UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
For the transition period from to
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
(Address of principal executive offices) | (Zip Code) |
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 | ||
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.
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).
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 ☐ |
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 November 1, 2022, the registrant had
TABLE OF CONTENTS
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 products 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; |
● | changes in U.S. and foreign laws; |
● | our ability to identify, in-license or acquire additional technology; |
● | our ability to maintain our existing license agreements and manufacturing arrangements; |
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; |
● | 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.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
VICARIOUS SURGICAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share data)
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Prepaid expenses and other current assets | ||||||||
Total current assets | ||||||||
Restricted cash | ||||||||
Property and equipment, net | ||||||||
Right-of-use assets | ||||||||
Total assets | $ | $ | ||||||
Liabilities, Convertible Preferred Stock and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Accrued expenses | ||||||||
Lease liabilities, current portion | ||||||||
Current portion of equipment loans | ||||||||
Current portion of term loan | ||||||||
Total current liabilities | ||||||||
Lease liabilities, net of current portion | ||||||||
Deferred rent | ||||||||
Equipment loans, net of current portion | — | |||||||
Term loan, net of current portion and issuance costs | ||||||||
Warrant liabilities | ||||||||
Total liabilities | ||||||||
Commitments and Contingencies (Note 8) | ||||||||
Legacy convertible preferred stock (Note 11) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $ | ||||||||
Class A Common stock, $ | ||||||||
Class B Common stock, $ | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ | $ |
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 September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | $ | $ | $ | $ | ||||||||||||
Sales and marketing | ||||||||||||||||
General and administrative | ||||||||||||||||
Total operating expenses | ||||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other income (expense): | ||||||||||||||||
Change in fair value of warrant liabilities | ( | ) | ( | ) | ( | ) | ||||||||||
Interest income | — | |||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income/(loss) before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
Provision for income taxes | ||||||||||||||||
Net income/(loss) and comprehensive gain/(loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Net income/(loss) per share of Class A and Class B common stock, basic | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Net income/(loss) per share of Class A and Class B common stock, diluted | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) |
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 September 30, 2022 | ||||||||||||||||||||||||||||
Convertible | Class A & B | Additional | Total | |||||||||||||||||||||||||
Preferred Stock | Common Stock | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Exercise of common stock options | ||||||||||||||||||||||||||||
Vesting of restricted stock | ||||||||||||||||||||||||||||
Stock-based compensation | — | — | ||||||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ |
Nine Months Ended September 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 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Exercise of common stock options | ||||||||||||||||||||||||||||
Exercise of public warrants | ||||||||||||||||||||||||||||
Vesting of restricted stock | ||||||||||||||||||||||||||||
Stock-based compensation | — | — | ||||||||||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ |
Three Months Ended September 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, June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Retroactive application of recapitalization (Note 1) | ( | ) | ( | ) | ||||||||||||||||||||||||
Adjusted balance, beginning of period | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
Reverse recapitalization, net of transaction costs (Note 1) | — | |||||||||||||||||||||||||||
Cashless exercise of warrants | — | |||||||||||||||||||||||||||
Exercise of common stock options | ||||||||||||||||||||||||||||
Stock-based compensation | — | — | ||||||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ |
Nine Months Ended September 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 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Retroactive application of recapitalization (Note 1) | ( | ) | ( | ) | ||||||||||||||||||||||||
Adjusted balance, beginning of period | ( | ) | ||||||||||||||||||||||||||
Reverse recapitalization, net of transaction costs (Note 1) | — | |||||||||||||||||||||||||||
Cashless exercise of warrants | — | |||||||||||||||||||||||||||
Exercise of common stock options | ||||||||||||||||||||||||||||
Stock-based compensation | — | — | ||||||||||||||||||||||||||
Vesting of restricted stock | ||||||||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ |
See accompanying notes to these condensed consolidated financial statements.
