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 the 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. During the quarter ended September 30, 2023, the Company entered into an agreement with a very prestigious cardiac focused hospital, Narayana Hrudalaya (NH) in Bangalore (India) under which 100 cardiac procedures are being performed using our Mantra surgical robotic system on a pay-per-use model. This agreement underlines the cardiac procedure capability of our surgical robotic system which is one of its unique selling propositions in comparison to other alternative surgical robotic systems available today. 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 CardioVentures and give pro forma effect to the reverse stock split. See Note 8 of 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 September 30, 2023, we have sold 12 systems, which have performed more than 400 procedures of various types involving varying degrees of complexities. 16 The following table provides selected balance sheet data for our Company as of September 30, 2023 (unaudited) and December 31, 2022: As of As of September 30, December 31, Balance Sheet Data 2023 2022 Cash $ 6,596,224 $ 1,351,364 Total Assets $ 24,058,996 $ 4,371,441 Total Liabilities $ 8,296,341 $ 4,051,229 Total Stockholders’ Equity $ 15,762,655 $ 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 September 30, 2023, as compared to three months ended September 30, 2022 Revenues. We had revenues of $1,429,772 for the three months ended September 30, 2023, compared to $ 0 for the three months ended September 30, 2022. The company sold 3 surgical robotic systems during the three months ended September 30,2023 and in addition to these three installations, the Company also installed two systems on pay per use basis in two hospitals in India for a predefined number of procedures post which the Company expects to receive regular purchase order for its surgical robotic system from these hospitals. Considering that the pay-per-use model installations at these two hospitals were done towards the latter part of the quarter and not many procedures were done as yet on these two installations, no revenues have yet been recognized from these two installations during the quarter ended September 30, 2023. Salary, Payroll and Compensation Expense. We had salary, payroll and stock compensation expenses of $857,243 and $724,965 during the three months ended September 30, 2023, and September 30, 2022, respectively. This includes compensation for the management staff and stock-based compensation expenses related to the Company’s 2016 Stock Incentive Plan. General and Administrative Expenses. We incurred $1,275,062 in general and administrative expenses during the three months ended September 30, 2023, and $175,180 September 30, 2022, respectively. General and administrative expenses include travel expenses, marketing expenses, 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 $11,478 for the three months ended September 30, 2023, as compared to $110,042 of other income during the three months ended September 30, 2022. Other expenses consist mainly of interest expenses related to bank overdraft. Net Loss. We incurred a net loss of $1,983,940 for the three months ended September 30, 2023, as compared to a net loss of $790,104 for the three months ended September 30, 2022. Nine months ended September 30, 2023, as compared to Nine months ended September 30, 2022 Revenues. We had revenues of $4,516,458 for the Nine months ended September 30, 2023, as compared to $ 0 for the Nine months ended September 30, 2022., Due to application of ASC606, as of September 30, 2023, the sum of US$ 1,355,448 stands transferred to unrealized deferred revenue and due to this adjustment, the revenues, and gross and net profitability for nine-month period ended September 30, 2023 is reflected less to the extent of this unrealized deferred revenue. 17 Salaries, Payroll and Compensation Expense. We had Salary, payroll and stock compensation expenses of $3,886,197 and $819,732 during Nine months ended September 30, 2023 and September 30, 2022, respectively. This includes compensation for the management staff and stock-based compensation expenses related to the Company’s 2016 Stock Incentive Plan. General and Administrative Expenses. We incurred $1,646,121 and $330,900 in general and administrative expenses during the nine months ended September 30, 2023, and September 30, 2022, respectively. General and administrative expenses include marketing expenses, and travel expenses, legal and other professional expenses related to the Company’s filings as a public company with the SEC. Other Income/Expenses . We incurred $185,269 in other expenses/income for the nine months ended September 2023, as compared to $110,106 in other income during the nine months ended September 30, 2022. Other expenses consisted of interest expense related to bank overdraft. Net Loss. We incurred a net loss of $4,822,406 for the nine months ended September 30, 2023, as compared to a net loss of $1,040,525 for the Nine months ended September 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 and to continue to finance its research and development work in the field of surgical robotics. 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 $US 20.0 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 September 27, 2023, US$16,980,000 in advances were outstanding under the Line of Credit Note. On September 27, 2023, SPL exercised its option to convert the US$16,980,000 in advances that were outstanding under the Line of Credit Note into 22,945,946 shares at the conversion price of $0.74 per share. The foregoing description of the Line of Credit Note is qualified in its entirety by reference to the copy of the Line of Credit Note filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2023. This conversion of funds advanced under the Line of Credit Note and subsequently converted into equity has resulted in a significant improvement in the Company’s stockholders’ equity and working capital position. As of September 30, 2023, the Company had stockholders’ equity of US$ 15.76 million and a working capital surplus of US$ 11.03 million as compared to stockholders’ equity of US$ 821,595 and a working capital deficit of US$ 2.88 million as of June 30, 2023. 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, 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. 18 Cash Flows used in Operating Activities During the nine months ended September 30, 2023, net cash used by operating activities was $13,831,054 resulting from our net loss of $4,822,406 partially offset by non-cash charges of $1,587,581 primarily driven by depreciation, stock compensation expense and translation adjustment. During the nine months ended 30 September 2023, we also had cash used in net operating assets and liabilities, to the extent of $10,596,231 primarily driven by increases in prepaid expenses and other current assets to the extent of $12,723,129 including the fixed deposits provided to bank to secure the working capital facilities thereagainst and an increase in accounts payable and accrued expenses to the extent of $2,126,898. During the nine months ended September 30, 2022, net cash used by operating activities was $303,711, resulting from our net loss of $1,040,525, partially offset by non-cash expenses of $819,732. During the same period, we also had cash invested in our operating assets and liabilities of $89,782 primarily due to decreases in accounts payable and contract liabilities. Cash Flows from Investing Activities During the nine months ended September 30, 2023, we had net cash used in investing activities of $4,946,786, investment in $877,403 in purchase of equipment, as well as our loans and advances and long term receivables of $4,069,383. During the nine months ended September 30, 2022, we had no cash flows from investing activities activity. Cash Flows from Financing Activities During the September 30, 2023, we had net cash provided by investing activities of $24,022,701, including $6,118,214 in proceeds from bank overdraft, $446,188 in securities offering, $12,360 in repayment of Warrants, $22,980,000 in Proceeds from Notes converted, $50,000 in Proceeds from Options Exercised, as well as our Recapitalization of $4,594,341 and also comprising of repayments of notes to the extent of $1,000,000. During the nine months ended September 30, 2022, we generated $412,080 from a private securities offering. 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. 19 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.