Vicarious Surgical Inc. - Quarter Report: 2023 September (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from               to               

 

Commission File Number: 001-39384

 

VICARIOUS SURGICAL INC.

(Exact name of registrant as specified in its charter)

 

Delaware		87-2678169
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
78 Fourth Avenue Waltham, Massachusetts		02451
(Address of principal executive offices)		(Zip Code)

 

617-868-1700

Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class		Trading Symbol		Name of Each Exchange on Which Registered
Class A common stock, $0.0001 par value per share		RBOT		The New York Stock Exchange
Warrants to purchase one share of Class A common stock, each at an exercise price of $11.50 per share		RBOT WS		The New York Stock Exchange

 

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. Yes ☒ No ☐

 

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

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 “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐	Accelerated filer ☐
Non-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 ☒

 

As of October 18, 2023, the registrant had 155,269,690 shares of Class A common stock outstanding and 19,619,760 shares of Class B common stock outstanding.

 

 

 

TABLE OF CONTENTS

 

		Page
PART I: FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022	2
	Condensed Consolidated Statements of Common Stock and Stockholders’ Equity/(Deficit) for the Three and Nine Months Ended September 30, 2023 and 2022	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	6
	Notes to the Condensed Consolidated Financial Statements	5
Item 2.	Management´s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	31
PART II: OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
SIGNATURES		36

  

In this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” the “Company” and “Vicarious Surgical” mean Vicarious Surgical Inc. (formerly D8 Holdings Corp.) and our subsidiaries. Vicarious Surgical Inc. was incorporated in the Cayman Islands on May 6, 2020. The Company’s legal name because Vicarious Surgical Inc. following a business combination between the Company and Vicarious Surgical Inc. on September 17, 2021 (the “Business Combination”).

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that relate to future events, our future operations or financial performance, or our plans, strategies and prospects. These statements are based on the beliefs and assumptions of our management team. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or performance, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” or the negative of these terms, or other comparable terminology intended to identify statements about the future, although not all forward-looking statements contain these identifying words. The forward-looking statements are based on projections prepared by, and are the responsibility of, our management team. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

 

●

the ability to maintain the listing of our Class A common stock on the New York Stock Exchange (“NYSE”);

 

●

the success, cost and timing of our product and service development activities;

 

●

the approval, commercialization and adoption of our initial product candidates and the success of our single-port surgical robot, called the Vicarious Surgical System, and any of our future product candidates and service offerings;

 

●

the potential attributes and benefits of the Vicarious Surgical System and any of our other product and service offerings once commercialized;

 

●

our ability to obtain and maintain regulatory authorization for the Vicarious Surgical System and our product and service offerings on the timeline we expect, and without unexpected restrictions and limitations of any authorized product or service offering;

 

●

changes in U.S. and foreign laws;

 

●

our ability to identify, in-license or acquire additional technology;

 

●

our ability to maintain our existing license agreements and manufacturing arrangements and scale manufacturing of the Vicarious Surgical System and any future product candidates to commercial quantities;

 

 

●

our ability to compete with other companies currently marketing or engaged in the development of products and services for use in ventral hernia repair procedures and additional surgical applications, as well as with the use of open surgeries;

 

●

the size and growth potential of the markets for the Vicarious Surgical System and any of our future product and service offerings, and the ability of each to serve those markets once commercialized, either alone or in partnership with others;

 

●

our estimates regarding expenses, future revenue, capital requirements, cash runway and needs for additional financing;

 

●

our ability to raise financing in the future;

 

●

our financial performance;

 

●

our intellectual property rights and our ability to protect or enforce these rights, and the impact on our business, results and financial condition if we are unsuccessful in doing so; and

 

●

our ability to address economic downturns and political and market conditions beyond our control and their potential to adversely affect our business, financial condition and results of operations, including, but not limited to, increasing our expenses and cost of capital and adverse impacting our supply chain.

 

These forward-looking statements are based on information available as of the date of this report, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Important factors could cause actual results, performance or achievements to differ materially from those indicated or implied by forward-looking statements such as those described under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K, elsewhere herein and in other filings that we make from time to time with the Securities and Exchange Commission. The risks described in such filings are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

VICARIOUS SURGICAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)

 

		September 30,				December 31,
		2023				2022
Assets
Current assets:
Cash and cash equivalents		$	59,113			$	116,208
Short-term investments			51,076			$	—
Prepaid expenses and other current assets			3,222				4,196
Total current assets			113,411				120,404
Restricted cash			936				936
Property and equipment, net			5,889				6,586
Right-of-use assets			11,669				12,273
Other long-term assets			146				92
Total assets		$	132,051			$	140,291
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	1,529			$	1,731
Accrued expenses			5,267				5,808
Lease liabilities, current portion			1,007				838
Current portion of equipment loans			—				16
Total current liabilities			7,803				8,393
Lease liabilities, net of current portion			14,060				14,832
Warrant liabilities			2,316				6,021
Total liabilities			24,179				29,246
Commitments and Contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued or outstanding at September 30, 2023 and December 31, 2022			—				—
Class A Common stock, $0.0001 par value; 300,000,000 shares authorized at September 30, 2023 and December 31, 2022; 155,227,730 and 106,251,429 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			15				11
Class B Common stock, $0.0001 par value; 22,000,000 shares authorized at September 30, 2023 and December 31, 2022; 19,619,760 and 19,627,576 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			2				2
Additional paid-in capital			227,545				172,673
Accumulated other comprehensive loss			(89	)			—
Accumulated deficit			(119,601	)			(61,641	)
Total stockholders’ equity			107,872				111,045
Total liabilities and stockholders’ equity		$	132,051			$	140,291

 

See accompanying notes to these condensed consolidated financial statements.

 

 

VICARIOUS SURGICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Operating expenses:
Research and development		$	13,040			$	12,120			$	39,110			$	32,023
Sales and marketing			1,401				1,912				5,027				4,625
General and administrative			6,911				8,130				20,988				22,820
Total operating expenses			21,352				22,162				65,125				59,468
Loss from operations			(21,352	)			(22,162	)			(65,125	)			(59,468	)
Other income (expense):
Change in fair value of warrant liabilities			4,703				(3,038	)			3,705				75,291
Interest and other income			946				494				3,463				603
Interest expense			(1	)			(31	)			(3	)			(89	)
Income/(loss) before income taxes			(15,704	)			(24,737	)			(57,960	)			16,337
Provision for income taxes			—				—				—				—
Net income/(loss)		$	(15,704	)		$	(24,737	)		$	(57,960	)		$	16,337
Net income/(loss) per share of Class A and Class B common stock, basic		$	(0.10	)		$	(0.20	)		$	(0.43	)		$	0.14
Net income/(loss) per share of Class A and Class B common stock, diluted		$	(0.10	)		$	(0.20	)		$	(0.43	)		$	0.12
Other comprehensive income/(loss):
Net unrealized income/(loss) on investments			41				—				(89	)			—
Other comprehensive income/(loss)			41				—				(89	)			—
Comprehensive net income/(loss)		$	(15,663	)		$	(24,737	)		$	(58,049	)		$	16,337

 

See accompanying notes to these condensed consolidated financial statements.

 

 

VICARIOUS SURGICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCK AND STOCKHOLDERS’ EQUITY/(DEFICIT)

(Unaudited)

(in thousands, except share data)

 

		Three Months Ended September 30, 2023
		Class A & B								Additional								Accumulated Other				Total
		Common Stock								Paid-In				Accumulated				Comprehensive				Stockholders’
		Shares				Amount				Capital				Deficit				Income				Equity
Balance, June 30, 2023			127,267,417			$	13			$	179,703			$	(103,897	)		$	(130	)		$	75,689
Exercise of common stock options			52,024				—				11				—				—				11
Vesting of restricted stock			482,825				—				—				—				—				—
Stock-based compensation			—				—				3,613				—				—				3,613
Issuance of class A common stock, net of issuance costs of $2,823			47,045,224				4				44,218				—				—				44,222
Net loss			—				—				—				(15,704	)			—				(15,704	)
Other comprehensive income/(loss)			—				—				—				—				41				41
Balance, September 30, 2023			174,847,490			$	17			$	227,545			$	(119,601	)		$	(89	)		$	107,872

 

		Nine Months Ended September 30, 2023
		Class A & B								Additional								Accumulated Other				Total
		Common Stock								Paid-In				Accumulated				Comprehensive				Stockholders’
		Shares				Amount				Capital				Deficit				Income				Equity
Balance, January 1, 2023			125,879,005			$	13			$	172,673			$	(61,641	)		$	—			$	111,045
Exercise of common stock options			885,829				—				262				—				—				262
Vesting of restricted stock			1,037,432				—				—				—				—				—
Stock-based compensation			—				—				10,192				—				—				10,192
Proceeds from short swing rule			—				—				200				—				—				200
Issuance of class A common stock, net of issuance costs of $2,823			47,045,224				4				44,218				—				—				44,222
Net loss			—				—				—				(57,960	)			—				(57,960	)
Other comprehensive income/(loss)			—				—				—				—				(89	)			(89	)
Balance, September 30, 2023			174,847,490			$	17			$	227,545			$	(119,601	)		$	(89	)		$	107,872

 

 

		Three Months Ended September 30, 2022
		Class A & B								Additional								Accumulated Other				Total
		Common Stock								Paid-In				Accumulated				Comprehensive				Stockholders’
		Shares				Amount				Capital				Deficit				Income				Equity
Balance, June 30, 2022			121,631,735			$	12			$	155,491			$	(25,724	)		$	—			$	129,779
Exercise of common stock options			408,778				—				261				—				—				261
Vesting of restricted stock			304,335				—				—				—				—				—
Stock-based compensation			—				—				3,649				—				—				3,649
Net loss			—				—				—				(24,737	)			—				(24,737	)
Balance, September 30, 2022			122,344,848			$	12			$	159,401			$	(50,461	)		$	—			$	108,952

 

		Nine Months Ended September 30, 2022
		Class A & B								Additional								Accumulated Other				Total
		Common Stock								Paid-In				Accumulated				Comprehensive				Stockholders’
		Shares				Amount				Capital				Deficit				Income				Equity
Balance, January 1, 2022			119,769,067			$	12			$	149,877			$	(66,798	)		$	—			$	83,091
Exercise of common stock options			2,110,961				—				818				—				—				818
Exercise of public warrants			20				—				—				—				—				—
Vesting of restricted stock			464,800				—				—				—				—				—
Stock-based compensation			—				—				8,706				—				—				8,706
Net income			—				—				—				16,337				—				16,337
Balance, September 30, 2022			122,344,848			$	12			$	159,401			$	(50,461	)		$	—			$	108,952

 

See accompanying notes to these condensed consolidated financial statements.

