Bluejay Diagnostics, Inc. 10-K

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: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted- average exercise price of outstanding options, warrants and rights (b) Number of securities (by class) remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders (1) 37,645 $ 31.16 53,490 Equity compensation plans not approved by security holders (2) 43,100 $ 17.95 - (1) Represents shares of common stock issuable upon exercise of outstanding stock options and rights under our 2018 Stock Incentive Plan (the “2018 Plan”) and 2021 Stock Plan (the “2021 Plan”). Both plans permit the Company to grant incentive and nonqualified stock options for the purchase of common stock, and restricted stock awards. The maximum number of shares of common stock reserved for issuance under the 2018 Plan and 2021 Plan are 31,472 and 98,000, respectively. At December 31, 2023 there were 13,113 and 40,377 shares of common stock available for grant under the 2018 Plan and 2021 Plan, respectively. (2) Consists of warrants issued to placement agents, underwriters and consultants. 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: (1) Financial Statements—See Index to Consolidated Financial Statements at Part II, Item 8 on page F-1 of this Form 10-K. (2) All financial statement schedules have been omitted because they are not applicable or not required or because the information is included elsewhere in the financial statements or the Notes thereto. (3) See the accompanying Index to Exhibits filed as a part of this Form 10-K, which list is incorporated by reference in this Item. (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 3.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Bluejay Diagnostics, Inc., filed with the Delaware Secretary of State on July 21, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 21, 2023). 3.3 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 4.2 Form of Prefunded Common Stock Warrant (January 2024 Offering) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 2, 2024). 4.3 Form of Common Stock Warrant (January 2024 Offering (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on January 2, 2024). 4.4 Form of Placement Agent Common Stock Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on January 2, 2024). 4.5 Form of Common Stock (August 2023 Offering) (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on August 28, 2023). 4.6 Form of Class A Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 16, 2021). 4.7 Form of Class B Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 4.8 Form of Warrant Agency Agreement (incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 4.9 Form of IPO Underwriters’ Warrant (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 4.1 0 * Description of Securities of Bluejay Diagnostics, Inc. 10.1** 2021 Stock Plan (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.2** Employment Agreement, dated July 1, 2021, between Neil Dey and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.3** First Amendment to Employment Agreement, dated January 27, 2023, between Neil Dey and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 27, 2023). 10.4** Employment Agreement, dated July 1, 2021, between Jason Cook and Bluejay Diagnostics, Inc. * (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.5 Form of Securities Purchase Agreement, dated December 27, 2023, between certain purchasers and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 2, 2024). 10.6 Form of Securities Purchase Agreement, dated August 24, 2023, by and between the Company and each of the Purchasers signatory thereto (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on August 28, 2023). 10.7 Securities Purchase Agreement, dated June 7, 2021, between certain purchasers and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.8 Registration Rights Agreement, dated June 7, 2021, between certain purchasers and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 38 10.9 Amended and Restated License Agreement, entered into on October 23, 2023, by and between Bluejay Diagnostics, Inc. and Toray Industries, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 26, 2023). 10.10 Master Supply Agreement, entered into on October 23, 2023, by and between Bluejay Diagnostics, Inc. and Toray Industries, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 26, 2023). 14.1 Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 31.1* Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended 31.2* Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended 32.1* Certification of Principal Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Principal Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97.1* Incentive Compensation Recovery Policy 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 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 104 Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101) * Filed herewith. ** Management contract or compensatory plan, contract or arrangement. ITEM 16. FORM 10-K SUMMARY. None. 39 SIGNATURES Pursuant to the requ irements 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, ASSETS 2023 2022 Current assets: Cash and cash equivalents $ 2,208,516 $ 10,114,990 Prepaid