SS Innovations International, Inc 10-Q/A for FY2023 Q3
SS Innovations International, Inc. (SSII)
About this 10-Q/A
SS Innovations International, Inc filed this 10-Q/A on January 14, 2025, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.19M
- up 313.1% from $529.35K a year earlier
- Net loss
- $1.9M
- compared with a net loss of $486.39K a year earlier
- Diluted EPS
- -$0.01
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1 to Form 10-Q
For the quarterly period ended
or
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or Other Jurisdiction of | (I.R.S. Employer |
(Address of Principal Executive Offices)
Registrant’s telephone number, including
area code:
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during
the preceding 12 months (or for such shorter period that the Registrant was required to submit such files.)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “accelerated filer”, “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
There were
Unless the context otherwise requires, the terms “SSi,” “the Company,” “we,” “us,” and “our” refer to SS Innovations International, Inc., and where appropriate, our subsidiaries.
EXPLANATORY NOTE
On May 3, 2024, the SEC entered an order barring BF Borgers CPA PC (“Borgers”), the Company’s then independent registered public accounting firm, from appearing or practicing before the SEC as an accountant and therefore Borgers could no longer act as the Company’s independent registered public accounting firm. Effective May 13, 2024, the Company dismissed Borgers as its independent registered public accounting firm. Subsequently, the Company engaged BDO India LLP (“BDO”) as the Company’s new independent registered public accounting firm.
Given the circumstances giving rise to Borgers’ dismissal, the Company asked BDO to re-audit SSi’s consolidated financial statements as of and for the years ended December 31, 2023 and December 31, 2022, which were included in the Company’s Annual Report on Form 10-K filed with the SEC on March 22, 2024 (the “2023 Form 10-K”). Contemporaneously with the re-audit, the Company also undertook an internal review of certain accounting policies and internal controls and procedures.
In the course of this internal review and while BDO was performing the reaudit, the Company discovered material errors in the prior filed audited consolidated financial statements included in the 2023 Form 10-K and in the interim unaudited condensed consolidated financial statements for the quarters ended September 30, 2023 and June 30, 2023, included in the Company’s Quarterly Reports on Form 10-Q for those quarters (the “Subject Forms 10-Q”). As a result, the Company determined that in order to reflect the foregoing, the Company’s consolidated financial statements included in the 2023 Form 10-K and the Subject Forms 10-Q would need to be restated. An external consulting firm was also appointed by the Company to help perform comprehensive technical accounting evaluations.
Thereafter, the board of directors of the Company, after discussion with management of the discovered material errors, concluded that the Company’s audited consolidated financial statements as of and for the years ended December 31, 2023 and December 31, 2022 and interim unaudited condensed consolidated financial statements for the quarters ended September 30, 2023 and June 30, 2023, should no longer be relied upon due to the reasons stated above. SSi reported the foregoing in a Current Report on Form 8-K, filed with the SEC.
This Form 10-Q/A Amendment No. 1 to Form 10-Q (this “Amendment” or this “Report”) restates the Company’s previously issued interim unaudited condensed consolidated financial statements and related footnote disclosures as of and for the quarter ended September 30, 2023, included in the Subject Form 10-Q for that quarter. For detailed information, see “Note 1. Restatement of Previously Issued Consolidated Financial Statements for Correction of Errors” to the interim unaudited condensed consolidated financial statements included in Part 1, Item 1 of this Amendment.
In connection with the restatement, management re-evaluated the effectiveness of SSi’s disclosure controls and procedures and internal control over financial reporting as of September 30, 2023. As a result of that assessment, management has concluded that SSi’s disclosure controls and procedures and internal controls over financial reporting were not effective as of September 30, 2023, due to material weaknesses in SSi’s internal control over financial reporting related to above accounting errors. For a discussion of management’s consideration of SSi’s disclosure controls and procedures, internal controls over financial reporting, the material weaknesses identified, and the remedial actions being taken, see “Item 4. Controls and Procedures” in this Amendment.
As a result of the above, this Amendment amends the following Items of our Form 10-Q for the Quarter ended September 30, 2023: “Item 1. Financial Statements”, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 4. Controls and Procedures” in Part I and “Item 1. Legal Proceedings” in Part II.
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
SS INNOVATIONS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Item 1. Financial Statements
| As of September 30, 2023 | As of December 31, | | |||||||||
| Notes | (As Restated) | 2022 | |||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | 6 | ||||||||||
| Restricted cash | 6 | ||||||||||
| Accounts receivable, net | 5 | ||||||||||
| Receivable from related party | 14 | ||||||||||
| Inventory, net | |||||||||||
| Prepaids and other current assets | 7 | ||||||||||
| Total Current Assets | |||||||||||
| Non- Current Assets: | |||||||||||
| Property, plant, and equipment, net | 3 | ||||||||||
| Right of use asset | 15 | ||||||||||
| Accounts receivable, net | 5 | ||||||||||
| Restricted cash | 6 | ||||||||||
| Prepaids and other non current assets | 7 | ||||||||||
| Total Non-Current Assets | |||||||||||
| Total Assets | |||||||||||
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Bank overdraft facility | 10 | ||||||||||
| Notes payable | 9 | ||||||||||
| Current maturities of long-term debt | 11 | ||||||||||
| Current portion of operating lease liabilities | 15 | ||||||||||
| Accounts payable | 8 | ||||||||||
| Payable to related party | 14 | ||||||||||
| Deferred revenue | 12 | ||||||||||
| Other accrued liabilities | 8 | ||||||||||
| Total Current Liabilities | |||||||||||
| Operating lease liabilities, less current portion | 15 | ||||||||||
| Deferred revenue | 12 | ||||||||||
| Other accrued liabilities | 8 | ||||||||||
| Long-term borrowings, less current portion | 11 | ||||||||||
| Total Non-Current Liabilities | |||||||||||
| Total Liabilities | |||||||||||
| Stockholders’ (deficit) equity: | |||||||||||
| 13 | |||||||||||
| Common stock, | 13 | ||||||||||
| Non-controlling interest | 13 | ||||||||||
| Accumulated other comprehensive income (loss) | ( | ) | |||||||||
| Additional paid in capital | 13 | ( | ) | ||||||||
| Capital reserve | |||||||||||
| Accumulated deficit | ( | ) | ( | ) | |||||||
| Total stockholders’ (deficit) equity | ( | ) | |||||||||
| Total liabilities and stockholders’ (deficit) equity | |||||||||||
See accompanying notes to Condensed Consolidated Financial Statements
1
SS INNOVATIONS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| For The Three
Month Ended September 30, | ||||||||||
| Notes | 2023 (As Restated) | 2022 (As Restated) | ||||||||
| REVENUES | ||||||||||
| System sales | 12 | |||||||||
| Instruments sale | 12 | |||||||||
| Total revenue | ||||||||||
| Cost of revenue | ( | ) | ( | ) | ||||||
| GROSS (LOSS) PROFIT | ||||||||||
| OPERATING EXPENSES: | ||||||||||
| Research & development expense | ||||||||||
| Stock compensation expense | ||||||||||
| Depreciation and amortization expense | 3 | |||||||||
| Selling, general and administrative expense | ||||||||||
| TOTAL OPERATING EXPENSES | ||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||
| OTHER INCOME (EXPENSE): | ||||||||||
| Interest expenses | ( | ) | ( | ) | ||||||
| Interest and other income, net | ||||||||||
| TOTAL OTHER (EXPENSE) INCOME | ( | ) | ( | ) | ||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||||
| Income tax expense | ||||||||||
| NET LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||||
| Net loss per share - basic and diluted | 2(p) | ( | ) | ( | ) | |||||
| Weighted average-basic shares | 2(p) | |||||||||
| Weighted average-diluted shares | 2(p) | |||||||||
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE LOSS
| September 30, | September 30, | |||||||
| 2023 (As Restated) | 2022 (As Restated) | |||||||
| NET LOSS | ( | ) | ( | ) | ||||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||
| Foreign currency translation (loss) | ( | ) | ( | ) | ||||
| Retirement benefit (net of tax) | ( | ) | ||||||
| COMPREHENSIVE LOSS | ( | ) | ( | ) | ||||
See accompanying notes to Condensed Consolidated Financial Statements
2
SS INNOVATIONS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| For The Nine Month Ended September 30, | ||||||||||
| Notes | 2023 (As Restated) | 2022 (As Restated) | ||||||||
| REVENUES | ||||||||||
| System sales | 12 | |||||||||
| Instruments sale | 12 | |||||||||
| Total revenue | ||||||||||
| Cost of revenue | ( | ) | ( | ) | ||||||
| GROSS (LOSS) PROFIT | ||||||||||
| OPERATING EXPENSES: | ||||||||||
| Research & development expense | ||||||||||
| Stock compensation expense | ||||||||||
| Depreciation and amortization expense | 3 | |||||||||
| Selling, general and administrative expense | ||||||||||
| TOTAL OPERATING EXPENSES | ||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||
| OTHER INCOME (EXPENSE): | ||||||||||
| Interest expenses | ( | ) | ( | ) | ||||||
| Interest and other income, net | ||||||||||
| TOTAL OTHER (EXPENSE) INCOME | ( | ) | ( | ) | ||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||||
| Income tax expense | ||||||||||
| NET LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||||
| Net loss per share - basic and diluted | 2(p) | ( | ) | ( | ) | |||||
| Weighted average-basic shares | 2(p) | |||||||||
| Weighted average-diluted shares | 2(p) | |||||||||
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE LOSS
| September 30, | September 30, | |||||||
| 2023 (As Restated) | 2022 (As Restated) | |||||||
| NET LOSS | ( | ) | ( | ) | ||||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||
| Foreign currency translation (loss) | ( | ) | ( | ) | ||||
| Retirement benefit (net of tax) | ( | ) | ||||||
| COMPREHENSIVE LOSS | ( | ) | ( | ) | ||||
See accompanying notes to Condensed Consolidated Financial Statements
3
SS INNOVATIONS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND SEPTEMBER 30, 2022
(Unaudited)
| Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Capital | Accumulated other Comprehensive | Non Controlling | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||
| Notes | Number | Amount | Number | Amount | Capital | Deficit | Reserve | income (loss) | Interest | Equity | ||||||||||||||||||||||||||||||||||
| Balance At December 31, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Common stock issued | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance At March 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Preferred Stock Issued | 4 | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Reverse Recapitalization | 4 | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Conversion of Notes Payable to equity | 4 | |||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services | 4 | |||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Stock to be issued for services | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance At June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Conversion of Notes Payable to equity | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued against exercise of options | ||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Stock to be issued for services | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance At September 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Retroactive application of recapitalization | 4 | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Common stock issued | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Common stock issued | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| BALANCE AS AT SEPTEMBER 30, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
4
SS INNOVATIONS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For The Nine Month Ended September 30, | ||||||||
| 2023 (As Restated) | 2022 (As Restated) | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Operating lease liability | ||||||||
| Interest expense (net) | ||||||||
| Share issue to investor and advisors | ||||||||
| Stock compensation expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( | ) | ( | ) | ||||
| Inventory, net | ( | ) | ( | ) | ||||
| Receivables from / payable to related parties | ( | ) | ( | ) | ||||
| Deffered revenue | ||||||||
| Prepaids and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Prepaids and other non current assets | ( | ) | ( | ) | ||||
| Other accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of / proceeds from sale of property, plant and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock against warrant and options | ||||||||
| Proceeds from issuance of convertible notes to other investors | ||||||||
| Proceeds from issuance of convertible notes to principal shareholder | ||||||||
| Proceeds from bank overdraft facility (net) | ||||||||
| Proceeds from / (Repayment) of term loan | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ||||||||
| Effect of exchange rate on cash | ( | ) | ||||||
| Cash at beginning of year | ||||||||
| Cash at end of year | ||||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Conversion of convertible notes into common stock | ||||||||
See accompanying notes to Condensed Consolidated Financial Statements
5
SS INNOVATIONS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – FINANCIAL STATEMENTS
Organization
SS Innovations International, Inc. (the “Company” or “SSII”) was incorporated as AVRA Surgical Microsystems, Inc. in the State of Florida on February 4, 2015. Effective November 5, 2015, the Company’s corporate name was changed to Avra Medical Robotics, Inc. (AVRA).
On April 14, 2023, a wholly owned subsidiary of the Company, AVRA-SSI Merger Corporation (Merger Sub) merged with CardioVentures, Inc., a Delaware corporation (“CardioVentures”), the indirect parent of Sudhir Srivastava Innovations Pvt. Ltd., an Indian private limited company engaged in the business of developing innovative surgical robotic technologies. As a result of the transaction, a “change in control” of the Company took place. In addition, among other matters, the Company changed its name to “SS Innovations International, Inc.” and implemented a one for ten reverse stock split. The financial statements, financial information, share and per share information contained in this report reflect the operations of both the Company and CardioVentures and give actual effect to the reverse stock split.
