SS Innovations International Inc(SSII) - 2024 Q2 - Quarterly Report

Preliminary Notes Auditor Change and Financial Restatement The company is restating prior financial statements and filing this Q2 2024 report unaudited due to an auditor change and internal review - The company dismissed its independent auditor, BF Borgers CPA PC, on May 13, 2024, after the SEC barred them from practice[9] - BDO India LLP was engaged as the new auditor on May 29, 2024, and is reauditing financial statements for FY2023 and FY22[10][11] - An internal review and ongoing reaudit necessitate restatement of financial statements for FY2022, FY2023, and interim periods through Q1 2024 due to unreliability[12] - This Form 10-Q for Q2 2024 is filed without required auditor review and will be amended post-completion[14] PART I – FINANCIAL INFORMATION Financial Statements This section presents unaudited condensed consolidated financial statements for Q2 and H1 2024, showing revenue growth, increased net loss, and balance sheet changes, all subject to restatement Condensed Consolidated Balance Sheets As of June 30, 2024, total assets grew to $38.3 million from $30.9 million at year-end 2023, driven by increases in accounts receivable and property, plant, and equipment. Total liabilities rose significantly to $21.3 million from $11.7 million, mainly due to a new $4.45 million in notes payable and a larger bank overdraft. Consequently, total stockholders' equity decreased from $19.2 million to $17.0 million Consolidated Balance Sheet Data (as of June 30, 2024 vs. Dec 31, 2023) | Balance Sheet Item | June 30, 2024 ($) | Dec 31, 2023 (Restated) ($) | | :--- | :--- | :--- | | Total Assets | 38,317,405 | 30,945,213 | | Total Current Assets | 22,622,430 | 19,290,319 | | Total Non-Current Assets | 15,694,975 | 11,654,894 | | Total Liabilities | 21,334,483 | 11,728,685 | | Total Current Liabilities | 17,725,305 | 7,894,300 | | Total Stockholders' Equity | 16,982,922 | 19,216,528 | Condensed Consolidated Statements of Operations For the second quarter of 2024, revenues increased to $4.4 million from $1.6 million year-over-year, but the net loss widened to $2.9 million from $1.9 million due to higher operating expenses. For the six-month period, revenues grew to $11.6 million from $3.1 million, while the net loss increased to $5.6 million from $2.8 million Statement of Operations Highlights (Q2 & H1 2024 vs 2023) | Metric | Q2 2024 ($) | Q2 2023 ($) | H1 2024 ($) | H1 2023 ($) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | 4,386,051 | 1,575,306 | 11,617,011 | 3,086,685 | | Gross Profit | 1,040,491 | 224,163 | 4,117,163 | 735,339 | | Loss from Operations | (2,767,056) | (1,758,890) | (5,411,234) | (2,664,675) | | Net Loss | (2,931,834) | (1,850,423) | (5,579,695) | (2,838,466) | | Net Loss Per Share | (0.02) | (0.01) | (0.03) | (0.03) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, the company used $2.1 million in cash from operating activities and $4.1 million in investing activities, primarily for property purchases and long-term receivables. These uses were funded by $6.2 million in cash from financing activities, including $4.45 million from new notes payable and $1.7 million from an increased bank overdraft. The ending cash balance was $7.1 million Cash Flow Summary (Six Months Ended June 30, 2024) | Cash Flow Activity | Amount ($) | | :--- | :--- | | Net cash used in operating activities | (2,094,584) | | Net cash used in investing activities | (4,118,959) | | Net cash provided by financing activities | 6,239,860 | | Cash at end of period | 7,074,165 | Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies, going concern considerations, and specifics on financial statement line items. Key events include the commercial progress with 32 systems sold and 5 on a pay-per-use basis as of June 30, 2024. The company raised $4.45 million in debt during the period to fund operations. A subsequent event note discloses an additional $0.5 million was raised in July 2024. The company's ability to continue as a going concern depends on its ability to raise further capital - The company has an accumulated deficit of $32.01 million and a net loss of $5.57 million for H1 2024, with its going concern status dependent on securing further funding[31][37] - As of June 30, 2024, the company sold 32 surgical robotic systems and installed 5 on a pay-per-use basis, totaling 40 systems including demo units[32] - In H1 2024, the company