| FINANCIAL STATEMENTS | NOTE 1 – FINANCIAL STATEMENTS Organization SS Innovations International, Inc. (the “ Company SSII 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 change in control SS Innovations International, Inc. 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 March 31, 2024, and the interim condensed consolidated statements of operations, comprehensive loss, cash flows, and stockholders’
equity for the three months ended March 31, 2024 and 2023 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 March 31, 2024 and our results
of operations and cash flows for the three months ended March 31, 2024 and 2023. The financial data and other financial information disclosed
in these notes to the interim condensed consolidated financial statements related to the three month periods are also unaudited. The
interim condensed consolidated results of operations for the three months ended March 31, 2024 are not necessarily indicative of the
results to be expected for the year ending December 31, 2024 or for any future annual or interim period. The interim condensed consolidated
balance sheet as of December 31, 2023 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. The interim condensed consolidated financial
statements and accompanying notes were prepared in accordance with accounting principles generally accepted in the United States (“ GAAP 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, 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 March 31, 2024 as well as the condensed consolidated statement of operations and comprehensive loss
and the condensed consolidated statements of cash flows for the three months ended March 31, 2024, and March 31, 2023 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 Restatement in March 2024 Summary of restatements made in condensed
consolidated balance sheet as at March 31, 2024 is as follows:
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 948,152 948,119 (33 ) - - - - (33 )
Restricted
cash 5,954,970 5,620,396 (334,574 ) - (334,574 ) - - -
Accounts
receivable, net 4,226,144 4,964,543 738,399 - 3,172,400 (2,896,293 ) - 462,292
Receivable
from related party - 1,510,647 1,510,647 - 1,409,555 - - 101,092
Inventory,
net 6,162,235 6,921,892 759,657 - - - - 759,657
Prepaids
and other current assets 2,495,457 3,625,957 1,130,500 (8,678 ) 282,413 - - 856,765
Total
Current Assets 19,786,958 23,591,554 3,804,596 (8,678 ) 4,529,794 (2,896,293 ) - 2,179,773
Non-
Current Assets:
Property,
plant, and equipment, net 2,061,596 2,176,439 114,843 (2,283 ) - - - 117,126
Right
of use asset 2,127,769 2,552,193 424,424 - - - 424,424 -
Accounts
receivable, net 5,659,347 2,486,947 (3,172,400 ) - (3,172,400 ) - - -
Restricted
cash - 327,065 327,065 - 327,065 - - -
Receivable
from related party 1,409,555 - (1,409,555 ) - (1,409,555 ) - - -
Prepaids
and other non current assets - 4,067,385 4,067,385 - 275,927 - - 3,791,457
Total
Non-Current Assets 11,258,267 11,610,029 351,762 (2,283 ) (3,978,962 ) - 424,424 3,908,583
Total
Assets 31,045,225 35,201,583 4,156,358 (10,961 ) 550,832 (2,896,293 ) 424,424 6,088,356
LIABILITIES
AND STOCKHOLDERS’ EQUITY
Current
Liabilities:
Bank overdraft
facility 6,207,185 6,207,185 - - - - - -
Notes
payable 2,450,000 2,450,000 - - - - - -
Current
maturities of long-term debt - 521,873 521,873 - - - - 521,873
Current
portion of operating lease liabilities 281,380 415,331 133,951 - - - 133,951 -
Accounts
payable 1,446,218 1,827,635 381,417 - 791,404 - - (409,987 )
Deferred
tax liability 6,582 - (6,582 ) - - - - (6,582 )
Deferred
revenue - 252,265 252,265 - - 252,265 - -
Other
accrued liabilities 5,271,874 1,358,275 (3,913,599 ) (5,700 ) 815,588 (3,560,077 ) - (1,163,410 )