 

 

VICARIOUS SURGICAL INC.

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

		Nine Months Ended September 30,
		2023				2022
Cash flows used in operating activities:
Net income/(loss)		$	(57,960	)		$	16,337
Adjustments to reconcile net income/(loss) to net cash used in operating activities:
Depreciation			1,329				709
Stock-based compensation			10,192				8,706
Amortization of capitalized debt issuance costs			—				25
Non-cash lease expense			604				636
Change in fair value of warrant liabilities			(3,705	)			(75,291	)
Change in accrued interest and net accretion of discounts on short-term investments			(969	)			—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			974				332
Accounts payable			(201	)			3,393
Accrued expenses			(542	)			1,268
Lease liabilities			(603	)			1,083
Other noncurrent assets			(54	)			—
Net cash used in operating activities			(50,935	)			(42,802	)
Cash flows from investing activities:
Purchases of property and equipment			(632	)			(4,360	)
Purchases of available-for-sale investments			(62,731	)			—
Proceeds from sales and maturities of available-for-sale investments			12,535				—
Net cash used in investing activities			(50,828	)			(4,360	)
Cash flows from financing activities:
Repayment of equipment loans			(16	)			(35	)
Repayment of term loan			—				(450	)
Proceeds from short swing rule			200				—
Gross proceeds from issuance of common stock			47,045				—
Issuance costs related to issuance of common stock			(2,823	)			—
Proceeds from exercise of stock options			262				818
Net cash provided by financing activities			44,668				333
Change in cash, cash equivalents and restricted cash			(57,095	)			(46,829	)
Cash, cash equivalents and restricted cash, beginning of period			117,144				174,562
Cash, cash equivalents and restricted cash, end of period		$	60,049			$	127,733
Reconciliation of restricted cash:
Cash and cash equivalents			59,113				126,797
Restricted cash			936				936
		$	60,049			$	127,733
Supplemental cash flow information:
Interest paid		$	1			$	36
Non-cash investing and financing activities:
Accruals for property, plant and equipment purchased during the period		$	—			$	40
Leasehold improvements acquired in connection with Waltham lease		$	—			$	1,200

 

See accompanying notes to these condensed consolidated financial statements.

 

 

VICARIOUS SURGICAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except for share and per share data)

 

1.	NATURE OF BUSINESS AND BASIS OF PRESENTATION

 

Nature of Business

 

Vicarious Surgical Inc. (including its subsidiaries, “Vicarious” or the “Company”) (formerly D8 Holdings Corp. (“D8”)) was incorporated in the Cayman Islands on May 6, 2020. The Company’s legal name became Vicarious Surgical Inc. following a business combination between the Company and Vicarious Surgical Inc., a Delaware corporation, on September 17, 2021 (the “Business Combination”). The Company is headquartered in Waltham, Massachusetts.

 

The Company is currently developing its differentiated surgical robotic system using proprietary de-coupled actuators to transport surgeons inside the patient to perform minimally invasive surgical procedures.

 

The Company has not yet generated any revenue from operations. Management believes that the Company’s current cash, cash equivalents and short-term investments balance of $110,189 will be sufficient to support our operations beyond the next twelve months from the date of issuance of these financial statements. However, we do not anticipate that the current cash, cash equivalents and marketable securities as of September 30, 2023 will be sufficient for us to fund our development through commercialization, and we will need to raise additional capital to complete the development and commercialization of our product. We may satisfy our future cash needs through the sale of equity securities, debt financings, corporate collaborations or other agreements, working capital lines of credit, grant funding, interest income earned on invested cash balances or a combination of one or more of these sources.

 

The accompanying condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative US GAAP.

 

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the condensed consolidated financial statements prepared in accordance with US GAAP may have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes for the years ended December 31, 2022 and 2021. The condensed consolidated balance sheet as of December 31, 2022, included herein, was derived from the audited consolidated financial statements of the Company.

 

The condensed consolidated financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of September 30, 2023, our results of operations, and stockholders’ deficit for the three and nine-month periods ended September 30, 2023 and 2022, and our cash flows for the nine-month periods ended September 30, 2023 and 2022. The operating results for the three and nine-month periods ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any interim period or for any other future year.

 

Principles of Consolidation

 

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.

 

Use of Estimates

 

The preparation of financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods presented. Estimates are used for, but are not limited to, the Company’s ability to continue as a going concern, fair value of financial instruments, and contingencies. Actual results may differ from those estimates.

 

 

Fair Value of Financial Instruments

 

US GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. The framework provides a fair value hierarchy that prioritizes the inputs for the valuation techniques. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements) and minimizes the use of unobservable inputs. The most observable inputs are used, when available. The three levels of the fair value hierarchy are described as follows:

 

Level 1—Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

 

Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived from, or corroborated by, observable market data by correlation or other means.

 

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement. 

 

Cash and Cash Equivalents

 

Cash and cash equivalents consist of checking accounts, money market funds, U.S. treasury securities and U.S. government agency securities. The Company considers all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents.

 

Restricted Cash

 

The Company has an agreement to maintain a cash balance of $936 at September 30, 2023 and December 31, 2022 as collateral for a letter of credit related to the Company’s lease. The balance is classified as long-term on the Company’s balance sheets as the lease period ends in March 2032.

 

Short-Term Investments

 

All of the Company’s investments, which consist of U.S. treasury securities and U.S. government agency securities, are classified as available-for-sale and are carried at fair value. There was an unrealized gain of $41 and an unrealized loss of $89 for the three and nine-month periods ended September 30, 2023, respectively. There were no unrealized gains or losses for the three and nine-month periods ended September 30, 2022.

 

Concentrations of Credit Risk and Off-Balance-Sheet Risk

 

The Company has no significant off-balance-sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially expose the Company to concentrations of credit risk consist mainly of cash and cash equivalents. The Company maintains its cash and cash equivalents principally with accredited financial institutions of high-credit standing. Periodically, there may be times when the deposits exceed the FDIC insurance limits.

 

 

Warrant Liabilities

 

The Company does not use derivative instruments to hedge its exposures to cash flow, market or foreign currency risks. Management evaluates all of the Company’s financial instruments, including issued warrants to purchase its Class A common stock, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

 

As part of the Business Combination, the Company assumed 17,249,991 Public Warrants and 10,400,000 Private Placement Warrants, each exercisable to purchase shares of Class A common stock. All of the Company’s outstanding warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrants as liabilities at fair value and adjusts the warrant liability to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the statement of operations. The fair value of Public Warrants was determined from their trading value on public markets. The fair value of Private Placement Warrants was calculated using the Black-Scholes option pricing model.

 

Property and Equipment

 

Property and equipment are recorded at cost. Expenditures for repairs and maintenance are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is included in the determination of net loss. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets.

 

Impairment of Long-Lived Assets 

 

The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets may warrant revision or that the carrying value of these assets may be impaired. The Company does not believe that any events have occurred through September 30, 2023, that would indicate its long-lived assets are impaired.

 

 

Guarantees and Indemnifications

 

As permitted under Delaware law, the Company indemnifies its officers, directors, consultants and employees for certain events or occurrences that happen by reason of the relationship with, or position held at, the Company. Through September 30, 2023, the Company had not experienced any losses related to these indemnification obligations, and no claims were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related liabilities have been established.

 

Research and Development 

 

Research and development costs are expensed in the period incurred. Research and development costs include payroll and personnel expenses, consulting costs, software and web services, legal, raw materials and allocated overhead such as depreciation and amortization, rent and utilities. Advance payments for goods and services to be used in future research and development activities are recorded as prepaid expenses and are expensed over the service period as the services are provided or when the goods are consumed.

 

Stock-Based Compensation

 

The Company accounts for all stock-based compensation, including stock options, restricted stock units (“RSUs”), performance-based RSUs (“PSUs”), warrants and other forms of equity issued as compensation for services, at fair value and recognizes stock-based compensation expense for those equity awards, net of actual forfeitures, over the requisite service period, which is generally the vesting period of the respective award.

