PROSPECTUS

 

Filed Pursuant to Rule 424(b)(4)

Registration Nos. 333-260029 and 333-260936

2,160,000 Units consisting of:

Common Stock
Class A Warrants
Class B Warrants

This is an initial public offering of units of our securities. Prior to this offering, there has been no public market for shares of our common stock.

Each Unit consists of (a) one share of our common stock (or, at the purchaser’s election, one share of Series E Convertible Preferred Stock), (b) one Class A warrant (the “Class A Warrants”) to purchase one share of our common stock at an exercise price equal to $7.00 per share, exercisable until the fifth anniversary of the issuance date, and (c) one Class B warrant (the “Class B Warrants,” and together with the Class A Warrants, the “Warrants”) to purchase one share of our common stock at an exercise price equal to $10.00 per share (or 100% of the unit offering price), exercisable until the fifth anniversary of the issuance date. Holders of Class B Warrants may exercise such warrants on a “cashless” basis upon the earlier of (i) 10 trading days from the issuance date of such warrant or (ii) the time when $10.0 million of volume is traded in our common stock, if the volume weighted average price (“VWAP”) of our common stock on any trading day on or after the date of issuance fails to exceed the exercise price of the Class B Warrant (subject to adjustment for any stock splits, stock dividends, stock combinations, recapitalizations and similar events). The shares of our common stock and the Warrants are immediately separable and will be issued separately, but will be purchased together in this offering.

We are also offering to those purchasers, if any, whose purchase of our common stock in this offering would otherwise result in such purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser prior to the date of issuance, 9.99%) of our outstanding common stock immediately following the consummation of this offering, the opportunity to substitute Series E Convertible Preferred Stock, referred to as “Preferred Stock” for the shares of common stock included in the Units purchased by that investor. Each share of Preferred Stock is being sold together with the same Warrants described above being sold with each share of common stock. For each share of Preferred Stock purchased in this offering in lieu of common stock, we will reduce the number of shares of common stock being sold in the offering on a one-for-one basis. Pursuant to this prospectus, we are also offering the shares of common stock issuable upon conversion of the Preferred Stock.

Each share of Preferred Stock is convertible into one share of our common stock (subject to adjustment as provided in the related designation of preferences) at any time at the option of the holder, provided that the holder will be prohibited from converting Preferred Stock into shares of our common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 4.99% (or, at the election of the purchaser prior to the date of issuance, 9.99%) of the total number of shares of our common stock then issued and outstanding. However, any holder may increase such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to us. The shares of Preferred Stock will otherwise have the preferences, rights and limitations described under “Description of Capital Stock - Series E Convertible Preferred Stock Being Issued in this Offering” in this prospectus.

Prior to this offering, there has been no public market for our common stock. Our common stock is listed for trading on the NASDAQ Capital Market under the symbol “BJDX”. We do not intend to apply for any listing of either of the Warrants on the Nasdaq Capital Market or any other securities exchange or nationally recognized trading system, and we do not expect a market to develop for the Class A Warrants or the Class B Warrants.

The registration statement of which this prospectus forms a part includes a separate prospectus to be used for the potential resale by a selling stockholder of 4,500,000 shares of common stock. Any shares sold by the selling stockholder until our common stock is listed or quoted on an established public trading market will take place at $10.00 per share, which is the public offering price of the Units we are selling in our initial public offering. Thereafter, any sales will occur at prevailing market prices or in privately negotiated prices.

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 11 for a discussion of certain risks that you should carefully consider in connection with an investment in our common stock.

 

Per Unit(2)

 

Total(3)

Public offering price

 

$

10.00

 

$

21,600,000

Underwriting discounts(1)

 

$

0.80

 

$

1,728,000

Proceeds to us, before expenses

 

$

9.20

 

$

19,872,000

____________

(1)        The underwriters will receive compensation in addition to the underwriting discounts and commissions. We refer you to “Underwriting” beginning on page 83 of this prospectus for additional information regarding underwriting compensation.

(2)        The public offering corresponds to a public offering price per share of common stock or share of Series E Convertible Preferred Stock of $9.98, a public offering price per Class A warrant of $0.01, and a public offering price per Class B Warrant of $0.01.

(3)        Persons affiliated with us may purchase our securities in this offering.

We have granted the underwriter an option, exercisable one or more times in whole or in part, to purchase up to 324,000 additional shares of common stock and/or Class A Warrants to purchase up to an aggregate of 324,000 shares of common stock and/or Class B Warrants to purchase up to an aggregate of 324,000 shares of common stock, in any combinations thereof, from us at the public offering price per security, less the underwriting discounts and commissions, for 45 days after the date of this prospectus to cover over-allotments, if any.

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and we have elected to comply with certain reduced public company reporting requirements.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the securities against payment on or about November 15, 2021.

Joint Book-Running Managers

Dawson James Securities, Inc.

 

I-Bankers Direct, LLC

The date of this prospectus is November 9, 2021

 

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ABOUT THIS PROSPECTUS

Neither we nor the underwriters have authorized anyone to provide you with any information or to make any representations other than as contained in this prospectus or in any free writing prospectuses we have prepared. Neither we nor the underwriters take responsibility for, and provide no assurance about the reliability of, any information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the securities. Our business, financial condition, results of operations and prospects may have changed since that date.

No action is being taken in any jurisdiction outside the United States to permit a public offering of our securities or possession or distribution of this prospectus in any such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions about this offering and the distribution of this prospectus applicable to those jurisdictions.

INDUSTRY AND MARKET DATA

This prospectus contains estimates, projections and other information concerning our industry, our business, the science of our products and the markets for our products, including data regarding the incidence of certain medical conditions and the scientific basis of our products. We obtained the industry, science, market and similar data set forth in this prospectus from our internal estimates and research and from academic and industry research, publications, surveys, and studies conducted by third parties.

The content of the above sources, except to the extent specifically set forth in this prospectus, does not constitute a portion of this prospectus and is not incorporated herein. Information that is based on estimates, forecasts, projections, market research, scientific research, or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information.

 

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PROSPECTUS SUMMARY

This summary highlights information contained in other parts of this prospectus. Because it is a summary, it does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should read the entire prospectus carefully, including our financial statements and the related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

When used herein, unless the context requires otherwise, references to the “Company,” “we,” “our” and “us” refer to Bluejay Diagnostics, Inc., a Delaware corporation, collectively with its wholly owned subsidiary SpinCo, LLC.

Our Company

We are a late-stage pre-revenue company focused on improving patient outcomes through a more cost efficient, rapid, near patient product for triage, diagnosis and monitoring of disease progression. We believe there is a market need for an on-site and rapid diagnostic system that can be employed for testing and monitoring. Our diagnostic system, which we refer to as “Symphony,” is an exclusively licensed, patented, low-cost, system that consists of a small footprint instrument and single-use indication specific test cartridges, that we believe, if cleared, authorized, or approved by the U.S. Food and Drug Administration (“FDA”), can provide a solution to this market need rapidly and with laboratory quality results in approximately 24 minutes, in the clinic, Intensive Care Unit (“ICU”), Emergency Room (“ER”) and in other hospital and clinical setting settings where rapid and reliable results are required. Currently, testing is generally performed in a laboratory, and the transportation and logistics of transporting the samples to the lab and obtaining the result takes between 8-48 hours. Our platform is a sample-to-result system that has been shown in a clinical study to provide results in 24 minutes. Our business model is to generate revenue from the sale of the table-top Symphony instrument, and from the sale of single-use indication specific cartridges that are used by the Symphony instrument for the diagnostic test. Once the test material (generally a small volume blood sample) is transferred to a single-use indication specific Symphony cartridge, no additional sample preparation or pre-processing is required. If our Symphony system is able to replicate the results from prior clinical studies and receives FDA clearance, we believe Symphony could eliminate the time required for transportation and logistics and will eliminate the number of operational ‘touch-points’ from ‘sample-to-result’ from six to two.

Our technology is the result of more than 12 years of development by our development partner and investor, Toray Industries, Inc. (“Toray”). Toray holds 100,081 shares of our common stock, which they acquired in 2020 for approximately $1.0 million. The core technology used in our Symphony platform and test cartridge product candidates are licensed from Toray.

For the past three years, Toray has used the technology successfully as a Research Use Only (“RUO”) product in Japan by selected clinical institutions for measurement of Interleukin-6 (“IL-6”) in rheumatoid arthritis to monitor disease progression. Based in part on this extensive development of the Symphony platform, we believe we are positioned now to complete the last stages of development needed to move to commercialization in the United States. Our initial regulatory pathway is to label and distribute Symphony as an RUO product in the U.S. Certain laboratories may choose to utilize the RUO Symphony in laboratory developed tests, or LDTs. An LDT is a type of in vitro diagnostic test that is designed, manufactured and used within a single laboratory. In parallel, we are pursuing 510(k) clearance from the FDA to use Symphony for in vitro diagnostic use. In order to expedite the submission of our 510(k), we may seek to obtain data from laboratories using the RUO Symphony in LDTs.

Prior to seeking 510(k) clearance for Symphony, we will need to complete additional clinical trials, which commenced in September 2021. In January 2022, we plan to submit a pre-submission application to the FDA presenting our study design and the data from our first set of studies. We will use the FDA’s feedback, if necessary, to modify the ongoing studies and to construct the 510(k) premarket notification clearance application. We plan to submit our 510(k) premarket notification at the end of the third quarter of 2022.

Our first diagnostic test in development is for triage of sepsis in patients utilizing IL-6 as the target biomarker. According to a report by Market Data Forecast (February 2020), the total market for IL-6 testing for sepsis triage was $934 million in 2020 and is estimated to reach $1.4 billion by 2025 growing at a CAGR of 8.5%. IL-6 has important roles in both innate and adaptive immunity. IL-6 is one of the principle inflammatory cytokines released during trauma or infection. Measuring IL-6 can serve as an early warning sign of a patient’s prognosis and inform quicker and more accurate healthcare. Unlike the conventional downstream biomarkers typically used for sepsis, IL6 is

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released hours to days before procalcitonin (“PCT”) and c-reactive protein (“CRP”). However, due to long wait times to receive lab results, IL-6 has had limited utility in healthcare. IL-6 is an inflammatory biomarker, also considered as a ‘first-responder,’ that is elevated in patients with infection, sepsis, and septicemia. Reports have shown IL-6 concentrations correlate with severity of sepsis, progression of cancer, rheumatoid arthritis and many other severe conditions as defined by clinical and laboratory parameters. IL-6 is a clinically established biomarker for assessment of severity of infection and inflammation across many disease indications. IL-6 is a biomarker that appears early on as a ‘first responder’ during infection or inflammation. We believe detection of IL-6 early on might allow physicians to make better therapeutic and treatment decisions. Due to the clinical significance of IL-6 testing, hospital systems and centralized testing labs routinely utilize IL-6 testing.

The importance of IL-6 testing has been further highlighted during the COVID-19 pandemic, and IL-6 concentrations in blood have been found to be heightened in patients with COVID-19-associated systemic inflammation and hypoxic respiratory failure. In addition, certain of the institutions that we are working with on our clinical studies have Clinical Laboratory Improvement Amendments (“CLIA”) certified labs. These CLIA certified laboratories might adopt Symphony IL-6 tests for their clinical testing as laboratory developed tests. We intend to submit an emergency use authorization (“EUA”) application with the FDA for this indication.

We are further developing a pipeline of diagnostic tests for Symphony including triage of myocardial infarction (“MI”), congestive heart failure (“CHF”), neutropenic sepsis in cancer, and other disease diagnostic indications using the same Symphony platform. We intend to pursue the general diagnostic marketplace following a sufficient clinical trial to support a 510(k) submission with the FDA, with the initial indication as a general diagnostic test for sepsis in triage of patients. We do not currently have any regulatory cleared products and our products will need to receive regulatory authorization from FDA in order to be marketed as a diagnostic product in the United States.

Our operations to date have been funded primarily through sales of preferred stock and convertible notes. We expect to incur increasing expenses over the next two years to develop additional diagnostic tests, to expand our sales and marketing infrastructure, and our research and development activities. We believe the proceeds from this offering will be sufficient to reach commercialization.

Symphony Advantages

We believe there is a fast-growing market for near-patient, low-cost diagnostic platforms that are used for time-sensitive patient testing in life-threatening situation in hospitals, Long-Term Acute Care facilities (“LTACs”), intensive-care units (“ICUs”) and clinics to replace legacy testing formats and processes. We believe our platform is well positioned to meet this need.

