Bluejay Diagnostics, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Bluejay is a late-stage, pre-revenue in-vitro diagnostics company developing its Symphony point-of-care platform, including tests focused on sepsis and other diseases. Its ALLEREYE test had FDA clearance; the filing describes Symphony tests as requiring FDA clearance, authorization, or approval. The financial statements are unaudited.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | No revenue reported; the filing describes the company as pre-revenue. | |||
| Operating expenses | $958,000 | $148,000 | $1.857 million | $615,000 |
| Operating loss | $(958,000) | $(148,000) | $(1.857) million | $(615,000) |
| Net loss | $(1.193) million | $(128,000) | $(2.028) million | $(614,000) |
| Basic and diluted loss per share | $(0.11) | $(0.04) | $(0.32) | $(0.20) |
| Cash used in operations | — | $(1.844) million | $(354,000) |
Revenue and gross margin were not reported, so margin analysis is not applicable. At September 30, cash and cash equivalents were $2.330 million; current assets were $3.264 million and current liabilities were $4.704 million, implying a $1.440 million working-capital deficit. Total assets were $3.623 million, accumulated deficit was $6.234 million, and stockholders’ deficit was $1.081 million.
Convertible debentures were reported at $3.974 million, net, as a current liability at September 30. They carried 7.5% interest and were due May 31, 2022. The company also had $115,000 due to a related party, payable on demand. The debentures subsequently converted in connection with the IPO, as described below.
Changes versus prior comparable periods
- Q3 net loss increased to $1.193 million from $128,000; nine-month net loss increased to $2.028 million from $614,000.
- Operating expenses rose substantially, driven by Symphony clinical-trial and analyzer-manufacturing costs, higher staffing, public-company transition costs, and increased commercialization activity. For the nine-month period, R&D increased by about $585,000, G&A by about $522,000, and marketing and business development by about $136,000.
- Interest expense increased, primarily from interest and discount amortization on the 2021 convertible debentures. The company also recorded an $85,000 charge for expiring inventory in Q2 2021.
- Cash used in operations increased to $1.844 million from $354,000. Financing provided $3.268 million, principally from $4.5 million of debenture proceeds, partly offset by debt repayments and financing and offering costs.
Outlook, risks, and notable items
- Management stated that cash available at September 30 was expected to fund operations for at least 12 months, but also expected continued losses and said substantial additional capital would be needed over the next several years. Failure to obtain financing or sufficient revenue could force spending cuts, program delays, or curtailment.
- After the reporting date, Bluejay completed its November 2021 IPO, selling 2.16 million units for $21.6 million gross proceeds, less $2.8 million in offering costs. The debentures converted into Series D preferred stock, and the Series D shares subsequently converted into 4.5 million common shares. The filing also reports subsequent Class B warrant exercises. These events materially changed the company’s post-quarter-end capital and share structure.
- Key business risks include the pre-revenue status of the company, clinical and regulatory development, competition, reliance on key personnel, and uncertainty about COVID-19’s effect on customers and commercialization. Management said the pandemic had delayed revenue generation as customer budgets shifted toward COVID-19 needs.
- The Toray license requires royalties of 15% of applicable net sales after first sale, along with minimum royalties; there had been no Toray chip sales through September 30. A $76,350 NMRC-related commitment remained. No legal proceedings were pending, and the filing reported no defaults upon senior securities.
- Disclosure controls and procedures were deemed effective as of September 30. Management was not yet required to assess internal control over financial reporting in this quarterly filing.
Important facts for investors to verify
- Post-IPO cash, net proceeds, operating runway, and quarterly cash burn, compared with the pre-IPO September 30 liquidity position.
- Current share count and potential dilution from IPO warrants, options, and other outstanding warrants; the filing reported 19,501,735 common shares outstanding as of December 6, 2021.
- Symphony clinical, manufacturing, and regulatory milestones, and the timing and prospects for first commercial revenue.
- Future operating costs and financing needs, including the effect of the debenture conversion and other post-quarter-end capital transactions.
- Whether Toray minimum royalty obligations or other contractual commitments become material once product sales begin.