See accompanying notes to unaudited Condensed
Financial Statements.
See accompanying notes to unaudited Condensed
Financial Statements.
See accompanying notes to unaudited Condensed
Financial Statements.
See accompanying notes to unaudited Condensed
Financial Statements.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 – COMPANY AND BASIS OF PRESENTATION
Organization
AVRA Medical Robotics, Inc. (the “Company”
or “AVRA”) was incorporated as AVRA Surgical Microsystems, Inc. in the State of Florida on February 4, 2015. Effective November
5, 2015, the Company’s corporate name was changed to AVRA Medical Robotics, Inc. The Company was established to develop advanced
medical surgical devices. The Company is structured to invest in four principal areas – surgical robotic systems, surgical tools,
implantable devices and surgical robotic training.
The significant accounting
policies of AVRA were described in Note 1 to the audited financial statements included in the Company’s 2019 Annual Report on Form
10-K (“2019 Form 10-K”). There have been no significant changes in the Company’s significant accounting policies for
the three months ended March 31, 2020.
Basis of Presentation
The accompanying unaudited
condensed financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United
States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and
Exchange Commission. Therefore, they do not include all information and footnotes normally included in annual consolidated financial
statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the 2019 Form 10-K
for the year ended December 31, 2019. In the opinion of the Company’s management, the accompanying unaudited condensed financial
statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of
the Company as of March 31, 2020 and the results of operations and cash flows for the periods presented. The results of operations for
the three months ended March 31, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future
period.
Going Concern
The accompanying financial statements have been
prepared assuming the continuation of the Company as a going concern. At March 31, 2020, the Company’s stockholders’ deficit
was $1,091,328 which raises substantial doubt about the Company. The Company has not yet established an ongoing source of revenues sufficient
to cover its operating costs and is dependent on debt and equity financing to fund its operations. Management of the Company is making
efforts to raise additional funding until a registration statement relating to an equity funding facility is in effect. While management
of the Company believes that it will be successful in its capital formation and planned operating activities, there can be no assurance
that the Company will be able to raise additional equity capital, or be successful in the development and commercialization of the products
it develops or initiates collaboration agreements thereon. The accompanying financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that
may result from the possible inability of the Company to continue as a going concern.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses.
The Company regularly evaluates estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates made by management.
Cash and Cash Equivalents
The Company considers all cash on hand, cash
accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three
months or less to be cash and cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of cash. The Company maintains its principal cash balance in a financial
institution. These balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At March 31,
2020 and 2019, $0 were in excess of the FDIC insured limit.
Revenue Recognition
In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers
(Topic 606). The ASU and all subsequently issued clarifying ASUs replaced most existing revenue recognition guidance in U.S. GAAP. The
ASU also required expanded disclosures relating to the nature amount, timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The Company adopted the new standard effective January 1, 2018, the first day of the Company’s fiscal
year. For these reasons, the adoption of this ASU did not have a significant impact on the Company’s financial statements
Effective January 1,
2018, the Company adopted guidance issued by the FASB regarding recognizing revenue from contracts with customers. The revenue recognition
policies as enumerated below reflect the Company’s accounting policies effective January 1, 2018, which did not have a materially
different financial statement result than what the results would have been under the previous accounting policies for revenue recognition.
Equipment
Equipment is recorded at cost and depreciated
using the straight-line method at rates determined to estimate the useful lives of the assets. The annual rates used in calculating depreciation
is as follows:
Equipment -5 years
straight-line
Intangibles
Intangible assets continue to be subject to amortization,
and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment,” intangible assets are stated
at historical cost and amortized over their estimated useful lives. The Company uses a straight-line method of amortization, unless a
method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can
be reliably determined
The Company purchased existing Intellectual Property
from the University of Central Florida. Management regularly assesses the carrying value of the intellectual property to determine if
there has been any diminution of value.
Website
Website is recorded at cost and amortized using
the straight-line method over its estimated life of 3 years.
Long-lived Assets
In accordance with ASC 360, “Property
Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances
indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to
: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation
of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current cash flow
or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset and current
expectation that the asset will more than likely not be sold or disposed significantly before the end of its estimated useful life. Recoverability
is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the discounted
cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain circumstances.