3
VICARIOUS SURGICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net income/(loss) | $ | $ | ( | ) | ||||
Adjustments to reconcile net income/(loss) to net cash used in operating activities: | ||||||||
Depreciation | ||||||||
Stock-based compensation | ||||||||
Amortization of capitalized debt issuance costs | ||||||||
Non-cash lease expense | ||||||||
Change in fair value of warrant liabilities | ( | ) | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | ( | ) | ||||||
Accounts payable | ||||||||
Accrued expenses | ||||||||
Lease liabilities | ||||||||
Deferred rent | ||||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | ( | ) | ( | ) | ||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of equipment loans | ( | ) | ( | ) | ||||
Proceeds from term loan | ||||||||
Proceeds from reverse recapitalization, net of issuance costs | ||||||||
Repayment of term loan | ( | ) | ||||||
Proceeds from exercise of stock options | ||||||||
Net cash provided by financing activities | ||||||||
Change in cash, cash equivalents and restricted cash | ( | ) | ||||||
Cash, cash equivalents and restricted cash, beginning of period | ||||||||
Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
Reconciliation of restricted cash: | ||||||||
Cash and cash equivalents | ||||||||
Restricted cash | ||||||||
$ | $ | |||||||
Supplemental cash flow information: | ||||||||
Interest paid | $ | $ | ||||||
Non-cash investing and financing activities: | ||||||||
Accruals for property, plant and equipment purchased during the period | $ | $ | ||||||
Leasehold improvements acquired in connection with Waltham lease | $ | $ | ||||||
Warrants assumed in acquisition | $ | $ | ||||||
Reverse recapitalization costs in accounts payable and accrued expenses | $ | $ |
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 Company consummated the transaction (the “Closing”) 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.
5
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with 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 September 30, 2022, our results of operations, and stockholders’ equity for the three and nine-month periods ended September 30, 2022 and 2021, and our cash flows for the nine-month periods ended September 30, 2022 and 2021. The operating results for the three and nine-month periods ended September 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.
6
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 $
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 nine-month periods ended September 30, 2022 or for the year ended December 31, 2021. The Company holds no short-term investments as of September 30, 2022.
Concentrations of Credit Risk and Off-Balance-Sheet Risk
The Company has no significant off-balance-sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially expose the Company to concentrations of credit risk consist mainly of cash and cash equivalents. The Company maintains its cash and cash equivalents principally with accredited financial institutions of high-credit standing.
7
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
Property and Equipment
Property and equipment are recorded at cost. Expenditures for repairs and maintenance are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is included in the determination of net loss. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets.
Impairment of Long-Lived Assets
The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets may warrant revision or that the carrying value of these assets may be impaired. The Company does not believe that any events have occurred through September 30, 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.
8
Guarantees and Indemnifications
As permitted under Delaware law, the Company indemnifies its officers, directors, consultants and employees for certain events or occurrences that happen by reason of the relationship with, or position held at, the Company. Through September 30, 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 web services, legal, raw materials and allocated overhead such as depreciation and amortization, rent and utilities. Advance payments for goods and services to be used in future research and development activities are recorded as prepaid expenses and are expensed over the service period as the services are provided or when the goods are consumed.
