Full Press Release Details
SafeOp Surgical, Inc.
Financial Statements With Independent Auditor s Report
Year Ended December 31, 2017
SafeOp Surgical, Inc.
| Page | ||||
| Independent Auditor s Report | 1 | |||
| Financial Statements: | ||||
| Balance Sheet | 2 | |||
| Statement of Operations | 3 | |||
| Statement of Convertible Preferred Stock and Stockholders Deficit | 4 | |||
| Statement of Cash Flows | 5 | |||
| Notes to Financial Statements | 6 |
Independent Auditor s Report
The Board of Directors
Report on the Financial Statements
We have audited the accompanying financial statements of SafeOp Surgical, Inc. which comprise the balance sheet as of December 31, 2017,
and the related statements of operations, convertible preferred stock and stockholders deficit, and cash flows for the year ended December 31, 2017, and the related notes to the financial statements.
Management s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with
auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the Company s preparation of and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of
the Company s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of significant accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence that we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SafeOp Surgical,
Inc. as of December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Nanavaty, Nanavaty & Davenport, LLP
SafeOp Surgical, Inc.
| Assets | ||||
| Assets: | ||||
| Cash and cash equivalents | $ | 300,581 | ||
| Accounts receivable | 55,467 | |||
| Inventory | 217,790 | |||
| Prepaid expenses and other | 41,332 | |||
| Equipment, net of accumulated depreciation | 22,905 | |||
| Intangible asset, net of accumulated amortization | 240,625 | |||
| Total assets | $ | 878,700 | ||
| Liabilities, Convertible Preferred Stock and Stockholders Deficit | ||||
| Liabilities: | ||||
| Accounts payable and accrued expenses | $ | 221,428 | ||
| Accrued compensation expense | 163,780 | |||
| Convertible promissory notes | 2,400,858 | |||
| Total liabilities | 2,786,066 | |||
| Series A Preferred Stock, $0.0001 par value per share; 4,340,000 shares authorized, issued and outstanding | 4,340,000 | |||
| Series B Preferred Stock, $0.0001 par value per share; 1,097,783 shares authorized, issued and outstanding | 2,470,012 | |||
| Series C Preferred Stock, $0.0001 par value per share;12,455,767 shares authorized, 7,096,900 shares issued and outstanding | 4,511,018 | |||
| Stockholders deficit: | ||||
| Common stock, 0.0001 par value; 50,000,000 shares authorized, 8,274,708 shares issued and outstanding | 827 | |||
| Stock warrants | 450 | |||
| Additional paid-in-capital | 531,962 | |||
| Retained deficit | (13,761,635 | ) | ||
| Total stockholders deficit | (13,228,396 | ) | ||
| Total liabilities, convertible preferred stock and stockholders deficit | $ | 878,700 |
See accompanying notes to the financial statements.
SafeOp Surgical, Inc.
Statement of Operations
Year Ended December 31, 2017
| Revenue | $ | 246,485 | ||
| Cost of goods sold | 123,038 | |||
| Gross profit | 123,447 | |||
| Research and development | 801,498 | |||
| Sales and marketing | 1,342,701 | |||
| General and administrative | 1,351,680 | |||
| Total operating expenses | 3,495,879 | |||
| Loss from operations | (3,372,432 | ) | ||
| Interest expense | (13,358 | ) | ||
| Total other expense, net | (13,358 | ) | ||
| Net loss | $ | (3,385,790 | ) |
See accompanying notes to the financial statements.
SafeOp Surgical, Inc.
Statement of Convertible Preferred Stock and Stockholders Deficit
| Convertible Preferred Stock | Stockholders Deficit | |||||||||||||||||||||||||||||||||||||||||||||||
| Series A Convertible | Series B Convertible | Series C Convertible | Additional | |||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | paid-in | Retained | Stockholders | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Warrants | capital | deficit | deficit | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2016 | 4,340,000 | $ | 4,340,000 | 1,097,783 | $ | 2,470,012 | 7,096,900 | $ | 4,511,018 | 8,274,708 | $ | 827 | $ | 450 | $ | 340,830 | $ | (10,375,845 | ) | $ | (10,033,738 | ) | ||||||||||||||||||||||||||
| Stock-based compensation | 191,132 | 191,132 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (3,385,790 | ) | (3,385,790 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2017 | 4,340,000 | $ | 4,340,000 | 1,097,783 | $ | 2,470,012 | 7,096,900 | $ | 4,511,018 | 8,274,708 | $ | 827 | $ | 450 | $ | 531,962 | $ | (13,761,635 | ) | $ | (13,228,396 | ) |
See accompanying notes to the financial statements.
SafeOp Surgical, Inc.
Statement of Cash Flows
Year Ended December 31, 2017
| Operating activities: | ||||
| Net loss | $ | (3,385,790 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Depreciation and amortization | 33,580 | |||
| Stock-based compensation | 191,132 | |||
| Noncash interest expense on convertible promissory notes | 13,358 | |||
| Change in operating assets and liabilities: | ||||
| Accounts receivable | (46,164 | ) | ||
| Inventory | 17,902 | |||
| Prepaid expenses | 92,817 | |||
| Accounts payable and accrued expenses | (20,023 | ) | ||
| Accrued compensation expense | (203,448 | ) | ||
| Net cash used in operating activities | (3,306,636 | ) | ||
| Investing activities: | ||||
| Acquisition of equipment | (6,822 | ) | ||
| Net cash used in investing activities | (6,822 | ) | ||
| Financing activities: | ||||
| Proceeds from issuance of convertible promissory notes | 2,387,500 | |||
| Net cash provided by financing activities | 2,387,500 | |||
| Net decrease in cash and cash equivalents | (925,958 | ) | ||
| Cash and cash equivalents, beginning of period | 1,226,539 | |||
| Cash and cash equivalents, end of period | $ | 300,581 |
See accompanying notes to the financial statements.