An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
Stock Compensation Expense
The Company accounts for equity instruments issued
in exchange for the receipt of goods or services from other than employees in accordance with Accounting Standards Codification (“ASC”)
Topic 505, “Equity.” Costs are measured at the estimated fair market value of the consideration received or the estimated
fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration
other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of
goods or services as defined by ASC Topic 505.
Income Taxes
The Company accounts for income taxes pursuant
to ASC Topic 740 “Income Taxes.” Under ASC Topic 740, deferred tax assets and liabilities are determined based on
temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred
tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating
the differences. A valuation allowance is recorded when it is more likely than not that some or all of the deferred tax assets will not
be realized.
The Company applies the provisions of ASC Topic
740-10-05 “Accounting for Uncertainty in Income Taxes.” The ASC clarifies the accounting for uncertainty in income
taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides
guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Basic and Diluted Loss per Share
In accordance with ASC Topic 260 “Earnings
Per Share,” basic loss per common share is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted loss per common share gives effect to dilutive convertible
securities, options, warrants and other potential common stock outstanding during the period, only in periods in which such effect is
dilutive. The Company has stock options, warrants, and convertible promissory notes that may be converted to outstanding potential common
shares.
Research and Development Costs
In accordance with ASC Topic 730 “Research
and Development”, with the exception of intellectual property that is purchased from another enterprise and have alternative future
use, research and development expenses are charged to operations as incurred.
Fair Value of Financial Instruments
Our financial instruments consist principally
of accounts receivable, amounts due to related parties and promissory notes payable. The carrying amounts of cash and cash equivalents
and promissory notes approximate fair value because of the short-term nature of these items.
Recent Accounting Pronouncements
Compensation—Stock Compensation
In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock
Compensation (Topic 718): Scope of Modification Accounting,” that provides guidance about which changes to the terms or conditions
of a share-based payment award require an entity to apply modification accounting. The new guidance became effective for the Company
on January 1, 2018 and was applied on a prospective basis, as required. The adoption of this standard did not have an impact on the financial
statements or the related disclosures.
Leases
In February 2016, the FASB issued ASU 2016-02,
“Leases (Topic 842)” (“ASU 2016-02”). The FASB issued ASU 2016-02 to increase transparency and comparability
among organizations recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing
arrangements. Under ASU 2016-02, lessors will account for leases using an approach that is substantially equivalent to existing GAAP
for sales-type leases, direct financing leases and operating leases. Unlike current guidance, however, a lease with collectability uncertainties
may be classified as a sales-type lease. If collectability of lease payments, plus any amount necessary to satisfy a lessee residual
value guarantee, is not probable, lease payments received will be recognized as a deposit liability and the underlying assets will not
be derecognized until collectability of the remaining amounts becomes probable. ASU 2016-02 is effective for interim and annual periods
beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective transition. The
Company did not adopt the standard effective January 1, 2019, utilizing the lessor practical expedient. On November 15, 2019, the
FASB issued ASU 2019-10 which amended the effective dates for ASC 842, to give implementation relief. Under the FASB’s new framework,
two “buckets” were defined, bucket 1 includes public companies that are SEC filers but excludes “Small Reporting Companies”
(SRC’s). Bucket 2 includes all other entities, including SRC’s. Bucket 2 entities have to apply ASC 842 for fiscal years
beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.
NOTE 3 – NOTES PAYABLE – RELATED PARTY
On December 31, 2018, the Company borrowed $15,000
under a non-interest bearing promissory note from a related party. The note matured on December 31, 2019 and was extended to December
31, 2020.
On February 6, 2019,
the Company borrowed from its CEO, $17,500 under a non-interest bearing promissory note which matures on February 6, 2020 and was extended
to December 31, 2020.
On May 8, 2019, the
Company borrowed from its CEO, $25,000 under a non-interest bearing promissory note which matures on May 8, 2020 and was extended to
December 31, 2020.
On May 29, 2019, the
Company borrowed from its CEO, $25,000 under a non-interest bearing promissory note which matures on May 29, 2020 and was extended to
December 31, 2020.
