PROSPECTUS SUPPLEMENT NO. 3 Filed Pursuant to Rule 424(b)(3)
To Prospectus dated April 4, 2022 Registration No. 333-260281

 

 

VICARIOUS SURGICAL INC.

 

Up to 122,932,036 Shares of Class A Common Stock
Up to 19,789,860 Shares of Class B Common Stock
Up to 10,400,000 Warrants

 

This prospectus supplement no. 3 supplements the prospectus dated April 4, 2022, as supplemented from time to time (the “Prospectus”), relating to the resale from time to time by the Selling Securityholders named in the Prospectus (the “Selling Securityholders”) of up to (i) 10,400,000 Private Placement Warrants (as defined below), (ii) 10,400,000 shares of Class A common stock, par value $0.0001 per share (“Class A common stock”) that may be issued upon exercise of the Private Placement Warrants, (iii) 75,493,555 shares of Class A common stock consisting of shares of Class A common stock held by our predecessor company’s sponsor, D8 Sponsor LLC (the “Sponsor”) and certain of its transferees (the “D8 Founder Shares”), shares of Class A common stock issued in the PIPE Financing (as defined in the Prospectus), and shares of Class A common stock issued to our directors, officers and affiliates and the directors, officers and affiliates of Legacy Vicarious (as defined in the Prospectus) pursuant to the Business Combination Agreement (as defined in the Prospectus), (iv) 19,789,860 shares of Class B common stock, par value $0.0001 per share (“Class B common stock”) issued pursuant to the Business Combination Agreement, and (v) 19,789,860 shares of Class A common stock that may be issued upon the conversion of 19,789,860 shares of Class B common stock.

 

The Prospectus and prospectus supplements also relate to the issuance by us of up to an aggregate of 27,648,621 shares of our Class A common stock, which consists of (i) (a) up to 1,500,000 shares of Class A common stock that are issuable upon the exercise of private placement warrants originally issued upon conversion of working capital loans made by our predecessor company, D8 Holdings Corp., a Delaware corporation (“D8”), at an exercise price of $11.50 per share of Class A common stock and (b) up to 8,900,000 shares of Class A common stock that are issuable upon the exercise of private placement warrants originally issued in a private placement in connection with the initial public offering of our predecessor company, D8, at an exercise price of $11.50 per share of Class A common stock (collectively, the “Private Placement Warrants”), and (ii) up to 17,248,621 shares of Class A common stock that are issuable upon the exercise of 17,248,621 warrants issued in connection with the initial public offering of D8 (the “Public Warrants,” and together with the Private Placement Warrants, the “Warrants”).

 

The Prospectus provides you with a general description of such securities and the general manner in which we and the Selling Securityholders may offer or sell the securities. More specific terms of any securities that we and the Selling Securityholders may offer or sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the securities being offered and the terms of the offering. The prospectus supplement may also add, update or change information contained in the Prospectus.

 

We will not receive any proceeds from the sale of shares of Class A common stock, shares of Class B common stock or Private Placement Warrants by the Selling Securityholders or of shares of Class A common stock by us pursuant to the Prospectus, except with respect to amounts received by us upon exercise of the Warrants.

 

However, we will pay the expenses, other than any underwriting discounts and commissions, associated with the sale of securities pursuant to the Prospectus.

 

We registered the securities for resale pursuant to the Selling Securityholders’ registration rights under certain agreements between us and the Selling Securityholders. Our registration of the securities covered by the Prospectus does not mean that either we or the Selling Securityholders will issue, offer or sell, as applicable, any of the securities. The Selling Securityholders may offer and sell the securities covered by the Prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Securityholders may sell the shares or Warrants in the section entitled “Plan of Distribution” in the Prospectus.

 

This prospectus supplement incorporates into the Prospectus the information contained in our attached quarterly report on Form 10-Q, which was filed with the Securities and Exchange Commission on August 8, 2022.

 

You should read this prospectus supplement in conjunction with the Prospectus, including any supplements and amendments thereto. This prospectus supplement is qualified by reference to the Prospectus except to the extent that the information in the prospectus supplement supersedes the information contained in the Prospectus. This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus, including any supplements and amendments thereto.

 

Our Class A common stock and Public Warrants are listed on the NYSE under the symbols “RBOT” and “RBOT WS,” respectively. On August 5, 2022, the closing price of our Class A common stock was $4.48 and the closing price for our Public Warrants was $0.58.

 

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 13 of the Prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement of the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus supplement is August 8, 2022.

 

 

 

 

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 June 30, 2022

 

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 August 1, 2022, the registrant had 102,006,331 shares of Class A common stock outstanding and 19,710,708 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 June 30, 2022 and December 31, 2021 1
  Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021 2
  Condensed Consolidated Statements of Convertible Preferred Stock, Common Stock and Stockholders’ Equity/(Deficit) for the Three and Six Months Ended June 30, 2022 and 2021 3
  Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 4
  Notes to the Condensed Consolidated Financial Statements 5
Item 2. Management´s Discussion and Analysis of Financial Condition and Results of Operations 23
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 and Use of Proceeds 33
Item 3. Defaults Upon Senior Securities 33
Item 4. Mine Safety Disclosures 33
Item 5. Other Information 33
Item 6. Exhibits 34
SIGNATURES 35

  

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. On September 17, 2021 (the “Closing Date”), D8 Holdings Corp., a Delaware corporation that was previously a Cayman Islands exempted company that migrated to, and domesticated in, Delaware (“D8” and after the Business Combination described herein, the “Company”), consummated the previously announced business combination (the “Business Combination”) pursuant to the terms of the Agreement and Plan of Merger, dated as of April 15, 2021 (the “Business Combination Agreement”), by and among D8, Snowball Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Vicarious Surgical Inc., a Delaware corporation (“Legacy Vicarious Surgical”). Immediately upon the consummation of the Business Combination and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”, and such completion, the “Closing”), Merger Sub merged with and into Legacy Vicarious Surgical, with Legacy Vicarious Surgical surviving the Business Combination as a wholly-owned subsidiary of D8 (the “Merger”). In connection with the Transactions, D8 changed its name to “Vicarious Surgical Inc.” and Legacy Vicarious Surgical changed its name to “Vicarious Surgical US Inc.”

 

i

 

 

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, the Company’s management. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

 

the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and our ability to grow and manage growth profitably and retain our key employees;

 

the ability to maintain the listing of our Class A common stock on the NYSE;

 

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

 

the commercialization and adoption of our initial products and the success of our single-incision surgical robot, called the Vicarious System, and any of our future product and service offerings;

 

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

 

our ability to obtain and maintain regulatory approval for the Vicarious System and our product and service offerings, and any related restrictions and limitations of any approved product or service offering;

 

our business is subject to a variety of U.S. and foreign laws, which are subject to change and could adversely affect our business;

 

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

 

our ability to maintain our existing license agreements and manufacturing arrangements;

 

ii

 

 

our ability to compete with other companies currently marketing or engaged in the development of products and services for ventral hernia repair and additional surgical applications, many of which have greater financial and marketing resources than us;

 

the size and growth potential of the markets for the Vicarious 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 and needs for additional financing;

 

our ability to raise financing in the future;

 

our financial performance;

 

our intellectual property rights and how failure to protect or enforce these rights could harm our business, results of operations and financial condition

 

economic downturns and political and market conditions beyond our control and their potential to adversely affect our business, financial condition and results of operations;

 

the anticipated continued impact of the COVID-19 pandemic on our business; and

 

other factors detailed under the section titled “Risk Factors.”

 

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 the Company’s Annual Report on Form 10-K  and in other filings that we make 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.