expenses and other current assets 747,263 1,673,480 Deferred offering costs 265,081 - Total current assets 3,220,860 11,788,470 Property and equipment, net 1,285,741 1,232,070 Operating lease right-of-use assets 333,267 465,514 Other non-current assets 28,663 35,211 Total assets $ 4,868,531 $ 13,521,265 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 491,474 $ 635,818 Operating lease liability, current 162,990 168,706 Accrued expenses 1,116,911 835,730 Total current liabilities 1,771,375 1,640,254 Operating lease liability, non-current 189,987 323,915 Other non-current liabilities 12,321 15,823 Total liabilities 1,973,683 1,979,992 Commitments and contingencies (Note 9) Stockholders’ equity: Common stock, $ 0.0001 par value; 7,500,000 shares authorized; 1,239,140 and 1,010,560 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively 124 101 Additional paid-in capital 29,845,714 28,538,274 Accumulated deficit ( 26,950,990 ) ( 16,997,102 ) Total stockholders’ equity 2,894,848 11,541,273 Total liabilities and stockholders’ equity $ 4,868,531 $ 13,521,265 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, 2023 2022 Revenue $ - $ 249,040 Cost of sales - 200,129 Gross profit - 48,911 Operating expenses: Research and development 5,714,574 4,152,152 General and administrative 4,313,200 4,763,114 Sales and marketing 283,443 451,421 Total operating expenses 10,311,217 9,366,687 Operating loss ( 10,311,217 ) ( 9,317,776 ) Other income (expense): Impairment of property and equipment - ( 237,309 ) Interest income 164,900 89,673 Other income, net 192,429 168,464 Total other income 357,329 20,828 Net loss $ ( 9,953,888 ) $ ( 9,296,948 ) Net loss per share - Basic and diluted $ ( 9.08 ) $ ( 9.22 ) Weighted average common shares outstanding: Basic and diluted 1,096,500 1,008,196 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 Balance as of December 31, 2021 1,005,612 $ 101 $ 28,076,394 $ ( 7,694,786 ) $ 20,381,709 Impact of adoption of ASC 842 - - - ( 5,368 ) ( 5,368 ) Stock-based compensation expense - - 433,004 - 433,004 Exercise of stock options 3,147 - 28,876 - 28,876 Exercise of common stock Series B Warrants 1,801 - - - - Net loss - - - ( 9,296,948 ) ( 9,296,948 ) Balance as of December 31, 2022 1,010,560 101 28,538,274 ( 16,997,102 ) 11,541,273 Stock-based compensation expense - - 24,385 - 24,385 Issuance of common stock from exercised RSU's 750 - - - - RSU tax withholding ( 358 ) - ( 1,453 ) - ( 1,453 ) Issuance of common stock to settle accrued bonus, net of shares withheld 12,188 1 107,234 - 107,235 Issuance of common stock, net of issuance costs of $ 413,544 216,000 22 1,177,274 - 1,177,296 Net loss - - - ( 9,953,888 ) ( 9,953,888 ) Balance as of December 31, 2023 1,239,140 $ 124 $ 29,845,714 $ ( 26,950,990 ) $ 2,894,848 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, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 9,953,888 ) $ ( 9,296,948 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 648,708 156,598 Stock-based compensation expense 189,245 433,004 Amortization of right-of-use asset 132,247 149,770 Non-cash interest expense for finance lease 1,305 - Impairment of property and equipment 1,787 237,309 Loss on disposal of property and equipment - 137 Changes in operating assets and liabilities: Prepaid expenses and other current assets 926,217 ( 40,772 ) Other non-current assets 6,548 ( 14,192 ) Accounts payable ( 235,760 ) 298,881 Due to related party - ( 2,000 ) Accrued expenses and other current liabilities ( 30,279 ) 336,620 Net cash used in operating activities ( 8,313,870 ) ( 7,741,593 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 704,166 ) ( 1,199,270 ) Net cash used in investing activities ( 704,166 ) ( 1,199,270 ) 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 Net decrease in cash and cash equivalents ( 7,906,474 ) ( 8,932,788 ) Cash and cash equivalents, beginning of period 10,114,990 19,047,778 Cash and cash equivalents, end of period $ 2,208,516 $ 10,114,990 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NON-CASH INVESTING ACTIVITIES 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. The Company has lease arrangements that contain incentives for tenant improvements as well as fixed rent escalation clauses. For contracts with tenant improvement incentives that are determined to be leasehold improvements and the Company is reasonably certain to exercise, it records a reduction to the lease liability and amortizes the incentive over the identified term of the lease as a reduction to rent expense. The Company records rental expense on a straight-line basis over the identified lease term on contracts with rent escalation clauses. F- 10 Fair Value Measurements The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and requires disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly. Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The Company determines fair value for cash equivalents with Level 1 inputs through the reference to the quoted market prices. There were no liabilities measured at fair value on a recurring basis, and no assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2023 and 2022. The carrying values of financial instruments such as prepaid expenses, accounts payable, and accrued expenses approximated fair value as of December 31, 2023 and 2022 due to their short-term maturities. Impairment of Property and Equipment The Company evaluates its long-lived assets with definite lives, such as fixed assets and right-of-use assets for impairment. The carrying value of fixed assets and right-of use assets is reviewed on a regular basis for the existence of facts or circumstances, both internally and externally, that may suggest impairment. Some factors which the Company considers to be triggering events for impairment review include a significant decrease in the market value of an asset, a significant change in the extent or manner in which an asset is used, a significant adverse change in the business climate that could affect the value of an asset, an accumulation of costs for an asset in excess of the amount originally expected, a current period operating loss or cash flow decline combined with a history of operating loss or cash flow uses or a projection that demonstrates continuing losses and a current expectation that, it is more likely than not, a long-lived asset will be disposed of at a loss before the end of its estimated useful life. The factors that drive the estimate of the life are often uncertain and are reviewed on a periodic basis or when events occur that warrant review. Recoverability is measured by comparison of the assets’ book value to future net undiscounted cash flows that the assets are expected to generate. If the assets are not recoverable, the impairment charge is measured as the amount by which the carrying value of the asset group exceeds the fair value. Concentration of Credit Risk Cash, and cash equivalents consist of financial instruments that potentially subject the Company to a concentration of credit risk in the event of a default by the related financial institution holding the securities, to the extent of the value recorded in the balance sheet. The Company invests cash that is not required for immediate operating needs primarily in highly liquid instruments with lower credit risk. Research and Development Expenses Costs incurred in the research and development of new products are expensed as incurred. Research and development costs include, but are not limited to, salaries, benefits, stock-based compensation, laboratory supplies, fees for professional service providers and costs associated with product development efforts, including preclinical studies and clinical trials. F- 11 The Company estimates preclinical study and clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on its behalf. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered. Stock-Based Compensation Share-based compensation expense for all share-based payment awards made to employees, directors and non-employees is measured based on the grant-date fair value of the award. Share-based compensation expense for awards granted to non-employees is determined using the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. The Company uses the Black-Scholes option pricing model to determine the fair value of options granted. The Company recognizes the compensation cost of share-based awards on a straight-line basis over the requisite service period. 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. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company does not have a history of market prices of its common stock, and as such, volatility is estimated using historical volatilities of similar public entities. The expected life of the awards is estimated based on the simplified method for grants to employees and is based on the contractual term for non-employee awards. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of the awards. The dividend yield assumption is based on history and expectation of paying no dividends. The Company recognizes forfeitures related to employee share-based payments when they occur. Segment Reporting Management has determined that the Company has one operating segment, which is consistent with the Company structure and how it manages the business. Income Taxes The Company follows accounting guidance regarding the recognition, measurement, presentation and disclosure of uncertain tax positions in the consolidated financial statements. Tax positions taken or expected to be taken in the course of preparing the Company’s tax returns are required to be evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authorities. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded in the consolidated financial statements. There are no uncertain tax positions that require accrual or disclosure as of December 31, 2023. Any interest or penalties are charged to expense. During the years ended December 31, 2023 and 2022, the Company had no significant interest and penalties. Tax years subsequent to December 31, 2019 are subject to examination by federal and state authorities. The Company recognizes deferred tax assets and liabilities based on the impact of temporary differences between assets and liabilities recognized for tax and financial reporting purposes measured by applying enacted tax rates and laws that will be in effect when the differences are expected to reverse, net operating loss carryforwards and tax credits. Valuation