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 related 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. Results of Operations Introduction The consolidated financial statements appearing elsewhere in this Annual Report have been prepared assuming that we will continue as a going concern. We are still in our initial years of revenue generation by way of the sale of our product and have not yet established consistent operational revenue cash flows to meet all our fixed operating costs and hence may continue to incur losses for some time. These conditions raise substantial doubt about our ability to continue as a going concern. 27 The following table provides selected financial data about our Company at December 31, 2025, and December 31, 2024: Balance Sheet Data As of As of December 31, 2025 December 31, 2024 Cash 3,206,406 466,500 Restricted cash** 6,396,614 6,157,035 Total Assets 74,226,217 42,385,213 Total Liabilities 36,007,966 28,928,110 Total stockholders’ equity 38,218,251 13,457,103 ** Represents Fixed Deposits held by the 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 2026, 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 year ended December 31, 2025 December 31, 2024 1 Total Revenue 42,484,747 20,649,528 2 Cost of revenue (22,940,492 ) (12,197,162 ) 3 Gross profit 19,544,255 8,452,366 4 Research & development expense 3,685,840 2,491,771 5 Stock compensation expense 8,128,103 14,342,784 6 Depreciation and amortization expense 1,075,907 436,005 7 Selling, general and administrative expense 14,848,439 10,157,768 8 Loss from operations (8,194,034 ) (18,975,962 ) 9 Other income (expenses) 33,087 (175,235 ) 10 Income tax expense 3,966,440 - 11 Net loss (12,127,387) (19,151,197 ) Year ended December 31, 2025, as compared to year ended December 31, 2024 Revenues. During the year ended December 31, 2025, the Company had revenues of $42,484,747 (comprising $38,353,048 of system sales, $3,183,757 of instrument sales, $877,033 of warranty sales and $70,909 of lease income), compared to revenues of $20,649,528 (comprising $19,457,767 of system sales, $942,548 of instrument sales, $177,518 of warranty sales and $71,695 of lease income) during the year ended December 31, 2024. The increase in revenue is primarily due to sale of increased number of surgical robotic systems and instruments in the year ended December 31, 2025 as compared to the year ended December 31, 2024. Research and Development Expenses. Research and Development expenses during the year ended December 31, 2025, were $3,685,840, as compared to $2,491,771 for the year ended December 31, 2024. 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. Stock Compensation Expenses. We had stock compensation expenses of $8,128,103 for the year ended December 31, 2025, compared to $14,342,784 for the year ended December 31, 2024. The substantial decrease in stock-based compensation expense for the year ended December 31, 2025 was primarily due to award of stock options in February 2024 under the Company’s 2016 Incentive Plan to certain executive officers. These were vested immediately upon grant and were fully expensed in the year ended December 31, 2024, resulting in the recognition of approximately $4,656,807 of stock-based compensation expense in the previous year. These options were awarded in recognition of the executives’ efforts in advancing the development and commercialization of the Company’s SSi Mantra system and the residual impact is primarily due to resignation of employees in the current year. Depreciation and amortization expenses. We had depreciation and amortization expense of $1,075,907 for the year ended December 31,2025, as compared to $436,005 in the year ended December 31, 2024. The depreciation and amortization expenses primarily consist of depreciation on fixed assets only. Selling, General and Administrative expenses. We incurred $14,848,439 in selling, general and administrative expenses during the year ended December 31, 2025, as compared to $10,157,768 for the year ended December 31, 2024. 28 Our Selling, General and Administrative expenses (“SG&A”) comprise 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 expenses also include 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 grant of our equity awards to members of our board of directors. We expect our SG&A costs to increase as we continue to strengthen our support and enabling functions and invest in leadership development, performance management and training programs. The increase in selling, general and administrative expenses resulted from the increased manpower strength and an increased scale of commercial operations during 2025 as compared to the year ended December 31, 2024. Other Income (Expenses) . We have recognized $33,087 in interest income (net) during the year ended December 31, 2025, as compared to an interest expense (net) of $175,235 during the year ended December 31, 2024. The increase in interest income by $343,724 relating to fixed deposits which is offset by increase in interest expense by $135,402 related to interest on our bank overdraft facility and convertible notes. Net Loss. We incurred a net loss of $12,127,387 for the year ended December 31, 2025, compared to a net loss of $19,151,197 for the year ended December 31, 2024. The decrease in net loss of $7,023,810 was primarily attributable to an increase in gross profit of $11,091,889 and a decrease in stock-based compensation expense of $6,214,681. These favorable variances were partially offset by increases in research and development expenses of $1,194,069, depreciation expense of $639,902, selling, general and administrative expenses of $4,690,671, and income tax expense of $3,966,440. 