ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and
analysis together with our Consolidated Financial Statements and the notes thereto included elsewhere in this Form 10-K. This discussion
contains forward-looking statements that involve risks and uncertainties. For additional discussion, see “CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS” above.
Overview
We are a clinical-stage medical diagnostics company
developing rapid, tests using whole blood on our Symphony platform (“Symphony”) to improve patient outcomes in critical care
settings. Our Symphony technology platform is an exclusively licensed, patented system 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 (“FDA”), can provide a solution
to a significant market need in the United States. Clinical trials indicate Symphony 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.
Since inception, we have incurred net losses from
operations each year and we expect to continue to incur losses for the foreseeable future. We incurred net losses of approximately $10.0
million and $9.3 million for the years ended December 31, 2023 and 2022, respectively. We had negative cash flow from operating
activities of approximately $8.3 million and $7.7 million for the years ended December 31, 2023 and 2022, respectively, and had an accumulated
deficit of approximately $26.9 million and $17.0 million as of December 31, 2023 and 2022, respectively.
29
Results of Operations
Comparison of Years Ended December 31, 2023
and 2022
The following table sets forth our results of operations for the years
ended December 31, 2023 and 2022:
For Years Ended December 31,
Operating expenses:
Other income (expense):
Impairment of property and equipment - (237,309 )
Revenue and Gross Profit
Revenue and gross profit decreased approximately
$0.2 million and $0.1 million respectively, for the year ended December 31, 2023, as compared to 2022. The decrease was due to a minor
sale of five Symphony analyzers to our business partner, Toray, during 2022. Future sales to Toray after 2022 are not anticipated.
Research and Development
Research and development expenses increased approximately
$1.6 million, or 38%, for the year ended December 31, 2023, as compared to 2022. The increase in research and development expenses was
primarily due to an approximately $0.2 million increase in personnel related costs, approximately $0.6 million of additional product development
costs related to bringing the Symphony analyzer and cartridges in compliance with the FDA manufacturing standards, and approximately $0.6
million of additional depreciation expense associated with the acceleration of depreciation of certain assets used for research and development
activities.
We expect increases in our future research and
development expenses which will be focused on our clinical trial program and any necessary manufacturing improvements.
30
General and Administrative
General and administrative expenses decreased
approximately $0.5 million, or 9%, for the year ended December 31, 2023, as compared to 2022. The decrease in general and administrative
expenses is primarily due to the cost reduction efforts focused on reducing personnel and insurance costs.
We expect to monitor and continue to reduce our
general and administrative spend, as necessary, to optimize operational alignment.
Sales and Marketing
Sales and marketing expenses decreased approximately
$0.2 million, or 37%, for year ended December 31, 2023, as compared to 2022. The decrease was primarily attributable to the Company’s
cost savings efforts as the Company seeks to limit marketing costs.
Other Income
Total other income increased approximately $0.3
million, or 1,616%, for the year ended December 31, 2023 as compared to 2022. The increase primarily related to increases in interest
income from the Company’s sweep account due to increased interest rates as compared to the prior period, as well as no material
impairment charge being recognized during 2023 as compared to 2022, which had an impairment charge of approximately $0.2 million.
Summary Statement of Cash Flows
The following table sets forth the primary sources
and uses of cash and cash equivalents for each of the periods presented.
Years Ended December 31,
Cash proceeds provided by (used in):
Net cash used in operating activities
During 2023, we used approximately $8.3 million
in cash for operating activities, an increase of approximately $0.6 million from 2022. The increase in net cash used in operating activities
was primarily due to increases in personnel and product development costs, which ultimately led to the reduction of personnel in the second
and third quarters of 2023.
Net cash used in investing activities
During 2023, we used approximately $0.7 million
in cash for investing activities, an approximately $0.5 million decrease from 2022. The Company acquired laboratory equipment and manufacturing
equipment for the development of the Symphony devices in both 2022 and 2023.
