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 and six months ended June 30, 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 June 30, 2020 and the results of operations and cash flows for the periods presented. The results of operations
for the three and six months ended June 30, 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 June 30, 2020, the
Company’s stockholders’ deficit was $1,205,142 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 June 30, 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.
On
May 4, 2020, the Company borrowed from its CEO, $2,500 under a non-interest bearing promissory note which matures on December 31, 2020.
On
June 1, 2020, the Company borrowed from its CEO, $4,000 under a non-interest bearing promissory note which matures on December 31, 2020.
On
June 30, 2020, the Company borrowed from its CEO, $5,000 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 and six months ended June 30, 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 June 30, 2020 consist of net operating loss carry forwards of $3,443,145. Using a new federal
statutory tax rate of 21%, the valuation allowance balance as of June 30, 2019 total of $723,060. The increase in the valuation allowance
balance for the six months ended June 30, 2020 of
$50,489 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 six months ended June 30, 2020 and 2019.
At
June 30, 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 June 30, 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; and |
| ● | 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 services 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 the
Chief Executive Officer under the Stock Award letter dated August 28, 2019.
During
the first quarter of 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 June 30, 2020 and 2019, $106,487 and $48,372, respectively, for stock based compensation. During
the six months ended June 30, 2020 and 2019, $158,964 and $61,786, 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 $268,728 as of June 30, 2020. This amount will be recognized over a period of 36 months
expiring June 30, 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 3yrs, 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 3yrs, 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 3yrs, 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 3yrs, 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 3yrs, 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 the 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.
For
the three and six months ended, June 30, 2020 and 2019, $-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. On April 30, 2020, the rent due under our lease agreement
had been reduced by 50% for the months of April and May, 2020. 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.