SS Innovations International, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Introduction The Company is 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. Having commenced commercial sales of our surgical robotic system in the second half of 2022, the year 2023 was our first full year of commercial sales of our surgical robotic system and its allied instruments and accessories. Accordingly, the operating results detailed below largely reflect the impact of the consummation of the CardioVentures Merger in April 2023, when compared with operating results for the corresponding period in 2022. Our financial performance is largely driven by increasing awareness of the benefits of robotically assisted surgery, reduced learning curves for robotic surgeons and the affordability and accessibility of surgical robotic technology. Our financial performance is also dependent on our obtaining regulatory approvals in various regulated markets where we have plans to sell our products. Robotically assisted surgeries are increasingly being recognized as an approved treatment modality from an insurance coverage perspective. Our manufacturing operations being based in India derive significant operating cost advantages in terms of availability of quality and cost-effective fabrication/3D printing solutions, electronic/electrical/mechanical components, outsourced services and skilled manpower. All these factors help us in having lower costs of production which eventually helps us make our surgical robotic system cost effective and relatively affordable. 22 During the years ended December 31, 2023, and December 31, 2022, we sold twelve and three surgical robotic systems, respectively. In addition, during the year ended December 31, 2023, we also installed four systems in four hospitals, belonging to well-known hospital groups in India, for their clinical evaluation in anticipation of orders from these hospital groups. In addition to this, we also installed three systems on a pay-per-use basis. These systems were installed in December 2023 and accordingly had not generated any revenues as of December 31, 2023. We also installed one system at the Johns Hopkins Hospital, in Baltimore, Maryland at no cost, for clinical training and ongoing research and development purposes. As such, at the end of December 2023, we had a total of twenty-three installed systems of which 20 were installed during the year ended December 31, 2023. Results of Operations Introduction The financial statements appearing elsewhere in this report have been prepared assuming that the Company will continue as a going concern. The Company has recently commenced its commercial operations by way of the sale of its product and has not yet established consistent operational revenue cash flows to meet all its fixed operating costs and hence may continue to incur losses for some time. These conditions raise doubt about the Company’s ability to continue as a going concern. The following table provides selected financial data about our Company at December 31, 2023 and December 31, 2022: Balance Sheet Data As of As of December 31, December 31, 2023 2022* Cash $ 2,022,276 $ 1,504,049 Restricted Cash** $ 5,010,725 $ 63,492 Total Assets $ 25,479,086 $ 8,676,204 Total Liabilities $ 11,181,102 $ 11,136,752 Total Shareholders’ Equity $ 14,297,984 $ (2,460,547 ) * Amounts for the year ended December 31, 2022, represent consolidated financials for AVRA Medical Robotics, Inc. and CardioVentures Inc. to reflect the effect of the CardioVentures Merger. ** Represents Fixed Deposits held by bank as security for bank facilities and certain performance guarantees. To date, the Company has mainly relied on debt and equity raised in private offerings to finance its operations. During 2024, the company plans to raise additional capital through further private or public offerings. However, if we are unable to do so and if we experience a shortfall in operating capital, we could be faced with having to limit our expansion plans, research and development and marketing activities. Year ended December 31, 2023, as compared to year ended December 31, 2022 Revenues. During the year ended December 31, 2023, the Company had revenues of $5,879,710 (comprising $5,692,721 of system and instrument sales and $186,989 of warranty sales), compared to revenues of $1,458,315 (comprising $1,438,969 of system and instrument sales and $19,346 of warranty sales) during the year ended December 31, 2022.The increase in revenue is primarily due to sale of increased number of surgical robotic systems and instruments in the year ended December 31, 2023 as compared to the year ended December 31, 2022. Research and Development Expenses. Research and Development expenses during the year ended December 31, 2023, were $576,168, as compared to $83,282 for the year ended December 31, 2022. The increase in the Research and Development expenses as compared to the previous year is in line with the Company’s continued focus on improving the design and technological capabilities of its existing SSi Mantra system and further expanding its product offerings. 23 Stock Compensation Expense. We had stock compensation expenses of $13,425,319 and $1,135,468 during the years ended December 31, 2023, and December 31, 2022 respectively. The substantial increase in the stock compensation expense in 2023 is primarily the result of the award of stock grants to employees of the Company and its subsidiaries and the issuance of stock awards and stock options to executive officers of the Company and its subsidiaries in November 2023 under our Incentive Stock Plan, in recognition of their efforts in developing and commercializing our SSi Mantra system. Salaries and Payroll Expense . We had salary and payroll expense of $2,215,620 for the year ended December 31,2023, as compared to $1,698,283 in the year ended December 31, 2022. This increase in salary and payroll expense is a reflection of the increase in Company’s employee count from 102 at December 31, 2022 to 221 at December 31, 2023, commensurate with the expansion in the Company’s manufacturing and commercial sales operations during 2023 Salaries and payroll expense includes salaries and payroll expense related to executive officers of the Company. General and Administrative Expenses. We incurred $5,164,713 in general and administrative expenses during the year ended December 31, 2023, as compared to $3,251,794 for the year ended December 31, 2022. General and administrative expenses include sales, marketing and travel-related expenses, rent for the manufacturing facility offices, legal and other professional expenses related to the Company’s filings as a public company with the SEC. The increase in general and administrative expenses resulted from the increased scale of commercial operations during 2023. as compared to the year ended December 31, 2022. Other Income (Expenses) . We have incurred $273,599 in interest expenses during the year ended December 31,2023 as compared to net interest income of $77,729 during the year ended December 31, 2022. The increase in interest expense from 2022 to 2023 resulted from an increase in bank borrowings for working capital from HDFC Bank in India. Net Loss. We incurred a net loss of $20,941,972 for the year ended December 31, 2023, as compared to a net loss of $5,601,504 for the year ended December 31, 2022. The increase in net loss from 2022 to 2023 is primarily the result of the increase in stock compensation expenses as set forth above. The net loss for the year ended December 31, 2023, was also higher due to $1,668,146 of system sales revenue that stands to be transferred to unrealized deferred revenue pursuant to the application of ASC606. Liquidity and Capital Resources The Company expects to require substantial funds for scaling up its operations, incurring capital expenditures to have its own manufacturing facility for 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. (“ Sushruta ”), the Bahamian holding company owned by Dr. Sudhir Srivastava, our Chairman, Chief Executive Officer and principal shareholder. Pursuant to the Line of Credit Note, Sushruta, in its discretion could make multiple advances to the Company through December 31, 2023 (the “ Maturity Date ”), in an aggregate amount of up to $20 million for working capital purposes. The advances under the Line of Credit Note did not bear interest and were due and payable on or before the Maturity Date. During the year ended December 31, 2023, Sushruta made advances aggregating to $16,980,000 under the Line of Credit Note and exercised its option to convert the full amount of advances made into shares of our common stock at a conversion price of $0.74 per share. Accordingly, 22,945,946 shares of our common stock were issued to Sushruta during the year ended December 31, 2023. As of December 31, 2023, the Company had shareholders’ equity of $14.3 million and a working capital surplus of $9.1 million as compared to shareholders’ deficit of $2.46 million and a working capital deficit of $4.42 million as of December 31, 2022. 24 Cash Flows Used in Operating Activities During the year ended December 31, 2023, net cash used in operating activities was $13,572,758 resulting from our net loss of $20,941,972, partially offset by non-cash charges of $ 14,193,327 comprised mainly of depreciation, stock compensation expense and expenses for which common stock issued. During the year ended December 31, 2023, we had net cash invested in our operating assets and liabilities of $6,962,654 primarily as a result of increases in prepaid expenses and other current assets to the extent of $9,200,688, including fixed deposits provided to HDFC bank to secure working capital facilities and an increase in accounts payable and accrued expenses of $2,238,034. During the year ended December 31, 2022, net cash used in operating activities was $5,555,345, resulting from our net loss of $5,601,504, partially offset by non-cash charges of $994,369 comprised mainly of depreciation and stock compensation expense. During 2022 we had net cash invested in our operating assets and liabilities of $948,209. primarily as a result of increased prepaid expenses and other current assets. Cash Flows from Investing Activities During the year ended December 31, 2023, we had net cash used in investing activities of $2,299,356, resulting mainly from investment of $563,967 in purchases of equipment, $2,199,418 towards the value of a Right of Use asset, as well as long term loans and advances and long-term receivables of $2,535,971 and receipt of funds through Note receivables – acquisition of $3,000,000. During the year ended December 31, 2022, we had net cash used in investing activities of $2,735,814, resulting mainly from investment of $220,324 in purchases of fixed assets, reduction in Notes Receivable – Acquisition of $3,000,000 and realization of $484,510 from sale of fixed assets. Cash Flows from Financing Activities During the year ended December 31, 2023, we had net cash provided by financing activities of $16,734,963, comprised of a $4,947,233 increase in restricted cash (i.e., fixed deposits provided to secure bank facilities and for providing guarantees), partially offset by an increase of $2,895,880 in proceeds from our bank overdraft facility, $808,244 from private securities offerings, $12,360 from the exercise of previously issued warrants, $22,980,000 in proceeds from promissory notes converted to common stock, $100,000 in proceeds from the exercise of stock options, as well as the reduction by conversion of promissory notes of $7,000,000. We also had an increase in right of use liability (non-current portion) of $1,910,432. During the year ended December 31, 2022, we had net cash provided by financing activities of $9,294,395, comprised of $145,000 in repayment of promissory notes, $2,583,798 of proceeds from our bank overdraft facility, $1,500,431 in proceeds from private securities offerings, $7,000,000 in proceeds from the issuance of 7% convertible promissory notes, $26,000 in common stock issued and a decrease of $1,670,834 in related party loans. While we have been successful in raising funds to finance our operations since inception and we believe that we will be successful in obtaining the necessary financing to fund our operations going forward, we do not have any committed sources of funding and there are no assurances that we will be able to secure additional funding. The accompanying financial statements 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. 25 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 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Item 8. Financial Statements and Supplementary Data. See the Index to the Financial Statements beginning on page F-1 below. 26 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.