The Transaction (Note 4) was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method, AVRA was treated as the “acquired” company (“Accounting Acquiree”) and Cardio Ventures Inc., the accounting acquirer, was assumed to have issued stock for the net assets of AVRA, accompanied by a recapitalization. Accordingly, for the year ended December 31, 2022, CardioVentures has been considered the ultimate holding company. Prior to October 18, 2022, Cardio Ventures Pvt Ltd., Bahamas (Cardio Bahamas), was in existence and served as the ultimate holding company. On October 18, 2022, Cardio Ventures Inc. acquired controlling interest in Otto Pvt Ltd. from Cardio Bahamas, making Cardio Ventures Inc. the ultimate holding company.
Basis of Presentation
Unaudited Interim Condensed Consolidated Financial Statements
The interim condensed consolidated balance sheet as of September 30, 2023 and the interim condensed consolidated statements of operations, comprehensive loss, cash flows, and stockholders’ equity (deficit) for the three and nine months ended September 30, 2023 and 2022 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of our financial position as of September 30, 2023 and our results of operations and cash flows for the three and nine months ended September 30, 2023 and 2022. The financial data and other financial information disclosed in these notes to the interim condensed consolidated financial statements related to the three and nine-month periods are also unaudited. The interim condensed consolidated results of operations for the nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future annual or interim period. The interim condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited consolidated financial statements as of that date. These interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in the Annual Report on Form 10-K/A as filed by us with the U.S. Securities and Exchange Commission (the “SEC”) on December 6, 2024.
6
The interim condensed consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The accompanying financial statements have been prepared on a consolidated basis and reflect the consolidated financial statements of SS Innovations International, Inc. and all of its subsidiaries (“Group”) for the quarter and nine months ended September 30, 2023. However, the comparative financial statements for the quarter and nine months ended September 30, 2022, have been prepared on a consolidated basis and reflect the consolidated financial statements of Cardio Bahamas and all of its subsidiaries (“Group”).
The standalone financial statements of subsidiaries are fully consolidated on a line-by-line basis. Intra-group balances and transactions, and gains and losses arising from intra-group transactions, are eliminated while preparing condensed consolidated financial statements.
Accounting policies of the respective individual subsidiaries are aligned wherever necessary, so as to ensure consistency with the accounting policies that are adopted by the Company under U.S. GAAP.
Restatement of Previously Issued Financial Statements for Correction of Errors
The Company restated the accompanying condensed consolidated balance sheet as at September 30, 2023 as well as the condensed consolidated statement of operations and comprehensive loss and the condensed consolidated statement of cash flows for the three and nine months ended September 30, 2023 and September 30, 2022 respectively, as previously reported in its Form 10-Q, to reflect the correction of errors arising out of:
| i. | Accounting for the merger transaction |
| ii. | Functional / other reclassification |
| iii. | Recognition of revenue in case of deferred payment sales |
| iv. | Recognition of right of use of certain assets and liabilities |
| v. | Errors / Adjustments |
7
Restatement in September 2023
| Particulars | As
Previously Reported | As
Restated | Changes | Accounting
for the merger transaction¹ | Functional
/ Other reclassification² | Recognition
of revenue in case of deferred payment sales³ | Recognition
of right of use of certain assets and liabilities³ | Errors
/ Adjustments⁴ | ||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||
| Current Assets: | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Restricted cash | ||||||||||||||||||||||||||||||||
| Accounts receivable, net | ( | ) | ||||||||||||||||||||||||||||||
| Receivable from related party | ( | ) | ||||||||||||||||||||||||||||||
| Inventory, net | ||||||||||||||||||||||||||||||||
| Prepaids and other current assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Total Current Assets | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Non-Current Assets: | ||||||||||||||||||||||||||||||||
| Property, plant, and equipment, net | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Right of use asset | ||||||||||||||||||||||||||||||||
| Accounts receivable, net | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Restricted cash | ( | ) | ||||||||||||||||||||||||||||||
| Receivable from related party | ( | ) | ( | ) | - | |||||||||||||||||||||||||||
| Prepaids and other non current assets | ( | ) | ||||||||||||||||||||||||||||||
| Total Non Current Assets | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Total Assets | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||
| Current Liabilities: | ||||||||||||||||||||||||||||||||
| Bank overdraft facility | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Notes payable | - | |||||||||||||||||||||||||||||||
| Current maturities of long-term debt | ||||||||||||||||||||||||||||||||
| Current portion of operating lease liabilities | - | |||||||||||||||||||||||||||||||
| Accounts payable | ||||||||||||||||||||||||||||||||
| Payable to related party | - | |||||||||||||||||||||||||||||||
| Deferred tax liability | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Deferred revenue | ||||||||||||||||||||||||||||||||
| Other accrued liabilities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Total Current Liabilities | ( | ) | ||||||||||||||||||||||||||||||
| Operating lease liabilities, less current portion | - | |||||||||||||||||||||||||||||||
| Deferred revenue | ||||||||||||||||||||||||||||||||
| Other accrued liabilities | ||||||||||||||||||||||||||||||||
| Long term liabilities | - | - | - | - | ||||||||||||||||||||||||||||
| Total Non Current Liabilities | - | |||||||||||||||||||||||||||||||
| Total Liabilities | ( | ) | ||||||||||||||||||||||||||||||
| Stockholders’ (deficit) equity: | ||||||||||||||||||||||||||||||||
| Preferred stock, $ | - | |||||||||||||||||||||||||||||||
| Common stock, | ||||||||||||||||||||||||||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Common Stock to be Issued | - | - | - | - | ||||||||||||||||||||||||||||
| Additional paid in capital | ( | ) | ( | ) | - | |||||||||||||||||||||||||||
| Capital reserve | ||||||||||||||||||||||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total Stockholders’ (deficit) equity | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Total Liabilities and stockholders’ (deficit) equity | ( | ) | ( | ) | ||||||||||||||||||||||||||||
8
| Particulars | As Previously Reported | As Restated | Changes | Accounting
for the merger transaction¹ | Functional / Other reclassification² | Recognition of revenue in case of deferred payment sales³ | Recognition of right of use of certain assets and liabilities³ | Errors / Adjustments⁴ | ||||||||||||||||||||||||
| REVENUE: | ||||||||||||||||||||||||||||||||
| System sales | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Warranty sales | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Instrument sale | ||||||||||||||||||||||||||||||||
| Total revenue | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| GROSS PROFIT | ( | ) | ||||||||||||||||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||||||||||||||
| Research & development expense | ||||||||||||||||||||||||||||||||
| Salaries & payroll expenses | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Stock compensation expense | ||||||||||||||||||||||||||||||||
| Depreciation and amortization expense | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | ( | ) | ||||||||||||||||||||||||||||||
| TOTAL OPERATING EXPENSES | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||||||||||||||||||
| Interest expenses | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Interest and other income, net | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| TOTAL OTHER INCOME (EXPENSE), NET | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
9
Condensed consolidated statement of operations and comprehensive loss for the three months ended September 30, 2023.
| Particulars | As Previously Reported | As Restated | Changes | Accounting for the merger transaction¹ | Functional / Other reclassification² | Recognition of revenue in case of deferred payment sales³ | Recognition of right of use of certain assets and liabilities³ | Errors / Adjustments⁴ | ||||||||||||||||||||||||
| REVENUE: | ||||||||||||||||||||||||||||||||
| System sales | ( | ) | ||||||||||||||||||||||||||||||
| Warranty sales | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Instrument sale | ||||||||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| GROSS PROFIT | ( | ) | ||||||||||||||||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||||||||||||||
| Research & development expense | ||||||||||||||||||||||||||||||||
| Salaries & payroll expenses | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock compensation expense | ||||||||||||||||||||||||||||||||
| Depreciation and amortization expense | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | ( | ) | ||||||||||||||||||||||||||||||
| TOTAL OPERATING EXPENSES | ( | ) | ||||||||||||||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||||||||||||||||||
| Interest expenses | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Interest and other income, net | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| TOTAL OTHER INCOME (EXPENSE), NET | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
10
| Particular | As
Previously Reported | As Restated | Changes | Accounting for the merger transaction¹ | Functional / Other reclassification² | Recognition of revenue in case of deferred payment sales³ | Recognition of right of use of certain assets and liabilities³ | Errors / Adjustments⁴ | ||||||||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Translation diff | ( | ) | ||||||||||||||||||||||||||||||
| Operating lease liability | ||||||||||||||||||||||||||||||||
| Interest expense (net) | ( | ) | ||||||||||||||||||||||||||||||
| Share issue to investor and advisors | ||||||||||||||||||||||||||||||||
| Stock compensation expense | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||||||||||||||
| Accounts receivable, net | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Inventory, net | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Receivables from / payable to related parties | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Deferred revenue | ||||||||||||||||||||||||||||||||
| Prepaids and other current assets | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Accounts payable | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Prepaids and other non current assets | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Prepaid expenses and other assets | ( | ) | - | - | - | |||||||||||||||||||||||||||
| Other accrued liabilities | ( | ) | ||||||||||||||||||||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||||||||||||||
| Accounts receivable, net | ( | ) | ||||||||||||||||||||||||||||||
| Purchase of / proceeds from sale of property, plant and equipment | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||||||||||||||
| Proceeds from issuance of common stock against warrant and options | ||||||||||||||||||||||||||||||||
| Proceeds from issuance of convertible notes to other investors | - | |||||||||||||||||||||||||||||||
| Proceeds from issuance of convertible notes to principal shareholder | ||||||||||||||||||||||||||||||||
| Proceeds from bank overdraft facility (net) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Proceeds from / (Repayment) of term loan | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Proceeds from securities offering | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Repayment of warrants | ( | ) | ||||||||||||||||||||||||||||||
| Proceeds from notes converted | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Proceeds from options exercised | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Recapitalization | ( | ) | ||||||||||||||||||||||||||||||
| Repayments of notes payable | ( | ) | ||||||||||||||||||||||||||||||
| Net cash provided by financing activities | ( | ) | ||||||||||||||||||||||||||||||
| Net change in cash | ||||||||||||||||||||||||||||||||
| Effect of exchange rate on cash | ||||||||||||||||||||||||||||||||
| Cash at beginning of year | ( | ) | ||||||||||||||||||||||||||||||
| Cash at end of year | ||||||||||||||||||||||||||||||||
11
(1) Accounting for merger transaction
Background
On April 14, 2023, SSII (earlier known as
‘AVRA Medical Robotics Inc’ or ‘AVRA’) consummated the acquisition of Cardio Ventures, Inc., a Delaware corporation
(“Cardio Ventures”), pursuant to a Merger Agreement dated November 7, 2022 (the “Merger Agreement”), by and among
the Company, a wholly owned subsidiary of the Company (“Merger Sub”), Cardio Ventures and Dr. Sudhir Srivastava, who, through
his holding company, owned a controlling interest in Cardio Ventures. Pursuant to the Merger Agreement, at Closing, Merger Sub merged
with and into Cardio Ventures (the “Cardio Ventures Merger”). Further, the Company
changed its name to “SS Innovations International, Inc.,” effected a
Before
In the previously filed financial statements (Form 10-Q) for the period ended September 30, 2023, the merger transaction between SS Innovations International, Inc. (“SSII” or “the Company”) and CardioVentures, Inc., was accounted for as a reverse merger in the nature of a recapitalization, in accordance with ASC 805. According to Note 1 of the originally filed Form 10-Q, a wholly owned subsidiary of the Company was treated as the accounting acquirer, and CardioVentures, Inc. was treated as the accounting acquiree. The opening balances in the financial statements for the period ended September 30, 2022, included only the assets and liabilities of AVRA.
After
Upon review of merger agreements and related technical accounting guidance available in ASC 805, it was determined that AVRA’s assets and liabilities should have been recorded at their fair value as of the date of merger and comparative balances as at December 31, 2022 should have been considered only for Cardio Venture Inc. at historical cost basis, being the accounting acquirer in the merger transaction. The fair value of assets and liabilities of AVRA was assessed as at the time of the merger. This revaluation resulted in a change in the recorded amounts for the acquired assets, which has now been appropriately reflected in the restated financial statements.
Additionally, the amount recognized as issued equity interests in the condensed consolidated financial statements was determined by considering the equity interests of Cardio Venture Inc. (for the quarter and nine months ended September 30, 2022 considered the equity interest of Cardio Bahamas) outstanding immediately before the business combination. In accordance with ASC 805, the equity structure (the number and type of equity interests issued) reflects that of AVRA, including the equity interests issued by AVRA to effect the merger as reverse recapitalization. As a result, the equity structure of Cardio Venture Inc. (for the quarter and nine months ended September 30, 2022, equity structure of Cardio Bahamas) (the accounting acquirer) has been restated using the exchange ratio established in the acquisition agreement to reflect the number of shares issued by the legal parent (AVRA, the accounting acquiree) in the merger.