 

iii

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

VICARIOUS SURGICAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)

 

    June 30,     December 31,  
    2022     2021  
Assets            
Current assets:            
Cash and cash equivalents   $ 141,315     $ 173,507  
Prepaid expenses and other current assets     2,319       4,867  
Total current assets     143,634       178,374  
Restricted cash     936       1,055  
Property and equipment, net     5,616       2,250  
Right-of-use assets     13,866        
Total assets   $ 164,052     $ 181,679  
                 
Liabilities, Convertible Preferred Stock and Stockholders’ Equity                
Current liabilities:                
Accounts payable   $ 1,326     $ 1,500  
Accrued expenses     4,265       4,098  
Lease liabilities, current portion     664        
Current portion of equipment loans     39       47  
Current portion of term loan     600       600  
Total current liabilities     6,894       6,245  
Lease liabilities, net of current portion     15,296        
Deferred rent           1,631  
Equipment loans, net of current portion           16  
Term loan, net of current portion and issuance costs     392       675  
Warrant liabilities     11,691       90,021  
Total liabilities     34,273       98,588  
                 
Commitments and Contingencies (Note 8)                
                 
Legacy convertible preferred stock (Note 11)            
                 
Stockholders’ equity:                
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued or outstanding at June 30, 2022 and December 31, 2021            
Class A Common stock, $0.0001 par value; 300,000,000 shares authorized at June 30, 2022 and December 31, 2021; 101,901,239 and 99,979,207 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively     10       10  
Class B Common stock, $0.0001 par value; 22,000,000 shares authorized at June 30, 2022 and December 31, 2021; 19,730,496 and 19,789,860 shares issued and outstanding at June 30, 2022 and December 31, 2021     2       2  
Additional paid-in capital     155,491       149,877  
Accumulated deficit     (25,724 )     (66,798 )
Total stockholders’ equity     129,779       83,091  
Total liabilities and stockholders’ equity   $ 164,052     $ 181,679  

 

See accompanying notes to these condensed consolidated financial statements.

 

1

 

 

VICARIOUS SURGICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2022     2021     2022     2021  
Operating expenses:                        
Research and development   $ 10,055     $ 4,008     $ 19,903     $ 7,616  
Sales and marketing     1,311       325       2,713       551  
General and administrative     7,760       2,279       14,690       3,676  
Total operating expenses     19,126       6,612       37,306       11,843  
Loss from operations     (19,126 )     (6,612 )     (37,306 )     (11,843 )
Other income (expense):                                
Change in fair value of warrant liabilities     17,601             78,329        
Interest income     101       1       109       2  
Interest expense     (29 )     (27 )     (58 )     (28 )
Income/(loss) before income taxes     (1,453 )     (6,638 )     41,074       (11,869 )
Provision for income taxes                        
Net income/(loss) and comprehensive gain/(loss)   $ (1,453 )   $ (6,638 )   $ 41,074     $ (11,869 )
Net income/(loss) per share of Class A and Class B common stock, basic   $ (0.01 )   $ (0.08 )   $ 0.34     $ (0.14 )
Net income/(loss) per share of Class A and Class B common stock, diluted   $ (0.01 )   $ (0.08 )   $ 0.32     $ (0.14 )

 

See accompanying notes to these condensed consolidated financial statements.

 

2

 

 

VICARIOUS SURGICAL INC.

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

(Unaudited)

(in thousands, except share data)

 

    Three Months Ended June 30, 2022  
    Convertible     Class A & B     Additional           Total  
    Preferred Stock     Common Stock     Paid-In     Accumulated     Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Deficit     Equity  
Balance, March 31, 2022         $       121,168,655     $ 12     $ 152,490     $ (24,271 )   $ 128,231  
Exercise of common stock options                 359,331             221             221  
Vesting of restricted stock                 103,749                          
Stock-based compensation                             2,780             2,780  
Net loss                                   (1,453 )     (1,453 )
Balance, June 30, 2022         $       121,631,735     $ 12     $ 155,491     $ (25,724 )   $ 129,779  

 

    Six Months Ended June 30, 2022  
    Convertible     Class A & B     Additional           Total  
    Preferred Stock     Common Stock     Paid-In     Accumulated     Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Deficit     Equity  
Balance, January 1, 2022         $       119,769,067     $ 12     $ 149,877     $ (66,798 )   $ 83,091  
Exercise of common stock options                 1,702,183             557             557  
Exercise of public warrants                 20                          
Vesting of restricted stock                 160,465                          
Stock-based compensation                             5,057             5,057  
Net income                                   41,074       41,074  
Balance, June 30, 2022         $       121,631,735     $ 12     $ 155,491     $ (25,724 )   $ 129,779  

 

    Three Months Ended June 30, 2021  
    Convertible     Class A & B     Additional           Total Stockholders’  
    Preferred Stock     Common Stock     Paid-In     Accumulated     Equity  
    Shares     Amount     Shares     Amount     Capital     Deficit     (Deficit)  
Balance, March 31, 2021     66,550,929     $ 46,670       21,126,147     $ 2     $ 2,084     $ (36,822 )   $ (34,736 )
Retroactive application of recapitalization (Note 1)     (66,550,929 )     (46,670 )     66,550,929       7       46,663             46,670  
Adjusted balance, beginning of period                 87,677,076     $ 9     $ 48,747     $ (36,822 )   $ 11,934  
                                                         
Exercise of common stock options                 189,584             55             55  
Stock-based compensation                               369             369  
Net loss                                   (6,638 )     (6,638 )
Balance, June 30, 2021         $       87,866,660     $ 9     $ 49,171     $ (43,460 )   $ 5,720  

 

    Six Months Ended June 30, 2021  
    Convertible     Class A & B     Additional           Total Stockholders’  
    Preferred Stock     Common Stock     Paid-In     Accumulated     Equity  
    Shares     Amount     Shares     Amount     Capital     Deficit     (Deficit)  
Balance, January 1, 2021     66,550,929     $ 46,670       20,662,068     $ 2     $ 1,772     $ (31,591 )   $ (29,817 )
Retroactive application of recapitalization (Note 1)     (66,550,929 )     (46,670 )     66,550,929       7       46,663             46,670  
Adjusted balance, beginning of period                 87,212,997       9       48,435       (31,591 )     16,853  
Exercise of common stock options                 436,060             111             111  
Stock-based compensation                               625             625  
Vesting of restricted stock                 217,603                          
Net loss                                   (11,869 )     (11,869 )
Balance, June 30, 2021         $       87,866,660     $ 9     $ 49,171     $ (43,460 )   $ 5,720  

 

See accompanying notes to these condensed consolidated financial statements.

 

3

 

 

VICARIOUS SURGICAL INC.

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Unaudited)

(in thousands)

 

   

Six Months Ended

June 30,

 
    2022     2021  
Cash flows from operating activities:            
Net income/(loss)   $ 41,074     $ (11,869 )
Adjustments to reconcile net income/(loss) to net cash used in operating activities:                
Depreciation     371       105  
Stock-based compensation     5,057       625  
Amortization of capitalized debt issuance costs     17       9  
Non-cash lease expense     435        
Change in fair value of warrant liabilities     (78,329 )      
Changes in operating assets and liabilities:                
Prepaid expenses and other current assets     2,548       (237 )
Deferred transaction costs           (155 )
Accounts payable     (333 )     536  
Accrued expenses     167       792  
Lease liabilities     27        
Deferred rent           290  
Net cash used in operating activities     (28,966 )     (9,904 )
Cash flows from investing activities:                
Purchases of property and equipment     (3,578 )     (340 )
Net cash used in investing activities     (3,578 )     (340 )
Cash flows from financing activities:                
Repayment of equipment loans     (24 )     (24 )
Proceeds from term loan           1,500  
Repayment of term loan     (300 )      
Proceeds from exercise of stock options     557       111  
Net cash provided by financing activities     233       1,587  
Change in cash, cash equivalents and restricted cash     (32,311 )     (8,657 )
Cash, cash equivalents and restricted cash, beginning of period     174,562       16,985  
Cash, cash equivalents and restricted cash, end of period   $ 142,251     $ 8,328  
                 
Reconciliation of restricted cash:                
Cash and cash equivalents     141,315       7,706  
Restricted cash     936       622  
    $ 142,251     $ 8,328  
Supplemental cash flow information:                
Interest paid   $ 23     $ 10  
                 
Non-cash investing and financing activities:                
Accruals for property, plant and equipment purchased during the period   $ 159     $  
Leasehold improvements acquired in connection with Waltham lease   $     $ 840  
Deferred transaction costs not yet paid included in accounts payable and accrual expenses   $     $ 1,619  

 

See accompanying notes to these condensed consolidated financial statements.

