SS Innovations International, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Introduction We are engaged in the business of developing, manufacturing, and selling a surgical robotic system under its 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 its 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 introduced our upgraded SSi Mantra 3 system, further consolidated our installed base of SSi Mantra in various parts of India and began to expand our presence in other global markets. Those efforts continued during 2025 with filing for U.S. FDA approval and EU CE mark approval during the year ended December 31, 2025, and are ongoing in 2026. We are also undertaking development efforts to expand our product line in connection with our goal to make robotic surgery more affordable and accessible. 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 plan 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 achieve lower costs of production and make our surgical robotic system cost effective and relatively affordable. During the six months ended June 30, 2026, we sold 46 SSi Mantra surgical robotic systems, installed 1 system on a pay-per-use basis and upgraded 3 systems. Results of Operations Introduction The financial statements appearing elsewhere in this 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 its 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. Balance Sheet Data June 30, 2026 December 31, 2025 Cash and cash equivalents $ 13,647,430 $ 3,206,406 Restricted cash** 9,023,593 6,396,614 Total Assets 96,982,013 74,226,217 Total Liabilities 43,580,790 36,007,966 Total stockholders’ equity $ 53,401,223 $ 38,218,251 ** Represents Fixed Deposits held by bank as security for bank facilities and certain performance guarantees. To date, we have mainly relied on debt and equity raised in private and public offerings to finance its operations. During the balance of the year ending December 31, 2026, we plan to raise additional capital through further private or public offerings of our securities. 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 efforts and marketing activities. 40 Three months ended June 30, 2026, as compared to the three months ended June 30, 2025 For the three months ended Particulars June 30, 2026 June 30, 2025 Total Revenue $ 13,939,709 $ 10,000,305 Cost of revenue (6,838,759 ) (4,085,247 ) Gross profit 7,100,950 5,915,058 Research & development expense 2,395,694 498,600 Stock-based compensation expense 2,178,156 1,630,295 Depreciation and amortization expense 346,364 260,361 Selling, general and administrative expense 4,452,090 3,428,788 Loss from operations (2,271,354 ) 97,014 Other income 115,280 24 Income tax expense 505,276 353,729 Net loss $ (2,661,350 ) $ (256,691 ) Total Revenue. For the three months ended June 30, 2026, we had revenues of $13,939,709 (comprised of $12,361,986 of system sales, $1,142,525 of instrument sales, $419,002 of warranty sales and lease income $16,196), compared to revenues of $10,000,305 (comprising $8,781,038 of system sales, $1,007,830 of instrument sales, $193,359 of warranty sales and lease income $18,078), during the three months ended June 30, 2025. The increase in revenue is primarily due to an increase in the number of SSi Mantra 3 surgical robotic systems and instruments sold during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. Research and Development Expenses. Research and development expenses for the three months ended June 30, 2026, were $2,395,694, as compared to $498,600 for the three months ended June 30, 2025. The increase was primarily attributable to higher expenditures incurred in connection with clinical trials and related regulatory activities undertaken to support the Company’s efforts to obtain regulatory approvals, including U.S. Food and Drug Administration (“FDA”) clearance and CE Mark certification. The increase also reflects higher professional service fees associated with these regulatory initiatives, including regulatory consulting, clinical trial management, testing, documentation, and other compliance-related activities. In contrast, research and development activities during the prior-year period were primarily focused on routine product enhancements, which required relatively lower levels of expenditure. Stock-based compensation expense . We had stock-based compensation expenses of $2,178,156 and $1,630,295 during the three months ended June 30, 2026 and 2025, respectively. The increase in stock-based compensation expense was primarily attributable to the issuance of new Restricted Share Awards, as well the vesting of advisory shares during the current period, under our 2016 Stock Incentive Plan. Depreciation and amortization expense. We had depreciation and amortization expense of $346,364 for three months ended June 30, 2026, as compared to $260,361 for three months ended June 30, 2025. The increase in depreciation and amortization expense was primarily attributable to an increase in fixed assets during the current period. Selling, general and administrative expense . We incurred $4,452,090 in selling, general and administrative (“ SG&A ”) expense during the three months ended June 30, 2026, as compared to $3,428,788 for the three months ended June 30, 2025. 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 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 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 fees and expenses incurred for business events held during the current period, which were not present in the previous period. 41 Other income, net . We have recognized $115,280 in interest income (net) for the three months ended June 30, 2026, as compared to $24 during the three months ended June 30, 2025. The increase in net income was primarily attributable to the increase in interest income on sales and fixed deposits. Income tax expense. For the three months ended June 30, 2026, income tax expense was $505,276 as compared to $353,729 for the three months ended June 30, 2025, The increase is primarily due to increase in the taxable profits arising from the Indian operations resulting in increase of income tax expense. Net Loss. We incurred net loss of $2,661,350 for the three months ended June 30, 2026, as compared to a net loss of $256,691 for the three months ended June 30, 2025. The increase in net loss from June 30, 2026 to June 30, 2025 is primarily the result of an increase in research & development expense of $1,897,094, SG&A expense of $1,023,302, stock-based compensation expense of $547,861, depreciation and amortization expense of $86,003 and income tax expense of $151,547 offset by an increase in gross profit by $1,185,892. Six months ended June 30, 2026, as compared to the six months ended June 30, 2025 For the six month ended Particulars June 30, 2026 June 30, 2025 Total Revenue $ 25,041,075 $ 15,120,915 Cost of revenue (12,612,904 ) (8,118,649 ) Gross profit 12,428,171 7,002,266 Research & development expense 3,391,134 1,508,695 Stock-based compensation expense 5,322,471 4,009,507 Depreciation and amortization expense 670,111 469,243 Selling, general and administrative expense 8,941,387 6,638,587 Loss from operations (5,896,932 ) (5,623,766 ) Other income 309,639 39,451 Income tax expense 656,628 353,729 