In a 2016 study conducted in Japan (the “Japan Study”), which was sponsored by Toray, it was shown that the Symphony system (known as the RAY-FAST system in Japan) is able to provide accurate results within 24 minutes. The Japan Study was conducted at the University of Yamanashi Hospital in Yamanashi, Japan to evaluate the accuracy and efficacy of the Symphony system in rheumatoid arthritis patients. The results of the study were published in Cytokine, “Development of a quick serum IL-6 measuring system in rheumatoid arthritis” (Volume 95. July 2017). In the Japan Study, 150 blood samples were collected from 76 rheumatoid arthritis patients, of which 16 samples were lower than the detection limit of the Symphony system. The Japan Study then examined the correlation between the results from the Symphony system and the Fujirebio human chemiluminescent enzyme immunoassay (“CLEIA”) Lumipulse f system. The Lumipulse f system is a clinical system that has been approved by the Ministry of Health, Labour and Welfare (MHLW) of Japan for clinical use. Chemiluminescent assays are a common method for quantifying IL-6, and is the method used by all three current FDA Emergency Use Authorized tests: Roche’s Elecsys IL-6, Beckman Coulter’s Access IL-6, and Siemens Centaur Interleukin-6. Furthermore, a publication in Clinical Chemistry and Laboratory Medicine, “Interleukin-6 chemiluminescent immunoassay on Lumipulse G600II: analytical evaluation and comparison with three other laboratory analyzers” (Volume 58, Issue 10, 2020) did a comparison of a similar Lumipulse IL-6 test with Roche’s Elecsys IL-6, Beckman Coulter’s Access IL-6, and Siemens Centaur Interleukin-6 and measured comparable performance across all four systems. The serum IL-6 concentrations measured by the Symphony system were positively correlated with those measured by the CLEIA method. The correlation between the Symphony system and CLEIA method for IL-6 was r = 0.941 (the closer the r-value is to 1, the more closely the two variables are related). As such, the Japan Study concluded that the Symphony system was as accurate as CLEIA methods. In addition, the Japan Study confirmed the time required for the measurement of the IL-6 concentration to be 24 minutes.

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Based on the results of the Japan Study, we believe the Symphony system may be able to reduce test result time from days to minutes and may be able to provide results which, as shown in the Japan Study, appear to be as accurate as those performed in a laboratory, allowing for more frequent testing, which we believe may lead to shortened hospital stays and improved patient outcomes, all of which also leads to reduced patient care costs.

Symphony is an automated diagnostic system, consisting of a fluorescence immuno-analyzer which uses a single-use diagnostic test cartridge with reagents integrated into the cartridge. Symphony utilizes a ‘sample-to-result’ format, which means that once a specimen is taken from the patient, it is placed in the cartridge and then the cartridge is placed inside the analyzer where the test is run without further technician intervention or additional reagent. This reduces test complexity and eliminates the need for highly trained and expensive laboratory technicians to run the tests. Our platform is designed to enable simple, rapid, and cost-effective analysis from a single clinical sample, which will allow LTACs, hospitals and clinics that traditionally could not afford more expensive or complex diagnostic testing platforms to modernize their laboratory testing and provide better patient testing at an affordable cost in time sensitive, life threatening situations. We believe our on-site testing may also help avoid potential penalties often imposed on LTACs by insurance companies for failure to monitor for potential sepsis.

We believe our technology can provide the following advantages over traditional diagnostic systems:

•        Ease of Use.    Symphony is a sample-to-result system. No sample preparation or pre-processing is required. Once the samples are placed inside the cartridge and the cartridge is placed in the analyzer, the technician does not need to monitor the test and can complete other unrelated tasks.

•        Cost Savings.    We believe that the Symphony system and our expected pricing strategy will make it possible for LTACs, clinics and many types of hospitals that have cost constraints to adopt in-house testing. Our customers will be able to either purchase the analyzer or lease it at an affordable price through a third-party leasing company. A typical Symphony test would cost approximately $80 (the cost of the single-use cartridge to the health-care facility) compared to the approximately $275 per test charged by a third-party lab, excluding overhead and transportation cost.

•        Time Savings.    Saving pre-processing time for samples reduces time to test results by approximately 1-2 hours depending on the pre-processing required for a particular assay system. Furthermore, as current tests can only be performed in a laboratory, the transportation and logistics of transporting the samples to the lab and obtaining the result takes between 8-48 hours. Based on the results of the Japan Study, we believe the Symphony system could eliminate the time required for transportation and logistics and eliminate the number of operational ‘touch-points’ from ‘sample-to-result’ from six to two.

•        Space Savings.    Symphony’s significantly smaller tabletop design (14.5 inches by 10.5 inches), compared to the 100-200 square feet of space required by other diagnostic systems, will make it possible for many healthcare providers to perform in-house testing where there is limited available laboratory space.

•        Versatile Platform with the Capability to Deliver a Broad Test Menu.    Our Symphony platform has the potential for broad application across a number of areas in near-patient diagnostic testing. The same analyzer can be utilized for all of our planned future diagnostic tests.

•        Throughput and Multiple Testing Capability.    Our platform has the ability to analyze up to six distinct targets or six different patient samples simultaneously within approximately 24 minutes. This functionality will allow any organization to run multiple tests or panels on a single analyzer.

Our Market

According to research published by Allied Market Research (Global Invitro Diagnostics Market, 2020-2027), the global in vitro diagnostics market was $67.1 billion in 2019; projected to reach $91.1 billion by 2027, a compound annual growth rate (“CAGR”) of 4.8% over 7 years driven by prevalence of chronic diseases including cancer, autoimmune diseases, and other inflammatory conditions. We believe the Symphony sample-to-result platform is well suited to address a subset of this market, including sepsis, cardio-metabolic diseases, cancer and other diseases that require time-sensitive, near-patient testing.

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According to a report by Market Data Forecast (February 2020), the total market for IL-6 testing for sepsis triage was $934 million in 2020 and is estimated to reach $1.4 billion by 2025 growing at a CAGR of 8.51%. Our platform is designed to provide on-site and rapid test results, with no pre-processing of the blood, and as such, we intend to pursue the following markets for triage:

•        Sepsis Triage using IL-6.    According to the CDC, each year, at least 1.7 million adults in America develop sepsis and nearly 270,000 Americans die as a result of sepsis. In the United States, 1 in 3 patients who dies in a hospital has sepsis. In addition, in 2016, according to the National Center for Health Statistics, 8.3 million people were served by LTACs. A major responsibility of these LTAC facilities is to monitor sepsis. We estimate the potential total market for sepsis triage testing in LTACs is approximately $2–$3 billion annually. Septic shock and multi-organ failure were the most common cause of death in COVID-19 patients, often due to suppurative pulmonary infection.

•        Chest Pain Triage using hsTNT and NT-proBNP.    According to a Washington Post article in April 2019, there are 7.6 million people in the United States each year who visit or are admitted to the hospital with chest pain. Research suggests that about 50% of those patients are admitted for further observation and care of potential heart disease, and that approximately 3.6 million people annually needed cardiac triage. Two major biomarkers that are assessed to diagnose and monitor cardiac irregularities are hsTNT and NT-proBNP. These clinically established biomarkers generated approximately $4.6 billion in revenue in 2019 and are expected to continue to grow with a CAGR of 11.2% through 2027. We are developing diagnostic tests for triage situations, using these cardiac biomarkers (hsTNT and NT pro-BNP), which were approximately a $3.6 billion market in 2020 and are estimated to be $5.5 billion by 2025, a CAGR of 8.9% (report by Markets and Markets, January 2021).

The CDC National Center for Health Statistics estimates that the market for the diagnostic cardiac triage tests will increase by more than 20% per year over the next several years. Many factors are driving the growth of these markets, particularly the accelerating adoption of near-patient testing inside hospitals, LTACs and ICUs. According to the 2021 edition of American Hospital Association Hospital Statistics, there were approximately 6,090 hospitals in the United States in 2019, approximately 5,000 of which are considered community hospitals. According to outside research, fewer than half of these facilities have the capabilities, technology and products for near-patient diagnoses for triage of either sepsis or cardiac conditions. We believe these facilities are candidates for our diagnostic platform.

Our Business Model

Our goal is to become a leading provider of sample-to-result, ‘near-patient’ diagnostic testing in infectious, inflammatory and metabolic diseases by leveraging the strengths of our Symphony platform. We intend to market the use of Symphony by targeting our sales and marketing to LTACs, clinics, and community hospitals in the United States. We believe that the format of our low-cost, ‘near-patient’ platform will be attractive to these institutions which may not otherwise have the financial resources, laboratory space, or trained personnel to justify the purchase of a diagnostic solution. Our business model relies on the following:

•        Attractive Financing Model.    We intend to provide our customers the ability to lease our analyzer at an affordable cost through third-party financial institutions. As such, our business model will not require a significant capital outlay by health care facility customers and, by moving testing in-house, will create a profit center for the facility.

•        Recurring Revenue.    We intend to sell our customers disposable, single-use diagnostic test cartridges. Our single-use test cartridges will create a growing and recurring revenue stream for us as we sell more systems, as adoption and utilization increases, and as we develop tests for additional indications. We expect the sale of test cartridges to generate the majority of our revenue.

•        Expand our Menu of Diagnostic Products.    If adoption increases, we believe the average customer use of the Symphony platform will begin to increase. As we expand our test menu, we believe we will be able to increase our annual revenue per customer through the resulting increase in utilization. To that end, we are in development on a broad menu of diagnostic tests that we believe will satisfy growing medical needs and present attractive commercial opportunities.

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•        Increase our revenue and reduce our cost of sales through a ‘waterfall’ sales strategy.    Our proprietary test cartridges and Symphony analyzers are manufactured through our agreements with Toray and Sanyoseiko Co., Ltd. (“Sanyoseiko”), thus reducing the manufacturing cost structure. They currently build our Symphony system and test cartridges and currently purchase materials at high per unit cost due to low purchase volumes. We believe that by focusing our initial sales efforts on multi-location institutions, increased adoption and utilization of Symphony may lead to increasing sales within a relatively small customer base. We believe sales within those institutions may lower our salesforce costs. We believe the increased unit sales of our Symphony and cartridges will not only increase revenue, but will also allow us to reduce manufacturing costs and improve gross margins enhancing our ability to provide a lower cost solution to customers.

Risks We Face

Our business and ability to execute our business strategy are subject to a number of risks of which you should be aware before you decide to buy our securities. In particular, you should consider the following risks, which are discussed more fully in the section entitled “Risk Factors”:

•        We expect to incur losses for the foreseeable future, until we are able to generate sufficient revenue from product sales.

•        Our losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.

•        All of our product candidates are dependent on our license agreement with the Toray. The license agreement imposes significant obligations on us, including the potential obligation to pay the minimum royalties upon regulatory approval. If our license agreement with Toray is terminated for any reason, we will not be able to generate revenues and our business will likely cease.

•        The regulatory approval pathway we must navigate may be expensive, time-consuming and uncertain, and may prevent us from obtaining approval for the marketing of our product candidates.

•        There can be no assurance that we will successfully complete any clinical evaluation studies necessary to receive regulatory approvals.

•        Our success is highly dependent on our IL-6 product candidates, which are yet to be approved and, even if approved, may not be accepted by the marketplace.

•        We intend to rely solely on third parties to manufacture our product candidates.

•        If Toray is unable to successfully protect or enforce its intellectual property and proprietary rights or elects to not do so, our competitive position will be harmed.

•        If others claim we or Toray are infringing on their intellectual property rights, we may be subject to costly and time-consuming litigation.

•        We face competition from companies that have greater resources than we do, and we may not be able to effectively compete against these companies.

•        Given our lack of revenue, we may need to raise additional capital, which may not be available to us on acceptable terms, or at all.

Corporate Information

We were incorporated under the laws of Delaware on March 20, 2015. Our principal executive offices are located at 360 Massachusetts Avenue, Suite 203, Acton, MA 01720 and our telephone number is (844) 327-7078. Our corporate website address is bluejaydx.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.