 

4

 

 

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”) was originally incorporated in the Cayman Islands as a special purpose acquisition company under the name D8 Holdings Corp. (“D8”) for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving D8 and one or more businesses. On September 17, 2021 (the “Closing”), the Company consummated the transaction contemplated by the Agreement and Plan of Merger, dated as of April 15, 2021 (the “Business Combination Agreement”), by and among D8, Snowball Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of D8 (“Merger Sub”), and Vicarious Surgical Inc., a Delaware corporation incorporated in the State of Delaware on May 1, 2014 (“Legacy Vicarious Surgical”). The Company is headquartered in Waltham, Massachusetts.

 

Pursuant to the terms of the Business Combination Agreement, a business combination between D8 was effected through the merger of Merger Sub with and into Legacy Vicarious Surgical, with Legacy Vicarious Surgical surviving as a wholly owned subsidiary of D8 (the “Merger,” and collectively with the other transactions described in the Business Combination Agreement, the “Business Combination”). Effective as of the Closing, D8 changed its named to Vicarious Surgical Inc. and Legacy Vicarious Surgical changed its name to Vicarious Surgical US Inc.

 

The Company is currently developing its virtual reality surgical system using proprietary human-like surgical robots and virtual reality to transport surgeons inside the patient to perform minimally invasive surgical procedures.

 

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.

 

Unless otherwise indicated or the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company” and “Vicarious Surgical” refer to the consolidated operations of Vicarious Surgical Inc. References to “D8” refer to the Company prior to the consummation of the Business Combination and references to “Legacy Vicarious Surgical” refer to Vicarious Surgical Inc. prior to the consummation of the Business Combination.

 

Legacy Vicarious Surgical was deemed to be the accounting acquirer in the Business Combination. The determination was primarily based on Legacy Vicarious Surgical’s stockholders having a majority of the voting power in the combined Company, Legacy Vicarious Surgical having the ability to appoint a majority of the Board of Directors of the Company, Legacy Vicarious Surgical’s existing management team comprising the senior management of the combined Company, Legacy Vicarious Surgical comprising the ongoing operations of the combined Company and the combined Company assuming Vicarious Surgical’s name. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Vicarious Surgical issuing stock for the net assets of D8, accompanied by a recapitalization. The net assets of D8 are stated at historical cost, with no goodwill or other intangible assets recorded.

 

While D8 was the legal acquirer in the Business Combination, because Legacy Vicarious Surgical was deemed the accounting acquirer, the historical financial statements of Legacy Vicarious Surgical became the historical financial statements of the combined Company upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy Vicarious Surgical prior to the Business Combination; (ii) the combined results of D8 and Legacy Vicarious Surgical following the close of the Business Combination; (iii) the assets and liabilities of Legacy Vicarious Surgical at their historical cost; and (iv) the Legacy Vicarious Surgical’s equity structure for all periods presented, as affected by the recapitalization presentation.

 

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In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparable periods up to September 17, 2021, to reflect the number of shares of the Company’s common stock, $0.0001 par value per share, issued to Legacy Vicarious Surgical’s stockholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Legacy Vicarious Surgical’s outstanding convertible preferred stock and Legacy Vicarious Surgical’s common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio of 3.29831 (the “Exchange Ratio”) established in the Business Combination. Legacy Vicarious Surgical’s convertible preferred stock previously classified as mezzanine was retroactively adjusted, converted into common stock and reclassified to permanent as a result of the reverse recapitalization.

 

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, 2021 and 2020. The condensed consolidated balance sheet as of December 31, 2021, 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 June 30, 2022, our results of operations, and stockholders’ equity for the three and six-month periods ended June 30, 2022 and 2021, and our cash flows for the six-month periods ended June 30, 2022 and 2021. The operating results for the three and six-month periods ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 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, depreciation of property and equipment, fair value of financial instruments, and contingencies. Actual results may differ from those estimates.

 

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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.

 

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 value of the Company’s publicly traded warrants (the “Public Warrants”) was determined from their trading value on public markets. The fair value of the Company’s warrants sold in a private placement (the “Private Placement Warrants”) was calculated using the Black-Scholes option pricing model since these instruments do not have the early redemption feature.

 

Cash and Cash Equivalents

 

Cash and cash equivalents consist of checking accounts and money market funds. 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 and $1,055 at June 30, 2022 and December 31, 2021, respectively as collateral for letters 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 certificates of deposit, are classified as available for sale and are carried at fair value. There were no unrealized gains for the three and six-month periods ended June 30, 2022 or for the year ended December 31, 2021. The Company holds no short-term investments as of June 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.

 

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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 that are exercisable to purchase shares of Class A common stock to investors as well as 10,400,000 Private Placement Warrants. 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 since these instruments do not have the early redemption feature.

 

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 June 30, 2022, that would indicate its long-lived assets are impaired.

 

Leases

 

Prior to January 1, 2022, the Company accounted for leases under Accounting Standards Codification (“ASC”) 840, Leases (“ASC 840”). The Company recorded monthly rent expense on a straight-line basis, equal to the total of the payments due over the lease term, divided by the number of months of the lease term. The difference between rent expense recorded and the amount paid was charged to deferred rent.

 

Effective January 1, 2022, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASC 842”), using the modified retrospective transition method. Under this method, financial statements for reporting periods after adoption are presented in accordance with ASC 842 and prior-period financial statements continue to be presented in accordance with ASC 840, the accounting standard originally in effect for such periods.

 

The adoption of ASC 842 requires lessees to record a lease liability which is initially measured at the present value of all future lease payments, and a right-of-use asset, associated with operating leases, is recorded on the Company’s balance sheet. The standard also requires a single lease expense to be recognized within the statement of operations on a straight-line basis over the lease term.  The effects of the Company’s January 1, 2022 adoption of ASC 842 resulted in the Company recording lease liabilities and right-of-use assets associated with its operating leases on its consolidated balance sheet and did not have any effect on the consolidated statement of operations or consolidated statement of cash flows.

 

As part of the adoption of ASC 842, the Company elected to use the package of practical expedients permitted under the transition guidance. As a result, the Company did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, or (iii) initial direct costs for any existing leases. For each asset class and the related lease agreements in which the Company is the lessee that include lease and non-lease components, the Company made an election about the use of the practical expedient on all leases entered into or modified after January 1, 2022 to combine lease and non-lease components.  Additionally, the Company elected to not record on the balance sheet leases with a term of twelve months or less.

 

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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 June 30, 2022, 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 webservices, 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”) 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 products, 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 market value of RSUs is 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.

 

9

 

 

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 purpose of this calculation, outstanding stock options, restricted stock units 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.

 

Comprehensive Income/(Loss)

 

There were no differences between net income/(loss) and comprehensive income/(loss) presented in the statements of operations for the three and six-month periods ended June 30, 2022 and 2021.

 

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 virtual reality surgical 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.

 

Recently Issued Accounting Standards

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). ASU No. 2016-13 requires measurement and recognition of expected credit losses for financial assets. In April 2019, the FASB issued clarification to ASU No. 2016-13 within ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This update is effective for entities other than public business entities, including emerging growth companies that elected to defer compliance with new or revised financial accounting standards until a company that is not an issuer is required to comply with such standards, for annual reporting periods beginning after December 15, 2022. The Company is currently evaluating the impact that ASU No. 2016-13 will have on the financial statements and related disclosures.

 

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3. AcquisitIon

 

As discussed in Note 1, “Nature of Business and Basis of Presentation,” on September 17, 2021, the Company and D8 consummated the Business Combination with Legacy Vicarious Surgical surviving the Merger as a wholly-owned subsidiary of D8. Upon the consummation of the Business Combination, each share of Legacy Vicarious Surgical issued and outstanding held by stockholders other than the initial founders of Legacy Vicarious Surgical was automatically cancelled and extinguished and converted into the right to the number of shares of the Company’s Class A common stock equal to the Exchange Ratio, and each share of Legacy Vicarious Surgical issued and outstanding held by the initial founders of Legacy Vicarious Surgical was automatically cancelled and extinguished and converted into the right to the number of shares of the Company’s Class B common stock equal to the Exchange Ratio.

