SS Innovations International, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. The company develops, manufactures and sells the SSI Mantra surgical robotic system and related instruments. Its April 14, 2023 merger with CardioVentures brought in the SSI-India business, changed control and the company name, and was accompanied by a 1-for-10 reverse stock split. Accordingly, 2023 results include the acquired business while 2022 comparatives largely reflect the prior company and are not directly comparable.
Financial performance and position
| Metric | Q3 2023 | Nine months 2023 | Comparable 2022 |
|---|---|---|---|
| Revenue | $1.43 million | $4.52 million | $0 reported |
| Gross profit | $159,844; 11.2% margin | $895,182; 19.8% margin | $0 reported |
| Operating expenses | $2.13 million | $5.53 million | $900,145 Q3; $1.15 million nine months |
| Net loss | $1.98 million | $4.82 million | $790,104 Q3; $1.04 million nine months |
| Operating cash flow | $(13.83) million for nine months | $(303,711) | |
| Investing cash flow | $(4.95) million for nine months | $0 reported | |
| Financing cash flow | $24.02 million for nine months | $412,080 |
Q3 revenue comprised $1.38 million of system sales and $53,859 of warranty sales. The filing states that $1.36 million of warranty-related revenue was deferred under ASC 606, reducing reported nine-month revenue and profitability. Basic and diluted loss per share was reported as $(0), rounded to zero.
- At September 30: Cash and cash equivalents were $6.60 million; total assets $24.06 million; total liabilities $8.30 million; and stockholders’ equity $15.76 million. Management reported working capital surplus of $11.03 million.
- Debt and liquidity: A $6.12 million bank overdraft was outstanding, comprising facilities secured by fixed deposits and current assets, with additional personal guarantees from the CEO. The $16.98 million balance under a CEO-affiliated company’s convertible line was converted into 22.95 million shares during Q3. The balance sheet also reports $1.86 million in related-party loans and advances as an asset, while a note describes $1.86 million as due to related parties; the filing text does not clearly reconcile this classification.
- Cash use: Operating cash outflow was driven in part by a $12.72 million increase in prepaid expenses and other assets, including deposits securing bank facilities. Investing outflows included $4.07 million in long-term receivables/loans and advances and $877,403 of equipment purchases.
Changes, outlook and risks
- The company reported 12 surgical robotic systems sold by September 30 and more than 400 procedures performed. It sold three systems in Q3 and recorded its first export sale, to Dubai. Two additional systems were installed under pay-per-use arrangements, but no revenue was recognized from them in the quarter. A system was also installed at Johns Hopkins for medical education training.
- The company entered an agreement with Narayana Hrudalaya in India for 100 cardiac procedures using the SSI Mantra under a pay-per-use model. Management plans to expand manufacturing, research and development, and global sales; the filing provides no quantified revenue or profitability guidance.
- Management says substantial funding is needed to scale operations, add in-house machining and tooling capacity, and continue R&D. It is seeking additional funding, but has no committed sources and gives no assurance it can raise capital or reach profitability. The filing warns that unsuccessful financing or revenue growth could raise substantial doubt about the company’s ability to continue as a going concern, despite the reported working capital surplus.
- The filing reports ineffective disclosure controls as of September 30 due to previously identified material weaknesses; management says remediation efforts have begun. It also reports $6.26 million of deposits above applicable insurance coverage limits.
- Related-party considerations include the CEO’s control, financing through his affiliated company, personal guarantees, employment compensation, and a contractual royalty to his holding company of 3% of net revenues from relevant intellectual property and products. Series A preferred shares held by merger-related holders carry 51% of total voting power, subject to the terms described in the filing.
- No material subsequent events through October 31, 2023 were identified. The filing reports no legal proceedings, defaults upon senior securities, or material off-balance-sheet arrangements.
Important facts for investors to verify
- How much of reported revenue is recurring, collectible, and attributable to system sales versus deferred warranty revenue; confirm collection timing for receivables and long-term receivables.
- The status and terms of further financing, cash runway, and the company’s ability to fund expansion without substantial shareholder dilution.
- The $1.86 million related-party balance’s correct balance-sheet classification, nature, and repayment terms.
- Cash availability after accounting for fixed deposits securing bank overdrafts, and the exposure of deposits above insured limits.
- Progress in remediating material weaknesses and the implications of the related-party royalty, preferred-share voting control, and CEO-affiliated financing.