SS Innovations International Inc(SSII) - 2023 Q4 - Annual Report

Part I Business SS Innovations International, Inc. designs, develops, manufactures, and markets the SSi Mantra Surgical Robotic System, commercially launched in India in August 2022, with 23 systems installed as of December 31, 2023, while pursuing regulatory approvals in the U.S. and E.U - The company designs, manufactures, and markets the SSi Mantra Surgical Robotic System, which was commercially launched in India in August 2022 after receiving regulatory approval[24][26] - As of December 31, 2023, 23 SSi Mantra systems have been installed: 21 in India, one in Dubai, and one at Johns Hopkins Hospital for research and training purposes[26] - The company has initiated the regulatory approval process with the U.S. FDA, filing a pre-submission application in January 2024, and is in discussions for CE certification in the European Union[26] - On April 14, 2023, the company acquired CardioVentures, Inc., which developed the SSi Mantra system, resulting in a change of control with Dr. Sudhir Srivastava becoming the principal stockholder and the company being renamed SS Innovations International, Inc[29][31][32] Products and Technology The SSi Mantra Surgical Robotic System, the company's core product, includes a surgeon console, modular robotic arm carts, and a vision cart, complemented by reusable 'SSi Mudra' instruments and new instruments and software applications under development - The SSi Mantra system consists of a surgeon console with a 32-inch 4K 3D monitor, modular robotic arm carts (3, 4, or 5-arm configurations), and a vision cart for the surgical team[37][38][39] - The company manufactures over 30 reusable 'Mudra' instruments with wristed joints, motion scaling, and tremor elimination technology, which are sterilizable and have a programmed chip to track usage[42][43] - Products under development include the NADI automated coronary connector, a multi-fire clip applier, an ultrasonic surgical device, and several mixed reality/AI software applications like SSi Maya (XR simulator) and SSi Yog (tele-proctoring)[45][46][47] Strategy and Market Focus The company's strategy focuses on penetrating underserved markets, starting with India, by offering the SSi Mantra system at approximately one-third the cost of existing systems, targeting large multi-specialty hospitals and leading surgeons, and establishing evaluation and training agreements with major medical facilities - Initial strategy is to focus on underserved markets like India by offering an advanced surgical robotic system at a significantly lower cost (approximately one-third of existing systems)[55] - Marketing efforts target large multi-specialty hospitals and influential 'thought leader' surgeons to build confidence and drive broader adoption[56][58] - The company establishes evaluation, familiarization, and training agreements with major medical facilities, including four hospital networks in India and Johns Hopkins University in the U.S[60] The Global Robotic Surgery Market The global surgical robotics market, valued at $8.78 billion in 2023, is projected to grow to $37.5 billion by 2032 at a CAGR of 17.5%, driven by demand for minimally invasive surgery and an aging population, with North America currently dominating but Asia-Pacific showing the highest growth potential Global Surgical Robotics Market Projections | Metric | Value | Period | CAGR | | :--- | :--- | :--- | :--- | | 2023 Market Value | $8.78 billion | 2023 | 17.5% | | 2032 Projected Value | $37.5 billion | 2032 | 17.5% | - Market growth is fueled by demand for minimally invasive procedures, an aging population, and advancements in visualization technologies like 3D imaging and augmented reality[77][78][79] - North America held the largest market share in 2022, but the Asia-Pacific region is projected to have the highest growth rate, driven by countries like India and China[87][88] Intellectual Property The company protects its technology through a portfolio of 33 granted utility patents and 63 pending applications across major jurisdictions, along with 44 granted design patents and 29 granted trademarks in India, all company-owned Utility Patent Portfolio Summary | Status | Count | | :--- | :--- | | Granted Utility Patents | 33 | | Pending Utility Patents | 63 | Design Patent and Trademark Summary | Type | Granted | Pending/Filed | | :--- | :--- | :--- | | Design Patents | 44 | 1 | | Trademark Applications (India) | 29 | 53 (total filed) | - The company's patents cover its MANTRA, MUDRA, and MAYA products