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Implications of being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise applicable to public companies. We intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:

•        not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the “Sarbanes-Oxley Act”;

•        reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

•        exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to avail ourselves of this exemption and, therefore, we are not subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

We expect to take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the date on which we are deemed to be a large accelerated filer, which is the end of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the end of our most recent second fiscal quarter, and (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

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The Offering

Securities offered by us:

 

Each Unit consists of (a) one share of our common stock (or, at the purchaser’s election, one share of Series E Convertible Preferred Stock), (b) one Class A warrant (the “Class A Warrants”) to purchase one share of our common stock at an exercise price equal to $7.00 per share, exercisable until the fifth  anniversary of the issuance date, and (c) one Class B warrant (the “Class B Warrants,” and together with the Class A Warrants, the “Warrants”) to purchase one share of our common stock at an exercise price equal to $10.00 per share (or 100% of the unit offering price), exercisable until the fifth anniversary of the issuance date and subject to certain adjustment and cashless exercise provisions as described herein. The shares of our common stock and the Warrants are immediately separable and will be issued separately, but will be purchased together in this offering.

We are also offering to those purchasers, if any, whose purchase of common stock in this offering would otherwise result in such purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser prior to the date of issuance, 9.99%) of our outstanding common stock immediately following the consummation of this offering, the opportunity to substitute Series E Convertible Preferred Stock, referred to as “Preferred Stock” for the shares of common stock included in the Units purchased by that investor. This prospectus also relates to the offering of shares of common stock issuable upon conversion of the Preferred Stock.

Each share of Preferred Stock is convertible into one share of our common stock (subject to adjustment as provided in the related designation of preferences) at any time at the option of the holder, provided that the holder will be prohibited from converting Preferred Stock into shares of our common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 4.99% (or, at the election of the purchaser prior to the date of issuance, 9.99%) of the total number of shares of our common stock then issued and outstanding. However, any holder may increase such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to us.

In the event of our liquidation, dissolution, or winding up, holders of our Preferred Stock will be entitled to receive the amount of cash, securities or other property to which such holder would be entitled to receive with respect to such shares of Preferred Stock if such shares had been converted to common stock immediately prior to such event (without giving effect for such purposes to any beneficial ownership limitation), subject to the preferential rights of holders of any class or series of our capital stock specifically ranking by its terms senior to the Preferred Stock as to distributions of assets upon such event, whether voluntarily or involuntarily.

The holders of the Preferred Stock have no voting rights, except as required by law. Any amendment to our certificate of incorporation that adversely affects the powers, preferences and rights of the Preferred Stock requires the approval of the holders of a majority of the shares of Preferred Stock then outstanding.

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The holders of our Preferred Stock are entitled to receive dividends on shares of Preferred Stock equal (on an as-if-converted-to-common-stock basis, without giving effect for such purposes to any beneficial ownership limitation) to and in the same form as dividends actually paid on shares of the common stock when such dividends are specifically declared by our board of directors.

Common stock outstanding prior to this offering:

 

10,534,265 shares

     

Common stock outstanding after this
offering:

 


12,694,265 shares (assuming no purchaser elects to purchase shares of Series E Convertible Preferred Stock in lieu of shares of common stock).

Over-allotment option:

 

We have granted the underwriter an option, exercisable one or more times in whole or in part, to purchase up to 324,000 additional shares of common stock and/or Class A Warrants to purchase up to an aggregate of 324,000 shares of common stock, and/or Class B Warrants to purchase up to an aggregate of 324,000 shares of common stock, in any combinations thereof, from us at the public offering price per security, less the underwriting discounts and commissions, for 45 days after the date of this prospectus to cover over-allotments, if any. See “Underwriting” for additional information.

Because the warrants will not be listed on a national securities exchange or other nationally recognized trading market, the underwriters will be unable to satisfy any overallotment of shares and warrants without exercising the underwriters’ overallotment option with respect to the warrants. As a result, the underwriters will exercise their overallotment option for all of the warrants which are over-allotted, if any, at the time of the initial offering of the shares and the warrants. However, because our common stock is publicly traded, the underwriters may satisfy some or all of the overallotment of shares of our common stock, if any, by purchasing shares in the open market and will have no obligation to exercise the overallotment option with respect to our common stock.

Use of proceeds:

 

We intend to use the net proceeds received from this offering (i) to obtain regulatory approvals of our product candidates, including completing any product development required to meet such regulatory requirements; and (ii) to market our products. The remaining net proceeds, if any, are expected to be used for working capital and other general corporate purposes. See “Use of Proceeds.”

Lockups

 

Our executive officers, directors, and stockholders holding 5% or more of our common stock prior to the offering, collectively, have agreed with the underwriters not to sell, transfer or dispose of any shares or similar securities for a period of six months following the closing of this offering.

We have also agreed, for a period of twelve months after the closing of this offering, not to sell, transfer or dispose of any shares or similar securities, subject to certain exceptions.

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Underwriters’ warrants

 

Upon the closing of this offering, we will issue to Dawson James, as representative of the underwriters, warrants entitling the representative to purchase 5% of the aggregate number of shares of common stock issued in this offering (including the shares of common stock issuable upon conversion of the Series E Convertible Preferred Stock). The warrants shall be exercisable at an exercise price of 125% of the public offering price per unit for a period of five years from the commencement of sales in this offering. For additional information, please refer to the “Underwriting” section on page 83.

Listing:

 

Our common stock is listed on the NASDAQ Capital Market under the symbol “BJDX.”

Risk factors:

 

An investment in our company is highly speculative and involves a high degree of risk. See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our securities.

The number of shares of common stock outstanding is based on 10,534,265 shares of common stock issued and outstanding as of October 20, 2021 and excludes the following:

•        4,500,000 shares of common stock issuable upon the conversion of our Series D Convertible Preferred Stock;

•        1,255,775 shares of common stock issuable upon the exercise of our outstanding warrants to purchase common stock at a weighted average price of $1.03 per share;

•        500,786 shares of common stock issuable upon the exercise of our outstanding options to purchase common stock at a weighted average price of $2.98 per share;

•        1,770,000 shares of common stock that are available for future issuance under our 2021 Stock Plan;

•        2,160,000 shares of common stock issuable upon the exercise of Class A warrants to be issued in this offering;

•        2,160,000 shares of common stock issuable upon the exercise (including the cashless exercise) of Class B warrants to be issued in this offering; and

•        108,000 shares of common stock issuable upon the exercise of warrants to be issued to the underwriters upon the closing of this offering.

Unless expressly indicated or the context requires otherwise, (i) all information in this prospectus assumes no exercise by the representative of the over-allotment option; and (ii) all common stock share and per share amounts reported in the following analysis reflect the stock dividend of 2.15 share of common stock for each outstanding share of common stock, effected June 7, 2021.

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Summary Financial Data

You should read the following summary financial data together with our financial statements and the related notes appearing at the end of this prospectus, “Capitalization,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have derived the financial data for the six months ended to June 30, 2021 from our unaudited condensed financial statements appearing elsewhere in this prospectus. We have derived the financial data for the fiscal years ended December 31, 2020 and 2019 from our audited financial statements included in this prospectus.

 

For the
Fiscal Year
Ended
December 31,
2019

 

For the
Fiscal Year
Ended
December 31,
2020

 

For the Six
Month
Period Ending
June 30,
2021

 

Pro Forma for
the Six Month
Period Ending
June 30,
2021
(1)

Results of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(819,842

)

 

$

(1,158,285

)

 

$

(834,421

)

 

$

(834,421

)

Basic and diluted net loss per common share

 

 

(0.26

)

 

 

(0.37

)

 

 

(0.20

)

 

 

(0.20

)

Weighted average number of common shares outstanding

 

 

3,147,200

 

 

 

3,147,200

 

 

 

4,201,688

 

 

 

4,201,688

 

 

As of
December 31,
2019

 

As of
December 31,
2020

 

As of
June 30,
2021

 

Pro Forma as
of June 30,
2021(1)

 

Pro Forma as
adjusted as
of June 30,
2021
(2)

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

Cash

 

$

96,011

 

 

$

912,361

 

 

$

2,400,457

 

 

$

3,765,457

 

$

22,649,457

Working capital

 

 

(276,197

)

 

 

(787,196

)

 

 

(516,185

)

 

 

3,461,930

 

 

22,078,039

Total assets

 

 

916,518

 

 

 

1,517,332

 

 

 

3,125,544

 

 

 

4,490,544

 

 

23,106,653

Total liabilities

 

 

1,380,826

 

 

 

1,845,390

 

 

 

3,249,029

 

 

 

635,914

 

 

635,914

Total redeemable preferred stock

 

 

2,468,130

 

 

 

3,878,115

 

 

 

 

 

 

 

 

Total stockholders’ equity (deficit)

 

 

(2,932,438

)

 

 

(4,206,173

)

 

 

(123,485

)

 

 

3,854,630

 

 

22,470,739

____________

(1)      Reflects issuance on August 4, 2021 of an additional $1.5 million in principal amount of convertible debentures, after deducting the origination fees and estimated offering expenses payable by us, and the mandatory conversion of the total $4.5 million in principal amount of debentures into Series D convertible preferred stock.

(2)      Reflects the sale and issuance of all the shares of common stock offered hereby, at the public offering price of $10.00 per unit, after deducting the underwriting discounts and estimated offering expenses payable by us.

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RISK FACTORS

Investing in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including the financial statements and the related notes included elsewhere in this prospectus, before deciding whether to invest in shares of our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.

Risks Related to Our Financial Condition and Capital Requirements

We are subject to the risks associated with new businesses.

We entered into a license agreement with Toray in October 2020 and are effectively a new business with a plan to commercialize our licensed technology. Our limited operating history may not be adequate to enable you to fully assess our ability to develop and market our Symphony platform and test cartridges, assuming we receive regulatory clearances for which there is no assurance, and respond to competition. Our efforts to date have related to the organization and formation of our company, research and development and preparation for commencing regulatory trials. We have no approved products, have not yet generated revenue, and we cannot guarantee we will ever be able to generate revenues. Therefore, we are, and expect for the foreseeable future to be, subject to all the risks and uncertainties, inherent in a new business focused on the development and sale of new medical devices. As a result, we may be unable to further develop, obtain regulatory approval for, manufacture, market, sell and derive revenues from our Symphony platform and test cartridges and the other product candidates in our pipeline, and our inability to do so would materially and adversely impact our viability. In addition, we still must optimize many functions necessary to operate a business, including expanding our managerial, personnel and administrative structure, continuing product research and development, and assessing and commencing our marketing activities.

Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies that have not yet commercialized their products, particularly those in the medical device field. In particular, potential investors should consider that there is a significant risk that we will not be able to:

•        implement or execute our current business plan, or that our business plan is sound;

•        maintain our management team and Board of Directors;

•        determine that the technologies that have been developed are commercially viable;

•        attract, enter into or maintain contracts with, and retain customers; and

•        raise any necessary additional funds in the capital markets or otherwise to effectuate our business plan.

In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.

We have incurred significant losses since inception and may not be able to achieve significant revenues or profitability.

Since our inception, we have engaged primarily in development activities. We have financed our operations primarily through financing from private capital raising, and have incurred losses since inception, including a net loss of $1.2 million for the fiscal year ended December 31, 2020 and a net loss of $834,421 for the six months ended June 30, 2021. We do not know whether or when we will become profitable. Our ability to generate revenue and achieve profitability depends upon our ability, alone or with others, to complete the development process of our product candidates, including regulatory approvals, and thereafter achieve substantial acceptance in the marketplace for our products. We may be unable to achieve any or all of these goals.

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Our losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.

We had cash and cash equivalents of approximately $1.9 million at October 20, 2021. We estimate that our existing cash resources, without giving effect to the proceeds from this offering, will not be sufficient to fund operations into 2022. Our financial statements included with this prospectus have been prepared assuming that we will continue as a going concern. We have concluded that substantial doubt about our ability to continue as a going concern exists and our auditors have made reference to this in their audit report on our audited financial statements for the year ended December 31, 2020. If we are unable to obtain sufficient funding, we could be forced to delay the commercialization of our product candidates, and our financial condition and results of operations will be materially and adversely affected. After the completion of this offering, future financial statements may continue to disclose substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.

We will require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce or cease our operations.