On June 26, 2019, the
Company borrowed from its CEO, $40,000 under a non-interest bearing promissory note which matures on June 26, 2020 and was extended to
December 31, 2020.
On July 19, 2019, the
Company borrowed from its CEO, $50,000 under a non-interest bearing promissory note which matures on July 19, 2020 and was extended to
December 31, 2020.
On October 11, 2019,
the Company borrowed from its CEO, $30,000 under a non-interest bearing promissory note which matures on March 11, 2020 and was extended
to December 31, 2020.
On November 14, 2019,
the Company borrowed from its CEO, $7,000 under a non-interest bearing promissory note which matures on November 14, 2020 and was extended
to December 31, 2020.
On March 1, 2020, the
Company entered into a promissory notes totaling $194,500 for the above notes, as an incentive to its CEO for entering into this agreement,
issued option to purchase 389,000 restricted common shares of the Company at $0.25 per share. The option will be fully vested as of March
1, 2020.
On August 26, 2019,
the Company borrowed from its CEO, $100,000 under a non-interest bearing promissory note which matures on December 26, 2019.
On December 3, 2019,
the Company borrowed from its CEO, $3,000 under a non-interest bearing promissory note which matures on December 3, 2020.
On December 6, 2019,
the Company borrowed from its CEO, $30,000 under a non-interest bearing promissory note which matures on December 6, 2020.
On December 30, 2019,
the Company borrowed from its CEO, $25,000 under a non-interest bearing promissory note which matures on December 30, 2020.
On January 3, 2020,
the Company borrowed from its CEO, $95,000 under a non-interest bearing promissory note which matures on January 3, 2021.
On January 5, 2020,
the related party exercised his option and converted his note of $100,000 into 1,000,000 shares at $0.10 per share.
On March 31, 2020, the
Company borrowed from its CEO, $6,000 under a non-interest bearing promissory note which matures on December 31, 2020.
NOTE 4 – PROMISSORY NOTES
On December 31, 2018, the Company borrowed an
additional $15,000, with interest payable annually at 4%, maturing on December 31, 2019. This note was paid in full on January 7, 2020.
During January 2019, the Company borrowed $20,000
under a non-interest bearing promissory note which matures on December 31, 2019, this amount was converted to 13,334 shares of common
stock in 2020.
On March 11, 2019, the
Company borrowed $25,000 under a promissory note bearing an annual interest rate of 5% and which matures on September 11, 2019. The loan
includes a warrant to purchase 12,500 common shares at a strike price of $1.25 per share. The warrant expires in 3 years. This note was
paid in full on January 16, 2020.
On March 14, 2019, the
Company borrowed $25,000 under a promissory note bearing an annual interest rate of 5% and which matures on September 14, 2019 and was
extended until December 31, 2020. The loan includes a warrant to purchase 12,500 common shares at a strike price of $1.25 per share.
The warrant expires in 3 years.
On March 29, 2019, the
Company borrowed $25,000 under a promissory note bearing an annual interest rate of 5% and which matures on September 29, 2019. The loan
includes a warrant to purchase 12,500 common shares at a strike price of $1.25 per share. The warrant expires in 3 years. This note was
paid in full on January 21, 2020.
During the three months ended March 31, 2020,
37,500 warrants were valued at $51,740 and expensed as stock compensation.
NOTE 5– INCOME TAXES
The Company’s deferred tax assets at March
31, 2020 consist of net operating loss carry forwards of $3,329,457 Using a new federal statutory tax rate of 21%, the valuation allowance
balance as of March 31, 2019 total of $699,186. The increase in the valuation allowance balance for the three months ended March 31,
2020 of $26,615 is entirely attributable to the net operating loss.
Due to the uncertainty of their realization,
no income tax benefits have been recorded by the Company for these loss carry forwards as valuation allowances have been established
for any such benefits. The increase in the valuation allowance was the result of increases in the net operating losses discussed above.
Therefore, the Company’s provision for income taxes is $-0- for the three months ended March 31, 2020 and 2019.
At March 31, 2020 and
December 31, 2019, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required.
The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months. The Company recognizes
interest and penalties related to uncertain tax positions in general and administrative expense. At March 31, 2020 and December 31, 2019,
the Company has not recorded any provisions for accrued interest and penalties related to uncertain tax positions.
