Bluejay Diagnostics(BJDX) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity changes, and cash flows, with detailed notes Condensed Consolidated Balance Sheets Balance Sheet Highlights | Metric | March 31, 2023 | December 31, 2022 | Change (Absolute) | Change (%) | | :--------------------------- | :------------- | :---------------- | :---------------- | :--------- | | Cash and cash equivalents | $6,781,911 | $10,114,990 | $(3,333,079) | -32.95% | | Total current assets | $8,901,923 | $11,788,470 | $(2,886,547) | -24.49% | | Total assets | $10,888,449 | $13,521,265 | $(2,632,816) | -19.47% | | Total current liabilities | $1,420,151 | $1,640,254 | $(220,103) | -13.42% | | Total liabilities | $1,725,031 | $1,979,992 | $(254,961) | -12.88% | | Total stockholders' equity | $9,163,418 | $11,541,273 | $(2,377,855) | -20.60% | | Accumulated deficit | $(19,536,945) | $(16,997,102) | $(2,539,843) | 14.94% | Condensed Consolidated Statements of Operations Statements of Operations Highlights | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (Absolute) | Change (%) | | :--------------------------- | :-------------------------------- | :-------------------------------- | :---------------- | :--------- | | Research and development | $1,354,549 | $694,757 | $659,792 | 94.97% | | General and administrative | $1,176,977 | $1,319,819 | $(142,842) | -10.82% | | Sales and marketing | $148,046 | $53,685 | $94,361 | 175.78% | | Total operating expenses | $2,679,572 | $2,068,261 | $611,311 | 29.56% | | Operating loss | $(2,679,572) | $(2,068,261) | $(611,311) | 29.56% | | Other income, net | $139,729 | $54,858 | $84,871 | 154.71% | | Net loss | $(2,539,843) | $(2,013,403) | $(526,440) | 26.15% | | Net loss per share - Basic and diluted | $(0.12) | $(0.10) | $(0.02) | 20.00% | Condensed Consolidated Statements of Changes in Stockholders' Equity - Total stockholders' equity decreased by $2,377,855 from $11,541,273 at December 31, 2022, to $9,163,418 at March 31, 2023[73] - Net loss for the three months ended March 31, 2023, was $(2,539,843)[73] - Stock-based compensation expense contributed $54,730 to additional paid-in capital, and grants of fully vested restricted stock units to settle accrued bonuses added $107,234[73] Condensed Consolidated Statements of Cash Flows Cash Flow Highlights | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (Absolute) | Change (%) | | :--------------------------- | :-------------------------------- | :-------------------------------- | :---------------- | :--------- | | Net cash used in operating activities | $(2,933,607) | $(1,877,255) | $(1,056,352) | 56.27% | | Net cash used in investing activities | $(340,669) | $(46,346) | $(294,323) | 635.04% | | Net cash used in financing activities | $(58,803) | $0 | $(58,803) | N/A | | Net decrease in cash and cash equivalents | $(3,333,079) | $(1,923,601) | $(1,409,478) | 73.27% | | Cash and cash equivalents, end of period | $6,781,911 | $17,124,177 | $(10,342,266) | -60.39% | Notes to Condensed Consolidated Financial Statements 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION Business - Bluejay Diagnostics is a clinical-stage medical diagnostics company developing rapid tests using its Symphony technology platform for critical care settings, aiming to provide laboratory-quality results in under 20 minutes[77] - The first product, Symphony IL-6 test, monitors disease progression and assesses infection/inflammation severity, particularly for sepsis[81] - Future plans include developing cardiac biomarkers (hsTNT and NT pro-BNP) and other tests on the Symphony platform, all requiring FDA clearance, authorization, or approval[82] Risks and Uncertainties - The company faces risks such as rapid technological change, competition from larger biotechnology companies, dependence on key personnel, inflationary pressures, and global supply chain disruptions[84] - Nasdaq notified the company on October 25, 2022, of non-compliance with the minimum bid price requirement (below $1.00 for 30 consecutive business days)[85] Going Concern - The company has incurred net losses and negative cash flows from operations since inception, raising substantial doubt about its ability to continue as a going concern[87] - Cash and cash equivalents of $6.8 million at March 31, 2023, are estimated to fund operations only into the fourth quarter of 2023, requiring additional capital for the next 12 months[88] - The company is seeking additional capital through various means (equity offerings, grants, debt, collaborations), but there is no assurance that adequate funds will be available on acceptable terms[89] Basis of Presentation - The unaudited condensed consolidated financial statements are prepared in conformity with US GAAP, reflecting normal recurring adjustments, and consolidate Bluejay Diagnostics, Inc. and its wholly-owned subsidiary[90] - Results for the three months ended March 31, 2023, are not necessarily indicative of the results for the full fiscal year[91] 2. SIGNIFICANT ACCOUNTING