To date, we have relied primarily on private debt and equity financing to carry on our business. We have limited financial resources, negative cash flow from operations and no assurance that sufficient funding will be available to us to fund our operating expenses and to further our product development efforts and pursue clinical trials for FDA approval. We expect the net proceeds from this offering, along with our current cash position, will enable us to fund our operating expenses and capital expenditure requirements for at least the next twelve months. Thereafter, unless we achieve profitability, we anticipate that we will need to raise additional capital to fund our operations while we implement and execute our business plan. We currently do not have any contracts or commitments for additional financing. In addition, any additional equity financing may involve substantial dilution to our existing shareholders. There can be no assurance that such additional capital will be available on a timely basis or on terms that will be acceptable to us. Failure to obtain such additional financing could result in delay or indefinite postponement of operations or the further development of our business with the possible loss of such properties or assets. If adequate funds are not available or are not available on acceptable terms, we may not be able to fund our business or the expansion thereof, take advantage of strategic acquisitions or investment opportunities or respond to competitive pressures. Such inability to obtain additional financing when needed could have a material adverse effect on our business, results of operations, cash flow, financial condition and prospects.

Risks Related to Our Business

The license agreement with Toray, which covers the license of the core technology used in our Symphony platform and test cartridge product candidates, contains significant risks that may threaten our viability or otherwise have a material adverse effect on us and our business, assets and its prospects.

We have an exclusive license with Toray for the entire world, excluding Japan, to use their patents and know-how related to our Symphony platform and test cartridges for the manufacturing, marketing and sale of such products. We also have a nonexclusive license for the same purposes in Japan. We have no contractual rights to the intellectual property covered in the license agreement other than as expressly set forth therein. Our plans, business, prospects and viability are substantially dependent on that intellectual property and subject to the limitations relating thereto as set forth in the license agreement:

•        After the receipt of regulatory approval in a country, we are required to pay Toray a minimum royalty of $60,000 for the initial year that royalties are payable increasing to a minimum of $100,000 thereafter, regardless of the actual amount of sales by us of licensed products. Accordingly, we could be obligated to pay royalties even though we have generated no or limited revenue. Such payments could materially and adversely affect our profitability and could limit our investment in our business.

•        For a period of three years, we are required to purchase test cartridges from Toray. Accordingly, we will not have unfettered right to select our suppliers, regardless of whether an unauthorized supplier could provide products on better pricing, delivery, quality or other terms, thus potentially materially and adversely impacting those aspects of our business, economies, profitability and prospects.

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•        The license is non-assignable and non-sublicensable (to third parties). These restrictions may limit our flexibility to structure our operations in the most advantageous manner.

•        At our sole expense, we must file for, prosecute the application for, and obtain all regulatory approvals for the licensed products and obtain all legal permits necessary for promoting, marketing, offering or selling each licensed product. The regulatory approval process can be expensive and time consuming, and there can be no assurances that we will be able to obtain or maintain any or all required permits.

•        We are required to obtain market approval for the products in the United States and the European Union by October 2023 or the license agreement could be terminated by Toray.

•        If we do not generate commercial sales within five years of the date of the license, Toray has the right to terminate the agreement or make it non-exclusive.

•        Except with respect to Toray’s ownership of all intellectual property rights in respect of the licensed property, Toray provides no, and disclaims all, representations, warranties or covenants relating to the licensed intellectual property or any other matters under the license agreement and in particular disclaims any fitness of the property for any purpose or any warranty against infringement of any third party patent. These provisions limit our recourse in the event that the licensed intellectual property is flawed, defective, inadequate, incomplete, uncommercial, wrongly described or otherwise not useful for our purposes. We have not independently verified any of the technical, scientific, commercial, legal, medical or other circumstances or nature of the licensed intellectual property and therefore there can be no assurances that any of the foregoing risks have been reduced or eliminated. These provisions represent a significant risk of a material adverse impact on us, our business and our prospects.

In addition, see the risks in “— Risks Related to Our Intellectual Property” below. These risks are not the only risks inherent in the license agreement. You are encouraged to read the complete text of the license agreement, which is filed as an exhibit to the registration statement of which this prospectus is a part.

We have not yet launched any products and the ability to do so will depend on the acceptance of our Symphony platform in the healthcare market.

We have not yet launched or received regulatory approvals in any country or territory for our Symphony platform or test cartridges. Even if we receive regulatory approvals, we are faced with the risk that our Symphony platform will not be accepted over competing products and that we will be unable to enter the marketplace or compete effectively. We cannot assure you that our Symphony platform or test cartridges will gain market acceptance. If the market for our future products fails to develop or develops more slowly than expected, or if any of the technology and standards supported by us do not achieve or sustain market acceptance, our business and operating results would be materially and adversely affected.

We cannot accurately predict the volume or timing of any sales, making the timing of any revenues difficult to predict.

We may be faced with lengthy and unpredictable customer evaluation and approval processes associated with our Symphony platform. Consequently, we may incur substantial expenses and devote significant management effort and expense in developing customer adoption of our Symphony platform, which may not result in revenue generation. We must also obtain regulatory approvals of our Symphony platform and test cartridges in jurisdictions in which we pursue approvals, which is subject to risk and potential delays. The same risks apply to other tests we may develop based on our Symphony platform. As such, we cannot accurately predict the volume, if any, or timing of any future sales.

If third-party payors do not provide coverage and reimbursement for the use of our platform, our business and prospects may be negatively impacted.

Third-party payors, whether governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in certain countries, no uniform policy of coverage and reimbursement for medical device products and services exists among third-party payors. Therefore, coverage and reimbursement for medical device products and services can differ significantly from payor to payor. In addition, payors continually

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review new technologies for possible coverage and can, without notice, deny coverage for these new products and procedures. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained, or maintained if obtained.

Our Symphony platform, including its software and systems, may contain undetected errors, which could limit our ability to provide our products and diminish the attractiveness of our offerings.

Our Symphony platform may contain undetected errors, defects or bugs. As a result, our customers or end users may discover errors or defects in our products, software or systems, or our products, software or systems may not operate as expected. We may discover significant errors or defects in the future that we may not be able to fix. Our inability to fix any of those errors could limit our ability to provide our products and services, impair the reputation of our brand and diminish the attractiveness of our product and service offerings to our customers.

In addition, we may utilize third party technology or components in our products, and we rely on those third parties to provide support services to us. The existence of errors, defects or bugs in third party technology or components, or the failure of those third parties to provide necessary support services to us, could materially adversely impact our business.

We will rely on the proper function, security and availability of our information technology systems and data to operate our business, and a breach, cyber-attack or other disruption to these systems or data could materially and adversely affect our business, results of operations, financial condition, cash flows, reputation or competitive position.

We will depend on sophisticated software and other information technology systems to operate our business, including to process, transmit and store sensitive data, and our future products and services may include information technology systems that collect data regarding patients. We could experience attempted or actual interference with the integrity of, and interruptions in, our technology systems, as well as data breaches, such as cyber-attacks, malicious intrusions, breakdowns, interference with the integrity of our products and data or other significant disruptions. Furthermore, we may rely on third-party vendors to supply and/or support certain aspects of our information technology systems. These third-party systems could also become vulnerable to cyber-attack, malicious intrusions, breakdowns, interference or other significant disruptions, and may contain defects in design or manufacture or other problems that could result in system disruption or compromise the information security of our own systems.

If in the future we pursue foreign jurisdictions, such international operations will mean that we are subject to laws and regulations, including data protection and cybersecurity laws and regulations, in many jurisdictions. Furthermore, there has been a developing trend of civil lawsuits and class actions relating to breaches of consumer data held by large companies or incidents arising from other cyber-attacks. Any data security breaches, cyber-attacks, malicious intrusions or significant disruptions could result in actions by regulatory bodies and/or civil litigation, any of which could materially and adversely affect our business, results of operations, financial condition, cash flows, reputation or competitive position.

In addition, our information technology systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving legal and regulatory standards, the increasing need to protect patient and customer information, changes in the techniques used to obtain unauthorized access to data and information systems, and the information technology needs associated any new products and services. There can be no assurance that our process of consolidating, protecting, upgrading and expanding our systems and capabilities, continuing to build security into the design of our products, and developing new systems to keep pace with continuing changes in information processing technology will be successful or that additional systems issues will not arise in the future.

If our information technology systems, products or services or sensitive data are compromised, patients or employees could be exposed to financial or medical identity theft or suffer a loss of product functionality, and we could lose existing customers, have difficulty attracting new customers, have difficulty preventing, detecting, and controlling fraud, be exposed to the loss or misuse of confidential information, have disputes with customers, physicians, and other health care professionals, suffer regulatory sanctions or penalties, experience increases in operating expenses or

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an impairment in our ability to conduct our operations, incur expenses or lose revenues as a result of a data privacy breach, product failure, information technology outages or disruptions, or suffer other adverse consequences including lawsuits or other legal action and damage to our reputation.

Our future performance will depend on the continued engagement of key members of our management team.

Our future performance depends to a large extent on the continued services of members of our current management. In the event that we lose the continued services of such key personnel for any reason, this could have a material adverse effect on our business, operations and prospects.

If we are not able to attract and retain highly skilled managerial, scientific and technical personnel, we may not be able to implement our business model successfully.

We believe that our management team must be able to act decisively to apply and adapt our business model in the markets in which we will compete. In addition, we will rely upon technical and scientific employees or third-party contractors to effectively establish, manage and grow our business. Consequently, we believe that our future viability will depend largely on our ability to attract and retain highly skilled managerial, sales, scientific and technical personnel. In order to do so, we may need to pay higher compensation or fees to our employees or consultants than we currently expect, and such higher compensation payments would have a negative effect on our operating results. Competition for experienced, high-quality personnel is intense and we cannot assure that we will be able to recruit and retain such personnel. We may not be able to hire or retain the necessary personnel to implement our business strategy. Our failure to hire and retain such personnel could impair our ability to develop new products and manage our business effectively.

If we or our manufacturers fail to comply with the regulatory quality system regulations or any applicable equivalent regulations, our proposed operations could be interrupted, and our operating results would suffer.

We and any third-party manufacturers and suppliers of ours will be required, to the extent of applicable regulation, to follow the quality system regulations of each jurisdiction we will seek to penetrate and also will be subject to the regulations of these jurisdictions regarding the manufacturing processes. If we or any third-party manufacturers or suppliers of ours are found to be in significant non-compliance or fail to take satisfactory corrective action in response to adverse regulatory findings in this regard, regulatory agencies could take enforcement actions against us and such manufacturers or suppliers, which could impair or prevent our ability to produce our products in a cost-effective and timely manner in order to meet customers’ demands. Accordingly, our operating results would suffer.

Product liability suits, whether or not meritorious, could be brought against us due to an alleged defective product or for the misuse of our Symphony platform or test cartridges. These suits could result in expensive and time-consuming litigation, payment of substantial damages, and an increase in our insurance rates.

If our Symphony platform or test cartridges, or any future tests based on our Symphony platform, are defectively designed or manufactured, contain defective components or are misused, or if someone claims any of the foregoing, whether or not meritorious, we may become subject to substantial and costly litigation. Misusing our devices or failing to adhere to the operating guidelines or our devices producing inaccurate readings could cause significant harm to patients. In addition, if our operating guidelines are found to be inadequate, we may be subject to liability. Product liability claims could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us. While we expect to maintain product liability insurance, we may not have sufficient insurance coverage for all future claims. Any product liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, could harm our reputation in the industry and could reduce revenue. Product liability claims in excess of our insurance coverage would be paid out of cash reserves harming our financial condition and adversely affecting our results of operations.

If we are found to have violated laws protecting the confidentiality of patient health information, we could be subject to civil or criminal penalties, which could increase our liabilities and harm our reputation or our business.

There are a number of laws around the world protecting the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. Privacy rules protect medical records and other personal health information by limiting their use and disclosure, giving individuals the

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right to access, amend and seek accounting of their own health information and limiting most use and disclosures of health information to the minimum amount reasonably necessary to accomplish the intended purpose. We may face difficulties in holding such information in compliance with applicable law. If we are found to be in violation of the privacy rules, we could be subject to civil or criminal penalties, which could increase our liabilities, harm our reputation and have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Product Development and Regulatory Approval

The regulatory approval process which we may be required to navigate may be expensive, time-consuming, and uncertain and may prevent us from obtaining clearance for our planned products.

We intend to market our Symphony platform or test cartridges following regulatory approval. To date, we have not received regulatory approval in any jurisdiction. The research, design, testing, manufacturing, labeling, selling, marketing and distribution of medical devices are subject to extensive regulation by country-specific regulatory authorities, which regulations differ from country to country. There can be no assurance that, even after such time and expenditures, we will be able to obtain necessary regulatory approvals for clinical testing or for the manufacturing or marketing of any products. In addition, during the regulatory process, other companies may develop other technologies with the same intended use as our products.