Net cash provided by financing activities
During 2023, we generated approximately $1.1 million
in cash from financing activities, as compared to less than $0.1 million in 2022. The increase in net cash provided by financing activities
was primarily due to the proceeds from the August 2023 Financing.
31
Contractual Obligations
See Note 8 to consolidated financial statements
for our lease obligations and Note 9 to the consolidated financial statements for our other non-cancellable contractual obligations.
Liquidity and Going Concern
The Company had cash and cash equivalents of
$2,208,516, as of December 31, 2023. The Company has incurred net losses since its inception, and has negative cash flows from
operations and had the accumulated deficit of $26,950,990 as of December 31, 2023. The Company continues to develop the Symphony
device and its first test for the measurement of IL-6. The Company remains committed to obtaining FDA clearance and will conduct
clinical trials to obtain sufficient data to support its FDA submission, while also continuing to build its manufacturing operations
with its contract manufacturing organizations. Current cash resources and expected operating expenses are considered in determining
its liquidity requirement; as well as $1,771,375 of current liabilities on its balance sheet as of December 31, 2023. The
Company estimates cash resources will be sufficient to fund its operations through the second quarter of 2024. The Company
will need additional capital to fund its planned operations for the next 12 months. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern.
The consolidated financial statements for the
years ended December 31, 2023 and 2022 were prepared under the assumption that the Company will continue as a going concern, which contemplates
that the Company will be able to realize assets and discharge liabilities in the normal course of business.
The Company expects that it will seek to raise
such additional capital through public or private equity offerings, grant financing and support from governmental agencies, convertible
debt, collaborations, strategic alliances and distribution arrangements. Additional funds may not be available when it needs them on terms
that are acceptable to them, or at all. If adequate funds are not available, it may be required to delay its FDA regulatory strategy,
and to delay or reduce the scope of its research or development programs, its commercialization efforts or its manufacturing commitments
and capacity. In addition, if it raises additional funds through collaborations, strategic alliances or distribution arrangements with
third parties, it may have to relinquish valuable rights to its technologies or future revenue streams.
Recent Offerings
August 2023 Offering
On August 24, 2023, the Company entered into a
securities purchase agreement with certain institutional and accredited investors (the “Purchase Agreement”) relating to the
registered direct offering and sale of 216,000 shares of the Company’s common stock at a purchase price of $7.365 per share (the
“Offering”).
In a concurrent private placement, the Company
also issued to such institutional and accredited investors unregistered warrants to purchase up to 216,000 shares of Common Stock (the
“Warrants”). Pursuant to the terms of the Purchase Agreement, for each share of Common Stock issued in this offering an accompanying
Warrant was issued to the purchaser thereof. Each Warrant is exercisable for one share of Common Stock (the “Warrant Shares”)
at an exercise price of $7.24 per share, will be immediately exercisable upon issuance and will expire five years from the date of issuance.
The Warrants were offered and sold at a purchase price of $0.125 per underlying warrant share, which purchase price is included in the
offering price per share of Common Stock issued in the Offering (the “Private Placement”).
32
Pursuant to an engagement letter, dated as of
August 7, 2023 (the “Engagement Letter”), between the Company and H.C. Wainwright & Co., LLC, or the placement agent,
the Company agreed to pay the placement agent a total cash fee equal to 7.0% of the gross proceeds received in the Offering and the Private
Placement. The Company also agreed to pay the placement agent in connection with the Offering and the Private Placement a management fee
equal to 1.0% of the gross proceeds raised in the Offering and Private Placement, $45,000 for non-accountable expenses, and $15,950 for
clearing fees. In addition, the Company agreed to issue to the placement agent, or its designees, warrants to purchase up to 15,120 shares
of Common Stock (the “Placement Agent Warrants”), which represents 7.0% of the aggregate number of shares of Common Stock
sold in the Offering. The Placement Agent Warrants have substantially the same terms as the Warrants, except that the Placement Agent
Warrants have an exercise price equal to $ 9.2063, or 125% of the offering price per share of Common Stock sold in the Offering, and a
term of five years from the commencement of the sales pursuant to the Offering.