 

The fair value of the Company’s stock options on the date of grant is determined by a Black-Scholes option pricing model utilizing key assumptions such as stock price, expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on the fair value of the Company’s stock, historical data, peer company data and judgment regarding future trends. Prior to becoming a publicly traded company, the fair value of the Company’s common stock was determined by the Board of Directors at each award grant date based upon a variety of factors, including the results obtained from an independent third-party valuation, the Company’s financial position and historical financial performance, the status of technological developments within the Company’s proposed product candidates, the illiquid nature of the common stock, arm’s length sales of the Company’s capital stock, including convertible preferred stock, the effect of the rights and preferences of the preferred stockholders, and the prospects of a liquidity event, among others, as the Company’s common stock was not actively traded. Since becoming a publicly traded company, the Company uses its publicly traded stock price as the fair value of its common stock.

 

The fair value of RSUs and PSUs are based on the closing stock price on the grant date.

 

Income Taxes

 

The Company accounts for income taxes under the asset and liability method pursuant to ASC 740, Accounting for Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

 

The Company recognizes deferred tax assets to the extent that management believes that these assets are more likely than not to be realized in the future. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

 

 

The Company provides reserves for potential payments of taxes to various tax authorities related to uncertain tax positions. Amounts recognized are based on a determination of whether a tax benefit taken by the Company in its tax filings or positions is “more likely than not” to be sustained on audit. The amount recognized is equal to the largest amount that is more than 50% likely to be sustained. Interest and penalties associated with uncertain tax positions are recorded as a component of income tax expense.

 

Net Income/(Loss) Per Share

 

Basic net income/(loss) per share attributable to common stockholders is computed by dividing the net income/(loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income/(loss) per share attributable to common stockholders is computed by dividing the net income/(loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common stock. For the purpose of this calculation, outstanding stock options, restricted stock units, performance-based RSUs and stock warrants are considered potential dilutive common stock and are excluded from the computation of net loss per share as their effect is anti-dilutive.

 

Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to be outstanding when their effect is anti-dilutive.

  

Segments

 

Operating segments are identified as components of an enterprise about which separate discrete financial information is made available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The CODM is the Company’s chief executive officer. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s singular concentration is focused on the development of its differentiated, human-like surgical robotic system.

 

Emerging Growth Company Status

 

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). Pursuant to the JOBS Act, an emerging growth company is provided the option to adopt new or revised accounting standards that may be issued by Financial Accounting Standards Board (“FASB”) or the SEC either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. We intend to take advantage of the exemption for complying with new or revised accounting standards within the same time periods as private companies so long as we qualify as an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies.

 

 

3.	SHORT-TERM INVESTMENTS

 

Short-term investments consist of U.S. treasury and U.S. government agency securities and are classified as available-for-sale. 

 

Available-for-sale investments are reported at fair value, with unrealized gains or losses reported in accumulated other comprehensive income. The fair values of our available-for-sale cash and cash equivalents securities are Level 1 measurements, based on quoted prices from active markets for identical assets. The fair values of our available-for-sale short-term investments securities are Level 2 measurements, based on quoted prices from inactive markets for identical assets.

 

The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of our marketable securities by type of security as of September 30, 2023 was as follows:

 

		September 30, 2023
		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Assets:
U.S. treasury and U.S. government securities			51,165				—				(89	)			51,076
Total assets		$	51,165			$	—			$	(89	)		$	51,076

 

The aggregate fair value of available-for-sale debt securities in an unrealized loss position as of September 30, 2023 was $50,742. We did not have any investments in a continuous unrealized loss position for more than twelve months as of September 30, 2023. As of September 30, 2023, we believe that the cost basis of our available-for-sale debt securities is recoverable. No allowance for credit losses was recorded as of September 30, 2023.

 

4.	PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net consist of the following:

 

		Estimated		September 30,				December 31,
		Useful Lives		2023				2022
Machinery and equipment		3 to 5 years		$	2,124			$	1,906
Furniture and fixed assets		3 to 7 years			1,173				1,059
Computer hardware and software		3 years			1,327				1,155
Leasehold improvements		Lesser of lease term or asset life			4,289				4,161
Total property and equipment					8,913				8,281
Less accumulated depreciation					(3,024	)			(1,695	)
Property and equipment, net				$	5,889			$	6,586

 

 

In connection with the Waltham lease, the Company received $1,200 in August 2022 related to leasehold improvements funded by its landlord. These leasehold improvements are being depreciated over the shorter of the lease term or each asset’s life. The $1,200 was included in leasehold improvements.

 

In connection with the Waltham lease, the Company received $840 in May 2021 related to leasehold improvements funded by its landlord. These leasehold improvements are being depreciated over the shorter of the lease term or each asset’s life. The $840 paid to vendors by the landlord was included in leasehold improvements.

 

Depreciation expense for the three and nine-month periods ended September 30, 2023 was $447 and $1,329, respectively. Depreciation expense for the three and nine-month periods ended September 30, 2022 was $338 and $709, respectively. 

 

5.	FAIR VALUE MEASUREMENTS

 

The following fair value hierarchy table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the inputs the Company utilized to determine such fair value:

 

		September 30, 2023
		Quoted Prices
		in Active Markets for Identical Items				Significant Other Observable Inputs				Significant Unobservable Inputs
		(Level 1)				(Level 2)				(Level 3)				Total
Assets:
Money market funds		$	24,725			$	—			$	—			$	24,725
U.S. treasury securities			—				51,076								51,076
Total assets		$	24,725			$	51,076			$	—			$	75,801
Liabilities:
Warrant liabilities - public warrants		$	1,380			$	—			$	—			$	1,380
Warrant liabilities - private warrants			—				—				936				936
Total liabilities		$	1,380			$	—			$	936			$	2,316

 

 

		December 31, 2022
		Quoted Prices in Active Markets for Identical Items				Significant Other Observable Inputs				Significant Unobservable Inputs
		(Level 1)				(Level 2)				(Level 3)				Total
Assets:
Money market funds		$	114,409			$	—			$	—			$	114,409
Total assets		$	114,409			$	—			$	—			$	114,409
Liabilities:
Warrant liabilities - public warrants		$	2,589			$	—			$	—			$	2,589
Warrant liabilities - private warrants			—				—				3,432				3,432
Total liabilities		$	2,589			$	—			$	3,432			$	6,021

 

Money market funds are classified as cash and cash equivalents. U.S. treasury securities are classified as cash equivalents when the date from initial purchase to maturity is less than 90 days. The remaining investments are classified as short-term investments.

 

The carrying values of prepaid expenses, right of use assets, accounts payable, and accrued expenses approximate their fair values due to the short-term nature of the instruments. The fair values of our short-term investments are Level 2 measurements as the US government securities are not the most recent offerings and are therefore not traded in an active market.

 

The fair value of the Public Warrants was determined from their trading value on public markets. The fair value of the Private Placement Warrants was calculated using the Black-Scholes option pricing model. The assumptions used in the model were the Company’s stock price, exercise price, expected term, volatility, interest rate, and dividend yield.

 

For the three months ended September 30, 2023, the Company recognized a gain to the statement of operations resulting from a decrease in the fair value of liabilities of $4,703 presented as a change in fair value of warrant liabilities on the accompanying statement of operations. For the nine months ended September 30, 2023, the Company recognized a gain to the statement of operations resulting from a decrease in the fair value of liabilities of $3,705 presented as a change in fair value of warrant liabilities on the accompanying statement of operations.

 

For the three months ended September 30, 2022, the Company recognized a loss to the statement of operations resulting from an increase in the fair value of liabilities of $3,038 presented as a change in fair value of warrant liabilities on the accompanying statement of operations. For the nine months ended September 30, 2022, the Company recognized a gain to the statement of operations resulting from a decrease in the fair value of liabilities of $75,291 presented as a change in fair value of warrant liabilities on the accompanying statement of operations.

 

The Company estimates the volatility of its warrants based on implied volatility from the Company’s Public Warrants and from historical volatility of select peer companies’ common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

 

The following table provides quantitative information regarding the inputs used in determining the fair value of the Company’s Level 3 liabilities:

 

Private Placement Warrants		As of September 30, 2023				As of December 31, 2022
Volatility			107.5	%			72.0	%
Stock price		$	0.59			$	2.02
Expected life of options			3.0 years				3.7 years
Risk-free rate			4.8	%			4.1	%
Dividend yield			0.00	%			0.00	%

 

 

The following table shows the change in number and value of the warrants since December 31, 2022:

 

		Public								Private								Total
		Shares				Value				Shares				Value				Shares				Value
December 31, 2022			17,248,601			$	2,589				10,400,000			$	3,432				27,648,601			$	6,021
Change in value			—			$	4,311				—			$	1,768				—			$	6,079
March 31, 2023			17,248,601			$	6,900				10,400,000			$	5,200				27,648,601			$	12,100
Change in value			—			$	(3,105	)			—			$	(1,976	)			—			$	(5,081	)
June 30, 2023			17,248,601			$	3,795				10,400,000			$	3,224				27,648,601			$	7,019
Change in value			—			$	(2,415	)			—			$	(2,288	)			—			$	(4,703	)
September 30, 2023			17,248,601			$	1,380				10,400,000			$	936				27,648,601			$	2,316

 

6.	ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

The following table summarizes the Company’s components of accrued expenses and other current liabilities:

 

		As of
		September 30, 2023				December 31, 2022
Compensation and benefits related		$	4,506			$	5,240
Professional services and other			761				568
Accrued expenses		$	5,267			$	5,808

 

 

7.	COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings—From time to time, the Company may face legal claims or actions in the normal course of business. At each reporting date, the Company evaluates whether a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to its legal proceedings.