We also will be subject to numerous post-marketing regulatory requirements, which may include labeling regulations and medical device reporting regulations, which may require us to report to different regulatory agencies if our device causes or contributes to a death or serious injury, or malfunctions in a way that would likely cause or contribute to a death or serious injury. In addition, these regulatory requirements may change in the future in a way that adversely affects us. If we fail to comply with present or future regulatory requirements that are applicable to us, we may be subject to enforcement action by regulatory agencies, which may include, among others, any of the following sanctions:

•        warning letters, fines, injunctions, consent decrees and civil penalties;

•        customer notification, or orders for repair, replacement or refunds;

•        voluntary or mandatory recall or seizure of our products;

•        imposing operating restrictions, suspension or shutdown of production;

•        refusing our requests for clearance or pre-market approval of new products, new intended uses or modifications to any products;

•        rescinding clearance or suspending or withdrawing pre-market approvals that have already been granted; and

•        criminal prosecution.

The occurrence of any of these events may have a material adverse effect on our business, financial condition and results of operations.

Clinical data obtained in the future may not meet the required objectives, which could delay, limit or prevent any regulatory approval.

There can be no assurance that we will successfully complete any clinical evaluations necessary to receive regulatory approvals. While preliminary results have been encouraging and indicative of the potential performance of our Symphony platform and test cartridges, data already obtained, or in the future obtained, from clinical studies do not necessarily predict the results that will be obtained from later clinical evaluations. The failure to adequately demonstrate the performance characteristics of the device under development 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. There can be no assurance that we will be able to receive approval for any potential applications of our principal technology, or that we will receive regulatory clearances from targeted regions or countries.

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We may be unable to complete required clinical evaluations, or we may experience significant delays in completing such clinical evaluations, which could prevent or significantly delay our targeted product launch timeframe and impair our viability and business plan.

The completion of any future clinical evaluations of our Symphony platform or test cartridges, or other studies that we may be required to undertake in the future, could be delayed, suspended or terminated for several reasons, including:

•        we may fail to or be unable to conduct the clinical evaluation in accordance with regulatory requirements;

•        sites participating in the trial may drop out of the trial, which may require us to engage new sites for an expansion of the number of sites that are permitted to be involved in the trial;

•        patients may not enroll in, remain in or complete, the clinical evaluation at the rates we expect; and

•        clinical investigators may not perform our clinical evaluation on our anticipated schedule or consistent with the clinical evaluation protocol and good clinical practices.

If our clinical evaluations are delayed it will take us longer to ultimately launch our Symphony platform and test cartridges in the market and generate revenues. Moreover, our development costs will increase if we have material delays in our clinical evaluation or if we need to perform more or larger clinical evaluations than planned.

Risks Related to Our Intellectual Property

We depend on intellectual property licensed from Toray, and any dispute over the license would significantly harm our business.

We are dependent on the intellectual property licensed from Toray. Disputes may arise between us and Toray regarding intellectual property subject to the license agreement. If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, or are insufficient to provide us the necessary rights to use the intellectual property, we may be unable to successfully develop and launch our Symphony platform and our other product candidates. If we or Toray fail to adequately protect this intellectual property, our ability to launch our products in the market also could suffer. For so long as we are dependent on the intellectual property covered by the license agreement for the pursuit of our business, any such disputes relating to the license agreement or failure to protect the intellectual property could threaten our viability.

We will depend primarily on Toray to file, prosecute, maintain, defend and enforce intellectual property that we license from it and that is material to our business.

The intellectual property relating to our Symphony platform is owned by Toray. Under the license agreement, Toray generally has the right to file, prosecute, maintain and defend the intellectual property we have licensed from Toray. If Toray fails to conduct these activities for intellectual property protection covering any of our product candidates, our ability to develop and launch those product candidates may be adversely affected and we may not be able to prevent competitors from making, using or selling competing products. In addition, pursuant to the terms of the license agreement, Toray generally has the right to control the enforcement of our licensed intellectual property and the defense of any claims asserting the invalidity of that intellectual property. We cannot be certain that Toray will allocate sufficient resources to and otherwise prioritize the enforcement of such intellectual property or the defense of such claims to protect our interests in the licensed intellectual property. In the absence of action by Toray, we may be unable to protect and enforce the proprietary rights on which our business relies. Even if we are not a party to these legal actions, an adverse outcome could harm our business because it might prevent us from continuing to use the licensed intellectual property that we need to operate our business. In addition, even if we take control of the prosecution of licensed intellectual property and related applications, enforcement of licensed intellectual property, or defense of claims asserting the invalidity of that intellectual property, we may still be adversely affected or prejudiced by actions or inactions of Toray and its counsel that took place prior to or after our assuming control, and we cannot ensure the cooperation of Toray in any such action. Furthermore, if we take action to protect, enforce or defend the licensed intellectual property, we may incur significant costs and the attention of our management may be diverted from our normal business operations. As a result, our business, results of operations and financial condition could be materially and adversely affected.

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We and Toray may be unable to protect or enforce the intellectual property rights licensed to us, which could impair our competitive position.

In order for our business to be viable and to compete effectively, the proprietary rights with respect to the technologies and intellectual property used in our products must be developed and maintained. Toray relies primarily on patent protection and trade secrets to protect its technology and intellectual property rights. There are significant risks associated with Toray’s ability (or our ability, in the absence of action by Toray) to protect the intellectual property licensed to us, including:

•        pending intellectual property applications may not be approved or may take longer than expected to result in approval in one or more of the countries in which we operate;

•        Toray’s intellectual property rights may not provide meaningful protection;

•        other companies may challenge the validity or extent of Toray’s patents and other proprietary intellectual property rights through litigation, oppositions and other proceedings. These proceedings can be protracted as well as unpredictable;

•        other companies may have independently developed (or may in the future independently develop) similar or alternative technologies, may duplicate Toray’s technologies or may design their technologies around Toray’s technologies;

•        enforcement of intellectual property rights is complex, uncertain and expensive, and may be subject to lengthy delays. In the event we take control of any such action under the license agreement, our ability to enforce our intellectual property protection could be limited by our financial resources; and

•        the other risks described in “— Risks Related to Our Intellectual Property.”

If any of Toray’s patents or other intellectual property rights fail to protect the technology licensed by us, it would make it easier for our competitors to offer similar products. Any inability on Toray’s part (or on our part, in the absence of action by Toray) to adequately protect its intellectual property may have a material adverse effect on our business, financial condition and results of operations.

We and/or Toray may be subject to claims alleging the violation of the intellectual property rights of others.

We may face significant expense and liability as a result of litigation or other proceedings relating to intellectual property rights of others. In the event that another party has intellectual property protection relating to an invention or technology licensed by us from Toray, we and/or Toray may be required to participate in an interference proceeding declared by the regulatory authorities to determine priority of invention, which could result in substantial uncertainties and costs for us, even if the eventual outcome was favorable to us. We and/or Toray also could be required to participate in interference proceedings involving intellectual property of another entity. An adverse outcome in an interference proceeding could require us and/or Toray to cease using the technology, to substantially modify it or to license rights from prevailing third parties, which could delay or prevent the launch of our products in the market or adversely affect our profitability.

The cost to us of any intellectual property litigation or other proceeding relating the intellectual property licensed by us from Toray, even if resolved in our favor, could be substantial, especially given our early stage of development. A third party may claim that we and/or Toray are using inventions claimed by their intellectual property and may go to court to stop us and/or Toray from engaging in our normal operations and activities, such as research, development and the sale of any future products. Such lawsuits are expensive and would consume significant time and other resources. There is a risk that a court will decide that we and/or Toray are infringing the third party’s intellectual property and will order us to stop the activities claimed by the intellectual property. In addition, there is a risk that a court will order us and/or Toray to pay the other party damages for having infringed their intellectual property. Moreover, there is no guarantee that any prevailing intellectual property owner would offer us a license so that we could continue to engage in activities claimed by the intellectual property, or that such a license, if made available to us, could be acquired on commercially acceptable terms.

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We and Toray may be subject to claims challenging the invention of the intellectual property that we license from Toray.

We and Toray may be subject to claims that former employees, collaborators or other third parties have an interest in intellectual property as an inventor or co-inventor. For example, we and Toray may have inventorship disputes arising from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we and Toray fail in defending any such claims, in addition to paying monetary damages, we and Toray may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. As a result, it is unclear whether and, if so, to what extent employees of ours and Toray may be able to claim compensation with respect to our future revenue. We may receive less revenue from future products if any of employees of Toray or us successfully claim compensation for their work in developing our intellectual property, which in turn could impact our future profitability.

Risks Related to Our Industry

We face intense competition in the diagnostic testing market, particularly in the IL-6 space, and as a result we may be unable to effectively compete in our industry.

We expect to compete directly and primarily with large medical device companies. These large companies have most of the diagnostic testing business and strong research and development capacity. Their dominant market position and significant control over markets could significantly limit our ability to introduce our Symphony platform or effectively market and generate sales of our products.

We have not yet entered the revenue stage and most of our competitors have long histories and strong reputations within the industry. They have significantly greater brand recognition, financial and human resources than we do. They also have more experience and capabilities in researching and developing testing devices, obtaining and maintaining regulatory clearances and other requirements, manufacturing and marketing those products than we do. There is a significant risk that we may be unable to overcome the advantages held by our competition, and our inability to do so could lead to the failure of our business.

Competition in the diagnostic testing markets is intense, which can lead to, among other things, price reductions, longer selling cycles, lower product margins, loss of market share and additional working capital requirements. To succeed, we must, among other critical matters, gain consumer acceptance for our products, technical solutions, prices and response time, or a combination of these factors, than those of other competitors. If our competitors offer significant discounts on certain products, we may need to lower our prices or offer other favorable terms in order to compete successfully. Moreover, any broad-based changes to our prices and pricing policies could make it difficult to generate revenues or cause our revenues, if established, to decline. Moreover, if our competitors develop and commercialize products that are more desirable than the products that we may develop, we may not convince customers to use our products. Any such changes would likely reduce our commercial opportunity and revenue potential and could materially adversely impact our operating results.

If we or Toray fail to respond quickly to technological developments, our products may become uncompetitive and obsolete.

The diagnostic testing market may experience rapid technology developments, changes in industry standards, changes in customer requirements and frequent new product introductions and improvements. If we or Toray are unable to respond to these developments, we may lose competitive position, and our products or technology may become uncompetitive or obsolete, causing our business and prospects to suffer. In order to compete, we and Toray may have to develop, license or acquire new technology on a schedule that keeps pace with technological developments and the requirements for products addressing a broad spectrum and designers and designer expertise in our industries.

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Risks Related to this Offering and the Ownership of Our Common Stock

We have broad discretion in the use of the net proceeds from this offering and may use the net proceeds in ways with which you may not agree.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not advance our business plan, achieve proposed objectives, improve our financial condition, generate revenue or enhance the value of our common stock. You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the net proceeds are being used appropriately. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending the application of these funds, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

We may not be able to satisfy the continued listing requirements of the NASDAQ Global Market in order to maintain the listing of our common stock.

We must meet certain financial and liquidity criteria to maintain the listing of our common stock on the NASDAQ Capital Market. If we fail to meet any of continued listing standards, our common stock may be delisted. In addition, while we have no present intention to do so, our Board of Directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from the NASDAQ Capital Market may have materially adverse consequences to our stockholders, including:

•        a reduced market price and liquidity with respect to our shares of common stock;

•        limited dissemination of the market price of our common stock;

•        limited news coverage;

•        limited interest by investors in our common stock;

•        volatility of the prices of our common stock, due to low trading volume;

•        our common stock being considered a “penny stock,” which would result in broker-dealers participating in sales of our common stock being subject to the regulations set forth in Rules 15g-2 through 15g-9 promulgated under the Exchange Act;

•        increased difficulty in selling our common stock in certain states due to “blue sky” restrictions; and

•        limited ability to issue additional securities or to secure additional financing.

If our common stock is delisted, we may seek to have our common stock quoted on an over-the-counter marketplace, such as on the OTCQX. The OTCQX is not a stock exchange, and if our common stock trades on the OTCQX rather than a securities exchange, there may be significantly less trading volume and analyst coverage of, and significantly less investor interest in, our common stock, which may lead to lower trading prices for our common stock.

Investors in this offering will experience immediate and substantial dilution in net tangible book value.

