SEC Filing Report: BullFrog AI Holdings, Inc. (10-K)

Executive Summary

This report analyzes BullFrog AI Holdings, Inc.’s 10-K filing for the fiscal year ended December 31, 2024. The company is focused on using AI/ML to improve drug development. Key findings include a net loss, reliance on future financing, and ongoing efforts to improve internal controls. The company’s cash position raises substantial doubt about its ability to continue as a going concern. Given the current financial situation and the early stage of its drug development programs, a neutral to cautious outlook is warranted. Further monitoring of the company’s ability to secure funding and generate revenue is crucial.

Company Overview

BullFrog AI Holdings, Inc. is a digital biopharmaceutical company that leverages artificial intelligence and machine learning (AI/ML) to improve drug development. Their core technology, bfLEAP™, is licensed from Johns Hopkins University Applied Physics Laboratory (JHU-APL). The company aims to reduce the cost and time associated with drug development by increasing the probability of success in clinical trials. They pursue this through strategic partnerships, collaborations, and acquisitions of drug assets.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management acknowledges the company’s history of net losses and negative cash flows. They emphasize the need for additional capital to fund operations. The MD&A highlights recent collaborations and acquisitions of drug assets as key strategic initiatives. The tone is cautiously optimistic, focusing on the potential of bfLEAP™ and strategic partnerships to drive future revenue. However, the going concern disclosure is a significant red flag.

Financial Statement Analysis

Income Statement

• Revenue: No revenue was recognized in 2024, compared to $65,000 in 2023.
• Research and Development Expenses: Increased by 55% to $2.22 million, driven by increased personnel costs and preclinical study expenses.
• General and Administrative Expenses: Increased by 25% to $5.01 million, primarily due to increased personnel costs.
• Net Loss: Increased to $6.99 million from $5.36 million in the prior year.

Balance Sheet

• Cash and Cash Equivalents: Increased to $5.44 million from $2.62 million.
• Total Assets: Increased to $5.55 million from $2.78 million.
• Total Liabilities: Increased to $0.59 million from $0.18 million.
• Accumulated Deficit: Increased to $16.79 million.

Cash Flow Statement

• Operating Activities: Cash used decreased slightly to $5.61 million.
• Financing Activities: Cash provided decreased to $8.42 million, primarily due to fewer proceeds from equity issuances.

Key Ratios and Trends

The absence of revenue in 2024 is a major concern. While cash increased, it was primarily through financing activities, not operational performance. The decreasing cash ratio indicates a reduced ability to cover short-term liabilities with available cash.

Risk and Opportunity Assessment

Risks

• Going Concern: The company’s cash position is insufficient to fund operations for the next year, raising substantial doubt about its ability to continue as a going concern.
• Lack of Revenue: The absence of revenue in 2024 highlights the company’s dependence on securing partnerships and generating revenue from its drug development programs.
• Reliance on Financing: The company’s operations are heavily reliant on securing additional financing, which may not be available on favorable terms.
• Material Weaknesses in Internal Control: Unremediated material weaknesses in internal control over financial reporting could lead to misstatements in financial statements.
• Early Stage Drug Development: The company’s drug development programs are in the early stages, and there is no guarantee of success.

Opportunities

• bfLEAP™ Platform: The company’s AI/ML platform has the potential to improve drug development and generate revenue through partnerships and collaborations.
• Strategic Partnerships: Recent collaborations with Eleison Pharmaceuticals and Lieber Institute for Brain Development demonstrate the company’s ability to secure partnerships.
• Acquisition of Drug Assets: The company’s acquisition of drug assets from universities provides opportunities for future development and monetization.
• Growing AI/ML Market: The increasing adoption of AI/ML in the pharmaceutical industry presents a significant market opportunity for the company.

Uncommon Metrics and Red Flags

• Minimum Royalty Payments: The company is obligated to make minimum annual royalty payments to JHU-APL, regardless of revenue generated.
• Going Concern Disclosure: The inclusion of a going concern disclosure is a significant red flag, indicating substantial doubt about the company’s ability to continue operations.
• Related Party Transactions: The SAFE agreement and convertible loan agreement with a related party, Tivoli Trust, converted into common stock upon the closing of the Company’s IPO in February 2023.

Conclusion and Actionable Insights

BullFrog AI Holdings faces significant financial challenges, primarily due to its lack of revenue and reliance on future financing. While the company’s AI/ML platform and strategic partnerships offer potential for future growth, the going concern disclosure and unremediated material weaknesses in internal control raise concerns. Investors should closely monitor the company’s ability to secure funding, generate revenue, and improve its internal controls. A neutral to cautious outlook is warranted at this time.

Recommendations:

• Monitor the company’s progress in securing partnerships and generating revenue.
• Assess the company’s ability to raise additional capital and the terms of any financing agreements.
• Track the company’s efforts to remediate the material weaknesses in internal control over financial reporting.
• Evaluate the potential of the company’s drug development programs and the likelihood of success in clinical trials.