Vicarious Surgical, Inc. (NYSE:RBOT) Q4 2022 Earnings Conference Call February 13, 2023 4:30 PM ET Company Participants Kaitlyn Brosco - IR Adam Sachs - Co-Founder, CEO, President & Director William Kelly - CFO & Treasurer Conference Call Participants Ryan Zimmerman - BTIG Eric Anderson - Cowen and Company Adam Maeder - Piper Sandler & Co. Kyle Rose - Canaccord Genuity Operator Good afternoon, and welcome to the Vicarious Surgical's Fourth Quarter 2022 Earnings Conference Call. My name is Tia, and I will be ...

Financial Data and Key Metrics Changes - Total operating expenses for Q3 2022 were $22.2 million, up from $8.6 million in the prior year period, primarily due to increased investment in development and team expansion [12] - Adjusted net loss for Q3 2022 was $21.7 million, or $0.18 per share, compared to an adjusted net loss of $8.6 million, or $0.09 per share in the same period last year [12] - GAAP net loss for Q3 2022 was $24.7 million, equating to a basic and diluted net loss of $0.20 per share, compared to a net loss of $45 million, or $0.49 per share in the prior year [12] - Cash burn for Q3 2022 was $14.5 million, with an ending cash balance of $127 million [13] - Full year 2022 cash burn is now expected to be approximately $65 million to $70 million, down from the previous estimate of $65 million to $75 million [14] Business Line Data and Key Metrics Changes - The company completed the integration phase of its Beta 2 system build, focusing on ergonomics, surgeon input, and visualization [6] - The Beta 2 system enhancements include improved imaging and enhanced sensing and motion capabilities [6] Market Data and Key Metrics Changes - The company has established partnerships with HCA Healthcare and UH, formalized through Center of Excellence agreements, to support the development and commercialization of its technology [7] - A new strategic collaboration agreement was executed with Pittsburgh CREATES, providing access to resources for clinical verification and validation [8][9] Company Strategy and Development Direction - The primary focus remains on system finalization and preparing for regulatory submissions, with plans for multiple indications including inguinal hernia and hysterectomy [10] - The company aims to ensure its product meets the needs of patients, surgeons, hospitals, and payers [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the engagement and receptiveness of hospital systems to the economic benefits of their technology [17] - The company continues to face supply chain challenges, particularly with semiconductor delays, but has implemented effective mitigation strategies [25] Other Important Information - The Beta 2 Demonstration Day is scheduled for December 6, where the finalized system will be showcased [15] Q&A Session Summary Question: Receptiveness of hospitals to economic benefits - Management noted that hospitals have been incredibly receptive to the economic benefits, focusing on patient outcomes while also needing to ensure profitability [17] Question: Preview of Beta 2 Demonstration Day - The event will showcase the Beta 2 system and include cadaver procedure videos, providing an opportunity for Q&A with surgeons and partners [19] Question: Insights from University of Pittsburgh agreement - The agreement offers additional insights, particularly regarding payer needs, complementing existing partnerships with HCA and UH [21] Question: Supply chain challenges - Management confirmed ongoing supply chain challenges but emphasized effective planning and mitigation efforts [25]

