PART I. FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents Syra Health Corp.'s unaudited condensed financial statements for periods ending September 30, 2023, including balance sheets, statements of operations, and cash flows, with accompanying notes Condensed Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$2,606,818** | **$2,319,642** | | Total Current Assets | $1,236,184 | $1,426,743 | | **Total Liabilities** | **$3,836,119** | **$1,609,544** | | Total Current Liabilities | $2,381,119 | $1,546,345 | | Convertible notes payable | $1,455,000 | $0 | | **Total Stockholders' Equity (Deficit)** | **($1,229,301)** | **$710,098** | Condensed Statement of Operations Highlights (Unaudited) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net Revenues | $3,748,943 | $3,651,978 | | Gross Profit | $829,856 | $770,836 | | Operating Loss | ($1,901,445) | ($1,488,946) | | **Net Loss** | **($1,943,068)** | **($1,505,533)** | | Net Loss Per Share | ($0.44) | ($0.64) | Condensed Statement of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,002,026) | ($1,022,661) | | Net cash used in investing activities | ($15,251) | ($76,358) | | Net cash provided by financing activities | $1,031,943 | $1,667,536 | | **Cash at End of Period** | **$18,010** | **$668,529** | - The company completed its Initial Public Offering (IPO) on October 3, 2023, raising gross proceeds of approximately **$6.7 million** from the sale of 1,615,000 units at $4.125 per unit[25](index=25&type=chunk)[90](index=90&type=chunk)[98](index=98&type=chunk) - Between January and April 2023, the company issued convertible promissory notes totaling **$1,455,000**. These notes, along with accrued interest, automatically converted into 446,206 shares of Class A common stock upon the closing of the IPO[24](index=24&type=chunk)[69](index=69&type=chunk)[89](index=89&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, detailing recent business developments, operational results, liquidity, capital resources, and critical accounting policies [Overview and Recent Developments](index=23&type=section&id=Overview) The company, a healthcare services firm, highlights recent developments including its October 2023 IPO, a **$4.75 million** contract with DC DBH, an Indiana contract extension, and the launch of Syrenity and CarePlus digital health products - Completed its IPO on October 3, 2023, raising gross proceeds of approximately **$6.7 million**[98](index=98&type=chunk) - Secured a five-year, **$4.75 million** contract with the District of Columbia's Department of Behavioral Health (DBH) to support its mental health initiatives[99](index=99&type=chunk) - Received a two-year contract extension worth up to **$636,000** with the Indiana Division of Mental Health and Addiction[100](index=100&type=chunk) - Launched two new digital health products: "Syrenity," a mental health platform, and "CarePlus," an electronic medical record (EMR) system for small to mid-sized healthcare organizations[101](index=101&type=chunk)[102](index=102&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section details the company's operational performance for the three and nine-month periods ending September 30, 2023, analyzing net revenues, gross profit margins, and fluctuations in operating expenses Q3 2023 vs Q3 2022 Performance | Metric | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $1,581,344 | $1,513,979 | +4% | | Gross Profit | $554,541 | $413,809 | +34% | | Gross Margin | 35% | 27% | +8 p.p. | | Operating Loss | ($343,016) | ($346,791) | -1% | | Net Loss | ($354,376) | ($354,535) | -0.04% | Nine Months 2023 vs 2022 Performance | Metric | Nine Months 2023 | Nine Months 2022 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $3,748,943 | $3,651,978 | +3% | | Operating Loss | ($1,901,445) | ($1,488,946) | +28% | | Net Loss | ($1,943,068) | ($1,505,533) | +29% | - For the nine months ended Sep 30, 2023, healthcare staffing revenue was **$3.1 million**, medical communication services revenue was **$513.6 thousand**, and new digital health services revenue was **$131.4 thousand**[116](index=116&type=chunk) - The increase in net loss for the nine-month period was primarily due to a **58% increase in salaries and benefits** and a **78% increase in SG&A expenses**, reflecting investments to support growth and the IPO process[118](index=118&type=chunk)[120](index=120&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company reported an accumulated deficit of **$4.07 million** and a working capital deficit of **$1.14 million** as of September 30, 2023, with recent IPO proceeds of approximately **$4.75 million** expected to fund operations for at least 12 months Liquidity Position | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Current Assets | $1,236,184 | $1,426,743 | | Current Liabilities | $2,381,119 | $1,546,345 | | **Working Capital (Deficit)** | **($1,144,935)** | **($119,602)** | | Accumulated Deficit | ($4,069,680) | ($2,126,612) | - Net proceeds from the October 2023 IPO were approximately **$4.75 million**, which management expects to be sufficient to fund current operations for at least 12 months from the report date[124](index=124&type=chunk)[156](index=156&type=chunk) - For the nine months ended Sep 30, 2023, financing activities provided **$1.03 million** in cash, primarily from **$1.46 million** in convertible notes and **$1.3 million** in related party advances, offset