Stock-Based Compensation
The Company accounts for all stock-based compensation, including stock options, restricted stock units (“RSUs”) 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
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 nine-month periods ended September 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 Closing, 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, 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
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
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) | $ | |||
Cash - PIPE financing | ||||
Less: Transaction costs and advisory fees | ( | ) | ||
Net proceeds from reverse recapitalization | ||||
Less: Warrant liabilities assumed | ( | ) | ||
Net assets and liabilities assumed in reverse recapitalization | $ |
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 | ||||
Less: Redemption of D8 shares | ( | ) | ||
D8 Public Shares | ||||
D8 Sponsor Shares | ||||
Shares issued in PIPE financing | ||||
Business combination and PIPE financing shares | ||||
Legacy Vicarious Surgical shares (1) | ||||
Total shares of common stock immediately after Business Combination |
(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 |
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4. | PROPERTY AND EQUIPMENT, NET |
Property and equipment, net consist of the following:
Estimated | September 30, | December 31, | ||||||||
Useful Lives | 2022 | 2021 | ||||||||
Machinery and equipment | $ | $ | ||||||||
Furniture and fixed assets | ||||||||||
Computer hardware and software | ||||||||||
Leasehold improvements | ||||||||||
Total property and equipment | ||||||||||
Less accumulated depreciation | ( | ) | ( | ) | ||||||
Property and equipment, net | $ | $ |
In connection with the Waltham lease, the Company received
$
In connection with the Waltham lease that was amended in
October 2021, the Company received $
Depreciation expense for the three and nine-month periods
ended September 30, 2022 was $
5. | FAIR VALUE MEASUREMENTS |
The following fair value hierarchy table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the inputs the Company utilized to determine such fair value:
September 30, 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 | $ | $ | $ | $ | ||||||||||||
Total assets | $ | $ | $ | $ | ||||||||||||
Liabilities: | ||||||||||||||||
Warrant liabilities - public warrants | $ | $ | $ | $ | ||||||||||||
Warrant liabilities - private warrants | ||||||||||||||||
Total liabilities | $ | $ | $ | $ |
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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 | $ | $ | $ | $ | ||||||||||||
Total assets | $ | $ | $ | $ | ||||||||||||
Liabilities: | ||||||||||||||||
Warrant liabilities - public warrants | $ | $ | $ | $ | ||||||||||||
Warrant liabilities - private warrants | ||||||||||||||||
Total liabilities | $ | $ | $ | $ |
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 September 30, 2022, the Company
recognized a loss to the statement of operations resulting from an increase in the fair value of liabilities of $
For the three months ended September 30, 2021, the Company
recognized a loss to the statement of operations resulting from an increase in the fair value of liabilities of approximately $
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 | September 30, 2022 | December 31, 2021 | ||||||
Volatility | % | % | ||||||
Stock price | $ | $ | ||||||
Expected life of options to convert | ||||||||
Risk-free rate | % | % | ||||||
Dividend yield | % | % |
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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 | $ | $ | $ | |||||||||||||||||||||
Exercised | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
Change in value | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
March 31, 2022 | $ | $ | $ | |||||||||||||||||||||
Exercised | ||||||||||||||||||||||||
Change in value | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
June 30, 2022 | $ | $ | $ | |||||||||||||||||||||
Exercised | ||||||||||||||||||||||||
Change in value | $ | $ | $ | |||||||||||||||||||||
September 30, 2022 | $ | $ | $ |
6. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
The following table summarizes the Company’s components of accrued expenses and other current liabilities:
As of | ||||||||
September 30, 2022 | December 31, 2021 | |||||||
Compensation and benefits related | $ | $ | ||||||
Professional services and other | ||||||||
Accrued expenses | $ | $ |
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 $
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 included 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 had prepayment fees if the Company elected to repay such loan prior to it becoming due, which penalties varied based upon the time remaining before the term loan was 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.
