SS Innovations International, Inc. — Q1 2024 Form 10-Q
Period: Three months ended March 31, 2024; comparisons are with the three months ended March 31, 2023 unless otherwise noted. The company develops and sells the SSI Mantra surgical robotic system. Financial statements are unaudited, and the filing was submitted without the required independent auditor review.
Financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $6.851 million | $1.511 million |
| Gross profit | $2.978 million | $0.511 million |
| Gross margin | 43.5% (calculated) | 33.8% (calculated) |
| Operating loss | $2.718 million | $2.963 million |
| Net loss | $2.798 million | $2.992 million |
| Net loss per share, basic and diluted | $0.02 | $0.05 |
| Operating cash flow | $1.338 million provided | $0.174 million used |
| Investing cash flow | $4.208 million used | $2.000 million used |
| Financing cash flow | $2.740 million provided | $1.434 million provided |
Revenue increased about 353%. The company sold eight systems during Q1 2024. Management attributed higher payroll costs to increased India manufacturing headcount and higher selling, general and administrative expense to marketing and promotion, including a January global robotics conference. Stock-based compensation was $1.937 million, up from $1.592 million. Q1 net loss narrowed about 6% year over year.
At March 31, 2024, total assets were $31.045 million and total liabilities were $17.510 million. Cash and cash equivalents were $0.948 million and restricted cash was $5.955 million; the MD&A reports cash of approximately $6.903 million, including restricted cash. Working capital was $4.124 million. Bank overdrafts totaled $6.207 million, and $2.450 million of new convertible notes were outstanding. Current and noncurrent lease liabilities totaled approximately $2.128 million. Stockholders’ equity was $13.536 million.
Changes, liquidity and outlook
- Accounts receivable rose to $4.226 million from $1.647 million at year-end 2023; long-term receivables increased to $5.659 million from $2.640 million, reflecting deferred-payment customer arrangements.
- Investing cash use included $1.317 million for property and equipment and a $3.019 million increase in long-term receivables. Positive operating cash flow reflected working-capital movements despite the net loss.
- The company raised $2.450 million in February through one-year notes bearing 7% interest, convertible at the holders’ option at $4.45 per share. It raised another $2.000 million through 7% notes in April 2024. Notes are due one year after issuance.
- Management expects substantial funding needs for manufacturing expansion, components, clinical trials, facilities, working capital and marketing. It is seeking further equity or debt funding but has no committed additional sources. Failure to obtain funding could constrain expansion or require curtailing operations; further financing could dilute shareholders.
- The filing reports 23 systems sold and a 32-system installed base, including pay-per-use/revenue-share, evaluation, and research/training placements. More than 1,000 procedures had been performed on systems in India.
- Warranty revenue is recognized over the related service period. The filing says $3.560 million was transferred to unrealized deferred revenue and that this adjustment reduced reported revenue and profitability for the quarter by $1.892 million.
- No specific financial guidance was provided. Management states the statements assume continued operations and notes substantial doubt could arise if funding efforts fail, despite reporting a working-capital surplus.
Risks, controls and unusual filing matters
- The SEC barred the company’s auditor, BF Borgers CPA PC, on May 3, 2024; the company dismissed the firm effective May 13 and had not engaged a replacement when it filed on May 15. The company said it would amend the 10-Q after a new auditor completes the required review.
- Management concluded disclosure controls and procedures were not effective as of March 31, citing incomplete written control documentation and insufficient segregation of accounting duties. Management said these deficiencies were not material weaknesses and described remediation efforts, including implementation of an ERP system.
- The filing contains apparent period-label inconsistencies: the cash-flow statement labels its columns 2023 and 2022 although the surrounding text and amounts refer to Q1 2024 and Q1 2023. The company’s reported share counts also vary slightly in different sections.
- The filing reports no currently pending or threatened legal proceedings other than matters previously disclosed, and no material off-balance-sheet arrangements.
Most important facts to verify
- Whether and when a replacement auditor completed the required review and the company amended this filing.
- The cash-flow statement’s correct reporting-period labels and the reported share-count discrepancies.
- Collection timing and credit risk for receivables, especially the $5.659 million classified as long term, and the amount and timing of deferred warranty revenue recognition.
- Available liquidity, restrictions on cash, overdraft terms and security, and the company’s ability to meet note maturities and fund planned expansion.
- Progress in remediating disclosure-control deficiencies and the status of the ERP implementation.