Syra Health Corp 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA SYRA HEALTH CORP. INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB Firm ID: 2738 ) F-2 Balance Sheets at December 31, 2023 and 2022 F-3 Statements of Operations for the Years Ended December 31, 2023 and 2022 F-4 Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2023 and 2022 F-5 Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 F-6 Notes to the Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Syra Health Corp. Opinion on the Financial Statements We have audited the accompanying balance sheets of Syra Health Corp. (the Company) as of December 31, 2023 and 2022, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2023 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company had a cash balance of $3,280,075, working capital of $3,871,038 and an accumulated deficit of $5,065,255 since inception, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provides a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audits of the financial statements that were communicated, or required to be communicated, to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. Due to the net loss for the year, the Company evaluated the need for a going concern. Auditing management’s evaluation of a going concern can be a significant judgement given the fact that the Company uses management estimates on future revenues and expenses which are not able to be substantiated. As discussed in Note 2, the Company has a going concern due to its insufficient cash balance and accumulated net losses. To evaluate the appropriateness of the going concern, we examined and evaluated the financial information along with management’s plans to mitigate the going concern and management’s disclosure on going concern. /s/ M&K CPAS, PLLC We have served as the Company’s auditor since 2022 Houston, TX March 25, 2024 F- 2 SYRA HEALTH CORP. BALANCE SHEETS December 31, December 31, 2023 2022 ASSETS Current assets: Cash $ 3,280,075 $ 3,344 Accounts receivable, net 1,060,634 1,201,097 Accounts receivable related party 50,614 - Accounts receivable 50,614 Other current assets 389,787 222,302 Total current assets 4,781,110 1,426,743 Deferred offering costs - 596,118 Property and equipment, net 78,974 112,493 Right-of-use asset 63,199 184,288 Total assets $ 4,923,283 $ 2,319,642 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 462,991 $ 432,388 Accounts payable, related parties - 3,200 Accounts payable - 3,200 Accrued expenses 198,978 239,117 Current portion of operating lease liability, related party 63,199 121,089 Notes payable 184,904 - Revolving line of credit - 750,551 Total current liabilities 910,072 1,546,345 Operating lease liability, related party - 63,199 Total liabilities 910,072 1,609,544 Commitments and contingencies - - Stockholders’ equity (deficit): Preferred stock, $ 0.001 par value, 1,000,000 shares authorized, no shares designated, issued and outstanding - - Class A common stock, $ 0.001 par value, 100,000,000 shares authorized, 5,588,298 and 3,568,758 shares issued and outstanding at December 31, 2023 and 2022, respectively 5,588 3,569 Convertible class B common stock, $ 0.001 par value, 5,000,000 shares authorized, 833,334 shares issued and outstanding 833 833 Common stock value 833 833 Additional paid-in capital 9,071,745 2,832,308 Accumulated deficit ( 5,064,955 ) ( 2,126,612 ) Total stockholders’ equity (deficit) 4,013,211 710,098 Total liabilities and stockholders’ equity (deficit) $ 4,923,283 $ 2,319,642 The accompanying notes are an integral part of these financial statements. F- 3 SYRA HEALTH CORP. STATEMENTS OF OPERATIONS 2023 2022 For the Years Ended December 31, 2023 2022 Net revenues $ 5,515,144 $ 5,617,706 Cost of services 4,103,244 4,555,924 Gross profit 1,411,900 1,061,782 Operating expenses: Salaries and benefits 2,292,295 1,524,971 Professional services 586,463 1,035,902 Research and development expenses 240,048 - Selling, general and administrative expenses 1,131,922 575,755 Depreciation 48,771 14,849 Total operating expenses 4,299,499 3,151,477 Operating loss ( 2,887,599 ) ( 2,089,695 ) Other income (expense): Interest income 2,942 63 Interest expense ( 53,686 ) ( 28,533 ) Total other income (expense) ( 50,744 ) ( 28,470 ) Net loss $ ( 2,938,343 ) $ ( 2,118,165 ) Weighted average common shares outstanding – basic and diluted 4,877,861 3,041,085 Net loss per common share – basic and diluted $ ( 0.60 ) $ ( 0.70 ) The accompanying notes are an integral part of these financial statements. F- 4 SYRA HEALTH CORP. STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Class A Convertible Class B Additional Total Stockholders’ Preferred Stock Common Stock Common Stock Paid-in Accumulated Equity Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Balance, December 31, 2021 - $ - - $ - 833,334 $ 833 $ 467 $ ( 8,447 ) $ ( 7,147 ) Class A common stock sold for cash - - 2,768,756 2,769 - - 2,319,731 - 2,322,500 Class A common stock issued for services - - 800,002 800 - - 509,200 - 510,000 Class A common stock options issued for services - - - - - - 2,910 - 2,910 Net loss - - - - - - - ( 2,118,165 ) ( 2,118,165 ) Balance, December 31, 2022 - - 3,568,758 3,569 833,334 833 2,832,308 ( 2,126,612 ) 710,098 Balance - - 3,568,758 3,569 833,334 833 2,832,308 ( 2,126,612 ) 710,098 Cancellation of Class A common stock - - ( 41,666 ) ( 42 ) - - 42 - - Class A common stock issued for debt conversion - - 446,206 446 - - 1,472,014 - 1,472,460 Stock-based compensation - - - - - - 32,831 - 32,831 Class A common stock sold for cash - - 1,615,000 1,615 - - 4,734,550 - 4,736,165 Net loss - - - - - - - ( 2,938,343 ) ( 2,938,343 ) Balance, December 31, 2023 - $ - 5,588,298 $ 5,588 833,334 $ 833 $ 9,071,745 $ ( 5,064,955 ) $ 4,013,211 Balance - $ - 5,588,298 $ 5,588 833,334 $ 833 $ 9,071,745 $ ( 5,064,955 ) $ 4,013,211 The accompanying notes are an integral part of these financial statements. F- 5 SYRA HEALTH CORP. STATEMENTS OF CASH FLOWS 2023 2022 For the Years Ended December 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 2,938,343 ) $ ( 2,118,165 ) Adjustments to reconcile net loss to net cash used in operating activities: Non-cash lease expense - 95,563 Depreciation 48,771 14,849 Amortization of debt discounts - 14,076 Common stock issued for services - 510,000 Stock-based compensation 32,831 2,910 Decrease (increase) in assets: Accounts receivable ( 59,547 ) ( 940,470 ) Accounts receivable, related party ( 50,614 ) - Other current assets 203,110 ( 200,798 ) Right-of-use asset 121,089 - Increase (decrease) in liabilities: Accounts payable 30,603 392,276 Accounts payable, related parties ( 3,200 ) ( 82,418 ) Accrued expenses ( 22,679 ) 163,675 Operating lease liability ( 121,089 ) ( 95,563 ) Net cash used in operating activities ( 2,759,068 ) ( 2,244,065 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ( 