Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ☒
Indicate by check mark whether
the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
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over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
State the aggregate market
value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked prices of such common equity as of the last business day of the registrant’s most recently
completed second fiscal quarter: Not applicable.
The number of shares outstanding of the issuer’s common stock,
$0.0001 par value, as of November 1, 2022, was 39,197,099 shares.
DOCUMENTS INCORPORATED BY
REFERENCE: No documents are incorporated by reference into this Report except those Exhibits so incorporated as set forth in the Exhibit
index.
PART I
Item 1 Business.
Overview
We are a medical robotics company developing a
fully autonomous medical robotic system using proprietary software which integrates Artificial Intelligence (“AI”)
and Deep Learning, or machine learning, (“DL”). By using an AI and DL enhanced software program, we are creating an
intelligent robotic system that we believe can “robotize” a wide range of medical procedures currently being performed
by human hands. We are concentrating our research and development efforts to meet rising expectations of patients and practitioners alike
for the precision, safety and speed offered by an AI enhanced robotics platform system that can be combined with proven medical devices,
end-effectors and surgical instruments.
We believe that progress in mechanical and software
engineering has made possible lightweight and relatively inexpensive robotic devices for difficult procedures in various medical fields.
Medical robots are already being successfully employed in several areas of surgery, including Urology (Prostate), Colo-Rectal, Gynecology,
Thoracic, General Surgery, Orthopedics, and Neuro and Spine Surgery. Robots are also being used for Telemedicine and assistive robotic
methods are addressing the delivery of healthcare in inaccessible locations, ranging from rural areas lacking specialist expertise to
post-disaster scenarios, and battlefield areas. With the aging population dominating demographics in the U.S. across all spectrums of
healthcare, robotic technologies are being developed toward promoting improved function, lower morbidity and improved overall outcomes.
We are developing a treatment-independent autonomous
robotics system utilizing our proprietary AI-driven precision guidance system, applicable to a variety of minimally and non-invasive procedures,
with an initial focus on skin resurfacing aesthetic procedures utilizing several FDA approved skin enhancing techniques robotized for
superior performance and optimal results. Our medical robotic system is being developed to deliver skin resurfacing treatments, such as
micro-needling and laser therapies with improved efficiency, accuracy and precision over current procedures conducted by human hand, and
only requiring the doctor to input or just confirm treatment parameters. As a result, use of our medical robotic system is expected to
provide improved quality and safety as well as improve patient throughput and workflow.
Our autonomous medical robotics system is being
developed to be compatible with available FDA approved surgical tools and end-effectors, enabling us to initially penetrate a sizable
and fast-growing aesthetics market, which includes micro-needling and laser solutions. Our robotics system will allow doctors, and anyone
permitted to treat patients, defined at the State level, such as a licensed aesthetician, to treat damaged skin autonomously by delivering,
for example, micro-needling to the skin. The micro-needling catalyzes the natural process of collagen remodeling, consisting of formation
of new collagen, elastin, and vascularization in the papillary dermis, similar to the effect of laser treatments.
We expect our robotic system to eliminate many
of the common errors that occur during handheld procedures, such as over- or under- exposure of the needles or energy-based instruments
that can have terrible cosmetic results and even injure the patient. In addition, our system is being designed to continuously adjust
treatment parameters, such as penetration depth, time, and energy in order to individualize the outcome based on our algorithms. Our robotic
system has been designed and developed through a seamless collaboration of the surgeon, the engineer and the scientist. Since the medical
robotic industry has progressed greatly in miniaturization, adaptability and lower costs, we believe that the Avra “brains”
technology component can lead to dramatic opportunities in all of medicine.
The advantages of robotizing already FDA approved
aesthetic devices are many. In contrast to a human using a handheld device, our aesthetics robotic system has the potential to perform
each and every procedure with unsurpassed precision without constraint of age, proficiency, experience or fatigue. Likewise, in many skin
related treatments the amount of energy delivered, distance and/or depth of the instrument to, or into, the skin, and treating only the
affected area are critical to the outcome. The robotic system can maintain these parameters with unparalleled accuracy. The system can
also replicate the same procedure time and again precisely. Delivery of certain aesthetic treatments by robotic systems is believed to
be the most efficient option, requiring fewer visits per patient while increasing patient throughput — a benefit for patients and
practitioners alike.
Advantages of using our medical robotic approach
to procedures include:
| ● | Reduced
cost per treatment. |
| ● | Better
treatment accuracy. |
| ● | Better
treatment outcomes. |
| ● | Increased
patient throughput and revenue generation for the physician. |
| ● | Easier
multi-platform integration. |
| ● | Addresses
shortfall of physicians/surgeons. |
| ● | Easier
future integration of medical and technological advancements such as molecular biologics. |
We believe that our initial medical robotic system
for the aesthetics market should find rapid acceptance based on the aforementioned advantages of using the attribute of robotics versus
traditional manual applications. Furthermore, there is general acceptance by consumers for fee-for-service cash payments in the facial
aesthetics market thereby avoiding medical insurance reimbursement issues. Our medical robotic system utilizes a robotic arm that has
7-degrees of freedom integrated with our proprietary AI-driven control software and algorithms. The robotic arm was designed and built
under the required medical device standards of the U.S. Food and Drug Administration (the “FDA”). Our strategy is to
integrate the robotic arm with FDA approved devices, which is expected to allow for a more expedited approval of the integrated system.
We believe that the FDA approval process will primarily focus upon validation of the medical robotic system’s software control.
This could lead to a less onerous, more de-risked regulatory path to approval, particularly if strong preclinical results are achieved.
Subsequent to the completion of the FDA preclinical work, estimated to take six months, we believe that we will be able to additionally
modify and robotize certain non-invasive instruments that do not require FDA approvals and proceed to the cosmetic treatments marketplace.
This action could sharply reduce the time to commercial operations and revenues.
We previously retained the services of The Horizon
Phoenix Group (“HPG”), a consulting firm experienced in securing U.S. and foreign regulatory approvals for medical
devices, in order to initiate the regulatory process. Working with HPG, we prepared and filed an application with the FDA for our initial
medical robotic system and in August 2019 held an initial pre-collaboration meeting with the FDA. We believe that this is the first of
a series of meetings where the Avra system and its regulatory requirements will be discussed in ever-increasing specificity. This should
allow for a more focused regulatory process, saving both resources and time. The robotic arm that we intend to utilize for our system
has already been granted approval in the EU and received a CE mark. We have begun implementing a quality and regulatory system that will
serve as the foundation for U.S., Canadian, European, Australian, Japanese, and Brazilian market access for our medical robotic system.
The Medical Device Single Audit Program(“MDSAP”), which we plan to employ, is a single inspection that, when completed,
is expected to support market access to these six most important medical device marketplaces.
Since 2016, we had a research partnership with
the University of Central Florida (“UCF”) to develop a prototype intelligent medical robotic system. UCF is recognized
particularly for its work in the area of medical robotic research and design, with a focus on the guidance systems. Avra has paid UCF
a one-time fee for outright ownership of work developed by UCF in the collaboration. The Research Agreement was extended several times
and expired on April 30, 2021. To further the depth of our research and development we also began a partnership in 2021 with Florida Polytechnic
University and are actively working with them on developing our system. Avra recently brought in two Associate Professors and three graduates
to join Avra’s engineering development team. Effective October 11th, 2021 Avra executed a Sponsored Student Project Agreement
which includes two payments of $8,030 each covering Fall semester in 2021 and Spring semester in 2022.
Recent Developments
On August 5, 2022, AVRA entered into a non-binding letter of intent
with Dr. Sudhir Srivastava (“Dr. Srivastava”), Cardio Ventures Pvt. Ltd., a Bahamian private limited company of which
Dr. Srivastava is the sole stockholder(“Cardio”), Otto Pvt, Ltd., a Bahamian private limited company and direct subsidiary
of Cardio (“Otto”) and Sudhir Srivastava Innovations Pvt. Ltd., an Indian private limited company and indirect subsidiary
of Cardio (“SSI,” and together with Cardio and Otto, the “SSI Parties”) with respect to a business
combination between AVRA and the SSI Parties (the “Transaction”). SSI, based in Haryana, India is engaged in the development,
commercialization, manufacturing and sale of medical and surgical robotic systems utilizing patents, trademarks and other intellectual
property held by Dr. Srivastava (the “SSI Intellectual Property”).
If and when the transaction is consummated, the
business of the SSI Parties, including the SSI Intellectual Property will be owned by AVRA. The shareholders of the SSI Parties will own
95% of the common stock of post-transaction AVRA and the current shareholders of AVRA will own 5% of the common stock of post-transaction
AVRA. In addition, there will be changes in composition of the board of directors, implementation of corporate governance policies and
changes in management, all with a view to listing the common stock of AVRA on the Nasdaq Stock Market, LLC or another National Securities
Exchange. In addition, AVRA will change its name to “SS Innovations, Inc.”
Consummation of the Transaction is subject to,
among other matters, the negotiation and execution of definitive agreements and documentation, containing, in addition to the above terms,
terms and conditions customary for agreements of this type and nature, including, without limitation, representations, warranties, and
indemnities of the parties.
Consummation of the Transaction is also subject
to completion of a due diligence review by each party of the other, the results of which shall be satisfactory to the reviewing parties
in their sole discretion.
Given the foregoing, there can be no assurance
given that the Company will be able to successfully complete the Transaction.
In connection with executing the letter of intent,
we advanced the SSI Parties, the amount of $990,000 (the “Interim Financing”). The Interim Financing is evidenced by
two notes, one for $100,000 and one for $1,000,000. Both are one-year Automatically Convertible Notes made in favor of the Company by
Cardio, Otto and Dr. Srivastava, jointly and severally (the “Cardio Notes”). Interest on the Cardio Notes shall accrue
at the rate of 7% per annum, payable together with the principal amount at maturity. The Cardio Notes have an original issue discount
of 10%. If the Cardio Notes are not repaid in full on or at maturity, they will automatically convert into a percentage equity interest
in Cardio determined by dividing the principal amount of and accrued interest on the Cardio Notes divided by $100 million. The Cardio
Notes contains customary default provisions and other typical terms and conditions.
We may make additional advances to the SSI Parties
of up to an aggregate principal amount of $5,000,000 of Interim Financing, evidenced by additional Cardio Notes. These Cardio Notes will
be substantially similar in form and substance to the first Cardio Note, provided, however, that Cardio Notes issued in
excess of an aggregate principal amount of $2.000,000, will have an original issue discount of 6% as opposed to 10%, and the valuation
for determining conversion will be $250 million as opposed to $100 million.
In order to fund the Interim Financing, the Company offered and sold
to two accredited investors, $1,000,000 and $100,000 one-year convertible promissory notes (the “Convertible Notes”).
The Convertible Notes will have the same interest rate and payment terms as the Cardio Notes and otherwise be substantially similar to
the Cardio Notes, provided, however, that the Convertible Notes do not have an original issue discount. Further, upon consummation
of the Transaction (if and when it is consummated) the Convertible Notes will automatically convert into a number of AVRA Shares determined
by dividing the principal amount of the Convertible Notes by $100 million and multiplying such number expressed as a percentage by the
number of AVRA Shares issued to Dr. Srivastava and the other shareholders of the SSI Parties (if any) upon closing of the Transaction.
The Company may offer and sell up to an aggregate principal amount of $5,000,000 in Convertible Notes in order to fund the Interim Financing.
The Convertible Notes were issued in a private transaction
pursuant to the exemptions from registration under the Section 4(a)2 of the Securities Act of 1933, as amended (the “Securities
Act”) and the rules and regulations promulgated thereunder.
Advantages of Our Senior Leadership Team
Our senior leadership team and advisory boards
have broad and deep experience in clinical practice, medical research, innovation and development in the medical robotics field. We believe
that our team, which has been active in the medical robotics field for many years, brings the necessary skills and experience to develop
and commercialize intelligent medical robotic systems, as well as in marketing, supply chain management, and the implementation of all
other aspects of our planned business operations.
