Business context and reporting period
The supplied filing is AVRA Medical Robotics, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2017, filed August 29, 2017. This differs from the request metadata, which identifies SS Innovations International, Inc.; verify the issuer before relying on this summary.
AVRA describes itself as a development-stage medical robotics company developing a prototype for skin resurfacing with the University of Central Florida (UCF). It reported no significant sales and was focused on research, planning, and raising capital.
Financial performance and position
| Metric | Q2 2017 / June 30, 2017 | Comparable period / prior balance |
|---|---|---|
| Revenue | $0 for Q2 and first half | $0 for Q2 and first half of 2016 |
| Operating expenses | Q2: $178,388; first half: $365,721 | Q2 2016: $39,701; first half 2016: $39,736 |
| Net loss | Q2: $187,376; first half: $383,691 | Q2 2016: $43,242; first half 2016: $43,276 |
| Cash and cash equivalents | $129,556 | $248,219 at December 31, 2016 |
| Current assets / current liabilities | $130,724 / $631,230 | $248,684 / $647,292 at December 31, 2016 |
| Promissory notes | $480,000 | $480,000 at December 31, 2016 |
| Stockholders’ deficit | $453,153 | $355,060 at December 31, 2016 |
For the first half, operating cash used was $227,612, investing cash used was $4,174, and financing cash provided was $113,123. Cash decreased by $118,663. The company had negative working capital of approximately $500,506 at June 30. No gross margin is reported because there was no revenue.
Material changes versus comparable periods
- First-half net loss increased to $383,691 from $43,276. General and administrative expense rose to $314,580 from $12,518, which management attributed to management compensation, legal and professional costs associated with SEC registration, and stock-based compensation.
- First-half research and development expense was $51,141, versus $27,218. Management attributed the increase to research activity occurring for the full six-month period in 2017; Q2 R&D expense declined to $4,624 from $27,218 as the first UCF research phase was completed.
- Cash fell from $248,219 at year-end 2016 to $129,556. The company raised $135,000 in February 2017 through a common-stock offering and reported $114,876 of related-party accrued expenses converted into stock as a noncash financing activity.
Outlook, risks, and unusual items
- Going concern and financing: The filing says the company has no sufficient ongoing revenue to cover operating costs and depends on debt and equity financing. Management expects substantial funding needs and says there are no committed funding sources or assurance of additional financing. Failure to raise funds could require curtailed operations or other strategic alternatives and raises substantial doubt about continued operations.
- Debt terms: The $480,000 notes bear 7.5% interest, are secured by all company assets, and were extended from June 30 to October 31, 2017. They are convertible under specified terms; default interest is 12%. The filing reports first-half interest expense of $18,000.
- UCF agreement and grant: The research collaboration was extended to June 30, 2019 with no additional payments to UCF required under the extension. A $68,952 Florida High Tech Corridor Council matching grant is subject to research obligations; failure to meet them could require AVRA to cover a funding shortfall. A 1% royalty is payable to UCF in years when sales of products using the intellectual property exceed $20 million.
- Development and commercialization: The company cautions that it may not raise capital, successfully develop or commercialize products, or enter collaboration agreements. No quantitative revenue or earnings guidance is provided.
- Controls: Management states disclosure controls were not effective at the reasonable-assurance level due to material weaknesses identified in the company’s S-1. Later language in the same discussion says the principal executive officer determined the controls were effective, creating an apparent inconsistency that investors should review.
- Filing-status indicators: The cover page marks “No” for having filed all required reports during the preceding 12 months and for submitting/posting required interactive data files. Verify the underlying filing history and any subsequent remediation.
- The filing reports no legal proceedings, defaults upon senior securities, or material off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm whether this AVRA filing is the intended document, given the mismatch with the requested company name.
- Review the S-1 risk factors and subsequent filings for financing raised, note repayment or conversion, and liquidity after the October 31, 2017 note maturity.
- Assess the status, milestones, funding obligations, and grant conditions of the UCF collaboration, as well as progress toward a commercializable product.
- Clarify the material weaknesses, the contradictory control-effectiveness statements, and whether the filing-status issues were corrected.
- Review dilution exposure from convertible notes, stock compensation, options, and future financing needs.