 

8.

LEASES

 

On January 1, 2022, we adopted Accounting Standards Update (“ASU”) 2016-02 and all subsequent amendments, collectively codified in ASC Topic 842, “Leases” (“Topic 842”). The guidance requires modified retrospective adoption, either at the beginning of the earliest period presented or at the beginning of the period of adoption. We elected to apply the guidance at the beginning of the period of adoption and recorded right-of-use (ROU) leased assets of $14,302. In conjunction with this, we recorded lease liabilities, which had been discounted at our incremental borrowing rates, of $15,933. The impact of our adoption of Topic 842 on our current and deferred income taxes was immaterial. The adoption of ASC 842 had no effect on retained earnings.

 

The Company leases its office facility under a noncancelable operating lease agreement that expires in March 2032. Rent expense for the three and nine-month periods ended September 30, 2023 was $534 and $1,603, respectively. Rent expense for the three and nine-month periods ended September 30, 2022 was $545 and $1,675, respectively.

 

 

A summary of the components of lease costs for the Company under ASC 842 for the nine months ended September 30, 2023 and September 30, 2022, respectively were as follows:

 

		September 30,
Lease costs		2023				2022
Operating lease costs		$	1,603			$	1,675
Total lease costs		$	1,603			$	1,675

 

Supplemental disclosure of cash flow information related to leases for the nine months ended September 30, 2023 and June 30, 2022, respectively were as follows:

 

		September 30,
		2023				2022
Cash paid		$	1,604			$	1,156
Cash received		$	—			$	(1,200	)
Total cash paid for amounts included in the measurement of operating lease liabilities (operating cash flows)		$	1,604			$	(44	)

 

The weighted-average remaining lease term and discount rate were as follows:

 

		September 30,
		2023				2022
Weighted-average remaining lease term (in years)			9				10
Weighted-average discount rate			8.74	%			8.74	%

 

The following table presents the maturity of the Company’s operating lease liabilities as of September 30, 2023:

 

Years Ended December 31,
2023, excluding the nine months ended September 30, 2023		$	558
2024			2,286
2025			2,358
2026			2,430
2027			2,502
Thereafter			11,431
Total future minimum lease payments		$	21,565
Less imputed interest			(6,498	)
Carrying value of lease liabilities		$	15,067

 

9.	INCOME TAXES

 

For the three and nine-month periods ended September 30, 2023 and for the year ended December 31, 2022, the Company did not record a tax provision as the Company did not earn any taxable income in either period and maintains a full valuation allowance against its net deferred tax assets.

 

 

10.	STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

 

Authorized Shares 

 

At September 30, 2023, the Company’s authorized shares consisted of 300,000,000 shares of Class A common stock, $0.0001 par value, 22,000,000 shares of Class B common stock, $0.0001 par value, and 1,000,000 shares of preferred stock, par value of $0.0001 per share.

 

Preferred Stock

 

Preferred stock shares authorized may be issued from time to time in one or more series, with each series terms, voting, dividend, conversion, redemption, liquidation and other rights to be determined by the Board of Directors at the time of issuance. As of September 30, 2023, there were no shares of preferred stock issued and outstanding.

 

Warrants

 

The Company’s outstanding warrants include Public Warrants, which were issued as one-half of a redeemable Public Warrant per unit issued in D8’s initial public offering on July 17, 2020, and Private Placement Warrants sold in a private placement to D8’s sponsor (the “Sponsor”) in connection with the closing of the initial public offering and in connection with the conversion of D8 working capital loans. Each warrant is exercisable to purchase one share of Class A common stock at $11.50 per share.

 

As of September 30, 2023, the Company had 17,248,601 Public Warrants and 10,400,000 Private Placement Warrants outstanding.

 

The Public Warrants became exercisable at $11.50 per share 30 days after the Closing. If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. The Company filed a registration statement with the SEC that was declared effective as of October 22, 2021 covering the shares of Class A common stock issuable upon exercise of the warrants and is maintaining a current prospectus relating to those shares of Class A common stock until the warrants expire, are exercised or redeemed, as specified in the warrant agreement. 

 

The warrants will expire five years after the closing of the Business Combination or earlier upon redemption or liquidation.

 

Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00. The Company may call the Public Warrants for redemption:

 

●

in whole and not in part;

 

●

at a price of $0.01 per warrant;

 

●

upon a minimum of 30 days’ prior written notice of redemption; and

 

●

if, and only if, the last reported sale price of Class A common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

 

Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00. The Company may call the Public Warrants for redemption:

 

●

in whole and not in part;

 

●

at a price of $0.10 per warrant;

 

●

upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the “fair market value” of the Company’s Class A common stock; and

 

●

if, and only if, the last reported sale price of Class A common stock shares equals or exceeds $10.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders.

 

 

The Private Placement Warrants are identical to the Public Warrants underlying the units sold in D8’s initial public offering, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants, so long as they are held by the Sponsor or its permitted transferees, (i) are not redeemable by the Company, (ii) could not (including the shares of Class A common stock issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the initial Business Combination, (iii) may be exercised by the holders on a cashless basis and (iv) are entitled to registration rights. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants. 

 

Common Stock

 

Classes of Common Stock

 

Class A common stock receives one vote per share. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of Class A common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available for such purposes. In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of Class A common stock are entitled to share ratably in all assets remaining after payment of our debts and other liabilities, subject to prior distribution rights of preferred stock or any class or series of stock having a preference over the Class A common stock, then outstanding, if any.

 

Class B common stock receives 20 votes per share and converts into Class A at a one-to-one conversion rate per share. Holders of Class B common stock will share ratably together with each holder of Class A common stock, if and when any dividend is declared by the board of directors. Holders of Class B common stock have the right to convert shares of their Class B common stock into fully paid and non-assessable shares of Class A common stock, on a one-to-one basis, at the option of the holder at any time. Upon the occurrence of certain events, holders of Class B common stock automatically convert into Class A common stock, on a one-to-one basis. In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of Class B common stock are entitled to share ratably in all assets remaining after payment of our debts and other liabilities, subject to prior distribution rights of preferred stock or any class or series of stock having a preference over the Class B common stock, then outstanding, if any.

 

Stock Based Compensation

 

2021 Plan — In connection with the Closing, the Company’s stockholders approved the Vicarious Surgical Inc. 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which 6,590,000 shares of Class A common stock were reserved for future equity grants under the 2021 Plan and 11,794,074 shares of Class A common stock were reserved for issuance under the 2021 Plan upon exercise of outstanding option awards assumed by the Company in connection with the Business Combination. On June 1, 2022, the Company’s stockholders approved an amendment to the 2021 Plan, which provides for the granting of up to 6,590,000 additional shares of Class A common stock under the 2021 Plan as determined by the Board of Directors. On June 1, 2023, the Company’s stockholders approved an amendment to the 2021 Plan, which provides for the granting of up to 6,970,817 additional shares of Class A common stock under the 2021 Plan as determined by the Board of Directors.

 

The 2021 Plan provides for the granting of incentive and nonqualified stock options, restricted stock, and other stock-based awards to employees, officers, directors, consultants, and advisors of the Company. Under the 2021 Plan, incentive and nonqualified stock options may be granted at not less than 100% of the fair market value of the Company’s common stock on the date of grant. If an incentive stock option is granted to an individual who owns more than 10% of the combined voting power of all classes of the Company’s capital stock, the exercise price may not be less than 110% of the fair market value of the Company’s common stock on the date of grant and the term of the option may not be longer than five years.

 

 

The 2021 Plan authorizes the Company to issue up to 31,944,891 shares of common stock (either Class A or Class B) pursuant to awards granted under the 2021 Plan. The Board of Directors administers the 2021 Plan and determines the specific terms of the awards. The contractual term of options granted under the 2021 Plan is not more than 10 years. The 2021 Plan will expire on April 13, 2031 or an earlier date approved by a vote of the Company’s stockholders or Board of Directors.

 

The Company issues RSUs of Class A common stock to certain employees and members of the board of directors. The RSUs vest over a four-year period. Performance-based RSUs are issued in the form of performance share units (“PSUs”). PSUs include threshold, target, and maximum achievement levels based on the achievement of specific performance measures. PSUs are subject to forfeiture if applicable performance measures are not attained. The expense is recognized over the vesting period, based on the best available estimate of the number of share units expected to vest. Estimates are subsequently revised if there is any indication that the number of share units expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. In July 2023, 2,510,422 PSUs were granted and an additional 2,510,422 PSUs could be earned if certain performance measures are overachieved. The activity for common stock subject to vesting is as follows:

 

		Shares Subject to Vesting				Weighted Average Grant Date Fair Value
Balance of unvested shares - January 1, 2023			3,085,123			$	5.01
Granted			5,044,878			$	2.10
Vested			(1,037,432	)		$	4.36
Forfeited			(146,297	)		$	3.80
Balance of unvested shares - September 30, 2023			6,946,272			$	3.02

 

Total stock-based compensation related to RSUs and PSUs during the three and nine-month periods ended September 30, 2023 was $1,722 and $4,598, respectively. As of September 30, 2023, the total unrecognized stock-based compensation expense related to unvested RSUs and PSUs aggregated $15,558 and is expected to be recognized over a weighted average period of 2.58 years. The aggregate intrinsic value of RSUs granted and vested during the nine months ended September 30, 2023 was $2,980 and $1,877, respectively. The aggregate intrinsic value of RSUs outstanding at September 30, 2023 was $4,103.