We believe we can rapidly develop and commercialize
its initial medical robotic system in the aesthetic skin resurfacing market because of the following advantages and progress made to date,
including:
| ● | Our
team is experienced in medical robotic engineering. |
| ● | We
are working in conjunction with preeminent physicians, engineers and scientific institutions. |
| ● | We
have substantially completed the design phase and are ready to complete a final, integrated prototype for the regulatory approval process
which has been initiated. |
| ● | Our
robotic arm was built under the required medical device standards of the FDA and has already received a CE Mark in Europe. |
| ● | Our
strategy is to integrate the robotic arm with FDA approved devices for skin resurfacing, which we anticipate will allow for a more expedited
regulatory approval, with the FDA approval process primarily focused upon validation of the medical robotic system’s software control.
We held a pre-collaboration meeting with the FDA in August 2019, which should allow us to better focus on only the meaningful required
activities, saving both resources and time. |
| ● | We
have begun implementing a quality and regulatory system that will serve as the foundation for U.S., Canadian, European, Australian, Japanese,
and Brazilian market access for AVRA’s medical robotic system. MDSAP, which we plan to employ, is a single inspection that, when
completed, is expected to support market access to the six most important medical device marketplaces. |
| ● | We
believe that our treatment-independent medical robotics platform system will be compatible with currently and yet to be approved end-effectors
and/or surgical tools enabling rapid entry into the skin resurfacing and other markets with new and improved devices. |
Medical Robotic and Skin Rejuvenation Markets
The United States is expected to see a shortage
of nearly 122,000 physicians by 2032 as demand for physicians continues to grow faster than supply, according to new data published by
the AAMC (Association of American Medical Colleges). This trend is unfortunately being seen in the rest of the world as well. The World
Health Organization (“WHO”) estimates that there is a global shortage of 4.3 million physicians, nurses, and other
health professionals. The shortage is often starkest in developing nations due to the limited numbers and capacity of medical schools
in these countries.
One solution that is expected to mitigate this
shortage will be the growing use of robotic systems for both their ability to be used remotely by the doctor (i.e. a doctor could, from
a central location, cover anywhere in the world given proper connectivity), but also for their ability to increase the efficiency of existing
practitioners. The ever-growing high cost of healthcare is also a driver for the growth in the use of robotic systems.
Advantages of using medical robotics include:
| ● | Reduced
cost per treatment |
| ● | Better
treatment accuracy |
| ● | Better
treatment outcomes |
| ● | Increase
patient throughput |
| ● | Easier
multi-platform integration |
| ● | Addresses
shortfall of physicians/surgeons |
The concept of using a robot in surgical procedures
became a practical reality in 2000, when the FDA approved the da Vinci® robotic system, introduced to the market by Intuitive Surgical,
Inc. (“ISRG”). For years, ISRG was essentially the sole company manufacturing and marketing robotic devices for use
in the rapidly emerging field of robotic assisted, minimally invasive surgery.
Today, the U.S. is the leader in robot-assisted
surgery. However, other countries are fast followers, having already recognized both the need and the promise of such technologies. The
development of surgical robotics is motivated by the desire to enhance the effectiveness of a procedure by coupling information to action
in the operating room or interventional suite and transcend human physical limitations in performing surgery and other interventional
procedures, while still affording human control over the procedure. Two decades after the first reported robot assisted surgical procedure,
surgical robots are now being widely used in the operating room. According to Kenneth Research, the worldwide medical robotics market
is projected to reach $11.36 billion by 2023, expanding at a compound annual growth rate (“CAGR”) of 12.6% during 2018–2023.
According to Kenneth Research, North America is
currently the world’s largest market for medical robotics, holding an over 40% market share as of 2019, with significant growth
expected in the coming years.
Growth in North America is driven by a few factors
including the high rate of adoption of these new technologies and the growing demand for more precise, less invasive, and safer surgical
methods. The overall growth of this industry is driven by the rising demand for these technologies, the growing and aging population,
as well as increasing healthcare expenditures.
Due to the growth in robotics for medical applications
over the last several years, the medical robotics space has seen increasing mergers and acquisitions activity and we expect this to continue
for the foreseeable future. Some recent examples include:
| ● | Medtronic’s
acquisition of Mazor Robotics in September 2018 for $1.6 billion. |
| ● | Johnson
& Johnson’s acquisition of Auris Health in February 2019 for $5.75 billion (Johnson & Johnson is now a shareholder of Avra
through its ownership of Auris Health, which was one of the founding shareholders of Avra. |
| ● | Stryker’s
acquisition of Orthoscape in March 2019 for $220 million. |
| ● | Intuitive
Surgical’s acquisition of Schölly Fiberoptic’s robotic endoscope business in July 2019 for an undisclosed sum. |
| ● | Siemens
Medical Solutions’ acquisition of Corindus Vascular Robotics in August 2019 for $1.1 billion. |
Similar to growth in the use of medical robots
in various procedures, the demand for skin rejuvenation procedures is also rapidly growing, which is a primary reason why we chose the
skin rejuvenation market as our initial point of entry into the medical robotics field. According to a research letter published by Jama
Network, in 2016, the total number of dermatology providers was 13,365 (10,845 dermatologists and 2,520 dermatology physician assistants).
The global medical aesthetic market is expected to reach $16.7 billion by 2022, with North America remaining the largest single market.
According to the National Laser Institute, between
2000 and 2018, the total number of non-surgical cosmetic treatments performed increased by 228% with 15.9 million non-surgical cosmetic
treatments performed in 2018. The National Laser Institute also estimated that over $16.5 billion was spent in the U.S. on cosmetic procedures
in 2018.
According to a research study by Persistence Market
Research, the global market for skin rejuvenation is projected to reach a CAGR of 8.7%. By region, the North American and Asian Pacific
excluding Japan (“APEJ”) regions reflect high potential in the years to come. The North American region is expected
to dominate the global market as it is estimated to be the largest and highly attractive for skin rejuvenation. The North American skin
rejuvenation market is estimated to reach a CAGR of 9.4% at its peak.
Most products designed to improve the appearance
of the skin do not repair the skin itself; rather, they cover and hide scarring and blemishes temporarily. Wrinkles also are challenging
as the skin ages and are hard to cover over. Some current treatments aim to slow or forestall the development of wrinkles, but with questionable
effectiveness. Micro-needling and laser treatments are two common ablative procedures currently in use today for skin resurfacing, specifically
focused on tone, texture and skin tightening. Other platforms include radiofrequency, ultrasound, cryolipolysis, and a multitude of laser
frequencies that are available to practitioners.
Micro-needling is used to treat and improve conditions
like acne scarring, fine lines and wrinkles, loose skin, skin texture, pore size, brown spots, stretch marks, and pigment issues. It is
also called skin needling, collagen induction therapy (“CIT”), and percutaneous collagen induction (“PCI”).
Most anyone can have the procedure performed, as long as they do not have any active infections, lesions, or any known wound healing problems.
Micro-needling is typically performed in
a series of four to six sessions, spaced about a month apart. During the procedure, a topical anesthetic is applied, and then stainless-steel
micro-needles are inserted into the skin to cause microinjuries or punctures. The damage caused by the needles encourages the body to
send healing agents (elastin and collagen) to the punctures to repair them. According to a 2008 study, skin treated with four micro-needling
sessions spaced one month apart produced up to a 400% increase in collagen and elastin six months after completing treatment.
Laser resurfacing also can shrink wrinkles,
even eliminating small wrinkles, by removing the outer layer of skin, allowing new skin to form. While simple, this procedure can be painful.
Laser resurfacing works by burning off skin; skin can reach 1500°F (800°C) in the process of being removed, and adjacent areas
of skin can approach 400°F. Unsurprisingly, general anesthesia is often required. Open wounds are created and healing may take up
to three weeks. Skin redness may persist for three months, during which the skin is particularly sensitive to UV light. Other risks of
laser resurfacing include scarring, changes in skin pigmentation and bacterial infection. Most, if not all, of the more severe adverse
effects of laser resurfacing treatments are due to errors in the application of the treatment. Applying the laser too close to the skin,
for too long on one area of the skin, and at the wrong settings, are just some examples of human errors for this procedure. Robotizing
this procedure could reduce, if not eliminate, these human errors.
A recent study by Yongsoo Lee, M.D., co-CEO and
co-founder, Oh and Lee Medical Robot, Inc., in South Korea, presented at the American Society for Laser Medicine and Surgery meeting held
in April 2017, comparing the improvements in the evenness of laser irradiation using a robot versus manual irradiation found the robot-guided
treatment to be much more accurate than the human hand, achieving superior outcomes. Results of the study showed that robotic irradiation
demonstrated consistency in distances between beams and distribution in fractions at both 30 and 10 Hz frequencies and was significantly
superior to manual irradiation in the ratio of area covered by beams to regions of interest, distances between beams, and distribution
in fractions at each frequency. The investigators concluded the robot-guided treatment to be superior to the manually guided treatment.
“As an aesthetic dermatologist myself, I
can appreciate that virtually all doctors would welcome the robot-guided treatments, as valuable time can be saved in the busy practice.
That saved time can then be invested in other patients and procedures, allowing physicians to see more patients per day. Moreover, due
to the heightened precision of robotic-guided treatments, cosmetic treatments are much safer with a significantly reduced chance of adverse
events occurring such as burns and spotty hypopigmentation,” Dr. Lee said.
Technology Overview
Current robots used in surgery are under the direct
control of a surgeon — the so-called “Master-slave system”, often in a teleoperation scenario in which a human
operator manipulates a master input device and the patient-side robot follows the input. There is no autonomy. Traditional minimally invasive
surgical robots provide the surgeon with a higher degree of dexterity inside the body, eliminate operator tremor, scale down operator
motions to a fraction of normal distances, and provide a very intuitive connection between the operator and the instrument tips. The surgeon
can cut, cauterize, suture and reconstruct tissue with accuracy equal to or better than that of invasive open surgery. A surgical system
contains both robotic devices and real-time imaging devices to visualize the operative field during the course of surgery.
The use of robotics in medicine inherently involves
physical interaction between caregivers, patients, and robots — in all combinations.
Developing user-friendly physical interfaces between
humans and robots requires all the classic elements of a robotic system: sensing, perception, and action. A great variety of sensing and
perception tasks are required, including recording the motions and forces of a surgeon to infer their intent, determining the mechanical
parameters of human tissue, and estimating the forces between a robot and a moving patient. The reciprocal nature of interaction means
that the robot will also need to provide useful feedback to the human operator, whether that person is a caregiver or a patient. We need
to consider systems that involve many human senses, the most common of which are vision, haptics (force and tactile), and sound. A major
reason why systems involving physical collaboration between humans and robots are so difficult to design well is that, from the perspective
of a robot, humans are extremely uncertain and dynamic.
Unlike in a passive, static environment, humans
dynamically change their motion, force, and immediate purpose throughout a procedure. These changes can be caused by something as simple
as physiologic movement (e.g., a patient breathing during surgery), or as complex as the motions of a surgeon suturing during surgery.
During physical interaction with a robot, the human is an integral part of a closed-loop feedback system, simultaneously exchanging information
and energy with the robotic system, and thus cannot simply be thought of as an external system input002E
In addition, the loop is often closed with both
human force and visual feedback, each with its own errors and delays that can potentially cause challenges in a human-robot system. Given
these problems, how does one guarantee safe, collaborative and useful physical interaction between robots and humans? To date, no existing
systems provide the user with an ideal experience of physically interacting with a robot. Device design and control are essential to the
operation of all medical and health robots, since they interact physically with their environment.