POLICIES Use of estimates - Management makes estimates and assumptions, particularly for stock-based compensation, accruals, and warrants, which could materially differ from actual results[93] Stock-based compensation - Share-based compensation expense is measured based on the grant-date fair value of the award and recognized on a straight-line basis over the requisite service period[95][96] - The Black-Scholes option pricing model is used to determine the fair value of options granted[96] Research and development expenses - Costs incurred in research and development, including personnel, supplies, professional services, and clinical trials, are expensed as incurred[98] - Future R&D expenses are expected to focus on clinical trial programs supporting regulatory strategy and manufacturing improvements[68] Segment Reporting - The company operates as a single operating segment, with all assets located in the United States as of March 31, 2023, and December 31, 2022[100] Net Loss per Share - Basic and diluted net loss per share are computed by dividing net loss by the weighted-average common shares outstanding, with no difference between basic and diluted due to anti-dilutive securities[103] Potentially Dilutive Securities | Potentially Dilutive Securities | 2023 (Common Stock Equivalent Shares) | 2022 (Common Stock Equivalent Shares) | | :------------------------------ | :------------------------------------ | :------------------------------------ | | Options to purchase common stock | 739,835 | 806,065 | | Restricted stock units | 197,500 | - | | Warrants for common stock | 811,882 | 811,882 | | Class A warrants for common stock | 2,484,000 | 2,484,000 | | Class B warrants for common stock | 75,400 | 76,500 | Recently Adopted Accounting Standards - The company adopted ASU No. 2021-08, Business Combinations (Topic 805), on January 1, 2023, which addresses the recognition and measurement of contract assets and liabilities acquired in a business combination[104] - The adoption of this new standard had no impact on the company's consolidated statements of operations or cash flows[104] 3. LICENSE AND SUPPLY AGREEMENT WITH TORAY INDUSTRIES - Bluejay Diagnostics holds an exclusive license (outside Japan) from Toray Industries for protein detection cartridges[107] - Royalty payments of 15% of net sales are due after regulatory approval and first sale, with minimum annual royalties of $60,000 (first year) and $100,000 (subsequent years) creditable against sales royalties[107] - No sales or revenues from these cartridges were recorded for the three months ended March 31, 2023, and 2022[107] 4. WARRANTS Warrant Summary | Warrant Type | Shares Outstanding (March 31, 2023) | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | | :------------------------ | :---------------------------------- | :------------------------------ | :-------------------------------------- | | Common Stock Warrants | 811,882 | $3.24 | 2.8 | | Class A Warrants | 2,484,000 | $7.00 | 3.6 | | Class B Warrants | 75,400 | $10.00 | 3.6 | - No warrants were issued during the three months ended March 31, 2023, and 2022[110] - 39,000 Class B Warrants were exercised on a cashless basis during the three months ended March 31, 2022, but none in 2023[113] 5. STOCK COMPENSATION - The company has 262,269 shares available for grant under the 2018 Stock Incentive Plan and 807,541 shares available under the 2021 Stock Plan as of March 31, 2023[115][116] - During Q1 2023, 512,180 restricted stock units were granted, and 374,680 vested, primarily to settle 2022 bonuses[119] Stock-Based Compensation Expense | Expense Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (Absolute) | Change (%) | | :--------------------------- | :-------------------------------- | :-------------------------------- | :---------------- | :--------- | | Research and development | $44,845 | $17,311 | $27,534 | 159.05% | | General and administrative | $159,584 | $108,305 | $51,279 | 47.35% | | Sales and marketing | $15,160 | $470 | $14,690 | 3125.53% | | Total stock-based compensation | $219,589 | $126,086 | $93,503 | 74.16% | 6. RELATED PARTY TRANSACTIONS - The company has an agreement with NanoHybrids, LLC, wholly owned by Bluejay's CTO, to utilize company R&D staff and lab facilities, billing at fully burdened personnel cost plus 10%[123] Income from NanoHybrids | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (Absolute) | Change (%) | | :------------------------- | :-------------------------------- | :-------------------------------- | :---------------- | :--------- | | Income from NanoHybrids | $95,798 | $40,886 | $54,912 | 134.32% | - Amounts receivable from NanoHybrids increased from $19,731 at December 31, 2022, to $95,798 at March 31, 2023[123] 7. PROPERTY AND EQUIPMENT Property and Equipment, Net | Asset Category | March 31, 2023 | December 31, 2022 | Change (Absolute) | Change (%) | | :------------------------- | :------------- | :---------------- | :---------------- | :--------- | | Construction-in-process | $768,850 | $375,466 | $393,384 | 104.77% | | Lab equipment | $1,275,958 | $1,268,380 | $7,578 | 0.60% | | Total property and equipment, net | $1,519,722 | $1,232,070 | $287,652 | 23.35% | - The company revised the useful life of certain lab equipment in Q1 2023, resulting in approximately $45,000 of additional depreciation expense[125] 8. LEASES Lease Assets and Liabilities | Metric | March 31, 2023 | December 31, 2022 | | :------------------------------------------------------------------------------------------------ | :------------- | :---------------- | | Operating lease right-of-use asset | $433,361 | $465,514 | | Finance lease asset | $21,067 | $21,067 | | Total lease assets | $454,428 | $486,581 | | Current operating lease liability | $168,709 | $168,706 | | Current finance lease liability | $4,807 | $4,807 | | Non-current operating lease liabilities | $289,910 | $323,915 | | Non-current finance lease liabilities | $14,970 | $15,823 | | Total lease liabilities | $478,396 | $513,251 | - The weighted average remaining lease term for operating leases was 3.5 years as of March 31, 2023[126] - Operating cash flows from operating leases increased to $43,564 for the three months ended March 31, 2023, from $29,248 in the prior year[126] 9. COMMITMENTS AND CONTINGENCIES - The company has a non-cancelable purchase commitment of approximately $800,000 with an international materials vendor, with 50% prepaid in 2022[128] - Open non-cancelable commitments for the IL-6 cartridge manufacturing line buildout totaled approximately $127,000 as of March 31, 2023[129] - Other non-cancelable purchase commitments, primarily for R&D supplies, prototypes, and advisory services, aggregate to approximately $1.5 million, all for less than one year[130] 10. SUPPLEMENTAL BALANCE SHEET INFORMATION Prepaid Expenses and Other Current Assets | Category | March 31, 2023 | December 31, 2022 | Change (Absolute) | Change (%) | | :------------------------------------------ | :------------- | :---------------- | :---------------- | :--------- | | Prepaid insurance | $564,361 | $751,979 | $(187,618) | -24.95% | | Vendor prepayments | $1,195,193 | $681,218 | $513,975 | 75.45% | | Prepaid other | $360,458 | $240,283 | $120,175 | 50.02% | | Total prepaid expenses and other current assets | $2,120,012 | $1,673,480 | $446,532 | 26.68% | Accrued Expenses and Other Current Liabilities | Category | March 31, 2023 | December 31, 2022 | Change (Absolute) | Change (%) | | :------------------------------------------------- | :------------- | :---------------- | :---------------- | :--------- | | Accrued personnel costs | $343,706 | $533,577 | $(189,871) | -35.59% | | Accrued good receipts | $281,054 | $10,077 | $270,977 | 2689.15% | | Accrued other | $238,637 | $292,076 | $(53,439) | -18.29% | | Total accrued expenses and other current liabilities | $863,397 | $835,730 | $27,667 | 3.31% | 11. SUBSEQUENT EVENTS - Nasdaq extended the compliance period for the minimum bid price requirement until October 23, 2023[134] - The company intends to monitor its stock price and may implement a reverse stock split, if approved by stockholders, to regain compliance[135] - Failure to regain compliance could lead to delisting, which the company would be entitled to appeal[135] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting key performance drivers, liquidity challenges, and regulatory statuses, including its classification as an emerging growth and smaller reporting company Overview - Bluejay Diagnostics is a clinical-stage medical diagnostics company developing rapid tests on its Symphony platform for critical care settings[66] - The company has incurred net losses from operations each year since inception and expects this trend to continue, with net losses of approximately $2.5 million for Q1 2023 and $2.0 million for Q1 2022[67] - Negative cash flow from operating activities was approximately $2.9 million for Q1 2023 and $1.9 million for Q1 2022, leading to an accumulated deficit of approximately $19.5 million as of March 31, 2023[67] Results of Operations Research and Development - Research and development expenses increased by approximately 95% to $1.4 million for Q1 2023, up from $695,000 in Q1 2022[68] - The increase was primarily due to higher personnel costs and clinical trial expenses[68] - Future R&D expenses will focus on clinical trial programs supporting regulatory strategy and manufacturing improvements[68] General and Administrative - General and administrative expenses slightly decreased by 10.8% to $1.2 million for Q1 2023, compared to $1.3 million in Q1 2022[71] - This decrease is attributed to ongoing efforts to preserve capital and limit infrastructure investment in line with the commercialization timeline[71] Sales and Marketing - Sales and marketing expenses increased by approximately 174% to $148,000 for Q1 2023, up from $54,000 in Q1 2022[56] - The increase was primarily due to increased personnel costs[56] Other Income, net - Other income, net, significantly