The Company files U.S.
federal and state income tax returns in jurisdictions with varying statutes of limitations.
NOTE 6 – STOCKHOLDERS’ DEFICIT
The Company is authorized
to issue up to 100,000,000 shares of common stock, $0.0001 par value per share plus 5,000,000 shares of preferred stock, par value $0.0001.
On February 1, 2016 subscriptions were issued for 5,899,600 shares of common stock at $0.0001 per share (total $590). In February 2017,
the Company raised an additional $135,000 from a private offering of 135,000 shares of common stock at a price of $1.00 per share made
to three investors.
On September 30, 2017,
the Company raised an additional $542,260, from a private offering of 433,808 shares of common stock at a price of $1.25 per share.
Effective April 1, 2017,
the Company entered into Conversion Agreements with its Chairman/CEO and the Chief Financial Officer whereby each agreed to convert the
amounts owing to them as of March 31, 2017 as compensation into common stock of the Company at a price of $2.00 per share. Furthermore,
the Chief Financial Officer has agreed to convert any future amounts due as compensation per his Employment Agreement effective through
August 1, 2017, into shares of common stock at $2.00 per share as such amounts are earned, and the Chairman/CEO has agreed to convert
any future amounts in excess of $2,500 per month due as compensation through July 1, 2017, per his Employment Agreement, into shares
of common stock at $2.00 per share as such amounts are earned. On April 1, 2017, 57,438 shares were issued under the agreement to convert
compensation due to the Chairman/CEO and Chief Financial Officer. Both agreements were renewed upon their respective expirations. As
of July 1, 2017, the Chairman/CEO agreed to convert any future amounts in excess of $2,500 per month due as compensation through December
31, 2017, per his Employment Agreement, into shares of common stock at $2.00 per share, as such amounts are earned. As of August 1, 2017,
the Chief Financial Officer agreed to convert all cash payments due to the employee per his Employment Agreement, into shares of common
stock using a price of $2.00 per share, as such amounts are earned.
On September 30, 2017, the Chairman/CEO and the
Chief Financial Officer converted $117,000 of compensation owed into 58,500 common shares.
In addition, on September 30, 2017, the promissory
notes of $480,000 were converted into 960,000 shares of common stock (see Note 5). The interest due on the promissory note was exchanged
for Warrants to purchase 144,000 common shares at $1.25. The Warrants expire on the third-year anniversary.
On February 23, 2018,
the board of directors of AVRA authorized the issuance of an aggregate of 218,000 shares of AVRA’s common stock (the “Shares”)
as follows:
| ● | 150,000 Shares at a value of $1.25 per Share, to six consultants and service providers for services rendered through December 31, 2017; |
| ● | 35,000 Shares, at a value of $1.25 per Share, to Farhan Taghizadeh, M.D., AVRA’s Chief Medical Officer, for services rendered during the period September 1, 2017 to December 31, 2017; and |
| ● | 19,500 and 13,500 Shares, at a value of $2.00 per Share, to Barry F. Cohen and A. Christian Schauer, our Chief Executive Officer and its former Chief Financial Officer, respectively, pursuant to Conversion Agreements with each of such officers, under which they converted all December 31, 2017 accrued but unpaid compensation due them under their respective employment agreements with the Company into the Shares. |
On August 13, 2018 the Company sold 16,000 shares
of its common stock for $20,000.
On October 4, 2018,
the Board of Directors adopted the following resolutions and took the following actions by unanimous written consent in lieu of a meeting
in accordance with the applicable provisions of the Florida business Corporation Act:
| ● | 128,300 shares of restricted common stock required to be issued, to six consultants and service providers for services rendered through September 30, 2018; |
| ● | 400 shares of restricted common stock required to be issued, for services rendered through February 28, 2018; |
On January 4, 2019,
115,050 Shares at a value of $1.25 per share were issued for service rendered.
On April 1, 2019, 95,050
shares at a value ranging from $1.25-$2.41 per share were issued for services rendered.
On July 1, 2019, 79,672
shares at a value ranging from $1.25-$2.76 per share were issued for services rendered.
