UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31,
2022
Or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-41031
Bluejay Diagnostics, Inc.
(Exact Name of Registrant as Specified in
Its Charter)
(Address of Principal Executive Offices) (Zip Code)
(844)327-7078
(Registrant’s Telephone Number, Including
Area Code)
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share BJDX The Nasdaq Stock Market LLC
Securities registered pursuant to section 12(g)
of the Act: None
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes☒
No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a 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.
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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. Yes ☐ No ☒
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
No ☒
The aggregate market value of the registrant’s
voting stock held by non-affiliates as of June 30, 2022, was approximately $21,361,484 based on the closing price of $1.06 of the common
stock of the registrant as reported on the Nasdaq Capital Market on such date. Shares of common stock held by each executive officer and
director and by each other person who may be deemed to be an affiliate of the registrant have been excluded from this computation. The
determination of affiliate status for this purpose is not necessarily a conclusive determination for other purposes. As of February 28,
2023, there were 20,459,057 shares of the registrant’s common stock, par value $0.001 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant’s definitive proxy statement
relating to its Annual Meeting of Stockholders will be filed within 120 days of the fiscal year ended December 31, 2022 and is incorporated
by reference in Part III of the Form 10-K to the extent described therein.
TABLE OF CONTENTS
Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ii
SUMMARY OF RISK FACTORS iii
PART I 1
ITEM 1. BUSINESS 1
ITEM 1A. RISK FACTORS 26
ITEM 1B. UNRESOLVED STAFF COMMENTS 26
ITEM 2. PROPERTIES 26
ITEM 3. LEGAL PROCEEDINGS 26
ITEM 4. MINE SAFETY DISCLOSURES 26
ITEM 6. RESERVED 27
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 31
ITEM 9A. CONTROLS AND PROCEDURES 32
ITEM 9B. OTHER INFORMATION 32
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 32
PART III 33
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 33
ITEM 11. EXECUTIVE COMPENSATION 33
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 33
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 34
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
We make forward-looking statements under the “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this Annual Report on Form 10-K
(“Form 10-K”). In some cases, you can identify these statements by forward-looking words such as “may,” “might,”
“should,” “would,” “could,” “expect,” “plan,” “anticipate,” “intend,”
“believe,” “estimate,” “predict,” “potential” or “continue,” and the negative
of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties
and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends
in our business. These statements are only predictions based on our current expectations and projections about future events. There are
important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results,
level of activity, performance or achievements expressed or implied by the forward-looking statements.
While we believe we have identified material risks,
these risks and uncertainties are not exhaustive. Other sections of this Form 10-K may describe additional factors that could adversely
impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks
and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact
of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.
Although we believe the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking
statements after the date of this Form 10-K to conform our prior statements to actual results or revised expectations, and we do not intend
to do so.
We caution you not to place undue reliance on
the forward-looking statements, which speak only as of the date of this Form 10-K in the case of forward-looking statements contained
in this Form 10-K.
You should not rely upon forward-looking statements
as predictions of future events. Our actual results and financial condition may differ materially from those indicated in the forward-looking
statements. We qualify all of our forward-looking statements by these cautionary statements. Although we believe that the expectations
reflected in the forward looking-statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Therefore, you should not rely on any of the forward-looking statements. In addition, with respect to all of our forward-looking statements,
we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of
1995.
SPECIAL NOTE REGARDING COMPANY REFERENCES
In this Form 10-K, and unless the context otherwise
requires, the “Company,” “we,” “us” and “our” refer to Bluejay Diagnostics, Inc. and its wholly-owned subsidiary
Bluejay Spinco, LLC, taken as a whole.
ii
SUMMARY OF RISK FACTORS
Our business is subject to a number of risks,
including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition,
liquidity, results of operations and prospects. These risks are discussed more fully in Item 1A. Risk Factors. These risks include, but
are not limited to, the following:
● Product clearances and approvals can often be denied or significantly delayed.
iii
PART I
ITEM 1. BUSINESS
Overview
Bluejay Diagnostics, Inc. (“Bluejay”)
is a medical diagnostics company developing rapid tests using whole blood on our Symphony technology platform (“Symphony”)
to improve patient outcomes in critical care settings. Our Symphony platform is a combination of Bluejay’s intellectual property
(“IP”) and exclusively licensed and patented IP that consists of a mobile device and single-use test cartridges that if cleared,
authorized, or approved by the U.S. Food and Drug Administration (the “FDA”), can provide a solution to a significant market
need in the United States. Clinical trials indicate the Symphony device produces laboratory-quality results in less than 20 minutes in
critical care settings, including Intensive Care Units (“ICUs”) and Emergency Rooms (“ERs”), where rapid and reliable
results are required.