Total
Current Liabilities 15,663,238 13,032,564 (2,630,674 ) (5,700 ) 1,606,992 (3,307,812 ) 133,951 (1,058,106 )
Non-Current
Liabilities:
Operating
lease liabilities, less current portion 1,846,389 2,238,259 391,870 - - - 391,870 -
Deferred
revenue - 3,133,632 3,133,632 - - 3,133,632 - -
Other
accrued liabilities - 48,358 48,358 - - - - 48,358
Total
Non-Current Liabilities 1,846,389 5,420,249 3,573,860 - - 3,133,632 391,870 48,358
Total
Liabilities 17,509,627 18,452,813 943,185 (5,700 ) 1,606,992 (174,180 ) 525,821 (1,009,748 )
Stockholders’
equity:
Preferred stock, $0.0001 par value per share; authorized 5,000,000 shares of Series A Non-Convertible Preferred Stock, 5,000 shares and nil 1 1 - - - - - -
Common stock, 250,000,000 shares authorized, $0.0001 par value,170,739,380 shares and 170,711,880 shares issued and outstanding as of March 31, 2024, and December 31, 2023 respectively 17,073 17,075 2 - - - - 2
Accumulated
other comprehensive income (loss) (331,489 ) (266,306 ) 65,183 - - - - 65,183
Additional
paid in capital 51,077,789 50,451,186 (626,603 ) (13,042,805 ) - - - 12,416,202
Capital
reserve 899,917 899,917 (0 ) - - - - -
Accumulated
deficit (38,127,694 ) (34,353,103 ) 3,774,591 13,037,544 (1,056,160 ) (2,722,113 ) (101,397 ) (5,383,283 )
Total
stockholders’ equity 13,535,597 16,748,770 3,213,173 (5,261 ) (1,056,160 ) (2,722,113 ) (101,397 ) 7,098,104
Total
liabilities and stockholders’ equity 31,045,224 35,201,583 4,156,358 (10,961 ) 550,832 (2,896,293 ) 424,424 6,088,356 Condensed consolidated statement of operations
and comprehensive loss for the three-months ended March 31, 2024:
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 6,474,832 3,494,759 (2,980,073 ) - (118,515 ) (2,861,558 ) - -
Instrument
sales - 118,515 118,515 - 118,515 - - -
Warranty
sales 376,226 9,407 (366,819 ) - - (366,819 ) - -
Lease
income - 15,012 15,012 - - - 15,012 -
Total
revenue 6,851,058 3,637,693 (3,213,365 ) - - (3,228,377 ) 15,012 -
Cost
of revenue (3,873,339 ) (2,909,511 ) 963,828 - 506,255 - (75,776 ) 533,348
GROSS
PROFIT 2,977,720 728,182 (2,249,538 ) - 506,255 (3,228,377 ) (60,764 ) 533,348
OPERATING
EXPENSES:
Research
and development expense 396,050 527,991 131,941 - 92,004 - 39,938 -
Stock
compensation expense 1,937,202 7,108,750 5,171,548 - - - - 5,171,548
Salaries
& Payroll Expenses 674,436 - (674,436 ) - (674,436 ) - - -
Depreciation
and amortization expense 77,189 80,101 2,912 - 2,912 - - -
Selling,
general and administrative expense 2,611,019 2,843,659 232,640 - 460,047 - 63,158 (290,564 )
TOTAL
OPERATING EXPENSES 5,695,897 10,560,501 4,864,604 - (119,475 ) - 103,096 4,880,984
Loss
from operations (2,718,177 ) (9,832,319 ) (7,114,142 ) - 625,730 (3,228,377 ) (163,859 ) (4,347,635 )
OTHER
INCOME (EXPENSE):
Interest
expenses (183,212 ) (190,088 ) (6,876 ) - 4,819 - - (11,695 )
Interest
and other income, net 102,941 180,654 77,713 - 4,034 71,181 - 2,498
TOTAL
OTHER INCOME (EXPENSE), NET (80,271 ) (9,434 ) 70,837 - 8,853 71,181 - (9,197 )
LOSS
BEFORE INCOME TAXES (2,798,448 ) (9,841,753 ) (7,043,305 ) - 634,583 (3,157,196 ) (163,859 ) (4,356,832 )
Income
tax expense - - - - - - - -
NET
LOSS (2,798,448 ) (9,841,753 ) (7,043,305 ) - 634,583 (3,157,196 ) (163,859 ) (4,356,832 )
Consolidated
statements of other comprehensive loss
NET
LOSS (2,798,448 ) (9,841,753 ) (7,043,305 ) - 634,583 (3,157,196 ) (163,859 ) (4,356,832 )
Foreign
currency translation gain/(loss) (2,389 ) (79,314 ) (76,925 ) - - - - (76,925 )
Retirement
benefit (net of tax) - 8,507 8,507 - - - - 8,507
TOTAL
COMPREHENSIVE LOSS (2,800,837 ) (9,912,560 ) (7,111,723 ) - 634,583 (3,157,196 ) (163,859 ) (4,425,250 ) Condensed consolidated statement of cashflows
for the three-months ended March 31, 2024:
Particular As As
Restated Changes Accounting
for Functional
/ Recognition
of Recognition
of Errors
/
Cash
flows from operating activities:
Net
loss (2,798,448 ) (9,841,753 ) (7,043,305 ) - 634,583 (3,157,196 ) (163,859 ) (4,356,832 )
Adjustments
to reconcile net loss to net cash used in operating activities:
Depreciation
and amortization 45,725 80,101 34,376 - - - - 34,376
Translation
difference (2,389 ) - 2,389 - 2,389
Operating
lease liability - 11,033 11,033 - - - 11,033 -
Stock
compensation expense 1,937,201 7,108,750 5,171,549 - - - - 5,171,549
Interest
expense (net) - 9,434 9,434 - (95,248 ) - - 104,682
Credit
loss reserve - 389,330 389,330 - - - 389,330
Changes
in operating assets and liabilities:
Accounts
receivable, net - (3,186,108 ) (3,186,108 ) - - (3,186,108 ) - -
Inventory,
net - 96,021 96,021 - - - - 96,021
Receivables
from / payable to related parties - 56,912 56,912 - 56,907 - - 5
Deffered
revenue - 2,290,417 2,290,417 - - 2,290,417 - -
Prepaids
and other current assets - 23,196 23,196 - (355,975 ) - - 379,171
Accounts
payable 3,697,874 926,083 (2,771,791 ) 788,799 (3,560,590 )
Prepaids
and other non current assets - (11,689 ) (11,689 ) - - - - (11,689 )
Prepaid
expenses and other assets (1,534,137 ) - 1,534,137 - - - - 1,534,137
Other
accrued liabilities - 799,235 799,235 - 977,618 - - (178,383 )
Right
of use liability, current portion (7,608 ) - 7,608 - - - - 7,608
Net
cash used in operating activities 1,338,218 (1,249,038 ) (2,587,256 ) - 2,006,684 (4,052,887 ) (152,826 ) (388,226 )
Cash
flows from investing activities:
Accounts
receivable, net (3,019,005 ) - 3,019,005 - - - - 3,019,005
Purchase
of property, plant and equipment (1,317,157 ) (1,550,135 ) (232,978 ) - - - - (232,978 )
Receivables
from / payable to related parties 56,907 - (56,907 ) - - - - (56,907 )
Right
of use asset 71,649 - (71,649 ) - - - - (71,649 )
Net
cash used in investing activities (4,207,606 ) (1,550,135 ) 2,657,471 - - - - 2,657,471
Cash
flows from financing activities:
Proceeds
from issuance of convertible notes to other investors - 1,450,000 1,450,000 - - - - 1,450,000
Proceeds
from issuance of convertible notes to principal shareholder 2,450,000 1,000,000 (1,450,000 ) - - - - (1,450,000 )
Proceeds
from bank overdraft facility (net) 188,259 188,259 - - - - - -
Proceeds
from securities offering 101,249 - (101,249 ) - - - - (101,249 )
Net
cash provided by financing activities 2,739,507 2,638,259 (101,249 ) - - - - (101,249 )
Net
change in cash (129,881 ) (160,914 ) (31,033 ) - 2,006,684 (4,052,887 ) (152,826 ) 2,167,996
Effect
of exchange rate on cash - (31,351 ) (31,351 )
Cash
and cash equivalents at the beginning of the period 7,033,001 7,087,845 54,844
Cash
and cash equivalents at end of the period 6,903,120 6,895,580 (7,540 ) (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 one-for-ten reverse stock split and increased its authorized common stock to 250,000,000 shares. Before In the previously filed financial statements
(Form 10-Q) for the period ended March 31, 2024, 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 balances in the financial statements
for the period ended March 31, 2023, included only the assets and liabilities of both AVRA and Cardio Ventures. 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. The fair value of assets and liabilities of AVRA was assessed as nil Additionally, the amount recognized as issued
equity interests in the condensed consolidated financial statements for three months ended March 31, 2023 was determined by considering
the equity interests of Cardio Venture Inc 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 for three months ended March 31, 2023 of Cardio Venture Inc.