 

The Company grants stock options to employees at exercise prices deemed by the Board of Directors to be equal to the fair value of the common stock at the time of grant. For options with a service condition, the fair value of the Company’s stock options and warrants on the date of grant is determined by a Black-Scholes pricing model utilizing key assumptions such as common stock price, risk-free interest rate, dividend yield, expected volatility and expected life. The Company’s estimates of these assumptions are primarily based on the fair value of the Company’s stock, historical data, peer company data and judgement regarding future trends. The Company uses its publicly traded stock price as the fair value of its common stock.

 

 

During the nine months ended September 30, 2023 and September 30, 2022, the Company granted options to purchase 4,217,330 and 4,708,299 shares, respectively, of Class A common stock, to employees and consultants with a fair value of $4,811 and $13,554 respectively, calculated using the Black-Scholes option-pricing model with the following assumptions:

 

			Nine Months Ended September 30,
			2023				2022
Risk-free interest rate			3.42% - 4.39	%			1.95% - 3.01	%
Expected term (in years)			6.02 - 6.08				5.52 - 6.07
Dividend yield			—	%			—	%
Expected volatility			74.42% - 79.44	%			68.87% - 70.26	%

 

The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of the related stock options. The expected life of employee and non-employee stock options was calculated using the average of the contractual term of the option and the weighted-average vesting period of the option, as the Company does not have sufficient history to use an alternative method to calculate an expected life for employees. The Company does not pay a dividend and is not expected to pay a dividend in the foreseeable future. Expected volatility for the Company’s common stock was determined based on a combination of an average of the historical volatility of a peer group of similar public companies and the Company’s own stock.

 

As of September 30, 2023, there was $18,210 of total gross unrecognized stock-based compensation expense related to unvested stock options. The costs remaining as of September 30, 2023 are expected to be recognized over a weighted-average period of 2.59 years.

 

Total stock-based compensation expense related to all of the Company’s stock-based awards granted is reported in the statements of operations as follows:

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Research and development		$	850			$	743			$	2,516			$	1,742
Sales and marketing			331				383				926				945
General and administrative			2,432				2,523				6,750				6,019
Total		$	3,613			$	3,649			$	10,192			$	8,706

 

The Company plans to generally issue previously unissued shares of common stock for the exercise of stock options.

 

There were 3,959,540 shares available for future equity grants under the 2021 Plan at September 30, 2023.

 

The option activity of the 2021 Plan for the nine months ended September 30, 2023, is as follows:

 

		Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (in Years)
Outstanding at January 1, 2023			14,192,417			$	3.90				8.26
Granted			4,217,330				1.96
Exercised			(885,829	)			0.30
Forfeited, expired, or cancelled			(2,639,359	)			4.78
Options vested and expected to vest at September 30, 2023			14,884,559			$	3.40				7.02

 

 

The weighted average grant date fair value of options granted during the nine months ended September 30, 2023 and September 30, 2022 was $1.14 and $2.88, respectively. The aggregate intrinsic value of options exercised during the nine months ended September 30, 2023 and September 30, 2022 was $1,748 and $9,927, respectively. The aggregate intrinsic value of options outstanding at September 30, 2023 was $685.

 

Common Stock Reserved for Future Issuance

 

As of September 30, 2023 and December 31, 2022, the Company has reserved the following shares of Class A common stock for future issuance (in thousands):

 

		As of
		September 30,				December 31,
		2023				2022
Common stock options outstanding			14,885				14,192
Restricted stock units outstanding			6,946				3,085
Shares available for issuance under the 2021 Plan			3,959				3,465
Public warrants			17,249				17,249
Private warrants			10,400				10,400
Total shares of authorized Common Stock reserved for future issuance			53,439				48,391

 

11.	EMPLOYEE RETIREMENT PLAN

 

The Company maintains the Vicarious Surgical Inc. 401(k) plan, under Section 401(k) of the Internal Revenue Code of 1986, as amended, covering all eligible employees. Employees of the Company may participate in the 401(k) plan after one month of service and must be 18 years of age or older. The Company offers company-funded matching contributions which totaled $187 and $758 for the three and nine-month periods ended September 30, 2023, respectively. For the three and nine-month periods ended September 30, 2022, the company-funded matching contributions were $192 and $591, respectively.

 

12.	NET INCOME/(LOSS) PER SHARE

 

The Company computes basic income/(loss) per share using net income/(loss) attributable to Vicarious Surgical Inc. common stockholders and the weighted-average number of common shares outstanding during each period. Diluted loss per share includes shares issuable upon exercise of outstanding stock options and stock-based awards where the conversion of such instruments would be dilutive.

 

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2023				2022				2023				2022
Numerator for basic and diluted net income/(loss) per share:
Net income/(loss)		$	(15,704	)		$	(24,737	)		$	(57,960	)		$	16,337
Denominator for basic net income/(loss) per share:
Weighted average shares			155,141,393				121,965,277				136,194,179				121,201,693
Denominator for diluted net income/(loss) per share:
Weighted average shares			155,141,393				121,965,277				136,194,179				131,102,132
Net income/(loss) per share of Class A and Class B common stock – basic		$	(0.10	)		$	(0.20	)		$	(0.43	)		$	0.14
Net income/(loss) per share of Class A and Class B common stock – diluted		$	(0.10	)		$	(0.20	)		$	(0.43	)		$	0.12

 

For the three and nine-month periods ended September 30, 2023, 46,596,484 and 46,164,379 potential shares, respectively, of the Company’s common stock were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options and warrants were greater than or equal to the average price of the common shares and were therefore anti-dilutive. For the three months ended September 30, 2022, 35,035,299 potential shares of the Company’s common stock were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options and warrants were greater than or equal to the average price of the common shares and were therefore anti-dilutive.

 

******

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

  

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our unaudited condensed consolidated results of operations and financial condition. The discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto for the year ended December 31, 2022 contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 15, 2023, and our other public reports filed with the SEC. This discussion contains forward looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to “we”, “us”, “our”, and “the Company” are intended to mean the business and operations of Vicarious Surgical Inc. and its consolidated subsidiaries. The condensed consolidated financial statements for the three and nine-month periods ended September 30, 2023 and 2022, respectively, present the financial position and results of operations of Vicarious Surgical Inc. and its consolidated subsidiaries. In preparing this MD&A, the Company presumes that readers have access to and have read the MD&A in our Annual Report on Form 10-K, pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S-K. Financial information is stated in thousands, except per share data.

 

Overview

 

We are combining advanced miniaturized robotics, computer science, sensing and 3D visualization to build a new category of intelligent and affordable, single-port surgical robot that virtually transports surgeons inside the patient to perform minimally invasive surgery. With our next-generation robotics technology and proprietary human-like surgical robots, we are seeking to improve patient outcomes, as well as the cost and efficacy of surgical procedures. Led by a visionary team of engineers from MIT, we intend to deliver the next generation in robotic surgery, designed to solve the shortcomings of both open surgery, as well as current manual and robot-assisted minimally invasive surgery, and transform the standard of care in surgical robotics.

 

We estimate there are over 45 million soft tissue surgical procedures addressable annually worldwide by our technology which represents a $150 billion market opportunity. Of these procedures, it is estimated that more than 50% are performed using open surgery, and less than 5% are performed by current robot-assisted minimally invasive surgery.

 

We believe this slow adoption of robot-assisted surgery has occurred because of several factors, including the following:

 

●

Significant Capital Investment. Legacy robotic systems require high upfront acquisition costs and burdensome annual service contracts that are often prohibitively expensive, especially in outpatient settings. Based on discussion with industry sources, we estimate these capital costs to be up to $2.0 million or more per system upfront, plus an additional 10% to 20% annually for maintenance and service contracts.

 

●

Low Utilization. In addition to the significant acquisition costs, existing robotic systems create inefficiencies and increase costs to medical facilities considering adoption. Due to their large size and limited portability, existing robotic systems require the construction of a dedicated operating room, occupying valuable real estate within the hospital. Once in place, these robotic systems require extensive set-up and operating room turnover times, which limits the number of procedures that can be performed with the robotic system.

 

●

Limited Capabilities. Existing robotic systems have limited capabilities and are ill-suited for many outpatient procedures. Due to their limited degrees of freedom inside the abdomen, they depend on significant, complicated, robotic motion outside the body, and they have limited ability to operate in multiple quadrants, difficulty operating on the “ceiling” of the abdomen, create collisions inside and outside of the patient’s abdomen, and restrict overall access of the operating team to the patient.

  

●

Difficult to Use. Existing robotic systems require the surgeon to develop an extensive procedure plan in advance to determine appropriate incision sites and angles for each procedure, in order to avoid collisions inside and outside of the patient’s abdomen. Surgeons must develop this plan with fewer degrees of freedom than they would employ using open surgery, restricting their natural movements. Becoming proficient at manipulating these legacy robotic systems to perform the procedures they otherwise were trained to perform via open surgery requires extensive training and several dozen procedures on live patients. As these systems are maintained in dedicated, expensive, operating rooms, obtaining access to train on the system becomes a significant impediment to adoption, resulting in more open surgeries.