Accordingly, one of the most important technical
challenges is in the area of mechanisms. Miniaturization is challenging in large part because current electromechanical actuators (the
standard because of their desirable controllability and power to weight ratio) are relatively large. Biological analogs (e.g., human muscles)
are far superior to engineered systems in terms of compactness, energy efficiency, low impedance, and high force output. Interestingly,
these biological systems often combine “mechanisms” and “actuation” into an integrated, inseparable system. Goals
for systems that achieve high dexterity at any scale will naturally differ greatly depending on the medical application (e.g. surgery,
rehabilitation, and prosthetics).
We are focusing on truly innovative technology
that is in line with current applications, but delivers an innovative approach. We are integrating image-guidance with navigation, AI,
and organ-targeting to bring a system that is truly diverse and multi-dimensional. Having identified limitations in the predominantly
non-autonomous robotic systems, we propose a disruptive model, which considers design and development through a seamless collaboration
of the surgeon, the engineer and the scientist.
The core of the design and engineering of our
medical robotic system is the AI-driven robotic arm navigation and guidance software which permits the system to autonomously guide a
medical, surgical grade robotic arm and end-effector for safer and more effective treatment of patients. Our initial medical robotic system
is designed to perform minimally invasive, surgical facial corrections using a micro-needling device for skin resurfacing. We plan to
quickly follow this up with a laser end-effector, a tool useable for various skin resurfacing procedures. This modular approach should
allow us to quickly adopt future technologies and instruments with only minor adaptations to the end-effectors and surgical tools approved
for use.
The key technology in our system is the Avra Intelligent
Instrument Guidance Software (“AIIGS”), an image-guided robotic guidance system that receives real-time 3D images,
live sensor inputs from various subsystems to calculate precise orientation of the arm and end-effector over the patient in real-time
during a procedure, ultimately allowing precision delivery of treatment to any area of the human body that is beyond the capabilities
of a human being, and which should allow for more optimal and consistent treatments. The various image capture and sensor subsystems are
outlined below and include, 2D image capture, 3D image capture and tracking, distance sensors, and touch sensors. We expect the AIIGS
capability should then be relatively easily employed to support other surgical procedures beyond skin resurfacing, such as skin and wound
care, drug delivery, tattoo removal, cellulite reduction, biopsies and Mohs surgery, to name a few.
In the case of facial micro-needling, through
our proprietary intuitive graphic user interface, the doctor will be able to acquire a high-resolution depth map of the patient’s
face and superimpose a trajectory map over Aesthetic Regions-of-Interest (“AROIs”). The doctor would then accept the
suggested treatment protocol or assign specific micro-needling parameters to each AROI. AIIGS will autonomously control the arm and end-effector
to follow a predetermined path based on the doctor’s specified parameters for each AROI, and continuously calculate the current
and desired position over the sequential AROIs to ensure the precise treatment parameters are met. It will also reorient the end-effector
so it is perpendicular to each AROI to ensure optimal application of micro-needling injection, and with the precise pressure needed, accounting
for patient movement in real-time.
Our medical robotic subsystems modules are outlined
below. Areas of continuous development work include AI, DL, and medical robotic safety guidelines.
While we plan to continue to develop our own custom
robotic arm we are using an existing robotic arm that has been specifically developed under medical device standards and that meets all
of our requirements for a robotic arm. The robot is classified as a lightweight robot and is a jointed-arm robot with seven axes. All
drive units and current-carrying cables are routed inside the robot. Every axis contains multiple sensors that provide signals for robot
control (e.g. position control and impedance control) and that are also used as a protective function for the robot. Every axis is monitored
by sensors: axis range sensors ensure that the permissible axis range is adhered to, torque sensors ensure that the permissible axis loads
are not exceeded, and temperature sensors monitor the thermal limit values of the electronics.
Our medical robotic system requires high levels
of accuracy and repeatability. Repeatability is a measure of the ability of the robot to consistently reach a specified point in 3D space
(X, Y, Z). Accuracy is a measure of the distance error between the commanded point and the achieved point. Accuracy can be improved with
external sensing, for example proximity, vision system or infra-red.
For skin resurfacing, technological improvements
in motors, materials and in high resolution imaging allow for the use of robotic devices to assist the surgeon to autonomously treat damaged
skin. Presently, we are not aware of any commercially available robotic devices designed for this application.
Application of Artificial Intelligence and
Deep Learning
Artificial intelligence, or AI, refers to software
technologies that make a robot or computer act and think like a human. Some software engineers state that it is only artificial intelligence
if it performs as well or better than a human. In this context, when we talk about performance, we mean human computational accuracy,
speed, and capacity.
Artificial intelligence includes the development
of computer systems that can perform tasks that normally require human intelligence. Speech recognition, decision-making, visual perception,
for example, are features of human intelligence that artificial intelligence may possess. Translation between languages is another feature.
Humans can “learn as we go along.”
In other words, learn from experience. Machines with AI can also do this, which we call machine learning. A neural network is an example
of machine learning.
A broad definition of a Deep Learning (“DL”)
solution is the implementation of algorithms and techniques that endow machines with the ability to autonomously acquire the skills for
executing complex tasks effectively letting robots acquire their own skills over time.
The term “learning” can be
equated to an optimization process. Optimizing an objective that reflects the actual fitness of the behavior at accomplishing a specific
task, such as a robot learning optimal trajectory, where the objective is to traverse a predetermined trajectory in a timely, safe and
efficient manner. Telling our AIIGS system to find the optimal trajectory is a very high-level objective. This cannot be implemented with
simple, static equations that control the robotic arm and end-effector, but with a reinforcement-learning algorithm we can discover the
behavioral skills that optimize the goal. We will need to choose a “representation” for a behavioral skill.
A representation could be a trajectory, a sequence
of points, a motion. The robot could traverse to a specific point, but will do so from its current pose. What if you ask it to go to the
same point from a different starting pose? The same sequence will not work. It needs to be more flexible to control a more complex movement.
This could be in the form of a feedback controller where it looks at the state, applies a function and outputs the action. The more flexible
the representation, the greater number of skills can be learned as it relates to a real-world environment.
One choice for a general, flexible representation
is a Large Neural Network (“LNN”) that can represent any function; therefore, they can represent any motor skill. It
needs more prior knowledge in order to learn. This is where sensor feedback is used and integrated. These can be cameras, tactile sensors,
joint encoders that feed into the LNN, reducing the need to engineer specific perceptions and actions for any input modality.
For non-embodied systems such as image processing
and speech processing, machine learning has been used and is very successful. This is primarily due to having good supervision. Learning
is very successful when you know what the output should be for a given input.
Deep Learning is a typical machine learning method
which we intend to use extensively for the perception and intelligent control of our medical robotic system. We intend to apply a DL approach
to detect and recognize facial features and use this information to optimally map, code and plan a trajectory over the individual AROIs
virtually superimposed over a patient’s face. This is accomplished through “feature” learning. In machine learning
and pattern recognition, a feature is an individual measurable property or characteristic of a phenomenon being observed. Choosing informative,
discriminating and independent features is a crucial step for effective algorithms in pattern recognition, classification and regression.
DL is typically classified into three categories:
supervised learning, unsupervised learning, and reinforcement learning.
| ● | Supervised
learning, the most common form of machine learning, where the error is measured between the actual and desired output and assigned a
cost function with the goal being to minimize the cost. Supervised learning can be directly applied to the trajectory the arm and end-effector
follows to arrive at a specific AROI. Accumulated data will be analyzed and used in future path trajectories. |
| ● | Unsupervised
learning does not assign a cost function, but instead aims to find the hidden patterns, structures or features embedded in the collected
data. Unsupervised learning can be applied to the specific sequence of movements the arm and end-effector traverses to arrive at a specific
AROI at the proper orientation and at the proper pressure. This varies with each patient’s skin type as well as the curvature and
location on the face. For example, prior to firing the needles the micro-needling instrument must approach at a perpendicular angle to
the specific AROI and make even and consistent contact with the patient’s skin. Our AIIGS will accumulate this information and
apply it to future procedures. |
| ● | In
reinforcement learning, a software agent is defined to explore and exploit the space of possible strategies. Feedback in the form of
reward or cost from the dynamic environment is referred as the outcome of the chosen action. |
With our medical robotic system, some examples
of functionality where DL will be employed are:
| ● | optimal
trajectory of the arm and end-effector based on the size and shape of the patient’s head and face; |
| ● | optimal
arm manipulation as it traverses the trajectory; |
| ● | efficient
and safe arm movements; |
| ● | optimal
approach attitude of the micro-needling instrument as it approaches various topographical sections of the patient’s face; and |
| ● | optimal
treatment protocols such as depth, energy, time for micro-needling for specific skin types and for each AROI. |
Product Description
There are five key elements to our medical robotic
system, all of which can potentially generate revenues:
| ● | Robotic
Systems: Standardized robotic arms, precision guidance system, and software controls designed to the needs of doctors and physicians.
This includes elements of AI, DL and related algorithms which may have applications to other fields of work beyond medical and may be
licensed out in the future. |
| ● | Robotic
Tools: Standardized tools that can be modified to cover a wide range of medical procedures. Avra plans to sell its robotic systems
while obtaining recurring revenues and high gross margins from its tools, which will need to be replaced, just as they are in the handheld
versions, for each individual procedure. |
| ● | Maintenance:
Service contracts supporting ongoing operation and simplified so that much of the support can be performed remotely. |
| ● | Education
and Training: Remote and on-site training programs for surgeons, aestheticians, hospitals and medical support staff. |
| ● | Software:
Updates to both the software and algorithms. |
Regulatory Strategy
Our products and operations will be subject to
extensive regulation in the U.S. by the FDA and by similar agencies in other countries or regions in which we may market our medical robotic
systems. In order to smooth our market entry a comprehensive regulatory strategy has been devised where we create robust preclinical and
clinical data supporting our product’s claims and proving the Avra Medical Robotic Arm is safe and will perform as intended. We
plan to employ four tiers of tightly interrelated activities. The specific undertaking in each of the tiers will be coordinated in advance
with each regulatory jurisdiction where we intend to offer the product line for sale (the U.S., Canada, the European Union, Brazil, Japan
and Australia). The four tiers are:
1. Preclinical testing of the system
(the controller, the computer, the arm and the end-effector.) Preclinical testing encompasses testing without using the device on human
subjects. Key facets of preclinical testing are electrical safety, EMC and EMI testing; integration testing of the system elements and
the development of a clinical training program.
2. Software involves all elements of
the arm’s operations. The documentation required to demonstrate safety and effectiveness is comprehensive. Each task within a process
is mapped and controlled. A risk matrix is established to guide the software development and also to play the pivotal role in verification,
validation and testing.
3. Proof of concept testing follows
preclinical and software. In proof of concept we demonstrate the arm and its end-effector operation and that even someone with little
robotic experience can successfully use the arm within the indications for use and for the purposes intended. A three-stage demonstration
will be undertaken first on animals of various sizes and weights; then on human cadavers of various sizes and weights and finally on a
small cohort of human subjects. Each stage must be successfully completed before the next stage is undertaken. The final stage (human
proof of concept testing) will be under the supervision of an Institutional Review Board (“IRB”) or similar ethics
committee.
4. The strength of our testing to date
has two aims — address all aspects of risk and second to minimize the size and expense of a human clinical trial. It is our belief
that any remaining element of risk or uncertainty will only require a small sample size (50 or less). Regardless of the sample size the
human clinical trial shall have a performance endpoint and a safety endpoint that will serve as milestones to measure the outcome.
To support our ongoing compliance the company
plans to become registered to the requirements of EN ISO 13485, the U.S.FDA QSR, ANVISA from Brazil, TGA from Australia, Health Canada,
Japanese MHLW and CE Marking under new Medical Device Regulations. To achieve this with minimal expense, we plan to use a Medical Device
Single Audit Program (“MDSAP”) Auditing Organization that is also a European Notified Body.