allowances are provided when necessary to reduce net deferred tax assets to an amount that is more likely than not to be realized. The deferred tax benefit or expense for the period represents the change in the deferred tax asset or liability from the beginning to the end of the period. F- 12 Deferred Offering Costs Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through December 31, 2023 that are directly related to the January 2024 Offering and that will be charged to stockholders’ equity upon the completion of the January 2024 Offering. Net Loss per Share Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury stock and if-converted methods. Dilutive common stock equivalents are comprised of options outstanding under the Company’s stock option plan, restricted stock units, and warrants. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive. Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares): December 31, 2023 2022 Options to purchase common stock 29,770 35,992 Restricted stock units 7,875 - Warrants for common stock 271,714 40,594 Class A Warrants for common stock 124,200 124,200 Class B Warrants for common stock 3,770 3,770 Recently Adopted Accounting Standards In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 805”) , an amendment of the ASC. The amendments to ASU 805 address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination and require that an acquirer recognize and measure contract assets and contract liabilities acquired in accordance with ASC 2014-09, Revenue from Contracts with Customers (Topic 606) (“ ASC 606”). Under GAAP, an acquirer generally recognizes assets and liabilities assumed in a business combination, including contract assets and liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC 606. The Company adopted this new standard on January 1, 2023. The new standard had no impact on the Company’s consolidated statements of operations or cash flows. Recently Issued Accounting Standards The Company does not believe that any recently issued but not yet effective accounting pronouncements will have a material effect on the accompanying consolidated financial statements. 3. LICENSE AND SUPPLY AGREEMENT WITH TORAY INDUSTRIES On October 6, 2020, the Company entered into a License and Supply Agreement (“License Agreement”) with Toray Industries, Inc. (“Toray”). Under the License Agreement, the Company received the exclusive license (outside of Japan) to make and distribute protein detection cartridges that have a function of automatic stepwise feeding of reagent (the “Cartridges”). In exchange for the license, the Company committed to make two payments of $ 120,000 each, both of which were made in 2021. In addition, following the first sale of the Cartridges after regulatory approval, the Company will make royalty payments to Toray equal to 15 % of the net sales of the Cartridges for the period that any underlying patents exist or five years after the first sale. Following the first sale after obtaining regulatory approval, the Company will make minimum annual royalty payments of $ 60,000 for the first year and $ 100,000 for each year thereafter, which shall be creditable against any royalties owed to Toray in such calendar year. F- 13 On October 23, 2023, the Company and Toray entered into an Amended and Restated License Agreement (the “New Toray License Agreement”) and a Master Supply Agreement (the “New Toray Supply Agreement”). Under the New Toray License Agreement, the Company continues to license from Toray intellectual property rights needed to manufacture single-use test cartridges, and the Company has received the right to sublicense certain Toray intellectual property to Sanyoseiko in connection with Sanyoseiko’s ongoing agreement with the Company to manufacture its Symphony device and cartridges (including in connection with the Company’s clinical trials). In addition, the New Toray License Agreement provides for the transfer of certain technology related to the cartridges to Sanyoseiko. The royalty payments payable by the Company to Toray have been reduced under the New Toray License Agreement from 15 % to 7.5 % (or less in certain circumstances) of net sales of certain cartridges for a term of 10 years. A 50 % reduction in the royalty rate applies upon expiry of applicable Toray patents on a product-by-product and country-by-country basis. The New Toray License Agreement contemplates that applicable royalty payment obligations from the Company to Toray for other products will be determined separately by the parties in the future. There were no sales of or revenues from the cartridges during the 12-month periods ended December 31, 2023 and 2022. Under the New Toray Supply Agreement, Toray will 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. These cartridges made using Toray intermediates are for the purpose of obtaining FDA approval and not for commercial sale. The New Toray Supply Agreement has a term ending on the earlier of October 23, 2025 or the date that the Company obtains FDA approval for its product, and may be extended for up to six months by mutual agreements of the parties. Once FDA approval has been obtained, the intermediates and cartridges will be manufactured by SanyoSeiko under a separate supply agreement between the Company and SanyoSeiko. At December 31, 2023 and 2022, there were no amounts accrued related to the New Toray License Agreement or the License Agreement. 