The gross proceeds to the Company from the Offering
and the Private Placement are $1,590,840. The Company incurred offering costs of $413,544.
January 2024 Offering
On January 2, 2024, the Company sold in a public
offering (such transaction, the “January 2024 Offering”) (i) 537,768 shares of the Company’s common stock, par value
$0.0001 per share and (ii) prefunded warrants to purchase up to an aggregate 2,154,540 shares of Common Stock (the “Prefunded Warrants”).
The Shares and Prefunded Warrants were sold together with warrants to purchase up to an aggregate of 2,692,308 shares of Common Stock
at an exercise price of $1.30 per share (the “January 2024 Warrants”). The combined public offering price was $1.30 per share
of Common Stock and related January 2024 Warrant and $1.2999 per Prefunded Warrant and related January 2024 Warrant. The Company intends
to use the net proceeds from the January Offering to fund matters related to obtaining FDA approval (including clinical studies related
thereto), as well as for other research and development activities, and for general working capital needs.
The Prefunded Warrants are immediately exercisable
and may be exercised at any time until all of the Prefunded Warrants are exercised in full. The January 2024 Warrants are exercisable
immediately upon issuance for a period of five years following the date of issuance.
Pursuant to an engagement letter, dated as of
August 7, 2023, as amended October 11, 2023 (the “Amended Engagement Letter”), by and between the Company and the Placement
Agent, the Company paid the Placement Agent a total cash fee of $245,000 equal to 7.0% of the gross proceeds received in the January 2024
Offering. The Company also paid the Placement Agent in connection with the January Offering a management fee of $35,000 equal to 1.0%
of the gross proceeds raised in the January 2024 Offering and certain expenses incurred in connection with the January Offering. In addition,
the Company issued to the Placement Agent, warrants to purchase up to an aggregate 188,462 shares of Common Stock (the “January
2024 Placement Agent Warrants”), which represents 7.0% of the aggregate number of shares of Common Stock and Prefunded Warrants
sold in the January 2024 Offering. The January 2024 Placement Agent Warrants have substantially the same terms as the January 2024 Warrants,
except that the January 2024 Placement Agent Warrants have an exercise price equal to $1.6250, or 125% of the offering price per share
of Common Stock and related January 2024 Warrant sold in the January Offering and expire on the fifth anniversary from the date of the
commencement of sales in the January 2024 Offering.
Concurrently with the closing of the January 2024
Offering, certain purchasers have elected to exercise Prefunded Warrants to purchase 174,770 shares of Common Stock.
33
Critical Accounting Policies and Estimates
Some of our critical accounting policies require
us to make difficult, subjective or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both
of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting
estimate is made, and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely
to occur from period to period may have a material impact on the presentation of our financial condition, changes in financial condition
or results of operations.
As an emerging growth company, we have elected
to opt-in to the extended transition period for new or revised accounting standards. As a result, our consolidated financial statements
may not be comparable to those of companies that comply with public company effective dates.
Stock-Based Compensation
Our stock-based compensation expense for stock
awards is estimated at the grant date based on the award’s fair value as determined by the consideration received or as calculated
by the Black-Scholes option pricing model, whichever is more readily measurable. The Black-Scholes pricing model requires various highly
judgmental assumptions including expected volatility and expected term. The expected volatility is based on the historical stock volatilities
of several similar public companies over a period equal to the expected terms of the awards as we do not have a sufficient trading history
to use the volatility of our own common stock. To estimate the expected term, we have opted to use the simplified method, which uses of
the midpoint of the vesting term and the contractual term. We recognize the compensation cost of share-based awards on a straight-line
basis over the requisite service period, however, for stock awards for which vesting is subject to performance – based milestones,
the expense is recorded over the implied service period after the point when the achievement of the milestone is probable, or the performance
condition has been achieved. If any of the assumptions used in the Black-Scholes pricing model changes significantly, stock-based compensation
expense may differ materially in the future from that recorded in the current period.