15,251 ) ( 121,260 ) Net cash used in investing activities ( 15,251 ) ( 121,260 ) CASH FLOWS FROM FINANCING ACTIVITIES Payments on deferred offering costs - ( 596,118 ) Repayment of notes payable ( 185,692 ) - Proceeds received on sale of Class A common stock 5,332,283 2,322,500 Proceeds received from line of credit 300,000 2,819,275 Repayments on line of credit ( 1,050,551 ) ( 2,082,800 ) Advances received from related party 1,295,010 94,000 Repayments on advances from related party ( 1,095,000 ) ( 288,200 ) Proceeds received from convertible notes payable 1,455,000 - Net cash provided by financing activities 6,051,050 2,268,657 NET CHANGE IN CASH 3,276,731 ( 96,668 ) CASH AT BEGINNING OF PERIOD 3,344 100,012 CASH AT END OF PERIOD $ 3,280,075 $ 3,344 SUPPLEMENTAL INFORMATION: Interest paid $ 36,226 $ 11,651 Income taxes paid $ - $ - NON-CASH INVESTING AND FINANCING ACTIVITIES: Initial recognition of right-of-use asset and lease liability $ - $ 131,187 Class A common stock issued for debt and interest conversion $ 1,472,460 $ - Cancellation of Class A common stock $ 42 $ - Non-cash application of invoices to STLogics loan $ 200,010 $ - Prepaid asset financed with notes payable $ 370,596 $ - The accompanying notes are an integral part of these financial statements. F- 6 SYRA HEALTH CORP. NOTES TO FINANCIAL STATEMENTS Note 1 – Nature of Business and Significant Accounting Policies Nature of Business Syra Health Corp. (“Syra” or the “Company”) was incorporated in the state of Indiana on November 20, 2020 to provide workforce staffing solutions, health education and healthcare research consulting services to mental health hospitals and organizations, including government agencies, integrated health networks, managed care entities and pharmaceutical manufacturers. On March 11, 2022, the Company redomiciled to Delaware. The Company’s corporate office is located in Carmel, Indiana. On October 3, 2023 (the “Closing Date”), the Company completed its initial public offering (the “IPO”) of an aggregate of 1,615,000 units (“Units”) at a public offering price of $ 4.125 per Unit, with each Unit consisting of (a) one share of the Company’s Class A common stock and (b) one warrant (each, a “Warrant” and collectively, the “Warrants”) to purchase one share of Class A common stock at an exercise price equal to $ 6.50 per share, exercisable until the fifth anniversary of the issuance date, pursuant to that certain underwriting agreement dated as of September 28, 2023 (the “Underwriting Agreement”) by and between the Company and Kingswood, a division of Kingswood Capital Partners, LLC, as representative of the several underwriters named in the Underwriting Agreement (the “Representative”). The Company received gross proceeds of approximately $ 6,661,876 from the sale of the Units before deducting underwriting discounts, commissions and offering expenses of $ 1,928,133 In addition, pursuant to the Underwriting Agreement, the Company granted the Representative a 45-day option to purchase up to 242,250 Units at the initial public offering price, less the underwriting discount, to cover over-allotments, if any (the “Over-Allotment Option”). On the Closing Date, the Company issued an additional 242,500 Warrants to the underwriters pursuant to the partial exercise by the underwriters of the Over-Allotment Option, generating gross proceeds of $ 2,422 . Basis of Presentation The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may 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 these estimates. Concentrations of Credit Risk The Company maintains cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 under current regulations. The Company did not have any cash in excess of FDIC insured limits at December 31, 2023, and 2022, and has not experienced any losses in such accounts. Fair Value of Financial Instruments Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows: - Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. - Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. - Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement. F- 7 The carrying value of the Company’s financial assets and liabilities, such as cash, accounts receivable, accounts payable and accrued expenses are estimated by management to approximate fair value primarily due to the short-term nature of the instruments. The Company’s advances from related party approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2023, and 2022. Cash and Cash Equivalents Cash equivalents include money market accounts which have maturities of three months or less. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates market value. There were no cash equivalents on hand at December 31, 2023, and 2022. Accounts Receivable Accounts receivable are carried at their estimated collectible amounts. Accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition. The Company had an allowance for doubtful accounts of $ 5,520 at December 31, 2023, and $ 4,533 at December 31, 2022. Deferred Offering Costs Deferred offering costs related to the Company’s initial public offering (“IPO”) consisted principally of professional fees, legal and accounting, and other costs such as printing, and registration costs incurred in connection with the planned IPO of the Company and the sale of its Class A common stock. During the year ended December 31, 2022, the Company incurred $ 596,118 of costs, directly attributable to its proposed IPO, which were offset against the proceeds from the IPO that closed in 2023. In total, the Company incurred $ 1,928,133 of offering costs related to the IPO. Property and Equipment Property and equipment is stated at cost, less accumulated depreciation. The cost of office equipment is depreciated using the straight-line method based on a five -year life expectancy. Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated depreciation are eliminated and any resulting gain or loss is reflected in operations. Impairment of Long-Lived Assets In accordance with the provisions of ASC Topic 360, “ Impairment or Disposal of Long-Lived Assets ”, all long-lived assets such as property and equipment held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. F- 8 Leases The Company accounts for its leases under ASC 842 – Leases . The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on the Company’s balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date, adjusted by the deferred rent liabilities at the adoption date. As the Company’s lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term. Segment Reporting ASC Topic 280, “ Segment Reporting ,” requires annual and interim reporting for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and expenses, and about which separate financial information is regularly evaluated by the chief operating decision maker in deciding how to allocate resources. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations. Revenue Recognition The Company recognizes revenue in accordance with ASC 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation. The Company accounts for revenues when both parties to the contract have approved the contract, the rights and obligations of the parties are identified, payment terms are identified, and collectability of consideration is probable. Payment terms vary by client and the services offered. The Company has the following main forms of revenue: – Healthcare Workforce; – Population Health – Digital Health – Behavioral and Mental Health Services – Health Education The Company primarily provides its services to state health and social service agencies and universities. Healthcare Workforce, Health Education and Behavioral Mental Health Service contracts are primarily accounted for as a single performance obligation satisfied over time because the customer simultaneously receives and consumes the benefits of our medical staffing on an hourly or daily basis. Population Health and Digital Health contracts generally consist of multiple performance obligations that are distinct, such as to provide data analytics and reporting, training, or develop technology for implementation and maintenance with the customer. The Company allocates the transaction price across the performance obligations based on the estimated fair value of the distinct performance obligations. Depending on the performance obligation, revenue is recognized at a point in time when the customer obtains the benefit of the services are provide, or over time in the case of digital health revenue where the customer simultaneously receives and consumes benefits of the contract, such as ongoing performance of our technology product. F- 9 The contracts generally stipulate bi-weekly or monthly billing, and the Company has elected the “as invoiced” practical expedient to recognize revenue based on the hours incurred at the contractual rate as the Company has the right to payment in an amount that corresponds directly with the value of performance completed to date. The Company may also be subject to penalties for violations of certain ethical standards and non-performance measures within these state contracts. The Company recognize revenue net of penalties. Disaggregated revenue data The Company’s revenue consists of the following revenue services within its industry: Schedule of Disaggregation of Revenue Net revenues: Healthcare workforce $ 4,259,292 $ 5,260,370 Population health 715,499 318,036 Digital health 515,250 - Behavioral and mental services 12,797 - Health education 12,306 39,300 Net revenues $ 5,515,144 $ 5,617,706 Cost of Services The cost of services includes the wages and the related payroll taxes, employee benefits and certain other employee-related costs of the Company’s contract service employees, while they work on contract assignments. Significant Concentrations The majority of accounts receivable and revenue contracts are between the Company and different divisions within the Indiana Family and Social Services Administration (“FSSA”). Most contracts require monthly payments as the projects progress. The Company generally does not require collateral or advance payments. For each of the years ended December 31, 2023 and 2022, FSSA accounted for approximately 68 % and 98 % of revenues, respectively, which was derived through a combination of divisions within the State of Indiana, including the FSSA – NeuroDiagnostic Institute, representing $ 3,734,004 and $ 5,214,128 of the Company’s healthcare workforce revenue, and the FSSA – Division of Mental Health and Addiction, which commenced on September 3, 2021, representing $ 305,000 and $ 306,000 of the Company’s Population Health revenues for the years ended December 31, 2023 and 2022, respectively. In addition, the combined divisions of the FSSA represented 30 % and 99 % of accounts receivable at December 31, 2023, and 2022, respectively. Research and Development Costs Research and development costs are expensed as incurred. The Company’s research and development costs consist of outside consultant fees to develop the Company’s technology-based solutions. Stock-Based Compensation The Company accounts for equity instruments issued to employees and non-employees in accordance with the provisions of ASC 718 Stock Compensation (“ASC 718”). All transactions in which the consideration provided in exchange for the purchase of goods or services consists of the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Basic and Diluted Loss Per Share The Company used the two-class method to compute net loss per common share because it had issued securities, other than a single class of common stock, that contractually entitled the holders to participate in dividends and earnings. These participating securities included the Company’s Class A common stock, which was authorized pursuant to the Company’s amendment to its Certificate of Incorporation on May 2, 2022, and convertible Class B common stock which are entitled to share equally, on a per share basis, in all assets of the Company of whatever kind available for distribution to the holders of common stock. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. F- 10 Under the two-class method, for periods with net income, basic net income per common share is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current period earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses. The Company reports the more dilutive of the approaches (two-class or “if-converted”) as its diluted net income per share during the period. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. Income Taxes The Company accounts for income taxes under the Financial Accounting Standards Board (“FASB”) ASC 740 Income Taxes (“ASC 740”), which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not, that such asset will not be recovered through future operations. Uncertain Tax Positions In accordance with ASC 740, the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe 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. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Various taxing authorities may periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities. The Company recognizes interest and penalties related to uncertain tax positions, if any, as an income tax expense. The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions. Recently Adopted Accounting Standards From time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective date. F- 11 In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. The guidance also requires increased disclosures. The amendments contained in ASU 2016-13 were originally effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years for the Company. In November 2019, the FASB issued ASU No. 2019-10, which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined in Rule 12b-2 of the Exchange Act) to fiscal years beginning after December 15, 2022, including interim periods. Early adoption is permitted. The Company meets the definition of a smaller reporting company and is adopting the deferral period for ASU 2016-13. The guidance requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company adopted ASU 2016-13 effective January 1, 2023. The Company determined that the update applied to trade receivables, but that there was no material impact to the financial statements from the adoption of ASU 2016-13. There are no other recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material effect on its financial position, results of operations, or cash flows. Note 2 – Going Concern As shown in the accompanying financial statements, as of December 31, 2023, the Company had a cash balance of $ 3,280,075 , working capital of $ 3,871,038 and an accumulated deficit of $ 5,064,955 since inception. The Company is too early in its development stage to project revenue with a necessary level of certainty. Therefore, the Company may not have sufficient funds to sustain its operations for the next twelve months from the issuance date of these financial statements and may need to raise additional cash to fund its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company has commenced sales and continues to develop its operations. In the event sales do not materialize at the expected rates, management would seek additional financing or would attempt to conserve cash by further reducing expenses. There can be no assurance that the Company will be successful in achieving these objectives. The Company continues to pursue sources of additional capital through debt and financing transactions or arrangements, including equity financing or other means. The Company may not be successful in identifying suitable funding transactions in a sufficient time period or at all, and may not obtain the required capital by other means. If the Company does not succeed in raising additional capital, resources may not be sufficient to fund its business. The Company’s ability to scale production and distribution capabilities and further increase the value of its brands, is largely dependent on its success in raising additional capital. From January through April of 2023, the Company raised a total of $ 1,455,000 of capital from the sale of convertible notes. On October 3, 2023 the Company completed IPO received net proceeds of approximately $ 5,332,283 . In October 2023, the convertible notes were converted into Class A common stock in accordance with the terms of the convertible promissory notes as a result of the IPO. The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. These financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Note 3 – Related Party Transactions Advances from Related Party On various dates from July 11, 2023, through August 23, 2023, Sahasra Technologies Corp., doing business as STLogics, which is an entity beneficially owned by the principal owners and management team of Syra, made short term, non-interest bearing advances due upon demand, of which an aggregate $ 1,295,010 advanced and we repaid an aggregate $ 1,095,000 of such advances. The Company pays for payroll and related costs for its employees that provide services to STLogics customers. During the year ended December 31, 2023, the Company applied $ 200,010 of such costs to reduce the balance of the advance to $ 0 , and has a receivable from STLogics of $ 50,614 for additional costs incurred as of December 31, 2023. During the year ended December 31, 2021, the Company’s operations were primarily financed by short term advances from Sahasra Technologies Corp., doing business as STLogics, which is an entity beneficially owned by Priya Prasad, the Company’s Chief Financial Officer and Chief Operating Officer, and STLHoldings Corp. which is an entity beneficially owned by the principal owners and management team of Syra. On various dates from December 30, 2020, through April 4, 2022, Sahasra Technologies Corp. made short term, non-interest bearing advances due upon demand to the Company, of which an aggregate $ 94,000 was loaned during the years ended December 31, 2022. During the year ended December 31, 2022, the Company repaid in full the loans totaling $ 288,200 . F- 12 Office Lease The Company leases its current corporate headquarters under a three-year lease from STVentures, LLC (“STVentures”), an entity beneficially owned by the principal owners and the management team of Syra and their affiliates. The lease commenced on July 1, 2021, and provided for a base monthly rent of $ 5,332 over the three-year term of the lease, which was subsequently amended to $ 10,711 , on May 1, 2022. A total of $ 128,527 and $ 107,013 of rent expense was included in selling, general and administrative expenses for the years ended December 31, 2023, and 2022, respectively. Information Technology (“IT”) Services The Company incurred a total of $ 3,320 and $ 23,260 of expenses from RAD CUBE LLC, which is an entity beneficially owned by the principal owners and the management team of the Company and their affiliates, for outsourced IT services which have been presented within selling, general and administrative expenses in the statement of operations during the years ended December 31, 2023, and 2022, respectively. An unpaid balance of $ 0 and $ 3,200 was outstanding at December 31, 2023, and 2022, respectively, as presented within accounts payable, related parties. The Company no longer receives services from RAD CUBE LLC. Recruitment and Human Resource Services The Company paid a total of $ 348,304 and $ 137,494 of recruitment and human resource services to NLogix, which is an entity beneficially owned by the principal owners and the management team of the Company and their affiliates, which have been presented within cost of sales in the statement of operations during the years ended December 31, 2023 and 2022, respectively. Common Stock Issuances The Company issued 83,334 shares of common stock on November 21, 2020 to its founders for services rendered in connection with the formation of the entity. In 2022, the Company’s board of directors approved a recapitalization of the Company’s equity, effected as of May 3, 2022, pursuant to which such shares were subsequently exchanged for 833,334 shares of convertible Class B common stock. Note 4 – Basic and Diluted Earnings per Share During the years ended December 31, 2023, and 2022, the Company used the two-class method to compute net loss per common share because it had issued securities, other than a single class of common stock, that contractually entitled the holders to participate in dividends and earnings. These participating securities included the Company’s Class A common stock, which was authorized pursuant to the Company’s amendment to its Certificate of Incorporation on May 2, 2022, and convertible Class B common stock which are entitled to share equally, on a per share basis, in all assets of the Company of whatever kind available for distribution to the holders of common stock. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. Under the two-class method, for periods with net income, basic net income per common share is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current period earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses. The Company reports the more dilutive of the approaches (two-class or “if-converted”) as its diluted net income per share during the period. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. F- 13 Common shares consisting of shares potentially dilutive that are excluded from the calculated of diluted earnings per share because they are anti-dilutive as of December 31, 2023 and 2022 are as follows: Schedule of Diluted Earnings Per Share December 31, 2023 December 31, 2022 Warrants 1,760,350 - Stock options 140,750 39,000 Total 1,901,100 39,000 Note 5 – Other Current Assets Other current assets at December 31, 2023, and 2022 consisted of the following: Schedule of Other Current Assets December 31, December 31, 2023 2022 EDGE tax credit receivable (1) $ - $ 116,361 Federal and State income tax receivable 73,069 28,734 Prepaid insurance 316,718 20,040 Prepaid rent - 10,711 Prepaid licensing and office fees - 16,456 Retainers paid on professional services - 30,000 Total other current assets $ 389,787 $ 222,302 (1) A refundable corporate income tax credit from the State of Indiana, called the Economic Development for a Growing Economy (“EDGE”) Tax Credit, which provides an incentive to businesses to support jobs creation, capital investment and to improve the standard of living for Indiana residents. Note 6 – Property and Equipment Property and equipment at December 31, 2023, and 2022 consisted of the following: Schedule of Property and Equipment December 31, December 31, 2023 2022 Office equipment – 5 year estimated life $ 81,340 $ 127,549 Leasehold improvements– 2 year estimated life 60,783 - Furniture and fixtures– 7 year estimated life 677 - Property and equipment, gross 677 - Less: Accumulated depreciation ( 63,827 ) ( 15,056 ) Total property and equipment, net $ 78,974 $ 112,493 Depreciation of property and equipment was $ 48,771 and $ 14,849 for the years ended December 31, 2023, and 2022, respectively. F- 14 Note 7 – Accrued Expenses Accrued expenses at December 31, 2023, and 2022 consisted of the following: Schedule of Accrued Expenses December 31, December 31, 2023 2022 Accrued payroll and taxes $ 148,924 $ 212,660 Accrued expenses 50,054 - Accrued retirement contributions - 4,874 Accrued franchise taxes - 18,777 Accrued interest - 2,806 Total accrued expenses $ 198,978 $ 239,117 The Company provides postretirement benefits pursuant to Internal Revenue Code of 1986, as amended, Section 401(k) for employees meeting specified criteria. The Company matches 100 % of the employees’ contributions that are not in excess of 4 % of the employee’s contributions. These matching contributions are fully vested and paid pursuant to the employees’ bi-weekly or semi-monthly pay periods. The Company does not prefund these benefits and has the right to modify or terminate certain of these benefits in the future. For the year ended December 31, 2023, the Company incurred $ 88,327 of investment retirement account contribution expenses pursuant to the Company’s matching contributions, including $ 8,778 , as accrued at December 31, 2023. For the year ended December 31, 2022, the Company incurred $ 28,534 of investment retirement account contribution expenses pursuant to the Company’s matching contributions, including $ 4,874 , as accrued at December 31, 2022. Note 8 – Debt Line of Credit On February 7, 2022, the Company entered into a business loan agreement (as amended, the “loan agreement”) with Citizens State Bank of New Castle pursuant to which it originally received a revolving line of credit of up to $ 1,500,000 which was subsequently amended to $ 800,000 (as amended, the “Revolving Line of Credit”). Pursuant to the terms of the Revolving Line of Credit, the outstanding balance shall not exceed 75% of the Company’s outstanding accounts receivable due from the State of Indiana aged more than 90 days together with all other accounts receivable aged less than 90 days. The Revolving Line of Credit was to terminate on December 31, 2022, unless extended pursuant to the terms thereof. The Company received extensions on the Revolving Line of Credit such that it will now terminate on October 24, 2023; however, no further advances are available under the Revolving Line of Credit. In the event of a default, all commitments and obligations pursuant to the Revolving Line of Credit will terminate immediately and, at Citizens State Bank of New Castle’s request, all Indebtedness (as defined in the loan agreement) shall become immediately due and payable. Advances on the Revolving Line of Credit are pursuant to a promissory note dated February 7, 2022 which accrues interest at a variable rate of 1.5% above the national prime interest rate as quoted in the Wall Street Journal, not to be less than 4.75% per annum or more than 21% per annum or the maximum rate allowed by law. Interest shall increase by an 2.0% in the event of a default. Pursuant to the promissory note, the Company has been required to pay monthly payments of unpaid interest since March 7, 2022. The Company may prepay all or a portion of the amount due prior to the date upon which it is due without any penalty. In connection with the Revolving Line of Credit, the Company entered into a commercial security agreement with Citizens State Bank of New Castle dated February 7, 2022, pursuant to which it granted Citizens State Bank of New Castle a security interest in the Collateral (as defined in the commercial security agreement) to secure the Indebtedness (as defined in the commercial security agreement). During the year ended December 31, 2023, the Company received proceeds of $ 300,000 and repaid total advances of $ 1,050,551 . In addition, the Company paid an underwriting fee of $ 14,076 on February 7, 2022, which was amortized over the original life of the line of credit using the straight-line method, which approximated the effective interest method. The balance of the line of credit was $ 0 and $ 750,551 at December 31, 2023, and December 31, 2022, respectively. The Revolving Line of Credit was closed. During the year ended December 31, 2022, the Company received total advances of $ 2,819,275 , and repaid advances of $ 2,068,724 . In addition, the Company paid an underwriting fee of $ 14,076 , which was amortized over the original life