SS Innovations International Inc(SSII) - 2024 Q4 - Annual Report

Part I Business SS Innovations is a commercial-stage surgical robotics company focused on democratizing advanced surgical robotics, particularly in underserved markets - The company is a commercial-stage surgical robotics firm focused on making advanced surgical robotics affordable and accessible, primarily with its SSi Mantra system[23][24] - As of December 31, 2024, the company has installed 62 SSi Mantra systems (58 in India, 4 overseas) and completed over 3,500 surgical procedures[26][29] - The company is actively seeking regulatory approval in the United States and the European Union, pursuing the FDA's Investigational Device Exemption (IDE) pathway and discussing CE certification[27] Surgical Procedures Performed with SSi Mantra (as of Dec 31, 2024) | Type of Surgical Procedure | No. of Procedures | % of total procedures | | :--- | :--- | :--- | | General Surgery | 1,077 | 39% | | Urology | 843 | 31% | | Gynaecology | 391 | 14% | | Cardiac | 151 | 5% | | Colorectal | 156 | 6% | | Gastroenterology | 73 | 3% | | Thoracic | 45 | 2% | | Head and Neck | 19 | 1% | | Plastic/Reconstructive | 4 | - | | Total | 2,759 | 100% | Products and Technology The SSi Mantra 3 system, with 3D 4K vision and modular arms, is the core product, complemented by 'Mudra' instruments and telesurgery - The SSi Mantra 3 system features a surgeon console with 3D 4K resolution and up to 10x magnification, modular robotic arm carts, and a separate vision cart for the surgical team[42][43][44] - The company offers over 30 reusable 'Mudra' instruments with wristed joints and motion scaling technology to enhance precision[48][49] - SSi is the only company with CDSCO approval for telesurgery and has successfully performed remote cardiac surgeries over distances up to 2,000 kilometers[51] - Products under development include the NADI anastomotic connector, a multi-fire clip applier, a robotic stapler, and mixed reality/AI software tools like SSi Maya and SSi Chitrasa[52][53][54][56] Market and Strategy The company's strategy focuses on penetrating underserved markets like India with its cost-effective SSi Mantra system before expanding globally - The initial strategy is to focus on underserved markets like India, which has a large number of hospitals but very low penetration of robotic surgery, before expanding to the U.S. and Europe[72] - Marketing efforts target large multi-specialty hospitals and leading surgeons to drive broad adoption and build confidence in the SSi Mantra system[73][74] - The company has established evaluation and training agreements with hospital networks in India and with Johns Hopkins University in the U.S. to facilitate familiarization with its system[76] Competition SS Innovations competes with traditional surgical methods and established robotic surgery companies possessing greater resources and longer operating histories - The company competes with traditional surgical methods and other medical treatments, as well as other robotic surgery companies[123] - Major competitors in the robotic surgery space include Intuitive Surgical, Medtronic, Johnson & Johnson, and CMR Surgical, most of whom possess greater financial resources and longer operating histories[124] Intellectual Property The company protects its technology through a portfolio of patents, trademarks, and copyrights, all of which are internally owned Intellectual Property Portfolio Summary | IP Type | Granted | Pending/Applications | | :--- | :--- | :--- | | Utility Patents | 5 | 65 | | PCT International (WIPO) | 0 | 10 | | Design Patents | 30 | 4 | | Trademarks (India) | 40 | 53 (93 total apps) | | Trademarks (International) | 13 | 18 (31 total apps) | | Copyrights | 2 | 0 | - The company's patents and patent applications are not licensed to or from any third parties[132] Government Regulation The company's products are subject to extensive regulation, holding CDSCO approval in India and pursuing FDA and CE certifications for global market entry - The company has CDSCO approval in India for its products, including a unique approval for telesurgery and tele-proctoring capabilities[139][140] - For U.S. market access, the company is pursuing the FDA's Investigational Device Exemption (IDE) pathway and anticipates starting its U.S. IDE study in Q3 2025[142] - The company is preparing for EU market entry and expects to submit its CE certification application in the second quarter of 2025[159] - Current approvals permit marketing in 50 non-FDA/EU countries without further regulatory