SS Innovations International, Inc. 10-Q

Item 2. 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 under our proprietary brand “SSi Mudra”. 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 and during the year 2024, we further consolidated our installed base of SSi Mantra in various parts of India and also expanded our presence in the global markets. 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. During the three months and six months period ended June 30, 2025, we sold 8 and 25 surgical robotic systems respectively. In addition, during the three month period ended June 30, 2025, we installed 5 systems on a pay-per-use basis and 1 system on a demonstration basis. 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 is still in its initial years of revenue generation 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 substantial doubt about the Company’s ability to continue as a going concern. 35 The following table provides selected balance sheet data for the Company as of: Balance Sheet Data June 30, 2025 December 31, 2024 Cash 11,375,265 466,500 Restricted cash** 6,230,413 6,157,035 Total Assets 69,977,771 42,385,213 Total Liabilities 27,954,902 28,928,110 Total liabilities and stockholders’ equity 69,977,771 42,385,213 ** 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 2025, 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. For the three months ended Particulars June 30, 2025 June 30, 2024 Total Revenue 10,000,305 4,509,126 Cost of revenue (4,085,247 ) (3,071,340 ) Gross profit 5,915,058 1,437,786 Research & development expense 498,600 759,004 Stock compensation expense 1,630,295 2,443,792 Depreciation and amortization expense 260,361 90,476 Selling, general and administrative expense 3,428,788 2,244,703 Income /(Loss) from operations 97,014 (4,100,189 ) Other income (expenses) 24 (40,381 ) Income tax expense 353,729 - Net loss (256,691 ) (4,140,570 ) Three months ended June 30, 2025, as compared to the three months ended June 30, 2024 Total Revenue. For the three months ended June 30, 2025,we had revenues of $10,000,305 (comprised $8,781,038 of system sales, $1,007,830 of instrument sales, $193,359 of warranty sales and lease income $18,078), as compared to $4,509,126 (comprising $4,258,198 of system sales and $204,121 of instrument sales $28,795 of warranty sales and lease income $18,012) for the three months ended June 30, 2024. The increase in revenue is primarily due to an increase in the number of SSI Mantra 3 surgical robotic systems and instruments during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. Gross profit. For the three months ended June 30, 2025, we had gross profit of $5,915,058, as compared to $1,437,786 for the three months ended June 30, 2024. The increase in gross profit margin was on account of decreases in raw material prices and improvements in manufacturing processes which resulted in less consumption of raw material from the 2024 quarter to the 2025 quarter. 36 Research and development expense. Research and development expenses were $498,600 for the three months ended June 30, 2025, as compared to $759,004 for the three months ended June 30, 2024. Research and development expense primarily consists of salaries paid to engineers, amounting to $411,505 and $431,920 for the three months ended June 30, 2025 and 2024, respectively. The decrease in research and development expenses compared to the prior period is primarily due to the nature of activities undertaken. In the previous quarter, we incurred higher research and development costs while working on the development of Mantra 3.0, whereas in the current quarter, our research and development efforts were focused on routine product enhancements, which involved relatively lower expenditure. Stock compensation expense. We had stock compensation expenses of $1,630,295 and $2,443,792 during three months ended June 30, 2025 and 2024, respectively. The substantial decrease in the stock compensation expense is primarily due to reversal of expenses relating to resigned employees during three months ending June 30, 2025. Depreciation and amortization expense. We had depreciation and amortization expense of $260,361 for three months ended June 30, 2025, as compared to $90,476 for three months ended June 30, 2024. The depreciation and amortization expenses primarily consist of depreciation on fixed assets. Selling, general and administrative expense. We incurred $3,428,788 in selling, general and administrative (“ SG&A ”) expense during the three months ended June 30, 2025, as compared to $2,244,703 for the three months ended June 30, 2024. Our SG&A expense is comprised of expenses relating to salaries and benefits, retirement benefits as well as costs related to recruitment, other compensation expenses of sales and marketing and client management personnel, sales commission, travel and brand building, client events and conferences, training and retention of senior management and other support personnel in enabling functions, telecommunications, utilities, travel and other miscellaneous administrative costs. SG&A expense also includes acquisition-related costs, legal and professional fees (which represent the costs of third party legal, tax, accounting, immigration and other advisors), investment in product development, digital technology, advanced automation and robotics, related to grants of our equity awards to members of our board of directors. The increase in SG&A expenses compared to the previous period is primarily due to higher legal and underwriting fees, increased expenses associated with the Company’s uplisting to