 

Upon the closing of the Business Combination, D8’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 143,931,076 shares, of which 124,141,216 were designated as Class A common stock and 19,789,860 were designated as Class B common stock both having a par value of $0.0001 per share.

 

In connection with the execution of the definitive agreement for the Business Combination, D8 entered into separate subscription agreements (each a “Subscription Agreement”) with a number of investors (each a “Subscriber”), pursuant to which the Subscribers agreed to purchase, and D8 agreed to sell to the Subscribers, an aggregate of 14,200,000 shares of the Company’s Class A common stock, for a purchase price of $10.00 per share and an aggregate purchase price of $142,000, in a private placement pursuant to the Subscription Agreements (the “PIPE financing”). The PIPE financing closed simultaneously with the consummation of the Business Combination.

 

The Business Combination is accounted for as a reverse recapitalization in accordance with US GAAP. Under this method of accounting, D8 was treated as the “acquired” company for financial accounting purposes. See Note 1, “Nature of Business and Basis of Presentation” for further details. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Vicarious Surgical issuing stock for the net assets of D8, accompanied by a recapitalization. The net assets of D8 are stated at historical cost, with no goodwill or other intangible assets recorded.

 

The following table reconciles the elements of the Business Combination to the statement of cash flows and the statement of changes in equity for the year ended December 31, 2021.

 

    Recapitalization  
Cash - D8’s trust and cash (net of redemptions)   $ 77,993  
Cash - PIPE financing     142,000  
Less: Transaction costs and advisory fees     (29,569 )
Net proceeds from reverse recapitalization     190,424  
Less: Warrant liabilities assumed     (93,110 )
Net assets and liabilities assumed in reverse recapitalization   $ 97,314  

   

The number of shares of common stock issued immediately following the consummation of the Business Combination was as follows:

 

    Number of
Shares
 
Common stock, outstanding prior to the Business Combination     34,500,000  
Less: Redemption of D8 shares     (26,745,028 )
D8 Public Shares     7,754,972  
D8 Sponsor Shares     8,625,000  
Shares issued in PIPE financing     14,200,000  
Business combination and PIPE financing shares     30,579,972  
Legacy Vicarious Surgical shares (1)     88,042,340  
Total shares of common stock immediately after Business Combination     118,622,312  

  

(1) The number of Legacy Vicarious Surgical shares was determined from the shares of Legacy Vicarious Surgical shares outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio of 3.29831. All fractional shares were rounded down.

 

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4. PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net consist of the following:

 

    Estimated   June 30,     December 31,  
    Useful Lives   2022     2021  
Machinery and equipment   3 to 5 years   $ 1,347     $ 957  
Furniture and fixed assets   3 to 7 years     320       186  
Computer hardware and software   3 years     626       259  
Leasehold improvements   Lesser of lease term or asset life     4,277       1,432  
Total property and equipment         6,570       2,834  
Less accumulated depreciation         (954 )     (584 )
Property and equipment, net       $ 5,616     $ 2,250  

 

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 six-month periods ended June 30, 2022 was $186 and $371, respectively. Depreciation expense for the three and six-month periods ended June 30, 2021 was $64 and $105, respectively. Depreciation expense for the year ended December 31, 2021 was $316. Machinery with a gross value of $232 was acquired for cash of $47 and equipment loans of $185 in 2019. This machinery had accumulated amortization of $184 and $155 at June 30, 2022 and December 31, 2021, 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:

 

    June 30, 2022  
    Quoted Prices                    
    in Active     Significant              
    Markets for
Identical Items
    Other
observable
Inputs
    Significant
Unobservable
Inputs
       
    (Level 1)     (Level 2)     (Level 3)     Total  
Assets:                        
Money market funds   $ 139,156     $       —     $       —     $ 139,156  
Total assets   $ 139,156     $     $     $ 139,156  
                                 
Liabilities:                                
Warrant liabilities - public warrants   $ 5,347     $     $     $ 5,347  
Warrant liabilities - private warrants                 6,344       6,344  
Total liabilities   $ 5,347     $     $ 6,344     $ 11,691  

 

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    December 31, 2021  
    Quoted Prices                    
    in Active     Significant              
    Markets for
Identical Items
    Other
observable
Inputs
    Significant
Unobservable
Inputs
       
    (Level 1)     (Level 2)     (Level 3)     Total  
Assets:                        
Money market funds   $ 171,196     $      —     $     —     $ 171,196  
Total assets   $ 171,196     $     $     $ 171,196  
                                 
Liabilities:                                
Warrant liabilities - Public Warrants   $ 37,085     $     $     $ 37,085  
Warrant liabilities - Private Warrants                 52,936       52,936  
Total liabilities   $ 37,085     $     $ 52,936     $ 90,021  

 

Money market funds are classified as cash and cash equivalents.

 

The fair value of Public Warrants was determined from their value trading on the public markets.

 

The fair value of Private Placement Warrants was calculated using the Black-Scholes option pricing model. The significant 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 June 30, 2022, the Company recognized a gain to the statement of operations resulting from a decrease in the fair value of liabilities of $17.6 million presented as a change in fair value of warrant liabilities on the accompanying statement of operations. For the six months ended June 30, 2022, the Company recognized a gain to the statement of operations resulting from a decrease in the fair value of liabilities of $78.3 million 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:

 

    As of     As of  
Private Placement Warrants   June 30,
2022
    December 31,
2021
 
Volatility     65 %     60.0 %
Stock price   $ 2.94     $ 10.62  
Expected life of options to convert     4.2 years       4.7 years  
Risk-free rate     3.0 %     1.2 %
Dividend yield     0.00 %     0.00 %

 

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The following table shows the change in number and value of the warrants since December 31, 2021:

 

    Public     Private     Total  
    Shares     Value     Shares     Value     Shares     Value  
December 31, 2021     17,248,621     $ 37,085       10,400,000     $ 52,936       27,648,621     $ 90,021  
Exercised     (20 )     (0 )                 (20 )     (0 )
Change in value         $ (22,769 )         $ (37,960 )         $ (60,728 )
March 31, 2022     17,248,601     $ 14,316       10,400,000     $ 14,976       27,648,601     $ 29,292  
Exercised                                    
Change in value         $ (8,969 )         $ (8,632 )         $ (17,601 )
June 30, 2022     17,248,601     $ 5,347       10,400,000     $ 6,344       27,648,601     $ 11,691  

 

6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

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

 

    As of  
    June 30,
2022
    December 31,
2021
 
Compensation and benefits related   $ 3,882     $ 3,233  
Professional services and other     383       865  
Accrued expenses   $ 4,265     $ 4,098  

 

7. DEBT

 

Term Loan

 

In October 2020, the Company entered into a term loan agreement that provided the Company with the ability to borrow up to $3.5 million with any amounts borrowed becoming due on April 1, 2024. The loan consisted of up to two tranches; a $1.5 million tranche which became available to the Company upon the close of the loan agreement in October 2020 and was available to the Company to draw through March 31, 2021 and a second tranche of $2.0 million which became available to the Company through September 30, 2021, upon the Company’s successful achievement of a milestone related to the development of the Company’s surgical robot. Although the milestone was achieved, the Company chose not to draw down the $2.0 million tranche.

 

The term loan was interest-only through September 30, 2021, at which time the Company made the first of 30 equal monthly payments of principal plus interest. The term loan bears interest at a floating rate equal to the Prime Rate, but not less than a minimum rate of 3.25%. In addition, the final payment made at the earlier of the maturity of the loan or its termination is to include a deferred interest payment of 7.5% of the amount borrowed, resulting in a minimum annual rate of 5.98% to be paid to the lender. The term loan has prepayment fees if the Company elects to repay such loan prior to it becoming due, which penalties vary based upon the time remaining before the term loan is due. If the Company had repaid the term loan prior to the first anniversary of the term loan closing, it would have been required to pay a prepayment fee of 3% of the outstanding principal balance. In the event the Company chooses to repay the term loan prior to the second anniversary of the term loan closing, a prepayment fee of 2% of the outstanding principal balance will apply. The prepayment fee is reduced to 1% if paid after the second anniversary date. The prepayment fee does not apply if the Company and the bank agree to refinance the loan prior to maturity.