Recently Adopted Accounting Standards
See Note 2 to consolidated financial statements
(under the caption “Recently Issued Accounting Standards”).
Recently Issued Accounting Standards
See Note 2 to consolidated financial statements
(under the caption “Recently Issued Accounting Standards”).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Information requested by this Item is not applicable
as we are electing scaled disclosure requirements available to Smaller Reporting Companies with respect to this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and The
Report of Independent Registered Public Accounting Firm are included in this Form 10-K on pages F-1
through F-20.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
34
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our President and Chief Executive Officer,
who is our principal executive officer, and our Interim Chief Financial Officer, who is our principal financial officer, evaluated
the effectiveness of our disclosure controls and procedures as of December 31, 2023. The term “disclosure controls and
procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a
company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms.
Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is accumulated and communicated to our management, including our President and Chief Executive Officer and our Interim
Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our President and Chief Executive Officer
and our Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023.
Management’s Annual Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange
Act). Our President and Chief Executive Officer and our Interim Chief Financial Officer assessed the effectiveness of our internal control over financial
reporting as of December 31, 2023. In making this assessment, our President and Chief Executive Officer and our Interim Chief Financial Officer
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control—Integrated
Framework. Based on that assessment and using the COSO criteria, our President and Chief Executive Officer and our Interim Chief Financial Officer have
concluded that, as of December 31, 2023, our internal control over financial reporting was effective.
Our independent registered public accounting firm
will not be required to formally attest to the effectiveness of our internal controls over financial reporting for as long as we are an
“emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control
over financial reporting during the most recent fiscal quarter, that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Inherent Limitations of Controls
Management does not expect that our disclosure
controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. Controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls
also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes
in conditions, or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and not be detected.
ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable.
35
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is hereby
incorporated by reference to our definitive proxy statement for our 2024 annual meeting of stockholders to be filed with the SEC within
120 days of the fiscal year ended December 31, 2023.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is hereby
incorporated by reference to our definitive proxy statement for our 2024 annual meeting of stockholders to be filed with the SEC within
120 days of the fiscal year ended December 31, 2023.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is hereby
incorporated by reference to our definitive proxy statement for our 2024 annual meeting of stockholders to be filed with the Securities
and Exchange Commission within 120 days of the fiscal year ended December 31, 2023.
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth information regarding
our equity compensation plans at December 31, 2023:
Equity compensation plans not approved by security holders (2) 43,100 $ 17.95 -
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is hereby
incorporated by reference to our definitive proxy statement for our 2024 annual meeting of stockholders to be filed with the SEC within
120 days of the fiscal year ended December 31, 2023.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is hereby
incorporated by reference to our definitive proxy statement for our 2024 annual meeting of stockholders to be filed with the SEC within
120 days of the fiscal year ended December 31, 2023.
36
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
(b) See the accompanying Index to Exhibits filed as a part of this Form 10-K.
(c) Other schedules are not applicable.
37
INDEX TO EXHIBITS
Exhibit No. Description of Document
4.10* Description of Securities of Bluejay Diagnostics, Inc.
38
97.1* Incentive Compensation Recovery Policy
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith.
** Management contract or compensatory plan, contract or arrangement.
ITEM 16. FORM 10-K SUMMARY.
None.
39
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 28, 2024.
Bluejay Diagnostics, Inc.