The loan had no financial covenants but did contain monthly
reporting requirements and gave the lender a first priority lien on all Company assets. In March 2021, the Company borrowed the first
tranche of $
In October 2022, the Company paid off the entire term loan
balance. As the Company chose to repay the term loan prior to the second anniversary of the term loan closing, a prepayment fee of
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Deferred Financing Costs
In connection with the term loan, the Company incurred $
Common Stock Warrant
In connection with the term loan, the Company issued the
lender a warrant to purchase
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 following table represents the future payments required
under the noncancellable equipment agreements and includes interest of $
Years Ended December 31, | ||||
2022, remaining three months | $ | |||
2023 | ||||
Total future equipment payments | $ |
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 $
The Company leases its office facility under a noncancelable
operating lease agreement that expires in March 2032. Rent expense for the three and nine-month periods ended September 30, 2022 was $
A summary of the components of lease costs for the Company under ASC 842 for the nine months ended September 30, 2022 and under ASC 840 for the nine months ended September 30, 2021 were as follows:
September 30, | ||||||||
Lease costs | 2022 | 2021 | ||||||
Operating lease costs | $ | $ | ||||||
Total lease costs | $ | $ |
Supplemental disclosure of cash flow information related to leases was as follows:
September 30, | ||||
2022 | ||||
Cash paid | $ | |||
Cash received | $ | ( | ) | |
Total cash received for amounts included in the measurement of operating lease liabilities (operating cash flows) | $ | ( | ) |
The weighted-average remaining lease term and discount rate were as follows:
September 30, | ||||
2022 | ||||
Weighted-average remaining lease term (in years) | ||||
Weighted-average discount rate | % |
The following table presents the maturity of the Company’s operating lease liabilities as of September 30, 2022:
Years Ended December 31, | ||||
2022, remaining three months ended December 31,2022 | $ | |||
2023 | ||||
2024 | ||||
2025 | ||||
2026 | ||||
Thereafter | ||||
Total future minimum lease payments | $ | |||
Less imputed interest | ( | ) | ||
Carrying value of lease liabilities | $ |
10. | INCOME TAXES |
For the three and nine-month periods ended September 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 September 30, 2022, the Company’s authorized
shares consisted of
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 September 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 | $ | |||||||||||
Series A1 Legacy Convertible Preferred Stock, $0.0001 par value | ||||||||||||
Series A2 Legacy Convertible Preferred Stock, $0.0001 par value | ||||||||||||
Series A3 Legacy Convertible Preferred Stock, $0.0001 par value | ||||||||||||
Total | $ |
Common Stock
Classes of Common Stock
Class A common stock receives one vote per share. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of Class A common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available for such purposes. In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of Class A common stock are entitled to share ratably in all assets remaining after payment of our debts and other liabilities, subject to prior distribution rights of preferred stock or any class or series of stock having a preference over the Class A common stock, then outstanding, if any.
Class B common stock receives 20 votes per share and converts into Class A at a one-to-one conversion rate per share. Holders of Class B common stock will share ratably together with each holder of Class A common stock, if and when any dividend is declared by the board of directors. Holders of Class B common stock have the right to convert shares of their Class B common stock into fully paid and non-assessable shares of Class A common stock, on a one-to-one basis, at the option of the holder at any time. Upon the occurrence of certain events, holders of Class B common stock automatically convert into Class A common stock, on a one-to-one basis. In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of Class B common stock are entitled to share ratably in all assets remaining after payment of our debts and other liabilities, subject to prior distribution rights of preferred stock or any class or series of stock having a preference over the Class B common stock, then outstanding, if any.
Restricted Stock Agreements —
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
Shares Subject to Vesting | Weighted Average Grant Date Fair Value | |||||||
Balance of unvested shares - January 1, 2022 | $ | |||||||
Granted | $ | |||||||
Vested | ( | ) | $ | |||||
Balance of unvested shares - March 31, 2022 | $ | |||||||
Granted | $ | |||||||
Vested | ( | ) | $ | |||||
Balance of unvested shares - June 30, 2022 | $ | |||||||
Granted | $ | |||||||
Vested | ( | ) | $ | |||||
Forfeited | ( | ) | $ | |||||
Balance of unvested shares - September 30, 2022 | $ |
Total stock-based
compensation related to RSUs during the three and nine-month periods ended September 30, 2022 was $
Preferred Stock
Preferred stock shares authorized may be issued from time to time in one or more series, with each series terms, voting, dividend, conversion, redemption, liquidation and other rights to be determined by the Board of Directors at the time of issuance. As of September 30, 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 $
As of September 30, 2022, the Company had
The Public Warrants became exercisable at $
18
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. |
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
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
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
The 2021 Plan authorizes the Company to issue up to
During the nine months ended September 30, 2022 the Company
granted options to purchase
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Risk-free interest rate | % | % | ||||||
Expected term (in years) | ||||||||
Dividend yield | % | % | ||||||
Expected volatility | % | % |
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 September 30, 2022, there was $
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 September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Research and development | $ | $ | $ | $ | ||||||||||||
Sales and marketing | ||||||||||||||||
General and administrative | ||||||||||||||||
Total | $ | $ | $ | $ |
The Company plans to generally issue previously unissued shares of common stock for the exercise of stock options.