across key markets including the USA, Europe, China, India, Japan, and South Korea[109] Government Regulation The company's products are subject to extensive government regulation, holding ISO 13485 certification and Indian CDSCO approval, while pursuing U.S. FDA 510(k) clearance and EU CE marking under MDR, leveraging existing Indian approvals for marketing in numerous other countries - The company holds ISO 13485 quality management certification and has approval from India's Central Drugs Standard Control Organization (CDSCO) for manufacturing, sales, and export[116][121] - In the U.S., the company has filed a pre-submission application with the FDA and believes its SSi Mantra system will be classified as a Class II device, likely requiring a 510(k) premarket notification[123][124][126] - The company is pursuing CE marking in the European Union under the Medical Devices Regulation (MDR) to place its products on the EU market[26][138] Risk Factors As a "smaller reporting company," SS Innovations is not required to provide the information for this item - The company is not required to provide risk factor disclosures as it qualifies as a "smaller reporting company" under Exchange Act rules[156] Cybersecurity The company maintains cybersecurity policies including continuous monitoring, network security, data encryption, and vendor assessments, with governance involving the management team, IT team, and the board of directors, and has not experienced any material cybersecurity incidents - Cybersecurity policies include continuous monitoring, network security, encryption, and vendor assessments, with the company also having a disaster recovery plan and performing vulnerability scanning[158] - Oversight of cybersecurity risk is managed by the IT team, management, and the board of directors[159] - The company reports that it has not experienced a cybersecurity incident that had a material impact on its business, operations, or financial condition[160] Properties The company's principal executive offices and manufacturing facility are located in a leased 51,100 square-foot space in Gurgaon, Delhi NCR, India, under two renewable lease agreements expiring in March 2030 and May 2032 - The company leases a 51,100 square-foot facility in Gurgaon, Delhi NCR, India, which serves as its headquarters and manufacturing site[161] Legal Proceedings The company is involved in a legal matter inherited from a dispute between Quinn Emmanuel and Avra Surgical Robotics, Inc., resulting in a $296,000 judgment against the company and its COO – Americas, Barry F. Cohen, who has agreed to fully indemnify the company - A judgment of $296,000 plus interest was entered against the company in December 2023 related to a legal fee dispute involving a separate, prior company affiliated with an executive[166] - The executive, Barry F. Cohen, has entered into an Indemnification Agreement to fully cover any damages and costs incurred by the company in this matter[167] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock is quoted on the OTCPink market under "SSII" with sporadic trading, and as of the report date, there were 170,724,381 shares outstanding held by 341 record holders, with no dividends paid or planned, and details provided on equity compensation plans and recent unregistered sales - The company's common stock trades on the OTCPink market under the symbol "SSII" with a sporadic and extremely limited trading market[172] - As of March 21, 2024, there were 170,724,381 shares of common stock outstanding[7] - The company has not paid dividends and does not plan to, intending to retain any earnings for business use[174] Equity Compensation Plan Information | Plan category | Securities to be issued upon exercise | Weighted average exercise price | Securities remaining for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 12,181,226 shares | $3.692 | 4,891,213 shares | | Equity compensation plans not approved by security holders | 0 shares | – | 0 shares | | Total | 12,181,226 | $0 | 4,891,213 | Management's Discussion and Analysis of Financial Condition and Results of Operations In its first full year of commercial sales, the company's revenues grew to $5.9 million in 2023 from $1.5 million in 2022, driven by the sale of twelve surgical robotic systems, though the net loss significantly increased to $20.9 million due to a $13.4 million stock compensation expense, with total shareholders' equity turning positive to $14.3 million from a deficit of $2.5 million due to a $17 million debt-to-equity conversion by its principal