On August 28, 2019,
600,000 shares at a value ranging from $1.25-$2.00 per share were issued for services rendered.
On December 1, 2019,
the Company canceled 250,000 restricted shares of the Company’s common stock that were previously issued to you under the Stock
Award letter dated August 28, 2019.
During the first quarter
2020, 122,200 shares at a value ranging from $.42-$2.79 per share were issued for services rendered.
Holders are entitled
to one vote for each share of common stock. No preferred stock has been issued.
NOTE 7 – 2016 INCENTIVE STOCK PLAN
On August 1, 2016, the Company adopted the 2016
Incentive Stock Plan (the “Plan”). The Plan provides for the granting of options to employees, directors, consultants and
advisors to purchase up to 3,000,000 shares of the Company’s common stock. The Board is responsible for administration of the Plan.
The Board determines the term of each option, the option exercise price, the number of shares for which each option is granted and the
rate at which each option is exercisable. Incentive stock options may be granted to any officer or employee at an exercise price per
share of not less than the fair market value per common share on the date of the grant. On August 1, 2019, the Board increased the plan
to 10,000,000 shares of common stock.
For options granted October 1, 2017, the following
factors were used: volatility 45.07%; expected term of 3 years, risk-free interest rate of 2.00%, dividend yield of 0% and exercise price
of $1.25 per share.
For options granted July 1, 2018, the following
factors were used: volatility 31.34%; expected term of 3 years, risk-free interest rate of 2.00%, dividend yield of 0% and exercise price
of $1.25 per share.
For options granted May 1, 2018, the following
factors were used: volatility 62.16%; expected term of 3 years, risk-free interest rate of 2.00%, dividend yield of 0% and exercise price
of $1.25 per share.
On July 1, 2018 options for 75,000 shares were
issued to our Counsel for services rendered totaling $21,000. These shares are vested immediately and expire on July 1, 2023. The exercise
price is $1.25.
For the year ended December 31, 2019 and 2018,
210,000 and -0- options were exercised, respectively. Non-vested Options for 97,639 shares were forfeited during March 2018.
On December 1, 2019, the Company granted to its
majority shareholder options to purchase 750,000 common shares of the Company at an exercise price per share will be $1.00. All shares
will immediately vest, and the Option will expire five years from the date of issuance.
At December 31, 2019 and 2018 options representing
3,486,667 shares and 2,243,250 shares were vested or exercisable, respectively.
All options issued to-date expire after five
years from the issue date. Except for the option for 1,750,000 shares issued to the CEO and to the Company’s counsel for 40,000
shares that vested immediately, all the options issued to date vest over three years.
Stock options are accounted for in accordance
with FASB ASC Topic 718, Compensation –Stock Compensation, with option expense amortized over the vesting period based on
the Black-Scholes option-pricing model fair value on the grant date, which includes a number of estimates that affect the amount of expense.
During the three months ended March 31, 2020 and 2019, $126,059 and $78,372 respectively, of expensed stock options has been recorded
as stock-based compensation and classified in general and administrative expense on the Statement of Operations. The total amount of
unrecognized compensation cost related to non-vested options was $291,876 as of March 31, 2020. This amount will be recognized over a
period of 35 months expiring February 28, 2023.
The grant date fair value of options granted
during the year of 2018 and 2019 were estimated on the grant date using the Black-Scholes model with the following assumptions:
For options granted May 1, 2018, the following
factors were used; volatility 62.16%; expected term of 3 years, risk-free interest rate of 2.00%, dividend yield of 0% and exercise price
of $1.25 per share.
For options granted July 1, 2018, the following
factors were used; volatility 31.34%; expected term of 3 years, risk-free interest rate of 2.00%, dividend yield of 0% and exercise price
of $1.25 per share.
For options granted February 1, 2019:
Volatility 50.58%, term 3 yrs, risk-free interest rate of 2.00%, dividend yield of 0% and exercise price of $2.00 per share. For
options granted April 1, 2019: Volatility 48.52%, term 3 yrs, risk-free interest rate of 2.00%, dividend yield of 0% and exercise
price of $1.25 per share.
For options granted August 1, 2019: Volatility
62.43%, term 3 yrs, risk-free interest rate of 2.00%, dividend yield of 0% and exercise price of $2.00 per share.