There were
The option activity of the 2021 Plan for the nine months ended September 30, 2022, is as follows:
Weighted Average Exercise | Weighted Average Remaining Contractual Life | |||||||||||
Options | Price | (in years) | ||||||||||
Outstanding at January 1, 2022 | $ | |||||||||||
Granted | ||||||||||||
Exercised | ( | ) | ||||||||||
Forfeited | ( | ) | ||||||||||
Expired | ( | ) | ||||||||||
Options vested and expected to vest at September 30, 2022 | $ |
The weighted average grant date fair value of options granted
during the nine months ended September 30, 2022 and September 30, 2021 was $
Common Stock Reserved for Future Issuance
As of September 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 | ||||||||
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
Common stock options outstanding | ||||||||
Restricted stock units outstanding | ||||||||
Shares available for issuance under the 2021 Plan | ||||||||
Public warrants | ||||||||
Private warrants | ||||||||
Total shares of authorized Common Stock reserved for future issuance |
21
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 $
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 September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Numerator for basic and diluted net loss per share: | ||||||||||||||||
Net income/(loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Denominator for basic net gain/(loss) per share: | ||||||||||||||||
Weighted average shares | ||||||||||||||||
Denominator for diluted net gain/(loss) per share: | ||||||||||||||||
Weighted average shares | ||||||||||||||||
Net income/(loss) per share of Class A and Class B common stock – basic | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Net income/(loss) per share of Class A and Class B common stock – diluted | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) |
For the nine months ended September 30, 2022,
******
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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, 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, and our other public reports filed with the SEC. This discussion contains forward looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 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 nine-month periods ended September 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 September 30, 2022.
We generated a net gain of $16,337 for the nine months ended September 30, 2022 and incurred a net loss of $56,993 for the nine months ended September 30, 2021, representing a period-over-period gain of $73,330 primarily due to a $111,823 gain incurred due to the mark-to-market value of our public and private warrants to market and partially offset by a $24,672 increase in personnel-related expenses, a $6,058 increase in professional fees, $4,116 of increased insurance costs, $2,279 of additional lease and facility expenses, an additional $1,383 of R&D supplies and materials, $486 of increased travel expenses, and $520 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 72% from an average of 78 people in the nine months ended September 30, 2021 to an average of 134 people for the nine months ended September 30, 2022. In addition, our general and administrative headcount increased by 142% from an average of 12 people in the nine months ended September 30, 2021 to an average of 29 people for the nine months ended September 30, 2022.
We incurred a net loss of $35,207 and $12,875 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 $3,085 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 $38,223 and $12,985 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 and 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.
Other Global Developments
In 2022, various central banks around the world (including the Federal Reserve in the United States) raised interest rates. While these rate increases have not had a significant adverse impact on the Company to date, the impact of such rate increases on the overall financial markets and the economy may adversely impact the Company in the future. In addition, the global economy has experienced and is continuing to experience high levels of inflation and global supply chain disruptions. We continue to monitor these supply chain, inflation and interest rate factors, as well as the uncertainty resulting from the overall economic environment.
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In addition, although we have no operations in or direct exposure to Russia, Belarus and Ukraine, we have experienced limited constraints in availability and increasing costs required to obtain some materials and supplies due, in part, to the negative impact of the Russia-Ukraine military conflict on the global economy. To date, our business has not been materially impacted by the conflict, however, as the conflict continues or worsens, it may impact our business, financial condition or results of operations.