hurdles and require only minimal registration in an additional 79 countries[170] Risk Factors As a "smaller reporting company," SS Innovations is not required to provide specific risk factor disclosures - The company is not required to provide risk factor disclosures as it qualifies as a "smaller reporting company"[177] Cybersecurity The company maintains a cybersecurity program overseen by the board to protect sensitive data and ensure compliance with medical device standards - The cybersecurity program is overseen by the Head-Server and Network Administrator, with ultimate oversight from the board of directors[180][181] - A specialized consulting firm has been engaged to ensure product cybersecurity compliance with medical device standards such as HIPPA, FDA regulations, and IEC 62443[182] - The company has not experienced any cybersecurity incidents that have had a material impact on its business, operations, or financial condition[183] Properties The company's primary property is a leased 70,000 sq. ft. facility in Gurugram, India, serving as its headquarters and manufacturing site - The company's principal property is a leased 70,000 sq. ft. facility in Gurugram, India, used for headquarters and manufacturing[184] Legal Proceedings The company is involved in litigation in the Bahamas regarding a disputed 9% interest in an indirect subsidiary, with the CEO providing indemnification - An ex-shareholder of an indirect subsidiary, Otto Pvt Ltd., has initiated litigation in the Bahamas claiming a 9% interest in Otto from a 2021 transaction[185] - The company believes the claim is invalid as the plaintiff failed to pay for the shares, leading to the cancellation of the shareholding in 2022[185] - Dr. Sudhir Srivastava has agreed to fully indemnify the company for all costs and damages related to this litigation[186] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades sporadically on the OTC Pink market, with a Nasdaq listing application pending, and no plans for future dividends - The common stock trades sporadically on the OTC Pink market under the symbol "SSII". The company has applied for a Nasdaq listing, but approval is not guaranteed[189] - As of April 14, 2025, there were 193,559,340 shares of common stock outstanding[8][190] - The company has not paid dividends and does not plan to, intending to retain earnings for business use[191] Equity Compensation Plan Information | Plan category | Number of securities to be issued upon exercise | Weighted average exercise price | Number of securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 12,142,838 shares | $3.863 | 7,213,096 shares | | Equity compensation plans not approved by security holders | 0 shares | – | 0 shares | | Total | 12,142,838 | $0 | 7,213,096 | Management's Discussion and Analysis of Financial Condition and Results of Operations In 2024, revenue increased to $20.6 million, but a $19.2 million net loss persisted due to high non-cash stock compensation and operational growth costs Results of Operations For 2024, revenue increased to $20.65 million, and gross profit grew, but a net loss of $19.15 million was recorded due to rising operating expenses Consolidated Statement of Operations Summary (in USD) | Particulars | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenue | 20,649,528 | 5,875,314 | | Gross profit | 8,452,366 | 725,528 | | Loss from operations | (18,975,962) | (20,273,984) | | Net loss | (19,151,197) | (20,878,292) | - Revenue increased significantly to $20.65 million in 2024 from $5.88 million in 2023, driven by increased sales of surgical robotic systems and instruments[205] - Stock compensation expense rose to $14.34 million in 2024 from $9.72 million in 2023, mainly due to new stock grants and options awarded to employees and executives[207] - Research and Development expenses increased to $2.49 million in 2024 from $1.06 million in 2023, aligning with the company's focus on enhancing its SSi Mantra system and expanding its product line[206] Liquidity and Capital Resources The company had a $6.1 million working capital surplus but faces going concern doubts, relying on external financing to fund operations and expansion - The company has a working capital surplus of $6.1 million as of Dec 31, 2024, but faces substantial doubt about its ability to continue as a going concern due to recurring losses[215][349] Summary of Cash Flows (in USD) | Particulars | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | (9,503,030) | (15,361,645) | | Net cash used in investing activities | (661,479) | (453,327) | | Net