Unless an exemption applies, each medical device
that we intend to market in the U.S. must first receive either “510(k) clearance” or “Premarket (PMA) approval”
from the FDA pursuant to the Federal Food, Drug, and Cosmetic Act. The FDA’s 510(k) clearance process usually takes from four to
12 months, but it can last longer. The process of obtaining PMA approval can be more costly, lengthy and uncertain. It generally takes
from one to three years or even longer.
The FDA decides whether a device must undergo
either the 510(k) clearance or PMA approval process based upon statutory criteria. These criteria include the level of risk that the agency
perceives is associated with the device and a determination whether the product is similar to devices that are already legally marketed.
Devices deemed to pose relatively less risk are placed in either class I or II, which requires the manufacturer to request 510(k) clearance,
unless an exemption applies. The manufacturer must demonstrate that the proposed device is “substantially equivalent”
in intended use, safety and effectiveness to a legally marketed “predicate device” that is either in class I, class
II, or is a “pre-amendment” class III device, one that was in commercial distribution before May 28, 1976, for which
the FDA has not yet called for submission of a PMA application. After a device receives 510(k) clearance, any modification to the device
that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, requires a new
510(k) clearance or could require a PMA approval.
Devices deemed by the FDA to pose the greatest
risk, such as life-sustaining, life-supporting, or devices deemed not substantially equivalent to a legally marketed predicate device,
are placed in class III. Such devices are required to undergo the PMA approval process in which the manufacturer must prove the safety
and effectiveness of the device to the FDA’s satisfaction.
PMA application must provide preclinical and clinical
trial data as well as information about the device and its components regarding, among other things, device design, manufacturing and
labeling. As part of the PMA review, the FDA will inspect the manufacturer’s facilities for compliance with cGMP and QSR requirements,
which include elaborate testing, control, documentation and other quality assurance procedures. During the FDA’s review, an FDA
advisory committee, typically a panel of clinicians, likely will be convened to review the application and recommend to the FDA whether,
or upon what conditions, the device should be approved. Although the FDA is not bound by the advisory panel decision, the panel’s
recommendation is important to the FDA’s overall decision-making process. If the FDA’s evaluation of the PMA application is
favorable, the FDA typically issues an “approvable letter” requiring the applicant’s agreement to comply with specific
conditions or to supply specific additional data or information in order to secure final PMA approval.
Once the approvable letter conditions are satisfied,
the FDA will issue a PMA order for the approved indications, which can be more limited than those originally sought by the manufacturer.
The PMA order can include post-approval conditions that the FDA believes necessary to ensure the safety and effectiveness of the device
including, among other things, restrictions on labeling, promotion, sale and distribution. Failure to comply with the conditions of approval
can result in an enforcement action, including withdrawal of the approval. After approval of a PMA, a new PMA or PMA supplement may be
required in the event of modifications to the device, its labeling or its manufacturing process.
A clinical trial may be required to support a
510(k) submission and generally is required for a PMA application. Such trials generally require an Investigational Device Exemption,
or IDE, application be approved in advance by the FDA for a specified number of patients and study sites, unless the product is deemed
an insignificant risk device eligible for more abbreviated IDE requirements. The IDE must be supported by appropriate data, such as animal
and laboratory testing results. Clinical trials may begin if the FDA and the appropriate institutional review boards at the clinical trial
sites approve the IDE. Trials must be conducted in conformance with FDA regulations and institutional review board requirements.
In order for us to market our products in other
countries, we must obtain regulatory approvals and comply with safety and quality regulations in those countries. These regulations, including
the requirements for approval or clearance and the time required for regulatory review, vary from country to country.
To expedite securing approvals to market, we initially
retained the services of HPG, a consulting firm experienced in securing U.S. and foreign approvals to market medical devices. HPG prepared
and filed an application with the FDA for our initial medical robotic system and participated in the initial pre-collaboration meeting
with the FDA in August 2019. This is the first of a series of meetings where the Avra system and its regulatory requirements will be discussed
in ever-increasing specificity. We believe that this should allow us to closely focus on only the meaningful activities saving both resources
and time. The robotic arm we will utilize for our system has already been approved in the EU and received a CE mark. The Company has begun
implementing a quality and regulatory system that will serve as the foundation for U.S., Canadian, European, Australian, Japanese, and
Brazilian market access for our medical robotic system. The Medical Device Single Audit Program, which we are employing, is a single inspection
that, when completed, is expected to support market access to these six most important medical device marketplaces.
Our regulatory strategy has been designed so that
once the first treatment is approved then following treatments, such as those using lasers, should enjoy a much quicker time to approval.
Our expected timeline may change depending on available resources and FDA response times.
We plan to be registered via the MDSAP in accordance
with the requirements of the U.S. FDA, Health Canada, Australian TGA, MHLW Japan, ANVISA of Brazil and the EU Medical Device Regulation,
and plan to have completed integration testing for the system (controller, computer, arm, cabling, end-effector and the software) for
at least two medical systems within two years of receipt of required funding.
Depending upon the terms of our agreement with
the FDA on the need for and depth of proof of concept and clinical trial testing we believe that we should have completed the proof of
concept and human clinical trial portion within one year of our agreement with them. We would then hold market clearances for our robotic
system from the U.S. FDA, Health Canada, and CE Marking under the European Medical Directive. At around the same time, we believe that
we will have made substantial progress toward market clearances in Australia, Japan and Brazil.
Manufacturing and Sources of Supply
We plan to initially assemble our systems in our
own facilities and will only begin using contract manufacturers when the volume of systems being sold becomes sufficiently large to justify
outsourcing. Most of the components used in our initial medical robotic system consist of existing hardware technologies relatively easily
available from multiple sources. We will then make any required modifications to allow them to be assembled on site. Recent advances in
such manufacturing techniques as 3D printing should allow us to do so relatively quickly. The software integration into our initial medical
robotic system, calibration and testing is expected to be done on site as well. We have already identified potential manufacturers for
the modified end-effectors, such as the microneedling tool, and other components we will integrate into the system.
Intellectual Property
Our proprietary software and algorithms are expected
to be one of the greatest value drivers for the Company. The software and AI links all our robotic system’s various sensors, systems
and tools and allows them to work seamlessly together to complete procedures autonomously given the treatment parameters provided by the
operator.
To date, we have submitted six provisional patents
which, upon further review internally with our IP counsel, were subsequently combined into one (1) international utility patent application.
This consolidation brought together the various parts of our AIIGS. In addition, it included broad device claims involving the combination
of a navigation system, sensors, a variety of end-effectors, and the robotic arm. The national stages of the international patent application
were then submitted in the U.S. in July 2018 and in Brazil in December 2018. In April 2018, we also submitted a U.S. design patent application,
specifically applied to the robotic arm segment housing. This design patent application was subsequently filed in Canada in October 2019.
We intend to continue filing, as necessary, patent
applications in the U.S., as well as in other jurisdictions where we intend to market our products and where the dates of our initial
patent applications will give us a right of priority.
We also expect to accumulate a tremendous amount
of data as needed for its AI and DL systems. This should result in continuous improvements in patient outcomes. This proprietary data
should not only be of value to Avra, but may also be of value to third parties in the aesthetics world.
Research Partnership with UCF
Effective as of May 2016, we entered into a Research
Agreement with UCF (the “Research Agreement”) establishing a research partnership for the development of a prototype
surgical robotic device supporting minimal invasive surgical facial corrections. Pursuant to the Research Agreement, UCF provided personnel
for the development of prototype navigation and control software for the robotic medical device and the integration of all the necessary
subcomponents. UCF engineering doctoral students under the direction of Professor of Electrical Engineering Zhihua Qu assisted Avra with
its research and development efforts in autonomous medical robotics pursuant to the Research Agreement, which was extended several times
and finally expired in April 2021. We provided funding of $163,307 for the project, which was supplemented by a $68,952 matching funds
grant from the Florida High Tech Corridor Council. In addition, Avra paid UCF $43,548 for outright ownership of work developed by UCF
in the collaboration.
Competition
The development and commercialization of medical
devices is highly competitive. We will compete with a variety of multinational companies and specialized medical device companies, as
well as technology being developed at universities and other research institutions.
As our technology would replace current handheld
solutions, our natural competition would be existing manufacturers of those handheld devices such as Hologic’s Cynosure, Syneron
Medical, and Lumenis. The current aesthetics device market is fragmented with no single company dominating the sector, particularly in
the laser and micro-needling segments. Based on our research and communications with the FDA, we are not currently aware of any companies
developing an autonomous robotic approach to aesthetics procedures.
As our strategy includes building a robotic platform
system that would work with any handheld device, we are not tied to any particular treatment or device and could potentially partner with
manufacturers of any particular end-effector technology versus competing with them. This strategy also ensures that our aesthetics solutions
never become outdated as we would only need to adapt emerging end-effector instrumentation and technology to our robotic system.
Employees
As of the date of this report the Company has
four full-time and six part-time employees, including certain executive officers. We also rely on independent third-party consultants
to perform additional services as needed. As we implement our business plan and subject to the availability of capital, additional employees
will be hired to meet the needs of our growth. We currently have agreements with several individuals, particularly in the software, artificial
intelligence and engineering disciplines, who are currently working on a part-time basis, but will become full-time Avra employees upon
financing.
Item 1A. Risk Factors.
As a “smaller reporting company,”
as defined in Rule 12b-2 under the Securities Exchange Act of 1924, as amended (the “Exchange Act”), we are not required
to provide the information required by this Item.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
The Company currently does not own any properties
but leases an office from UCF at 3259 Progress Drive, Suite 114, Orlando, FL 32826 under a lease expiring July 31, 2023, at a rental of
$2,082.64 per month.
Item 3. Legal Proceedings.
Currently there are no legal proceedings pending
or threatened against us. However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in
the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in any such matter may harm our
business.
Item 4. Mine Safety Disclosures.
Not applicable.
PART III
Item 10. Directors, Executive Officers and
Corporate Governance.
Our directors and executive officers and their
respective ages and titles are as follows:
| Name |
|
Age |
|
Position(s) and Office(s) Held |
| Barry F. Cohen |
|
83 |
|
Chief Executive Officer. Acting Chief Financial Officer and Director |
| Dr. Ray Powers |
|
77 |
|
Chief Operating Officer |
| Farhan Taghizadeh, M.D. |
|
51 |
|
Chief Medical Officer |
| Alen Sands York |
|
91 |
|
Director |
| Ettore Tomasetti |
|
83 |
|
Director |
Set forth below is a brief description of the
background and business experience of our directors and executive officers.
Barry F. Cohen founded the Company and
has served as its Chief Executive Officer and a director since February 4, 2015. Between 2006 and 2008, Mr. Cohen was a private investor
and founded AVRA Surgical, Inc., a medical technology company. Prior to founding AVRA, Mr. Cohen was a director of Dualis Med-Tech from
2012 to 2014 and has been a director of AvraMiro since 2009 and Avra Surgical Robotics, Inc. since 2011, which companies are currently
inactive. From approximately 1979 to 1983 he served as director of Synalloy Corp., a manufacturer of pipe, piping systems and specialty
chemicals after which he was appointed to serve as President from 1984 to 1985. Mr. Cohen also served as Chairman of the Executive Board
of Wolverine Technologies, Inc., a NYSE listed company from 1979 to 1983 and President of Barry F. Cohen & Co., an NASD (n/k/a FINRA)
member firm from 1983 to 1999. Mr. Cohen has over 50 years’ experience in managing private and public industrial companies, and
47 years’ experience as a securities executive. This significant experience qualifies Mr. Cohen to serve as a director.