shareholder, raising substantial doubt about its ability to continue as a going concern without additional financing - The company sold twelve surgical robotic systems in 2023, compared to three in 2022, with a total of 23 systems installed by year-end 2023, including those for evaluation and research[183] Financial Performance (2023 vs. 2022) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Revenues | $5,879,710 | $1,458,315 | | Research & Development | $576,168 | $83,282 | | Stock Compensation Expense | $13,425,319 | $1,135,468 | | Net Loss | ($20,941,972) | ($5,601,504) | - The significant increase in net loss in 2023 was primarily driven by a large non-cash stock compensation expense of $13.4 million[190][194] - The company's principal shareholder, through Sushruta Pvt Ltd., converted $16.98 million of debt into 22.9 million shares of common stock, significantly improving the company's working capital and equity position[196] Controls and Procedures Management concluded that as of December 31, 2023, the company's disclosure controls and procedures were not effective due to two material weaknesses: a lack of written documentation for internal control policies and insufficient segregation of duties within accounting functions, with remediation efforts underway including a new ERP system implementation - The CEO and CFO concluded that as of December 31, 2023, disclosure controls and procedures were not effective at a reasonable assurance level[212] - Two material weaknesses were identified: (1) lack of written documentation of internal control policies and (2) insufficient segregation of duties within accounting functions[218] - Remediation efforts are underway, including the implementation of a new ERP system at its Indian subsidiary to integrate business functions and address the identified weaknesses[213] Part III Directors, Executive Officers, and Corporate Governance The report identifies key directors and executive officers, including Chairman & CEO Dr. Sudhir Srivastava and CFO Anup Sethi, and states the company's intent to establish audit, compensation, and nominating committees composed of independent directors, with two current directors determined to be independent - The executive team is led by Dr. Sudhir Srivastava (Chairman & CEO), Anup Sethi (CFO), Dr. Vishwajyoti P. Srivastava (President, COO – South Asia), and Barry F. Cohen (COO – Americas)[220] - The company plans to establish audit, compensation, and nominating/corporate governance committees[232] - Two directors, Dr. Mylswamy Annadurai and Dr. S.P. Somashekhar, have been determined to be "independent" under SEC and Nasdaq rules[232] Executive Compensation For fiscal year 2023, Chairman & CEO Dr. Sudhir Srivastava's total compensation was $3.2 million, including a $600,000 salary and a $2.4 million option award, with other executives receiving salaries and significant equity awards, all under employment agreements for three to five years, and the 2016 Incentive Stock Plan reserving 20,000,000 shares for issuance 2023 Executive Compensation Summary | Name and Principal Position | Salary ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Sudhir Srivastava, M.D. (Chairman & CEO) | 600,000 | 2,425,710 | 3,231,702 | | Anup Kumar Sethi (CFO) | 167,197 | 0 | 167,775 | | Vishwajyoti P. Srivastava, M.D. (President & COO – South Asia) | 200,000 | 808,570 | 1,018,193 | | Barry F. Cohen (COO-Americas) | 128,000 | 808,570 | 936,570 | - The company has employment agreements with its executive officers for terms ranging from three to five years, specifying base salaries and other standard provisions[244][245] - The 2016 Incentive Stock Plan has 20,000,000 shares of common stock reserved for issuance as equity incentives[251] Security Ownership of Certain Beneficial Owners and Management As of the report date, Dr. Sudhir Srivastava is the principal and controlling shareholder, beneficially owning 71.1% of the outstanding common stock, primarily through Sushruta Pvt. Ltd., including Series A Preferred Shares granting him 51% of the total voting power, with all directors and executive officers as a group owning 76.6% Beneficial Ownership | Name of Beneficial Owner | Percentage of Class (%) | | :--- | :--- | | Sudhir Srivastava, M.D. | 71.1% | | Barry F. Cohen | 5.12% | | All directors and executive officers as a group (6 persons) | 76.6% | | Dr. Frederic H. Moll | 6.02% | - Dr. Sudhir Srivastava holds 1,000 Series A Preferred Shares, which entitle him to 51% of the total voting power of the company, establishing him as the controlling