The Company identified that fair value of assets and liabilities of AVRA was assessed as at the time of merger.
Additionally, the Company excluded Accumulated deficit and Additional paid in capital pertaining to AVRA as per ASC 805.
Further, Selling, general and administrative
expenses and Interest and other income, net amounting to $
Differential impact of above adjustments have been corrected in the condensed consolidated statement of cash flows for the period ended September 30, 2023.
12
(2) Functional / Other reclassifications
In 2023, the Company conducted an in-depth review of its functional expense classification and other reclassifications resulting in more appropriate allocation of costs based on their specific business functions. The following adjustments have been implemented:
1. Reclassification of lease expenses related to Production (COGS) and Research & Development (R&D) from Sales General & Administration cost (SG&A)
Previously, lease expenses related to production and R&D activities were grouped under SG&A expenses. As a result of the review, these costs have now been reclassified to more accurately reflect their functional relationship with core business activities.
Lease expenses for production-related activities are now included under cost of revenue, as they are directly tied to the production process.
Lease expenses for R&D activities are now classified under R&D expenses, ensuring that these costs are appropriately aligned with innovation efforts and accurately allocated based on the proper assumptions regarding their direct contribution to the Company’s research and development initiatives.
This reclassification provides a clearer picture of how the Company allocates resources toward both operational production and future product development.
2. Salaries and Related Expenses in COGS, R&D and SG&A
Previously, salaries and related expenses were shown directly as a separate head in the statement of Income and Other comprehensive income. Following further evaluation, these expenses have been reclassified between COGS, R&D and SG&A.
Salaries and benefits for production staff are now included under COGS, aligning them more accurately with the Company’s production costs. This enhances the calculation of gross profit margins and ensures the expenses are matched with the corresponding revenue.
Salaries for R&D personnel have been classified exclusively in R&D expenses, properly attributing costs to the development of new products and technologies and reflecting the Company’s ongoing investment in innovation.
These changes improve the functional categorization of expenses and provide a more accurate depiction of the Company’s operating performance.
3. Other reclassifications in condensed consolidated balance sheet and condensed consolidated statement of cash flows
We noted that there are reclassifications required in the condensed consolidated balance sheet and condensed consolidated statement of cash flows to
| - | correct current/non-current positions |
| - | correct classification basis nature of receivable/payable |
Impact on restated condensed consolidated financial statements for the period ended September 30, 2023
(A) Reclassifications in Condensed Consolidated Balance Sheet
Reclassifications were of below nature:
| 1. | Restricted Cash: - 1. Fixed deposit against bank guarantee of $ |
13
| 2. | Accounts receivable of $ |
| 3. | Receivables from related parties of $ |
| 4. | Prepaids and other current assets: - Security Deposit of $ |
| 5. | Reclassification of long term deferred revenue from other accrued liabilities to long term deferred revenue amounting to $ |
| 6. | Accounts payable: - As at September 30, 2023 Amount of advance to vendors knocked off earlier amounting to $ |
| 7. | Other accrued liabilities: - As at September 30, 2023, A. Due to Provision for professional fees recorded amounting to $ |
Differential impact of above adjustments have been corrected in the condensed consolidated statement of cash flows for the nine months period ended September 30, 2023.
(B) Reclassifications Condensed Consolidated Statement of Operations and comprehensive loss
Reclassifications were of below nature:
| (i) | Functional classification |
| 1. | Operating expenses (including Salaries and payroll expenses) are now reclassified functionally, encompassing Cost of revenue, Selling,
General and Administrative expense and Research and Development expense. This reclassification has resulted in a decrease in the Cost
of Revenue by $ |
This reclassification has further
resulted in a decrease in the Cost of Revenue by $
| (ii) | Other reclassifications |
| 1. | In the financial reporting
structure, total revenue is now detailed into two categories: System Sales and Instrument Sales. Earlier, Instrument Sales were not disclosed
separately which has been effected now. Consequently, in restated financial statements, System Sales is now reduced by $ |
14
| 2. | Interest expenses related to credit notes and discounts on credit note have been reclassified from Selling, General, and Administrative Expenses to Interest Expense. This reclassification amounts to $ |
(3) Correction of accounting policies misapplications
A. Revenue recognition
Background
The Company identified that it had inadvertently failed to apply some of the relevant provisions of ASC 606, “Revenue from Contacts”, accordingly, in the preparation of our revised financial statements for the period ended September 30, 2023 and September 30, 2022. We have revised our revenue recognition policy to incorporate discounting for the present value of expected revenue.
Before
In previously filed financial statements, our revenue was recognized at nominal values without considering the time value of money. Also, in previously filed financial statements, the Company recognized revenue from maintenance and warranty services starting in the first year following delivery. Further, the Company included deferred revenue within accrued liabilities.
After
The decision to adopt a discounting approach arises from our commitment to providing stakeholders with a more precise representation of our revenue streams. By discounting future cash flows to their present value, we ensure that our revenue reflects the economic reality of our transactions, considering the timing of cash receipts. This adjustment aligns our financial statements with best practices in revenue recognition and improves the comparability of our financial information across periods.
However, after management’s evaluation, it has been determined that the first year post-delivery is classified as a standard warranty period, with extended comprehensive maintenance and warranty services commencing in the second year. The services offered under the extended maintenance and warranty agreements are consumed by customers concurrently with the Company’s performance of those services. In line with ASC 606-10-25-27, revenue from maintenance and warranty services is to be recognized over the term of the comprehensive maintenance and warranty agreements. As a result, any advance revenue received will be recorded as deferred revenue until the related performance obligations are fulfilled.
Also, deferred revenue has now been reclassified as a separate line item on the Balance Sheet, in accordance with U.S. GAAP guidelines. Additionally, deferred revenue has now been divided into short-term and long-term classifications based on when revenue is expected to be recognized. These adjustments provide more clarity and transparency.
Moreover, the Company has now separated revenue into instrument sales and system sales. This differentiation enables a more detailed understanding of the revenue streams and their respective recognition patterns. Revenue from instrument sales and system sales will now be recorded separately on the face of condensed consolidated statement of operations and other comprehensive loss, reflecting the distinct performance obligations and timing of revenue recognition for each category.
Impact on restated condensed consolidated financial statements for the period ended September 30, 2023
The Company identified that revenue and accounts receivable were incorrectly recorded due to the financing component of trade receivables and deferred revenue, which is to be recovered and recognized after one year from the balance sheet date according to purchase order terms. In line with ASC 606, correction entries were made to reflect the financing component in accounts receivable and revenue.
15
Long term account receivables balances were
presented at gross balances basis in previous filed financial statements however, as per ASC 606, revenue contract in which company have
significant financing component in consideration receivable from customers, the net sales and related debtor balance should be accounted
at the present value of the future cash flow and the interest component related to financing component should be recorded over the
period of contract. Accordingly, the company restated the account receivable balances on net level to provide impact of significant financing
component and reduced trade receivable by $
Also, warranty income to be recognized once
the performance obligation condition gets fulfil to in line with this provision, unrealized warranty income included of the sale were
reversed and recoded as deferred revenue in balance sheet till the time performance obligation relation to this is not fulfilled. Hence
due to this $
Earlier all unrealized income (deferred revenue)
are recorded in other accrued liabilities and now the same had been recorded separately as deferred revenue in balance sheet by $
Interest income for the current period related
to unwinding of account receivable balances recorded as interest income of $
Interest income for the current period related
to unwinding of account receivable balances recorded as interest income of $
B. Lease
Before
For the period ended September 30, 2023 the Company identified that it had inadvertently failed to apply ASC 842, “Leases,” to certain operating lease arrangements.
Upon further review, the Company also determined that similar issues impacted the financial statements for the period ended September 30, 2023. During these periods, while preparing the condensed consolidated financial statements, the Company inadvertently failed to apply ASC 842 to all of their lease agreements. This resulted in the exclusion of material lease liabilities and related right-of-use assets from the financial statements.
After
In conjunction with the correction of the lease accounting, the Company has also updated its incremental borrowing rates used to measure lease liabilities and right-of-use assets. The revised rates are now more reflective of the Company’s current borrowing conditions and have been applied retrospectively to all affected lease arrangements.
Impact on Financial Statements: The restatement is expected to primarily affect:
Lease Liabilities: Previously unrecorded liabilities associated with the identified leases will be recognized.
Right-of-Use Assets: Corresponding assets related to the identified lease arrangements will be recognized.
Lease Expenses: Adjustments will be made to accurately reflect lease-related expenses, including interest and depreciation charges for the right-of-use assets.
Impact on restated condensed consolidated financial statements for the period ended September 30, 2023
The Company identified that it had a leased
property in India, but no transection recorded initially as per ASC 842 only the lease payments were recorded as rent expenses. As per
ASC 842, if a company entered into a lease contract for specific period of time it shall record the Right to Use Assets (ROU), Lease
liabilities and amortize ROU and interest on lease liabilities over the lease term. Accordingly, Restatement adjustment of $
Differential impact of above adjustments has been corrected in the consolidated statement of cash flows for the period ended September 30, 2023.
16
4. Correction of other errors in measurement of income/expense/asset/liabilities.
We also noted errors in measurement of income/expense/assets/liabilities throughout different financial statements captions which were corrected in the restated financial statements. Below are major error corrections made in condensed consolidated financial statements for the period ended September 30, 2023:
| (i) | Reinstatement of recourse letter of credit: - The Company identified that the encashment of a letter of credit (LC – with recourse) received from banker against the customer’s invoicing was incorrectly netted off with the customer’s closing balance, affecting the financing component for the period ending September 30, 2023. To rectify this, a correction was made to reconcile the accounts receivable balance and the impact of the financing component on the income statement. Accounts receivable balance of $ |
| (ii) | Personal expenses pertaining to Director earlier recorded as business expense of the Company: - The company identified that legal expenses amounting to $ |
| (iii) | Stock compensation expenses: |
The Company identified that stock
compensation expense was recorded incorrectly as it did not include advisory shares given to non employees. Rectification adjustments
were made and stock compensation expense of $
The Company identified that an
additional issuance of advisory shares to Dr. Frederic Moll during the period ended September 30, 2023, recognizing his strategic knowledge
and expertise within the industry to be recorded as selling, general and administration expense. This transaction has been classified
under Selling, General, and Administrative (SG&A) expenses, totaling $
| (iv) | Advance to vendors: For the period ended September 30, 2023, the Company identified that an advance given to a vendor was not adjusted against respective capital and operating expenditures while the invoices were received by the Company. An adjustment was recorded to adjust the vendor advance against respective expenditure totaling $ |
| (v) | Incorrect useful life of PPE: - The company identified that property, plant, and equipment were previously recorded incorrectly, with depreciation charged based on estimated useful life determined by management. Following a thorough analysis, the asset lives were corrected, and depreciation was recalculated accordingly. As a result of this adjustment, an entry of $ |
17
| (vi) | Incorrect valuation of inventory: The Company identified that the inventory was previously recorded at incorrect valuation. As a result of this adjustment inventory is increased by $ |
| (vii) | Cut off errors: - The Company identified that professional fees were recorded based on payments made during the current year, though they pertained to 2022. To correct this, a reversal entry of $ |
| (viii) | Unrecognized gratuity provision: - The Company identified that the expense and provision for gratuity were not recorded from the initial stage. These were subsequently recorded for the years 2021, 2022 and the current period, with balances reconciled against the actuarial report. A gratuity liability recorded by $ |
| (ix) | Discounting of security deposits: - The Company identified that discounting of security deposits was not initially performed. As a result, the discounting of security deposits has now been recorded, along with the corresponding prepaid security deposit. |
| (x) | Deferred tax liability: - Since the company has carried forward significant tax losses hence earlier recorded deferred tax liability reversed $ |
| (xi) | Interest income: - The company has identified that certain interest income on deposits amounting to $ 40,350 and $36,256 which are not recorded for the nine months and three months period ended September 30, 2023 respectively are now recorded. |
| (xii) | System sales: - The company has identified that at the time of the original filing the instrument sale was incorrectly classified as system sales, and the calculation of the instrument sale was also inaccurate. The same has been corrected, with $535,447 reclassified from system sales to instrument sales. The differences of $550,567 for the nine-month period and $112,912 for the three-month period ended September 30, 2023, are primarily due to fluctuations in foreign exchange rates. |
Differential impact of above adjustments has been corrected in the condensed consolidated statement of cash flows for the nine months period ended September 30, 2023.