Dr. Ray Powers, who became our Chief Operating
Officer on August 1. 2016, was an executive within the Bell System for 30 years prior to moving on to C-level positions in the technology
sector serving in both private and public companies. He has served as Director of Standards for the Project Management Institute, and
on their Board of Directors as well as on several non-profit boards. During the last 5 years, he has been a full-time professor and administrator
in higher education. In December 2015, Dr. Powers and his spouse filed a petition for bankruptcy protection under Chapter 11 of the Bankruptcy
Code. Their plan of reorganization was confirmed and the bankruptcy was discharged in December 2016. Dr. Powers holds a professional project
manager credential (PMP); a bachelor of science degree in business from Arizona State University; a master of arts degree in education;
a master of arts degree in business (MBA); and a doctorate degree in leadership (EdD).
Farhan Taghizadeh, M.D., 45, became our
Chief Medical Officer on September 15, 2017, after serving as a member of our Medical Advisory Board since October 1, 2016. Dr. Taghizadeh
received his undergraduate degree from Yale University and attended medical school at Penn State University. He completed his residency
at the University of Rochester in Rochester, New York and his post-residency fellowship at the University of Bern, Switzerland. Dr. Taghizadeh
has authored numerous publications and received many honors. He is certified by the American Board of Otolaryngology-Head and Neck Surgery.
Dr. Taghizadeh is an expert in facial rejuvenation, having performed over 3,000 face lifts and thousands of laser procedures. He has authored
numerous publications, spoken at many national meetings, and has been involved as a consultant and luminary with various companies in
the facial aesthetic arena. Dr. Taghizadeh holds various patents in the field of personalized skincare and automated aesthetic devices.
He completed the FDA studies for the Vivace, an advanced RF Microneedling technology, and in 2015, founded Aesthetics Biomedical, a thought
leader in the innovation of treatment serums, masks, numbing cream and recovery agents to optimize the results of the treatments they
design. In 2014, Dr. Taghizadeh co-founded Omni Bioceutical Innovations, an innovative skin treatment and care solutions company, which
was a presenter at MEIDAM in 2017. Dr. Taghizadeh also founded Amnioaesthetics, a company launched in 2016, which is dedicated to advancing
amniotic products in the space of regenerative skin and hair care. He has also served as the Chief Medical Director of Arizona Facial
Plastics since 2016. Dr. Taghizadeh’s interest in robotics stems from his 2013 publication outlining the steps to use robots to
conduct facial cosmetic procedures. His recent research focuses on advancing various laser applications, robotics and personalized skincare
solutions.
Alen Sands York who became a Director on
March 1, 2020, has over sixty years of entrepreneurial and international business experience. From managing a third-generation family
home textile company in the USA and Germany to diverse ventures in advertising, public relations, international marketing, automotive
and marine industries, industrial design, motion pictures, restaurants, wine and spirits. He is multilingual, an artist, published author
and poet. He has worked in the USA, Cuba, Mexico, Japan, the UK, Hong Kong, the Philippines, and Germany. His family has a medical background
and for the last ten years has been dedicated to the development of surgical robotics internationally. We believe that Mr. York’s
business experience makes him a valuable member of our Board of Directors.
Mr. Ettore Tomassetti who became a Director
on March 1, 2020, has over fifty-five years of experience in Electromechanical Design and Fabrication, Food Processing, Building Sciences
and Customer Service. After several years of Military Service, he went on to managing/directing a variety of service and manufacturing
companies. His business acumen allowed him to secure contractual agreements with commercial and retail businesses in Germany, Canada,
Mexico, UK and throughout the Caribbean Islands. For the past five years he has been involved in the design and fabrication of medical
robotic instruments and air sanitizing devices. Given his experience, we believe that Mr. Tomassetti is well qualified to serve as a Director
of the Company.
Terms of Office
Our directors are appointed for a one-year term
to hold office until the next annual meeting of our shareholders and until a successor is appointed and qualified, or until their removal,
resignation, or death. Executive officers serve at the pleasure of the board of directors.
Director Independence
At present, we believe that our two non-employee
directors (Messrs. York and Tomassetti) are “independent” as defined under Rule 10A-3(b)(1) under the Exchange Act.
Board Committees
Our board of directors does not currently have
an audit committee, a compensation committee, or a corporate governance committee. We plan to establish such committees in the near future,
all the members of which will be “independent” directors.
Code of Ethics
We have we adopted a Code of Ethics that applies
to employees, including our principal executive officer, principal financial officer, or persons performing similar functions.
Board of Directors Role in Risk Oversight
Members of the board of directors have periodic
meetings with management and the Company’s independent auditors to perform risk oversight with respect to the Company’s internal
control processes. The Company believes that the board’s role in risk oversight does not materially affect the leadership structure
of the Company.
Medical Advisory Board
The Company has also established a medical advisory
board, whose members meet periodically in person or by telephone with management and/or the board of directors to advise on scientific,
product development and marketing matters. The current members of the medical advisory board are:
Dr. Nikhil L. Shah, D.O., who served as
a director of the Company from October 1, 2016 until March 1, 2018, at which time he stepped down from such position and became the Company’s
Chief Strategy Officer until March 1, 2020, at which time he stepped down as an executive officer of the Company, but continued in the
role of the Company’s Chief Strategy Officer on an advisory basis. Dr. Shah is one of the top global leaders in robotic surgery
and is currently the Chief of Minimal Access and Robotic Surgery at Piedmont Healthcare in Atlanta, GA. He previously served as the Director
of Urology and Urologic Oncology at Piedmont Atlanta Hospital from 2012 to 2016. He holds an Associate Professor (adjunct) at the Georgia
Institute of Technology in the College of Computing — Robotics & Intelligent Machines. Prior positions also include the Section
Chief of Urology, Department of Surgery, Saint Joseph’s Hospital of Atlanta, and the Director of Robotic Surgery, Saint Joseph’s
Hospital of Atlanta. Dr. Shah is founder and board member of the Men’s Health & Wellness Center in Atlanta. This is a 501(3)(c)
non-profit that works to educate men on screening and prevention for all health issues affecting the aging male as well as awareness of
cancer conditions affecting men and their partners. Given his experience, he has been an invited speaker and advisor for organizations
in the financial arena, academia and medical device Industry. Dr. Shah has a Bachelor’s of Science (B.S.) degree in Neurobiology
from the University of Michigan in Ann Arbor, a Master’s in Health Management & Health Policy from the University of Michigan
in Ann Arbor, and his Doctor of Osteopathic Medicine (D.O.) degree from the Kirksville College of Osteopathic Medicine.
Dr. Vipul Patel, M.D., is Medical Director
of the Global Robotics Institute at Florida Hospital. Founder of the Society of Robotic Surgery, Dr. Patel has personally performed the
most robotic surgeries in the world, 12,000+ robotic prostatectomies. He is the editor emeritus of The Journal of Robotic Surgery and
editor of the first-ever robotic urology textbook. He is a professor of urology at the University of Central Florida, College of Medicine
in Orlando, Florida, and a clinical associate professor of urology at Nova Southeastern University, also in Orlando. He is the founder
of the International Prostate Cancer Foundation and a founding member of the Society of Robotic Surgery. He serves as an honorary professor
at the University of Milan, Korea University and Ricardo Palma University in Lima, Peru, and was recently made an honorary professor of
the Russian Academy of Science. Dr. Patel received his Bachelor of Science degree in Biological Science from the University of Southern
California, Los Angeles, California and his Medical Degree from Baylor College of Medicine, Houston, Texas.
Dr. Juan Jose Badimon, Ph.D., is a Professor
of Medicine and Director of the Atherothrombosis Research Unit at the Cardiovascular Institute, Mount Sinai School of Medicine, New York.
His academic appointments include the Mayo Clinic, Massachusetts General Hospital, Harvard University, Boston, and Mount Sinai School
of Medicine, New York. His major research interests are focused on pathogenesis and treatment of atherothrombosis and cardiovascular diseases.
Dr. Badimon has published more than 370 peer-reviewed articles in athero-thrombosis, imaging and cardiovascular diseases. He serves as
reviewer for 10 of the top journals in cardiovascular diseases. Dr. Badimon holds a Pharmacy degree from the University of Barcelona and
a Ph.D. degree in Pharmacology from the University of Barcelona.
Dr. Heywood Y. Epstein, M.D., was Chief
Resident in Radiation Therapy at Montefiore Hospital in the Bronx, NY, Assistant Professor of Radiology at Columbia Physicians and
Surgeons, New York University, Mount Sinai Medical School in New York City, and SUNY at Stony Brook on Long Island. While in the U.S.
Public Health Service (“USPHS”) he was both Director of Staten Island Radiology Residency Program, Director of their Radiology
Technologist Training Program, and USPHS radiation safety officer for the Northeast United States. Dr. Epstein helped establish NYU’s
first ultrasound section in their Radiology Department and has co-authored 25 articles for juried journals. Dr. Epstein has performed
approximately 10,000 angiograms and interventional radiographic procedures, in addition to another 10,000 breast biopsies guided by ultrasound,
and stereotactically Dr. Epstein holds a bachelor’s degree in biology from Harvard University and received his Medical Degree from
State University of New York.
Dr. Jochen Binder, M.D., was the first
physician worldwide to perform a daVinci® prostate surgery in 2000, and in 2005 Dr. Binder received Recognition of the First daVinci®
Prostatectomy, European Robotic Urology Symposium ERUS, Geneva. His live surgeries have been televised via global viewing. He is a published
author and the subject of many articles and reviews. He was Chief of the Urology Department at Universitatsklinikum Frankfurt am Main,
Klinik fur Urologie und Kinderurologie and Kantonsspital, Frauenfeld, Switzerland. He is currently with Klinik Seeschau Kreuzlingen, Klinik
Hirslanden Zurich, Spital Mannedorf and Klinik Uroviva Bulach. Dr. Binder has a Professor Doctorate (PD) from the University of Frankfurt
and received his Medical
Degree from the University of Glessen, Germany.
Members of the medical advisory board are compensated
through the grant of a stock option awards under our 2016 Incentive Stock Plan. Except for Dr. Shah, current members each received a five-year
option to purchase 36,000 shares at an exercise price equal to fair market value as of the date of grant, 6,000 shares of which vested
upon grant and the balance of which vest in twelve quarterly installments of 2,500 shares each, subject to continued service. Dr. Shah
received a five-year option to purchase 108,000 shares at an exercise price equal to fair market value as of the date of grant vesting
in thirty-six monthly installments of 3,000 shares each, subject to continued service.
Scientific Advisory Board
The Company has also established a scientific
advisory board, whose members meet periodically in person or by telephone with management and/or the board of directors to advise on scientific,
product development and marketing matters. Set forth below is a brief description of the background and business experience of the current
members of our scientific advisory board.
Andrew M. Economos, Ph.D., initially worked
in the aerospace computing industry in Los Angeles, and after some years moved to Princeton to work in RCA’s Sarnoff Labs. From
there he went to RCA subsidiary company NBC in New York, where he was Vice President of Management Information Services, managing the
immense computing needs of NBC. From there he founded and led a highly successful broadcast software company, Radio Computing Services,
which he sold in 2006 to Clear Channel Communications (now iHeartMedia). He has served on The New York Botanical Garden’s Science
Committee and Corporation Board, the Board of Selby Gardens in Sarasota, and the Board of the Science Committee of Westchester Community
College. Dr. Economos earned his M.S in Mathematics at the University of Florida and his Ph.D. in Mathematical Statistics at UCLA.
Fred Nazem, Ph.D., has been building highly
disruptive, industry-leading healthcare and technology companies since the late 1970’s. He is best known as the turnaround specialist
who, as Chairman, led the successful reorganization of Oxford Health Plans, which was later sold to United Healthcare for more than $6
billion. A number of his start-up ventures, including Cirrus Logic Inc., Bluebird Bio, and Genesis Health Ventures, have grown to become
billion-dollar enterprises and more than a dozen of them have achieved multi-billion-dollar revenue status. A scientist turned financier,
Mr. Nazem holds a bachelor’s degree in biochemistry from Ohio University, a master’s degree in physical chemistry from the
University of Cincinnati, and an MBA in finance from Columbia University.