raised $4.45 million through one-year 7% promissory notes, with $2.45 million convertible into common stock at $4.45 per share[35][70][71] - In July 2024, the company raised an additional $0.5 million from Sushruta Pvt Ltd. via a one-year 7% promissory note[99] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategy to democratize surgical robotics, highlighting significant sales growth, increased operating expenses, and the critical need for ongoing capital to fund expansion - The company's strategy focuses on democratizing access to advanced surgical robotics through its affordable SSi Mantra system[100] - Regulatory approvals for the SSi Mantra system are secured in India, Indonesia, Nepal, Guatemala, and Ecuador, with US and EU approvals anticipated in H2 2025[104] - As of June 30, 2024, the company sold 33 systems and has an installed network of 40 systems, with over 1400 procedures performed in India[105] - The company requires substantial funds for expansion, having raised $4.45 million in notes in H1 2024 and filed a Form S-1, but the lack of committed funding raises substantial doubt about its going concern ability[117][118][120] Results of Operations Comparing the three and six months ended June 30, 2024, to the same periods in 2023, revenues showed strong growth due to increased sales of surgical robotic systems. However, net losses also widened significantly, driven by a substantial increase in Selling, General, and Administrative (SG&A) expenses related to higher manpower, marketing, and business promotion costs to support expansion Financial Performance Comparison (YoY) | Metric | Q2 2024 ($) | Q2 2023 ($) | H1 2024 ($) | H1 2023 ($) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 4,386,051 | 1,575,306 | 11,617,011 | 3,086,685 | | SG&A Expenses | 3,777,479 | 1,983,053 | 9,102,278 | 3,400,013 | | Net Loss | (2,931,834) | (1,850,423) | (5,579,695) | (2,838,466) | Liquidity and Capital Resources The company's liquidity is strained, relying on recently raised capital to fund operations. In the first half of 2024, it raised $4.45 million through convertible and promissory notes. An additional $0.5 million was raised in July 2024. Despite these efforts, the company has no committed long-term funding sources, and its ability to secure future financing is critical for its survival and expansion plans - In February 2024, the company raised $2.45 million through 7% one-year convertible promissory notes[118] - In April 2024, the company raised $2.0 million from Sushruta Pvt Ltd. via 7% one-year promissory notes, with an additional $0.5 million raised in July 2024[119] - Management indicates that inability to obtain additional financing may force curtailment of operations, raising substantial doubt about its going concern ability[120] Quantitative Disclosures About Market Risks The company is not required to provide this information as it qualifies as a "smaller reporting company" - As a "smaller reporting company," SS Innovations International, Inc. is exempt from providing quantitative disclosures about market risks[131] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of June 30, 2024, due to documentation and segregation issues, with remediation efforts underway including ERP implementation - The CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of June 30, 2024[132] - Identified control deficiencies include insufficient written documentation for internal control policies and incomplete segregation of duties in accounting[136] - Remediation efforts are underway, including implementing a new ERP system at its Indian operating subsidiary[133] PART II - OTHER INFORMATION Legal Proceedings No new legal proceedings are reported beyond prior disclosures, though the company may face litigation in the ordinary course of business - No legal proceedings are currently pending or threatened against the company, other than those previously reported[138] Risk Factors The company is not required to provide this information as it qualifies as a "smaller reporting company" - As a "smaller reporting company," the company is not required to provide risk factor disclosures in its Form 10-Q[139] Other Part II Items The company reported no unregistered equity sales, no defaults on senior securities, and no other disclosures under Item 5 for the quarter - Item 2: No unregistered sales of equity securities - Item 3: No defaults upon senior securities - Item 5: No other information to report