18
Restatement in September 2022
Condensed consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2022.
| Particulars | As Previously Reported | As Restated | Changes | Accounting for the merger transaction | ||||||||||||
| REVENUE: | ||||||||||||||||
| System sales | ||||||||||||||||
| Warranty sales | - | - | - | |||||||||||||
| Instrument sale | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Research & development expense | ||||||||||||||||
| Stock compensation expense | ( | ) | ( | ) | ||||||||||||
| Depreciation and amortization expense | - | |||||||||||||||
| Selling, general and administrative expense | ||||||||||||||||
| TOTAL OPERATING EXPENSES | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Interest expenses | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest and other income, net | ( | ) | ( | ) | ||||||||||||
| TOTAL OTHER INCOME (EXPENSE), NET | ( | ) | ( | ) | ( | ) | ||||||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
19
Condensed consolidated statement of operations and comprehensive loss for the three months ended September 30, 2022.
| Particulars | As Previously Reported | As Restated | Changes | Accounting for the merger transaction | ||||||||||||
| REVENUE: | ||||||||||||||||
| System sales | ||||||||||||||||
| Warranty sales | ||||||||||||||||
| Instrument sale | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Research & development expense | ||||||||||||||||
| Stock compensation expense | ( | ) | ( | ) | ||||||||||||
| Depreciation and amortization expense | ||||||||||||||||
| Selling, general and administrative expense | ||||||||||||||||
| TOTAL OPERATING EXPENSES | ( | ) | ( | ) | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Interest expenses | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest and other income, net | ( | ) | ( | ) | ||||||||||||
| TOTAL OTHER INCOME (EXPENSE), NET | ( | ) | ( | ) | ( | ) | ||||||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||||||||||
| Income tax expense | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ||||||||||||
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Condensed consolidated statement of cashflows for the nine months ended September 30, 2022.
Particular | As Previously Reported | As Restated | Changes | Accounting for the merger transaction | ||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Operating lease liability | ||||||||||||||||
| Stock compensation expense | ( | ) | ( | ) | ||||||||||||
| Interest expense (net) | ||||||||||||||||
| Changes
in operating assets and liabilities: Accounts receivable, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Inventory, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Receivables from / payable to related parties | ( | ) | ( | ) | ( | ) | ||||||||||
| Prepaids and other current assets | ( | ) | ( | ) | ( | ) | ||||||||||
| Accounts payable | ( | ) | ||||||||||||||
| Prepaids and other non current assets | ( | ) | ( | ) | ( | ) | ||||||||||
| Other accrued liabilities | ||||||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ( | ) | ||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Purchase of / proceeds from sale of property, plant and equipment | ||||||||||||||||
| Net cash used in investing activities | ||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Proceeds from issuance of convertible notes to other investors | ||||||||||||||||
| Proceeds from bank overdraft facility (net) | ||||||||||||||||
| Proceeds from / (Repayment of) term loan | ||||||||||||||||
| Proceeds from securities offering | ( | ) | ( | ) | ||||||||||||
| Net cash provided by financing activities | ||||||||||||||||
| Net change in cash | ( | ) | ||||||||||||||
| Effect of exchange rate on cash | ( | ) | ( | ) | ||||||||||||
| Cash at beginning of year | ( | ) | ||||||||||||||
| Cash at end of year | ( | ) | ||||||||||||||
Impact on restated consolidated financial statements for the nine-months period ended September 30, 2022 (refer note 4)
During the course of a detailed re-review of the original filing of Form 10-Q for period ended September 2023, it has been observed that there were also significant inaccuracies in the corresponding figures reported for the three and nine months ended September 2022 condensed consolidated statement of operations and comprehensive loss and condensed consolidated statement of cashflows. These errors primarily originated from the inclusion of figures that pertain to AVRA Medical Robotics, Inc., rather than the correct entities i.e. Cardio Bahamas Pvt. Ltd and its subsidiaries.
Details of Identified Errors:
| 1. | Condensed consolidated statement of operations and comprehensive loss and condensed consolidated statement of cashflows figures for the three months and nine months period ended September 2022: |
The corresponding figures reported in the condensed consolidated statement of operations and comprehensive loss and condensed consolidated statement of cashflows for September 2022 were entirely related to AVRA Medical Robotics, Inc., rather than Cardio Bahamas Pvt. Ltd and its subsidiaries.
Corrective Actions Undertaken:
| 1. | Condensed consolidated statement of operations and comprehensive loss and condensed consolidated statement of cashflow adjustments for the three months and nine months period ended September 2022: |
The figures related to Cardio Bahamas Pvt. Ltd. and its subsidiaries now have been updated as the corresponding figures in the condensed consolidated statement of operations and comprehensive loss and condensed consolidated statement of cashflows for three months and nine months period ended September 2022. These updated numbers provide a correct basis for comparison with the financials for the three and nine months periods ended September 30, 2023.
21
Going Concern
The accompanying
condensed consolidated financial statements have been prepared on a going concern basis which implies the Company will continue to meet
its obligations for the next 12 months as of the date these financial statements are issued. The Company had a working capital surplus
of $
Management recognizes
that the Company must obtain additional resources to successfully implement its business plans. The Company has been able to augment
its financial resources to further supplement its operations. On April 15, 2023, the Company executed a Convertible Promissory Note (the
“Line of Credit Note”) with Sushruta Pvt Ltd. (“SPL”), the Bahamian holding company owned by Dr.
Sudhir Srivastava, our Chairman, Chief Executive Officer and principal shareholder. Pursuant to the line of credit note, SPL, in its
discretion could make multiple advances to the Company through December 31, 2023 (the “Maturity Date”), in an aggregate
amount of up to $
This conversion of funds advanced under the
line of credit note and subsequently converted into equity has resulted in a significant improvement in the Company’s stockholders’
equity and working capital position. As of September 30, 2023, the Company had a stockholders’ equity of $
However, the Company’s existing cash resources and income from operations, are not expected to provide sufficient funds to carry out the Company’s operations and business development through the next twelve (12) months. The management of the Company is making efforts to raise further funding to scale up operations and meet its longer-term capital needs. While management of the Company believes that it will be successful in its capital formation and planned expansion of its operating activities, there can be no assurance that the Company will be able to raise additional equity capital or be successful in generating additional revenues and ultimately achieving profitability. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
22
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| a) | Use of Estimates |
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses. The Company regularly evaluates estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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 made by management. Significant estimates included discount rate for measuring significant financing component for deferred collections in revenue contracts, fair value of stock options, incremental borrowing rate for leases and useful life of property plant and equipment.
| b) | Cash and Cash Equivalents |
The Company considers all highly liquid investments purchased with an original maturity of ninety days or less to be cash equivalents.
| c) | Restricted Cash |
Restricted cash includes any cash and cash equivalents that are legally restricted as to withdrawal or usage for the Company’s operations. For the purposes of the condensed consolidated statement of cash flows, the Company includes in its cash and cash-equivalent balances those amounts that have been classified as restricted cash and restricted cash equivalents.
| d) | Accounts Receivable and Allowance for Expected Credit Losses |
The Company’s account receivables are due from customers relating to contracts to supply surgical robotic systems, instruments, and accessories and to provide post sales warranty/maintenance services. The Company also sells surgical robotic systems under deferred payment arrangements and in such cases, the amounts due and recoverable beyond the one year period at the balance sheet date are classified as long-term receivables. Collateral is currently not required. The Company also maintains credit loss allowance for estimated losses resulting from the inability of the Company’s customers to make payments. The Company periodically reviews these estimated allowances, including an analysis of the customers’ payment history and creditworthiness, the age of the trade receivable balances and current economic conditions that may affect a customer’s ability to make payments as well as historical collection trends for its customers as a whole. Based on this review, the Company specifically reserves for those accounts deemed uncollectible or likely to become uncollectible. When receivables are determined to be uncollectible, principal amounts of such receivables outstanding are deducted from the allowance. The allowance for doubtful accounts as of September 30, 2023 and December 31, 2022 amounted to $ and $ respectively.
| e) | Employee Benefits |
Contributions to defined contribution plans are charged to the condensed consolidated statement of operations and comprehensive loss in the period in which services are rendered by the covered employees. Current service costs for defined benefit plans are recognized in the period to which they relate. The liability in respect of defined benefit plans is calculated annually by the Company using the projected unit credit method. The Company records annual amounts relating to its defined benefit plans based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, future compensation increases and attrition rates. The Company reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in other comprehensive income (loss) (“OCI”) and amortized to net periodic benefit cost over the expected remaining period of service of the covered employees using the corridor method. The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions. These assumptions may not be within the control of the Company and accordingly it is reasonably possible that these assumptions could change in future periods. The Company includes the service cost component of the net periodic benefit cost in the same line item or items as other compensation costs arising from services rendered by the respective employees during the period. The interest cost, expected return on plan assets and amortization of actuarial gains/loss, are included in “Other income/(expense), net”.
| f) | Foreign Currency Translation |
The functional currency of each entity in the group is the currency of the primary economic environment in which it operates. Transactions in foreign currencies are initially recorded into functional currency at the rates of exchange prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are remeasured into functional currency at the rates of exchange prevailing at the balance sheet date. Non-monetary assets and liabilities are remeasured to the functional currency at exchange rates that prevailed on the date of inception of the transaction. All foreign exchange gains and losses arising on re-measurement are recorded in the Company’s condensed consolidated statement of operations and comprehensive loss.
23
The assets and liabilities of the subsidiaries for which the functional currency is other than the U.S. dollar are translated into U.S. dollars, the reporting currency, at the rate of exchange prevailing on the balance sheet date. Revenues and expenses are translated into U.S. dollars at the exchange rates prevailing on the last business day of each month, which approximates the average monthly exchange rate. Share capital and other equity items are translated at exchange rates that prevailed on the date of inception of the transaction. Resulting translation adjustments are included in “Accumulated other comprehensive income/(loss)” in the condensed consolidated balance sheet.
The
relevant translation rates are as follows: for the nine months ended September 30, 2023 closing rate at
The
relevant translation rates are as follows: for the nine months ended September 30, 2022 closing rate at
The
relevant translation rates are as follows: for the year ended December 31, 2022 closing rate at
| g) | Inventory |
The Company’s inventory consists of
finished goods in the form of fully assembled and tested surgical robotic system, semi-finished goods in the form of various sub-systems
of the surgical robotic systems in various stages of assembly and manufacturing and raw material in the form of various mechanical, electrical,
and other material components, parts, motors, encoders etc. which are not yet assembled/manufactured. The inventory is valued at the
lower of cost (first-in, first-out) or estimated net realizable value. As of September 30, 2023 and December 31, 2022, the Company valued
the inventory at $
| h) | Fair value measurements |
ASC Topic 820, Fair Value Measurements and Disclosures defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability as against assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company’s own credit risk. The fair value hierarchy consists of the following three levels:
| ● | Level I — Quoted prices for identical instruments in active markets. |
| ● | Level II — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. |
| ● | Level III — Instruments whose significant value drivers are unobservable. |
| i) | Concentration of Credit Risk |
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. and cash equivalents, time deposits and accounts receivable. By their nature, all such financial instruments involve risks including the credit risks of non-performance by counterparties. The surplus funds are maintained as cash and cash equivalents and time deposits, placed with highly rated financial institutions to reduce its exposure to market risk with regard to these funds. The Company’s exposure to credit risk on account receivable is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers. To mitigate this risk the Company evaluates the creditworthiness of its customers in conjunction with its revenue recognition processes as well as through its ongoing collectability assessment processes for accounts receivable. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
24
| j) | Commitments and Contingencies |
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recognized when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. A disclosure for a contingent liability is made when there is a possible obligation that may require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Legal costs incurred in connection with such liabilities are expensed as incurred. Capital commitments are disclosed in the condensed consolidated financial statements.
| k) | Revenue Recognition |
The Company recognizes revenue in accordance with Accounting Standards Codification, or ASC606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized:
| ● | Identification of a contract with a customer or placement of a purchase order by the customer. |
| ● | Identification of the performance obligations in the contract or the purchase order as the case may be. |
| ● | Determination of the transaction price which is reflected in the purchase order placed by the customer. |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when or as the performance obligations are satisfied as per the terms of the purchase order received from the customer. |
The Company accounts for revenues when both parties to the contract have approved the contract, the rights and obligations of the parties are identified, payment terms are identified, and collectability of consideration is probable. Product type and payment terms vary by client.
| i. | System Sales: |
The Company recognizes revenue when the “transfer of control” occurs, which typically takes place upon the delivery of the system to the customer. In cases where a deferred payment arrangement exists, revenue is recognized at the present value of the consideration receivable, adjusted by the present value of any extended warranty obligations.