Our first product, the Symphony IL-6 test, is
for the monitoring of disease progression in critical care settings. IL-6 is a clinically established inflammatory biomarker, and is considered
a ‘first-responder,’ for assessment of severity of infection and inflammation across many disease indications, including sepsis.
A current challenge of healthcare professionals is the excessive time and cost associated determining a patient’s level of severity
at triage and our Symphony IL-6 test has the ability to consistently monitor this critical care biomarker with rapid results.
In the future we plan to develop additional tests
for Symphony including two cardiac biomarkers (hsTNT and NT pro-BNP) as well as other tests using the Symphony platform. We do not yet
have regulatory clearance for our Symphony products, and our Symphony products will need to receive regulatory authorization from the
FDA in order to be marketed as a diagnostic product in the United States.
Our operations to date have been funded primarily
through the proceeds of our initial public offering (the “IPO”) on November 2021 (the “IPO Date”). We were incorporated
under the laws of Delaware on March 20, 2015. Our headquarters is located in Acton, Massachusetts.
Our Market
The Symphony platform and our initial biomarker
test, Symphony IL-6 test, is well suited to address a subset of the global in vitro diagnostics devices (“IVDs”) market,
including sepsis, cardio-metabolic diseases, cancer and other diseases that require rapid tests. Symphony targets critical care markets
where physicians must quickly determine patient acuity to identify optimal treatment regimens.
Our Business Model
Our goal is to become the first provider of rapid
tests for infectious, inflammatory and metabolic diseases by leveraging the strengths of our Symphony platform. We intend to target our
sales and marketing of Symphony to the largest critical care facilities in the United States. Our business model includes the following:
1
The Symphony Platform
The Symphony platform is an innovative and proprietary
technology platform that provides rapid and accurate measurements of key diagnostic biomarkers found in whole blood. Symphony is compact
and can be deployed mobile as compared to current laboratory diagnostic platforms. Symphony incorporates a user-friendly interface where
all sample preparation and reagents are integrated into disposable Symphony cartridges. Symphony only requires a few drops of blood to
provide a measurement in less than 20 minutes.
The Symphony analyzer orchestrates whole blood
processing, biomarker isolation, and immunoassay preparation using non-contact centrifugal force. All necessary reagents and components
are integrated into the Symphony cartridges. Utilizing precision microchannel technology and high specificity antibodies, whole blood
is processed, and the biomarker is isolated within the Symphony cartridge. Intermitted centrifugation cycles enable complex fluid movements,
allowing sequential reagent additions and independent reaction steps inside the hermitically sealed Symphony cartridge. At the conclusion
of the test, the Symphony analyzer measures the fluorescence signature correlating to a highly sensitive quantitation of the biomarker.
To perform a Symphony test, the test operator
adds three drops of blood to the Symphony cartridge. After scanning in the patient ID, the Symphony cartridge is inserted into the Symphony
analyzer and the test runs automatically. Each analyzer can run up to six cartridges simultaneously, either with six different patient
samples or six different tests, in less than 20 minutes, providing quantitative measurements used for improved patient management and
clinical decision-making.
Manufacturing
We plan to manufacture both our devices and cartridges
through Contract Manufacturing Organizations (“CMOs”). We have contracts with Toray Industries, Inc (“Toray”)
to manufacture our cartridges and Sanyoseiko Co. Ltd (“Sanyoseiko”) to manufacture both our device and cartridges. Each of
our partners are well-established global manufacturing companies with capabilities to scale up, re-design and supply our devices and cartridges.
Sanyoseiko had been selected as our CMO, though
in the near-term Toray will continue to develop, validate and manufacture our IL-6 cartridges as our pilot-manufacturing partner. We expect
to meet the demands of our global market. Both Toray’s and Sanyoseiko’s facilities are located in Japan. We license the technology
for the Symphony cartridges from Toray. Our license grants us exclusive global use with the exception of Japan.
Regulatory Strategy
Our current regulatory strategy is designed to
support commercialization of Symphony in the United States pending authorization from the FDA. The FDA has identified Symphony as a de
novo device, and we are subject to the de novo authorization regulatory pathway, which includes expansion of our clinical studies.
We have several clinical studies currently active, all designed to support our de novo FDA submission. We have targeted large,
well-known medical and academic institutions for our studies, which should also help support initial commercialization and market penetration.
