivative action, provided that there is a determination that the individual acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe the individual’s conduct was unlawful. Such determination will be made, in the case of an individual who is a director or officer at the time of such determination:

by a majority of the disinterested directors, even though less than a quorum;

by a committee of such directors designated by a majority vote of such directors, even though less than a quorum;

if there are no disinterested directors, or if such directors so direct, by independent legal counsel; or

by a majority vote of the stockholders, at a meeting at which a quorum is present.

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Without court approval, however, no indemnification may be made in respect of any derivative action in which such individual is adjudged liable to the corporation.

The Delaware General Corporation Law requires indemnification of directors and officers for expenses relating to a successful defense on the merits or otherwise of a derivative or third-party action.

The Delaware General Corporation Law permits a corporation to advance expenses relating to the defense of any proceeding to directors and officers contingent upon such individuals’ commitment to repay any advances unless it is determined ultimately that such individuals are entitled to be indemnified.

Under the Delaware General Corporation Law, the rights to indemnification and advancement of expenses provided in the law are non-exclusive, in that, subject to public policy issues, indemnification and advancement of expenses beyond that provided by statute may be provided by law, agreement, vote of stockholders, disinterested directors or otherwise.

Limitation of Personal Liability of Directors

The Delaware General Corporation Law provides that a corporation’s certificate of incorporation may include a provision limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. However, no such provision can eliminate or limit the liability of a director for:

Our Amended and Restated Certificate of Incorporation provides that our directors will not be personally liable to us or any of our stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by the Delaware General Corporation Law.

Disclosure of Commission Position on Indemnification for Securities Act Liabilities

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to our directors, officers and persons controlling us, we have been advised that it is the Securities and Exchange Commission’s opinion that such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.


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PLAN OF DISTRIBUTION
 
Each selling stockholder (the “Selling Stockholders”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the OTCQB or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling securities:

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

an exchange distribution in accordance with the rules of the applicable exchange;

privately negotiated transactions;