Key Terms of Customer Contracts
The Company enters into binding contracts with customers through either an agreement or a sales order, with all terms and conditions mutually agreed upon by both parties. The key terms and conditions include:
| 1. | Finalization of Product and Price: Agreement on the specific model of the “SSI Mantra” system and its selling price. |
| 2. | Payment Terms: Determination of payment terms, which may involve either a deferred payment arrangement or a one-time payment upon delivery and installation of the system at the customer’s premises. |
| 3. | Deferred Payment Model: For deferred payments, customers typically pay an advance amount before the dispatch of the system. The remaining balance is payable in yearly installments over a period of |
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| 4. | Warranty Services: Instead of negotiating the sales price, the Company provides a warranty service that includes a 1-year assurance warranty and an extended warranty for an additional |
| 5. | Delivery, Installation, and Training: The Company is responsible for delivering and installing the system at the customer’s premises. Post-installation, the Company provides free training to surgeons and surgical staff to enable them to operate the system effectively. |
| 6. | Transfer of Risk and Rewards: The risks and rewards associated with the system are transferred to the customer upon delivery to their premises. |
| ii. | Instrument and accessories Sales: |
We also sell instruments for use by surgeons in conjunction with the use of our surgical robotic systems. These instruments are consumable items for our hospital customers, and we recognize the revenues from the sale of instruments as and when the instruments are delivered to the customer.
| iii. | Warranty and Annual Maintenance Contract Sales: |
Under ASC 606, the portion of the equipment sales value attributable to annual maintenance contracts is recorded separately as Warranty sales, which are recognized at their present value. Once the warranty periods expire, the maintenance contracts commence, and the revenue generated from these maintenance contracts is recognized as a distinct revenue stream.
| l) | Property Plant & Equipment |
Property and equipment are stated at cost, which is generally comprised of the purchase price for such property or equipment, non-refundable duties and taxes, but excludes any discounts and/or rebates, less accumulated depreciation and impairment.
The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.
Property Plant & Equipment depreciated using the straight-line
method at rates determined as per estimated useful lives of the assets.
| Years | ||||
| Computer & peripherals | ||||
| Furniture | ||||
| Leasehold improvement | ||||
| Office equipment | ||||
| Plant and machinery | ||||
| R & D equipment | ||||
| Server & networking | ||||
| Vehicles | ||||
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| m) | Long-lived Assets |
In accordance with ASC 360, “Property Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to : significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset and current expectation that the asset will more than likely not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the discounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain circumstances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
| n) | 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.
Stock Options: These provide employees with the right, but not the obligation, to purchase shares of the Company’s stock at a specified price, within a defined period, as per the terms of the stock option agreement. Stock-based compensation expense associated with AVRA 2016 Stock 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. The Company uses last three month’s average share price of common stock on OTC exchange as grant date fair value for RSUs.
The Company recognizes stock-based compensation expense in the condensed consolidated statement of operations and comprehensive loss for both employees and non-employee directors based on the grant-date fair value of the awards. These costs are recognized on a straight-line basis over the requisite service period, or until the date at which the recipient becomes eligible for retirement, if shorter. Forfeitures of equity awards are accounted for as they occur.
The Company accounts for equity instruments issued in exchange for goods or services from non-employees in accordance with ASC Topic 718 Stock Compensation. The costs associated with these equity instruments are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.
| o) | Income Taxes |
The Company accounts for income taxes using the asset and liability method of accounting for income taxes. The Company calculates and provides income taxes in each of the tax jurisdictions in which it operates. The deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the condensed consolidated financial statement carrying values of existing assets and liabilities and their respective tax bases and all operating losses carried forward, if any. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which the applicable temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or tax status is recognized in the statements of income in the period in which the change is identified. The Company releases (reclassifies) the tax effects from AOCI to the condensed consolidated statement of operations and comprehensive loss for amortization of deferred actuarial gain/(loss) on retirement benefits. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company establishes provisions for uncertain tax provisions and related interest and penalties when the Company believes those tax positions are not more likely than not of being sustained, if challenged.
27
| p) | Basic and Diluted Loss per Share |
| For the Nine Months ended | ||||||||
| September 30, | ||||||||
| 2023 (As Restated) | 2022 (As Restated) | |||||||
| Net Loss | ( | ) | ( | ) | ||||
| Basic weighted average common shares outstanding (1) | ||||||||
| Dilutive effect of stock-based awards | ||||||||
| Diluted weighted average common shares outstanding | ||||||||
Earnings per share attributable to SS INNOVATIONS INTERNATIONAL INC. stockholders :
| Basic and Diluted | ( | ) | ( | ) |
| For the Three Months ended | ||||||||
| September 30, | ||||||||
| 2023 (As Restated) | 2022 (As Restated) | |||||||
| Net Loss | ( | ) | ( | ) | ||||
| Basic weighted average common shares outstanding (1) | ||||||||
| Dilutive effect of stock-based awards | ||||||||
| Diluted weighted average common shares outstanding | ||||||||
Earnings per share attributable to SS INNOVATIONS INTERNATIONAL INC. stockholders :
| Basic and Diluted | ( | ) | ( | ) |
| 1. |
Basic net loss per share is calculated by dividing the net loss attributable to SSII stockholders by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period. For periods in which we report net losses, diluted net loss per share is the same as basic net loss per share because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
| q) | Research and Development Costs |
In accordance with ASC Topic 730 “Research and Development”, with the exception of intellectual property that is purchased from another enterprise and have alternative future use, research and development expenses are charged to operations as incurred.
| r) | Fair Value of Financial Instruments |
Our financial instruments consist principally of accounts receivable, amounts due to related parties and promissory notes payable. The carrying amounts of cash and cash equivalents and promissory notes approximate fair value because of the short-term nature of these items.
| s) | Leases |
The Company determines if an arrangement is a lease at inception of the contract. The Company’s assessment is based on whether: (1) the contract involves the use of a distinct identified asset, (2) the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term of the contract, and (3) the Company has the right to direct the use of the asset. A lease is classified as a finance lease if any one of the following criteria are met: (1) the lease transfers ownership of the asset by the end of the lease term, (2) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (3) the lease term is for a major part of the remaining useful life of the asset or (4) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset.
28
Operating leases are presented within “Right-of-use assets, operating lease” “Current portion of operating lease liabilities” and “Operating lease liabilities, less current portion” in the Company’s condensed consolidated balance sheet.
Right-of-use assets (ROU) assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease arrangement. Lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease ROU assets are recognized at commencement date in an amount equal to lease liability, adjusted for any lease prepayments, initial direct costs, and lease incentives. For leases in which the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date. The Company determines the incremental borrowing rate by adjusting the benchmark reference rates with appropriate financing spreads applicable to the respective geographies where the leases are entered and lease specific adjustments for the effects of collateral, if applicable. Lease terms includes the effects of options to extend or terminate the lease when it is reasonably certain at commencement of the lease that the Company will exercise that option. Lease expense for operating lease arrangements is recognized on a straight-line basis over the lease term reflecting single operating lease cost. The Company evaluates lease agreements to determine lease and non-lease components, which are accounted for separately.
Lease payments that depend on factors other than an index or rate are considered variable lease payments and are excluded from the operating lease assets and liabilities and are recognized as expense in the period in which the obligation is incurred. Lease payments include payments for common area maintenance, utilities such as electricity, heating and water, among others, and property taxes, and other similar payments paid to the landlord, which are treated as non-lease component.
The Company accounts for lease-related concessions in accordance with guidance in Topic 842, Leases, to determine, on a lease-by-lease basis, whether the concession provided by lessor should be accounted for as a lease modification.
The Company accounts for a modification as a separate contract when it grants an additional right of use not included in the original lease and the increase is commensurate with the standalone price for the additional right of use, adjusted for the circumstances of the particular contract. Modifications which are not accounted for as a separate contract are reassessed as of the effective date of the modification based on its modified terms and conditions and the facts and circumstances as of that date. Upon modification, the Company remeasures the lease liability to reflect changes to the remaining lease payments and discount rates and recognizes the amount of the remeasurement of the lease liability as an adjustment to the ROU assets. However, if the carrying amount of the ROU assets is reduced to zero as a result of modification, any remaining amount of the remeasurement is recognized as an expense in condensed consolidated statement of operations and comprehensive loss.
The Company reviews ROU assets for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable.
| t) | Segment reporting |
The Company operates in one segment
only. The chief operating decision maker regularly reviews the operating results of the Company on a condensed consolidated basis as
part of making decisions for allocating resources and evaluating performance. As of both September 30, 2023 and December 31, 2022
29
| u) | Recent Accounting Pronouncements |
In March 2023, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-01, Leases (“Accounting Standards Codification (“ASC”) Topic 842”): Common Control Arrangements. This ASU provides guidance in ASC Topic 842 that leasehold improvements associated with common control leases should be (i) amortized by the lessee over the useful life of the leasehold improvements to the common control group, regardless of the lease term, as long as the lessee controls the use of the underlying asset through a lease, and (ii) accounted for as a transfer between entities under common control through an adjustment to equity if and when the lessee no longer controls the use of the underlying asset. The ASU is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted for both interim and annual financial statements that have not yet been issued. When adopted in an interim period, it must be adopted from the beginning of the year that includes that interim period. The Company does not have any lease arrangements with entities under common control and the adoption of this ASU is not expected to have a material impact on its condensed consolidated financial statements.
NOTE 3 – PROPERTY, PLANT AND EQUIPMENT, NET
| September 30, | ||||||||
| 2023 | December 31, | |||||||
| (As Restated) | 2022 | |||||||
| Gross Amount | ||||||||
| Computer & peripheral | ||||||||
| Furniture | ||||||||
| Leasehold improvement | - | |||||||
| Office equipment | ||||||||
| Plant and machinery | ||||||||
| R & D equipment | ||||||||
| Server & networking | ||||||||
| Vehicles | ||||||||
| Leasehold improvement CWIP | ||||||||
| Machine CWIP | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Total | ||||||||
Depreciation expenses for the three-month
ended September 30, 2023 and 2022 amounted to $
Depreciation expenses for the nine months
ended September 30, 2023 and 2022 amounted to $
NOTE 4 – REVERSE RECAPITALIZATION
The Transaction
On April 14, 2023 (“Closing”), the Company consummated the acquisition of CardioVentures, Inc., a Delaware corporation (“CardioVentures”), pursuant to a Merger Agreement dated November 7, 2022 (the “Merger Agreement”). This agreement was executed among AVRA-SSI Merger Corporation, a wholly owned subsidiary of the Company (“Merger Sub”), CardioVentures, and Dr. Sudhir Srivastava, who, through his holding company, owned a controlling interest in CardioVentures.
At Closing, Merger Sub merged with and into CardioVentures (the “Merger”), with CardioVentures being determined as the accounting acquirer for financial reporting purposes in accordance with ASC 805. The transaction was accounted for as a reverse recapitalization, with AVRA being treated as the accounting acquiree. This determination was based on several factors:
| ● | CardioVentures’ stockholders obtained the largest portion of voting rights in the post-combination company. |
30
| ● | The Board and management of the combined entity are primarily composed of individuals associated with CardioVentures. |
| ● | CardioVentures had a larger entity size based on historical operations, assets, revenues, and workforce. |
| ● | The ongoing operations, post-combination, are those of CardioVentures. |
Merger Consideration and Share Issuance:
As part of the Merger, holders of CardioVentures’ outstanding common stock, including certain parties who provided interim
convertible financing, were issued
Pursuant to the Merger Agreement, the holders
of CardioVentures’ common stock also received
| ● | Vote together with SSII common stock as a single class, except as required by law. |
| ● | Entitle holders to exercise |
| ● | Are not convertible into common stock, have no dividend rights, and carry a nominal liquidation preference. |
| ● | Include protective provisions requiring the majority vote of Series A Preferred Shares to amend their rights. |
| ● | Are subject to automatic redemption for nominal consideration if holders own less than |
Restructuring and Capital Contributions: Concurrent with the Merger:
| ● | The Company changed its name to “SS Innovations International, Inc.,” effected a |
| ● | Dr. Sudhir Srivastava, through his holding company, assigned patents, trademarks, and other intellectual property related to its surgical robotic systems to a wholly owned subsidiary of SSII. |
| ● | Dr. Frederic Moll and Andrew Economos provided interim financing during 2022, contributing $ |
Reverse Recapitalization Impact: As
part of the reverse recapitalization, CardioVentures acquired the net assets of AVRA at fair value at Closing. The fair value of AVRA’s
net assets was assessed to be zero by management, resulting in a recognized loss of $
For comparative periods, the assets and liabilities of CardioVentures (the accounting acquirer) were recognized at their pre-combination carrying amounts, with retained earnings and equity balances carried forward. The equity structure reflects that of AVRA (the legal parent) using the exchange ratio established in the Merger Agreement.
