| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Use of Estimates The
preparation of financial statements in conformity with GAAP 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 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 deferred revenue, costs incurred related to deferred revenue, stock-based compensation, leases, the useful lives of
property and equipment
(b) Cash and Cash Equivalents The
Company considers all highly liquid investments purchased with 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 statements 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 Accounts
receivables are recorded as net of allowances for expected credit losses. The Company evaluates the credit risk of its customers based
on a combination of various financial and qualitative factors that may affect the ability of each customer to pay. The Company considered
current and anticipated future economic conditions relating to the industries of the Company’s customers and the countries where
it operates. In calculating expected credit loss, the Company also considered past payment trends, credit rating and other related credit
information for its significant customers to estimate the probability of default in the future. Accounts receivable balances are written
off against the allowance for expected credit losses after all means of collection have been exhausted and the potential for recovery
is considered remote.
(e) Employee Benefits Contributions
to defined contribution plans are charged to the consolidated statements of income 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, assumed rates of return on plan assets, 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
consolidated statements of income. 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 consolidated balance sheets. The
relevant translation rates are as follows: for the three months ended September 30, 2024, closing rate at INR 83.71 to one US$ and average
rate at 83.38 INR to one US$
(g) Inventory The
Company’s inventory consists of finished goods in the form of fully assembled and tested surgical robotic systems, 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, 2024, the Company
valued the inventory at $9,190,414
(h) Fair value measurements ASC Topic
820, Fair Value Measurements and Disclosures
● 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 concentration of credit risk consist principally of cash. The Company maintains its
principal cash balance in United States financial institutions, where deposits are insured by the Federal Deposit Insurance Corporation
(“FDIC”) up to $250,000. The Company also maintains cash balances maintained with banks in India, where balances are insured
by Deposit Insurance and Credit Guarantee Corporation of India (DICGC) to the extent of approximately $6,100 per account and in the Bahamas,
where deposits are insured by the Deposit Insurance Corporation Bahamas up to B$50,000 (equivalent to $50,000) per account. As of September
30, 2024, the Company had none
(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 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 of 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 3 to 5 years.
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 3 to 5 years. The exact terms are mutually agreed upon with the customer.
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 dispatched
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. 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, Installation cost, freight, other associated costs, 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. The
estimated useful lives used in calculating depreciation are as follows:
Years
Office furniture and fixtures 4
Plant and equipment 4-8
Motor vehicles 3
Computer & Peripherals’ 3
Leasehold properties 6-9 Long-lived
Assets In
accordance with ASC 360, “ Property Plant and Equipment Stock
Compensation Expense The
Company accounts for equity instruments issued in exchange for goods or services from non-employees in accordance with ASC Topic 505,
“Equity.” 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. The fair value of these
equity instruments is determined on the earlier of either (1) the achievement of a performance commitment or (2) the completion of performance
by the provider of goods or services, as outlined by ASC Topic 505. As
of September 30, 2024, the Company has issued two types of equity incentives: Stock
Options Stock
Units (Restricted Stock Units, or RSUs): The
Company recognizes stock-based compensation expense in the consolidated statements of income 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. Additionally, under the Company’s 2016 Stock Incentive Plan,
the Company grants performance-based stock awards to executive officers, key employees, and advisors. These awards are tied to the achievement
of specified performance criteria, and the associated compensation costs are recognized when it becomes probable that the performance
conditions will be met. These grants shall vest as to 20% of the Restricted Shares covered thereunder as of the Grant Date, with the balance
of the Restricted Shares covered thereunder vesting in 4 equal annual installments on the first, second, third and fourth anniversaries
of the Grant Date, subject to the Grantee’s continued employment by the Company, as provided for in the Plan. The
fair value of each stock units is determined based on the market price of one share of our common stock on the day prior to the date
of grant. The grant date fair value for the Stock option is determined using Black Scholes model. The Black Scholes model involves the
use of key assumptions i.e. expected term, risk free interest rate. We periodically assess the reasonableness of our assumptions and
update our estimates as required. If actual results differ significantly from our estimates, stock-based compensation expense and our
results of operations could be materially affected. Employees:
Non-employees:
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 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 consolidated
statements of income 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. Basic
and Diluted Loss per Share In
accordance with ASC Topic 260 “ Earnings Per Share, 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 has alternative future use, research and development expenses are charged to operations as incurred. 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. 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. Operating
leases are presented within “Operating lease right-of-use assets,” “Current portion of operating lease liabilities”
and “Operating lease liabilities, less current portion” in the Company’s consolidated balance sheets 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 consolidated statements of income. The
Company reviews ROU assets for impairment whenever events or changes in circumstances indicate that the related carrying amount may not
be recoverable. Segment
reporting The
Company operates in one segment only. The chief operating decision maker regularly reviews the operating results of the Company
on a consolidated basis as part of making decisions for allocating resources and evaluating performance. As of both September 30, 2024,
and December 31, 2023 100% of long-lived assets were in India. Revenue from external customers is attributed to individual
countries based on customer location. |