The difference between the public offering price per share of our common stock and the pro forma net tangible assets per share of our common stock after this offering constitutes the dilution to the investors in this offering. You will incur immediate and substantial dilution as a result of this offering. After giving effect to the sale by us of all 2,160,000 shares of common stock in this offering at the public offering price of $10.00 per share, investors in this offering can expect an immediate dilution to net tangible assets of $8.22 per share, based on a pro forma as adjusted net tangible book value per share after the offering of $1.78. This dilution is due in large part to the fact that our existing investors acquired their securities prior to this offering at substantially less than investors are paying in this offering. If any outstanding warrants to purchase shares of our common stock are exercised, there would be further dilution.

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If any outstanding warrants to purchase shares of our common stock are exercised, there would be further dilution. In addition, if upon the earlier of (i) 10 trading days from the issuance date of the Class B Warrants or (ii) the time when $10.0 million of volume is traded in our common stock, if the volume weighted average price of our common stock on any trading day on or after the date of issuance fails to exceed the exercise price of the Class B Warrants, the Class B Warrants can be exercised on a “cashless” basis for shares of common stock on a one-for-one basis, regardless of whether the market price of our common stock is above the exercise price, which may result in additional dilution and no additional proceeds to us in connection with such exercises. See “Dilution” for a more complete description of how the value of your investment in our common stock will be diluted upon the completion of this offering.

The market price of our common stock may be significantly volatile.

The market price for our common stock may be significantly volatile and subject to wide fluctuations in response to factors including the following:

•        developments prior to commercial sales relating to regulatory approval, manufacturing and distribution of our products;

•        actual or anticipated fluctuations in our quarterly or annual operating results;

•        changes in financial or operational estimates or projections;

•        conditions in markets generally;

•        changes in the economic performance or market valuations of companies similar to ours; and

•        general economic or political conditions in the United States or elsewhere.

In particular, the market prices for securities of medical device companies have historically been particularly volatile. Some of the factors that may cause the market price of our common stock to fluctuate include:

•        any delay in or the results of our clinical evaluations;

•        any delay in manufacturing of our products;

•        any delay with the approval for reimbursement for the patients from their insurance companies;

•        our failure to comply with regulatory requirements;

•        the announcements of clinical evaluation data, and the investment community’s perception of and reaction to those data;

•        the results of clinical evaluations conducted by others on products that would compete with ours;

•        any delay or failure to receive clearance or approval from regulatory agencies or bodies;

•        our inability to commercially launch products or market and generate sales of our products;

•        failure of our products, even if approved for marketing, to achieve any level of commercial success;

•        our failure to obtain intellectual property protection for any of our technologies and products or the issuance of third-party intellectual property that cover our proposed technologies or products;

•        developments or disputes concerning our future products intellectual property rights;

•        our or our competitors’ technological innovations;

•        announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, capital commitments, new technologies, or intellectual property;

•        failure to adequately manufacture our products through third parties;

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•        future sales of our common stock or other securities, including shares issuable upon the exercise of outstanding warrants or otherwise issued pursuant to certain contractual rights;

•        period-to-period fluctuations in our financial results; and

•        low or high trading volume of our common stock due to many factors, including the terms of our financing arrangements.

In addition, if we fail to reach an important research, development or commercialization milestone or result by a publicly expected deadline, even if by only a small margin, there could be significant impact on the market price of our common stock. Additionally, as we approach the announcement of anticipated significant information and as we announce such information, we expect the price of our common stock to be volatile and negative results would have a substantial negative impact on the price of our common stock.

In some cases, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our business operations and reputation.

The Class A Warrants may not have value.

The Class A Warrants being offered by us in this offering have an exercise price of $7.00 per share and will expire five years from the date of issuance. In the event that our common stock does not exceed the exercise price of the Class A Warrants during the period when such warrants are exercisable, such Class A Warrants may not have any value.

Holders of our warrants will have no rights as shareholders until they acquire shares of our common stock, if ever.

If you acquire the warrants to purchase shares of our common stock in this offering, you will have no rights with respect to our common stock until you acquire shares of such common stock upon exercise of your warrants. Upon exercise of your warrants, you will be entitled to exercise the rights of a holder of common stock only as to matters for which the record date occurs after the exercise date.

There is no public market for either of the warrants being offered by us in this offering and an active trading market for the same is not expected to develop.

There is no established public trading market for either of the warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply for any listing of either of the warrants offered hereby on the Nasdaq Capital Market or any other securities exchange or nationally recognized trading system. Without an active market, the liquidity of the warrants will be severely limited.

We could issue “blank check” preferred stock without stockholder approval with the effect of diluting interests of then-current stockholders and impairing their voting rights, and provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

Our Certificate of Incorporation provides for the authorization to issue up to 5,000,000 shares of “blank check” preferred stock with designations, rights and preferences as may be determined from time to time by our board of directors. Our board of directors is empowered, without stockholder approval, to issue one or more series of preferred stock with dividend, liquidation, conversion, voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders. The issuance of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control. For example, it would be possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our company. In addition, advanced notice is required prior to stockholder proposals, which might further delay a change of control.

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If you purchase Preferred Stock in lieu of common stock in this offering, as a holder of Preferred Stock, you will have no rights as a common stockholder with respect to the shares of common stock underlying the Preferred Stock until you acquire our common stock.

If you purchase Preferred Stock in lieu of common stock in this offering, until you acquire our common stock upon conversion of your Preferred Stock, you will have no rights with respect to the common stock underlying the Preferred Stock. Upon conversion of your Preferred Stock, you will be entitled to exercise the rights of a common stockholder only as to matters for which the record date for actions to be taken by our common stockholders occurs after the date you convert your Preferred Stock.

Our Preferred Stock will rank junior to all our liabilities to third party creditors, and to any class or series of our capital stock created after this offering specifically ranking by its terms senior to the Preferred Stock, in the event of a bankruptcy, liquidation or winding up of our assets.

In the event of bankruptcy, liquidation or winding up, our assets will be available to pay obligations on our Preferred Stock only after all our liabilities have been paid. Our Preferred Stock will effectively rank junior to all existing and future liabilities held by third party creditors. The terms of our Preferred Stock do not restrict our ability to raise additional capital in the future through the issuance of debt. Our Preferred Stock will also rank junior to any class or series of our capital stock created after this offering specifically ranking by its terms senior to the Preferred Stock. In the event of bankruptcy, liquidation or winding up, there may not be sufficient assets remaining, after paying our liabilities, to pay amounts due on any or all of our Preferred Stock then outstanding.

Shares eligible for future sale may adversely affect the market for our common stock.

The price of our common stock could decline if there are substantial sales of our common stock, particularly sales by our directors, executive officers, employees, and significant stockholders, or when there is a large number of shares of our common stock available for sale.

Our directors, officers and certain existing stockholders will enter into lock-up agreements pursuant to which, subject to certain exceptions, such persons will not sell 9,812,735 shares of our common stock (including common stock underlying options and warrants) that they own for six months after the date of this prospectus, as further described in “Underwriting.” Notwithstanding the foregoing, the lock-up provisions in these agreements may be waived, at any time and without notice by the representative.

Subject to the lock-up agreements, our existing stockholders (including the holders of our preferred stock and warrants) may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market, subject to the limitations of Rule 144, promulgated under the Securities Act of 1933, as amended, or the “Securities Act.” In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person is entitled to sell those shares without complying with any of the requirements of Rule 144. Our affiliates and other persons selling shares on behalf of our affiliates also are entitled to sell as long as they comply with Rule 144’s manner of sale, volume limitation and notice provisions, in addition to the provisions applicable to non-affiliates described above.

The market price of the shares of our common stock could decline as a result of the sale of a substantial number of our shares of common stock in the public market or the perception in the market that the holders of a large number of shares intend to sell their shares.

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We do not currently intend to pay dividends on our common stock in the foreseeable future, and consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We do not anticipate paying any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.

The determination of the offering price for the shares is more arbitrary compared with the pricing of securities for an established operating company.

There is no direct relationship between the offering price and our assets, book value, net worth, or any other economic or financial criteria. Rather, the price of the shares was derived through negotiations with the underwriters after considering various factors including prevailing market conditions, our future prospects and our capital structure. Although these factors were considered, the determination of the offering price is more arbitrary than the pricing of securities for an established operating company. This price does not necessarily accurately reflect the actual value of the shares or the price that may be realized upon disposition of the shares.

If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.

Any trading market for our common stock will be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our common stock could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage or us, the market price and market trading volume of our common stock could be negatively affected.

As an “emerging growth company” under applicable law, we will be subject to lessened disclosure requirements, which could leave our stockholders without information or rights available to stockholders of other public companies that are not “emerging growth companies.”

For as long as we remain an “emerging growth company” as defined in the JOBS Act, we have elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:

•        not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

•        reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

•        exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We expect to take advantage of these reporting exemptions until we are no longer an “emerging growth company”. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the date on which we are deemed to be a large accelerated filer, which is the end of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the end of our most recent second fiscal quarter, and (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Because of these lessened regulatory requirements, our stockholders would be left without information or rights available to stockholders of other public companies that are not “emerging growth companies.” In addition, we cannot predict if investors will find our common stock less attractive because we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may suffer or be more volatile.

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Because we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company” our financial statements may not be comparable to companies that comply with public company effective dates.

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. While we are not currently delaying the implementation of any relevant accounting standards, in the future we may avail ourselves of these rights, and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. Because our financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock.

Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.

We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change in control would be beneficial to our existing stockholders. In addition, our amended and restated certificate of incorporation and by-laws may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. Our amended and restated certificate of incorporation and bylaws will:

•        provide for the issuance of “blank check” preferred stock that could be issued by our Board of Directors to thwart a takeover attempt;

•        provide that stockholders will not be able to take action by written consent, and special meetings of stockholders may only be called by our Chief Executive Officer, our President, our Board of Directors or a majority of our stockholders;

•        provide that our stockholders are required to provide advance notice and additional disclosures in order to nominate individuals for election to our Board of Directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and

•        do not provide stockholders with the ability to cumulate their votes, which limits the ability of minority stockholders to elect director candidates.

These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock.

As a result of becoming a public company, we will be obligated to develop and maintain a system of effective internal control over financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may harm investor confidence in our company and, as a result, the value of our common stock.

We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting in the second annual report we file with the SEC. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. However, our auditors will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the JOBS Act, if we take advantage of the exemptions available to us through the JOBS Act. Even after we cease to be an “emerging growth company,” our auditors will not be required to formally attest to the effectiveness of our internal control over financial reporting unless we are an accelerated filer or a large accelerated filer (as defined under the Exchange Act).

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We are in the very early stages of the costly and challenging process of compiling the system and process documentation necessary to perform the evaluation needed to comply with Section 404. In this regard, we will need to continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. As we transition to the requirements of reporting as a public company, we may need to add additional finance staff. We may not be able to complete our evaluation and testing in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. We may not be able to remediate any material weaknesses in a timely fashion. If we are unable to complete our evaluation and testing, or if we are unable to assert that our internal control over financial reporting is effective, particularly if we have been unable to remediate any material weaknesses identified, or if or our auditors, when required to do so, are unable to express an opinion that our internal controls are effective, investors could lose confidence in the accuracy and completeness of our financial reports, which could harm our stock price.

We will incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices. Moreover, our ability to comply with all applicable laws, rules and regulations is uncertain given our management’s relative inexperience with operating United States public companies.

As a public company, and particularly after we are no longer an “emerging growth company,” we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the listing requirements of the NASDAQ Market and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel will need to devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain directors’ and officers’ liability insurance, which could make it more difficult for us to attract and retain qualified members of our board of directors. Furthermore, new or changing laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs.

Moreover, our executive officers have little experience in operating a United States public company, which makes our ability to comply with applicable laws, rules and regulations uncertain. Our failure to company with all laws, rules and regulations applicable to United States public companies could subject us or our management to regulatory scrutiny or sanction, which could harm our reputation and stock price.

Our amended and restated certificate of incorporation will provide, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, subject to limited exceptions, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel in any action brought to enforce the exclusive forum provision. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation.

Notwithstanding the foregoing, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. In addition, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As a result, the exclusive forum provision will provide that the Court of Chancery and the federal district court for the District of Delaware will have

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concurrent jurisdiction over any action arising under the Securities Act or the rules and regulations thereunder, and the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder or any other claim for which the federal courts have exclusive jurisdiction. To the extent the exclusive forum provision restricts the courts in which our stockholders may bring claims arising under the Securities Act and the rules and regulations thereunder, there is uncertainty as to whether a court would enforce such provision. Investors cannot waive compliance with the federal securities laws and the rules and regulations promulgated thereunder.