Net loss $ (6,243,921 ) $ (5,938,044 ) Total Revenue. For the six months ended June 30, 2026, we had revenues of $25,041,075 (comprised of $21,937,356 of system sales, $2,293,753 of instrument sales, $776,688 of warranty sales and lease income $33,278), compared to 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), during the six months ended June 30, 2025. The increase in revenue is primarily due to an increase in the number of SSi Mantra 3 surgical robotic systems and instruments sold during the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. Research and Development Expenses. Research and development expenses for the six months ended June 30, 2026, were $3,391,134, as compared to $1,508,695 for the six months ended June 30, 2025. The increase was primarily attributable to higher expenditures incurred in connection with clinical trials and related regulatory activities undertaken to support the Company’s efforts to obtain regulatory approvals, including U.S. Food and Drug Administration (“FDA”) clearance and CE Mark certification. The increase also reflects higher professional service fees associated with these regulatory initiatives, including regulatory consulting, clinical trial management, testing, documentation, and other compliance-related activities. Additionally, our continued to invest in enhancing the design and technological capabilities of its existing SSi Mantra system and expanding our product offerings. Stock-based compensation expense. We had stock-based compensation expenses of $5,322,471 and $4,009,507 during the six months ended June 30, 2026 and 2025, respectively. The increase in stock-based compensation expense was primarily attributable to the issuance of new Restricted Share Awards, as well the vesting of advisory shares during the current period, under our 2016 Stock Incentive Plan. Depreciation and amortization expense. We had depreciation and amortization expense of $670,111 for six months ended June 30, 2026, as compared to $469,243 for six months ended June 30, 2025. The increase in depreciation and amortization expense was primarily attributable to an increase in fixed assets during the current period. Selling, general and administrative expense. We incurred $8,941,387 in selling, general and administrative (“ SG&A ”) expense during the six months ended June 30, 2026, as compared to $6,638,587 for the six months ended June 30, 2025. 42 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 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 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 our uplisting to Nasdaq, and expenses incurred for business events held during the current period, which were not present in the previous period. Other income, net . We have recognized $309,639 in interest income net for the six months ended June 30, 2026, as compared to $39,451 during the six months ended June 30, 2025. The increase was primarily attributable to higher interest income on sales and fixed deposits, together with nil interest expense on convertible notes, as such expense was incurred during the prior-year period. Income tax expense. For the six months ended June 30, 2026, income tax expense was $656,628 as compared to $353,729 for the six months ended June 30, 2025. The increase was primarily due to an increase in the taxable profits arising from the Indian operations as compared to the previous period resulting in an increase of income tax expense. Net Loss. We incurred a net loss of $6,243,921 for the six months ended June 30, 2026, as compared to a net loss of $5,938,044 for the six months ended June 30, 2025. The increase in net loss from June 30, 2026 to June 30, 2025 is primarily the result of an increase in research & development expense of $1,882,439, SG&A expense of $2,302,800, stock-based compensation expense of $1,312,964, depreciation and amortization expense of $200,868 and income tax expense of $302,899 offset by an increase in the gross profit by $5,425,905. Liquidity and Capital Resources We expect to require substantial funds for scaling up our operations, incurring capital expenditure to have our own in-house machining and tooling capacity and to continue to finance our research and development work in the field of surgical robotics. Cash Flow Summary: For the six months ended Particulars June 30, 2026 June 30, 2025 Net cash provided by operating activities: Net loss $ (6,243,921 ) $ (5,938,044 ) Non-cash adjustments 5,735,820 4,149,120 Change in operating assets and liabilities (6,038,348 ) (7,766,779 ) Net cash used in operating activities (6,546,449 ) (9,555,703 ) Net cash used in investing activities (215,060 ) (1,189,452 ) Net cash provided by financing activities 21,638,510 21,703,921 Net change in cash 14,877,001 10,958,766 Effect of exchange rate on cash (1,808,998 ) 23,377 Cash at beginning of year 9,603,020 6,623,535 Cash at end of year $ 22,671,023 $ 17,605,678 Cash Flows from Operating Activities During the six months ended June 30, 2026, net cash used in operating activities was $6,546,449 resulting from our net loss of $6,243,921 partially offset by non-cash charges of $5,735,820 primarily driven by depreciation charges, operating lease expense and stock-based compensation expense. We had cash used in our operating assets and liabilities of $6,038,348 primarily driven by increases in accounts receivables, prepaid and other assets, inventory and decrease accounts payables offset by increase in deferred revenue and income taxes payable. 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-based 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. Cash Flows from Investing Activities During the six months ended June 30, 2026, we had net cash used in investing activities of $215,060 in purchase of property and equipment. 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. 43 Cash Flows from Financing Activities Net cash provided by financing activities was $21,638,510 for the six months ended June 30, 2026, compared to $21,703,921 for the six months ended June 30, 2025. Financing activities during the current period were primarily driven by net proceeds of $18,446,498 from a private placement completed in March 2026, and proceeds received from bank overdraft facility of $3,192,012. 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. Critical Accounting Policies Use of Estimates The preparation of condensed 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 condensed 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 condensed 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-based 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, 2026, we have issued two types of equity incentives: Stock Options: These provide employees with the right, but not the obligation, to purchase shares of our common 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 Stock Incentive Plan and its 2026 Stock Incentive Plan (adopted in April 2026) is measured at fair value using a Black-Scholes option-pricing model at commencement of each offering period and recognized over that offering period. 44 Stock Awards (Restricted Stock Awards, or RSAs): 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 the last three month’s 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.