Bluejay Diagnostics, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis together with our Consolidated Financial Statements and the notes thereto included elsewhere in this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. For additional discussion, see “CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS” above. Overview We are a clinical-stage medical diagnostics company developing rapid tests using whole blood on our Symphony platform (“Symphony”) to improve patient outcomes in critical care settings. Our Symphony technology platform is an exclusively licensed, patented system that consists of a mobile device and single-use test cartridges that if cleared, authorized, or approved by the U.S. Food and Drug Administration (“FDA”), could provide a solution to a significant market need in the United States. Clinical trials indicate Symphony produces laboratory-quality results in less than 20 minutes in critical care settings, including Intensive Care Units (“ICUs”) and Emergency Rooms (“ERs”), where rapid and reliable results are required. Since inception, we have incurred net losses from operations each year and we expect to continue to incur losses for the foreseeable future. We incurred net losses of approximately $7.7 million and $10.0 million for the years ended December 31, 2024 and 2023, respectively. We had negative cash flow from operating activities of approximately $7.5 million and $8.3 million for the years ended December 31, 2024 and 2023, respectively, and had an accumulated deficit of approximately $34.7 million and $26.95 million as of December 31, 2024 and 2023, respectively. 29 Results of Operations Comparison of Years Ended December 31, 2024 and 2023 The following table sets forth our results of operations for the years ended December 31, 2024 and 2023: For Years Ended December 31, 2024 2023 Operating expenses: Research and development $ 3,471,671 $ 5,714,574 General and administrative 3,689,648 4,313,200 Sales and marketing 8,297 283,443 Total operating expenses 7,169,616 10,311,217 Operating loss (7,169,616 ) (10,311,217 ) Other income (expense): Interest expense (823,028 ) - Interest income 145,823 164,900 Other income, net 129,027 192,429 Total other income (expense) (548,178 ) 357,329 Net loss $ (7,717,794 ) $ (9,953,888 ) Research and development Research and development expenses decreased approximately $2.2 million, or 39%, for the year ended December 31, 2024, as compared to 2023. The decrease in research and development expenses was primarily due to a $0.5 million decrease in personnel related costs, a $0.8 million decrease in depreciation expense, and a $1.1 million decrease in product development costs, which was partially offset by a $0.5 million increase in clinical development costs. The decrease in research and development expenses was primarily due to a reduction in technology transfer efforts which offset increased clinical trial expenses. We expect future research and development expenses to be focused on costs specifically associated with our clinical trial program supporting our regulatory strategy, technology transfer efforts and any necessary manufacturing improvements. General and administrative General and administrative expenses decreased approximately $0.6 million, or 14%, for the year ended December 31, 2024, as compared to 2023. The decrease in general and administrative expenses is primarily due to the cost reduction efforts focused on reducing personnel and other administrative costs. We expect to monitor and continue to reduce our general and administrative spend, as necessary, to optimize operational alignment. 30 Sales and marketing Sales and marketing expenses decreased approximately $0.3 million, or 97%, for year ended December 31, 2024, as compared to 2023. The low sales and marketing expenses in 2024 are due to a reduction in spending in all sales and marketing efforts. Other income (expense) Total other income (expense) decreased approximately $0.9 million for the year ended December 31, 2024 as compared to 2023. The decreases primarily related to the $0.8 million increase in interest expense associated with the Bridge Note Financing. Summary Statement of Cash Flows The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented. Years Ended December 31, 2024 2023 Cash proceeds provided by (used in): Operating activities $ (7,819,769 ) $ (8,313,870 ) Investing activities (306,783 ) (704,166 ) Financing activities 10,219,981 1,111,562 Net increase (decrease) in cash and cash equivalents $ 2,093,429 $ (7,906,474 ) Net cash used in operating activities During 2024, we used approximately $7.8 million in cash for operating activities, a decrease of approximately $0.5 million from 2023. The decrease in net cash used in operating activities was primarily due to a decrease in the net loss and partially offset by the timing of payments to vendors and other decreases in working capital during 2024. Net cash used in investing activities During 2024, we used approximately $0.3 million in cash for investing activities, an approximately $0.4 million decrease from 2023. The Company acquired laboratory equipment and manufacturing equipment for the development of the Symphony devices in both 2024 and 2023. Net cash provided by financing activities During 2024, we generated approximately $10.2 million in cash from financing activities, as compared to $1.1 million in 2023. The increase in net cash provided by financing activities was primarily due to the proceeds from our public offerings in January 2024 and June 2024 as compared to our private placement of common stock in August 2023. 31 Contractual Obligations See Note 9 to consolidated financial statements for our lease obligations and Note 10 to the consolidated financial statements for our other non-cancellable contractual obligations. Liquidity and Going Concern The Company had cash and cash equivalents of $4,301,945 and current liabilities of $810,368 on its balance sheet as of December 31, 2024. The Company has incurred net losses since its inception, and has negative cash flows from operations and had an accumulated deficit of $34,668,784 as of December 31, 2024. The Company continues to develop its Symphony device and its first test for the measurement of IL-6. The Company remains committed to obtaining FDA clearance and hopes to 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 requirements. The Company estimates cash resources will be sufficient to fund its operations up to the third quarter of 2025. 