NASDAQ, and expenses incurred for business events held during the current period, which were not present in the previous period. Other income/expenses, net . We earned other income of $24 for the three months ended June 30, 2025, as compared to $40,381 of other expenses during the three months ended June 30, 2024. The decrease in interest expenses of $25,777 is due to the decrease in interest expenses related to notes payable by $81,983, offset by an increase of $56,206 in interest expenses on overdraft facilities. Additionally, interest and other income, net, increased by $14,628 due to the reversal of certain provisions and higher interest income earned on fixed deposits. Income tax expense. For the three months ended June 30, 2025 our income tax expense increased by $353,729 as compared to nil during the three months period ended June 30, 2024, primarily due to the recognition of income tax expense in our Indian operations for the first time. Historically, our Indian subsidiary had incurred tax losses and was not subject to current income tax. However, during the current period, the Indian operations generated sufficient taxable profits, resulting in the utilization of previously unrecognized deferred tax assets and recognition of current tax expense. Net Loss . We incurred net loss of $256,691 for the three months ended June 30, 2025, as compared to a net loss of $4,140,570 for the three months ended June 30, 2024. The decrease in net loss from June 30, 2024 to June 30, 2025 is primarily the result of increases in gross profit by $4,477,272 and reduction in stock compensation expense by $813,497 offset by increases in SG&A by $1,184,085 and income tax expense of $353,729. For the six months ended Particulars June 30, 2025 June 30, 2024 Total Revenue 15,120,915 8,146,819 Cost of revenue (8,118,649 ) (5,980,851 ) Gross profit 7,002,266 2,165,968 Research & development expense 1,508,695 1,286,995 Stock compensation expense 4,009,507 9,552,542 Depreciation and amortization expense 469,243 170,577 Selling, general and administrative expense 6,638,587 5,088,362 Loss from operations (5,623,766 ) (13,932,508 ) Other income (expenses) 39,451 (49,815 ) Income tax expense 353,729 - Net loss (5,938,044 ) (13,982,323 ) 37 Six months ended June 30, 2025, as compared to the Six months ended June 30, 2024 Total Revenue. We had revenues of $15,120,915 (comprising $13,283,520 of system sales, $1,485,038 of instrument sales, $315,863 of warranty sales and lease income $36,494), for the six months ended June 30, 2025, compared to $8,146,819 (comprising $7,752,957 of system sales and $322,636 of instrument sales, $38,202 of warranty sales and lease income of $33,024) for the six months ended June 30, 2024. The increase in revenue is primarily due to sale of increased number of surgical robotic systems and instruments in the June 2025 period, as compared to the June 2024 period. Gross profit. We had gross profit of $7,002,266 for the six months ended June 30, 2025, as compared to $2,165,968 for the six months ended June 30, 2024. The increase in gross profit margin was on account of decreases in raw material prices and improvements in manufacturing processes which resulted in less consumption of raw material from the 2024 quarter to the 2025 quarter. Research and development expense. Research and development expenses were $1,508,695 during the six months ended June 30, 2025 as compared to $1,286,995 for the six months ended June 30, 2024. Research and development expense primarily consists of salaries paid to engineers, amounting to $720,652 and $618,471 for the six months period ended June 30, 2025 and June 30, 2024, respectively. The increase in research and development expenses as compared to the prior period 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 till the previous quarter. Stock compensation expense. We had stock compensation expense of $4,009,507 and $9,552,542 during six months ended June 30, 2025 and June 30, 2024, respectively. The substantial decrease in the stock compensation expense is primarily due to reversal of expenses relating to resigned employees during the current period. Depreciation and amortization expense. We had depreciation and amortization expense of $469,243 for the period ended June 30, 2025, as compared to $170,577 for the period ended June 30, 2024. The depreciation and amortization expenses primarily consist of depreciation on fixed assets only. Selling, general and administrative expense. We incurred $6,638,587 in general and administrative expenses during the six months ended June 30, 2025, as compared to $5,088,362 in June 30, 2024, respectively. Our SG&A expense is comprised of expense relating to salaries and benefits, retirement benefits as well as costs related to recruitment, other compensation expenses of sales and marketing and client management personnel, sales commission, travel and brand building, client events and conferences, training and retention of senior management and other support personnel in enabling functions, telecommunications, utilities, travel and other miscellaneous administrative costs. SG&A expense also includes acquisition-related costs, legal and professional fees (which represent the costs of third party legal, tax, accounting, immigration and other advisors), investment in product development, digital technology, advanced automation and robotics, related to grants of our equity awards to members of our board of directors. The increase in SG&A expenses compared to the previous period is primarily due to higher legal and underwriting fees, increased expenses associated with the Company’s uplisting to NASDAQ, and expenses incurred for business events held during the current period, which were not present in the previous period. 