by repayments on a line of credit and offering costs[130](index=130&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines key accounting policies and estimates, including revenue recognition across three service lines, lease accounting, asset impairment, and accounts receivable collectability, noting significant customer concentration with Indiana FSSA - The company recognizes revenue from three main sources: healthcare staffing, medical communication, and digital health services, following the principles of ASC 606[141](index=141&type=chunk)[143](index=143&type=chunk) - A significant concentration of revenue exists with the Indiana Family and Social Services Administration (FSSA), which accounted for approximately **82% of revenues** for the nine months ended September 30, 2023[144](index=144&type=chunk) - As an "emerging growth company" under the JOBS Act, the company has elected to use the extended transition period for complying with new or revised accounting standards[145](index=145&type=chunk)[146](index=146&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is not required to provide market risk disclosures as it qualifies as a "smaller reporting company" under SEC rules - The company is a "smaller reporting company" as defined in Rule 12b-2 of the Exchange Act and is therefore not required to provide the information for this item[148](index=148&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of September 30, 2023, due to material weaknesses, including a lack of formal policies and insufficient staff, with remediation plans outlined - Management concluded that disclosure controls and procedures were not effective as of September 30, 2023[149](index=149&type=chunk) - Identified material weaknesses include: (i) a lack of formal policy for related-party transactions; (ii) lack of formal documented agreements and policies; and (iii) insufficient staff to maintain optimal segregation of duties[149](index=149&type=chunk) - Remediation plans involve adopting formal policies, providing written documentation of controls, and adding staff with requisite accounting experience when resources become available[151](index=151&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently aware of any legal proceedings or claims expected to have a material adverse effect on its business, financial condition, or operating results - The company is not currently aware of any legal proceedings or claims that are expected to have a material adverse effect on its business[153](index=153&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section details significant investment risks, categorized by financial position, business competition, technology reliance, government regulations, and risks associated with the company's Class A common stock and dual-class structure - Financial Risks: The company has a history of net losses (**$1.94 million** for the nine months ended Sep 30, 2023) and an accumulated deficit (**$4.07 million**), requiring substantial additional funding to sustain operations[155](index=155&type=chunk)[156](index=156&type=chunk) - Customer Concentration Risk: The company is highly dependent on a small number of large customers, with the Indiana Family and Social Services Administration (FSSA) accounting for approximately **82% of revenues** for the nine months ended September 30, 2023[207](index=207&type=chunk) - IT and Data Security Risks: The business relies on secure IT systems to handle sensitive health information, where breaches, system failures, or cyber-attacks could result in significant liability, reputational damage, and business disruption[173](index=173&type=chunk)[174](index=174&type=chunk) - Governance and Stock Risks: The dual-class stock structure concentrates approximately **71.1% of voting power** with Class B stockholders, limiting the influence of Class A stockholders, and the company has identified material weaknesses in its internal controls over financial reporting[218](index=218&type=chunk)[225](index=225&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company reports no unregistered equity sales and details the use of approximately **$4.75 million** net proceeds from its October 3, 2023 IPO, with no material change in planned use from the prospectus - On October 3, 2023, the company completed its IPO, selling 1,615,000 Units at **$4.125 per Unit**[243](index=243&type=chunk) - Net proceeds from the IPO were approximately **$4.75 million** after deducting underwriting discounts, commissions, and other offering expenses[244](index=244&type=chunk) - There has been no material change in the planned use of proceeds from the IPO as described in the final prospectus[246](index=246&type=chunk) [Defaults Upon Senior Securities](index=51&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[247](index=247&type=chunk) [Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[248](index=248&type=chunk) [Other Information](index=51&type=section&id=Item%205.%20Other%20Information) The company reports no other information for this item - None[249](index=249&type=chunk) [Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including officer certifications required by Sarbanes-Oxley Act and Inline XBRL documents - This section lists the exhibits filed with the report, including officer certifications under Sarbanes-Oxley Act Sections 302 and 906, and Inline XBRL data files[250](index=250&type=chunk)