For options granted October 1, 2019: Volatility
48.57%, term 3 yrs, risk-free interest rate of 2.00%, dividend yield of 0% and exercise price of $2.00 per share.
For options granted December 1, 2019: Volatility
61.91%, term 3 yrs, risk-free interest rate of 2.00%, dividend yield of 0% and exercise price of $1.00 per share.
The grant date fair value of options granted
during the year of 2020 were estimated on the grant date using the Black-Scholes model with the following assumptions:
For options granted March 1, 2020 the fair market
value is $0.45, exercise $0.25, rate 2%, and volatility 39.73%.
Option values are calculated using Black Scholes
with the following inputs: expected volatilities are based on the average volatilities of six similar companies; fair market values are
calculated using the implied share values of recent company financings or OTC closing prices for that day, whichever is more suitable;
risk-free rate used was 2%.
NOTE 8 – COMMITMENTS
Intellectual property
Effective May 1, 2016, the Company entered into
a Research Agreement (the “Research Agreement”) with the University of Central Florida (“UCF” or the “University”)
for the development of a prototype surgical robotic device supporting minimal invasive surgical facial corrections.
The Agreement provides that the University will
provide personnel to accomplish the objectives as stated in the Statement of Work over a period extending to September 30, 2017. Effective
May 1, 2016, the research agreement with the University of Central Florida has been extended to April 30, 2021. No additional payments
to the University were required.
The Company agreed to extend funding of $163,307
from AVRA’s existing funds.
In addition, AVRA has paid $43,548 for outright
ownership of the University’s Intellectual Property resulting from the collaboration, which amount is shown as Intellectual Property.
Management has assessed the carrying value of the asset at December 31, 2019 and has recorded an impairment loss in the amount of $43,548.
In 2019 and 2018, $-0- had been paid under the
Agreement. The balance of the amount owing to the University was fully paid on February 24, 2017 and April 7, 2017. Additionally, a $68,952
matching funds grant from the Florida High Tech Corridor Council (FHTCC) was approved on July 16, 2016 which will provide the University
research funds in addition to the Company’s funding obligation to the University. The FHTCC research grant is subject to certain
research obligations and action requirements which if not met may result in the loss of the FHTCC research funding. The agreement further
provides for the payment of a 1% royalty to the University in any year when the sales of products using the intellectual property exceeds
$20,000,000.
Employment Agreements
On July 1, 2016, the
Company entered into an Employment Agreement with its Chairman and Chief Executive Officer. The agreement provides for an annual salary
of $120,000 per year, increasing to $180,000 per year beginning July 2017. Through December 2016, the employee agreed to not receive
the compensation in cash until the Board of Directors deemed it prudent to pay some or all of his salary. Further the Agreement provides
that the employee will receive a three-year option to purchase 1,000,000 shares of the Company’s common stock at an exercise price
of $0.10 per share, and becoming fully vested on August 15, 2016.
On August 1, 2016, the
Company entered into a one-year Employment Agreement with its Chief Financial Officer. The agreement provides for an annual salary of
$108,000 per year. Through December 2016, the employee agreed to not receive the compensation in cash until the Board of Directors deemed
it prudent to pay some or all of his salary. Further the Agreement provides that the employee will receive a three-year option to purchase
210,000 shares of the Company’s common stock at an exercise price of $0.10 per share, with 70,000 shares becoming fully vested
upon each yearly anniversary. The options are to be surrendered and cancelled if the Agreement is terminated. The Agreement has expired
but its compensation terms continue in effect as long as the employee remains employed by the Company.
On August 1, 2016, the
Company entered into a three-year Employment Agreement with its Vice President of Global Business Development. The agreement provides
for an annual salary of $96,000 per year, increasing to $144,000 per year beginning July 2017. Through December 2016, the employee agreed
to not receive the compensation in cash until the Board of Directors deemed it prudent to pay some or all of his salary. Further the
Agreement provides that the employee will receive a three-year option to purchase 300,000 shares of the Company’s common stock
at an exercise price of $0.10 per share, with 100,000 shares vested on each yearly anniversary.