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 within one year from the date these financial statements are issued. The consolidated financial statements for the years ended December 31, 2024 and 2023 were prepared under the assumption that the Company will continue as a going concern, and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The Company expects that it will seek to raise such additional capital through public or private equity offerings, grant financing and support from governmental agencies, convertible debt, collaborations, strategic alliances and distribution arrangements. Additional funds may not be available when it needs them on terms that are acceptable to them, or at all. If adequate funds are not available, it may be required to delay its FDA regulatory strategy, and to delay or reduce the scope of its research or development programs, its commercialization efforts or its manufacturing commitments and capacity. In addition, if it raises additional funds through collaborations, strategic alliances or distribution arrangements with third parties, it may have to relinquish valuable rights to its technologies or future revenue streams. Recent Offerings August 2023 Offering On August 24, 2023, the Company entered into a securities purchase agreement with certain institutional and accredited investors (the “Purchase Agreement”) relating to the registered direct offering and sale of 540 shares of the Company’s common stock at a purchase price of $2,946.00 per share (the “Offering”). In a concurrent private placement, the Company also issued to such institutional and accredited investors unregistered warrants to purchase up to 540 shares of Common Stock (the “Warrants”). Pursuant to the terms of the Purchase Agreement, for each share of Common Stock issued in this offering an accompanying Warrant was issued to the purchaser thereof. Each Warrant is exercisable for one share of Common Stock (the “Warrant Shares”) at an exercise price of $2,896.00 per share, will be immediately exercisable upon issuance and will expire five years from the date of issuance. The Warrants were offered and sold at a purchase price of $50.00 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, between the Company and H.C. Wainwright & Co., LLC, or 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 agreed to pay the placement agent in connection with the Offering and the Private Placement a 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 agreed to issue to the placement agent, or its designees, warrants to purchase up to 36 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 $3,684.00, or 125% of the offering price per share of Common Stock sold in the Offering, and a term of five years from the commencement of the sales pursuant to the Offering. The gross proceeds to the Company from the Offering and the Private Placement are $1,590,840. The Company incurred offering costs of $413,544. 32 January 2024 Offering On January 2, 2024, the Company sold in a public offering (such transaction, the “January 2024 Offering”) (i) 1,344 shares of the Company’s common stock, par value $0.0001 per share and (ii) prefunded warrants to purchase up to an aggregate 5,386 shares of Common Stock (the “January Prefunded Warrants”). The Shares and January Prefunded Warrants were sold together with warrants to purchase up to an aggregate of 6,730 shares of Common Stock at an exercise price of $520.00 per share (the “January 2024 Warrants”). The combined public offering price was $520.00 per share of Common Stock and related January 2024 Warrant and $519.96 per January Prefunded Warrant and related January 2024 Warrant. As of December 31, 2024, all January Prefunded Warrants have been exercised in full. The January 2024 Warrants are exercisable 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, 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 471 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 $650.00, 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. The gross proceeds to the Company from the January 2024 Offering were $3,500,000. The Company incurred offering costs of $711,031. May 2024 Bridge Note Financing On May 31, 2024, the Company entered into a Note Purchase Agreement with an accredited investor (the “NPA”), and a Securities Purchase Agreement with three accredited investors (the “SPA”). Under the terms of the NPA, the investor provided the Company with a $1,000,000 cash subscription in exchange for the issuance of a senior secured note. As of December 31, 2024, a total of $1,176,470 was repaid to the NPA investors. The difference between such note and the subscription amount, initially recorded as a discount on the notes, was the result of the discount factor included in the NPA of approximately 17.6%. Under the terms of the SPA, the three investors agreed to collectively provide the Company with a separate $1,000,000 cash subscription in exchange for the issuance of senior secured notes ($333,333 each), and the collective issuance of 1,451 shares of the Company’s common stock. The fair value of the common stock issued in connection with the SPA was $307,563. As of December 31, 2024, a total of $1,111,110 was repaid to the SPA investors. The difference between such notes and the subscription amounts, initially recorded as a discount on the notes, was the result of the discount factor included in the SPA of 11.11%. Interest expense recorded on the NPA and SPAs was $807,797 for the year ended December 31, 2024, including debt issuance costs related to the NPA and SPA totaling $212,654. June 2024 Offering On June 28, 2024, the Company sold in a public offering ( the “June 2024 Offering”), (i) 11,541 common units (the “Common Units”), each consisting of one share of common stock, two Class C Warrants and one Class D Warrant and (ii) 95,815 prefunded warrants (the “Prefunded Units”), each consisting of one prefunded warrant to purchase one share of common stock (each, a “Prefunded Warrant”), two Class C Warrants and one Class D Warrant to purchase Common Shares. Aegis Capital Corp. (“Aegis” or, the “Underwriter”) partially exercised its over-allotment option in respect to 13,573 Class C Warrants and 6,787 Class D Warrants (the “Over-Allotment Warrants”). The Common Units were sold at a price of $81.50 per unit and the Prefunded Warrants were sold at a price of $81.495 per unit. As of December 31, 2024, all Prefunded Warrants have been exercised in full. 33 Pursuant to an engagement letter dated June 6, 2024, by and between the Company and Aegis, the Company paid Aegis a total cash fee of $743,750 equal to 8.5% of the gross proceeds received in the June 2024 Offering. The gross proceeds to the Company from the June 2024 Offering were $8,569,075. The Company incurred offering costs of $1,133,419. Critical Accounting Policies and Estimates Some of our critical accounting policies require us to make difficult, subjective or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period may have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. As an emerging growth company, we have elected to opt-in to the extended transition period for new or revised accounting standards. As a result, our consolidated financial statements may not be comparable to those of companies that comply with public company effective dates. See Note 2 to consolidated financial statements for a summary of significant accounting policies. Recently Adopted Accounting Standards See Note 2 to consolidated financial statements (under the caption “Recently Issued Accounting Standards”). Recently Issued Accounting Standards See Note 2 to consolidated financial statements (under the caption “Recently Issued Accounting Standards”). ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information requested by this Item is not applicable as we are electing scaled disclosure requirements available to Smaller Reporting Companies with respect to this Item. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our Consolidated Financial Statements and The Report of Independent Registered Public Accounting Firm are included in this Form 10-K on pages F-1 through F-19. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 34