4. WARRANTS The following table summarizes information with regard to warrants outstanding at December 31, 2023: Shares Exercisable for Weighted Average Exercise Price Weighted Average Remaining Life (in Years) Common Stock Warrants 271,714 Common Stock $ 15.94 4.3 Class A Warrants 124,200 Common Stock $ 140.00 2.8 Class B Warrants 3,770 Common Stock $ 200.00 2.8 As part of the August 2023 Offering that occurred during the year ended December 31, 2023, the Company issued 216,000 Warrants and 15,120 Placement Agent Warrants, which were accounted for as equity classified financial instruments under ASC 815, Derivatives and Hedging . There were no exercises of Common Stock Warrants during the years ended December 31, 2023 and 2022. Holders of Class B Warrants may also exercise such warrants on a “cashless” basis after the earlier of (i) 10 trading days from closing date of the offering or (ii) the time when $ 10.0 million of volume is traded in the Company’s common stock, if the volume weighted average price of the Company’s common stock on any trading day on or after the closing date of the offering fails to exceed the exercise price of the Class B Warrant (subject to adjustment as described in the warrant agreement). During the year ended December 31, 2023, no Class A or Class B Warrants were exercised. During the year ended December 31, 2022, 2,005 Class B Warrants were exercised, all on a cashless basis, while there were no exercises of Class A Warrants. 5. STOCK COMPENSATION Stock Incentive Plans In 2018, the Company adopted the 2018 Stock Incentive Plan (the “2018 Plan”) for employees, consultants, and directors. The 2018 Plan, which is administered by the Company’s Board of Directors, permits the Company to grant incentive and nonqualified stock options for the purchase of common stock, and restricted stock awards. The maximum number of shares of common stock reserved for issuance under the 2018 Plan is 31,472 . At December 31, 2023 there were 13,113 shares of common stock available for grant under the 2018 Plan. On July 6, 2021, the Company’s Board of Directors and stockholders approved and adopted the Bluejay Diagnostics, Inc. 2021 Stock Plan (the “2021 Plan”). A total of 98,000 shares of common stock were approved to be initially reserved for issuance under the 2021 Stock Plan. At December 31, 2023 there were 40,377 shares of common stock available for grant under the 2021 Plan. F- 14 Stock Award Activity The following table summarizes the status of the Company’s non-vested restricted stock awards for years ended December 31, 2023: Non-vested Restricted Stock Awards Number of Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2022 3,000 $ 25.80 Granted 25,609 8.80 Vested ( 19,484 ) 9.45 Cancelled / forfeited ( 1,250 ) 25.80 Outstanding at December, 2023 7,875 $ 10.96 The following is a summary of stock option activity for the year ended December 31, 2023: Number of Stock Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value Outstanding at December 31, 2022 35,992 $ 39.25 6.5 $ 20,578 Granted 1,000 10.60 Exercised - - Cancelled / forfeited ( 7,222 ) 46.57 Outstanding at December 31, 2023 29,770 $ 36.51 6.7 $ - Exercisable at December 31, 2023 25,548 $ 35.59 6.5 $ - The weighted average grant date fair value of options granted during the years ended December 31, 2023 and 2022 was $ 10.60 per share and $ 28.40 per share, respectively. The Company determined the grant-date fair value of stock option awards granted during the years ended December 31, 2023 and 2022 using the Black-Scholes model with the following assumptions: 2023 2022 Risk-free interest rate 3.63 % 1.58 % – 4.35 % Expected dividend yield 0.00 % 0.00 % Volatility factor 108.78 % 102.03 % – 107.36 % Expected life of option (in years) 6.00 5.40 – 6.00 Stock-Based Compensation Expense For the years ended December 31, 2023 and 2022, the Company recorded stock-based compensation expense as follows: Year ended December 31, 2023 2022 Research and development $ 62,955 $ 64,352 General and administrative 133,840 367,702 Marketing and business development ( 7,550 ) 950 Total stock-based compensation $ 189,245 $ 433,004 At December 31, 2023, there was approximately $ 38,002 of unrecognized compensation expense related to non-vested stock option awards that are expected to be recognized over a weighted-average period of 1.16 years. At December 31, 2023, there was approximately $ 14,060 of unrecognized compensation expense related to non-vested restricted stock awards that are expected to be recognized over a weighted-average period of 0.75 years. F- 15 6. RELATED PARTY TRANSACTIONS NanoHybrids, LLC In December 2021, the Company entered into an agreement with NanoHybrids, LLC (“NanoHybrids”) to utilize the Company’s research and development staff and laboratory facility when available to perform work for NanoHybrids. Any hours worked by Company employees for NanoHybrids is billed to NanoHybrids at a bill rate of the respective employee’s fully burdened personnel cost plus 10 %. Additionally, the Company may purchase certain lab