This clinical trial expansion could also support additional indications. The expansion also could delay obtaining marketing authorization
for the product.
Sales and Marketing
Until Symphony products are authorized by the FDA, we will focus our
sales and marketing efforts on brand awareness and market education to potential customers, emphasizing the value of monitoring a critical
care patient’s IL-6 levels to improve decision making and patient outcomes. If cleared or approved by the FDA, we will target sales
to ERs and ICUs at United States hospitals, as well as to long-term acute care facilities. We plan to establish a market presence by selling
Symphony devices and tests both directly and through various distribution channels to maximize sales volume and market penetration.
2
License Agreement
On October 6, 2020, we entered into a License
and Supply Agreement, as amended, (the “License Agreement”) with Toray, providing us with an exclusive global license with
Toray, excluding Japan, to use their patents and know-how related to the Symphony detection cartridges for the manufacturing, marketing
and sale of the products (as defined in the License Agreement). We also have a nonexclusive license for the same purposes in Japan. The
agreement terminates in 2029 upon expiration of the last of the patents included in the license.
In connection with entering into the License Agreement,
we are required to pay a 15% royalty fee for the period that any underlying patents exist or for five years after the first sale for the
licensed technology after obtaining regulatory approval based on a percentage of our “Net Sales” of products using these technologies
(as defined in the license Agreement) with a minimum royalty of $60,000 for the initial year that royalties are payable increasing to
a minimum of $100,000 thereafter.
Intellectual Property, Proprietary Technology
We do not currently hold any patents directly.
We rely on a combination either directly or through the License Agreement with Toray of patent, copyright, trade secret, trademark, confidentiality
agreements, and contractual protection to establish and protect our proprietary rights.
Competition
Our primary competition in the IL-6 market is laboratory size equipment
including the Roche Cobas®, Siemens ADVIA Centaur® and Beckman Coulter Access 2®, which require
pre-processing of whole blood prior to performing their test. We believe that our technology, which uses whole blood, provides us with
a substantial competitive advantage over our existing competition that will sustain through commercialization, despite the major life
science companies and consistent entry of innovative start-ups that define our competitive landscape.
Government Regulation
The design, development, manufacture, testing
and sale of our products are subject to regulation by numerous governmental authorities, principally the FDA, and corresponding state
and foreign regulatory agencies.
FDA Regulation
Medical Devices
Generally, the products we develop must be cleared
by the FDA before they are marketed in the United States. Before and after approval, authorization, or clearance in the United States,
our products are subject to extensive regulation by the FDA, as well as by other regulatory bodies. FDA regulations govern, among other
things, the development, testing, manufacturing, labeling, safety, storage, recordkeeping, market clearance, authorization or approval,
advertising and promotion, import and export, marketing and sales, and distribution of medical devices, including IVDs. IVDs are a type
of medical device and include reagents and instruments used in the diagnosis or detection of diseases, conditions or infections, including,
without limitation, the presence of certain chemicals or other biomarkers. Predictive, prognostic and screening tests can also be IVDs.
3
In the United States, medical devices are subject
to varying degrees of regulatory control and are classified in one of three classes depending on the extent of controls the FDA determines
are necessary to reasonably ensure their safety and effectiveness:
● Class III: special controls and requires a premarket approval (“PMA”).
FDA Premarket Clearance and Approval Requirements
Unless an exemption applies, each medical device
commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, approval of a de novo
application, or approval of a premarket approval (PMA).
While most Class I devices are exempt from the 510(k) premarket
notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification under
Section 510(k) of the FDCA requesting permission to commercially distribute the device. The FDA’s permission to commercially
distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance. Devices deemed by the FDA to pose
the greatest risks, such as life sustaining, life supporting or some implantable devices, or devices that have a new intended use, or
use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring
approval of a PMA. Some pre-amendment devices are unclassified, but are subject to FDA’s premarket notification and clearance process
in order to be commercially distributed. Our initial product is a Class II device subject to 510(k) clearance.
510(k) Clearance Marketing Pathway
To obtain 510(k) clearance, a company must submit
to the FDA a premarket notification submission demonstrating that the proposed device is “substantially equivalent” to a predicate
device already on the market. A predicate device is a legally marketed device that is not subject to PMA, i.e., a device that was legally
marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, a device that has been reclassified from
Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process. The FDA’s
510(k) clearance process usually takes from three to twelve months, but often takes longer. The FDA may require additional information,
including clinical data, to make a determination regarding substantial equivalence. In addition, the FDA collects user fees for certain
medical device submissions and annual fees for medical device establishments.