By: /s/ Neil Dey
Neil Dey
President, Chief Executive Officer and Director
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Neil Dey President, Chief Executive Officer and Director March 28, 2024
Neil Dey (Principal Executive Officer)
/s/ Frances Scally Interim Chief Financial Officer March 28, 2024
Frances Scally (Principal Financial and Accounting Officer)
/s/ Douglas C. Wurth Chairman of the Board of Directors March 28, 2024
Douglas C. Wurth
/s/ Donald R. Chase Director March 28, 2024
Donald R. Chase
/s/ Svetlana Dey Director March 28, 2024
Svetlana Dey
/s/ Fred S. Zeidman Director March 28, 2024
Fred S. Zeidman
/s/ Gary Gemignani Director March 28, 2024
Gary Gemignani
40
Index to Consolidated Financial Statements
Contents
Report of Independent Registered Public Accounting Firm (PCAOB ID #392) F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Stockholders’ Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
F-1
Report
of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting
Firm
To the Shareholders and the Board of Directors of Bluejay Diagnostics,
Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Bluejay Diagnostics, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements
of operations, stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial
statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter Regarding Going Concern
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has
incurred net losses since its inception, and has negative cash flows from operations and will need additional funding to complete planned
development efforts. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans in regard to these matters also are described in Note 1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Wolf & Company, P.C.
We have served as the Company’s auditor since 2017.
Boston, Massachusetts
March 28, 2024
F-2
Bluejay Diagnostics, Inc.
Consolidated Balance Sheets
December 31,
Current assets:
Deferred offering costs 265,081 -
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Commitments and contingencies (Note 9)
Stockholders’ equity:
See notes to consolidated financial statements.
Reflects a 1-for-20 reverse stock split effective
July 24, 2023.
F-3
Bluejay Diagnostics, Inc.
Consolidated Statements of Operations
For Years Ended December 31,
Operating expenses:
Other income (expense):
Impairment of property and equipment - (237,309 )
Net loss per share - Basic and diluted $ (9.08 ) $ (9.22 )
Weighted average common shares outstanding:
See notes to consolidated financial statements.
Reflects a 1-for-20 reverse stock split effective
July 24, 2023.
F-4
Bluejay Diagnostics, Inc.
Consolidated Statements of Changes in Stockholders’
Equity
Common Stock Additional Paid-In Accumulated Total Stockholders'
Shares Amount Capital Deficit Equity
Exercise of common stock Series B Warrants 1,801 - - - -
Stock-based compensation expense - - 24,385 - 24,385
Issuance of common stock from exercised RSU's 750 - - - -
See notes to consolidated financial statements.
Reflects a 1-for-20 reverse stock split effective
July 24, 2023.
F-5
Bluejay Diagnostics, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense for finance lease 1,305 -
Loss on disposal of property and equipment - 137
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 926,217 (40,772 )
Due to related party - (2,000 )
Accrued expenses and other current liabilities (30,279 ) 336,620
CASH FLOWS FROM INVESTING ACTIVITIES:
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, gross 1,590,840 -
Payment for issuance costs of common stock (413,544 ) -
Payment of tax withholding on obligations on restricted stock units (59,078 ) -
Payment of deferred offering costs (1,849 ) (20,000 )
Proceeds from exercise of stock options - 28,876
Payment of finance lease (4,807 ) (801 )
Net cash provided by financing activities 1,111,562 8,075
Cash paid for interest on finance lease $ 1,305 $ 364
Offering costs included in accounts payable and accrued expenses $ 263,232 $ -
Purchases of property and equipment included in accrued expenses $ - $ 41,159
See notes to consolidated financial statements.
F-6
Bluejay Diagnostics, Inc.
Notes to the Consolidated Financial Statements
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Business
Bluejay Diagnostics, Inc. (“Bluejay”
and/or the “Company”) is a medical diagnostics company developing rapid tests using whole blood on its Symphony technology
platform (“Symphony”) to improve patient outcomes in critical care settings. The Company’s 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.
On June 4, 2021, the Company formed Bluejay Spinco,
LLC, a wholly-owned subsidiary of the Company, for purposes of further development of the Company’s ALLEREYE diagnostic test. ALLEREYE
is a point-of-care device offering healthcare providers a solution for diagnosing Allergic Conjunctivitis.