SafeOp Surgical, Inc.
Notes to Financial Statements
SafeOp Surgical, Inc., (the Company ) was incorporated in the state of Delaware on September 30, 2011. The Company is a private
biotech company focused on the commercializing of a medical device that automatically monitors and detects nerve abnormalities during surgeries. The Company s corporate office is in Hunt Valley, Maryland.
In January 2014, the Company received clearance from the Food and Drug Administration of the U.S. Department of Health and Human Services, to
market its Evoked Potential Assessment Device (EPAD ). The device is portable and intended for use in monitoring neurological status by recording somatosensory evoked potentials (SSEPs).
In 2016, the Company officially launched its product and began recording revenues. Prior to 2016, the Company s primary activities since
incorporation were to establish its offices, recruit personnel, conduct research and development, perform business and financial planning, and raise capital.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. Since inception the Company has
reported losses from operations and is expected to generate losses and consume significant cash resources in the foreseeable future as the Company continues development of modules around the core product and continues to expand its sales channels.
The Company has cash and cash equivalents of $300,581 and an accumulated deficit of $13,761,635 as of December 31, 2017. During 2017, the Company received bridge note financing of $2,387,500 in the form of convertible promissory notes. These
promissory notes are convertible to Series D preferred stock. As part of the Series D Closing, the Company also plans to issue an additional 1,795,342 shares of Series D Preferred Stock raising $1,172,678 in additional funds. Management believes
that cash and cash equivalents on hand at December 31, 2017 of $300,581, the funds raised by the Series D Closing, and cash flows from sales in 2018, will be sufficient to fund planned expenditures and meet the Company s obligations
through part of 2018. However, there can be no assurance that additional financing will be available on satisfactory terms at all.
Basis of Presentation
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the continued existence of the Company.
financial statements in conformity with accounting principles generally accepted in the United States requires management to make 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 expenses during the reporting period. Actual results could differ from such estimates, and any difference could be material to the financial statements and
Fair Value of Financial Instruments
The carrying amounts of the Company s financial instruments, which include cash and cash equivalents, prepaid expenses, accounts payable
and accrued expenses generally approximate their respective fair value because of the short-term maturities.
SafeOp Surgical, Inc.
Notes to Financial Statements (continued)
Cash and Cash Equivalents
Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments with original maturities of three
months or less to be cash equivalents. The Company maintains its cash in depository accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses on such accounts.
Many of the purchased
components used to manufacture the Company s products are single-sourced due to technology, price, or other considerations. Some of these single-sourced components are manufactured to the Company s design and specifications. Most of these
items, however, may be sourced from other suppliers, often after a requalification process. In the event that the Company s supply of critical components was interrupted due to the time required to requalify materials or modify product designs,
the Company s ability to manufacture the related product in desired quantities and in a timely manner could be adversely affected. The Company attempts to mitigate these risks by working closely with key suppliers to coordinate product plans
and the transition to replacement components for critical parts.
Inventories consists primarily of finished goods, which includes specialized medical devices, and are stated at the lower of cost or market
using the first-in, first-out cost method. The Company evaluates inventories for obsolescence and excess quantities based on changes in market demand or introduction of
competing technologies.
Equipment and Depreciation
Equipment consists of computers, office equipment and furniture and is stated at cost, less accumulated depreciation. Depreciation is
calculated using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. Expenditures for maintenance and repairs, which do not improve or extend the useful lives of the respective assets,
are expensed as incurred.
Research and Development Expenses
Research and development costs are charged to expense as incurred. Research and development costs include the costs to design, develop, test,
deploy and enhance its product. Costs incurred under agreements with third parties are charged to expense as incurred in accordance with the specific contractual performance terms of such agreements. Milestone payments incurred are charged to
expense in accordance with the specific contractual performance terms of such agreements.
Intangible asset consists of purchased developed technology, which is amortized over a period of 20 years.
SafeOp Surgical, Inc.
Notes to Financial Statements (continued)
Income taxes are accounted for under the asset-and-liability
method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, as well as the
operating loss and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets and liabilities are measured at the balance sheet date using
the enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income
in the period such tax rate changes are enacted. The Company has incurred losses since September 30, 2011 (inception). Therefore, the Company has incurred no income tax liability and has not recorded any provision for income taxes.
The Company recognizes uncertain income tax positions at the largest amount that is more likely than not to be sustained upon review by the
relevant tax authorities. An uncertain income tax position will not be recognized if it is less than 50 percent likely of being sustained.
The Company s income tax returns are subject to examination by the appropriate taxing jurisdictions, and generally remain open for the
last three years, as applicable.
Revenue is derived from sale of goods and services associated with the EPAD device, and recognized upon delivery of such goods and services.
Revenue is recorded at the fair value of the consideration received or receivable, excluding any trade discounts.