After a device receives 510(k) marketing clearance,
any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification
in its intended use, will require a new 510(k) clearance or, depending on the modification, PMA approval. The FDA requires each manufacturer
to determine whether the proposed change requires submission of a 510(k) or a PMA in the first instance, but the FDA can review any such
decision and disagree with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s determination, the FDA
can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) marketing clearance or PMA
approval is obtained. Also, in these circumstances, the manufacturer may be subject to significant regulatory fines or penalties.
4
De Novo Classification
Devices of a new type that FDA has not previously
classified based on risk are automatically classified into Class III by operation of section 513(f)(1) of the FDCA, regardless of the
level of risk they pose. To avoid requiring PMA review of low- to moderate-risk devices classified in Class III by operation of law, Congress
enacted section 513(f)(2) of the FDCA. This provision allows FDA to classify a low- to moderate-risk device not previously classified
into Class I or II. After de novo authorization, an authorized device may be used as a predicate for future devices going through the
510(k) process.
The FDA has classified Symphony as de novo, a
device of a new type that the FDA has not previously classified. Once obtained, a de novo authorization may lead to Symphony’s use
as a predicate for future devices going through the 510(k) process.
Clinical Trials
Clinical trials are often required for a de novo
authorization. All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s
IDE regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of
recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a “significant
risk,” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which
must become effective prior to commencing human clinical trials. A significant risk device is one that presents a potential for serious
risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially
important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents
a potential for serious risk to a subject. An IDE application must be supported by appropriate data, such as animal and laboratory test
results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE will automatically
become effective 30 days after receipt by the FDA unless the FDA notifies the company that the investigation may not begin. If the FDA
determines that there are deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit a clinical
trial to proceed under a conditional approval.
In addition, the study must be approved by, and
conducted under the oversight of, an Institutional Review Board (IRB) for each clinical site. The IRB is responsible for the initial and
continuing review of the IDE study and may pose additional requirements for the conduct of the study. If an IDE application is approved
by the FDA and one or more IRBs, human clinical trials may begin at a specific number of investigational sites with a specific number
of patients, as approved by the FDA. If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial
after obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but must still follow abbreviated IDE
requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping
requirements. Acceptance of an IDE application for review does not guarantee that the FDA will allow the IDE to become effective and,
if it does become effective, the FDA may or may not determine that the data derived from the trials support the safety and effectiveness
of the device or warrant the continuation of clinical trials. An IDE supplement must be submitted to, and approved by, the FDA before
a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights,
safety or welfare of human subjects.
During a study, the sponsor is required to comply
with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with
the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational
devices or on making safety or effectiveness claims for them. The clinical investigators in the clinical study are also subject to FDA
regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition
of the investigational device, and comply with all reporting and recordkeeping requirements. Additionally, after a trial begins, we, the
FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that the risks to study
subjects outweigh the anticipated benefits.
Sponsors of applicable clinical trials of devices
also are required to register with www.clinicaltrials.gov, a public database of clinical trial information. Information related to
the device, patient population, phase of investigation, study sites and investigators and other aspects of the clinical trial is made
public as part of the registration. Although the QSR does not fully apply to investigational devices, the requirement for controls on
design and development does apply.
5
Post-market Regulation
After a device is cleared or approved for marketing, numerous and pervasive
regulatory requirements continue to apply. These include:
● establishment registration and device listing with the FDA;
● requirements related to promotional activities;
Once we have a commercialized product, our manufacturing
processes will be required to comply with the applicable portions of the QSR, which cover the methods and the facilities and controls
for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation
and servicing of finished devices intended for human use. The QSR also requires, among other things, maintenance of a device master file,
device history file, and complaint files. As a manufacturer, we are subject to periodic scheduled or unscheduled inspections by the FDA.
Our failure to maintain compliance with the QSR requirements could result in the shut-down of, or restrictions on, our manufacturing operations
and the recall or seizure of our products, which would have a material adverse effect on our business. The discovery of previously unknown
problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether
resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could
result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.
The FDA has broad regulatory compliance and enforcement
powers. If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or
enforcement actions, which may result in any of the following sanctions:
● unanticipated expenditures to address or defend such actions;
● operating restrictions, partial suspension or total shutdown of production;
● withdrawing a PMA that has already been granted;
● refusal to grant export approval for our products; or
● criminal prosecution
6
Employees
As of December 31, 2022, we have sixteen full-time
employees. We also contract with several consultants and contractors performing regulatory advisory, investor relations and manufacturing
scale-up support. None of our employees are represented by labor unions or covered by collective bargaining agreements.