August 2023 Offering
On August 24, 2023, the Company entered into a
securities purchase agreement with certain institutional and accredited investors (the “Purchase Agreement”) relating to the
registered direct offering and sale of 216,000 shares of the Company’s common stock at a purchase price of $7.365 per share (the
“August 2023 Offering”).
In a concurrent private placement, the Company
also issued to such institutional and accredited investors unregistered warrants to purchase up to 216,000 shares of Common Stock (the
“Warrants”). Pursuant to the terms of the Purchase Agreement, for each share of Common Stock issued in this offering an accompanying
Warrant was issued to the purchaser thereof. Each Warrant is exercisable for one share of Common Stock (the “August 2023 Warrant
Shares”) at an exercise price of $7.24 per share, is immediately exercisable upon issuance and will expire five years from the date
of issuance. The Warrants were offered and sold at a purchase price of $0.125 per underlying warrant share, which purchase price is included
in the offering price per share of Common Stock issued in the Offering (the “Private Placement”).
Pursuant to an engagement letter, dated as of
August 7, 2023 (the “Engagement Letter”), between the Company and H.C. Wainwright & Co., LLC (the “Placement Agent”)
the Company paid the placement agent a total cash fee of $111,359 equal to 7.0% of the gross proceeds received in the Offering and the
Private Placement. The Company also paid the placement agent the management fee equal to $15,908 or 1.0% of the gross proceeds raised
in the Offering and Private Placement, $45,000 for non-accountable expenses, and $15,950 for clearing fees. In addition, the Company issued
to the placement agent, warrants to purchase up to 15,120 shares of Common Stock (the “Placement Agent Warrants”), which represents
7.0% of the aggregate number of shares of Common Stock sold in the Offering. The Placement Agent Warrants have substantially the same
terms as the Warrants, except that the Placement Agent Warrants have an exercise price equal to $ 9.2063, or 125% of the offering price
per share of Common Stock sold in the Offering, and a term of five years from the commencement of the sales pursuant to the Offering.
The gross proceeds to the Company from the August
2023 Offering and the August 2023 Private Placement are $1,590,840. The Company incurred offering costs of $413,544.
FDA Regulatory Strategy
The Company’s current regulatory strategy
is designed to support commercialization of Symphony in the United States pending marketing authorization from the FDA. Previously, the
Company’s regulatory strategy involved clinical studies involving COVID-19 patients. However, the Company has shifted its focus
away from COVID-19 patients due to a significant decline in the number of COVID-19 related hospitalizations. Pursuant to this revised
strategy, the Company is beginning to conduct a clinical study to support an FDA regulatory submission with an initial indication for
risk stratification of hospitalized sepsis patients. The Company submitted a pre-submission application to the FDA presenting the new
study design in May 2023 and participated in a pre-submission meeting on August 11, 2023. At the meeting, the FDA provided feedback on
the new study design, determined that the submission of a 510(k) is the appropriate premarket submission pathway, and requested that certain
data be provided in the 510(k). Based on this feedback, the Company determined to proceed as planned while taking into account the FDA’s
feedback.
F-7
In the first quarter
of 2024, the Company initiated the study at multiple sites, which study is intended to use the Symphony IL-6 test to monitor IL-6 concentrations
in patients who are diagnosed with sepsis or septic shock and are admitted or intended to be admitted to the ICU. The objective of this
study is to establish IL-6 concentrations in these sepsis patients that best predict 28-day all-cause mortality. The Company expects that
it will need to bring several additional sites into the study in the future, which it believes will help support initial commercialization
and market penetration. The Company believes that this clinical trial expansion could also support additional indications, but that
any such expansion also could delay obtaining marketing authorization for the product. As a result of its lack of cash resources, the
Company has recently slowed the timeline of this study to preserve cash resources in the near-term, and the Company expects that this
will delay its Symphony platform regulatory submission timeline until 2025.