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 2024 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
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.
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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.
Results of Operations
Comparison of the Three Months ended September 30, 2022 and 2021
The following table sets forth our historical operating results for three months ended September 30, 2022 and 2021:
Three months ended September 30, | ||||||||||||||||
(in thousands, except for per share amounts) | 2022 | 2021 | Change | % Change | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | $ | 12,120 | $ | 5,189 | $ | 6,931 | 134 | % | ||||||||
Sales and marketing | 1,912 | 842 | 1,070 | 127 | % | |||||||||||
General and administrative | 8,130 | 2,530 | 5,600 | 221 | % | |||||||||||
Total operating expenses | 22,162 | 8,561 | 13,601 | 159 | % | |||||||||||
Loss from operations | (22,162 | ) | (8,561 | ) | (13,601 | ) | 159 | % | ||||||||
Other income (expense): | ||||||||||||||||
Change in fair value of warrant liabilities | (3,038 | ) | (36,532 | ) | 33,494 | 92 | % | |||||||||
Interest income | 494 | — | 494 | N/M | ||||||||||||
Interest expense | (31 | ) | (31 | ) | — | N/M | ||||||||||
Loss before income taxes | (24,737 | ) | (45,124 | ) | 20,387 | 45 | % | |||||||||
Provision for income taxes | — | — | — | N/M | ||||||||||||
Net loss and comprehensive loss | $ | (24,737 | ) | $ | (45,124 | ) | $ | 20,387 | 45 | % | ||||||
Net loss per common share, basic and diluted | $ | (0.20 | ) | $ | (0.49 | ) | $ | 0.29 | 59 | % |
Research and Development Expenses. Research and development expenses increased $6,931, or 134%, to $12,120 during the three months ended September 30, 2022, compared to $5,189 during the three months ended September 30, 2021. The increase in research and development expenses was primarily due to increases of $3,630 of personnel-related expenses, $1,512 in professional services, $1,050 in materials and supplies, $450 in lease and facility expenses, and $223 in depreciation expense. The increase in personnel-related expense was due primarily to an increase in average headcount of 68%, from an average of 91 people in the three months ended September 30, 2021 to an average of 153 people in the three months ended September 30, 2022, with the remainder of the increase attributable to increases in wages and benefits.
Sales and Marketing Expenses. The $1,070 increase in sales and marketing expenses for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was related to an increase of $1,182 of personnel-related expenses. The increase in personnel-related expense was due to an average headcount increase of 50%, from an average of 12 people in the three months ended September 30, 2021 to an average of 18 people for the three months ended September 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 $5,600, or 221%, to $8,130 during the three months ended September 30, 2022, compared to $2,530 during the three months ended September 30, 2021. The increase in general and administrative costs was due to increases of $3,948 in personnel-related expenses, $1,083 in insurance expense primarily related to our becoming a public company and $652 in professional fees. The increase in personnel-related expense was due to an average headcount increase of 209% from an average of 11 people in the three months ended September 30, 2021 to 34 people in the three months ended September 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 September 30, 2022 was a $3,038 loss. 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 increase in our stock price during the three months ended September 30, 2022.
Interest Income. Interest income increased by $494 during the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The increase in interest income was primarily due to an increase in interest rates during the three months ended September 30, 2022, compared to the three months ended September 30, 2021.
Interest Expense. Interest expense was $31 in each of the three-month periods ended September 30, 2022 and September 30, 2021.