Available Information
Our
principal executive offices are located at 360 Massachusetts Avenue, Suite 203, Acton, MA 01720 and our telephone number is (844) 327-7078.
Our website address is www.bluejaydx.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and all amendments to those reports, proxy statements and other information about us are made available, free of charge, through the Securities
and Exchange Commission (“SEC”) Filings section of our website at www.ir.bluejaydx.com/financial-information/sec-filings and
at the SEC’s website at www.sec.gov as soon as reasonably practicable
after such material is electronically filed with or furnished to the SEC. We include our website address in this report only as an inactive
textual reference and do not intend it to be an active link to our website. The contents of our website are not incorporated into this
report.
In addition, our Board of Directors has adopted
a written Code of Business Conduct and Ethics applicable to all officers, directors and employees, which is available through the “Governance
Overview” section of our website at www.ir.bluejaydx.com/corporate-governance/governance-overview. We intend to satisfy the disclosure
requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics
and by posting such information on the website address and location specified above.
7
ITEM 1A. RISK FACTORS
Investing in our securities carries a significant degree of risk.
You should carefully consider the risks described below, together with all of the other information in this Form 10-K, including our consolidated
financial statements and related notes included elsewhere in this Form 10-K, before deciding whether to invest in our securities. If any
or a combination of the following risks were to materialize, our results of operations, financial condition and prospects could be materially
adversely affected. If that were to be the case, the market price of our securities could decline, and investors could lose all or part
of their investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not
presently known to us or that we currently believe to be immaterial may also adversely affect our business.
Risks Related to Our Financial Condition
and Capital Requirements
We are subject to the risks associated with
new businesses.
We entered into a License Agreement with Toray
in October 2020 and are effectively a new business with a plan to commercialize our licensed technology. Our limited operating history
may not be adequate to enable you to fully assess our ability to develop and market our Symphony platform and test cartridges, assuming
we receive regulatory clearances, for which there is no assurance, and respond to competition. Our efforts to date have related to the
organization and formation of our Company, research and development and performing clinical trials. We have no approved products, have
not yet generated sustainable revenue, and we cannot guarantee we will ever be able to generate future revenues. Therefore, we are, and
expect for the foreseeable future to be, subject to all the risks and uncertainties, inherent in a new business focused on the development
and sale of new medical devices. As a result, we may be unable to further develop, obtain regulatory approval for, manufacture, market,
sell and derive revenues from our Symphony platform and test cartridges and the other product candidates in our pipeline, and our inability
to do so would materially and adversely impact our viability. In addition, we still must optimize many functions necessary to operate
a business, including expanding our managerial, personnel and administrative structure, continuing product research and development, and
assessing and commencing our marketing activities.
Accordingly, you should consider our prospects
in light of the costs, uncertainties, delays and difficulties frequently encountered by companies that have not yet commercialized their
products, particularly those in the medical device field. In particular, potential investors should consider that there is a significant
risk that we will not be able to:
● maintain our management team and Board of Directors;
● attract, enter into or maintain contracts with, and retain customers; and
In the event that we do not successfully address
these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.
8
We have incurred significant losses since
inception and may not be able to achieve significant revenues or profitability.
Since our inception, we have engaged primarily
in development activities. We have funded our operations primarily through debt and equity financings, and have incurred losses since
inception, including a net loss of $9.3 million and $3.5 million for the years ended December 31, 2022 and 2021, respectively. We do not
know whether or when we will become profitable. Our ability to generate revenue and achieve profitability depends upon our ability, alone
or with others, to complete the development process of our product candidates, including regulatory approvals, and thereafter achieve
substantial acceptance in the marketplace for our products. We may be unable to achieve any or all of these goals.
We will require substantial additional funding,
which may not be available to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce or cease
our operations.