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NOTE 5 – ACCOUNTS RECEIVABLE, NET
| September 30, 2023 | December 31, | |||||||
| (As Restated) | 2022 | |||||||
| Accounts receivable, net | ||||||||
| Accounts receivable, net (non-current) | ||||||||
| Total accounts receivable, net | ||||||||
The Company performed an analysis of the trade
receivables related to SSI India and determined, based on the deferred payment terms of the contracts, that a $
| Percentage of Revenue | Percentage of Revenue | Percentage of Accounts | ||||||||||||||||||||||
| For nine months ended | For three months ended | Receivable as at | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | September 30, 2023 | December 31, 2022 | |||||||||||||||||||
| Customer A | | % | | % | | % | | % | | % | | % | ||||||||||||
| Customer B | % | % | ||||||||||||||||||||||
| Customer C | % | % | % | |||||||||||||||||||||
| Customer D | % | % | % | |||||||||||||||||||||
| Customer E | % | |||||||||||||||||||||||
| Customer F | % | % | ||||||||||||||||||||||
| Customer G | % | % | ||||||||||||||||||||||
| Customer H | % | % | % | |||||||||||||||||||||
| Customer I | % | % | % | |||||||||||||||||||||
| Customer J | % | % | % | |||||||||||||||||||||
NOTE 6 – CASH, CASH EQUIVALENTS AND RESTRICTED CASH
| September 30, | ||||||||||
| 2023 | December 31, | |||||||||
| (As Restated) | 2022 | |||||||||
| Cash and cash equivalents | ||||||||||
| Fixed deposit | Lien against overdraft facility | |||||||||
| Lien against bank guarantee | ||||||||||
| Lien against credit card facility | ||||||||||
| Restricted cash (current) | ||||||||||
| Fixed deposit | Lien against bank guarantee | |||||||||
| Lien against credit card facility | ||||||||||
| Restricted cash (non- current) | ||||||||||
| Total cash, cash equivalents and restricted cash | ||||||||||
32
We have classified fixed deposits (FDs), which are subject to withdrawal restrictions, as Restricted cash. Additionally, time deposits with a maturity of over one year have been classified as non-current.
The Company has secured a bank overdraft facility from HDFC bank, collateralized by fixed deposits held with HDFC bank. This facility includes a withdrawal restriction tied to the fixed deposit. (Refer Note 10 – Bank overdraft.)
NOTE 7 – PREPAID, CURRENT AND NON- CURRENT ASSETS
| September 30, 2023 | December 31, | |||||||
| (As Restated) | 2022 | |||||||
| Receivables from statutory authorities | ||||||||
| Security deposit | ||||||||
| Other prepaid- current assets | ||||||||
| Prepaid and other current assets | ||||||||
| Security deposits | ||||||||
| Other prepaid- non current asset | ||||||||
| Prepaid and other non current assets | ||||||||
| Total prepaid, current and non current assets | ||||||||
Prepaid expenses – stock compensation represents unamortized portion of common stock granted to advisors for services to be rendered by them in future. (Refer Note 18 – Stock Compensation Expenses)
NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| September 30, 2023 | December 31, | |||||||
| (As Restated) | 2022 | |||||||
| Accounts Payable | ||||||||
| Payable to statutory authorities | ||||||||
| Salary payable | ||||||||
| Other accrued liabilities | ||||||||
| Other accrued liabilities | ||||||||
| Provision for gratuity long term | ||||||||
| Other accrued liabilities- non current | ||||||||
| Total accounts payable, accrued current and non-current expenses | ||||||||
Accounts payable $
NOTE 9 – NOTES PAYABLE
On April 15, 2023, the Company executed a
Convertible Promissory Note (the “Line of Credit Note”) with Sushruta Pvt Ltd. (“Sushruta”), the
Bahamian holding company owned by Dr. Sudhir Srivastava, our Chairman, Chief Executive Officer and principal shareholder. Pursuant to
the line of credit note, SPL, in its discretion may make multiple advances to the Company through December 31, 2023 (the “Maturity
Date”), in an aggregate amount of up to $
33
The Company entered into an Agreement with
Andrew Economos and Dr. Frederic Moll for issuing a convertible redeemable note in the principal amount of $
NOTE 10 – BANK OVERDRAFT FACILITY
| September 30, 2023 | December 31, | |||||||
| (As Restated) | 2022 | |||||||
| HDFC Bank Ltd overdraft (with personal guarantee of Dr. Sudhir Srivastava) (OD1) | ||||||||
| HDFC Bank Ltd overdraft (with personal guarantee of Dr. Sudhir Srivastava) (OD2) | ||||||||
| Bank overdraft | ||||||||
The HDFC bank (OD1) of US$
HDFC bank has sanctioned overdraft facilities subject to operational terms and conditions, including payment on demand, comprehensive insurance coverage against all risks of primary security, periodic inspections of the plant by the bank, and submission of monthly stock and financial records to the bank within 30 days after each month-end. Security for this facility includes current assets, plant and machinery, furniture and fixtures, and a personal guarantee from Mr. Sudhir Prem Shrivastava.
The cash credit facility is sanctioned at
an interest rate of
NOTE 11 – BORROWINGS
As part of our ongoing efforts to manage working
capital and improve liquidity, we have arranged for Axis Bank to issue a Letter of Credit (LC) on behalf of one of our debtors, Indraprastha
Cancer Society & Research Centre (RGCI), for $
In 2021, the Company received an offer for
a term loan with a tenure of
The primary securities provided against the
loan include current assets, movable fixed assets, fixed deposits and plant and machinery. Additionally, the loan is backed by the personal
guarantee of Dr. Sudhir Prem Shrivastava.
| September 30, | ||||||||
| 2023 | December 31, | |||||||
| (As Restated) | 2022 | |||||||
| Current maturities of long-term debt | ||||||||
| Long-term borrowings, less current portion | ||||||||
| Total Borrowings | ||||||||
34
NOTE 12 – DEFERRED REVENUE
Contract liabilities (deferred revenue) consist of advance billings and billing in excess of revenues recognized. Deferred revenue also includes the amount for which services have been rendered but other conditions of revenue recognition are not met, for example, where the Company does not have an enforceable contract.
The revenues attributable to the warranty is recognized over the period to which it relates. During the quarter and nine-month period ended September 30, 2023, the company had sold five and nine surgical robotic systems, respectively. The revenues attributable to warranty for the agreed warranty period in respect of each of the sales contracts are deferred for recognition over the period to which it relates.
In case of systems sold on a deferred payment
basis, the present value of the invoiced system sales realizable over the deferred payment period is recognized as systems sales. The
difference between the invoiced amount and its present value is adjusted (reduced) in the accounts receivable balance. This difference
is recorded as interest income under other income, with a corresponding impact on accounts receivable over the collection period of contract.
| September 30, 2023 | December 31, | |||||||
| (As Restated) | 2022 | |||||||
| Deferred revenue— beginning of period | ||||||||
| Additions | ||||||||
| Net changes in liability for pre-existing contracts | ||||||||
| Revenue recognized | ||||||||
| Deferred revenue— end of period | ||||||||
| September 30, 2023 | December 31, | |||||||
| (As Restated) | 2022 | |||||||
| Deferred revenue expected to be recognized in: | ||||||||
| One year or less | ||||||||
| More than One year | ||||||||
For the nine months ended September 30, 2023 and 2022.
| September 30, | September 30, | |||||||
| 2023 (As Restated) | 2022 (As Restated) | |||||||
| System Sales | ||||||||
| Instruments Sale | ||||||||
| Total revenue | ||||||||
| September 30, | September 30, | |||||||
| 2023 (As Restated) | 2022 (As Restated) | |||||||
| India | ||||||||
| UAE | ||||||||
35
For the three months ended September 30, 2023 and 2022.
| September 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| System Sales | ||||||||
| Instruments Sale | ||||||||
| Total revenue | ||||||||
| September 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| India | ||||||||
| UAE | ||||||||
NOTE 13 – STOCKHOLDERS’ EQUITY
Common stock
The Company is authorized to issue up to
Preference shares
The Company had issued and outstanding
36
Common stock issued at the time of Merger
At
Closing of the Merger on April 14, 2023,
Common Stock issued post-Merger
During
the nine months ended September 30, 2023, $
During
the nine months ended September 30, 2023, Farhan Taghizadeh exercised options and received
As
of September 30, 2023, there were
NOTE 14 – RELATED PARTY TRANSACTIONS
| September 30, 2023 | December 31, | |||||||
| (As Restated) | 2022 | |||||||
| Receivable from related party | ||||||||
| Total | ||||||||
| September 30, 2023 | December 31, | |||||||
| (As Restated) | 2022 | |||||||
| Payable to related party | ( | ) | ||||||
| Total | ( | ) | ||||||
The receivable/payable balances from/to related parties is across the Company and its related entities in the normal course of business. All such receivable/payable balances are non-interest bearing and are receivable/repayable on demand.
Receivable
from related party amounting to $
37
On
April 15, 2023, the Company executed a Convertible Promissory Note (the “Line of Credit Note”) with Sushruta Pvt Ltd.
(“SPL”), the Bahamian holding company owned by Dr. Sudhir Srivastava, our Chairman, Chief Executive Officer and principal
shareholder. Pursuant to the line of credit note, SPL, in its discretion may make multiple advances to the Company through
NOTE 15 – LEASES
The Company conducts its operations using facilities leased under operating lease agreements that expire at various dates.
| September 30, | ||||||||
| 2023 | December 31, | |||||||
| Operating leases | (As Restated) | 2022 | ||||||
| Assets | ||||||||
| Right of use operating lease assets | ||||||||
| Liabilities | ||||||||
| Current portion of operating lease liablities | ||||||||
| Non Current portion of operating lease liablities | ||||||||
| Total lease liablities | ||||||||
| September 30, 2023 | December 31, | |||||||
| Operating leases | (As Restated) | 2022 | ||||||
Weighted average remaining lease term (years) | ||||||||
| Ilabs Info Technology 3rd Floor | | | ||||||
| Village Chhatarpur-1257-1258-Farm | ||||||||
| Ilabs Info Technology Ground Floor | ||||||||
| Village Chhatarpur-1849-1852-Farm | ||||||||
| Weighted average discount rate | ||||||||
| Ilabs Info Technology 3rd Floor | % | % | ||||||
| Village Chhatarpur-1257-1258-Farm | % | |||||||
| Ilabs Info Technology Ground Floor | % | |||||||
| Village Chhatarpur-1849-1852-Farm | % | |||||||
| Period ended September 30 | ||||||||
| 2023 (As Restated) | 2022 (As Restated) | |||||||
| Cash payments for amounts included in the measurement of lease liabilities : | ||||||||
| Operating cash outflows for operating leases | ||||||||
38
| Operating Leases | ||||
| Fiscal Year | Amount (in $) | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 and thereafter | ||||
| Total Lease Payment | ||||
| Less: Imputed Interest | ||||
| Present value of lease liabilities | ||||
NOTE 16 – INCOME TAX
The Company has not recorded income tax benefits for the net operating losses incurred during the period ended September 30, 2023 and 2022, nor for other deferred tax assets generated, due to its uncertainty of realizing a benefit from those items.
| Period ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| (As Restated) | (As Restated) | |||||||
| Domestic | ||||||||
| Foreign | ( | ) | ( | ) | ||||
| Total | ( | ) | ( | ) | ||||
The Company does not have federal and state net operating losses for the period ended September 30, 2023 and September 30, 2022.
The Company has not recorded any amounts for unrecognized tax benefits as of September 30, 2023 and September 30, 2022. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. The Company had no accrual of interest and penalties on the Company’s balance sheets and has not recognized interest and penalties in the condensed consolidated statement of operations and comprehensive loss for the period ended September 30, 2023 and September 30, 2022.
The Company is subject to taxation in the United States and India. The Company’s tax returns filed has no pending examinations in India and US.
| Period ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| (As Restated) | (As Restated) | |||||||
| Accounting profit / (loss) before income tax | ( | ) | ( | ) | ||||
| Income tax expense (benefit) at federal statutory rate at | ( | ) | ( | ) | ||||
| Foreign tax rate differential | ( | ) | ( | ) | ||||
| Non-deductible expenses | ||||||||
| Excess tax expense/(benefit) on depreciation | ||||||||
| Excess tax expense/(benefit) on Security deposit | ||||||||
| Impact of unrecognized deferred tax asset on the loss of the year | ||||||||
| Income tax expense/(benefit) | ||||||||
39
The Company recorded income tax expense for the period ended September 30, 2023 and September 30, 2022, due to losses in current period and prior period and it does not expect to recover the tax benefit on the losses incurred during the period ended September 30, 2023 and September 30, 2022.
| September 30, 2023 |
December 31, | |||||||
| (As Restated) | 2022 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carry forwards | ||||||||
| Net operating loss | ||||||||
| Lease payments | ||||||||
| Others | ||||||||
| Valuation allowance | ( |
) | ( |
) | ||||
| Deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Depreciation and amortization | ||||||||
| Others | ||||||||
| Deferred tax liabilities | ||||||||
| Net deferred tax assets/Liability | ||||||||
Deferred
tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement
carrying values of assets and liabilities and their respective tax bases and operating loss carry forwards. The Company performed an
analysis of the realizability of deferred tax assets as of September 30, 2023 and December 31, 2022 and recorded a valuation
allowance of $
NOTE 17 – FAIR VALUE MEASUREMENT – FINANCIAL INSTRUMENTS
Assets and liabilities recorded at fair value are measured using the fair value hierarchy, which prioritizes the inputs used in measuring fair value. The levels of the fair value hierarchy are:
| ● | Level 1: observable inputs such as quoted prices in active markets. |
| ● | Level 2: inputs other than quoted prices in active markets that are either directly or indirectly observable; and |
| ● | Level 3: unobservable inputs for which little or no market data exists, therefore requiring the Company to develop its own assumptions. |
40
The company’s financial assets which are set out below in the table is measured at fair value by considering the level III inputs. The company does not have financial assets which are measured using Level I or Level II inputs.
| Carrying Value | Fair value | |||||||||||||||
| September 30, | December 31, | September 30, | December 31, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Financial Assets | ||||||||||||||||
| Account receivables net (1) | ||||||||||||||||
| Other non-current financial assets (2) | ||||||||||||||||
| Total | ||||||||||||||||
| Financial Liabilities | ||||||||||||||||
| Borrowings (3) | ||||||||||||||||
| Lease liabilities (4) | ||||||||||||||||
| Other non-current financial liabilities (5) | ||||||||||||||||
| Total | ||||||||||||||||
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
The Company has assessed that the financial instruments that are not carried at fair value consist primarily of cash and cash equivalents, restricted cash, receivable from related party, prepaid and other current assets, note payable, Bank overdraft facility, account payable, and payable to related party for which fair values approximate their carrying amounts due to the short-term maturities of these instruments.