cash provided by financing activities | 9,425,980 | 22,796,286 | | Cash at end of year | 6,623,535 | 7,087,845 | - Cash from financing activities in 2024 totaled $9.4 million, sourced from a bank overdraft facility ($2.0M), convertible notes to the principal shareholder ($3.0M), promissory notes ($3.0M), and convertible notes to other investors ($1.45M)[219] Critical Accounting Estimates Key accounting estimates involve determining fair value for stock compensation and estimating Standalone Selling Price for bundled revenue contracts - The company identifies determining the fair value of stock-based compensation as a critical accounting estimate, requiring judgment on inputs like stock volatility and expected term[225][226] - Estimating the Standalone Selling Price (SSP) for different components in bundled sales arrangements is another critical estimate, used to allocate revenue among performance obligations like the system, instruments, and services[224][229] Controls and Procedures Management concluded that disclosure controls were ineffective as of December 31, 2024, due to material weaknesses, and a remediation plan is underway - Management concluded that disclosure controls and procedures were not effective as of December 31, 2024[236] - Material weaknesses identified include: inadequate controls for applying U.S. GAAP, lack of documented internal control policies, and insufficient segregation of duties[247] - A remediation plan is underway, involving external experts and the implementation of a new cloud-based ERP system to improve internal controls[241][242] Part III Directors, Executive Officers, and Corporate Governance The company's leadership includes eight directors, four independent, with established committees and a Code of Ethics, though some insider filings were late - The board consists of eight members, four of whom (Dr. Annadurai, Dr. Somashekhar, Dr. Moll, and Mr. Adams) are determined to be independent[263] - The company has established Audit, Compensation, and Nominating and Corporate Governance committees, with Tim Adams serving as the 'audit committee financial expert'[262][263] - Dr. Sudhir Srivastava (Chairman & CEO) and Dr. Vishwajyoti P. Srivastava (President & COO – South Asia) are father and son[260] - Several Form 4 filings for insiders, including Dr. Sudhir Srivastava, were filed late during the reporting period due to administrative oversights[270][276] Executive Compensation Executive compensation in 2024 primarily comprised base salaries and substantial stock-based awards, with Dr. Sudhir Srivastava receiving a $13.3 million option award 2024 Executive Compensation Summary | Name and Principal Position | Salary ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Sudhir Srivastava, M.D. (Chairman and CEO) | 600,000 | 13,307,213 | 14,196,780 | | Anup Kumar Sethi (CFO) | 177,385 | 0 | 178,251 | | Vishwajyoti P. Srivastava, M.D. (President and COO – South Asia) | 200,000 | 2,883,468 | 3,095,632 | | Barry F. Cohen (COO-Americas) | 180,000 | 2,883,468 | 3,063,468 | - The company has employment agreements with its named executive officers, with base salaries ranging from $175,000 to $600,000 and terms of three to five years[280][281] - Non-employee directors are compensated with periodic grants of options. For 2024, Dr. S.P. Somashekhar received a stock award of 50,000 restricted shares, which fully vested[286][288] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Dr. Sudhir Srivastava is the principal shareholder, beneficially owning 58.94% of common stock and controlling 51% of total voting power Beneficial Ownership of Common Stock | Names of beneficial owners | Number of shares | Percentage of class (%) | | :--- | :--- | :--- | | Directors and executive officers | | | | Sudhir Srivastava, M.D. | 117,158,445 | 58.94% | | Dr. Frederic H Moll | 20,335,045 | 10.23% | | All directors and executive officers as a group (eight persons) | 152,026,515 | 76.48% | | 5% or greater shareholders | | | | Manipal Global Health Services | 14,949,070 | 7.52% | - Dr. Sudhir Srivastava holds controlling voting power through his beneficial ownership of 58.94% of common stock and 100% of Series A Preferred Shares, which grant him 51% of the total voting power[294] Certain Relationships and Related Transactions, and Director Independence Significant related-party transactions occurred, primarily with CEO Dr. Sudhir Srivastava and his holding company, involving substantial financing and stock compensation - The company received significant financing from its principal