Bluejay Diagnostics, Inc. Commitments Disclosure

9. COMMITMENTS AND CONTINGENCIES

 

Purchase Commitments

 

In October 2022, the Company entered into a non-cancelable purchase commitment with an international materials vendor for items needed for both development of the Symphony product line and also to resell to its customers. This agreement commits the Company to purchase approximately $800,000 in goods, of which 50% was prepaid in 2022, with the remainder being paid in 2023. All goods have been received under this arrangement as of December 31, 2023.

 

The Company had multiple open purchase commitments with its primary contract manufacturing organization in Japan related to the buildout of a manufacturing line for the IL-6 cartridges for the Symphony device as of December 31, 2022 for approximately $375,000. During the year ended December 31, 2023, the Company purchased all items related to these purchase commitments.

 

Separation Agreement

 

Under the terms of a separation agreement with Mr. Kenneth Fisher, the Company’s former Chief Financial Officer, the Company has agreed to compensate Mr. Fisher $240,000 (representing six months of base salary and the pro rata amount of Mr. Fisher’s 2023 target bonus). The payments of such amounts are subject to the compliance by Mr. Fisher of certain ongoing covenants with respect to confidentiality, cooperation and other matters. Mr. Fisher departed from the Company on September 26, 2023, and the Company has recorded a severance liability of $240,000, which was included in accrued severance in the amount of $150,000 and in accrued bonuses of $90,000.

 

The Company has paid Mr. Fisher $80,000 as of December 31, 2023, resulting in an remaining accrual of $160,000 which has been included accrued expenses and other current liabilities on the Company’s Consolidated Balance Sheets as of December 31, 2023.

  

Minimum Royalties

 

As required under the License Agreement (see Note 3), following the first sale of Cartridges, the Company will also make royalty payments to Toray equal to 7.5% of the net sales of the Cartridges for a term of 10 years. A 50% reduction in the royalty rate applies upon expiry of applicable Toray patents on a product-by-product and country-by-country basis. There were no sales of or revenues from the Cartridges through December 31, 2023.

 

Indemnification

 

The Company has certain agreements with service providers with which it does business that contain indemnification provisions pursuant to which the Company typically agrees to indemnify the party against certain types of third-party claims. The Company accrues for known indemnification issues when a loss is probable and can be reasonably estimated. The Company would also accrue for estimated incurred but unidentified indemnification issues based on historical activity. As the Company has not incurred any indemnification losses to date, there were no accruals for or expenses related to indemnification issues for any period presented.