NOTE 18 – STOCK COMPENSATION EXPENSES
Stock Options issued to Doctors/Proctors as Advisors: Company issue common stock (“Advisory Share”) to retain the Advisor to perform the Services and in exchange for the compensation, which is issued in a phased manner as determined by the company. The “Services” includes (a) provide proctoring and medical advisory services, (b) advise the Company related to development of surgical robotics procedures and improvements in design and technology (c) participate in case observation and live surgery performance (d) disseminate information about Company’s products as speaker in various scientific meets/surgical robotic conferences globally.
Advisory shares:
| Grant dates | Fair
value on grant date |
Total
shares granted |
Option
vested |
Unvested
Option at period end |
||||||||||||
| 1-Jun-23 | ||||||||||||||||
| 1-May-23 | ||||||||||||||||
| 28-Jun-23 | ||||||||||||||||
| Total | ||||||||||||||||
41
During
the period ended September 30, 2023, the Company has recorded share compensation expense of $
As share-based compensation expense recognized in the condensed consolidated statement of operations and comprehensive loss during the period ended September 30, 2023 and 2022, is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures, if any.
As
of September 30, 2023, there was $
NOTE 19 – COMMITMENTS
The
Company, through its SSI-India subsidiary, occupies office, manufacturing, and assembly space in Gurugram, Haryana (India) under a lease
agreement entered into in March 2021, with monthly payments of $
NOTE 20 – SUBSEQUENT EVENTS
| 1. | On February 13, 2024, the Company granted |
| 2. | In the month of February 2024, through February 14, 2024, the Company raised $ |
| 3. | In April 2024, the Company raised $ |
| 4. | In July 2024, the Company raised $ |
| 5. | In August 2024, the Company issued |
| 6. | In October 2024, the Company borrowed $ |
| 7. | In December 2024, the Company borrowed $ |
42
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Amendment contains certain statements that constitute forward-looking statements. Any and all statements contained in this Amendment that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Those statements appear in this Report, and include statements regarding the intent, belief or current expectations of our Company and management that are subject to known and unknown risks, uncertainties and assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Item 1. Business” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” in our 2023 Form 10-K, as amended.
Forward-looking statements in this Amendment may include, without limitation, statements regarding:
| (i) | the plans and objectives of management for future operations, including plans or objectives relating to the marketing of our surgical robotic systems both in and out of India; |
| (ii) | the timing or likelihood of regulatory filing, approvals and required licenses for marketing our surgical robotic systems in the U.S., the European Union (the “EU”) and in other countries outside of India; |
| (iii) | our ability to adequately protect our intellectual property rights and enforce such rights to avoid violation of the intellectual property rights of others; |
| (iv) | the timing, costs and other aspects of our surgical robotic systems; |
| (v) | our estimates regarding the market opportunity, clinical utility, potential advantages and market acceptance of our surgical robotic systems; |
| (vi) | the impact of government laws and regulations; |
| (vii) | our ability to recruit and retain qualified research and development personnel; |
| (viii) | difficulties in maintaining commercial scale manufacturing capacity and capability and our ability to generate growth; |
| (ix) | uncertainty in industry demand; |
| (x) | general economic conditions and market conditions in our industry;
|
| (xi) | a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items; |
(xii)
|
our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC; and |
| (xiii) | Changes resulting from the restatement of our condensed consolidated financial statements included in this Report. |
These statements are not guarantees of future performance and are subject to numerous risks, uncertainties, and assumptions that are difficult to predict.
43
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we do not assume any obligation to update any forward-looking statement. We disclaim any intention or obligation to update or revise any forward-looking statement contained herein, whether as a result of new information, future events or otherwise.
Introduction
The Company was originally incorporated in the state of Florida on February 4, 2015, under the name “Avra Surgical Microsystems, Inc.,” and changed its name to “Avra Medical Robotics, Inc.” (AVRA) on November 5, 2015.
From inception through April 13, 2023, we were engaged in developing a fully autonomous medical robotic system using proprietary software which integrated Artificial Intelligence and Deep Learning, or Machine Learning. Our research and development efforts were based in Orlando, Florida, where we established a research partnership with the University of Central Florida.
In July and August 2022, AVRA and the management of Cardio Ventures Inc began discussions to explore potential merger synergies, leading to a formal agreement in November 2022 by and among the Company, a wholly owned subsidiary of the Company (“Merger Sub”), CardioVentures and Dr. Sudhir Srivastava, who, through his holding company, owned a controlling interest in CardioVentures (“Merger Agreement”). Cardio Ventures was primarily seeking a platform to raise funds in the U.S. to support operations of its subsidiary, SSI India. AVRA’s ability to attract funds from its high-net-worth investors became a focal point in these discussions, presenting a path for AVRA shareholders to also benefit from the merger. Consequently, as part of the merger strategy, AVRA raised funds through convertible notes (at the rate of 7% interest per annum), which were subsequently provided to Cardio Ventures via convertible notes issued by Cardio Ventures. Investors like Andrew Economos and Dr. Fred Moll, both existing AVRA shareholders, contributed to these notes, foreseeing significant commercial benefits and the potential for AVRA’s turnaround post-merger, despite AVRA’s status as an inactive company at the time. On April 14, 2023, we consummated the acquisition by merger of CardioVentures, Inc., pursuant to the Merger Agreement.
The Company is currently engaged in the business of developing, manufacturing, and selling a surgical robotic system under our 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. Having commenced commercial sales of our surgical robotic system in the second half of 2022 and its allied instruments and accessories. Accordingly, the operating results detailed below largely reflect the impact of the consummation of the Reverse Merger transaction in April 2023, when compared with operating results for the corresponding period in 2022.
Our financial performance is largely driven by increasing awareness of the benefits of robotically assisted surgery, improved 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.
The condensed consolidated financial statements appearing elsewhere in this report have been prepared assuming the Company will continue as a going concern. In the second half of 2022, the Company commercially launched its “SSI Mantra” robotic surgical system in India. As of September 30, 2023, we have sold 12 systems, which have performed more than 400 procedures of various types involving varying degrees of complexities.
44
Results of Operations
Introduction
The following discussion should be read in conjunction with our condensed consolidated financial statements and Notes thereto. This section of the Report generally discusses 2023 and 2022 items and quarter-to- quarter comparisons between 2023 and 2022.
The Company has recently commenced its commercial operations by way of the sale of its product and has 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 doubt about the Company’s ability to continue as a going concern.
The financial statements appearing elsewhere in this report have been prepared assuming that the Company will continue as a going concern.
The following table provides selected balance sheet data for our Company as of September 30, 2023 (audited) and December 31, 2022:
Balance Sheet Data
| As of | As of | |||||||
| September 30, | December 31, | |||||||
| 2023 | 2022* | |||||||
| (As Restated) | ||||||||
| Cash | 6,596,223 | 217,177 | ||||||
| Restricted cash** | 5,046,501 | 57,448 | ||||||
| Total Assets | 28,155,157 | 6,980,533 | ||||||
| Total Liabilities | 11,786,905 | 9,659,070 | ||||||
| Total Stockholders’ Equity / (deficit) | 16,368,252 | (2,678,537 | ) | |||||
| * | Amounts for the year ended December 31, 2022, represent consolidated financials for Cardio Ventures Inc. (ultimate holding company before the merger transaction). |
| ** | Represents Fixed Deposits held by bank as security for bank facilities and certain performance guarantees. |
45
To date, the Company has mainly relied on debt and equity raised in private offerings to finance its operations. Subsequent to September 2023, 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 Three months ended | ||||||||
| September 30, | ||||||||
| 2023 (As Restated) | 2022 (As Restated) | |||||||
| Total Revenue | 2,187,006 | 529,351 | ||||||
| Cost of revenue | (1,888,158 | ) | (288,773 | ) | ||||
| Gross profit | 298,848 | 240,578 | ||||||
| Research & development expense | 291,909 | 156,489 | ||||||
| Stock compensation expense | 24,450 | - | ||||||
| Depreciation and amortization expense | 38,644 | 24,712 | ||||||
| Selling, general and administrative expense | 1,795,945 | 484,780 | ||||||
| Loss from operations | (1,852,100 | ) | (425,403 | ) | ||||
| Other income (expenses) | (46,438 | ) | (60,983 | ) | ||||
| Net loss | (1,898,538 | ) | (486,386 | ) | ||||
Three months ended September 30, 2023, as compared to three months ended September 30, 2022
Total Revenues. We had revenues of $2,187,006 ($2,133,295 from system sales and $ 53,711 from instrument sales) for the three months ended September 30, 2023, compared to $ 529,351 ($500,636 from system sales and $ 28,715 from instrument sales) for the three months ended September 30, 2022. The increase in net total is primarily due to sale of increased number of surgical robotic systems and instruments in the period ended September 30, 2023 as compared to the period ended September 30, 2022.
Research and development expense. Research and development expenses were $291,909 during the three months ended September 30, 2023 and $156,489 for the three months ended September 30, 2022. Research and development expense primarily consists of salaries paid to engineers, amounting to $155,104 and $107,721 for the period ended September 30, 2023 and 2022, respectively. 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 expense. We had compensation expenses of $ 24,450 and $nil during the three months ended September 30, 2023 and September 30, 2022, respectively. The substantial increase in the stock compensation expense in 2023 is primarily the result of the award of stock grants to advisors.
Depreciation and amortization expense. We had depreciation and amortization expense of $38,644 for the period ended September 30, 2023, as compared to $24,712 for the period ended September 30, 2022. The depreciation and amortization expenses primarily consist of depreciation on fixed assets only.
Selling, general and administrative expense. We incurred $1,795,945 in general and administrative expenses during the three months ended September 30, 2023 and $484,780 September 30, 2022, respectively.
Our SG&A expense comprise of expense 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 expense also include acquisition-related costs, 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 expense 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 SG&A expense resulted from the increased scale of commercial operations during the period September 30, 2023 as compared to the period ended September 30, 2022.
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Other income/expenses. We incurred other expenses of $46,438 for the three months ended September 30, 2023 as compared to $60,983 of other expenses during the three months ended September 30, 2022. The increase in interest expense from September 30, 2022 to September 30, 2023 resulted from an increase in bank borrowings for working capital from HDFC bank in India.
Net Loss. We incurred a net loss of $ 1,898,538 for the three months ended September 30, 2023, as compared to a net loss of $486,386 for the three months ended September 30, 2022. The increase in net loss from September 30, 2022 to September 30, 2023 is primarily the result of the increase in general and administrative expenses of $ 1,311,165 respectively.
| For the Nine months ended | ||||||||
| September 30, | ||||||||
| 2023 (As Restated) | 2022 (As Restated) | |||||||
| Total Revenue | 4,448,939 | 529,351 | ||||||
| Cost of revenue | (3,304,447 | ) | (288,773 | ) | ||||
| Gross profit | 1,144,492 | 240,578 | ||||||
| Research & development expense | 780,462 | 956,406 | ||||||
| Stock compensation expense | 32,600 | - | ||||||
| Depreciation and amortization expense | 105,701 | 71,745 | ||||||
| Selling, general and administrative expense | 8,339,593 | 1,293,997 | ||||||
| Loss from operations | (8,113,864 | ) | (2,081,570 | ) | ||||
| Other income (expenses) | (622,178 | ) | (104,104 | ) | ||||
| Net loss | (8,736,042 | ) | (2,185,674 | ) | ||||
Nine months ended September 30, 2023, as compared to Nine months ended September 30, 2022
Total Revenues. We had revenues of $4,448,939 ($ 3,913,492 from system sales and $ 535,447 from instrument sales) for the nine months ended September 30, 2023, as compared to $ 529,351 ($ 500,636 from system sales and $ 28,715 from instrument sales) for the nine months ended September 30, 2022. The increase in net total is primarily due to sale of increased number of surgical robotic systems and instruments in the period ended September 30, 2023 as compared to the period ended September 30, 2022.