of the line of credit using the straight-line method, which approximated the effective interest method. The balance of the line of credit was $ 750,551 at December 31, 2022. F- 15 Convertible Notes payable On various dates from January through April 7, 2023, the Company entered into subscription agreements with accredited investors pursuant to which it issued convertible promissory notes in the aggregate principal amount of $ 1,455,000 . The notes mature on various dates between July 10, 2024 and October 7, 2024 , accrue interest at 2 % per annum and may be prepaid by the Company at any time without any penalties. The holders may convert the principal amount of the notes together with accrued interest thereon at any time prior to the earlier of the maturity date and the effectiveness of the registration statement relating to the Company’s initial public offering at a conversion price of $ 6.00 per share. Upon the closing of the Next Equity Financing (as defined herein), the principal amount of the notes together with accrued interest thereon shall automatically convert into such number of shares of the Company’s Class A common stock determined by dividing (x) the outstanding principal balance and unpaid accrued interest of the notes on the date of conversion by (y) the price per share equal to the product of the price per Equity Security (as defined in the notes) sold in the Next Equity Financing multiplied by 80%. “Next Equity Financing” means an initial public offering by the Company of its Equity Securities pursuant to which such Equity Securities are listed on a national securities exchange. In addition, if prior to the maturity date of the notes, the notes remains outstanding, then in the event of a Corporate Transaction (as defined in the notes), the holder of each note may elect to convert the outstanding principal balance and unpaid accrued interest of each note, subject to the terms and conditions contained in the note, into Conversion Shares (as defined in the notes) immediately prior to the closing of such Corporate Transaction based upon a conversion price equal to the lesser of (i) the Corporate Transaction Price (as defined in the notes) or (ii) the quotient resulting from dividing (x) the Valuation Cap (as defined in the notes) by (y) the fully diluted capitalization immediately prior to the closing of the Corporate Transactions. On October 3, 2023, a total of $ 1,472,460 , consisting of $ 1,455,000 of principal and $ 17,460 of interest, was converted into an aggregate 446,206 shares of Class A common stock in accordance with the terms of the convertible promissory notes. Notes Payable The Company recognized interest expense for the years ended December 31, 2023, and 2022, as follows: Schedule of Recognized Interest Expense December 31, December 31, 2023 2022 Interest on line of credit $ 27,054 $ 14,397 Interest on convertible notes payable 17,460 - Interest on notes payable 8,966 Amortization of underwriting fee on line of credit - 14,076 Interest on credit card debt 206 60 Total interest expense $ 53,686 $ 28,533 Insurance Notes Payable In 2023, the Company entered into three insurance policy financing arrangements to purchase various insurance policies. The total principal of these arrangements is $ 370,596 with interest rates ranging from 10.38 % through 14.05 % and monthly payments totaling $ 32,328 are due through July 2024. During the year ended December 31, 2023, the Company repaid $ 185,692 on the insurance notes payable, and the remaining balance as of December 31, 2023 was $ 184,904 . Note 9 – Lease The Company leases its current corporate headquarters under a three -year lease from STVentures, a related party. The lease, as amended on May 1, 2022 to expand the office space from 2,976 square feet to 5,978 square feet, commenced on July 1, 2021, and provides for a base monthly rent of $ 10,711 , as increased from $ 5,332 per month, over the three -year term of the lease. The Company is occupying the space for executive and administrative offices. Rent expense was $ 128,527 and $ 107,013 for the years ended December 31, 2023 and 2022 respectively, which is included in other general and administrative expenses within the statements of operations. F- 16 The components of lease expense were as follows: Schedule of Lease Cost expenses For the Year Ended December 31, 2023 2022 Operating lease cost: Amortization of ROU asset $ 121,089 $ 184,288 Interest on lease liability 7,438 8,733 Total operating lease cost $ 128,527 $ 175,555 Supplemental balance sheet information related to leases was as follows: Schedule of Supplemental Balance Sheets Information December 31, December 31, 2023 2022 Operating lease: Operating lease assets $ 63,199 $ 184,288 Current portion of operating lease liability, related party $ 63,199 $ 121,089 Noncurrent operating lease liability, related party - 63,199 Total operating lease liability $ 63,199 $ 184,288 Weighted average remaining lease term: Operating leases 0.5 years 1.5 years Weighted average discount rate: Operating lease 5.75 % 5.75 % Supplemental cash flow and other information related to operating leases was as follows: Schedule of Supplemental Cash Flow and Other Information For the Year Ended December 31, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used for operating leases $ 121,089 $ 107,013 Leased assets obtained in exchange for lease liabilities: Total operating lease liabilities $ - $ 131,187 Future minimum annual lease payments required under the operating lease and the present value of the net minimum lease payments are as follows at December 31, 2023: Schedule of Minimum Lease Payments For the Year Minimum Lease Ended December 31: Commitments 2024 $ 64,263 2025 - Total 64,263 Amount representing interest $ ( 1,064 ) Present value of net future minimum lease payments 63,199 Less current portion ( 63,199 ) Operating lease liability, related party, long term $ - F- 17 Note 10 – Commitments and Contingencies Legal Contingencies From time to time, we may be involved in various disputes and litigation matters that arise in the ordinary course of business. The Company is currently not a party to any material legal proceedings. On June 28, 2022, the Company entered into a settlement agreement with a former employee pursuant to a wrongful termination lawsuit filed in the U.S. District Court, Southern District of Indiana in the amount of $ 28,000 . The Company accrued the full amount of the settlement as of December 31, 2021, and the settlement was paid in July of 2022. In January 2024, a former employee filed a wrongful termination lawsuit against the Company in the U.S. District Court, Southern District of Indiana. The Company plans to vigorously defend itself against the claims, which it believes are without merit. Note 11 – Stockholders’ Equity (Deficit) In 2022, the Company’s board of directors