 

The loan has no financial covenants but does contain monthly reporting requirements and gives the lender a first priority lien on all Company assets. In March 2021, the Company borrowed the first tranche of $1.5 million. The outstanding balance of the term loan was $1.1 million and $1.4 million at June 30, 2022 and December 31, 2021, respectively.

 

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Deferred Financing Costs

 

In connection with the term loan, the Company incurred $0.1 million in expenses, inclusive of the warrant expense, which are netted against the long-term portion of the term loan proceeds. The Company is amortizing these costs over the life of the borrowing. In the three and six-month periods ended June 30, 2022, $8 and $17, respectively of capitalized costs were amortized to interest expense. In each of the three and six-month periods ended June 30, 2021, $8 of capitalized costs were amortized to interest expense.

 

Common Stock Warrant

 

In connection with the term loan, the Company issued the lender a warrant to purchase 254,794 shares of common stock at $0.41 per share. The fair value of the common stock warrant was $0.33 per share at the grant date, and the Company recorded a total of $85 in deferred financing costs associated with the warrant issuances which are netted against the long-term portion of the term loan proceeds. At the time of the Company’s recapitalization, the lender elected to cashless exercise the warrants resulting in the net issuance of 146,577 shares of Class A common stock. The remaining 108,217 warrants were cancelled as the Company elected not to draw down the second tranche.

 

Equipment Loans

 

In March 2019, the Company entered into two equipment loans with a vendor for the purchase of manufacturing machinery. The equipment loans had an aggregate principal balance of $185 at inception, with forty-eight equal monthly payments of principal and interest due beginning ninety days after taking possession of the machinery. The equipment loans are collateralized by the underlying machinery. As of June 30, 2022 and December 31, 2021, the aggregate outstanding principal balance of the equipment loans was $0 and $16, respectively, net of current portions of $39 and $47, respectively.

 

The following table represents the future payments required under the noncancellable equipment agreements and includes interest of $3:

 

Years Ended December 31,      
2022, remaining six months   $ 25  
2023     17  
Total future equipment payments   $ 42  

 

8. 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.

 

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9. LEASES

 

On January 1, 2022, the Company 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 $14.3 million. In conjunction with this, we recorded lease liabilities, which had been discounted at our incremental borrowing rates, of $15.9 million. 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 six-month periods ended June 30, 2022 was $565 and $1,131, respectively. Rent expense for the three and six-month periods ended June 30, 2021 was $415 and $528, respectively. Rent expense for the year ended December 31, 2021 was $1,447.

 

A summary of the components of lease costs for the Company under ASC 842 for the six months ended June 30, 2022 and under ASC 840 for the six months ended June 30, 2021 were as follows:

 

    June 30,  
Lease costs   2022     2021  
Operating lease costs   $ 1,131     $ 528  
Total lease costs   $ 1,131     $ 528  

 

Supplemental disclosure of cash flow information related to leases was as follows:

 

    June 30,  
    2022  
Cash paid for amounts included in the measurement of operating lease liabilities (operating cash flows)   $ 669  

 

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

 

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

 

The following table presents the maturity of the Company’s operating lease liabilities as of June 30, 2022:

 

Years Ended December 31,      
2022, excluding the six months ended June 30, 2022   $ 975  
2023     2,162  
2024     2,286  
2025     2,358  
2026     2,430  
Thereafter     13,932  
Total future minimum lease payments   $ 24,143  
Less imputed interest     (8,183 )
Carrying value of lease liabilities   $ 15,960  

 

  10. INCOME TAXES

 

For the three and six-month periods ended June 30, 2022 and for the year ended December 31, 2021, 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.

 

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  11. STOCKHOLDERS’ EQUITY

 

Authorized Shares 

 

At June 30, 2022, the Company’s authorized shares consisted of 300,000,000 shares of Class A common stock, $0.0001 par value; and 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.

 

Legacy Vicarious Surgical Preferred Stock

 

In connection with the Business Combination, Legacy Vicarious Surgical’s Convertible Preferred Stock (“Legacy Convertible Preferred Stock”), previously classified as mezzanine was retroactively adjusted, converted into Class A common stock, and reclassified to permanent equity as a result of the Business Combination. As of June 30, 2022, there were no Legacy Convertible Preferred Stock authorized, issued or outstanding. The following table summarizes details of Legacy Convertible Preferred Stock authorized, issued and outstanding immediately prior to the Business Combination:

 

    Prior to Business Combination  
    Shares        
Legacy Convertible Preferred Stock   Authorized     Issued and
Outstanding
    Preferred
Stock
 
Series A Legacy Convertible Preferred Stock, $0.0001 par value     16,740,853       16,740,854     $ 6,477  
Series A1 Legacy Convertible Preferred Stock, $0.0001 par value     26,107,321       26,107,321       16,678  
Series A2 Legacy Convertible Preferred Stock, $0.0001 par value     10,036,853       10,036,853       9,995  
Series A3 Legacy Convertible Preferred Stock, $0.0001 par value     18,267,057       13,665,901       13,520  
Total     71,152,084       66,550,929     $ 46,670  

 

Common Stock

 

Classes of Common Stock

 

Class A common stock receive 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.

 

Restricted Stock Agreements — In 2014, the Company issued 19,789,860 shares of Legacy Class A common stock to the initial founders of the Company at par that contained a repurchase right by the Company at the lesser of the original purchase price of $0.0001 per share or the then current fair value of the share, which lapsed over a four-year period. In 2016 and 2018 these shares were amended with respect to the lapse of the repurchase rights, such that beginning as of January 2018 60% percent of the shares were vested and the remaining shares vest over a thirty-six-month period.

 

As of January 30, 2021, the shares were fully vested and on September 17, 2021, in connection with the Business Combination, the shares were converted to Class B common stock.

 

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In 2021, subsequent to the Business Combination, the Company issued 749,691 RSUs of Class A common stock to employees and members of the board of directors. The RSUs vest over a four-year period. The activity for common stock subject to vesting for the six months ended June 30, 2022, is as follows:

 

    Shares
Subject to
Vesting
    Weighted
Average
Grant Date
Fair Value
 
Balance of unvested shares - January 1, 2022     698,051     $ 12.54  
Granted     84,744     $ 5.81  
Vested     (56,716 )   $ 11.86  
Balance of unvested shares - March 31, 2022     726,079     $ 11.81  
Granted     2,972,796     $ 3.84  
Vested     (103,749 )   $ 11.27  
Balance of unvested shares - June 30, 2022     3,595,126     $ 5.23  

 

Total stock-based compensation related to RSUs during the three and six-month periods ended June 30, 2022 was $1.3 million and $2.1 million, respectively. As of June 30, 2022, the total unrecognized stock-based compensation expense related to unvested RSUs aggregated $18.2 million and is expected to be recognized over a weighted average period of 3.49 years. The aggregate intrinsic value of RSUs granted during the six months ended June 30, 2022 and 2021, was $9.0 million and $0.0 million, respectively. The aggregate intrinsic value of RSU’s vested during the six months ended June 30, 2022 and 2021, was $0.5 million and $1.9 million, respectively. The aggregate intrinsic value of RSUs outstanding at June 30, 2022 was $10.6 million.

 

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 June 30, 2022, there were no shares of preferred stock issued and outstanding.

 

Warrants

 

In D8’s initial public offering, on July 17, 2020 it sold units at a price of $10.00 per unit, which consisted of one D8 Class A ordinary share, $0.0001 par value, and one-half of a redeemable Public Warrant. On July 17, 2020, simultaneously with the closing of its initial public offering, D8 consummated the private placement of 8,000,000 Private Placement Warrants, each exercisable to purchase one D8 Class A ordinary share at $11.50 per share, at a price of $1.00 per Private Placement Warrant. On July 24, 2020, simultaneously with the sale of D8’s over-allotment units, D8 consummated a private sale of an additional 900,000 Private Placement Warrants. In connection with the Business Combination, 1,500,000 additional Private Placement Warrants were issued upon conversion of D8 working capital loans. In connection with the Business Combination, each issued and outstanding D8 Class A ordinary share automatically converted into one share of Class A common stock. Each warrant is exercisable to purchase one share of Class A common stock at $11.50 per share.

 

As of June 30, 2022, 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. 