To date, we have relied primarily on private debt
and equity financing to carry on our business. We have limited financial resources, negative cash flow from operations and no assurance
that sufficient funding will be available to us to fund our operating expenses and to further our product development efforts and pursue
clinical trials for FDA approval. Based on these and other factors, in our audited consolidated financial statements for the years ended
December 31, 2022 and 2021, we concluded that this circumstance raised substantial doubt about our ability to continue as a going concern
within one year from the original issuance date of such financial statements. Similarly, in its report on the consolidated financial statements
for the years ended December 31, 2022 and 2021, our independent registered public accounting firm included an emphasis of matter paragraph
stating that our recurring losses from operations and continued cash outflows from operating activities raised substantial doubt about
our ability to continue as a going concern. Our consolidated financial statements for the years ended December 31, 2022 and 2021 do not
include any adjustments that may result from the outcome of this uncertainty. We anticipate that we will need to raise additional capital
to fund our operations while we implement and execute our business plan. We currently do not have any contracts or commitments for additional
financing. In addition, any additional equity financing may involve substantial dilution to our existing stockholders.
There can be no assurance that such additional
capital will be available on a timely basis or on terms that will be acceptable to us. Failure to obtain such additional financing could
result in delay or indefinite postponement of operations or the further development of our business with the possible loss of such properties
or assets. If adequate funds are not available or are not available on acceptable terms, we may not be able to fund our business or the
expansion thereof, take advantage of strategic acquisitions or investment opportunities or respond to competitive pressures. Such inability
to obtain additional financing when needed could have a material adverse effect on our business, results of operations, cash flow, financial
condition and prospects.
We have received a notification letter
from the Nasdaq Listing Qualifications Staff that our common stock does not satisfy Nasdaq’s $1.00 minimum price per share rule
and we could face delisting by Nasdaq if we are unable to regain compliance with this requirement, which could adversely affect our ability
to sell stock in the public markets, the liquidity of our common stock and our general ability to raise additional capital.
Our common stock currently is listed for quotation
on the Nasdaq Capital Market. We are required to meet specified financial requirements in order to maintain such listing. On October 25,
2022, we received a notification letter from the Nasdaq Listing Qualifications Staff of the Nasdaq Stock Market LLC (“Nasdaq”)
notifying us that the closing bid price for our common stock had been below $1.00 for the previous 30 consecutive business days and that
we therefore are not in compliance with the minimum bid price requirement for continued inclusion on the Nasdaq Capital Market under Nasdaq
Listing Rule 5550(a)(2). The notification has no immediate effect on the listing of our common stock on the Nasdaq Capital Market.
9
Under the Nasdaq Listing Rules, we have a period
of 180 calendar days to regain compliance. To regain compliance, the closing bid price of our common stock must be at least $1.00 or higher
for a minimum of ten consecutive business days, and in such case, Nasdaq will provide us with written confirmation of compliance. If we
do not regain compliance by April 24, 2023, we may be eligible for an additional 180 calendar days, provided that we meet the continued
listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq, except the bid price
requirement. If we are not eligible or it appears to Nasdaq that we will not be able to cure the deficiency during the second compliance
period, Nasdaq will provide written notice to us that our common stock will be subject to delisting. In the event of such notification,
we may appeal Nasdaq’s determination to delist its securities, but there can be no assurance that Nasdaq would grant our request
for continued listing.
We intend to take all reasonable measures available
to us to achieve compliance to allow for continued listing on the Nasdaq Capital Market. However, there can be no assurance that we will
be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria.
If our common stock does not regain compliance with the minimum price requirement during the applicable compliance period, we may need
to effect a reverse stock split, whereby shares of our common stock are consolidated so that the per-share trading price becomes greater
than $1.00 per share. If our common stock is delisted, we may seek to have our common stock quoted on an over-the-counter marketplace,
such as on the OTCQX. The OTCQX is not a stock exchange, and if our common stock trades on the OTCQX rather than a securities exchange,
there may be significantly less trading volume and analyst coverage of, and significantly less investor interest in, our common stock,
which may lead to lower trading prices for our common stock.
Any potential delisting
of our common stock from the Nasdaq Capital Market may have materially adverse consequences to our stockholders, including:
● limited dissemination of the market price of our common stock;
● limited news coverage;
● limited interest by investors in our common stock;
● volatility of the prices of our common stock, due to low trading volume;
10
Risks Related to Our Business
The License Agreement with Toray, which
covers the license of the core technology used in our Symphony Cartridges, contains significant risks that may threaten
our viability or otherwise have a material adverse effect on us and our business, assets and its prospects.
We have an exclusive license with Toray for the
entire world, excluding Japan, to use their patents and know-how related to our Symphony test cartridges for the manufacturing, marketing
and sale of such products. We also have a nonexclusive license for the same purposes in Japan. We have no contractual
rights to the intellectual property covered in the License Agreement other than as expressly set forth therein. Our plans, business, prospects
and viability are substantially dependent on that intellectual property and subject to the limitations relating thereto as set forth in
the License Agreement:
In addition, see the risks in “Risks
Related to Our Intellectual Property” below. These risks are not the only risks inherent in the License Agreement. You are encouraged
to read the complete text of the License Agreement, which is filed as an exhibit to this Form 10-K.