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 Nine Months ended September 30, 2022 and 2021
The following table sets forth our historical operating results for the nine months ended September 30, 2022 and 2021:
Nine months ended September 30, | ||||||||||||||||
(in thousands, except for per share amounts) | 2022 | 2021 | Change | % Change | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | $ | 32,023 | $ | 12,804 | $ | 19,219 | 150 | % | ||||||||
Sales and marketing | 4,625 | 1,393 | 3,232 | 232 | % | |||||||||||
General and administrative | 22,820 | 6,206 | 16,614 | 268 | % | |||||||||||
Total operating expenses | 59,468 | 20,403 | 39,065 | 191 | % | |||||||||||
Loss from operations | (59,468 | ) | (20,403 | ) | (39,065 | ) | 191 | % | ||||||||
Other income (expense): | ||||||||||||||||
Change in fair value of warrant liabilities | 75,291 | (36,532 | ) | 111,823 | 306 | % | ||||||||||
Interest income | 603 | 1 | 602 | 60,200 | % | |||||||||||
Interest expense | (89 | ) | (59 | ) | (30 | ) | 50 | % | ||||||||
Income/(loss) before income taxes | 16,337 | (56,993 | ) | 73,330 | 129 | % | ||||||||||
Provision for income taxes | — | — | — | N/M | ||||||||||||
Net income/(loss) and comprehensive gain/(loss) | $ | 16,337 | $ | (56,993 | ) | $ | 73,330 | 129 | % | |||||||
Net income/(loss) per common share, basic | $ | 0.14 | $ | (0.64 | ) | $ | 0.78 | 122 | % | |||||||
Net income/(loss) per common share, diluted | $ | 0.12 | $ | (0.64 | ) | $ | 0.76 | 119 | % |
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Research and Development Expenses. Research and development expenses increased $19,219, or 150%, to $32,023 during the nine months ended September 30, 2022, compared to $12,804 during the nine months ended September 30, 2021. The increase in research and development expenses was primarily due to increases of $11,156 of personnel-related expenses, $4,038 in professional services, $1,990 in lease and facility expenses, $1,312 in materials and supplies, $466 in depreciation expense, and $302 in travel and entertainment expense. The increase in personnel-related expense was due primarily to an increase in average headcount of 72%, from an average of 78 people in the nine months ended September 30, 2021 to an average of 134 people in the nine months ended September 30, 2022, with the remainder of the increase attributable to increases in wages and benefits.
Sales and Marketing Expenses. The $3,232 increase in sales and marketing expenses for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily related to an increase of $2,987 of personnel-related expenses. The increase in personnel-related expense was due to an average headcount increase of 150%, from an average of six people in the nine months ended September 30, 2021 to an average of 15 people for the nine months ended September 30, 2022, with the remainder of the increase attributable to increases in wages and benefits.
General and Administrative Expenses. General and administrative expenses increased $16,614, or 268%, to $22,820 during the nine months ended September 30, 2022, compared to $6,206 during the nine months ended September 30, 2021. The increase in general and administrative costs was due to an increase of $10,529 in personnel-related expenses, an increase of $4,084 in insurance expense primarily related to our becoming a public company, and an increase of $1,814 in professional fees. The increase in personnel-related expense was due to an average headcount increase of 142% from an average of 12 people in the nine months ended September 30, 2021 to 29 people in the nine months ended September 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 nine months ended September 30, 2022 was a $111,823 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 nine months ended September 30, 2022.
Interest Income. Interest income increased by $602 during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase in interest income was primarily due to an increase in interest rates and a higher average cash balance during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The higher average cash balance during the nine months ended September 30, 2022 was primarily due to funds received as a result of the Business Combination.
Interest Expense. Interest expense increased by $30 during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase was primarily due to our $1,500 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.
Liquidity and Capital Resources
To date, our primary sources of capital have 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 $35,207 and $12,985 during the years ended December 31, 2021 and 2020, respectively. As of September 30, 2022, we held cash and cash equivalents of $126,797 and had an accumulated deficit of $50,461.
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 $126,797 in cash which we expect to be sufficient to support our operations beyond the next twelve months.
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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.