increased by 154.5% to $140,000 for Q1 2023, compared to $55,000 in Q1 2022[57] - This increase was primarily driven by approximately $28,000 higher interest income and an $84,000 increase in related party income from NanoHybrids[57] Liquidity and Going Concern - The company had cash and cash equivalents of $6.8 million at March 31, 2023[58] - Current cash resources are insufficient to fund operations for the next twelve months, considering $1.4 million in current liabilities and $2.5 million in capital commitments, raising substantial doubt about the company's ability to continue as a going concern[58][60] - The company is actively seeking additional capital through various means (equity offerings, grants, debt, collaborations) but cannot guarantee availability or acceptable terms[59] Summary Statement of Cash Flows - Net cash used in operating activities increased by approximately $1.1 million to $2.9 million in Q1 2023, primarily due to higher personnel and product development costs[78] - Net cash used in investing activities significantly increased by approximately $294,000 to $341,000 in Q1 2023, mainly due to capital purchases of manufacturing equipment[79] - Net cash used in financing activities was approximately $59,000 in Q1 2023, an increase of $59,000 from Q1 2022, primarily due to tax withholdings on vested restricted stock units[28] Recently Adopted Accounting Standards - The company refers to Note 2 of its condensed consolidated financial statements for details on recently adopted accounting standards[29] Emerging Growth Company and Smaller Reporting Company Status - The company is an "emerging growth company" (EGC) under the JOBS Act, allowing it to use an extended transition period for new accounting standards[30] - The company is also a "smaller reporting company" (SRC), which provides exemptions from certain disclosure requirements, such as presenting only two years of audited financial statements and reduced executive compensation disclosures[32] JOBS Act Accounting Election - Despite its EGC status, the company has irrevocably elected not to use the extended transition period for new accounting standards, choosing to adopt them on the same dates as other public companies[34] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Bluejay Diagnostics is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide information on quantitative and qualitative disclosures about market risk[36] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures and confirms no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[37] - The company continuously reviews and may make changes to enhance the effectiveness of its disclosure controls[37] Changes in Internal Control Over Financial Reporting - There were no material changes in the company's internal control over financial reporting during the quarter ended March 31, 2023[38] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings, though it may encounter litigation in the ordinary course of business and maintains insurance for potential losses - The company is not currently involved in any legal proceedings[42] - The results of litigation are inherently unpredictable, and any claims could be time-consuming and costly[41] - The company accrues for known indemnification issues when a loss is probable and estimable and has insurance policies covering potential losses where cost-effective[41] Item 1A. Risk Factors For a comprehensive discussion of potential risks and uncertainties, the company refers to its 2022 annual report on Form 10-K, noting no material changes to those factors except as disclosed - For a discussion of potential risks or uncertainties, refer to the "Risk Factors" section in the company's 2022 annual report on Form 10-K[43] - There have been no material changes to the risk factors disclosed in the prior registration statement, except as set forth in this report[43] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - None[44] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - None[44] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[45] Item 5. Other Information There is no other information to report under this item - None[46] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including employment agreements, certifications from principal executive and financial officers, and various Inline XBRL documents - Exhibits include the First Amendment to Employment Agreement for Neil Dey, certifications of Principal Executive and Financial Officers (Rule 13a-14(a) and 18 U.S.C. Section 1350), and Inline XBRL documents[49] - The certifications on Exhibit 32 are not deemed "filed" for purposes of Section 18 of the Exchange Act[50] Signatures The report is duly signed on behalf of Bluejay Diagnostics, Inc. by its Chief Executive Officer and Director, Neil Dey, and its Chief Financial Officer, Kenneth Fisher, on May 11, 2023 - The report is signed by Neil Dey, Chief Executive Officer and Director, and Kenneth Fisher, Chief Financial Officer, on May 11, 2023[55]