(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 nil Additionally, the Company excluded Accumulated
deficit and Additional paid in Capital pertaining to AVRA as per ASC 805. (2) Functional / Other reclassifications 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 innovative 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 loss. 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 March 31, 2024 (A) Impact on restated Condensed Consolidated
Balance Sheet Reclassifications were of below nature: 1. Restricted Cash: 1. Fixed deposit against bank guarantee of $310,410 are now reclassified to Restricted cash non-current, 2. Fixed Deposits of $16,655 reclassified to Restricted cash non-current, 3. Fixed deposit with no withdrawal restrictions of $7,469 reclassified under prepaids and other non-current assets. 2. Accounts receivable of $3,172,400 are reclassified from non-current to current based on their due date of collection as per contract with customers. 3. Receivables from related party (net) of $1,409,555 reclassified from non-current to current based on their due date of collection. 4. Prepaids and other current assets: Security Deposit of $268,458 for long term lease earlier classified under Prepaid Current assets now reclassified to Prepaid and other non-current assets. 5. Reclassification of long term deferred revenue from other accrued liabilities to long term deferred revenue amounting to $3,133,632. This amount has now been reclassified to deferred revenue (Non-Current) for accurate reporting and compliance with revenue recognition standards. 6. Accounts payable: As at March 31, 2024 Amount of advance to vendors knocked off earlier amounting to $791,404 are now reclassified to prepaid and other current asset. 7. Other accrued liabilities: As at March 31, 2024 amount of $779,897 relating to advance from customers is now reclassified in other accrued liabilities. Differential impact of above adjustments have
been corrected in the condensed consolidated statement of cash flows for the three months ended March 31, 2024. (B) Reclassifications Condensed Consolidated
Statement of Operations and comprehensive loss Reclassifications were of below nature:
(i) Functional classification 1. Operating expenses are now reclassified functionally, encompassing Selling, General and Administrative, Research and Development, Stock compensation expense and Salaries & Payroll Expenses. This reclassification has resulted in a decrease in the Cost of revenue by $506,255, and increase in Research and Development expense by $92,004 and in Selling, General and administrative expense by $460,047 for three months ended March 31, 2024.
(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 $118,515 for three months ended March 31, 2024 and is disclosed as Instrument sales specifically to reflect this refined categorization. 2. Interest and other income related to deposits and deferred payment on revenue have been reclassified from Selling, General, and Administrative Expenses and Interest and other income to Interest Expense. This reclassification amounts to $4,034 for three months ended March 31, 2024, aligning the reporting with appropriate expense categorization standards. (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 March 31, 2024 and 2023. 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 the 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 March 31, 2024 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. 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 $2,896,293. 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 $3,385,897 was recorded as deferred revenue till the period and further the same was reclassed as current and non-current
$252,265 and $3,133,632 respectively in these restated financial statements. Deferred revenue recorded earlier amounting
to $ 3,560,077 in Other accrued liabilities was reversed as the same was not as per ASC 606 Principles. Interest income for the current period related
to unwinding of account receivable balances recorded as interest income of $71,181 which is adjusted with the net of system and warranty
sale of $3,228,377 in condensed consolidated statement of operations and other comprehensive loss for three months ended March 31, 2024. B. Lease Before For the three months ended March 31, 2024,
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 three months ended March 31, 2024. 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. The Company identified that it had a leased
property in India, but no transaction 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 $424,424 was
recorded to correct the balances of ROU in line with above provision of ASC 842. Classification of current and non-current amount of
lease liability corrected by $133,951 and $391,870 respectively. Further lease expenses was classified based on functional classification
as $75,776 as cost of revenue, $39,938 as research and development and $63,158 as Selling, general and administrative for the three months
ended March 31, 2024. Differential impact of above adjustments has
been corrected in the consolidated statement of cash flows for the three months ended March 31, 2024. Further as per ASC 842, lease payments of
$15,012 are recognized in condensed consolidated statement of operations and other comprehensive loss for three months ended March 31,
2024 relating to the fixed payments arising out of the systems installed on Pay per use basis. 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 March 31, 2024: (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 March 31, 2024. To rectify this, a correction was made to reconcile the accounts receivable balance and the impact of the financing component amounting to $11,695 on the income statement. Accounts receivable balance of $534,280 has been restated and corresponding current maturities of long-term borrowings, as the bank retains the right to recover proceeds from the company in case customer makes default in payment. (ii) Advance to vendors: For the period ended March 31, 2024, 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 $305,198. (iii) 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 property, plant, and equipment was increased by $117,126 for the period ended March 31, 2024. (iv) 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 $759,657 as at March 31, 2024. Consequent to this adjustment, cost of revenue has decreased by $533,348 for three months ended March 31, 2024. (v) 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, 2023 and the current period, with balances reconciled against the actuarial report. A gratuity liability recorded by $48,358 relates to noncurrent and $426 as current portion which was not accounted for earlier.
(vi) 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. (vii) Deferred tax liability: Since the company has significant carried forward tax losses hence earlier recorded deferred tax liability reversed $6,582. (viii) Stock compensation expenses: Included in Selling, general and administrative expense pertaining to non-employees: The Company identified that stock compensation expense was recorded incorrectly as it did not pertain to the current year. A correction entry was made |