approved a recapitalization of the Company’s equity, effected as of May 3, 2022, pursuant to which the 83,334 outstanding shares of common stock were exchanged for 833,334 shares of convertible Class B common stock, as retrospectively applied. Each share of Class B common stock is entitled to 16.5 votes and is convertible at any time into ten shares of Class A common stock . During March of 2022, the Company raised $ 1,000,000 of capital from the sale of 2,000,000 shares of Class A common stock at a share price of $ 0.50 in a private placement. On various dates between June and August of 2022, the Company also raised $ 1,322,500 of capital from the sale of 1,102,094 shares of Class A Common Stock at a share price of $ 1.20 in a private placement. Amendment to Articles of Incorporation On May 2, 2022, the Company filed an Amended and Restated Certificate of Incorporation that was subsequently amended on October 6, 2022 and May 30, 2023 to authorize the following: ● 100,000,000 shares of Class A common stock with a par value of $ 0.001 per share; ● 5,000,000 shares of convertible Class B common stock with a par value of $ 0.001 per share; and ● 10,000,000 shares of “blank check” preferred stock with a par value of $ 0.001 per share. Liquidation rights: In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Company, the holders of Class A common stock and the holders of convertible Class B common stock shall be entitled to share equally, on a per share basis, in all assets of the Company of whatever kind available for distribution to the holders of common stock. Voting: The holders of the Class A common stock and the holders of the convertible Class B common stock shall at all times vote together as one class on all matters, including the election of directors, submitted to a vote or for the consent of the stockholders of the Company. Each holder of shares of convertible Class B common stock shall be entitled to 16.5 votes for each share of convertible Class B common stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Company. Each holder of shares of Class A common stock shall be entitled to one vote for each share of Class A common stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Company. Each share of convertible Class B common Stock was also convertible into 16.5 fully paid and nonassessable shares of Class A common stock. On October 6, 2022, the Company’s Amended and Restated Certificate of Incorporation was amended to change the conversion ratio from 16.5 shares to 10 shares of Class A common stock. The voting rights remain unchanged. The voting powers, conversion features, if any, designations, preferences, limitations, restrictions and other rights of each series of preferred stock shall be prescribed by resolution of the Board of Directors at the time a specific series of preferred stock is designated. None of the preferred shares have been designated or issued to date. F- 18 Class A Common Stock The Company has 100,000,000 authorized shares of $ 0.001 par value Class A common stock, and 5,588,298 shares were issued and outstanding as of December 31, 2023. 3,568,758 shares were issued and outstanding as of December 31, 2022. Class A Common Stock Sales On October 3, 2023 (the “Closing Date”), the Company completed its initial public offering (the “IPO”) of an aggregate of 1,615,000 units (“Units”) at a public offering price of $ 4.125 per Unit, with each Unit consisting of (a) one share of the Company’s Class A common stock and (b) one warrant (each, a “Warrant” and collectively, the “Warrants”) to purchase one share of Class A common stock at an exercise price equal to $6.50 per share, exercisable until the fifth anniversary of the issuance date, pursuant to that certain underwriting agreement dated as of September 28, 2023 (the “Underwriting Agreement”) by and between the Company and Kingswood, a division of Kingswood Capital Partners, LLC, as representative of the several underwriters named in the Underwriting Agreement (the “Representative”). The Company received gross proceeds of approximately $ 6,661,876 from the sale of the Units before deducting underwriting discounts, commissions and offering expenses of $ 1,928,133 . In addition, pursuant to the Underwriting Agreement, the Company granted the Representative a 45-day option to purchase up to 242,250 Units at the initial public offering price, less the underwriting discount, to cover over-allotments, if any (the “Over-Allotment Option”). On the Closing Date, the Company issued an additional 242,500 Warrants to the underwriters pursuant to the partial exercise by the underwriters of the Over-Allotment Option, generating gross proceeds of $ 2,422 . On the Closing Date, the Company granted to the underwriter fully vested warrants to purchase 145,350 shares of the Company’s common stock, having an exercise price of $ 5.156 per share, exercisable over a 5 -year term, to the Representative. The fair value of the warrants was estimated at $ 352,677 using a Black-Scholes option pricing model and the following assumptions: 1) dividend yield of 0 %; 2) risk-free rate of 4.80 %; 3) volatility of 122 %; 4) a common stock price of $ 3.03 , and 5) an expected term of 5 years. The fair value of the options was recognized as a cost of capital related to the IPO. On May 10, 2023, a stockholder voluntarily surrendered 41,667 shares of Class A common stock, which were subsequently cancelled. In June and August 2022, the Company raised a total of $ 1,322,500 of capital from the sale of an aggregate of 1,102,094 shares of Class A common stock to a total of 23 accredited investors at a share price of $ 1.20 in a private placement. During March 2022, the Company raised an aggregate of $ 1,000,000 of capital from the sale of 2,000,000 shares of Class A common stock to a total of 22 accredited investors at a share price of $ 0.50 in a private placement. The following is a summary of activity of outstanding stock warrants: Summary of Activity of Outstanding Stock Warrants Weighted Average Number Exercise of Shares Prices Balance, December 31, 2021 - $ - Warrants granted - - Warrants cancelled - - Balance, December 31, 2022 - - Warrants granted 2,002,850 6.40 Warrants exercised - - Warrants cancelled ( 242,500 ) ( 6.50 ) Balance, December 31, 2023 1,760,350 $ 6.39 Exercisable, December 31, 2023 - $ - The warrants have a weighted average remaining contractual life of 4.75 years and no intrinsic value as of December 31, 2023. Class A Common Stock Issued for Services In November 2023, the Company award 50,000 shares of restricted stock to a consultant, which vest in four equal quarterly installments. The restricted shares had a fair value of $ 75,500 based on the stock price at the grant date, and the Company recognized $ 8,122 of expense during the year ended December 31, 2023. No shares were issued during the