38 Other income/expenses . We earned other income of $39,451 for the six months ended June 30, 2025, as compared to $49,815 of other expenses during the six months ended June 30, 2024. The increase in interest income by $253,306 relating to fixed deposits which is offset by increase in interest expense by $164,040 related to interest on bank overdraft facility and convertible notes. Income tax expense . For the six months ended June 30, 2025 our income tax expense increased by $353,729 as compared to nil during the six months period ended June 30, 2024, primarily due to the recognition of income tax expense in our Indian operations for the first time. Historically, our Indian subsidiary had incurred tax losses and was not subject to current income tax. However, during the current period, the Indian operations generated sufficient taxable profits, resulting in the utilization of previously unrecognized deferred tax assets and recognition of current tax expense. Net Loss. We incurred a net loss of $5,938,044 for the six months ended June 30, 2025, as compared to a net loss of $13,982,323 for the six months ended June 30, 2024. The decrease in net loss from June 30, 2024 to June 30, 2025 is primarily the result of the increase in gross profit by $4,836,298, decrease in stock compensation expense by $5,543,035 offset by increase in selling, general and administrative expenses of $1,550,225 and income tax expense of $353,729. 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. Effective February 14, 2024, the Company sold $2,450,000 in principal amount of 7% Convertible One-Year Promissory Notes (the “ Bridge Notes ”) to five investors in a private transaction, one of whom was Sushruta Pvt Ltd. (“ Sushruta ” ), Sushruta, the Bahamian holding company of Dr. Sudhir Srivastava, our founder, Chairman, Chief Executive Officer and controlling shareholder, who subscribed for a $1,000,000 Bridge Note. Interest on the Bridge Notes accrued at the rate of 7% per annum and was payable together with the principal amount upon maturity, which was one year from issuance. The Bridge Notes were convertible at the option of the noteholders, at any time prior to maturity into shares of our common stock at a conversion price of $4.45 per share. Sushruta’s Bridge Note, together with accrued interest thereon, was repaid upon maturity in February 2025. In April 2024, the Company raised $2,000,000 from Sushruta by the issuance of two One-Year 7% Promissory Notes (the “ 7% Notes ”) of $1,000,000 each, to meet certain working capital requirements. In July 2024, the Company raised $500,000 from Sushruta by the issuance of an additional 7% Note to finance its ongoing working capital requirements. In October and November 2024, the Company raised $500,000 from Sushruta by issuance of 7% Notes to finance its ongoing working capital requirements. All of the 7% Notes are payable in full together with accrued interest, after 12 months from their respective date of issuance. All of the 7% Notes were repaid in full together with accrued interest thereon, upon maturity in February 2025. Dr. Sudhir Srivastava, through Sushruta, provided the Company with $2,000,000 in financing on December 4, 2024, $5,000,000 in financing on January 3, 2025, $10,000,000 in financing on January 20, 2025, $5,000,000 in financing on January 30, 2025 and $8,000,000 in financing on March 19. 2025. Each tranche of financing provided by Dr. Srivastava was evidenced by a one-year convertible promissory note (collectively, the “ One-Year Notes ”). The One-Year Notes bore interest at the rate of seven percent (7%) per annum, which accrued and was due at maturity. The One-Year Notes were convertible at the option of the holder into shares of our common stock at a conversion price of $1.38 per share, subject to adjustment for stock splits, stock dividends and similar recapitalization events. As of March 31, 2025, all $30,000,000 in principal amount of One-Year Notes, together with $164,548 in interest thereon, were converted by Sushruta into 21,858,368 shares of our common stock. 39 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. 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. These factors raise a substantial doubt about the Company’s ability to continue as a going concern. For the six months ended June 30, 2025 June 30, 2024 Net cash provided by operating activities: Net loss (5,938,044 ) (13,982,323 ) Non-cash adjustments 4,149,120 10,661,083 Change in operating assets and liabilities (7,766,779 ) (373,246 ) Net cash used in operating activities (9,555,703 ) (3,694,486 ) Net cash used in investing activities (1,189,452 ) (2,239,139 ) Net cash provided by financing activities 21,703,921 5,292,610 Net change in cash 10,958,766 (641,015 ) Effect of exchange rate on cash 23,377 108,572 Cash at beginning of year 6,623,535 7,087,845 Cash at period end 17,605,678 6,555,402 Cash Flows from Operating Activities During the six months ended June 30, 2025, net cash used in operating activities was $9,555,703 resulting from our net loss of $5,938,044 partially offset by non-cash charges of $4,149,120 primarily driven by depreciation charges, operating lease expense and stock compensation expense. We had cash used in our operating assets and liabilities of $7,766,779 primarily driven by increase in inventory, prepaid and other assets and accounts receivables offset by increase in deferred revenue, accounts payable, accrued expenses and other liabilities. During the six months ended June 30, 2024, net cash used in operating activities was $3,694,486 resulting from our net loss of $13,982,323 partially offset by non-cash charges of $10,661,083 primarily driven by credit loss reserve, depreciation charges and stock compensation expense. We had cash used in our operating assets and liabilities of $373,246 primarily driven by increases in inventory, accounts payable and prepaid expenses. 