 

 

The single-port Vicarious Surgical System with advanced, miniaturized robotics and capabilities for exceptional sensing and visualization is designed to address the significant limitations of open surgery and existing single- and multi-port robotic surgical approaches to improve patient outcomes and enhance adoption by hospitals and other medical facilities. The Vicarious Surgical System is designed with a fundamentally different architecture, and proprietary de-coupled actuators, to overcome many of the limitations of open surgery or existing robot-assisted surgical procedures with a minimally invasive and more capable robotic system. This architecture enables unprecedented dexterity, sensing and visualization inside the abdomen through an ultra-thin support tube, providing significant improvement over existing legacy robotic systems and minimizing the complications and trauma associated with open surgery. Our goal is to leverage this architecture to eventually enable automated patient protection, which is a set of features designed to enhance patient safety, including real-time multimodal fluorescent imaging and full 3D anatomical depth mapping. We would be able to introduce these features if and when the Vicarious Surgical System, and, separately, these additional features, are approved by the Food and Drug Administration (“FDA”).

 

The Vicarious Surgical System has not yet been authorized by the FDA. We have had pre-submission meetings with the FDA to align on our regulatory strategy and plan to file a de novo application with the FDA for use in ventral hernia procedures as our first indication in early 2026. There are currently an estimated 3.9 million worldwide ventral hernia cases per year. Based on our pre-submission meetings with the FDA, we now expect to initiate a clinical trial in mid-2025 with an estimated 30 to 60 patients. The primary performance endpoint of our clinical trial will be the ability of the surgeon to complete the intended ventral hernia repair and our primary safety endpoint will be adverse event rate as compared to existing laparoscopic data.

 

Financial Highlights

 

We are pre-revenue generating as of September 30, 2023.

 

We incurred a net loss of $57,960 for the nine months ended September 30, 2023 and generated net income of $16,337 for the nine months ended September 30, 2022, representing a period-over-period loss of 455%. The net income for the nine months ended September 30, 2022 is inclusive of a gain of $75,291 related to the change in valuation of our warrant obligations while the net loss for the nine months ended September 30, 2023 is inclusive of a gain of $3,705 related to the change in valuation of our warrant obligations. Our loss from operations prior to the warrant gain and other income and expense items was $65,125 and $59,468 for the nine months ended September 30, 2023 and 2022, respectively, representing a period-over-period loss of 10%, which was primarily due to a 12% increase in our average headcount and increased spending as we continue to develop our surgical robot. Our increase in average headcount was primarily due to an increase in research and development (“R&D”) personnel for which our average headcount increased by 16% from an average of 134 people in the nine months ended September 30, 2022 to an average of 155 people for the nine months ended September 30, 2023.

  

Factors Affecting Results of Operations

 

The following factors have been important to our business and we expect them to impact our results of operations and financial condition in future periods:

 

Revenue

 

To date, we have not generated any revenue. We do not expect to generate revenue unless and until we receive FDA authorization of our product candidate. The amount of revenue, if any, from initial sales of a new product is difficult to predict and, even if we successfully commercialize our product candidate upon approval and begin generating revenue, such revenues will initially only modestly reduce our continued net losses resulting from our research and development and marketing activities which we expect to continue to increase even after market authorization is received.

 

 

Research and Development Expenses

 

R&D expenses consist primarily of engineering, product development, regulatory expenses, medical affairs, and other costs associated with product candidates and technologies that are in development. These expenses include employee compensation, including stock-based compensation, supplies, consulting, prototyping, testing, materials, travel expenses, depreciation and an allocation of facility overhead expenses. Additionally, R&D expenses include internal and external costs associated with our regulatory compliance and quality assurance functions and overhead costs. We expect R&D expenses as a percentage of revenue to vary over time depending on the level and timing of our new product development efforts, as well as our clinical development, clinical trial and other related activities.

 

General and Administrative Expenses

 

General and administrative (“G&A”) expenses consist primarily of compensation for personnel, including stock-based compensation, related to executive, finance and accounting, information technology and human resource functions. Other G&A expenses include travel expenses, professional services fees (including legal, audit and tax fees), insurance costs, general corporate expenses and allocated facilities-related expenses. We expect G&A expenses to continue to increase in absolute dollars as we expand our infrastructure to both drive and support the anticipated growth due to additional legal, accounting, insurance and other expenses associated with being a public company.

 

Sales and Marketing Expenses

 

Sales and marketing (“S&M”) expenses consist primarily of compensation for personnel, including stock-based compensation, related to selling and marketing functions and physician education programs. Other S&M expenses include training, travel expenses, promotional activities, marketing initiatives, market research and analysis, conferences and trade shows, professional services fees and allocated facilities-related expenses. We expect S&M expenses to continue to increase in absolute dollars as we increase potential customers’ awareness of our presence and prepare our sales and marketing function for our product launch at a future, yet undetermined date.

 

Change in Fair Value of Warrant Liabilities

 

The change in fair value of the warrant liability represents the mark-to-market fair value adjustments to the outstanding Public Warrants and Private Placement Warrants assumed as part of the consummation of the Business Combination on September 17, 2021. The change in fair value of our Private Placement Warrants is primarily the result of the change in the underlying stock price of our stock used in the Black-Scholes option pricing model while the Public Warrants are marked-to-market based on their price on the New York Stock Exchange. The warrant liability was measured at fair value initially on September 17, 2021 and is remeasured at exercise, and for warrants that remain outstanding at the end of each subsequent reporting period.

 

Interest Income

 

Interest income consists primarily of interest income earned on our cash and cash equivalents and short-term investments.

 

Interest Expense

 

Interest expense consists primarily of interest incurred on our equipment loans. In 2022, interest expense also included interest incurred on our term loan which was paid off in October 2022.

 

 

Results of Operations

 

The following table sets forth our historical operating results for three months ended September 30, 2023 and 2022:

 

		Three months ended September 30,
(in thousands, except for per share amounts)		2023				2022				Change				%  Change
Operating expenses:
Research and development		$	13,040			$	12,120			$	920				8	%
Sales and marketing			1,401				1,912				(511	)			(27	)%
General and administrative			6,911				8,130				(1,219	)			(15	)%
Total operating expenses			21,352				22,162				(810	)			(4	)%
Loss from operations			(21,352	)			(22,162	)			810				(4	)%
Other income (expense):
Change in fair value of warrant liabilities			4,703				(3,038	)			7,741				255	%
Interest and other income			946				494				452				91	%
Interest expense			(1	)			(31	)			30				(97	)%
Loss before income taxes			(15,704	)			(24,737	)			9,033				(37	)%
Provision for income taxes			—				—				—				N/M
Net loss		$	(15,704	)		$	(24,737	)		$	9,033				(37	)%
Net loss per common share, basic and diluted		$	(0.10	)		$	(0.20	)		$	0.10				(50	)%
Other comprehensive income/(loss):
Net unrealized income/(loss) on investments			41				—				41				N/M
Other comprehensive income/(loss)			41				—				41				N/M
Comprehensive net income/(loss)		$	(15,663	)		$	(24,737	)		$	9,074				(37	)%

 

Comparison of the Three Months ended September 30, 2023 and 2022

 

Research and Development Expenses. R&D expenses increased $920, or 8%, to $13,040 during the three months ended September 30, 2023, compared to $12,120 during the three months ended September 30, 2022. This increase was primarily due to increases of $377 of personnel-related expenses, $201 in facility expenses, $171 in materials and supplies and $108 in depreciation expense. The increase in personnel-related expense was due primarily to a $631 severance accrual offset by a decrease in average headcount of 5%, from an average of 153 people in the three months ended September 30, 2022 to an average of 146 people in the three months ended September 30, 2023, with the remainder of the increase attributable to increases in wages and benefits.

 

Sales and Marketing Expenses. S&M expenses decreased $511, or 27%, to $1,401 during the three months ended September 30, 2023, compared to $1,912 during the three months ended September 30, 2022. This decrease was primarily due to a decrease of $344 in personnel-related expenses. The decrease in personnel-related expense was due primarily to a decrease in average headcount of 28%, from an average of 18 people in the three months ended September 30, 2022 to an average of 13 people in the three months ended September 30, 2023, with the remainder of the decrease attributable to decreases in wages and benefits.

 

 

General and Administrative Expenses. G&A expenses decreased $1,219, or 15%, to $6,911 during the three months ended September 30, 2023, compared to $8,130 during the three months ended September 30, 2022. This decrease was primarily due to a $634 decrease in insurance expense, a $917 decrease in personnel-related expenses and offset by a $121 increase in facilities expenses. The decrease in personnel-related expense was due primarily to a decrease in average headcount of 32%, from an average of 34 people in the three months ended September 30, 2022 to an average of 23 people in the three months ended September 30, 2023, with the remainder of the decrease attributable to decreases in wages and benefits.

 

Change in Fair Value of Warrant Liabilities. The change in fair value of warrant liabilities during the three months ended September 30, 2023 was a $4,703 gain. The change in fair value of warrant liabilities during the three months ended September 30, 2022 was a $3,038 loss. These changes in fair value of the warrant liabilities resulted from the remeasurement of the public and private placement warrant liabilities at September 30, 2023 and 2022, respectively.

 

Interest and Other Income. Interest and other income increased by $452 to $946 during the three months ended September 30, 2023, compared to $494 during the three months ended September 30, 2022. The increase was primarily due to an increase in interest income from short-term investments.