On October 7, 2022, we filed a universal shelf registration statement on Form S-3, which was declared effective by the SEC on October 27, 2022, on which we registered for sale up to $400 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, which includes up to $100 million of common stock that we may issue and sell from time to time, through Cowen and Company, LLC acting as our sales agent, pursuant to the sales agreement that we entered into with Cowen and Company, LLC on October 7, 2022 for our “at-the-market” equity program. To date, we have not sold any shares under our sales agreement with Cowen and Company, LLC.
Cash
Our cash and cash equivalents balance as of September 30, 2022 was $126,797. Our future capital requirements may vary from those currently planned and will depend on various factors, including the timing and extent of R&D spending and spending on other strategic business initiatives.
Cash Flows Summary
Comparison of the Nine Months ended September 30, 2022 and September 30, 2021
Nine months ended September 30, | ||||||||
(in thousands) | 2022 | 2021 | ||||||
Net cash used in operating activities | $ | (42,802 | ) | $ | (23,545 | ) | ||
Net cash used in investing activities | $ | (4,360 | ) | $ | (422 | ) | ||
Net cash provided by financing activities | $ | 333 | $ | 192,650 |
Operating Activities
Net cash used in operating activities during the nine months ended September 30, 2022 was $42,802, attributable to net income of $16,337 plus a net change in our net operating assets and liabilities of $6,076 and offset by non-cash items of $65,215. Non-cash items consisted of a gain of $75,291 due to the change in fair value of our warrant liabilities, partially offset by $8,706 in stock-based compensation, $709 of depreciation and amortization and $636 for non-cash lease expenses. The $6,076 change in our net operating assets and liabilities was primarily due to a $3,393 increase in accounts payable, a $1,268 increase in accrued expenses, a $1,083 increase in lease liabilities and a $332 increase in prepaid expenses and other assets.
Net cash used in operating activities for the nine months ended September 30, 2021 was $23,545, attributable to a net loss of $56,993 and a net change in our net operating assets and liabilities of $4,302 and non-cash items of $37,750. Non-cash items consisted of $36,532 due to the change in fair value of our warrant liabilities, $992 in stock-based compensation and $226 of depreciation and amortization. The $4,302 change in our net operating assets and liabilities was primarily due to a $5,921 increase in prepaid expenses and other assets partially offset by a $860 increase in accrued expenses, a $190 increase in accounts payable, and a $569 increase in deferred rent.
Investing Activities
Net cash used by investing activities for the nine months ended September 30, 2022 was $4,360 for fixed asset purchases consisting primarily of leasehold improvements and R&D equipment.
Net cash used in investing activities for the nine months ended September 30, 2021 was $422 for equipment purchases.
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Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2022 was $333 consisting primarily of $818 received for stock option exercises and offset by $485 of loan repayments.
Net cash provided by financing activities for the nine months ended September 30, 2021 was $192,650 and primarily related to $191,070 of proceeds from the reverse recapitalization and proceeds of $1,500 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.
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.
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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.
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 September 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 September 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 September 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 nine months ended September 30, 2022.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
Exhibit Number |
Exhibit Description | Incorporated by Reference herein from Form or Schedule |
Filing Date | SEC File / Registration Number | ||||
10.1 | Sales Agreement, dated as of October 7, 2022, by and between the Registrant and Cowen and Company, LLC |
Form S-3 (Exhibit 1.2) |
10/7/2022 | 333-267785 | ||||
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. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
VICARIOUS SURGICAL INC. | ||
November 7, 2022 | By: | /s/ Adam Sachs |
Adam Sachs | ||
Chief Executive Officer and President | ||
(Principal Executive Officer) | ||
November 7, 2022 | By: | /s/ William Kelly |
William Kelly | ||
Chief Financial Officer | ||
(Principal Financial Officer and Principal Accounting Officer) |
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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: November 7, 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: November 7, 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 September 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: November 7, 2022 | /s/ Adam Sachs |
Adam Sachs | |
Chief Executive Officer | |
(Principal Executive Officer) |
Dated: November 7, 2022 | /s/ Adam Sachs |
William Kelly | |
Chief Financial Officer | |
(Principal Financial Officer) |