Further, on July 1, 2016, the Company entered
into Indemnification Agreements with the Chairman and Chief Executive Officer, and on August 1, 2016 the Chief Financial Officer and
the Vice-President of Global Business Development providing for the Company to indemnify the individuals for all expenses, judgments,
etc. incurred while serving in various capacities with the Company.
Commencing March 1, 2018, the Company entered
into an employment agreement with its new Chief Strategy Officer whereby compensation will be determined upon sufficient funding of the
Company. The Company granted a 300,000 share stock award under its 2016 Incentive Stock Plan, which vests in five equal annual installments
of 60,000 shares each.
In addition, on May 1, 2018 options for 250,000
shares that vest monthly over 3 years were also issued to our Chief Strategy Officer. These options expire on May 1, 2023 and are exercisable
at $1.25.
Commencing January 1, 2019, the Company entered
into a consulting agreement with an IR/PR Company whereby compensation will be $1,500 per month for six months. During third quarter
2019, these services stopped. On July 1, 2019, the Company issued 36,000 restricted common shares as part of the compensation.
Lease
The Company occupies office and laboratory space
in Orlando, Florida under a lease agreement that expired on July 31, 2018. Effective August 1, 2018 and expiring July 31, 2019, the Company
signed a new agreement, with monthly payments of $1,829.25 plus applicable sales tax. Effective August 1, 2019, the Company signed a
year lease agreement, provides that the Company pay insurance, maintenance and taxes with a monthly lease expense of $2,454.75 plus applicable
sales tax. Effective January 15, 2020, the Company amended its August 1, 2019 lease agreement reducing its monthly lease payment to $2,223
plus applicable sales tax. Either party may cancel the agreement at any time with 30 days’ notice (see Note 15).
NOTE 9 – OTHER MATTERS
On January 30, 2020,
the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating
in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond
its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
The full impact of the
COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic
will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring
the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution
of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19
outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.
On March 27, 2020, President
Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES act was enacted as
a response to the COVID-19 outbreak discussed above and is meant to provide companies with economic relief. The CARES Act,
among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments,
net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations,
increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement
property.
NOTE 10 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through
the date that the financial statements were issued and determined that there were subsequent events requiring adjustments to or disclosure
in the financial statements.
Effective January 1,
2021, the Company signed an amendment which modified the August 1, 2020 agreement, increasing the monthly lease expense to $1,964.74
plus applicable sales tax.
On October 26, 2020, AVRA issued an aggregate
256,027 Units (“Units”) at a price of $1.00 per Unit in a private offering (the “Offering”) to four “accredited
investors.” Each Unit consisted of (a) four shares of our common stock (“Shares”); (b) a three-year warrant to purchase
five Shares at an exercise price of $0.40 per Share; and (c) a put option of their Membership Units in Avra Air LLC for one share of
our common stock. As a result of the foregoing, the investors were issued an aggregate of 1,024,108 Shares, warrants to purchase 1,280,135
Shares and put options for 256,027 Shares. One of the accredited investors, per his original commitment, subsequently invested an additional
$45,000 on May 3, 2021 in this same Unit funding thus receiving an additional 180,000 Shares, a warrant to purchase 225,000 Shares and
a put option for 45,000 Shares.
On August 21, 2020 and
October 19, 2020 the Company borrowed from its CEO, $17,700 and $11,500, respectively, under non-interest bearing promissory notes which
mature on December 31, 2020 and on December 31, 2021, respectively. These were subsequently converted into shares via the purchase of
Units in the following December 22, 2020 funding.
On December 22, 2020
one accredited investor and the CEO invested $25,000 and $202,700, respectively, into 227,700 Units at a price of $1.00 per Unit in a
private offering (the “Offering”). Each Unit consisted of (a) four shares of our common stock; and (b) a three-year warrant
to purchase five Shares at an exercise price of $0.40 per Share. As a result of the foregoing, they were issued an aggregate of 910,800
Shares, and warrants to purchase 1,138,500 Shares. The CEO used a total of $202,700 of Notes due to him from the Company to purchase
these Units.
