SS Innovations International, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview General We are a medical robotics company engaged in the business of developing, manufacturing and selling a surgical robotic system under our proprietary brand “ SSI Mantra ,” together with allied accessories and a wide range of surgical instruments capable of supporting cardiac and a variety of other surgical procedures. We are focused on making the benefits of robotic surgery affordable and accessible to a large part of the global population by consistently working on keeping our cost of production low. The modular design of our surgical robotic system is aimed at being more user friendly and relatively more adaptable to operating theatres of varying sizes and different geographical locations. Our primary research and development, manufacturing and marketing operations are based in India. We believe that with the constant development of minimally invasive treatment technologies which are aimed at reducing patient recovery times, the use of surgical robotic systems equipped with technologically advanced surgical instruments is only going to increase. This is evidenced by the consistent year-on-year growth in number of robotic surgeries being performed worldwide. We believe that with our vision to make the benefits of robotic surgeries affordable and accessible, we can help to further accelerate the adoption of robot assisted surgeries thereby making its benefits reach to all those segments of the society who have hitherto been deprived to benefit from it. A wide range of surgical procedures including Urology (Prostate), Colo-Rectal, Oncology, Gynecology, Thoracic, and General Surgery are already being done with the use of surgical robotic systems, including our SSI-Mantra surgical robotic system, we plan to extend the usage of our robotic system to complex Cardiac procedures as well. We believe that this this can be hugely beneficial for faster recovery of cardiac patients who have to currently undergo sternotomy which has a much longer recovery period. We also believe that use of robotic systems is also going to help address the delivery of healthcare in inaccessible locations, ranging from rural areas lacking specialist expertise to post-disaster scenarios, and remote battlefield areas and that the robotic technologies are going to consistently evolve for promoting faster recovery periods, improved functionality, lower morbidity and improved overall medical outcomes of healthcare. Merger On April 14, 2023, a wholly owned subsidiary of the Company merged with CardioVentures, Inc., a Delaware corporation (“ CardioVentures ”), which is the indirect parent of Sudhir Srivastava Innovations Pvt. Ltd., (“ SSI India ”) an Indian private limited company engaged in the business of developing innovative surgical robotic technologies. As a result of the transaction, a “ change in control ” of the Company took place. In addition, among other matters, the Company changed its name to “ SS Innovations International, Inc. ” and implemented a one for ten reverse stock split. The financial statements, financial information and share and per share information contained in this report reflect the operations of both the Company and Cardio Ventures and give pro forma effect to the reverse stock split. See Note 8 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for additional details regarding the business combination. Results of Operations Introduction The financial statements appearing elsewhere in this report have been prepared assuming the Company will continue as a going concern. In the second half of 2022, the Company commercially launched its “ SSI Mantra ” robotic surgical system in India. As of June 30, 2023, we have sold 9 systems, which have performed more than 230 procedures of various types involving varying degrees of complexities. 15 The following table provides selected balance sheet data for our Company as of June 30, 2023 (unaudited) and December 31, 2022: Balance Sheet Data As of As of June 30, December 31, 2023 2022 Cash $ 423,060 $ 1,351,364 Total Assets $ 9,693,331 $ 4,371,441 Total Liabilities $ 8,871,736 $ 4,051,229 Total Stockholders’ Equity $ 821,595 $ 320,213 The Company has been consistently making efforts to raise debt and equity capital to meet the demands of and further scale up its growing operations. To date, the Company has relied on debt and equity raised in private offerings and shareholder loans to finance operations and no other sources of capital has been identified. If we experience a shortfall in operating capital, we could face slower revenue growth and we may be faced with having to slow down our expansion plans. Three months ended June 30, 2023 , as compared to three months ended June 30, 2022 Revenues. We had revenues of $1,575,307 for the three months ended June 30, 2023, compared to $ 0 for the three months ended June 30, 2022, reflecting the commercial launch of our robotic surgical system in late 2022.. Selling, General and Administrative Expenses. We incurred $1,983,053 in selling, general and administrative expenses during the three months ended June 30, 2023, and $170,030 June 30, 2022, respectively. General and administrative expenses include compensation expenses including compensation for the management staff and stock-based compensation, consultancy charges and legal and other professional expenses related to the Company’s filings as a public company with the Securities and Exchange Commission (the “ SEC ”). Other Income/Expenses . We incurred other expenses of $91,533 for the three months ended June 30, 2023 as compared to $29 of other expenses during the three months ended June 30, 2022. Other expenses consisted of interest expense related to loans. Net Loss. We incurred a net loss of $1,850,423 for the three months ended June 30, 2023, as compared to a net loss of $170,002 for the three months ended June 30, 2022. Six months ended June 30, 2023, as compared to six months ended June 30, 2022 Revenues. We had revenues of $3,086,686 for the six months ended June 30, 2023, as compared to $ 0 for the six months ended June 30, 2022, reflecting the commercial launch of our robotic surgical system in late 2022. 