Bijan Safai, M.D., D.Sc., was trained in internal
medicine and dermatology at NYU Medical School and completed a fellowship in immunology at Memorial Sloan Kettering Cancer Center (“MSKCC”).
He continued his career at MSKCC where he established a dermatology program to include research, education and patient care. During
his tenure, he developed programs for the management of various skin cancers, lymphoma of the skin and Kaposi’s Sarcoma. Dr. Safai
has a bachelor’s degree from the University of Tehran, Iran, a Medical Degree from Tehran University School of Medicine in Iran
and a Doctor of Medical Sciences (D.Sc.) in immunology from the University of Gutenberg, Sweden.
Members of the scientific advisory board are compensated
through the grant of a stock option awards under our 2016 Incentive Stock Plan. Current members each received a five-year option to purchase
shares at an exercise price equal to fair market value as of the date of grant, subject to continued service.
Item 11. Executive Compensation.
Summary Compensation Table
The table below summarizes all compensation awarded
to, earned by, or paid to our Chief Executive Officer and our other executive officers for the years ended December 31, 2021, December
31, 2020, and December 31, 2019.
| Name and Principal
Position | |
Year | | |
Salary
($) | | |
Bonus
($) | | |
Stock
Awards
(#) | | |
Option
Awards
(#) | | |
Option
Awards
($) | | |
Non-Equity
Incentive Plan
Compensation
($) | | |
Nonqualified
Deferred
Compensation
Earnings ($) | | |
All
Other
Compensation
($) | | |
Total
($) | |
| Barry F. Cohen, | |
| 2021 | | |
| 0 | | |
| | | |
| | | |
| 0 | | |
| 0 | | |
| | | |
| | | |
| 0 | | |
| 0 | |
| Chairman and | |
| 2020 | | |
| 180,000 | | |
| 0 | | |
| 0 | | |
| 1,000,000 | | |
| 145,050 | | |
| 0 | | |
| 0 | | |
| 6,000 | | |
| 331,050 | |
| Chief
Executive Officer(1) | |
| 2019 | | |
| 180,000 | | |
| 0 | | |
| 0 | | |
| 750,000 | | |
| 938,584 | | |
| 0 | | |
| 0 | | |
| 6,000 | | |
| 1,124,584 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Ray Powers, | |
| 2021 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Chief Operating Officer | |
| 2020 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| 2019 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Farhan Taghizadeh, M.D., | |
| 2021 | | |
| 0 | | |
| 0 | | |
| 60,000 | | |
| 29,167 | | |
| 653 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 653 | |
| Chief Medical Officer(2) | |
| 2020 | | |
| 0 | | |
| 0 | | |
| 76,000 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| 2019 | | |
| 0 | | |
| 0 | | |
| 76,000 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Nikhil Shah, M.D., | |
| 2021 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 16,667 | | |
| 373 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 373 | |
| Chief Strategy Officer(3) | |
| 2020 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 108,000 | | |
| 25,342 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 25,342 | |
| | |
| 2019 | | |
| 0 | | |
| 0 | | |
| 300,000 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| (1) | Pursuant
to a conversion agreement with the Company, $39,000 in accrued but unpaid salary due Mr. Cohen at December 31, 2017 was converted into
19,500 shares of our common stock in 2018. As of December 1, 2019 Mr. Cohen was granted an option for 750,000 shares all vesting immediately.
Per Mr. Cohen’s renewed employment agreement dated July 1, 2020, he was granted an option for 1,000,000 shares all vesting immediately. |
| (2) | Dr.
Taghizadeh became the Company’s Chief Medical Officer on September 15, 2017, at which time he was awarded a grant of 20,000 shares
of common stock under our 2016 Incentive Stock Plan and a grant of 5,000 shares under our 2016 Incentive Stock Plan for each subsequent
month in which he serves in such capacity. As of May 1, 2019, the 5,000 shares per month was increased to 7,000 shares per month. As
of September 15, 2020 the number of shares per month was reduced to 5,000 per month. On October 1, 2021 Dr. Taghizadeh was awarded an
option for 350,000 shares, vesting in equal monthly installments over 36 months. |
| (3) | Dr.
Shah became our Chief Strategy Officer on March 1, 2018, at which time he was awarded a stock grant of 300,000 shares, with 60,000 of
those shares vesting on each yearly anniversary of his employment date, as long as he remains employed by the Company. On May 1, 2018,
Dr. Shah was awarded an option for 250,000 shares of common stock under our 2016 Incentive Stock Plan vesting in equal monthly installments
over 36 months. On April 15, 2019, Dr. Shah was awarded a stock grant of 300,000 shares, with 100,000 of those shares vesting on each
yearly anniversary of the award date, as long as he remains employed by the Company. Dr. Shah was granted an option for 108,000 shares
on March 1, 2020 vesting in equal monthly installments over 36 months. Dr. Shah stepped down as an executive officer effective March
1, 2020, but has continued as our Chief Strategy Officer in an advisory capacity. On October 1, 2021 Dr. Shah was awarded an option for
200,000 shares, vesting in equal monthly installments over 36 months. |
Employment and Service Agreements
The Company is party to an employment agreement
with Barry F. Cohen, its Chief Executive Officer. Mr. Cohen’s employment agreement currently expires June 30, 2024 and provides
for a base salary currently set at $15,000 per month. The employment agreement also provides for reimbursement of other reasonable business
expenses incurred by Mr. Cohen in the performance of his duties and contains confidentiality and non-competition provisions. We are also
party to “at will” service agreements with our Chief Medical Officer, Dr. Farhan Taghizadeh and our Chief Operating
Officer, Ray Powers.
Outstanding Equity Awards at Fiscal Year-End
Table
The table below summarizes all unexercised options,
stock that has not vested, and equity incentive plan awards for each of our executive officers outstanding as of December 31, 2021.
| | |
Number of
Securities
Underlying
Unexercised
Options
Exercisable | | |
Number of
Securities
Underlying
Unexercised
Options
Unexercisable | | |
Option
Exercise
Price | | |
Option
Expiration
Date | |
Number of
Shares that
have not vested | | |
Market
value of
shares of
stock that
have not
vested* | |
| | |
| | |
| | |
| | |
| |
| | |
| |
| Barry F. Cohen | |
| 750,000 | | |
| 750,000 | | |
$ | 1.00 | | |
12/1/2024 | |
| 0 | | |
| 0 | |
| Barry F. Cohen | |
| 389,000 | | |
| 389,000 | | |
| 0.25 | | |
3/1/2025 | |
| 0 | | |
| 0 | |
| Barry F. Cohen | |
| 1,000,000 | | |
| 1,000,000 | | |
$ | 0.25 | | |
7/1/2025 | |
| 0 | | |
| 0 | |
| Barry F. Cohen | |
| 390,000 | | |
| 390,000 | | |
$ | 0.25 | | |
12/22/2025 | |
| 0 | | |
| 0 | |
| Barry F. Cohen | |
| 1,000,000 | | |
| 1,000,000 | | |
$ | 0.25 | | |
10/1/2026 | |
| 0 | | |
| 0 | |
| Dr. Ray Powers (1) | |
| 0 | | |
| 0 | | |
| $ | | |
| |
| 0 | | |
| 0 | |
| Farhan Taghizadeh, M.D.(2) | |
| 29,167 | | |
| 350,000 | | |
$ | 0.25 | | |
10/01/2026 | |
| 320,833 | | |
| 653 | |
| Nikhil L. Shah, D.O.(3) | |
| 250,000 | | |
| 250,000 | | |
$ | 1.25 | | |
05/01/2023 | |
| 0 | | |
| 0 | |
| Nikhil L. Shah, D.O.(3) | |
| 66,000 | | |
| 108,000 | | |
$ | 0.25 | | |
03/01/2025 | |
| 42,000 | | |
| 15,487 | |
| Nikhil L. Shah, D.O.(3) | |
| 16,667 | | |
| 200,000 | | |
$ | 0.25 | | |
10/01/2026 | |
| 183,333 | | |
| 373 | |
|
(1)
(2)
(3) |
Dr. Powers exercised 75,000 options on July 27,
2021.
Dr. Taghizadeh exercised 36,000 options on July
27, 2021.
Dr. Shah stepped down as an executive officer
effective March 1, 2020. Dr. Shah exercised 102,361 options on July 27, 2021. |
Compensation of Directors
On March 1, 2020 our Director Mr. Peter Carnegie
resigned and was replaced on the same date by Mr. Ettore Tomassetti.
On March 1, 2020 both of our Independent Directors
received an Option for 36,000 restricted common shares of our Company with an exercise price of $0.25 per share and vesting equally over
36 months.
On October 1, 2021 both of our Independent Directors
received an Option for 50,000 restricted common shares of our Company with an exercise price of $0.25 per share and vesting equally over
36 months.
2016 Incentive Stock Plan
Our 2016 Incentive Stock Plan (the “2016
Plan”) provides for equity incentives to be granted to our employees, executive officers or directors or to key advisers or
consultants. Equity incentives may be in the form of stock options with an exercise price not less than the fair market value of the underlying
shares as determined pursuant to the 2016 Plan, restricted stock awards, other stock-based awards, or any combination of the foregoing.
The 2016 Plan is administered by the compensation committee, or alternatively, if there is no compensation committee, the board of directors.
3,000,000 shares of our common stock were originally reserved for issuance pursuant to the exercise of awards under the 2016 Plan. In
August 2019, our board of directors and our majority shareholders approved an increase in the number of shares reserved under the 2016
Plan to 10,000,000 shares of our common stock. Our board of directors and majority shareholders in July 2022, approved a subsequent increase
in the number of shares of our common stock reserved under the 2016 Plan to 20,000,000 shares of common stock. As of the date of this
report, we have granted options to purchase 16,056,000 shares under the 2016 Plan, exercisable at prices ranging from of $0.10 to $2.00
per share and 3,113,000 shares in stock grants. As of December 31, 2021, the Company has granted options to purchase 7,815,361 shares
under the 2016 Plan, exercisable at prices ranging from of $0.10 to $2.00 per share and 2,903,000 shares in stock grants.
Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of the date
of this report, the beneficial ownership of our common stock by each director and executive officer, by each person known by us to beneficially
own 5% or more of our common stock and by directors and executive officers as a group. Unless otherwise stated, the address
of the persons set forth in the table is c/o the Company, 3259 Progress Drive, Suite 114, Orlando, FL 32826.
| Names and addresses of beneficial owners | |
Number of shares
of common
stock* | | |
Percentage of
class (%)* | |
| Barry F. Cohen (1) | |
| 22,917,768 | | |
| 54.75 | |
| Avra Acquisitions, LLC | |
| 908,700 | | |
| 2.32 | |
| Dr. Ray Powers(2) | |
| 89,444 | | |
| ** | |
| Farhan Taghizadeh , M.D.(3) | |
| 997,944 | | |
| 2.52 | |
| Alen Sands York(4) | |
| 565,188 | | |
| 1.44 | |
| Ettore Tomasetti(5) | |
| 103,444 | | |
| ** | |
| All directors and executive officers as a group (five persons) | |
| 25,582,488 | | |
| 61.53 | |
| * |
Includes shares issuable upon the exercise of options within sixty (60) days of the date of this prospectus. |
| (1) | Includes
22,917,768 shares owned by Mr. Cohen directly of which 8,319,000 are shares issuable upon the exercise of stock options, and 908,700
shares held by Avra Acquisitions, LLC of which Mr. Cohen is managing member and over which shares Mr. Cohen exercises voting and dispositive
control. |
| (2) | Includes
89,444 shares owned by Dr. Powers directly. |
| (3) | Includes
997,944 shares owned by Dr. Taghizadeh directly of which 606,944 are shares issuable upon the exercise of stock options. |
| (4) | Includes
565,188 shares owned by Mr. York directly of which 52,444 are shares issuable upon the exercise of stock options. |
| (5) | Includes
103,444 shares owned by Mr. Tomassetti directly of which 52,444 are shares issuable upon the exercise of stock options. |
The persons named above have full voting and investment
power with respect to the shares indicated. Under the rules of the SEC, a person (or group of persons) is deemed to be a “beneficial
owner” of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security,
or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial
owner of the same security.