 

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The warrants will expire five years after the completion of a 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. 

 

  12. Stock-based Compensation

 

2014 Plan — In 2014, Legacy Vicarious Surgical adopted the Vicarious Surgical Inc. 2014 Stock Incentive Plan (the “2014 Plan”), which provided for the granting of incentive and nonqualified stock options, restricted stock, and other stock-based awards to employees, officers, directors, consultants, and advisors of Legacy Vicarious Surgical. Legacy Vicarious Surgical reserved 19,914,315 shares of common stock for issuance under the 2014 Plan. The Legacy Vicarious Surgical board of directors administered the 2014 Plan and determined the specific terms of the awards. The contractual term of options granted under the 2014 Plan was 10 years from the date of grant. In connection with the Business Combination, the Company’s stockholders voted to approve the 2021 Plan, which terminated and replaced the 2014 Plan, and options outstanding under the 2014 Plan were converted to options outstanding under the 2021 Plan. No additional awards will be granted under the 2014 Plan and no shares remained available for issuance pursuant to future grants under the 2014 Plan as of June 30, 2022 and December 31, 2021, respectively.

 

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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.

 

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 24,974,074 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.

 

During the six months ended June 30, 2022 and June 30, 2021, the Company granted options to purchase 1,187,691 and 3,788,941 shares, respectively, of Class A common stock, to employees and consultants with fair values of $3,591 and $4,657, respectively. These fair values were calculated using the Black-Scholes option-pricing model with the following assumptions:

 

    Six Months Ended
June 30,
 
    2022     2021  
Risk-free interest rate     1.95% - 2.86 %     0.45% - 1.13 %
Expected term (in years)     5.67 - 6.07       5.20 - 6.11  
Dividend yield     %     %
Expected volatility     69.33% - 70.02 %     69.66% - 71.02 %
Fair value of Common Stock   $ 2.94     $ 8.55  

 

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 an average of the historical volatility of a peer group of similar public companies.

 

At June 30, 2022, there was $18,463 of total gross unrecognized stock-based compensation expense related to unvested stock options. The costs remaining as of June 30, 2022 are expected to be recognized over a weighted-average period of 2.77 years.

 

20

 

 

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
June 30,
    Six Months Ended
June 30,
 
    2022     2021     2022     2021  
Research and development   $ 526     $ 145     $ 999     $ 256  
Sales and marketing     268       21       562       36  
General and administrative     1,986       203       3,496       333  
Total   $ 2,780     $ 369     $ 5,057     $ 625  

 

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

 

There were 7,522,041 shares available for future equity grants under the 2021 Plan at June 30, 2022.

 

The option activity of the 2021 Plan for the six months ended June 30, 2022, is as follows:

 

          Weighted Average Exercise     Weighted Average Remaining Contractual Life  
    Options     Price     (in years)  
                   
Outstanding at January 1, 2022     12,009,768     $ 2.92       7.76  
                         
Granted     1,187,691       4.76       9.48  
Exercised     (1,702,183 )     0.32       2.51  
Forfeited     (660,145 )     2.48        
Expired     (10,994 )     1.90        
                         
Options vested and expected to vest at June 30, 2022     10,824,137     $ 3.56       7.91  

 

The weighted average grant date fair value of options granted during the six months ended June 30, 2022 and June 30, 2021 was $3.02 and $1.23, respectively. The aggregate intrinsic value of options exercised during the six months ended June 30, 2022 and June 30, 2021 was $8,569 and $1,377, respectively. The aggregate intrinsic value of options outstanding at June 30, 2022 was $15,074.

 

Common Stock Reserved for Future Issuance

 

As of June 30, 2022 and December 31, 2021, the Company has reserved the following shares of Class A common stock for future issuance (in thousands):

 

    As of  
    June 30,     December 31,  
    2022     2021  
Common stock options outstanding     10,824       12,010  
Restricted stock units outstanding     3,595       698  
Shares available for issuance under the 2021 Plan     7,522       4,506  
Public warrants     17,249       17,249  
Private warrants     10,400       10,400  
Total shares of authorized Common Stock reserved for future issuance     49,590       44,863  

 

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  13. 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 three months of service and must be 21 years of age. The Company offers company-funded matching contributions which totaled $192 and $399 for the three and six-month periods ended June 30, 2022, respectively. For the three and six-month periods ended June 30, 2021, the company-funded matching contributions were $93 and $168, respectively.

 

  14. 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
June 30,
    For the Six Months Ended
June 30,
 
    2022     2021     2022     2021  
Numerator for basic and diluted net loss per share:                        
Net income/(loss)   $ (1,453 )   $ (6,638 )   $ 41,074     $ (11,869 )
                                 
Denominator for basic net gain/(loss) per share:                                
Weighted average shares     121,341,460       87,841,781       120,813,572       87,676,277  
                                 
Denominator for diluted net gain/(loss) per share:                                
Weighted average shares     121,341,460       87,841,781       127,847,825       87,676,277  
                                 
Net income/(loss) per share of Class A and Class B common stock – basic   $ (0.01 )   $ (0.08 )   $ 0.34     $ (0.14 )
Net income/(loss) per share of Class A and Class B common stock – diluted   $ (0.01 )   $ (0.08 )   $ 0.32     $ (0.14 )

 

For the six months ended June 30, 2022, 31,307,459 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 were greater than or equal to the average price of the common shares and were therefore anti-dilutive.

 

******

 

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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 audited consolidated financial statements and notes thereto for the year ended December 31, 2021 contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022. 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, 2021. 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 six-month periods ended June 30, 2022 and 2021, 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.

 

Overview

 

We are combining advanced miniaturized robotics, computer science and 3D visualization to build a new category of intelligent and affordable, single-incision surgical robot that virtually transports surgeons inside the patient to perform minimally invasive surgery, or MIS. 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 the Massachusetts Institute of Technology, or 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 MIS.

 

We estimate there are over 39 million soft tissue surgical procedures addressable by our technology. 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 MIS.

 

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

 

  Significant Capital Investment. Existing robotic systems require a high upfront cost and burdensome annual service contracts that are often prohibitively expensive, especially in outpatient settings. These capital costs are estimated to be up to $2.0 million per system upfront, plus an additional 10-20% 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 necessitate device-specific training requiring the surgeon to “design the robotic motion” for each procedure. In choosing the incision sites, the surgeon must effectively design the kinematic motion of the robot for every procedure to operate well and avoid collisions inside and outside of the patient’s abdomen. They must design this kinematic motion with fewer degrees of freedom than they would employ using open surgery, restricting their natural movements. To become 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.

 

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Our single-port system with advanced, miniaturized robotics and advanced 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 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 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.

 

Financial Highlights

 

We are pre-revenue generating as of June 30, 2022.

 

We generated a net gain of $41.1 million for the six months ended June 30, 2022 and incurred a net loss of $11.9 million for the six months ended June 30, 2021, representing a period-over-period gain of $53.0 million primarily due to a $78.3 million gain incurred due to the mark to market value of our public and private warrants to market and partially offset by a $15.9 million increase in personnel-related expenses, a $3.8 million increase in professional fees, $3.0 million of increased insurance costs, $1.7 million of additional lease and facility expenses, $0.4 million of increased travel expenses, an additional $0.3 million of R&D supplies and materials, and $0.3 million of increased depreciation expense. Our increase in personnel-related expenses was driven primarily by our ramp up in R&D personnel for which our average headcount increased by 93% from an average of 68 people in the six months ended June 30, 2021 to an average of 131 people for the six months ended June 30, 2022. In addition, our general and administrative headcount increased by 383% from an average of six people in the six months ended June 30, 2021 to an average of 29 people for the six months ended June 30, 2022.

 

We incurred a net loss of $35.2 million and $12.9 million for the years ended December 31, 2021 and 2020, respectively, representing a period-over-period increased loss of 173%. The 2021 net loss is inclusive of a gain of $3.1 million related to the decrease in the fair value of our warrant obligations due to our stock price decrease during the fourth quarter of 2021. Our loss from operations prior to the warrant gain and other income and expense items was $38.2 million and $13.0 million for the years ended December 31, 2021 and 2020, respectively, representing period-over-period loss of 194%, which was primarily due to a 70% increase in our average headcount. Our increase in average headcount and a 467% increase in our general and administrative expenses which was primarily related to expenses associated with our becoming a public company during 2021. Our increase in average headcount was almost entirely by our ramp up in R&D personnel for which our average headcount increased by 65% from an average of 51 people in the year ended December 31, 2020 to an average of 84 people for the year ended December 31, 2021.