year ended December 31, 2023. From February through May 2022, the Company awarded a total of 800,002 shares to six consultants for services provided. The shares were subsequently issued on August 3, 2022. The aggregate fair value of the shares was $ 510,000 , based on recent sales of the Company’s Class A common stock to third parties. Convertible Class B Common Stock The Company has 5,000,000 authorized shares of $ 0.001 par value convertible Class B common stock, and had 833,334 shares issued and outstanding as of December 31, 2022 and 2021, as retrospectively applied, pursuant to the Company’s subsequent recapitalization in 2022 and effected as of May 3, 2022, whereby the founders exchanged their 83,334 founders shares for 833,334 shares of convertible Class B common stock. F- 19 Convertible Class B Common Stock Issuances On November 21, 2020, the Company issued 83,334 shares of common stock to its founders for services rendered in connection with the formation of the entity. The aggregate fair value of the common stock was $ 100 based on par value of the Company’s common stock, as there was no immediate intrinsic value in the Company upon inception. In 2022, the Company’s board of directors approved a recapitalization of the Company’s equity, effected as of May 3, 2022, pursuant to which the equity was recapitalized with the exchange of the 83,334 shares of common stock for 833,334 shares of convertible Class B common stock, as retrospectively applied. Each share of convertible Class B common stock was convertible into 16.5 shares of Class A common stock, which was subsequently amended to be convertible into ten shares on of Class A common stock on October 4, 2022. Note 12 – Common Stock Options Omnibus Equity Incentive Plan On April 11, 2022, the Company’s board of directors adopted, and the Company’s stockholders approved, the Syra Health Corp. 2022 Omnibus Equity Incentive Plan (“2022 Plan”). No more than 1,041,667 shares of the Company’s Class A common stock shall be issued pursuant to the exercise of incentive stock options and other securities under the 2022 Plan. Class A Common Stock Option Awards On November 8, 2023, the Company granted options to purchase an aggregate 32,750 shares of the Company’s common stock under the 2022 Plan, having an exercise price of $ 1.51 per share, exercisable over a 10 -year term, to a total of ten employees. The options vest annually over four years from the date of grant. On November 8, 2023, the Company granted options to purchase an aggregate 30,000 shares of the Company’s common stock under the 2022 Plan, having an exercise price of $ 1.51 per share, exercisable over a 10 -year term, to a total of three consultants. The options vest quarterly over one year from the date of grant. On October 9, 2023, the Company granted options to purchase an aggregate 50,000 shares of the Company’s common stock under the 2022 Plan, having an exercise price of $ 2.68 per share, exercisable over a 10 -year term, to a total of five newly appointed board members. The options vest in four (4) equal annual installments with the first installment vesting on the date of grant. The fair value of the options was estimated at $ 198,383 using a Black-Scholes option pricing model and the following assumptions: 1) dividend yield of 0 %; 2) risk-free rate of 4.45 % to 4.71 %; 3) volatility of 112 % to 115 % based on; 4) a common stock price ranging from $ 1.51 to $ 2.68 , and 5) an expected term of 6.25 years. During the year ended December 31, 2023, a total of $ 21,041 was recognized as expense related to stock options and $ 196,955 remains to be expensed. On various dates between July 1, 2022 and September 1, 2022, the Company granted options to purchase an aggregate 32,502 shares of the Company’s Class A common stock at an exercise price of $ 1.20 per share under the 2022 Plan, which represented the recent sales price of securities to third parties. These options will vest 25 % on each anniversary until fully vested. The options had no intrinsic value. The aggregate estimated value using the Black-Scholes Pricing Model, based on an expected term of 6.25 years, a weighted average volatility rate of 93 %, a weighted average risk-free interest rate of 3.03 %, and a weighted average call option value of $ 0.9328 , was $ 30,317 . The options are being expensed over the vesting period, resulting in $ 2,910 of stock-based compensation expense during the year ended December 31, 2022. During the fourth quarter of 2022, a total of 9,167 options at a strike price of $ 1.20 per share were cancelled. F- 20 The following is a summary of activity of outstanding stock options: Schedule of Share-Based Compensation, Stock Options Activity Weighted Average Number Exercise of Shares Prices Balance, December 31, 2021 - $ - Options granted 39,000 1.00 Options cancelled - Balance, December 31, 2022 39,000 1.20 Options granted 112,750 2.03 Options forfeited ( 11,000 ) ( 1.00 ) Balance, December 31, 2023 140,750 $ 1.82 Exercisable, December 31, 2023 - $ - The options had a weighted average remaining life of 9.58 years and no intrinsic value as of December 31, 2023. Note 13 - Income Taxes For the period from November 20, 2020 (inception) through December 31, 2023, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2023, and 2022, the Company had approximately $ 4,637,000 and $ 1,731,000 of federal net operating losses. Under the Tax Cuts and Jobs Act of 2017, the net operating loss carry forwards can be carried forward indefinitely, however the deductions are limited to 80% of taxable income. The effective income tax rate for the years ended December 31, 2023 and 2022 consisted of the following: Schedule of Effective Income Tax Rate December 31, December 31, 2023 2022 Federal statutory income tax rate 21 % 21 % State income taxes 3 % 3 % Change in valuation allowance ( 24 )% ( 24 )% Net effective income tax rate - - The components of the Company’s deferred tax asset are as follows: Schedule of Deferred Tax Assets December 31, 2023 2022 Deferred tax assets: Net deferred tax assets before valuation allowance $ 1,029,723 $ 332,400 Less: Valuation allowance ( 1,029,723 ) ( 332,400 ) Net deferred tax assets $ - $ - Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2023 and 2022, respectively. In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions. Note 14 – Subsequent Events The Company evaluates events that have occurred after the balance sheet date through the date these financial statements were issued. Subsequent to December 31, 2023, two investors exercised 130,789 warrants to purchase Class A Common stock pursuant to which the Company received cash proceeds of $ 850,139 . Subsequent to December 31, 2023, the Company issued 12,500 shares pursuant to the restricted stock award from November 2023. F- 21 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.