supplies for NanoHybrids and rebill these costs to NanoHybrids. The Company’s Chief Technology Officer is the majority shareholder of NanoHybrids. The table below summarizes the amounts earned for the years ended December 31, 2023 and 2022 and balances due from NanoHybrids as of December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Income from NanoHybrids included in Other Income $ 178,042 $ 163,256 Cash receipts from NanoHybrids $ 156,504 $ 143,525 As of December 31, 2023 2022 Amounts receivable from NanoHybrids included in Prepaids and Other Current Assets $ 41,269 $ 19,731 Toray Industries, Inc. In June 2022, the Company sold five Symphony analyzers to the Company’s business partner, Toray, for $ 249,040 , all of which was paid in June 2022. Future sales to Toray are not currently anticipated. 7. PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31, 2023 and 2022: December 31, Depreciable lives 2023 2022 Construction in process $ 1,052,822 $ 375,466 Furniture, fixtures, and equipment 3 - 5 years 141,164 136,942 Software 3 years 4,457 4,457 Lab equipment 3 - 5 years 1,287,783 1,268,380 Leasehold improvements Life of lease 43,231 43,231 2,529,457 1,828,476 Less: accumulated depreciation ( 1,243,716 ) ( 596,406 ) Property and equipment, net $ 1,285,741 $ 1,232,070 The Company reviews long-lived assets for impairment when events, expectations, or changes in circumstances indicate that the asset’s carrying value may not be recoverable. As a result of this review in 2023, the Company revised the useful life of certain lab equipment in the first quarter of 2023 due to a change in expectations of the time the equipment will be used which resulted in approximately $ 382,795 of additional depreciation recorded in the year ended December 31, 2023. F- 16 8. LEASES The Company primarily enters into lease arrangements for office, laboratory space, and copiers. A summary of supplemental lease information is as follows: December 31, 2023 2022 Weighted average remaining lease term - operating leases (in years) 2.9 3.7 Weighted average remaining lease term - finance leases (in years) 4.1 5.1 Weighted average discount rate 7.0 % 7.0 % Operating cash flows from operating leases $ 174,640 $ 149,700 Operating cash flows from finance leases $ 4,807 $ - A summary of the Company’s lease assets and liabilities are as follows: December 31, 2023 2022 Operating lease right-of-use asset $ 333,267 $ 465,514 Finance leases in Property and Equipment 15,152 21,067 Total lease assets 348,419 486,581 Current portion of operating lease liability 162,990 168,706 Current portion of finance lease liability included in accrued expenses 4,807 4,807 Noncurrent operating lease liabilities 189,987 323,915 Noncurrent finance lease liabilities 12,321 15,823 Total lease liabilities $ 370,105 $ 513,251 The following table reconciles the undiscounted lease liabilities to the total lease liabilities recognized on the consolidated balance sheet as of December 31, 2023: Year Operating Lease Finance Lease 2024 $ 162,990 $ 4,807 2025 100,000 4,807 2026 100,000 4,807 2027 25,000 5,207 Thereafter - - Total future lease payments 387,990 19,628 Less: Imputed interest 35,013 2,500 Present value of lease liability $ 352,977 $ 17,128 9. COMMITMENTS AND CONTINGENCIES Purchase Commitments In October 2022, the Company entered into a non-cancelable purchase commitment with an international materials vendor for items needed for both development of the Symphony product line and also to resell to its customers. This agreement commits the Company to purchase approximately $ 800,000 in goods, of which 50 % was prepaid in 2022, with the remainder being paid in 2023. All goods have been received under this arrangement as of December 31, 2023. The Company had multiple open purchase commitments with its primary contract manufacturing organization in Japan related to the buildout of a manufacturing line for the IL-6 cartridges for the Symphony device as of December 31, 2022 for approximately $ 375,000 . During the year ended December 31, 2023, the Company purchased all items related to these purchase commitments. F- 17 Separation Agreement Under the terms of a separation agreement with Mr. Kenneth Fisher, the Company’s former Chief Financial Officer, the Company has agreed to compensate Mr. Fisher $ 240,000 (representing six months of base salary and the pro rata amount of Mr. Fisher’s 2023 target bonus). The payments of such amounts are subject to the compliance by Mr. Fisher of certain ongoing covenants with respect to confidentiality, cooperation and other matters. Mr. Fisher departed from the Company on September 26, 2023, and the Company has recorded a severance liability of $ 240,000 , which was included in accrued severance in the amount of $ 150,000 and in accrued bonuses of $ 90,000 . The Company has paid Mr. Fisher $ 80,000 as of December 31, 2023, resulting in an remaining accrual of $ 160,000 which has been included accrued expenses and other current liabilities on the Company’s Consolidated Balance Sheets as of December 31, 2023. Minimum Royalties As required under the License Agreement (see Note 3), following the first sale of Cartridges, the Company will also make royalty payments to Toray equal to 7.5 % of the net