 

COVID-19

 

In March 2020, the World Health Organization declared the global outbreak of COVID-19 to be a pandemic. We continue to closely monitor the recent developments surrounding the continued spread of COVID-19. The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on our operations, particularly as a result of preventive and precautionary measures that we, other businesses, and governments are taking. Refer to “Risk Factors” included in our Annual Report on Form 10-K for more information. We are unable to predict the full impact that the COVID-19 pandemic will have on our future results of operations, liquidity and financial condition due to numerous uncertainties, including the duration of the pandemic, the actions that may be taken by government authorities across the United States. We will continue to monitor the performance of our business and reassess the impacts of COVID-19.

  

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 until at least 2023 and only then if we receive FDA approval of our product. Any revenue from initial sales of a new product is difficult to predict and, in any event, will initially only modestly reduce our continued net losses resulting from our increasing research and development and marketing activities.

 

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Research and Development Expenses

 

Research and development, or R&D, expenses consist primarily of engineering, product development, clinical studies to develop and support our products, regulatory expenses, medical affairs, and other costs associated with products 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 costs associated with our clinical studies, including clinical trial design, clinical trial site initiation and study costs, data management, related travel expenses and the cost of products used for clinical trials, 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, or 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, or 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 prepares our sales and marketing function for our product launch at a future, yet undetermined date.

 

Change in Fair Value of Warrant Liabilities

 

Change in fair value of 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.

 

Interest Expense

 

Interest expense consists primarily of interest incurred on our outstanding equipment loans.

 

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Results of Operations

 

Comparison of the Three Months ended June 30, 2022 and 2021

 

The following table sets forth our historical operating results for three months ended June 30, 2022 and 2021:

 

    Three months ended
June 30,
             
(in thousands, except for per share amounts)   2022     2021     Change     % Change  
Operating expenses:                        
Research and development   $ 10,055     $ 4,008     $ 6,047         151 %
Sales and marketing     1,311       325       986       303 %
General and administrative     7,760       2,279       5,481       241 %
Total operating expenses     19,126       6,612       12,514       189 %
Loss from operations     (19,126 )     (6,612 )     (12,514 )     189 %
Other income (expense):                                
Change in fair value of warrant liabilities     17,601             17,601       N/M  
Interest income     101       1       100       10,000 %
Interest expense     (29 )     (27 )     (2 )     7 %
Loss before income taxes     (1,453     (6,638 )     5,185       (78 )%
Provision for income taxes                       N/M  
Net loss and comprehensive loss   $ (1,453   $ (6,638 )   $ 5,185       (78 )%
Net loss per common share, basic and diluted   $ (0.01   $ (0.08 )   $ 0.07       (88 )%

 

Research and Development Expenses. Research and development expenses increased $6.0 million, or 151%, to $10.1 million during the three months ended June 30, 2022, compared to $4.0 million during the three months ended June 30, 2021. The increase in research and development expenses was primarily due to increases of $3.9 million of personnel-related expenses, $1.0 million in professional services, $0.7 million in lease and facility expenses, and $0.2 million in materials and supplies. The increase in personnel-related expense was due primarily to an increase in average headcount of 88%, from an average of 76 people in the three months ended June 30, 2021 to an average of 143 people in the three months ended June 30, 2022, with the remainder of the increase attributable to increases in wages and benefits.

 

Sales and Marketing Expenses. The $1.0 million increase in sales and marketing expenses for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was related to an increase of $0.9 million of personnel-related expenses. The increase in personnel-related expense was due to an average headcount increase of 40%, from an average of 10 people in the three months ended June 30, 2021 to an average of 14 people for the three months ended June 30, 2022, with the remainder of the increase attributable to increases in wages and benefits.

 

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General and Administrative Expenses. General and administrative expenses increased $5.5 million, or 241%, to $7.8 million during the three months ended June 30, 2022, compared to $2.3 million during the three months ended June 30, 2021. The increase in general and administrative costs was due to an increase of $3.4 million in personnel-related expenses, an increase of $1.5 million in insurance expense primarily related to our becoming a public company, and an increase of $0.7 million in professional fees. The increase in personnel-related expense was due to an average headcount increase of 325% from an average of eight people in the three months ended June 30, 2021 to 34 people in the three months ended June 30, 2022, with the remainder attributable to increases in wages and benefits.

 

Change in Fair Value of Warrant Liabilities. The change in fair value of warrant liabilities during the three months ended June 30, 2022 was a $17.6 million gain. The change in fair value of the warrant liability resulted from the remeasurement of the Public Warrant and Private Placement Warrant liabilities which was primarily driven by the decrease in our stock price during the three months ended June 30, 2022.

 

Interest Income. Interest income increased by $100 during the three months ended June 30, 2022, compared to the three months ended June 30, 2021. The increase in interest income was primarily due to an increase in cash during the three months ended June 30, 2022, compared to the three months ended June 30, 2021. The increase was primarily due to interest earned on funds received as a result of the Business Combination.

 

Interest Expense. Interest expense increased by $2 during the three months ended June 30, 2022, compared to the three months ended June 30, 2021. The increase was primarily due to our $1.5 million term loan.

 

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 net cumulative losses, we maintain a valuation allowance against our U.S. and state deferred tax assets.

 

Comparison of the Six Months ended June 30, 2022 and 2021

 

The following table sets forth our historical operating results for the six months ended June 30, 2022 and 2021:

 

    Six months ended
June 30,
             
(in thousands, except for per share amounts)   2022     2021     Change     % Change  
Operating expenses:                        
Research and development   $ 19,903     $ 7,616     $ 12,287       161 %
Sales and marketing     2,713       551       2,162       392 %
General and administrative     14,690       3,676       11,014       300 %
Total operating expenses     37,306       11,843       25,463       215 %
Loss from operations     (37,306 )     (11,843 )     (25,463 )     215 %
Other income (expense):                                
Change in fair value of warrant liabilities     78,329             78,329       N/M  
Interest income     109       2       107       5,350 %
Interest expense     (58 )     (28 )     (30 )     107 %
Income/(loss) before income taxes     41,074       (11,869 )     52,943       (446 )%
Provision for income taxes                       N/M  
Net income/(loss) and comprehensive gain/(loss)   $ 41,074     $ (11,869 )   $ 52,943       (446 )%
Net income/(loss) per common share, basic   $ 0.34     $ (0.14 )   $ 0.48       (343 )%
Net income/(loss) per common share, diluted   $ 0.32     $ (0.14 )   $ 0.46       (329 )%

 

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Research and Development Expenses. Research and development expenses increased $12.3 million, or 161%, to $19.9 million during the six months ended June 30, 2022, compared to $7.6 million during the six months ended June 30, 2021. The increase in research and development expenses was primarily due to increases of $7.5 million of personnel-related expenses, $2.5 million in professional services, $1.5 million in lease and facility expenses, $0.3 million in materials and supplies, and $0.2 million in travel and entertainment expense. The increase in personnel-related expense was due primarily to an increase in average headcount of 93%, from an average of 68 people in the six months ended June 30, 2021 to an average of 131 people in the six months ended June 30, 2022, with the remainder of the increase attributable to increases in wages and benefits.

 

Sales and Marketing Expenses. The $2.2 million increase in sales and marketing expenses for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was related to an increase of $1.8 million of personnel-related expenses. The increase in personnel-related expense was due to an average headcount increase of 33%, from an average of nine people in the six months ended June 30, 2021 to an average of 12 people for the six months ended June 30, 2022, with the remainder of the increase attributable to increases in wages and benefits.