shareholder, Sushruta Pvt. Ltd. (owned by CEO Dr. Sudhir Srivastava), including $6,000,000 in proceeds from notes issued during 2024[501] - Significant non-cash ESOP expenses were recorded for key management personnel, including $6.4 million for Dr. Sudhir Srivastava and $1.3 million for CFO Anup Sethi in 2024[501] - As of December 31, 2024, the company had a payable balance of $6,000,000 for notes issued to Sushruta Pvt. Ltd[502] Principal Accounting Fees and Services Total audit fees for 2024 significantly increased to $686,326, covering annual audits, quarterly reviews, and services for restatement and S-1 filing Accountant Fees (in USD) | Fee Category | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Audit Fees | 686,326 | 112,500 | | Audit-Related Fees | - | - | | Tax Fees | - | - | | All Other Fees | - | - | | Total | 686,326 | 112,500 | - Audit fees for 2024 included expanded services related to the company's financial restatement and S-1 registration statement filing[299] - All audit services were pre-approved by the Board of Directors, as the audit committee was only recently constituted[304][305] Part IV Exhibits and Financial Statement Schedules This section includes consolidated financial statements, an auditor's report with a going concern warning, and detailed notes on accounting policies and subsequent events - The independent auditor's report from BDO India LLP expresses substantial doubt about the company's ability to continue as a going concern due to recurring losses and negative cash flows[322] - The auditor identified the determination of Standalone Selling Price (SSP) for multiple-element revenue arrangements as a Critical Audit Matter, due to the significant management judgment involved[327][328] - Subsequent to year-end, in early 2025, the company raised a total of $28 million in convertible notes from its principal shareholder, Sushruta Pvt Ltd., and converted a total of $30 million in notes and interest into common stock, significantly improving its equity position[504] Consolidated Financial Statements The consolidated financial statements show total assets of $42.4M, total liabilities of $28.9M, and a net loss of $19.2M for FY2024 Consolidated Balance Sheet Data (as of Dec 31, in USD) | | 2024 | 2023 | | :--- | :--- | :--- | | Total Assets | 42,385,213 | 31,515,994 | | Total Liabilities | 28,928,110 | 11,797,916 | | Total Stockholders' Equity | 13,457,103 | 19,718,078 | Consolidated Statement of Operations Data (for the year ended Dec 31, in USD) | | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenue | 20,649,528 | 5,875,314 | | Gross Profit | 8,452,366 | 725,528 | | Loss from Operations | (18,975,962) | (20,273,984) | | Net Loss | (19,151,197) | (20,878,292) | | Net loss per share | (0.11) | (0.14) | Note 5 – Reverse Recapitalization The April 14, 2023, transaction with CardioVentures was accounted for as a reverse recapitalization, with CardioVentures as the accounting acquirer - The April 14, 2023 transaction with CardioVentures was accounted for as a reverse recapitalization, with CardioVentures as the accounting acquirer[416] - Post-merger, former CardioVentures shareholders held ~95% of the common stock and controlled the company via new Series A Preferred Stock, which carries 51% of the total voting power[416][417] Note 20 – Stock Compensation Expenses Stock compensation expense increased to $14.3 million in 2024, with $25.1 million in unrecognized expense remaining as of year-end Stock Compensation Expense (in USD) | Category | 2024 | 2023 | | :--- | :--- | :--- | | Stock options | 7,546,149 | 3,152,066 | | Restricted stock units (RSU) | 5,479,441 | 6,095,401 | | Advisory shares | 1,317,194 | 476,025 | | Total | 14,342,784 | 9,723,492 | - As of Dec 31, 2024, $25.1 million of total unrecognized compensation expense remains, to be recognized over a weighted-average period of 2.91 years[500] Note 23 – Subsequent Events In early 2025, the company engaged in significant financing, raising $28 million in convertible notes and converting $30 million in notes into common shares - In January and March 2025, the company raised a total of $28 million by issuing convertible promissory notes to its principal shareholder, Sushruta Pvt Ltd[504] - In February and March 2025, the company converted a total of $30 million in principal from convertible notes held by Sushruta Pvt Ltd., plus accrued interest, into 21,858,368 common shares[504] - In February 2025, the company repaid promissory notes totaling approximately $5.2 million to Sushruta Pvt Ltd. and another investor[504]