This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. By requiring a stockholder to bring such a claim in the Court of Chancery (or the federal district court for the District of Delaware, in the case of an action under the Securities Act or the rules and regulations thereunder), the exclusive forum provision also may increase the costs to a stockholder of bringing such a claim. Alternatively, if a court were to find the exclusive forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements other than statements of historical fact or relating to present facts or current conditions included in this prospectus are forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can have,” “likely” and other words and terms of similar meaning, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by the federal securities laws, we are under no duty to update any of these forward-looking statements after the date of this prospectus or to conform these statements to actual results or revised expectations.

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USE OF PROCEEDS

We estimate that the net proceeds from the sale of our securities in this offering will be approximately $18.88 million (or $21.86 million if the underwriters exercise the over-allotment option in full), after deducting the underwriting discounts and estimated offering expenses payable by us. We will not receive any proceeds from the exercise of the Class A Warrants or the Class B Warrants unless such warrants are exercised for cash. We intend to use the net proceeds from the offering as follows:

•        approximately $6.5 million to obtain our initial 510(k) regulatory approval in the United States for our sepsis product candidate, including completing any product development required to meet regulatory requirements and establishing relationships with manufacturing facilities with sufficient capacity for clinical evaluation and commercial scale production of the biosensor architecture;

•        approximately $3.5 million to market the Sepsis test and Symphony system and establish a distribution network across the United States; and

•        the remainder for working capital and general corporate purposes.

We expect the net proceeds to be sufficient to enable us to obtain regulatory approvals, including completing the related product development and establishing the related manufacturing facilities, as well as to market the Sepsis Test for Symphony and establish a distribution network.

This expected use of the net proceeds from this offering represents our intentions based upon our current plans and prevailing business conditions, which could change in the future as our plans and prevailing business conditions evolve. Predicting the cost necessary to develop medical devices can be difficult and the amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our development, the status of and results from clinical evaluations, any collaborations that we may enter into with third parties and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.

Pending the use of the net proceeds of this offering, we intend to invest the net proceeds in short-term investment-grade, interest-bearing securities.

We believe that the net proceeds from this offering will allow us to operate for at least the next 12 months. In addition, available resources may be consumed more rapidly than currently anticipated, and there can be no assurance that we will be successful in developing our planned products and generating sufficient revenue in the timeframe set forth above, or at all. We may be unable to meet our targets for regulatory approval and market launch, or we may be unable to generate anticipated amounts of revenue from sales of the system. We may also need additional funding for developing new products and services and for additional sales, marketing and promotional activities. Should this occur, we may need to seek additional capital earlier than anticipated. In the event we require additional capital, there can be no assurances that we will be able to raise such capital on acceptable terms, or at all. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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DIVIDEND POLICY

Since our inception, we have not paid any dividends on our common stock, and we currently expect that, for the foreseeable future, all earnings (if any) will be retained for the development of our business and no dividends will be declared or paid. In the future, our Board of Directors may decide, at their discretion, whether dividends may be declared and paid, taking into consideration, among other things, our earnings (if any), operating results, financial condition and capital requirements, general business conditions and other pertinent facts, including restrictions imposed by foreign jurisdictions on paying dividends or making other payments to us.

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DILUTION

The difference between the public offering price per share of our common stock and our pro forma as adjusted net tangible book value per share after this offering constitutes the dilution to investors in this offering. Net tangible book value per share is determined by dividing our net tangible book value, which is our total tangible assets less total liabilities, by the number of outstanding shares of common stock.

At June 30, 2021, our historical net tangible book deficit was approximately $400,000, or approximately $0.04 per share. Our historical net tangible book deficit represents our total tangible assets (total assets less deferred offering costs) less total liabilities and convertible preferred stock, and our historical net tangible book deficit per share is that number divided by the number of shares of common stock outstanding as of June 30, 2021.

At June 30, 2021, our pro forma net tangible book value was approximately $3.6 million, or approximately $0.34 per share after giving effect to the issuance on August 4, 2021 of an additional $1.5 million convertible debentures, after deducting the origination fees and estimated offering expenses payable by us, and the mandatory conversion of the debentures into Series D convertible preferred stock in connection with this offering.

After giving further effect to the sale of all 2,160,000 units (and the shares of common stock thereunder), and after deducting the underwriting discounts and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value at June 30, 2021 would have been approximately $22.5 million or $1.78 per share, representing an immediate increase in net tangible book value of $1.44 per share to our existing stockholders and an immediate dilution of $8.22 per share to new investors.

The following table illustrates the dilution to the new investors on a per-share basis:

Public offering price per share

 

 

 

 

 

$

10.00

Historical net tangible book deficit per share before offering

 

$

(0.04

)

 

 

 

Increase per share attributable to the pro forma adjustments described above

 

$

0.38

 

 

 

 

Pro forma net tangible book value per share before offering

 

$

0.34

 

 

 

 

Increase in net tangible book value per share attributable to shares offered hereby

 

$

1.44

 

 

 

 

Pro forma as adjusted net tangible book value per share after offering

 

 

 

 

 

$

1.78

Dilution in pro forma net tangible book value per share to investors in offering

 

 

 

 

 

$

8.22

If the representative exercises the option to purchase additional shares to cover over-allotments in full, the pro forma as adjusted net tangible book value per share of our common stock after giving effect to this offering would be approximately $1.96 per share, and the dilution in pro forma as adjusted net tangible book value per share to investors in this offering would be approximately $8.04 per share of common stock.

The following table summarizes, as of June 30, 2021, and assuming the sale of all the shares offered hereby, the differences between the number of shares of our common stock purchased from us, the total cash consideration paid, and the average price per share paid by our existing stockholders prior to this offering and by our new investors purchasing shares in this offering, before deducting the underwriting discounts and estimated offering expenses payable by us:

 

Shares Purchased

 

Total Consideration

 

Average Price
Per Share

   

Number

 

Percent

 

Amount

 

Percent

 

Existing Stockholders

 

10,477,880

 

82.9

%

 

$

4,598,410

 

17.6

%

 

$

0.44

New Investors

 

2,160,000

 

17.1

%

 

$

21,600,000

 

82.4

%

 

$

10.00

Total

 

12,637,880 

 

100.00

%

 

$

26,198,410

 

100.00

%

 

 

 

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The number of shares of common stock outstanding is based on 10,477,880 shares of common stock issued and outstanding as of June 30, 2021 and excludes the following:

•        4,500,000 shares of common stock issuable upon the conversion of our Series D Convertible Preferred Stock;

•        1,172,120 shares of common stock issuable upon the exercise of our outstanding warrants to purchase common stock at a weighted average price of $1.02 per share;

•        555,826 shares of common stock issuable upon the exercise of our outstanding options to purchase common stock at a weighted average price of $2.59 per share;

•        1,960,000 shares of common stock that will become available for future issuance under our 2021 Stock Plan;

•        2,160,000 shares of common stock issuable upon the exercise of Class A warrants to be issued in this offering;

•        2,160,000 shares of common stock issuable upon the exercise (including the cashless exercise) of Class B warrants to be issued in this offering; and

•        108,000 shares of common stock issuable upon the exercise of warrants to be issued to the underwriters upon the closing of this offering.

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CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2021:

•        on an actual basis;

•        on a pro forma basis, after giving effect to the issuance on August 4, 2021 of an additional $1.5 million in principal amount of convertible debentures, after deducting the origination fees and estimated offering expenses payable by us, and the mandatory conversion of the debentures into Series D convertible preferred stock;

•        on a pro forma as adjusted basis, after giving further effect to the sale of Units of our securities in this offering, and after deducting the underwriting discounts and estimated offering expenses payable by us.

You should read this table together with the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

 

As of June 30, 2021

Actual

 

Pro Forma

 

Pro Forma
As Adjusted

Cash and cash equivalents

 

$

2,400,457 

 

 

$

3,765,457 

 

 

$

22,649,457 

 

Convertible Debentures(1)

 

$

2,501,904

 

 

$

 

 

$

 

   

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

 

 

 

 

Series D convertible preferred stock, $0.0001 par value: 4,500 shares authorized; 0 shares issued and outstanding actual, 4,500 shares issued and outstanding pro forma and pro forma as adjusted

 

 

 

 

 

3,811,298

 

 

 

3,811,298

 

Series E convertible preferred stock, $0.0001 par value: 0 shares authorized, actual, 0 shares authorized and pro forma and pro forma as adjusted; 0 shares issued and outstanding actual and pro forma and pro forma as adjusted

 

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 30,000,000 shares authorized, actual pro forma and pro forma as adjusted; 10,477,880 shares issued and outstanding actual, and pro forma and 12,637,880 shares issued and outstanding pro forma as adjusted

 

 

1,048

 

 

 

1,048

 

 

 

1,264

 

Additional paid-in capital

 

 

4,916,376

 

 

 

5,083,193

 

 

 

23,699,086

 

Accumulated deficit

 

 

(5,040,909

 

 

(5,040,909

 

 

(5,040,909

Total stockholders’ equity (deficit)

 

 

(123,485

 

 

3,854,630 

 

 

 

22,470,739 

 

Total capitalization

 

$

2,378,419

 

 

$

3,854,630 

 

 

$

22,470,739 

 

____________

(1)      Net of discount and issuance costs of $539,052, and amortization thereof of $40,956.

The number of shares of common stock outstanding is based on 10,477,880 shares of common stock issued and outstanding as of June 30, 2021 and excludes the following:

•        4,500,000 shares of common stock issuable upon the conversion of our Series D Convertible Preferred Stock;

•        1,172,120 shares of common stock issuable upon the exercise of our outstanding warrants to purchase common stock at a weighted average price of $1.02 per share;

•        555,826 shares of common stock issuable upon the exercise of our outstanding options to purchase common stock at a weighted average price of $2.59 per share;

•        1,960,000 shares of common stock that will become available for future issuance under our 2021 Stock Plan;

•        2,160,000 shares of common stock issuable upon the exercise of Class A warrants to be issued in this offering;

•        2,160,000 shares of common stock issuable upon the exercise (including the cashless exercise) of Class B warrants to be issued in this offering; and

•        108,000 shares of common stock issuable upon the exercise of warrants to be issued to the underwriters upon the closing of this offering.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION

Prospective investors should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” You should review the “Risk Factors” section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

All common stock share and per share amounts reported in the following analysis reflect the stock dividend of 2.15 share of common stock for each outstanding share of common stock, effected June 7, 2021 unless indicated otherwise.

Overview

We are a late-stage pre-revenue company focused on improving patient outcomes through a more cost efficient, rapid, near patient product for triage, diagnosis and monitoring of disease progression. We believe there is a market need for an on-site and rapid diagnostic system that can be employed for testing and monitoring. Our diagnostic system, which we refer to as “Symphony,” is an exclusively licensed, patented, low-cost, system that consists of a small footprint instrument and single-use indication specific test cartridges, that we believe, if cleared, authorized, or approved by the U.S. Food and Drug Administration (“FDA”), can provide a solution to this market need with rapid and with laboratory quality results in approximately 24 minutes, in the clinic, Intensive Care Unit (“ICU”), Emergency Room (“ER”) and in other hospital and clinical setting settings where a rapid and reliable results are required. Currently, testing is generally performed in a laboratory, and the transportation and logistics of transporting the samples to the lab and obtaining the result takes between 8-48 hours. Our platform is a sample-to-result system that has been shown in a clinical study to provide results in 24 minutes. Our business model is to generate revenue from the sale of the table-top Symphony instrument, and from the sale of single-use indication specific cartridges that are used by the Symphony instrument for the diagnostic test. Once the test material (generally a small volume blood sample) is transferred to a single-use indication specific Symphony cartridge, no additional sample preparation or pre-processing is required.

Since inception, we have incurred net losses from operations each year and we expect to continue to incur losses for the foreseeable future. Our losses attributable to operations for the fiscal year ended December 31, 2020 and December 31, 2019 were approximately $1.2 million and $0.8 million, respectively. As of June 30, 2021, we had an accumulated deficit of approximately $5 million.

Going Concern

Our financial statements are prepared based on the assumption that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We face certain risks and uncertainties that are present in many emerging growth companies regarding product development and commercialization, limited working capital, recurring losses and negative cash flow from operations, future profitability, our ability to obtain future capital, our protection of patents, technologies and property rights, competition, rapid technological change, navigating the domestic and major foreign markets’ regulatory environment, recruiting and retaining key personnel, our dependence on licensing agreements and our lack of sales and marketing activities. These factors raise substantial doubt about our ability to continue as a going concern.