 

General and Administrative Expenses. General and administrative expenses increased $11.0 million, or 300%, to $14.7 million during the six months ended June 30, 2022, compared to $3.7 million during the six months ended June 30, 2021. The increase in general and administrative costs was due to an increase of $6.6 million in personnel-related expenses, an increase of $3.0 million in insurance expense primarily related to our becoming a public company, and an increase of $1.2 million in professional fees. The increase in personnel-related expense was due to an average headcount increase of 383% from an average of six people in the six months ended June 30, 2021 to 29 people in the six months ended June 30, 2022, with the remainder attributable to increases in wages and benefits.

 

Change in Fair Value of Warrant Liabilities. The change in fair value of warrant liabilities during the six months ended June 30, 2022 was a $78.3 million gain. The change in fair value of the warrant liability resulted from the remeasurement of the public and private placement warrant liabilities which was primarily driven by the decrease in our stock price during the six months ended June 30, 2022.

 

Interest Income. Interest income increased by $107 during the six months ended June 30, 2022, compared to the six months ended June 30, 2021. The increase in interest income was primarily due to an increase in cash during the six months ended June 30, 2022, compared to the six months ended June 30, 2021. The increase was primarily due to interest earned on funds received as a result of the Business Combination.

 

Interest Expense. Interest expense increased by $30 during the six months ended June 30, 2022, compared to the six months ended June 30, 2021. The increase was primarily due to our $1.5 million term loan.

 

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 net cumulative losses, we maintain a valuation allowance against our U.S. and state deferred tax assets.

 

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Liquidity and Capital Resources

 

To date, our primary sources of capital had been private placements of preferred stock prior to the Business Combination and recapitalization with D8. We have incurred a net loss in each of our annual periods since our inception. We incurred net losses of $35.2 million and $12.9 million during the years ended December 31, 2021 and 2020, respectively. As of June 30, 2022, we held cash and cash equivalents of $141.3 million and had an accumulated deficit of $25.7 million.

 

We expect net losses to continue in connection with our ongoing activities, particularly as we continue to invest in commercialization and new product development. On a gross basis, we have approximately $141.3 million in cash which we expect to be sufficient to support our operations beyond the next twelve months.

 

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 and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. 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 products or grant licenses on terms that are not favorable to us. Additional capital may not be available on reasonable terms, or at all.

 

Cash

 

Our cash and cash equivalents balance as of June 30, 2022 was $141.3 million. 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 Six Months ended June 30, 2022 and June 30, 2021

 

    Six months ended
June 30,
 
(in millions)   2022     2021  
Net cash used in operating activities   $ (29.0 )   $ (9.9 )
Net cash used in investing activities   $ (3.6 )   $ (0.3 )
Net cash provided by financing activities   $ 0.2     $ 1.6  

 

Operating Activities

 

Net cash used in operating activities during the six months ended June 30, 2022 was $29.0 million, attributable to net income of $41.1 million plus a net change in our net operating assets and liabilities of $2.4 million and offset by non-cash items of $72.4 million. Non-cash items consisted of a gain of $78.3 million due to the change in fair value of our warrant liabilities, partially offset by $5.1 million in stock-based compensation, $0.4 million of depreciation and amortization and $0.4 million for non-cash lease expense. The $2.4 million change in our net operating assets and liabilities was primarily due to a $2.5 million increase in prepaid and other assets and a $0.2 million increase in accrued expenses, and was partially offset by a $0.3 million decrease in accounts payable.

 

Net cash used in operating activities for the six months ended June 30, 2021 was $9.9 million, attributable to a net loss of $11.9 million and a net change in our net operating assets and liabilities of $1.2 million and non-cash items of $0.7 million. Non-cash items primarily consisted of $0.6 million in stock-based compensation. The $1.2 million change in our operating assets and liabilities was primarily due to a $0.8 million increase in accrued expenses and a $0.5 million increase in accounts payable, partially offset by a $0.2 million increase in prepaid expenses and other current assets and a $0.2 million increase in deferred transaction costs.

 

29

 

 

Investing Activities

 

Net cash used by investing activities for the six months ended June 30, 2022 was $3.6 million for fixed asset purchases consisting primarily of leasehold improvements and R&D equipment.

 

Net cash used in investing activities for the six months ended June 30, 2021 was $0.3 million for equipment purchases.

 

Financing Activities

 

Net cash provided by financing activities for the six months ended June 30, 2022 was $0.2 million consisting primarily of $0.6 million received for stock option exercises partially offset by $0.3 million of loan repayments.

 

Net cash provided by financing activities for the six months ended June 30, 2021 was $1.6 million and primarily related to the proceeds of $1.5 million from the term loan.

 

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:

 

Stock-Based Compensation

 

We account for all stock-based compensation, including stock options, RSUs and other forms of equity issued as compensation, at fair value and recognize 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 our stock options on the date of grant is determined by a Black-Scholes pricing model utilizing key assumptions such as stock price, expected volatility and expected term. Our estimates of these assumptions are primarily based on the fair value of our stock, historical data, peer company data and judgment regarding future trends. Prior to becoming a publicly traded company, the fair value of our common stock was determined by our Board of Directors at each award grant date based upon a variety of factors, including the results obtained from an independent third-party valuation, our financial position and historical financial performance, the status of technological developments within our proposed products, the illiquid nature of the common stock, arm’s length sales of our 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 our common stock was not actively traded. Since becoming a publicly traded company, we use the publicly traded stock price as the fair value of our common stock. We use the simplified method when calculating the expected term due to insufficient historical exercise data. Volatility is based on a benchmark of comparable companies within the surgical robotics and medical device industries. The dividend yield used is zero, as we have never paid any cash dividends and do not anticipate doing so in the foreseeable future. 

 

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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 Weakness

 

In connection with our evaluation of disclosure controls and procedures covering our condensed consolidated financial statements as of December 31, 2020 and 2021, we identified material weaknesses in our internal control over financial reporting. We have concluded that material weaknesses exist in our evaluation of 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 the recording of journal entries and the reconciliation of key accounts, as well as the analysis of accounting for certain transactions and accounts.

 

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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 controls 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 controls 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 June 30, 2022, 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 June 30, 2022 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

 

Other than the material weaknesses described above, 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 quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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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.

 

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K filed with the SEC on March 31, 2022.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Unregistered Sales of Equity Securities

 

Not applicable.

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities during the six months ended June 30, 2022.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

33

 

 

Item 6. Exhibits.

 

Exhibit
Number
  Exhibit Description   Incorporated by
Reference herein
from Form or
Schedule
  Filing Date   SEC File /
Registration
Number 
10.1+   Vicarious Surgical Inc. 2021 Equity Incentive Plan, as amended, and forms of agreement thereunder.  

Form 8-K

(Exhibit 10.1)

  6/3/2022   001-39384
                 
10.2+   Amended and Restated Non-Employee Director Compensation Policy.  

Form 10-Q

(Exhibit 10.1)

  5/9/2022   001-39384
                 
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.
  + Management contract or compensatory plan or arrangement.

 

34

 

 

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.
        
August 8, 2022 By:   /s/ Adam Sachs
    Adam Sachs
    Chief Executive Officer and President
    (Principal Executive Officer)
     
August 8, 2022 By: /s/ William Kelly
    William Kelly
    Chief Financial Officer
   

(Principal Financial Officer and

Principal Accounting Officer)

 

35

 

 

Exhibit 31.1

 

CERTIFICATIONS UNDER SECTION 302

 

I, Adam Sachs, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Vicarious Surgical Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 8, 2022

 

/s/ Adam Sachs  
Adam Sachs  
Chief Executive Officer  
(Principal Executive Officer)  

 

 

 

 

Exhibit 31.2

 

 CERTIFICATIONS UNDER SECTION 302

 

I, William Kelly, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Vicarious Surgical Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 8, 2022

 

/s/ William Kelly  
William Kelly  
Chief Financial Officer  
(Principal Financial Officer)  

 

 

 

 

Exhibit 32

 

CERTIFICATIONS UNDER SECTION 906

 

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Vicarious Surgical Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

 

The Quarterly Report for the quarter ended June 30, 2022 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: August 8, 2022 /s/ Adam Sachs
  Adam Sachs
  Chief Executive Officer
  (Principal Executive Officer)

 

Dated: August 8, 2022 /s/ William Kelly
  William Kelly
  Chief Financial Officer
  (Principal Financial Officer)

 

 

 

 

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