Product Manufacturing
The Company maintains contracts with Sanyoseiko
Co. Ltd (“Sanyoseiko”) to manufacture our device and cartridges, and with Toray Industries, Inc (“Toray”) to manufacture
in the near-term (through its wholly owned subsidiary Kamakura Techno-Science, Inc.) certain product intermediate components for use in
cartridges being manufactured for the Company by Sanyoseiko.
Risks and Uncertainties
As noted above, Bluejay is reliant upon Toray
and Sanyoseiko to provide cartridges in sufficient quantity and quality to complete our clinical trials, and our clinical trials could
be delayed if the Company encountered any material supply interruptions while the clinical trials are being conducted. In addition, there
can be no assurance that we will be able to obtain necessary regulatory authorization for the manufacturing or marketing of the Symphony
in the United States or elsewhere. There also can be no assurance that we will successfully complete any clinical evaluations necessary
to receive regulatory approvals, or that the clinical trial will demonstrate sufficient safety and efficacy of the Symphony. The failure
to adequately demonstrate the clinical performance of the Symphony device could delay or prevent regulatory approval of the device, which
could prevent or result in delays to market launch and could materially harm our business.
In addition to the FDA regulatory strategy risks
and uncertainties, the Company is subject to a number of risks similar to other companies in its industry, including rapid technological
change, competition from larger biotechnology companies and dependence on key personnel. The Company is also impacted by inflationary
pressures and global supply chain disruptions currently impacting many companies.
On October 25, 2022, the Company received a notification
letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that the
closing bid price for its common stock had been below $1.00 for the previous 30 consecutive business days and that the Company therefore
is not in compliance with the minimum bid price requirement for continued inclusion on the Nasdaq Capital Market under Nasdaq Listing
Rule 5550(a)(2). On April 25, 2023, at the Company’s request, Nasdaq’s Listing Qualifications Staff notified the Company that
it had extended the time for the Company to regain compliance with the Minimum Bid Requirement until October 23, 2023. To regain compliance,
the closing bid price of the Company’s common stock needed to be at least $1.00 or higher for a minimum of ten consecutive business
days.
On July 24, 2023, the Company effected a reverse
stock split of its shares of common stock at a ratio of 1-for-20 (the “Reverse Stock Split”), with a corresponding reduction
in the number of authorized outstanding number of shares of common stock from 100,000,000 to 7,500,000.
F-8
All of the Company’s
historical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable
for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect this 1-for-20 reverse stock split.
On August 8, 2023, the Company received a letter
from the Listing Qualifications Department of Nasdaq notifying the Company that, based on the closing bid price of the Company’s
common stock having been at least $1.00 per share for the required period, the Company has regained compliance with Nasdaq Listing Rule
5550(a)(2) and the minimum bid price deficiency matter previously disclosed by the Company on October 25, 2022 was closed. However, as
further described below under note 12, on February 28, 2024, the Company received a new deficiency letter from the Listing Qualifications
Department as a result of the closing bid price for its common stock having again been below $1.00 for the previous 30 consecutive business
days.
Going Concern
The Company had cash and cash equivalents of
$2,208,516, as of December 31, 2023. The Company has incurred net losses since its inception, and has negative cash flows from
operations and had the accumulated deficit of $26,950,990 as of December 31, 2023. The Company continues to develop the Symphony
device and its first test for the measurement of IL-6. The Company remains committed to obtaining FDA clearance and will conduct
clinical trials to obtain sufficient data to support its FDA submission, while also continuing to build its manufacturing operations
with its contract manufacturing organizations. Current cash resources and expected operating expenses are considered in determining
its liquidity requirement; as well as $1,771,375 of current liabilities on its balance sheet as of December 31, 2023. The
Company estimates cash resources will be sufficient to fund its operations through the second quarter of 2024. The Company will need
additional capital to fund its planned operations for the next 12 months. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern.