On January 26, 2021, AVRA issued an aggregate
235,000 Units (“Units”) at a price of $1.00 per Unit in a private offering (the “Offering”) to four “accredited
investors.” Each Unit consisted of (a) four shares of our common stock (“Shares”); and (b) a three-year warrant to
purchase five Shares at an exercise price of $0.40 per Share. As a result of the foregoing, the investors were issued an aggregate of
940,000 Shares, and warrants to purchase 1,175,000 Shares.
On June 3, 2021, the
Board of Directors ratified the following issuances of common stock:
| 1. | The Company issued 33,000 shares of restricted common stock required to be issued for services through June 1, 2021 to Farhan Taghizadeh, per his employment agreement dated September 15, 2020. |
| 2. | The Company issued 10,000 shares of restricted common stock required to be issued to Ettore Tomassetti per his Stock Award dated April 15, 2019. |
| 3. | The Company issued 160,000 shares of restricted common stock required to be issued to Nikhil Shah per his Stock Grant Award dated April 15, 2019 and his Employment Agreement dated March 1, 2018. |
| 4. | The Company issued 5,600 shares of restricted common stock required to be issued for services through June 1, 2021 to Maria Carin Bruck, per her services agreement dated October 1, 2018. |
| 5. | The Company issued 3.889 shares of restricted common stock required to be issued for services through June 1, 2021 to Robert Santangelo, per his services agreement dated February 15, 2019. |
| 6. | The Company issued 19,445 shares of restricted common stock required to be issued for services through June 1, 2021 to Vipul Patel, per his services agreement dated September 1, 2019. |
| 7. | The Company issued 7,000 shares of restricted common stock required to be issued for services through June 1, 2021 to Henry Gewanter, per his services agreement dated February 10, 2020. |
| 8. | The Company issued 19,444 shares of restricted common stock required to be issued to Jared Stammel per his Stock Award dated September 1, 2020. |
| 9. | The Company issued 25,000 shares of restricted common stock required to be issued to Robert Chanson, per his services agreement dated February 20, 2021. |
| 10. | On October 26, 2020, the Company received a commitment to sell 135,000 units for $135,000. A $25,000 promissory note plus accrued interest of $1,027 was converted towards the commitment for 26,027 units. On May 3, 2021, the Company received $45,000 towards his commitment and the remaining balance is $63,973. The balance is due on or before October 21, 2021. (this later expired without any further payments being made) (this was also covered in paragraph above with regards to the 256,027 Units funding) |
In July, 2021 several
holders of stock options elected to exercise their stock options with a cashless exercise provision resulting in the issuance of 629,375
shares of common stock.
On September 22, 2021,
the Company’s CEO, converted a total of $50,000 of notes payable into 384,615 shares of common stock and converted $50,000 of accrued
salary into 384,615 shares of common stock.
On October 1, 2021,
the Company’s CEO, converted a total of $595,000 of accrued salary into 5,950,000 shares of common stock at a price of $0.10 per
share and agreed to receive 450,000 shares of common stock for $45,000 of the remaining salary due for the three months ending December
31, 2021at a price of $0.10 per share.
On October 1, 2021,
a former employee now a consultant elected to convert a total of $251,500 of accrued consulting fees into 2,515,000 shares of common
stock at a price of $0.10 per share, converted $161,500 of accrued salary into 1,615,000 shares of common stock at a price of $0.10 per
share. and $4,500 of expenses into 45,000 shares of common stock at a price of $0.10 per share.
Between October 5, 2021
and December 8, 2021 the Company sold a total of 2,229,231 shares of common stock at prices ranging between $0.13 and $0.52 per share.
The Company received proceeds of $315,200.
On October 1, 2021 the
Company issued a total of 1,500,000 of stock options to consultants with an exercise price of $0.25 per option.
On October 1, 2021 the
Company issued 50,000 of stock options to each of its independent Directors with an exercise price of $0.25 per option.
On October 1, 2021 the
Company issued 350,000 of stock options to its Chief Medical Officer with an exercise price of $0.25 per option.
On October 1, 2021 the
Company issued a total of 390,000 of stock options to Company’s CEO with an exercise price of $0.25 per option for the extension
of loans.
On October 1, 2021 the
Company issued a total of 174,553 shares of common stock to several consultants.
On October 1, 2021 the
Company issued 25,000 shares of common stock to its Chief Medical Officer.