shareholder[256][32] Certain Relationships and Related Transactions The company has engaged in significant related party transactions, primarily with CEO Dr. Sudhir Srivastava and his holding company, Sushruta Pvt. Ltd., including a $20 million line of credit with $16.98 million converted to equity, a subsequent $1 million investment in convertible notes, and interest-free demand loans, alongside selling two surgical robotic systems to Aster Hospitals Group where a director holds a senior leadership position - Sushruta Pvt. Ltd., a holding company owned by CEO Dr. Sudhir Srivastava, provided a line of credit, converting $16.98 million into 22.9 million shares of common stock in 2023[261] - In February 2024, Sushruta Pvt. Ltd. subscribed to a $1,000,000 convertible promissory note with a conversion price of $4.45 per share[262] - The company sold two surgical robotic systems to Aster Hospitals Group, where company director Dr. SP Somashekhar is a senior executive[264] Principal Accounting Fees and Services The company's independent registered public accounting firm is BF Borgers CPA PC, with aggregate audit fees of $112,500 for 2023, an increase from $68,400 in 2022, and no audit-related or tax fees billed for either year Audit Fees | Year | Audit Fees Billed | | :--- | :--- | | 2023 | $112,500 | | 2022 | $68,400 | Part IV Exhibits and Financial Statement Schedules This section lists the documents filed as part of the Form 10-K report, including financial statements, articles of incorporation, employment agreements, and CEO/CFO certifications, with financial statement schedules omitted as they are not applicable or included elsewhere - Key exhibits filed with the report include the Amended and Restated Articles of Incorporation, By-Laws, the 2016 Incentive Stock Plan, various employment agreements, and CEO/CFO certifications[276] Financial Statements Report of Independent Registered Public Accounting Firm The independent auditor, BF Borgers CPA PC, issued an opinion stating that the consolidated financial statements present fairly the financial position of the company, but included a "Going Concern Matter" paragraph highlighting recurring losses that raise substantial doubt about its ability to continue as a going concern - The auditor's report contains a "Going Concern Matter" paragraph, citing the company's recurring losses from operations as a factor that raises substantial doubt about its ability to continue operating[288] Consolidated Financial Statements The consolidated financial statements for the year ended December 31, 2023, show total assets increased to $25.5 million from $8.7 million, total liabilities remained stable at $11.2 million, leading to a major improvement in stockholders' equity to a surplus of $14.3 million from a $2.5 million deficit, with revenue growth to $5.9 million but a widened net loss of $20.9 million due to non-cash stock compensation Consolidated Balance Sheet Data (as of Dec 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Assets | $25,479,086 | $8,676,204 | | Total Liabilities | $11,181,102 | $11,136,752 | | Total Stockholders' Equity (Deficit) | $14,297,984 | ($2,460,547) | Consolidated Statement of Operations (for year ended Dec 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Revenues | $5,879,710 | $1,458,315 | | Gross Profit | $713,447 | $489,594 | | Total Operating Expenses | $21,381,820 | $6,168,827 | | Net Loss | ($20,941,972) | ($5,601,504) | | Net Loss Per Share | ($0.16) | ($0.14) | Notes to Consolidated Financial Statements The notes provide critical context, detailing the April 2023 reverse merger with CardioVentures, elaborating on the 'Going Concern' uncertainty due to recurring losses and reliance on future financing, explaining key accounting policies like ASC 606 revenue recognition which deferred $1.67 million of revenue in 2023, and outlining related party transactions including significant CEO financing and subsequent events like the February 2024 filing of a Form S-1 and raising $2.45 million in convertible notes - The April 2023 merger with CardioVentures was accounted for as a reverse merger and recapitalization, with SS Innovations being the accounting acquirer[316] - Under ASC 606, $1,668,146 of system sales revenue related to warranty was transferred to unrealized deferred revenue as of Dec 31, 2023, increasing the reported net loss for the year[329] - Subsequent to year-end, in February 2024, the company filed a Form S-1 registration statement and raised $2.45 million through the issuance of 7% convertible promissory notes[383]