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. As of December 31, 2025, the Company had shareholders’ equity of $38,218,251 and a working capital surplus of $22,558,961 as compared to shareholders’ equity of $13,457,103 and a working capital surplus of $6,086,069 as of December 31, 2024. For the year ended S. No. Particulars December 31, 2025 December 31, 2024 Net cash provided by operating activities: 1 Net loss (12,127,387 ) (19,151,197 ) 2 Non-cash adjustments 9,378,429 16,435,264 3 Change in operating assets and liabilities (15,794,029 ) (6,787,097 ) 4 Net cash used in operating activities (18,542,987 ) (9,503,030 ) 5 Net cash used in investing activities (3,659,058 ) (661,479 ) 6 Net cash provided by financing activities 26,166,556 9,425,980 7 Net change in cash 3,964,511 (738,529 ) 8 Effect of exchange rate on cash (985,026 ) 274,219 9 Cash at beginning of year 6,623,535 7,087,845 10 Cash at end of year 9,603,020 6,623,535 29 Cash Flows Used in Operating Activities Net cash used in operating activities was $18,542,987 for the year ended December 31, 2025, compared to $ 9,503,030 for the year ended December 31, 2024, representing an increase of $9,039,957 year over year, reflecting the increase in net cash used in operating activities was primarily driven by higher working capital requirements associated with the Company’s expanded scale of operations, which more than offset improvements in operating results. The major drivers contributing to the increase of $9,039,957 in net cash used in operating activities year-over-year included the following: ● Accounts receivable amounted to $13,037,284 in fiscal year 2025, compared to $4,890,032 in fiscal year 2024, reflecting higher billings and the timing of customer collections. ● Inventory amounted to $8,070,786 in fiscal year 2025, compared to $7,691,518 in fiscal year 2024, reflecting production levels and inventory management in support of anticipated demand. ● Prepaid expenses and other assets amounted to $5,101,794 in fiscal year 2025, compared to $1,411,621 primarily related to advance payments made in connection with operating activities. These uses of cash were partially offset by deferred revenue of $3,953,938 in fiscal year 2025 and accounts payable of $2,877,810 in fiscal year 2025, reflecting customer advance payments and vendor activity. In addition, net loss was $12,127,387 in fiscal year 2025, compared to $19,151,197 in fiscal year 2024, and stock-based compensation expense was $8,128,103 in fiscal year 2025, compared to $14,342,784 in fiscal year 2024. These items impacted operating cash flows during the respective periods and were considered together with the working capital changes discussed above. Cash Flows from Investing Activities During the year ended December 31, 2025, we had net cash used in investing activities of $3,659,058 resulting from purchases of property, plant and equipment. During the year ended December 31, 2024, we had net cash used in investing activities of $661,479 resulting from purchase of property, plant and equipment. Cash Flows from Financing Activities During the year ended December 31, 2025, we had net cash provided by financing activities of $26,166,556, which comprised of $3,448,042 in proceeds from our bank overdraft facility, $28,000,000 in proceeds from the issuance of convertible notes to our principal shareholder, partially offset by repayments of $4,212,637 related to convertible notes to our principal shareholder, including interest, and repayments of $1,068,849 related to convertible notes to other investors, including interest. During the year ended December 31, 2024, we had net cash, provided by financing activities of $9,425,980, which comprised of $1,975,980 in proceeds from our bank overdraft facility, $3,000,000 each in proceeds from issuance of convertible notes and promissory notes to our principal shareholder and $1,450,000 in proceeds from issuance of convertible notes to other investors. 30 Critical Accounting Estimates Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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. 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 December 31, 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 our stock at a specified price, within a defined period, as per the terms of the stock option agreement. Stock-based compensation expense associated with our 2016 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. We use last three months’ average share price of common stock on OTC (prior to April 24, 2025) or on Nasdaq (subsequent to April 24, 2025) 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. 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. 31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Item 8. Financial Statements and Supplementary Data. See the Index to the Consolidated Financial Statements beginning on page F-1 below. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.