40 Cash Flows from Investing Activities During the six months ended June 30, 2025, we had net cash used in investing activities of $1,189,452 in purchase of property and equipment. During the six months ended June 30, 2024, we had net cash used in investing activities of $2,239,139 in purchase of property and equipment. Cash Flows from Financing Activities During the six months ended June 30, 2025, we had net cash provided by financing activities of $21,703,921, which comprised of proceeds of $28,000,000 from issuance of convertible notes to our principal shareholder offset by repayment of convertible notes to our principal shareholder and other investors amounting to $4,212,637 and $1,068,849 respectively and repayment of bank overdraft by $1,014,593. During the six months ended June 30, 2024, we had net cash, provided by financing activities of $5,292,610, which comprised of $842,610 in proceeds from our bank overdraft facility (net), $4,450,000 in proceeds from issuance of convertible notes to our principal shareholder and other investors as set forth above. 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 condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, 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. Critical Accounting Policies Use of Estimates The discussion and analysis of our financial condition and results of operations is based upon the unaudited interim condensed consolidated financial statements included in this Report on Form 10-Q, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). A summary of our significant accounting policies is included in Note 2 - Summary of Significant Accounting Policies to our unaudited interim condensed consolidated financial statements under Part I, Item 1, “Financial Statements.” We consider the policies discussed below to be critical to an understanding of our consolidated financial statements, as their application places the most significant demands on management’s judgment regarding matters that are inherently uncertain at the time an estimate is made. These policies include fair value of stock options and standalone selling price in case of bundled revenue contracts. These accounting policies, estimates and the associated risks are set out below. Future events may not develop exactly as forecasted and estimates routinely require adjustment. 41 Stock Compensation Expense Under the fair value recognition provisions of ASC Topic 718, Compensation-Stock Compensation, cost is measured at the grant date based on the fair value of the award and is amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Determining the fair value of stock-based awards at the grant date requires significant judgment, including estimating the expected term over which the stock awards will be outstanding before they are exercised and the expected volatility of our stock. As of June 30, 2025, the Company has issued two types of equity incentives: Stock Options: These provide employees with the right, but not the obligation, to purchase shares of the Company’s stock at a specified price, within a defined period, as per the terms of the stock option agreement. Stock-based compensation expense associated with the AVRA 2016 Stock Incentive Plan is measured at fair value using a Black-Scholes option-pricing model at commencement of each offering period and recognized over that offering period. Stock Units (Restricted Stock Units, or RSUs): These do not require the employee to exercise any options. Each stock unit automatically converts into a specified number of shares upon vesting. The Company uses last three months’ average share price of common stock on OTC exchange as grant date fair value for RSUs. Standalone Selling Price: Our system sale arrangements contain multiple products and services, including system, accessories, instruments and services. Other than services, we generally deliver all of the products upfront. Each of these products and services is a distinct performance obligation. System, instruments, accessories and services are also sold on a standalone basis. For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which we separately sell the products or services. If a standalone selling price is not directly observable, then we estimate the standalone selling prices considering market conditions and entity-specific factors including, but not limited to, historical pricing data, features and functionality of the products and services and industry benchmark. We regularly review standalone selling prices and maintain internal controls over establishing and updating these estimates. Revenue that is allocated to the service obligation is deferred and recognized ratably over the service period upon expiration of first year of service which is free and included in the system sale arrangements. Recent Accounting Pronouncements Refer to Note 1, Basis of Presentation and Summary of Significant Accounting Policies, within the notes to the to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and results of operations. 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 are material to investors. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.