11
We have not yet launched any products and
the ability to do so will depend on the acceptance of our Symphony platform in the healthcare market.
We have not yet launched or received regulatory
approvals in any country or territory for our Symphony platform or test cartridges. Even if we receive regulatory approvals, we are faced
with the risk that our Symphony platform will not be accepted over competing products and that we will be unable to enter the marketplace
or compete effectively. We cannot assure you that our Symphony platform or test cartridges will gain market acceptance. If the market
for our future products fails to develop or develops more slowly than expected, or if any of the technology and standards supported by
us do not achieve or sustain market acceptance, our business and operating results would be materially and adversely affected.
We cannot accurately predict the volume
or timing of any sales, making the timing of any revenues difficult to predict.
We may be faced with lengthy and unpredictable
customer evaluation and approval processes associated with our Symphony platform. Consequently, we may incur substantial expenses and
devote significant management effort and expense in developing customer adoption of our Symphony platform, which may not result in revenue
generation. We must also obtain regulatory approvals of our Symphony platform and test cartridges in jurisdictions in which we pursue
approvals, which is subject to risk and potential delays. The same risks apply to other tests we may develop based on our Symphony platform.
As such, we cannot accurately predict the volume, if any, or timing of any future sales.
If third-party payors do not provide coverage
and reimbursement for the use of our platform, our business and prospects may be negatively impacted.
Third-party payors, whether governmental or commercial,
are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in certain countries, no uniform policy
of coverage and reimbursement for medical device products and services exists among third-party payors. Therefore, coverage and reimbursement
for medical device products and services can differ significantly from payor to payor. In addition, payors continually review new technologies
for possible coverage and can, without notice, deny coverage for these new products and procedures. As a result, the coverage determination
process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our
products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.
Our Symphony platform, including its software
and systems, may contain undetected errors, which could limit our ability to provide our products and diminish the attractiveness of our
offerings.
Our Symphony platform may contain undetected errors,
defects, or bugs. As a result, our customers or end users may discover errors or defects in our products, software or systems, or our
products, software or systems may not operate as expected. We may discover significant errors or defects in the future that we may not
be able to fix. Our inability to fix any of those errors could limit our ability to provide our products and services, impair the reputation
of our brand and diminish the attractiveness of our product and service offerings to our customers.
In addition, we may utilize third party technology
or components in our products, and we rely on those third parties to provide support services to us. The existence of errors, defects,
or bugs in third party technology or components, or the failure of those third parties to provide necessary support services to us, could
materially adversely impact our business.
12
We will rely on the proper function, security
and availability of our information technology systems and data to operate our business, and a breach, cyber-attack or other disruption
to these systems or data could materially and adversely affect our business, results of operations, financial condition, cash flows, reputation,
or competitive position.
We will depend on sophisticated software and other
information technology systems to operate our business, including to process, transmit and store sensitive data, and our future products
and services may include information technology systems that collect data regarding patients. We could experience attempted or actual
interference with the integrity of, and interruptions in, our technology systems, as well as data breaches, such as cyber-attacks, malicious
intrusions, breakdowns, interference with the integrity of our products and data or other significant disruptions. Furthermore, we may
rely on third-party vendors to supply and/or support certain aspects of our information technology systems. These third-party systems
could also become vulnerable to cyber-attack, malicious intrusions, breakdowns, interference, or other significant disruptions, and may
contain defects in design or manufacture or other problems that could result in system disruption or compromise the information security
of our own systems.
If in the future we pursue foreign jurisdictions,
such international operations will mean that we are subject to laws and regulations, including data protection and cybersecurity laws
and regulations, in many jurisdictions. Furthermore, there has been a developing trend of civil lawsuits and class actions relating to
breaches of consumer data held by large companies or incidents arising from other cyber-attacks. Any data security breaches, cyber-attacks,
malicious intrusions or significant disruptions could result in actions by regulatory bodies and/or civil litigation, any of which could
materially and adversely affect our business, results of operations, financial condition, cash flows, reputation, or competitive position.