Securities Authorized for Issuance under Equity
Compensation Plans
| Plan category | |
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights | | |
Weighted-average
exercise price of
outstanding
options, warrants
and rights | | |
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding securities
reflected in
column (a)) | |
| Equity compensation plans approved by security holders | |
| 5,926,000 shares | (1) | |
$ | 0.528 | | |
| 4,074,000shares
| (1) |
| Equity compensation plans not approved by security holders | |
| 0 shares | | |
| None issued | | |
| 0
shares | |
| Total | |
| 5,926,000 shares | (1) | |
$ | 0.528 | | |
| 4,074,000
shares | (1) |
| (1) |
Represents shares of common stock under the 2016 Plan. |
Item 13. Certain Relationships and
Related Transactions, and Director Independence.
Related Party Transactions
We describe below transactions since January 1,
2019, to which we were a party or will be a party, in which the amounts involved exceeded or will exceed the lesser of $120,000 or one
percent of the average of our total assets at year-end for the last two completed fiscal years ending December 31, 2021; and any of our
directors, nominees for director, executive officers or holders of more than 5% of our outstanding capital stock, or any immediate family
member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material
interest.
We have granted stock options to our named executive
officers and certain of our directors. See the section titled “Executive Compensation — Outstanding Equity Awards at Year-End”
for a description of these stock options.
We are party to an employment agreement with our
Chief Executive Officer, which, among other matters, provides for certain severance and change in control benefits. See the section titled
“Executive Compensation— Employment Agreement” for a description of this agreement.
During 2018, compensation owed the late A. Christian
Schauer, and former director for the period from January 1, 2018, until his resignation as an executive officer on February 28, 2018,
was converted into 9,000 shares of our common stock during 2018.
In December 2018, the Company obtained loans from
the late A. Christian Schauer, our former Chief Financial Officer and a non-affiliated shareholder, in the principal amounts of, $20,000
and $15,000, respectively. The loans were due December 31, 2019 and did not bear interest, other than the loan obtained from the non-affiliated
shareholder, which bore interest at the rate of 4% per annum, payable upon maturity. In December 2019, the loan from Mr. Schauer was converted
into 13,334 shares of our common stock, and the non-affiliated shareholder loan was repaid in full.
In addition to the foregoing, from December 2018
thru October 2020, the Company obtained sixteen loans from Barry F. Cohen, our Chief Executive Officer totaling $497,700. The loans were
due 12 months from funding date and did not bear interest. With the exception of two loans totaling $145,000, all of these loans were
subsequently repaid in full via conversions into restricted company shares or Units, totaling 1,195,415 restricted common shares and warrants
to purchase 1,013,500 restricted common shares, and one loan for $100,000 was used to exercise an Option for 1,000,000 shares granted
under our 2016 Plan to Mr. Cohen.
On April 15, 2019 Dr. Shah, the Company’s
Chief Strategy Officer, was issued a performance bonus in the form of a stock grant under the 2016 Plan, in the amount of 300,000 shares
of our common stock per a vesting schedule. 100,000 shares vest on each yearly anniversary of the grant.
On December 1, 2019 the Board of Directors issued
a bonus to Mr. Cohen as allowed under his Employment Agreement in the form of an option to purchase 750,000 shares of the Company’s
common stock at an exercise price of $1.00.
In March 2020 the Company issued a total of 389,000
stock options to the Company’s CEO with an exercise price of $0.25 per option for the extension of loans.
In December 2020 the Company issued a total of 390,000
stock options to the Company’s CEO with an exercise price of $0.25 per option for the extension of loans.
In July 2021 the Company issued a total of 90,987
shares to Dr, Nikhil Shah, Chief Strategy Officer, with an exercise price of $0.15 per option as a result of a ‘cashless’
exercise of an option for 102,361 shares.
In July 2021 the Company issued a total of 32,000
shares to Dr. Farhan Taghizadeh, Chief Medical Officer, with an exercise price of $0.15 per option as a result of a ‘cashless’
exercise of an option for 36,000 shares.
In July 2021 the Company issued a total of 69,444
shares to Dr. Ray Powers, Chief Operating Officer, with an exercise price of $0.15 per option as a result of a ‘cashless’
exercise of an option for 75,000 shares.
In October 2021 the Company issued a total of 390,000
stock options to the Company’s CEO with an exercise price of $0.25 per option for the extension of loans.
In October 2021 the Company issued a total of 350,000
stock options to the Company’s Chief Medical Officer with an exercise price of $0.25 per option.
In October 2021 the Company issued a total of 200,000
stock options to the Company’s Chief Strategy Officer with an exercise price of $0.25 per option.
In October 2021 the Company issued a total of 50,000
stock options to the Company’s Independent Director, Alen York, with an exercise price of $0.25 per option.
In October 2021 the Company issued a total of 50,000
stock options to the Company’s Independent Director, Ettore Tomassetti, with an exercise price of $0.25 per option.
Review, Approval and Ratification of Related
Party Transactions
Given our small size and limited financial resources,
we had not adopted formal policies and procedures for the review, approval or ratification of transactions with our executive officers,
directors and significant shareholders. However, we intend that such transactions will, on a going-forward basis, be subject
to the review, approval or ratification of our board of directors, or an appropriate committee thereof.
Item 14. Principal Accounting Fees
and Services.
BF Borgers CPA PC. (“Borgers”)
is our current independent registered public accounting firm and was such for the years ended December 31, 2021 and December 31, 2020.
Audit Fees
Aggregate audit fees billed by Borgers for the
years ended December 31, 2021 and December 31, 2020 was $37,000.
Audit-Related Fees
There were no audit-related fees billed by Borgers
for the years ended December 31, 2021 and December 31, 2020.
Tax Fees
There were no tax fees billed by Borgers for
the years ended December 31, 2021 and December 31, 2020.
Pre-Approval Policy
We do not currently have a standing audit committee.
Provision of the above services was approved by our board of directors.
The accompanying notes are an integral part of
these financial statements.
The accompanying notes are an integral part of
these financial statements.
The accompanying notes are an integral part of
these financial statements.
The accompanying notes are an integral part of
these financial statements.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 – FINANCIAL STATEMENTS
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.
Basis of Presentation
The accompanying financial statements are prepared
on the basis of accounting principles generally accepted in the United States of America (“GAAP”). The Company is a development-stage
enterprise devoting substantial efforts to establishing a new business, financial planning, raising capital, and research into products
which may become part of the Company’s product portfolio. The Company has not realized sales through December 31, 2020. A development
stage company is defined as one in which all efforts are devoted substantially to establishing a new business and, even if planned principal
operations have commenced, revenues are insignificant.
Going Concern
The accompanying financial statements have been
prepared assuming the continuation of the Company as a going concern. At December 31, 2021, the Company’s stockholders’ deficit
was $8,400,668 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 December
31, 2021 and 2020, $147,460 and $0, respectively, 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.
Revenues are recognized when control of the promised
goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange
for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be
recognized as it fulfills its obligations under each of its agreements:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in
the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance
obligations
Step 5: Recognize revenue when the entity satisfies
a performance obligation
As the Company had no business operations during
the year ended December 31, 2021 and 2020 we have not identified specific planned revenue streams.
During the year ended December 31, 2021 and 2020,
we did not recognize any revenue.
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
are as follows:
Equipment -5 years straight-line
The Company originally purchased medical equipment
for a total cost of $75,000 which was 100% financed by the seller. After making several payments, the Company settled with the vendor
due to issues with equipment, and was relieved of the $25,000 balance owed as of first quarter 2020. The total amount paid of $50,000
represents the actual cost. During the year 2021, there is no addition.
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 it has been fully
amortized during the year. The Company originally designed a website in February 2018 for a total cost of $36,000 out of which $14,400
was paid via bank transfer and the balance was paid by issuing 24,000 shares. In 2019, the company incurred a small expense of $121.93
which was paid via bank transfer. $36,000 has been amortized using the straight-line method over its estimated life of 3 years, and $121.93
is amortized in this year.
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 only has stock options 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 – INVESTMENT
On November 6, 2020, AVRA made an investment (the
“Investment”) of $210,000 in Avra Air, LLC which was made with $40,000 in cash and the balance by the issuance to Avra Air,
LLC of 472,222 restricted common shares of AVRA valued at $0.36 per Share. In exchange for the Investment AVRA received (a) a 49.8% limited
liability company membership interest in Avra Air, LLC; and (b) the remaining 50% of a vehicular air sterilization provisional patent
that AVRA did not yet control. In addition, AVRA agreed to pay Avra Air, LLC a royalty payment of $1.50 per vehicular air sterilization
kit for two years from the date that a first kit that uses the patent is sold. On December 22, 2020, the Company issued 472,222 shares
of its common stock towards its acquisition of Avra Air. LLC.
Investment in Avra Air- LLC was reduced by $12,150
in the second quarter of 2021 as a result of an investor’s follow-on investment. An impairment charge of $77,392 was then taken
in the last quarter of 2021. As the $26,000 remaining balance was paid for in the original investment using Avra Medical shares this remaining
balance is considered a buy-back of Avra Medical common shares and are thus treated as treasury shares shown in the equity section of
the balance sheet. This results in a $0 cost on the books for this investment.
NOTE 4 – 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 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 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 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 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 August 21, 2020, the Company borrowed from its CEO, $17,700
under a non interest bearing promissory note which matures on December 31, 2020 (see below). On October 19, 2020, the Company borrowed
from its CEO, $11,500 under a non interest bearing promissory note which matures on December 31, 2021. On December 22, 2020, these notes
totaling $202,700, totaling 202,700 units were all converted into 810,800 shares of common shares and a warrant was issued for 1,013,500
shares with an exercise price of $0.40/share.
On May 4, 2020, the Company borrowed from its
CEO, $2,500. On June 1, 2020, the Company borrowed from its CEO, $4,000. On June 30, 2020, the Company borrowed from its CEO, $5,000.
On July 15, 2020, the Company borrowed from its
CEO, $2,000. On July 20, 2020, the Company borrowed from its CEO, $1,000. On August 7, 2020, the Company borrowed from its CEO, $1,200.
On August 21, 2020, the Company borrowed from its CEO, $2,000. On August 21, 2020, the Company entered into a non interest bearing promissory
note with the total above combined funds of $17,700 which matures on December 31, 2020. This note was then part of the December 22, 2020
conversion (see above).
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 then subsequently
extended to December 31, 2021, and on September 22, 2021 the note was converted into 384,615 shares of common stock. 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 then subsequently extended to December 31, 2021, and on September 22, 2021 the note was converted into 384,615 shares
of common stock... 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 then subsequently extended to December 31, 2021 and then was further extended to
December 31, 2022. 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 December 22, 2020, these notes’ maturity date was extended to December 31, 2021, then was subsequently extended
to December 31, 2022. As an incentive for extending theses notes the Company issued an option for 390,000 common shares with an exercise
price of $0.25/share.
On August 26, 2019, the Company borrowed from
its CEO, $100,000 under a non interest bearing promissory note which matured on December 26, 2019. On January 5, 2020, the related party
used his $100,000 note to exercise his 1,000,000 options to purchase 1,000,000 shares of the Company’s common stock at $0.10 per
share.
During the year ended December 31, 2020 the Company
received a Payroll Protection Loan (PPP Loan) in the amount of $4,630. Prior to December 31, 2020 the Company received forgiveness on
the loan.
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.
NOTE 5 – PROMISSORY NOTES
On December 31, 2018, the Company borrowed $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. This note was paid in full on October 31, 2020.