 

Interest Expense. Interest expense decreased by $30 to $1 during the three months ended September 30, 2023, compared to $31 during the three months ended September 30, 2022. The decrease was primarily due to the term loan being paid off in full during the fourth quarter of 2022.

 

Income Taxes. Our income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in tax law. Due to historical cumulative losses and expected future losses, we maintain a full valuation allowance against our U.S. and state deferred tax assets.

 

The following table sets forth our historical operating results for the nine months ended September 30, 2023 and 2022:

 

		Nine months ended September 30,
(in thousands, except for per share amounts)		2023				2022				Change				%  Change
Operating expenses:
Research and development		$	39,110			$	32,023			$	7,087				22	%
Sales and marketing			5,027				4,625				402				9	%
General and administrative			20,988				22,820				(1,832	)			(8	)%
Total operating expenses			65,125				59,468				5,657				10	%
Loss from operations			(65,125	)			(59,468	)			(5,657	)			10	%
Other income (expense):
Change in fair value of warrant liabilities			3,705				75,291				(71,586	)			(95	)%
Interest and other income			3,463				603				2,860				474	%
Interest expense			(3	)			(89	)			86				(97	)%
Income (loss) before income taxes			(57,960	)			16,337				(74,297	)			(455	)%
Provision for income taxes			—				—				—				N/M
Net income (loss)		$	(57,960	)		$	16,337			$	(74,297	)			(455	)%
Net income (loss) per common share, basic		$	(0.43	)		$	0.14			$	(0.57	)			(407	)%
Net income (loss) per common share, diluted		$	(0.43	)		$	0.12			$	(0.55	)			(458	)%
Other comprehensive income/(loss):
Net unrealized income/(loss) on investments			(89	)			—				(89	)			N/M
Other comprehensive income/(loss)			(89	)			—				(89	)			N/M
Comprehensive net income/(loss)		$	(58,049	)		$	16,337			$	(74,386	)			(455	)%

 

 

Comparison of the Nine Months ended September 30, 2023 and 2022

 

Research and Development Expenses. R&D expenses increased $7,087, or 22%, to $39,110 during the nine months ended September 30, 2023, compared to $32,023 during the nine months ended September 30, 2022. This increase was primarily due to increases of $4,434 in personnel-related expenses, $1,478 in materials and supplies, $564 in depreciation expense, and $516 in lease and facility expenses. The increase in personnel-related expense was due primarily to an increase in average headcount of 16%, from an average of 134 people in the nine months ended September 30, 2022 to an average of 155 people in the nine months ended September 30, 2023, with the remainder of the increase attributable to increases in wages and benefits.

 

Sales and Marketing Expenses. S&M expenses increased $402, or 9%, to $5,027 during the nine months ended September 30, 2023, compared to $4,625 during the nine months ended September 30, 2022. This increase was primarily due to increases of $65 in personnel-related expenses and $366 in professional services. The increase in personnel-related expense was due to an average headcount increase of 13%, from an average of 15 people in the nine months ended September 30, 2022 to an average of 17 people for the nine months ended September 30, 2023, with the remainder of the increase attributable to increases in wages and benefits.

 

General and Administrative Expenses. G&A expenses decreased $1,832, or 8%, to $20,988 during the nine months ended September 30, 2023, compared to $22,820 during the nine months ended September 30, 2022. This decrease was primarily due to decreases of $534 in personnel-related expenses and $1,930 in insurance expense, and partially offset by increases of $327 increase in facility expenses and $277 in other operating costs. The decrease in personnel-related expense was due primarily to a decrease in average headcount of 3%, from an average of 29 people in the nine months ended September 30, 2022 to an average of 28 people in the nine months ended September 30, 2023, with the remainder of the decrease attributable to decreases in wages and benefits.

 

Change in Fair Value of Warrant Liabilities. The change in fair value of warrant liabilities during the nine months ended September 30, 2023 was a $3,705 gain. The change in fair value of warrant liabilities during the nine months ended September 30, 2022 was a $75,291 gain. These changes in fair value of the warrant liabilities resulted from the remeasurement of the public and private placement warrant liabilities at September 30, 2023 and 2022, respectively.

 

Interest and Other Income. Interest and other income increased by $2,860 to $3,463 during the nine months ended September 30, 2023, compared to $603 during the nine months ended September 30, 2022. The increase was primarily due to an increase in interest income from short-term investments.

 

Interest Expense. Interest expense decreased by $86 to $3 during the nine months ended September 30, 2023, compared to $89 during the nine months ended September 30, 2022. The decrease was primarily due to the term loan being paid off in full during the fourth quarter of 2022.

 

Income Taxes. Our income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in tax law. Due to historical cumulative losses and expected future losses, we maintain a full valuation allowance against our U.S. and state deferred tax assets.

 

 

Liquidity and Capital Resources

 

To date, our primary sources of capital have been private placements of preferred stock prior to the Business Combination, the recapitalization with D8 and the issuance of common stock. Net cash used in our operating activities for the nine months ended September 30, 2022 and the year ended December 31, 2022 was $42,802 and $61,211, respectively. As of September 30, 2023, we held cash and cash equivalents of $59,113, short-term investments of $51,076 and had an accumulated deficit of $120,273.

 

Excluding the non-cash impact of potential changes in the fair value of warrant liabilities, we expect net losses to continue in connection with our ongoing activities, particularly as we continue to invest in commercialization and new product development. We believe our current cash, cash equivalents and short-term investments balance of $110,189 as of September 30, 2023 will be sufficient to support our operations beyond the next twelve months from the date of issuance of these financial statements. Our future capital requirements will depend on many factors, including, but not limited to, any changes in the size, number and scope of clinical trials we may be required to conduct, the timing and conditions of market authorization (if any) for the Vicarious Surgical System, whether we are able to successfully commercialize the Vicarious Surgical System, if approved, additional product candidates we may choose to develop, fluctuations in the cost and timing of our business activities, including manufacturing, hiring and protection of our intellectual property portfolio, and the other risks and uncertainties described herein, under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K, in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, and in other filings that we make with the Securities and Exchange Commission from time to time.

 

We expect that we will need to obtain substantial additional funding in order to complete our clinical trials, obtain market authorization for the Vicarious Surgical System, and commercialize it, if approved. Until such time, if ever, as we can generate sufficient revenues to support our expenses, we may seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. The sale of equity and convertible debt securities may result in dilution to our stockholders. Preferred equity securities or convertible debt could provide for rights, preferences or privileges senior to those of our common stock, including liquidation or other preferences that could adversely affect the rights of our existing stockholders. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. If we raise funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our platform technologies or product candidates or grant licenses on terms that are not favorable to us, or that we would otherwise seek to develop or commercialize ourselves. Additional capital may not be available on reasonable terms, or at all, particularly given the current macroeconomic environment, including diminished liquidity and credit availability, declines in consumer confidence and economic growth, rising interest rates, inflation, uncertainty about economic stability and potential for economic recession. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and more dilutive. If we are unable to raise capital when needed or on attractive terms, we could be forced to significantly delay, scale back or discontinue the development, market authorization or commercialization of the Vicarious Surgical System or future product candidates, or seek collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available.

 

On October 7, 2022, we filed a universal shelf registration statement on Form S-3 (the “Form S-3”), which was declared effective by the SEC on October 27, 2022, on which we registered for sale up to $400 million of any combination of our Class A common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, which includes up to $100 million of Class A common stock that we may issue and sell from time to time, through Cowen and Company, LLC acting as our sales agent, pursuant to the sales agreement that we entered into with Cowen and Company, LLC on October 7, 2022 for our “at-the-market” equity program. In December 2022, we issued 3,048,781 shares of Class A common stock under our sales agreement with Cowen and Company, LLC, resulting in gross proceeds of $10.0 million.

 

On August 2, 2023, we entered into an underwriting agreement related to the public offering of 45,000,000 shares of our Class A common stock, at a public offering price of $1.00 per share less the underwriting discounts and commission, pursuant to the Form S-3. We received approximately $45 million in gross proceeds from this offering, before deducting underwriting discounts and commission and offering expenses. The offering closed on August 7, 2023. In addition, 2,045,224 shares of Class A common stock were issued upon exercise of by the underwriters at their option to purchase additional shares at the same offering price, which closed on August 29, 2023. The gross proceeds from the offering of 47,045,224 shares of our Class A common stock were $47.0 million and net proceeds of $44.2 million, after deducting underwriting discounts and commissions and other offering expenses payable by us.

 

 

Cash

 

Our cash and cash equivalents and short-term investments balance as of September 30, 2023 was $59,113 and $51,076, respectively. Our future capital requirements may vary from those currently planned and will depend on various factors, including the timing and extent of R&D spending and spending on other strategic business initiatives.

 

Cash Flows Summary

 

Comparison of the nine months ended September 30, 2023 and June 30, 2022

 

		Nine months ended September 30,
(in thousands)		2023				2022
Net cash used in operating activities		$	(50,935	)		$	(42,802	)
Net cash used in investing activities		$	(50,828	)		$	(4,360	)
Net cash provided by financing activities		$	44,668			$	333

 

Cash flows used in Operating Activities

 

Net cash used in operating activities during the nine months ended September 30, 2023 was $50,935, attributable to a net loss of $57,960, a $426 net change in our net operating assets and liabilities and offset by non-cash items of $7,451. Non-cash items consisted of $10,192 in stock-based compensation, a gain of $3,705 due to the change in fair value of our warrant liabilities, $1,329 of depreciation and amortization, $604 for non-cash lease expense and partially offset by a loss of $969 due to the change in accrued interest and net accretion of discounts on marketable securities. The $426 change in our net operating assets and liabilities was due to a $542 decrease in accrued expenses, a $603 decrease in lease liabilities, a $201 decrease in accounts payable, and a $54 increase in other noncurrent assets and was partially offset by a $974 decrease in prepaid and other current assets.