In addition, our information technology systems
require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep
pace with continuing changes in information processing technology, evolving legal and regulatory standards, the increasing need to protect
patient and customer information, changes in the techniques used to obtain unauthorized access to data and information systems, and the
information technology needs associated any new products and services. There can be no assurance that our process of consolidating, protecting,
upgrading and expanding our systems and capabilities, continuing to build security into the design of our products, and developing new
systems to keep pace with continuing changes in information processing technology will be successful or that additional systems issues
will not arise in the future.
If our information technology systems, products
or services or sensitive data are compromised, patients or employees could be exposed to financial or medical identity theft or suffer
a loss of product functionality, and we could lose existing customers, have difficulty attracting new customers, have difficulty preventing,
detecting, and controlling fraud, be exposed to the loss or misuse of confidential information, have disputes with customers, physicians,
and other health care professionals, suffer regulatory sanctions or penalties, experience increases in operating expenses or an impairment
in our ability to conduct our operations, incur expenses or lose revenues as a result of a data privacy breach, product failure, information
technology outages or disruptions, or suffer other adverse consequences including lawsuits or other legal action and damage to our reputation.
If we are not able to attract and retain
highly skilled managerial, scientific and technical personnel, we may not be able to implement our business model successfully.
We believe that our management team must be able
to act decisively to apply and adapt our business model in the markets in which we will compete. Our future performance depends to a large
extent on the continued services of members of our current management. In addition, we will rely upon technical and scientific employees
or third-party contractors to effectively establish, manage and grow our business. Consequently, we believe that our future viability
will depend largely on our ability to attract and retain highly skilled managerial, sales, scientific and technical personnel. In order
to do so, we may need to pay higher compensation or fees to our employees or consultants than we currently expect, and such higher compensation
payments would have a negative effect on our operating results. Competition for experienced, high-quality personnel is intense and we
cannot assure that we will be able to recruit and retain such personnel. We may not be able to hire or retain the necessary personnel
to implement our business strategy. Our failure to hire and retain such personnel could impair our ability to develop new products and
manage our business effectively. In the event that we lose the continued services of such key personnel for any reason, this could have
a material adverse effect on our business, operations and prospects.
13
If we or our manufacturers fail to comply
with the regulatory quality system regulations or any applicable equivalent regulations, our proposed operations could be interrupted,
and our operating results would suffer.
We and any third-party manufacturers and suppliers
of ours will be required, to the extent of applicable regulation, to follow the quality system regulations of each jurisdiction we will
seek to penetrate and also will be subject to the regulations of these jurisdictions regarding the manufacturing processes. If we or any
third-party manufacturers or suppliers of ours are found to be in significant non-compliance or fail to take satisfactory corrective action
in response to adverse regulatory findings in this regard, regulatory agencies could take enforcement actions against us and such manufacturers
or suppliers, which could impair or prevent our ability to produce our products in a cost-effective and timely manner in order to meet
customers’ demands. Accordingly, our operating results would suffer.
Product liability suits, whether or not
meritorious, could be brought against us due to an alleged defective product or for the misuse of our Symphony platform or test cartridges.
These suits could result in expensive and time-consuming litigation, payment of substantial damages, and an increase in our insurance
rates.
If our Symphony platform or test cartridges, or
any future tests based on our Symphony platform, are defectively designed or manufactured, contain defective components or are misused,
or if someone claims any of the foregoing, whether or not meritorious, we may become subject to substantial and costly litigation. Misusing
our devices or failing to adhere to the operating guidelines or our devices producing inaccurate readings could cause significant harm
to patients. In addition, if our operating guidelines are found to be inadequate, we may be subject to liability. Product liability claims
could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us.
While we expect to maintain product liability insurance, we may not have sufficient insurance coverage for all future claims. Any product
liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing
continuing coverage, could harm our reputation in the industry and could reduce revenue. Product liability claims in excess of our insurance
coverage would be paid out of cash reserves harming our financial condition and adversely affecting our results of operations.
If we are found to have violated laws protecting
the confidentiality of patient health information, we could be subject to civil or criminal penalties, which could increase our liabilities
and harm our reputation or our business.
There are a number of laws around the world protecting
the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected
information. Privacy rules protect medical records and other personal health information by limiting their use and disclosure, giving
individuals the right to access, amend and seek accounting of their own health information and limiting most use and disclosures of health
information to the minimum amount reasonably necessary to accomplish the intended purpose. We may face difficulties in holding such information
in compliance with applicable law. If we are found to be in violation of the privacy rules, we could be subject to civil or criminal penalties,
which could increase our liabilities, harm our reputation and have a material adverse effect on our business, financial condition and
results of operations.