sales of the Cartridges for a term of 10 years. A 50 % reduction in the royalty rate applies upon expiry of applicable Toray patents on a product-by-product and country-by-country basis. There were no sales of or revenues from the Cartridges through December 31, 2023. Indemnification The Company has certain agreements with service providers with which it does business that contain indemnification provisions pursuant to which the Company typically agrees to indemnify the party against certain types of third-party claims. The Company accrues for known indemnification issues when a loss is probable and can be reasonably estimated. The Company would also accrue for estimated incurred but unidentified indemnification issues based on historical activity. As the Company has not incurred any indemnification losses to date, there were no accruals for or expenses related to indemnification issues for any period presented. 10. SUPPLEMENTAL BALANCE SHEET INFORMATION Prepaid expenses and other current assets consist of the following: December 31, 2023 2022 Prepaid insurance $ 136,342 $ 751,979 Vendor prepayments 558,959 681,218 Prepaid other 51,962 240,283 Total prepaid expenses and other current assets $ 747,263 $ 1,673,480 Accrued expenses and other current liabilities consist of the following: December 31, 2023 2022 Accrued personnel costs $ 566,087 $ 533,577 Goods received but unpaid 78,579 10,077 Accrued expenses for CFO separation agreement 160,000 - Accrued legal fees 157,670 61,737 Accrued other 154,575 230,339 Total accrued expenses and other current liabilities $ 1,116,911 $ 835,730 F- 18 11. INCOME TAX No provision for federal income taxes has been recorded for the years ended December 31, 2023 and 2022 due to net losses and the valuation allowance established. Significant components of the Company’s deferred tax assets are as follows: As of December 31, 2023 2022 Deferred tax assets: Net operating losses $ 4,553,431 $ 3,043,585 Tax credits 546,325 190,489 Intangible assets 58,063 66,716 Capitalized R&D expenses 2,106,995 1,018,165 Fixed assets 114,657 37,580 Other 314,958 272,106 Total deferred tax assets 7,694,429 4,628,641 Valuation allowance ( 7,694,429 ) ( 4,628,641 ) Deferred tax asset, net of allowance $ - $ - A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 2023 and 2022 is as follows: Year Ended December 31, 2023 2022 Federal statutory rate 21.00 % 21.00 % State income taxes, net of federal benefit and tax credits 7.43 % 6.86 % Change in valuation allowance ( 30.80 )% ( 29.06 )% Permanent differences 2.37 % 1.20 % Effective tax rate 0.00 % 0.00 % The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. In assessing the realizability of deferred tax assets, the Company considers taxable income in prior carryback years, as permitted under the tax law, forecasted taxable earnings, tax planning strategies, and the expected timing of the reversal of temporary differences. This determination requires significant judgment, including assumptions about future taxable income that are based on historical and projected information and is performed on a jurisdiction-by-jurisdiction basis. The Company continues to maintain a full valuation allowance against its deferred tax assets. During the years ended December 31, 2023 and 2022, management assessed the positive and negative evidence in its operations, and concluded that it is more likely than not that its deferred tax assets as of December 31, 2023 and 2022 will not be realized given the Company’s history of operating losses. The valuation allowance against deferred tax assets increased by approximately $ 3.1 million and $ 2.7 million during 2023 and 2022, respectively, related to a full valuation allowance recorded against capitalized research expenditures, additional net operating losses and tax credits generated in the year. As of December 31, 2023, the Company had federal net operating losses of approximately $ 16.8 million. The Company’s federal net operating losses incurred prior to 2018 totaling $ 713,000 expire through 2037, while its federal net operating losses incurred in 2018 to 2023 totaling approximately $ 16.1 million can be carried forward indefinitely but are limited to 80 % utilization against future taxable income each year. As of December 31, 2023, the Company had post-apportioned state net operating losses of approximately $ 16.3 million that can generally be carried forward 20 years and will expire at various dates through 2043. As of December 31, 2022, the Company had post-apportioned Massachusetts net operating losses of approximately $ 10.8 million that can generally be carried forward 20 years and will expire at various dates through 2042. F- 19 12. SUBSEQUENT EVENTS 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. Nasdaq Notification On February 28, 2024, 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). The notification has no immediate effect on the listing of the Company’s common stock on the Nasdaq Capital Market. The Company intends to take all reasonable measures available to achieve compliance and allow for continued listing on the Nasdaq Capital Market. However, there can be no assurance that the Company will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria. F-20