 

Net cash used in operating activities during the nine months ended September 30, 2022 was $42,802, attributable to net income of $16,337 plus a net change in our net operating assets and liabilities of $6,076 and offset by non-cash items of $65,215. Non-cash items consisted of a gain of $75,291 due to the change in fair value of our warrant liabilities, partially offset by $8,706 in stock-based compensation, $709 of depreciation and amortization and $636 for non-cash lease expense. The $6,076 change in our net operating assets and liabilities was primarily due to a $3,393 increase in accounts payable, a $1,268 increase in accrued expenses, a $1,083 increase in lease liabilities and a $332 increase in prepaid expenses and other assets. 

 

 

Cash flows used in Investing Activities

 

Net cash used by investing activities for the nine months ended September 30, 2023 was $50,828 consisting of $62,731 used for purchases of available-for-sale investments and $632 for fixed asset purchases, and partially offset by proceeds of $12,535 from sales and maturities of available-for-sale investments.

 

Net cash used by investing activities for the nine months ended September 30, 2022 was $4,360 for fixed asset purchases consisting primarily of leasehold improvements and R&D equipment.

 

Cash flows provided by Financing Activities

 

Net cash provided by financing activities for the nine months ended September 30, 2023 was $44,668 consisting of $44,222 of proceeds from the issuance of common stock net of issuance costs, $262 received for stock option exercises, $200 in proceeds from a stockholder of the Company pursuant to the application of the Section 16 short swing profit rules and partially offset by $16 of equipment loan repayments.

 

Net cash provided by financing activities for the nine months ended September 30, 2022 was $333 consisting of $818 received for stock option exercises and offset by $450 of term loan repayments and $35 of equipment loan repayments.

 

Off-Balance Sheet Arrangements

 

During the periods presented, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.

 

Critical Accounting Policies and Estimates

 

Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the consolidated balance sheet date, as well as the reported expenses incurred during the reporting periods. Our management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to our consolidated financial statements.

 

While our significant accounting policies are described in the notes to our historical condensed consolidated financial statements (see Note 2 of the accompanying condensed consolidated financial statements), we believe the following critical accounting policy requires significant judgment and estimates in the preparation of our condensed consolidated financial statements:

 

Warrant Liabilities

 

We recognize our warrants as liabilities at fair value and adjust the warrant liability to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the statement of operations. The fair value of Public Warrants is determined from their trading value on public markets. The fair value of Private Placement Warrants is calculated using the Black-Scholes option pricing model. The assumptions used in the model are the Company’s stock price, exercise price, expected term, volatility, interest rate, and dividend yield.

 

The Company estimates the volatility of its warrants based on implied volatility from the Company’s Public Warrants and from historical volatility of select peer companies’ common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero. 

 

 

Recently Adopted Accounting Pronouncements

 

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 “Summary of Significant Accounting Policies – Recently Issued Accounting Pronouncements” in our condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.

 

Emerging Growth Company

 

Following the Business Combination, we became an “emerging growth company,” as defined in the JOBS Act. Pursuant to the JOBS Act, an emerging growth company is provided the option to adopt new or revised accounting standards that may be issued by FASB or the SEC either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. We intend to take advantage of the exemption for complying with new or revised accounting standards within the same time periods as private companies. Accordingly, the information contained herein may be different than the information you receive from other public companies.

 

We also intend to take advantage of some of the reduced regulatory and reporting requirements of emerging growth companies pursuant to the JOBS Act so long as we qualify as an emerging growth company, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

Item 4. Controls and Procedures.

 

Background and Remediation of Material Weaknesses

 

In connection with our evaluation of disclosure controls and procedures covering our consolidated financial statements as of December 31, 2022, we identified material weaknesses in our internal control over financial reporting. We have concluded that material weaknesses exist in our disclosure controls and procedures, including internal control over financial reporting, as we do not have the necessary business processes, personnel and related internal controls to operate in a manner to satisfy the accounting and financial reporting requirements of a public company. These material weaknesses manifested themselves in ways that included the improper segregation of duties relating to review of the recording of journal entries and the reconciliation of key accounts and safeguarding of assets, as well as the analysis of accounting for certain transactions and accounts, improper controls related to information technology, ineffective risk assessment process and documentation and monitoring of control processes, accounting policies and procedures.

 

 

We are focused on designing and implementing effective internal controls measures to improve our evaluation of disclosure controls and procedures, including internal control over financial reporting, and remediate the material weaknesses. In order to remediate these material weaknesses, we have taken and plan to take the following actions:

 

●

the hiring and continued hiring of additional accounting, finance and legal resources with public company experience; and

 

●

implementation of additional review controls and processes requiring timely account reconciliation and analyses of certain transactions and accounts.

 

These actions and planned actions are subject to ongoing evaluation by management and will require testing and validation of design and operating effectiveness of internal control over financial reporting over future periods. We are committed to the continuous improvement of our internal control over financial reporting and will continue to review the internal control over financial reporting.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of September 30, 2023 to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities and Exchange Act is recorded, processed, summarized and reported as and when required.

 

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

As of the date of this Quarterly Report on Form 10-Q, to our knowledge, we are not party to and our property is not subject to any material pending legal proceedings. However, from time to time, we may become involved in legal proceedings or subject to claims that arise in the ordinary course of our business activities. Regardless of the outcome, such legal proceedings or claims could have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

 

Item 1A. Risk Factors.

 

The following risk factor disclosure should be read in conjunction with our risk factors as described in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 15, 2023 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed with the SEC on July 28, 2023. Careful consideration should be given to the following risk factors, in addition to the other information set forth in this this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, and in other documents that we file with the SEC, in evaluating our company and our business. Investing in our securities involves a high degree of risk. If any of the events described in the following risk factors actually occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected and the trading price of our securities could decline. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of the factors that are described below and elsewhere in this this Quarterly Report on Form 10-Q.

 

Our failure to maintain compliance with the NYSE’s continued listing requirements could result in the delisting of our Class A common stock.

 

Our Class A common stock is listed on the New York Stock Exchange (the “NYSE”). In order to maintain this listing, we must satisfy minimum financial and other requirements. On September 20, 2023, we received notice from the NYSE that the average per share trading price of our Class A common stock was below the NYSE’s continued listing standard rule relating to minimum average share price. Rule 802.01C of the NYSE’s Listed Company Manual requires that a company’s common stock trade at a minimum average closing price of $1.00 over a consecutive 30 trading-day period.

 

Pursuant to Section 802.01C, we have a period of six months following the receipt of the notice to regain compliance with the minimum share price requirement. In accordance with the NYSE’s rules, we notified the NYSE within 10 business days of our intent to cure the deficiency, which may include effecting a reverse stock split, subject to approval by our Board of Directors and stockholders. We may regain compliance with the minimum share price requirement at any time during the cure period if, on the last trading day of any calendar month during the cure period, or on the last day of the cure period, our Class A common stock has (i) a closing share price of at least $1.00, and (ii) an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of that month or on the last day of the cure period, as applicable. The Notice has no immediate impact on the listing of our Class A common stock, which will continue to be listed and traded on the NYSE during this period, subject to our compliance with the other continued listing requirements of the NYSE. Failure to satisfy the conditions of the cure period or to maintain other listing requirements could lead to delisting.

 

The perception among investors that we are at a heightened risk of delisting could negatively affect the market price and trading volume of our Class A common stock. If our Class A common stock is delisted from the NYSE, the delisting could: substantially decrease trading in our Class A common stock; adversely affect the market liquidity of our Class A common stock as a result of the loss of market efficiencies associated with the NYSE and the loss of federal preemption of state securities laws; adversely affect our ability to issue additional securities or obtain additional financing in the future on acceptable terms, if at all; result in the potential loss of confidence by investors, suppliers, partners and employees and fewer business development opportunities; and result in limited news and analyst coverage. Additionally, the market price of our Class A common stock may decline further, and stockholders may lose some or all of their investment.

 

 

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

 

Unregistered Sales of Equity Securities

 

Not applicable.

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities during the nine months ended September 30, 2023.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

No director or officer adopted or terminated any Rule 10b5-1 plan or any non-Rule 10b5-1 trading arrangement during the third quarter of 2023.

 

 

Item 6. Exhibits.

 

Exhibit Number		Exhibit Description		Incorporated by Reference herein from Form or Schedule		Filing Date		SEC File / Registration Number
31.1*		Certification of Principal Executive Officer Pursuant to Rules 12a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Rules 12a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*†		Certifications of Principal Executive Officer and Principal Financial Officer and Principal Accounting Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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)

 

*	Filed herewith.
†	The certifications furnished in Exhibit 32 hereto are deemed to accompany this Quarterly Report and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

 

	VICARIOUS SURGICAL INC.
November 13, 2023	By:	/s/ Adam Sachs
		Adam Sachs
		Chief Executive Officer and President
		(Principal Executive Officer)
November 13, 2023	By:	/s/ William Kelly
		William Kelly
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

 

 

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