Bullfrog AI Holdings, Inc. — Q3 2023 Form 10-Q
Period: Three and nine months ended September 30, 2023. The interim financial statements are unaudited. Bullfrog develops bfLEAP, an AI/ML platform for analyzing complex medical and drug-development data, and is also pursuing licensed drug programs.
Financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $65,000 | $0 | $65,000 | $0 |
| Gross profit | $59,800 | $0 | $59,800 | $0 |
| Operating expenses | $1.364 million | $641,000 | $4.092 million | $1.873 million |
| Net loss | $1.253 million | $765,000 | $4.059 million | $2.107 million |
| Loss per share, basic and diluted | $0.21 | $0.16 | $0.72 | $0.45 |
- Q3 gross margin was approximately 92% on the reported $65,000 of revenue. Management described this as the company’s first completed commercial service contract, with a leading rare-disease nonprofit. It reported service contracts with two organizations.
- At September 30, cash and cash equivalents were $3.856 million, versus $58,000 at December 31, 2022. Current assets were $4.208 million and current liabilities $446,000. Total assets were $4.215 million; stockholders’ equity was $3.769 million.
- Cash used in operating activities for the first nine months was $4.983 million, compared with $871,000 in the prior-year period. Financing provided $8.782 million, principally from the February IPO and warrant exercises; cash increased by $3.798 million.
- Debt was substantially reduced: no convertible notes remained outstanding at quarter-end. Current liabilities included $213,000 of short-term insurance financing. Accounts payable were $111,000 and accrued expenses $122,000.
Changes, outlook, and risks
- Losses and operating expenses increased materially year over year. Nine-month R&D rose $575,000, attributed to staffing and consulting, the JHU-APL technology amendment, the J. Craig Venter Institute collaboration, and work on the Mebendazole program. G&A rose $1.644 million, including public-company, staffing, consulting, recruiting, investor-relations, and marketing costs.
- Management said IPO proceeds and other capital would fund planned operations for approximately nine months from the filing date, absent significant revenue. It expects to spend approximately $2.1 million over the next 24 months on service offerings, preclinical/IND-enabling work, and R&D. Management expects expenses, including R&D and public-company costs, to increase.
- The company completed a preclinical study for its Mebendazole prodrug program and is seeking a strategic development partner. Its broader strategy depends on commercial partnerships and, for drug development, external partners, drug supply, and clinical-trial execution. Management’s plans and revenue expectations are forward-looking, not assured.
- Risks include ongoing operating losses and cash burn, limited revenue, the need for additional financing or partners, market acceptance, and substantial licensing costs and royalties. The JHU-APL license includes minimum annual royalties of $60,000 for 2023 and $300,000 for 2024 and later years, subject to the agreement’s terms.
- Potential dilution is significant: 3.796 million warrants and 507,717 options were outstanding at quarter-end, excluded from diluted loss per share as anti-dilutive. The CEO’s Rule 10b5-1 plan permits sales of up to 1 million shares through September 2024; 50,000 shares were sold under it in September 2023.
- The company reported changes to financial-reporting processes during Q3, including moving day-to-day accounting to a new external firm and beginning a transition to an enterprise accounting platform. The filing also checked “No” for having filed all required reports during the preceding 12 months; investors should clarify this reported filing status.
Important facts to verify
- Cash runway assumptions and financing needs, especially against the reported $4.983 million nine-month operating cash outflow.
- Whether the initial $65,000 service engagement leads to repeat or additional revenue, and the status of discussions with prospective customers.
- Progress, funding, partner commitments, and development milestones for the Mebendazole and other licensed programs; confirm related royalty, milestone, and payment obligations.
- Potential dilution from warrants, options, and the CEO’s share-sale plan, including the plan’s remaining authorization.
- The “No” response regarding timely filing history and the status and effectiveness of the company’s evolving disclosure and financial-reporting controls.