16 Selling, General and Administrative Expenses. We incurred $3,400,013 and $250,486 in general and administrative expenses during the six months ended June 30, 2023, and June 30, 2022, respectively. General and administrative expenses include legal and other professional expenses related to the Company’s filings as a public company with the SEC. Other Income/Expenses . We incurred $173,791 in other expenses for the six months ended June 2023, as compared to $64 in other expenses during the six months ended June 30, 2022. Other expenses consisted of interest expense related to loans. Net Loss. We incurred a net loss of $2,838,465 for the six months ended June 30, 2023, as compared to a net loss of $250,422 for the six months ended June 30, 2022. Liquidity and Capital Resources The Company expects to require substantial funds for scaling up its operations, for incurring capital expenditure to have its own in-house machining and tooling capacity to meet its growing manufacturing and assembly needs and also to reduce its dependence on outsourcing vendors which, in turn, would help the Company to ensure consistency in quality and delivery schedules of the components and potentially also bring down the manufacturing costs. Due to the launch of our surgical robotic system in later part of 2022, operating activities in terms of manufacturing and selling of our surgical robotic system significantly increased in 2023, and as a result, $10,679,114 was net cash used in operating activities during the six months ended June 30, 2023, as compared to $216,766 during the six months ended June 30, 2022. To supplement, support and finance this increase in the operating activities, the Company raised an aggregate of $11,258,363 in the form of Bank Overdrafts (Demand Notes Payable) and securities offered in private financings during the six months ended June 30, 2023, as compared to $72,081 in the corresponding period in 2022. On April 15, 2023, the Company executed a Convertible Promissory Note (the “ Line of Credit Note ”) with Sushruta Pvt Ltd. (“ SPL ”), the Bahamian holding company owned by Dr. Sudhir Srivastava, our Chairman, Chief Executive Officer and principal shareholder. Pursuant to the Line of Credit Note, SPL, in its discretion may make multiple advances to the Company through December 31, 2023 (the “ Maturity Date ”), in an aggregate amount of up to $US20.0 million for working capital purposes. The advances under the Line of Credit Note do not bear interest and are due and payable on or before the Maturity Date. SPL may, at its option, convert the principal amount of any advance into shares of our common stock, at a conversion price of US$0.74 per share. As of June 30, 2023, US$1,225,000 in advances were outstanding under the Line of Credit Note. The foregoing description of the Line of Credit Note is qualified in its entirety by reference to the copy of the Line of Credit Note filed as Exhibit 10.1 to this report. While we have been successful in raising funds to meet our working capital needs to date, believe that we have the resources to do so for the balance of , we do not have any committed sources of funding and there are no assurances that we will be able to secure additional funding if and when needed. The condensed consolidated financial statements included in this report have been prepared assuming that the Company will continue as a going concern; however, if the efforts noted above are not successful, it would raise substantial doubt about the Company’s ability to continue as a going concern. If we cannot obtain financing, then we may be forced to further curtail our operations or consider other strategic alternatives. Even if we are successful in raising the additional financing, there is no assurance regarding the terms of any additional investment and any such investment or other strategic alternative would likely substantially dilute our current shareholders. Cash Flows From Operating Activities During the six months ended June 30, 2023, net cash used in operating activities was $10,679,114, reflecting the initial commercial sales of our robotic surgical system and resulting from our net loss of $2,838,465, partially offset by non-cash charges of $310,897, primarily attributable to depreciation charges. During the 2023 period,, we had cash provided by our operating assets and liabilities of $8,151,546, primarily driven by increases in accounts payable and prepaid expenses. In comparison, during the six months ended June 30, 2022, net cash used by operating activities was $216,766, resulting from our net loss of $250,421, partially offset by depreciation charges of $99,351. During the period, we had cash used in our operating assets and liabilities of $65,696 primarily due to increases in accounts payable. Cash Flows From Investing Activities During the six months ended June 30, 2023, we had net cash used in investing activities of $1,507,552, including repayment of $3,000,000 of notes receivable, $736,006 in purchase of property and equipment, as well as an increase in a long term receivable of $3,771,547. During the six months ended June 30, 2022, we had no cash flows from investing activities. Cash Flows From Financing Activities During the six months ended June 30, 2023, we had net cash used in investing activities of $11,258,363, including increase in bank overdraft facility by $4,963,385 and $8,170,061 in private securities offerings, as well as our other comprehensive income (loss) of $899,917 and repayments of notes of $2,775,000. During the six months ended June 30, 2022, we had private securities offerings of $72,081. 17 Critical Accounting Policies Use of Estimates The preparation of 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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates included deferred revenue, costs incurred related to deferred revenue, the useful lives of property and equipment and the useful lives of intangible assets. Income Taxes The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740. ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Off-Balance Sheet Arrangements There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Item 3. Quantitative Disclosures About Market Risks. As a “ smaller reporting company, ” we are not required to provide the information required by this Item.