SS Innovations International, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview We are a commercial-stage surgical robotics company focused on transforming patient lives by democratizing access to advanced surgical robotics technologies. We design, manufacture and market an advanced, next-generation and affordable surgical robotic system called the SSi Mantra. While surgical robotic systems have gained acceptance globally in the past two decades for providing greater efficiency, better clinical outcomes and reducing healthcare costs, access to such systems remains largely limited to developed countries such as the United States, the European Union and Japan. With the SSi Mantra, we are breaking down barriers and accelerating access to surgical robotics technologies in underserved regions of the world. 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 March 31, 2024, we have sold 23 systems and in addition to these sold systems, we have also installed 5 systems on pay-per-use/revenue share basis, three systems are installed in three prominent hospitals in India for clinical evaluation and one system is installed at Johns Hopkins hospital for research and training purposes. As of March 31, 2024, we have a network of 32 systems within India and overseas. More than 1000 procedures of various types involving varying degrees of complexities have been performed on the systems installed in India. The following table provides selected balance sheet data for our Company as of March 31, 2024, (unaudited) and December 31, 2023: As of As of March 31, December 31, Balance Sheet Data 2024 2023 Cash $ 6,903,121 $ 7,033,001 Total Assets $ 31,045,225 $ 25,479,086 Total Liabilities $ 17,509,627 $ 11,181,102 Total Stockholders’ Equity $ 13,535,597 $ 14,297,984 The Company has been consistently making efforts to raise debt and equity capital to meet the demands of further scaling 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. 14 Three months ended March 31, 2024, 2023, as compared to three months ended March 31, 2023 Revenues. We had revenues of $6,851,058 for the three months ended March 31, 2024, compared to $ 1,511,379 for the three months ended March 31, 2023. The company sold 8 surgical robotic systems during the three months ended March 31, 2024, and in addition to the sale of these eight systems, the Company also installed a robotic system at a minimal access surgery training institute in India on revenue share basis. Salary and Payroll Expense. We had salary and payroll expenses of $674,436 during the three months ended March 31, 2024, as compared to $357,674 for the three months ended March 31, 2023. This 89% y-o-y increase is mainly due to increase in manpower strength at our India manufacturing facility from 128 at the end of March 2023 to 237 at the end of March 2024. Stock Compensation Expense. We had stock compensation expense of $1,937,202 for the three months period ended March 31, 2024, as against $1,592,309 for the three months ended March 31, 2023. This includes stock-based compensation expenses related to the Company’s 2016 Stock Incentive Plan. Selling, General and Administrative Expenses. We incurred $2,611,019 and $1,490,414 in selling, general and administrative expenses during the three months ended March 31, 2024, and March 31, 2023, respectively. General and administrative expenses mainly include travel expenses, marketing and business promotions expenses, legal and other professional expenses including the expenses related to the Company’s filings as a public company with the Securities and Exchange Commission (the “ SEC ”). The y-o-y increase of about 75% in selling, general and administration expenses is mainly due to increased marketing and business promotion expenses to expand our system installed base across India. We also organized a global robotics conference in New Delhi, India in the month of Jan 2024 involving significant expense which also led to this increase in Selling, General and Administrative expenses, year on year basis. Other Income/Expenses . We incurred other expenses of $80,271 for the three months ended March 31, 2024, as compared to $29,510 of other income during the three months ended March 31, 2023, Other expenses consist mainly of interest expenses related to bank overdraft and other income mainly consist of interest earned on fixed deposits. Net Loss. We incurred a net loss of $2,798,448 for the three months ended March 31, 2024, as compared to a net loss of $2,992,362 for the three months ended March 31, 2023. Liquidity and Capital Resources The Company expects to require substantial funds for expansion of its manufacturing capacity through the installation of additional machinery and equipment, bulk ordering of components for use in manufacturing of its final products, conducting global clinical trials to meet various regulatory requirements, lease of additional office and manufacturing space, augmenting working capital and establishing regional marketing offices. To meet these fund requirements, the company is making efforts to raise long term funds by way of equity or loans. Between February 1, 2024, and February 14, 2024, the Company raised $2.45 million through a private offering of 7% One-Year Convertible Promissory Notes (“ Notes ”) from two affiliates ($1,000,000 each) and $450,000 from three other investors to finance its ongoing working capital requirements. These Notes are payable in full after 12 months from the respective date of issuance of these Notes and are convertible at the election of noteholder at any time through the maturity date at a per share price of $4.45. On February 14, 2024, the Company filed a Registration Statement on Form S-1 with the Securities and Exchange Commission with respect to a proposed public offering of our common stock. In April 2024, the Company has raised US$2.00 Million from Sushruta Pvt Ltd. by issuance of two, One-Year 7% Promissory Notes of US$ 1.00 Million each, to meet certain working capital needs. 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. 15 Cash Flows used in Operating Activities During the three months ended March 31, 2024, net cash provided by operating activities was $1,338,218 resulting from our net loss of $2,798,448 partially offset by non-cash charges of $1,980,537 comprising of depreciation, stock compensation expense and translation adjustment and movement of $2,156,128 in net operating assets and liabilities comprising mainly of prepaid expenses and other current assets and accounts payable and accrued expenses. During the three months ended March 31, 2024, net cash used by operating activities was $173,553, resulting from our net loss of $2,992,362, partially offset by non-cash expenses of $1,599,972 and movement of $1,218,838 in net operating assets and liabilities comprising mainly of accounts payable and accrued expenses. Cash Flows from Investing Activities During the three months ended March 31, 2024, we had net cash used in investing activities of $4,207,606 which is the net result of $1,245,508 towards net additions in equipment and right-of-use assets and $2,962,098 towards increase in loans and advances and long-term receivables. During the three months ended March 31, 2023, we had $2,000,000 as reduction in Notes Receivables. Cash Flows from Financing Activities During the three months ended March 31, 2024, we had $2,739,507 of net cash provided by financing activities including $2,450,000 in proceeds from Notes Payables, $101,249 in securities offering, and $188,259 as increase in bank overdraft. During the three months ended March 31, 2023, we had $1,433,828 of net cash provided by financing activities comprising of $446,188 in securities offering, $1,000,000 from 7% convertible promissory notes and repayment of warrants of $12,360. 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. 16 Item 3. Quantitative Disclosures About Market Risks. As a “ smaller reporting company, ” we are not required to provide the information required by this Item.