Research and development expense. Research and development expenses were $780,462 during the nine months ended September 30, 2023 and September 30, 2022 were $956,406. Research and development expense primarily consists of salaries paid to engineers, amounting to $452,227 and $403,308 for the period ended September 30, 2023 and 2022, respectively. 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 expense. We had compensation expenses of $ 32,600 and $nil during the nine months ended September 30, 2023 and September 30, 2022, respectively. The substantial increase in the stock compensation expense in 2023 is primarily the result of the award of stock grants to advisors.
Depreciation and amortization expense. We had depreciation and amortization expense of $105,701 for the period ended September 30, 2023 as compared to $71,745 for the period ended September 30, 2022. The depreciation and amortization expenses primarily consist of depreciation on fixed assets only.
Selling, general and administrative expense. We incurred $8,339,593 and $1,293,997 in general and administrative expenses during the nine months ended September 30, 2023 and September 30, 2022, respectively.
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The increase in SG&A expense resulted from the increased scale of commercial operations during the period September 30, 2023 as compared to the period ended September 30, 2022.
Other income/expenses. We incurred $622,178 in other expenses for the nine months ended September 2023, as compared to $104,104 of other expenses during the nine months ended September 30, 2022. The increase in interest expense from September 30, 2022 to September 30, 2023 resulted from an increase in bank borrowings for working capital from HDFC bank in India.
Net Loss. We incurred a net loss of $8,736,042 for the nine months ended September 30, 2023, as compared to a net loss of $2,185,674 for the nine months ended September 30, 2022. The increase in net loss from September 30, 2022, to September 30, 2023 is primarily the result of the increase in general and administrative expenses of $ 7,045,596 respectively.
Liquidity and Capital Resources
The Company expects to require substantial funds for scaling up its operations, for incurring capital expenditure to have its own in-house machining and tooling capacity and to continue to finance its research and development work in the field of surgical robotics.
On April 15, 2023, the Company executed a Convertible Promissory Note (the “Line of Credit Note”) with Sushruta Pvt Ltd. (“Sushruta”), the Bahamian holding company owned by Dr. Sudhir Srivastava, our Chairman, Chief Executive Officer and principal shareholder. Pursuant to the line of credit note, SPL, in its discretion may make multiple advances to the Company through December 31, 2023 (the “Maturity Date”), in an aggregate amount of up to $20,000,000 for working capital purposes. The advances under the line of credit note do not bear interest and are due and payable on or before the maturity date. SPL may, at its option, convert the principal amount of any advance into shares of our common stock, at a conversion price of $0.74 per share. As of September 30, 2023, Sushruta made advances aggregating to $16,980,000 that were outstanding under the line of credit note and exercised its option to convert the full amount of advances made into shares of our common stock at a conversion price of $0.74 per share. Accordingly, 22,945,946 shares of our common stock were issued to Sushruta as of September 30, 2023.
The Company had a working capital surplus of $14,215,627 and an accumulated deficit of $12,369,100 as of September 30, 2023. The Company also had a net loss of $8,736,042 for the nine months ended September 30, 2023 and $1,898,538 for the three months ended September 30, 2023.
| For the Nine Months ended September 30, | ||||||||
| 2023 (As Restated) | 2022 (As Restated) | |||||||
| Net cash provided by operating activities: | ||||||||
| Net loss | (8,736,042 | ) | (2,185,674 | ) | ||||
| Non-cash adjustments | 5,245,448 | 195,934 | ||||||
| Change in operating assets and liabilities | (7,477,317 | ) | (1,166,131 | ) | ||||
| Net cash used in operating activities | (10,967,911 | ) | (3,155,871 | ) | ||||
| Net cash provided by investing activities | (326,078 | ) | 378,348 | |||||
| Net cash provided by financing activities | 22,645,723 | 2,823,966 | ||||||
| Net change in cash | 11,351,734 | 46,443 | ||||||
| Effect of exchange rate on cash | 16,365 | (58,847 | ) | |||||
| Cash at beginning of year¹ | 274,625 | 87,709 | ||||||
| Cash at end of year¹ | 11,642,724 | 75,305 | ||||||
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Cash Flows from Operating Activities
During the nine months ended September 30, 2023, net cash used in operating activities was $10,967,911 resulting from our net loss of $8,736,042 partially offset by non-cash charges of $5,245,448 primarily driven by depreciation charges and stock compensation expense. In 2023, we had cash used in our operating assets and liabilities of $7,477,317 primarily driven by increases in accounts receivable, inventory, accounts payable and prepaid expenses.
During the nine months ended September 30, 2022, net cash used in operating activities was $3,155,871, resulting from our net loss of $2,185,674, partially offset by non-cash charges of $195,934. In 2022, we had cash used in our operating assets and liabilities of $1,166,131 primarily due to increases in related party and accounts payable, inventory and prepaid expenses.
Cash Flows from Investing Activities
During the nine months ended September 30, 2023, we had net cash used in investing activities of $326,078 in purchase of property and equipment.
During the nine months ended September 30, 2022, We had net cash provided in investing activities of 378,348 in sale of property and equipment.
Cash Flows from Financing Activities
During the nine months ended September 30, 2023, we had net cash provided by financing activities of $22,645,723, which comprised of $2,705,568 in proceeds from our bank overdraft facility (net), $50,000 in proceeds from issuance of common stock against warrant and options, $16,980,000 in proceeds from issuance of convertible notes to principal shareholder and $ 3,000,000 in proceeds from issuance of convertible notes to other investors. There was a decrease of $89,845 on account of repayment of term loans.
During the nine months ended September 30, 2022, we had net cash provided by financing activities of $2,823,966 which comprised increase in bank overdraft facility(net) by $1,283,088, $1,100,000 in proceeds from issuance of convertible notes to other investors and $440,878 on account of proceeds of term loans.
While we have been successful in raising funds to finance our operations since inception and we believe that we will be successful in obtaining the necessary financing to fund our operations going forward, we do not have any committed sources of funding and there are no assurance that we will be able to secure additional funding. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, if we cannot obtain financing, then we may be forced to further curtail our operations or consider other strategic alternatives. Even if we are successful in raising the additional financing, there is no assurance regarding the terms of any additional investment and any such investment or other strategic alternative would likely substantially dilute our current shareholders.
Critical Accounting Policies
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States 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. Significant estimates included discount rate for measuring significant financing component for deferred collections in revenue contracts, fair value of stock options, incremental borrowing rate for leases and useful life of property plant and equipment.
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 is material to investors.
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Item 4. Controls and Procedures.
Management’s Report on Disclosure Controls and Procedures
In connection with the restatement of the Company’s financial statements included in this Amendment, our Chief Executive Officer and Chief Financial Officer re-evaluated the effectiveness of the design and operation of our disclosure controls and procedures and internal control over financial reporting, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2023.
To ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Based on that re-evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2023, our disclosure controls and procedures and internal control over financial reporting were not effective, due to material weaknesses in SSi’s internal control in that:
| ● | We failed to design controls and procedures to provide reasonable assurance that U.S. GAAP was being properly applied to the matters resulting the restatement of our financial statements, including accounting for merger transaction, recognition of revenue in case of deferred payment sales, recognition of right of use of certain assets and lease liabilities and functional and other classifications, resulting in the accounting errors described in Note 1. Restatement of Previously Issued Condensed Consolidated Financial Statements, of this Amendment. |
| ● | We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. |
| ● | We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and procedures and has concluded that the control deficiency that resulted represented a material weakness. |
Remediation Plan
The Company has been addressing and remediating these material weaknesses with the support and assistance of the accounting and financial staff employed by our Indian operating subsidiary. We are enhancing the review process for significant transactions to ensure proper accounting treatment under applicable guidelines and are engaging external experts where necessary to assist in the application of accounting principles to complex transactions. In addition, we are implementing a new ERP system which is designed to integrate all business functions within the accounting and financial department to further address the abovementioned weaknesses.
Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or internal controls will prevent all errors and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of any control system is subject to resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the fact that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
(b) Changes in Internal Controls Over Financial Reporting
Except for the remediation efforts described above, there were no changes in our internal controls over financial reporting that occurred during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
In April 2024, an ex-shareholder of Otto Pvt Ltd., an indirect wholly owned Bahamian subsidiary of SSi(“Otto”) commenced litigation in the Bahamas, seeking legal confirmation that it holds 9,000 shares (approximately a 9% interest) in Otto. The litigation, in which Otto is one of the defendants, relates to a purported transaction in 2021, at which time Dr. Sudhir Srivastava, the Company’s Chairman, Chief Executive Officer and principal shareholder, was the sole shareholder of Otto. The plaintiff in the litigation alleges that at that time, it acquired the 9,000 Otto shares from Dr. Srivastava. However, as the plaintiff failed to pay the agreed upon consideration for the shares, in July 2022, the shareholding was cancelled. Dr. Srivastava along with Otto, has recently filed an action in the Bahamas to confirm the cancellation of the shares and reconfirm their ownership and both actions are pending in the Bahamian courts. The Bahamian court has issued an interim order to maintain the status quo as it stands today with respect to the 9,000 Otto shares at the center of the dispute, as well as Otto’s shareholdings in Sudhir Srivastava Innovations Pvt Ltd. (“SSI-India”), our Indian operating subsidiary and SSI-India’s assets during the pendency of the litigation. Based on legal opinions obtained from counsel, the Company believes that there will be a favorable outcome in this case.
Notwithstanding the foregoing, Dr. Srivastava and the Company have entered into an Indemnification Agreement on October 12, 2024, pursuant to which Dr. Srivastava has agreed to fully indemnify the Company for any claims, damages and costs (including legal fees) which it incurs in connection with this litigation or in relation to any of his ventures prior to consummation of the Company’s acquisition by merger of CardioVentures, Inc. in April 2023.
Item 2. Exhibits.
| Exhibit No. | Description of Exhibit | |
| 10.1 | Promissory Note dated April 15, 2023, made by the Company in favor of Sushruta Pvt. Ltd.(1) | |
| 10.2 | Employment Agreement between the Company and Barry F. Cohen*(1) | |
| 31.1 | Section 302 Certification – Chief Executive Officer(2) | |
| 31.2 | Section 302 Certification – Chief Financial Officer(2) | |
| 32.1 | Section 906 Certification – Chief Executive Officer(2) | |
| 32.2 | Section 906 Certification – Chief Financial Officer(2) | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Management Compensation Plan or Arrangement. |
| 1. | Previously filed. |
| 2. | Filed herewith. |
51
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SS INNOVATIONS INTERNATIONAL, INC. | ||
| Dated: January 14, 2025 | By: | /s/ Anup Sethi |
| Anup
Sethi, Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
52
Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sudhir Prem Srivastava, M.D., Chairman of the Board and Chief Executive Officer of SS Innovations International, Inc., a Florida corporation (the “Registrant”), certify that:
1. I have reviewed this Form 10-Q/A Amendment No. 1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 of the Registrant;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the registrant and have:
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. The other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| Dated: January 14, 2025 |
| SS INNOVATIONS INTERNATIONAL, INC. | ||
| By: | /s/ Sudhir Prem Srivastava | |
| Sudhir Prem Srivastava, M.D. Chairman of the Board and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Anup Sethi, Chief Financial Officer of SS Innovations International, Inc., a Florida corporation (the “Registrant”), certify that:
1. I have reviewed this Form 10-Q/A Amendment No. 1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 of the Registrant;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the registrant and have:
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. The other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| Dated: January 14, 2025 |
| SS INNOVATIONS INTERNATIONAL, INC. | ||
| By: | /s/ Anup Sethi | |
| Anup Sethi Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
Exhibit 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Form 10-Q/A Amendment No. 1 to Quarterly Report on Form 10-Q of SS Innovations International, Inc., a Florida corporation (the “Company”) for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sudhir Prem Srivastava, M.D., the Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: January 14, 2025
| SS INNOVATIONS INTERNATIONAL, INC. | ||
| By: | /s/ Sudhir Prem Srivastava | |
| Sudhir Prem Srivastava, M.D. Chief Executive Officer | ||
| (Principal Executive Officer) | ||
Exhibit 32.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Form 10-Q/A Amendment No. 1 to Quarterly Report on Form 10-Q of SS Innovations International, Inc., a Florida corporation (the “Company”) for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anup Sethi., the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: January 14, 2025
| SS INNOVATIONS INTERNATIONAL, INC. | ||
| By: | /s/ Anup Sethi | |
| Anup Sethi Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||