The consolidated financial statements for the
years ended December 31, 2023 and 2022 were prepared under the assumption that the Company will continue as a going concern, which contemplates
that the Company will be able to realize assets and discharge liabilities in the normal course of business.
The Company expects that it will seek to raise
such additional capital through public or private equity offerings, grant financing and support from governmental agencies, convertible
debt, collaborations, strategic alliances and distribution arrangements. Additional funds may not be available when it needs them on terms
that are acceptable to them, or at all. If adequate funds are not available, it may be required to delay its FDA regulatory strategy,
and to delay or reduce the scope of its research or development programs, its commercialization efforts or its manufacturing commitments
and capacity. In addition, if it raises additional funds through collaborations, strategic alliances or distribution arrangements with
third parties, it may have to relinquish valuable rights to its technologies or future revenue streams.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements
have been prepared in accordance with U.S. generally accepted accounting principles in the United States (“GAAP”) and include
all adjustments necessary for the presentation of the Company’s consolidated financial position, results of operations and cash
flows for the periods presented. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary.
All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in these consolidated
financial statements and accompanying notes. Actual results could differ materially from those estimates. The Company believes judgment
is involved in accounting for the fair value-based measurement of stock-based compensation, accruals, and warrant issuances. The Company
evaluates its estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with
precision, actual results could differ from these estimates and assumptions, and those differences could be material to the condensed
consolidated financial statements.
F-9
Cash and Cash Equivalents
The Company considers all highly liquid investments
with maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents, consisting of highly liquid
money market funds are carried at fair market value which approximates cost. The Company recognized interest income associated with cash
equivalents of $164,900 and $89,673 for the years ended December 31, 2023 and 2022, respectively.
Revenue Recognition
The Company recognizes revenue under the core
principles of depicting the transfer of control to the Company’s customers in an amount reflecting the consideration to which the
Company expected to be entitled. In order to achieve that core principle, the Company applies the following five step approach: (1) identify
the contract with a customer, (2) identify the performance obligations in that contract, (3) determine the transaction price, (4) allocate
the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.
The Company recognizes revenue when performance
obligations under the terms of the contract with the customer are satisfied and are recognized at a point in time, which is also when
control is transferred. When the Company performs shipping and handling activities after the transfer of control to the customer (e.g.
when control transfers prior to delivery), they are considered fulfillment activities and, accordingly, the costs are accrued for when
the related revenue is recognized. Sales tax and valued added taxes collected from the customers relating to product sales and remitted
to governmental authorities are excluded from revenues.
Leases
The Company accounts for its leases under the
Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) ASC 842, Leases
(“ASC 842”).
The Company has arrangements involving the lease
of facilities and the lease of copiers. Under ASC 842, at inception of the arrangement, the Company determines whether the contract is
or contains a lease and whether the lease should be classified as an operating or a financing lease. This determination, among other considerations,
involves an assessment of whether the Company can control the underlying asset and have the right to obtain substantially all of the economic
benefits or outputs from the asset. The Company accounts for the leases of less than 12 months as short-term leases.
The Company recognizes right-of-use (“ROU”)
assets and lease liabilities as of the lease commencement date based on the net present value of the future minimum lease payments over
the lease term. The Company amortizes the right-of-use assets over the remaining terms of the lease. ASC 842 requires the leases to use
the rate implicit in the lease unless it is not readily determinable and then it may use its incremental borrowing rate (“IBR”)
to discount the future minimum lease payments. Most of the Company’s leases do not provide an implicit rate; therefore, the Company
uses its IBR to discount the future minimum lease payments. The Company determines its IBR with its credit rating and other economic information
available as of the commencement date, as well as the identified lease term. During the assessment of the lease term, the Company considers
its renewal options and extensions within the arrangements and the Company includes these options when it’s reasonably certain to
extend the term of the lease.