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 years ended 2020 and 2021, 2,643,635
and 1,175,000 warrants, were valued at $471,825 and $912,489 using a black-scholes pricing model and expensed as stock compensation, respectively.
NOTE 6 – INCOME TAXES
The Company’s deferred tax assets at December
31, 2021 consist of net operating loss carry forwards of $4,393,785. Using a new federal statutory tax rate of 21%, the valuation allowance
balance as of December 31, 2020 total of $0. The increase in the valuation allowance balance for the year ended December 31, 2021 of $221,827
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 years ended December 31, 2021 and 2020.
At December 31, 2021 and 2020, 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 December 31, 2021 and 2020, 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 7 – 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 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 its CEO under a Stock Award letter dated August 28,
2019.
On November 6, 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 0.00008749_% limited liability company membership interest in Avra Air,
LLC (“Avra Air”), a development stage company, which interest may be put to the Company at the option of the investor for
a period of two years from issuance, in exchange for one Share. 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 a 22.4% limited liability company membership interest in Avra Air, LLC.
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 (this amount is included above).
On November 6, 2020, AVRA issued an aggregate
of 321,489 Shares as follows:
| | ● | 10,000 Shares to its Director Arthur Tomassetti per his prior advisory agreement; and |
| | ● | 220,489 Shares to seven consultants, advisors, and service providers for services rendered through November 1, 2020; and |
| | ● | 70,000 Shares to Farhan Taghizadeh, M.D., AVRA’s Chief Medical Officer, for services thru November 1, 2020; and |
| | ● | 21,000 Shares for a stock option exercised by an investor at an exercise price of $0.10 per Share. |
During 2020, the Company’s CEO converted
$302,700 of its notes payable into 1,810,800 shares of common stock.
On December 22, 2020, the Company issued 472,222
shares of its common stock towards its acquisition of Avra Air (See Note 3).
During the first quarter 2021, 1,025,00 shares
at a value ranging from $0.89-$1.07 per share were issued for services rendered.
During the second quarter 2021, 378,378 shares
at a value ranging from $0.89-$1.02 per share were issued for services rendered.
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.
During the last quarter 2021, 3,619,817 shares
at a value ranging from $0.13-$0.89 per share were issued for services rendered.
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.
Holders are entitled to one vote for each share
of common stock. No preferred stock has been issued.
NOTE 8 – 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, 2020 and 2019 options representing
4,327,167 shares and 3,276,667 shares were vested or exercisable, respectively.
All options issued to-date expire after five years
from the issue date. Except for the option for 1,779,000 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 years ended December 31, 2021 and 2020, $159,949 and $412,788, 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 $94,955 as of December 31, 2021. This amount will be recognized over a period of 33
months expiring September 30, 2024.
The grant date fair value of options granted during
the year of 2018 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.
The grant date fair value of options granted during
the year of 2019 were estimated on the grant date using the Black-Scholes model with the following assumptions: 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.
For the warrants granted on October 26, 2020 the
fair market value used was $0.40, exercise $0.40, rate 2%, and volatility 44.35%. The warrants granted on December 22, 2020: Fair market
value used was $0.468, exercise $0.40, rate 2%, and volatility 71.79%. For the options granted on December 22 2020 the fair market value
used was $0.468, exercise $0.25, rate 2%, and volatility 71.79%. For the warrants granted on January 26 2021 the fair market value used
was $0.980, exercise $0.40, rate 2%, and volatility 106.16%.
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
stock options to each of its two independent Directors with an exercise price of $0.25 per option.
On October 1, 2021 the Company issued 350,000 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 stock options to the Company’s CEO with an exercise price of $0.25 per option for the extension
of loans.
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 9 – COMMITMENTS
Intellectual property
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.
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.
The Company agreed to extend funding of $163,307
from AVRA’s existing funds.
The Company 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
year ended December 31, 2019.
For the years ended, December 31, 2021 and 2020,
$-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 would 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.
Effective July, 1, 2020, the Company entered into
an employee agreement with its Chairman and Chief Executive Officer, for a term of 48 months. The employee’s base salary is $15,000
monthly, beginning with the July 2020 payment, which rate shall be inclusive of all claims by the employee for his services. However,
employee agrees to accrue his salary from the July 1, 2020 through and including December 2020 and allows the Board of Directors to decide
on whether to convert any or all accrued salary into Company restricted common shares. Beginning on the July 1, 2020, normal direct business
expenses will be covered, including business class travel on flights over 5 hours. Employee will receive a $500 per month vehicle expense
stipend to help mitigate the costs of the frequent travel required to visit the Orlando office and University of Central Florida from
the employee’s home. Employee will also be granted an option pursuant to the Company’s Equity Incentive Plan to purchase 1,000,000
restricted shares of the Company’s common stock, with an exercise price of $0.25 per share, and a Start Date of July 1, 2020. All
1,000,000 shares were fully vested on July 1, 2020.
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. On July 17, 2020, the Company signed a lease that was effective August 1, 2020 through July 31, 2021, which provides that the
Company pay insurance, maintenance and taxes with a monthly lease expense of $1,474.17 plus applicable sales tax.
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.
Either party may cancel the agreement at any time
with 30 days’ notice.
NOTE 10 – 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
carry back 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 11 – 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.
On July 1, 2022 the Company paid $5,000 and issued
to a consultant an option for 2,520,000 common shares with an exercise price of $0.10 per share as a performance bonus and for foregoing
all accrued and unpaid fees due for 2022 and for foregoing a portion of the fees due for the remaining five months of calendar year 2022.
The option vested immediately.
On July 1, 2022 the Company issued to its CEO an option for 5,400,000
common shares with an exercise price of $0.10 per share as a performance bonus and for foregoing all of his 2022 salary. The option vested
immediately.
On July 1, 2022 the Company issued to its Chief
Medical Officer an option for 500,000 common shares with an exercise price of $0.10 per share as a performance bonus. The option vested
immediately.
On July 1, 2022 the Company issued to its Chief
Strategy Advisor an option for 500,000 common shares with an exercise price of $0.10 per share as a performance bonus. The option vested
immediately.
On July 1, 2022 the Company issued 240,270 shares
of common stock as payment in full for the accrued but unpaid fees due to its Counsel.
On July 1, 2022 the Company issued 27,250 shares
of common stock to its patent attorney per their fee agreement.
On July 1, 2022 the Company issued 160,000 shares
of common stock to its Chief Strategy Officer as required by his Stock Grant Award dated April 15, 2019 and his Employment Agreement dated
March 1, 2018.
On July 1, 2022 the Company issued 40,000 shares
of common stock to its Chief Medical Officer as required by his employment agreement dated September 15, 2020
On July 1, 2022 the Company issued a total of
569,747 shares of common stock to several consultants.
In July 2022, four investors exercised their put
options obtained from the Offering dated October 26, 2020, transferred their Membership Units in Avra Air LLC back to AVRA and received
301,027 shares of the Company’s common stock in return.
On July 25, 2022 the Directors and Shareholders
holding a majority of the issued and outstanding common shares of the Company adopted, by joint written consent, a resolution to increase
the Company's common stock reserved for issuance under the Company’s 2016 Incentive Stock Plan to 20,000,000.
On August 5, 2022, AVRA entered into a non-binding letter of intent
with Dr. Sudhir Srivastava (“Dr. Srivastava”), Cardio Ventures Pvt. Ltd., a Bahamian private limited company of which
Dr. Srivastava is the sole stockholder(“Cardio”), Otto Pvt, Ltd., a Bahamian private limited company and direct subsidiary
of Cardio (“Otto”) and Sudhir Srivastava Innovations Pvt. Ltd., an Indian private limited company and indirect subsidiary
of Cardio (“SSI,” and together with Cardio and Otto, the “SSI Parties”) with respect to a business
combination between AVRA and the SSI Parties (the “Transaction”). SSI, based in Haryana, India is engaged in the development,
commercialization, manufacturing and sale of medical and surgical robotic systems utilizing patents, trademarks and other intellectual
property held by Dr. Srivastava (the “SSI Intellectual Property”).
If and when the transaction is consummated, the
business of the SSI Parties, including the SSI Intellectual Property will be owned by AVRA. The shareholders of the SSI Parties will own
95% of the common stock of post-transaction AVRA and the current shareholders of AVRA will own 5% of the common stock of post-transaction
AVRA. In addition, there will be changes in composition of the board of directors, implementation of corporate governance policies and
changes in management, all with a view to listing the common stock of AVRA on the Nasdaq Stock Market, LLC or another National Securities
Exchange. In addition, AVRA will change its name to “SS Innovations, Inc.”
Consummation of the Transaction is subject to,
among other matters, the negotiation and execution of definitive agreements and documentation, containing, in addition to the above terms,
terms and conditions customary for agreements of this type and nature, including, without limitation, representations, warranties, and
indemnities of the parties.
Consummation of the Transaction is also subject
to completion of a due diligence review by each party of the other, the results of which shall be satisfactory to the reviewing parties
in their sole discretion.
Given the foregoing, there can be no assurance
given that the Company will be able to successfully complete the Transaction.
In connection with executing the letter of intent, we advanced the
SSI Parties, the amount of $990,000 (the “Interim Financing”). The Interim Financing is evidenced by two notes, one
for $100,000 and one for $1,000,000. Both are one-year Automatically Convertible Notes made in favor of the Company by Cardio, Otto and
Dr Srivastava, jointly and severally (the “Cardio Notes”). Interest on the Cardio Notes shall accrue at the rate of
7% per annum, payable together with the principal amount at maturity. The Cardio Notes have an original issue discount of 10%. If the
Cardio Notes are not repaid in full on or at maturity, they will automatically convert into a percentage equity interest in Cardio determined
by dividing the principal amount of and accrued interest on the Cardio Notes divided by $100 million. The Cardio Notes contains customary
default provisions and other typical terms and conditions.
We may make additional advances to the SSI Parties
of up to an aggregate principal amount of $5,000,000 of Interim Financing, evidenced by additional Cardio Notes. These Cardio Notes will
be substantially similar in form and substance to the first Cardio Notes, provided, however, that Cardio Notes issued in
excess of an aggregate principal amount of $2.000,000, will have an original issue discount of 6% as opposed to 10%, and the valuation
for determining conversion will be $250 million as opposed to $100 million.
In order to fund the Interim Financing, the Company offered and sold
to two accredited investors, $1,000,000 and $100,000 one-year convertible promissory notes (the “Convertible Notes”).
The Convertible Notes will have the same interest rate and payment terms as the Cardio Notes and otherwise be substantially similar to
the Cardio Notes, provided, however, that the Convertible Notes do not have an original issue discount. Further, upon consummation
of the Transaction (if and when it is consummated) the Convertible Notes will automatically convert into a number of AVRA Shares determined
by dividing the principal amount of the Convertible Notes by $100 million and multiplying such number expressed as a percentage by the
number of AVRA Shares issued to Dr. Srivastava and the other shareholders of the SSI Parties (if any) upon closing of the Transaction.
The Company may offer and sell up to an aggregate principal amount of $5,000,000 in Convertible Notes in order to fund the Interim Financing.
The Convertible Notes were issued in a private
transaction pursuant to the exemptions from registration under the Section 4(a)2 of the Securities Act of 1933, as amended (the “Securities
Act”) and the rules and regulations promulgated thereunder.
In August 2022 the Company sold 1,000,000 shares
of common stock at a price of $0.25 per share receiving proceeds of $250,000.
On September 7th 2022, Avra Air LLC
purchased back the 49.8% voting rights held by the Company in return for all rights to any royalty fees which would have previously been
owed by the Company to Avra Air LLC and $26,000 paid via the transfer of 52,000 restricted Company shares owned.
In September 2022 and thru the date of this document,
the Company sold 1,631,000 shares of common stock at a price of $0.25 per share receiving proceeds of $407,750.
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