We have relied exclusively on private placements to finance our business and operations. We do not have any credit facilities as a source of future funds. If we are not successful in securing additional outside financing, there are no assurances that investors will continue to fund us to an adequate level of financing needed for the long-term development and commercialization of our products.

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There is substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be different should we be unable to continue as a going concern based on the outcome of these uncertainties described above. Our management and board of directors believe that the net proceeds from this offering, our current cash balance and cash expected to be generated from commercial sales activity, will enable us to fund our operations for at least 12 months.

Results of Operations

Comparison of the Years Ended December 31, 2020 and 2019

The following table sets forth our results of operations for the years ended December 31, 2020 and 2019:

 

Years Ended December 31,

   

2020

 

2019

Revenues

 

$

 

 

$

 

Operating costs and expenses

 

 

 

 

 

 

 

 

Research and development

 

 

527,253

 

 

 

454,610

 

General and administrative

 

 

596,116

 

 

 

883,999

 

Marketing and business development

 

 

73,022

 

 

 

292,804

 

Total operating expenses

 

 

1,196,391

 

 

 

1,631,413

 

   

 

 

 

 

 

 

 

Operating loss

 

 

(1,196,391

)

 

 

(1,631,413

)

   

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

Gain on transfer of equipment at fair value

 

 

 

 

 

741,590

 

Gain on forgiveness of note payable, Paycheck Protection Program

 

 

102,000

 

 

 

 

Derivative warrant liability (loss) gain

 

 

(42,434

)

 

 

9,842

 

Interest income (expense), net of amortization of premium

 

 

(26,997

)

 

 

52,284

 

Other income

 

 

5,537

 

 

 

7,855

 

Net loss

 

$

(1,158,285

)

 

$

(819,842

)

Research and Development

Research and development expenses increased approximately $73,000, or 16%, for the year ended December 31, 2020, as compared to the same period of 2019. The increase was due to fees paid and accrued to Toray of approximately $240,000 in connection with our license agreements offset by decreases in payroll and other expenses due to funding shortages in 2020 as compared to 2019.

General and Administrative

General and administrative expenses decreased approximately $288,000, or 33%, for the year ended December 31, 2020, as compared to the same period of 2019. The decrease was primarily attributable to reduced general and administrative expenses related to funding shortages, including salary reductions and reduced spending.

Marketing and Business Development

Marketing and business development expenses decreased approximately $220,000, or 75%, for the year ended December 31, 2020, as compared to the same period of 2019 The decrease was primarily attributable to reduced sales and marketing expenses due to funding shortages, including reduction of expenses and headcount.

Gain on transfer of equipment at fair value

Gain on transfer of equipment at fair value decreased by $742,000 or 100%, for the year ended December 31, 2020 as compared to the same period of 2019, due to recognition of a gain relating to equipment transferred to us as in 2019 part of a licensing deal with Hitachi. As part of this agreement Hitachi transferred approximately $742,000 of equipment for use in the manufacture products licensed and related to the licensed technology. Such equipment was measured at fair value upon transfer to the Company.

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Gain on forgiveness of note payable, Paycheck Protection Program

The gain on forgiveness of note payable, Paycheck Protection Program was due to a loan the Company received under the Paycheck Protection Program (“PPP”) totaling $116,000 of which $102,000 was forgiven in 2020 as the Company met the requirements as to usage of the funds.

Derivative Warrant Liability Gain (Loss)

Derivative warrant liability loss increased by approximately $52,000 or 531% in the year ended December 31, 2020 as compared to the same period of 2019, primarily because of a revaluation of the derivative warrant liability that is required each reporting period.

Interest Expense, Net of Amortization of Premium

Interest expense increased by approximately $79,000 or 152% in the year ended December 31, 2020 as compared to the same period of 2019. The increase was primarily related to the notes issued in October 2020 which were issued at a discount, the amortization of which increased non-cash interest expense by approximately $65,000, which was offset by the amortization of premium on the notes payable issued in 2017.

Comparison of the Six Months Ended June 30, 2021 and 2020

The following table sets forth our results of operations for the six months ended June 30, 2021 and 2020:

 

Six Months Ended June 30,

   

2021

 

2020

Revenues

 

$

 

 

$

 

   

 

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

 

 

 

 

Research and development

 

 

250,175

 

 

 

105,469

 

General and administrative

 

 

529,741

 

 

 

321,752

 

Marketing and business development

 

 

119,354

 

 

 

39,222

 

Total operating expenses

 

 

899,270

 

 

 

466,443

 

Operating loss

 

 

(899,270

)

 

 

(466,443

)

   

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

Derivative warrant liability (loss) gain

 

 

9,676

 

 

 

(49,667

)

Interest income (expense), net of amortization of premium

 

 

(32,116

)

 

 

24,610

 

Grant income

 

 

75,000

 

 

 

 

Other income

 

 

12,289

 

 

 

5,228

 

Net loss

 

$

(834,421

)

 

$

(486,272

)

Research and Development

Research and development expenses increased approximately $145,000, or 137%, for the six months ended June 30, 2021, as compared to the same period of 2020. The increase was primarily due to fees paid to Sanyoseiko of approximately $140,000 in connection with developing procedures, necessary components and machines, and trainings needed to manufacture the Symphony analyzers in Sanyoseiko’s factories.

General and Administrative

General and administrative expenses increased approximately $208,000, or 65%, for the six months ended June 30, 2021, as compared to the same period of 2020. The increase was primarily attributable to increased accounting, legal, and professional fees of approximately $219,000 related to our preparation to perform an initial public offering of common stock that do not qualify as offering costs, as well as expense for expiring inventory of approximately $85,000, offset by reduced payroll expenses of approximately $114,000 related to headcount reductions in June 2020 due to funding shortages.

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Marketing and Business Development

Marketing and business development expenses increased approximately $80,000, or 204%, for the six months ended June 30, 2021, as compared to the same period of 2020. The increase was primarily attributable to increased sales and business development expenses of approximately $90,000 paid to consultants to expand the development and commercialization of our Symphony platform.

Derivative Warrant Liability Gain (Loss)

Derivative warrant liability gain increased by approximately $59,000 or 119% in the six months ended June 30, 2021, as compared to the same period of 2020, primarily because of a revaluation of the derivative warrant liability that is required each reporting period.

Interest Income (Expense), Net of Amortization of Premium

Interest expense increased by approximately $57,000 or 230% in the six months ended June 30, 2021, as compared to the same period of 2020. The increase was primarily related to the amortization of discount and accrued interest on the notes issued in June 2021 of approximately $41,000 and $15,000, respectively, offset by the amortization of premium on the notes payable issued in 2017.

Grant Income

Grant income increased by $75,000 in the six months ended June 30, 2021, as compared to the same period of 2020. The increase was due to a $75,000 grant received from Massachusetts Growth Capital Corporation.

Liquidity and Capital Resources

We have funded our operations to date primarily with net proceeds from sales of our preferred stock and issuance of convertible notes. On June 30, 2021, we had cash of approximately $2.4 million and we had a working capital deficit of approximately $516,000.

In 2017, we issued 106 units, at a purchase price of $20,000 per unit, with each unit consisted of 100 shares of Series A redeemable, convertible preferred stock (“Series A”) at a purchase price of $100 per share and $10,000 in notes payable (the “Notes”). Gross proceeds from the financing were $2,120,000, less $183,194 in issuance costs. All Series A and related notes were converted to common stock and retired on June 1, 2021.

On April 5, 2019, we issued 4,455 shares of Series B redeemable, preferred stock (“Series B”) at a purchase price of $361.50 per share. Gross proceeds from the Series B financing were approximately $1.61 million. We also issued 622 Series B warrants in connection with the Series B financing. Through the rest of 2019 we issued an additional 277 shares of Series B and 41 Series B warrants for gross proceeds of $100,000. In 2020, we issued 456 additional shares of Series B and 68 Series B warrants for gross proceeds of $50,000. The 731 warrants convertible into Series B were adjusted and restated to convert into 36,600 shares of common stock and following the split were convertible into 115,190 shares of common stock.

On October 22, 2020, we issued $154,000 of 8% subordinated promissory notes (“Subordinated Notes”) to related party shareholders, as well as warrants to purchase 1,154,000 (prior to the stock dividend) shares of common stock at $0.10 per share, exercisable in cash or through cancellation of the notes. All warrants were adjusted and restated to be convertible to common stock on June 1, 2021. On June 7, 2021 all notes were converted to common stock pursuant to related warrants or repaid (see below).

In November 2020, we issued 636 shares of Series C redeemable, convertible preferred stock (“Series C”) at a purchase price of $1,578.50 per share and received proceeds, net of issuance costs of approximately $995,000. All shares were converted to common stock in June 2021.

In 2020, we received loan proceeds of $116,000 from a Paycheck Protection Program loan (“PPP loan”). In November 2020, we received notice of forgiveness of $102,000 of principal of the PPP loan and, in February 2021, we received an adjustment which increased the forgiven balance by approximately $5,000 and repaid the $9,000 related to the unforgiven balance.

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On June 1, 2021, our Series A with a stated value of approximately $1.1 million was converted into 530,000 (prior to the stock dividend) shares of common stock, our Series B preferred stock with a stated value of approximately $1.8 million was converted into 259,350 (prior to the stock dividend) shares of common stock, and our Series C preferred stock with a stated value of approximately $1.0 million was converted into 31,800 (prior to the stock dividend) shares of common stock. In addition, holders of our 2017 secured notes amended and restated their agreement such that the notes would automatically convert into 184,292 (prior to the stock dividend) shares of common stock upon the occurrence of a qualified financing (as defined in the notes) and certain warrants issued in connection with the issue of Series B preferred stock were amended and restated to be exercisable into common stock.

On June 7, 2021, certain holders of approximately $132,000 in principal of our convertible subordinated notes elected to convert their debt, inclusive of accrued interest, into 1,323,830 (prior to the stock dividend) shares of common stock and we repaid the remaining principal and interest of approximately $28,000 on the remaining notes.

Also on June 7, 2021, we:

•        declared a stock dividend which increased the number of shares of common stock outstanding from 3,329,272 to 10,477,880;

•        adjusted the number of shares of common stock issuable upon exercise of the restated Series B warrants from 36,600 to 115,190;

•        adjusted the number of shares of common stock issuable upon exercise of the remaining warrants issued with subordinated notes from 216,170 to 680,331;

•        adjusted the number of shares issuable upon exercise of outstanding options under our 2018 equity incentive plan from 119,416 to 375,826 and the number of shares reserved for issue under future grants from 80,584 to 253,614; and

•        approved an amendment to our certificate of incorporation to increase the number of authorized shares of common and preferred stock to 30 million and 5 million shares, respectively.

On June 8, 2021, we entered into an agreement to issue a total of $4.5 million of 7.5% Senior Secured Convertible Debentures (the “Debentures”) to Sabby Volatility Master Fund, Ltd (“Sabby”), of which $3.0 million of the Debentures were issued at closing. The agreement provides for the purchase by Sabby of an additional $1.5 million of the Debentures after we file a registration statement for an initial public offering. The Debentures are convertible, at Sabby’s option, into our Series D Preferred Stock at a conversion price of $1,000 per share.

On August 4, 2021 we issued and additional $1.5 million in principal amount of the Debentures to Sabby.

Upon completion of this offering, we expect our existing cash and the net proceeds of this offering to support our operations for at least 12 months. In order to finance continued business development, to generate sales, to invest in further research and development and to otherwise satisfy obligations as they mature, we may need to seek additional financing through the issuance of common stock, preferred stock, and convertible or non-convertible debt financing. Additional funding, however, may not be available to us on acceptable terms, or at all. If we are unable to access additional funds when needed, we will not be able to continue the development of our platform, our tests or we could be required to delay, scale back or eliminate some or all of our research and development programs and other operations. Any additional equity financing, if available to us, may not be available on favorable terms, will most likely be dilutive to our current stockholders, and debt financing, if available, may involve restrictive covenants. Any of these events could harm our business, financial condition and prospects.

Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements. We may be unable to continue to operate without the threat of liquidation for the foreseeable future unless we raise additional capital.

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Summary Statement of Cash Flows for the Years Ended December 31, 2020 and 2019

The following table summarizes our cash flows for the periods indicated:

 

Years Ended December 31,

   

2020

 

2019

Net cash provided by (used in):