Financial Performance - As of September 30, 2022, the company is pre-revenue generating and reported a net gain of $16,337 for the nine months ended September 30, 2022, compared to a net loss of $56,993 for the same period in 2021, representing a period-over-period gain of $73,330[147]. - The company incurred a net loss of $24,737 for the three months ended September 30, 2022, compared to a net loss of $45,124 for the same period in 2021, representing a 45% improvement[163]. - The company expects net losses to continue as it invests in commercialization and new product development[177]. Revenue Generation - The company does not expect to generate revenue until at least 2024, contingent upon receiving FDA approval for its product[154]. Expenses - Research and development expenses for the three months ended September 30, 2022, increased by $6,931, or 134%, to $12,120 compared to $5,189 for the same period in 2021[163]. - Total operating expenses for the three months ended September 30, 2022, were $22,162, a 159% increase from $8,561 in the same period in 2021[163]. - Sales and marketing expenses increased by $3,232, or 232%, to $4,625 for the nine months ended September 30, 2022, compared to $1,393 for the same period in 2021[173]. - General and administrative expenses rose by $16,614, or 268%, to $22,820 during the nine months ended September 30, 2022, compared to $6,206 in the same period in 2021[174]. - Research and development expenses increased by $19,219, or 150%, to $32,023 for the nine months ended September 30, 2022, compared to $12,804 for the same period in 2021[172]. Cash Flow - Net cash used in operating activities was $42,802 for the nine months ended September 30, 2022, compared to $23,545 for the same period in 2021[184]. - Cash and cash equivalents as of September 30, 2022, were $126,797, with an accumulated deficit of $50,461[177]. - Net cash provided by financing activities was $333 for the nine months ended September 30, 2022, compared to $192,650 for the same period in 2021[187]. Investment and Financing - The company filed a universal shelf registration statement for the sale of up to $400 million of various securities, including $100 million of common stock[180]. - Interest income increased by $602 during the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to higher interest rates and a larger average cash balance[175]. Company Structure and Regulations - Following the Business Combination, the company qualifies as an "emerging growth company" under the JOBS Act, allowing it to adopt new accounting standards within the same time periods as private companies[194]. - The company intends to take advantage of reduced regulatory and reporting requirements for emerging growth companies, including exemptions from certain auditor attestation requirements[195]. - The company is classified as a smaller reporting company and is not required to provide certain market risk disclosures[196]. - The company has never paid cash dividends and does not anticipate doing so in the foreseeable future[192]. Market Potential - The company estimates that over 39 million soft tissue surgical procedures are addressable by its technology, with more than 50% currently performed using open surgery[140]. - The company’s single-port system aims to improve patient outcomes and enhance adoption by addressing significant limitations of existing surgical systems[146]. Fair Value and Liabilities - The change in fair value of warrant liabilities for the three months ended September 30, 2022, was a loss of $3,038, compared to a loss of $36,532 in the same period in 2021, reflecting a 92% improvement[163]. - The change in fair value of warrant liabilities resulted in a gain of $111,823 during the nine months ended September 30, 2022, compared to a loss of $36,532 in the same period in 2021[175]. - The fair value of the company's stock options is determined using a Black-Scholes pricing model, with key assumptions based on stock price, expected volatility, and expected term[192]. Workforce - The average headcount increased by 72% from 78 people in the nine months ended September 30, 2021, to 134 people for the same period in 2022, with general and administrative headcount increasing by 142%[147]. Economic Factors - The company continues to monitor the impact of global economic factors, including inflation and supply chain disruptions, on its operations[150].

Financial Data and Key Metrics Changes - Total operating expenses for Q2 2022 were $19.1 million, up from $6.6 million in the prior year, primarily due to investments in the development of the Beta 2 platform and team expansion [17] - Adjusted net loss for Q2 2022 was $19.1 million, equating to an adjusted net loss of $0.16 per share, compared to an adjusted net loss of $6.6 million or $0.08 per share for the same period last year [17] - GAAP net loss for Q2 2022 was $1.5 million, equating to a basic and diluted net loss of $0.01 per share, compared to a net loss of $6.6 million or a basic net loss of $0.08 per share for the same period last year [18] - Cash burn for Q2 2022 was $15.7 million, with an ending cash balance of $141 million [18] Business Line Data and Key Metrics Changes - The company has executed center of excellence agreements with HCA Healthcare and University Hospital, which will support the development and commercialization of its surgical robotics platform [7][8] - The Beta 2 robotic platform is in the integration phase, with positive feedback on ergonomic prototypes [14] Market Data and Key Metrics Changes - The company is addressing a significant market opportunity, as over 50% of the 39 million annual procedures that could be performed using surgical robots are still done using open surgical techniques [9] - The partnerships with over 200 hospitals through center of excellence agreements are expected to enhance the company's market presence and commercial strategy [12] Company Strategy and Development Direction - The company aims to leverage next-generation robotic technology to improve surgical outcomes and address the limitations of current surgical techniques [9][10] - The focus is on developing a platform that meets the needs of hospitals and surgeons, with an emphasis on collaboration and feedback from leading surgeons [11][13] - The company is also working to mitigate supply chain challenges by building internal redundancies and multi-sourcing key components [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating supply chain challenges, although they acknowledged risks to timelines due to semiconductor shortages [15] - The company is optimistic about its position in the market and the potential for widespread commercial adoption of its technology [16] Other Important Information - The company plans to share more details about the Beta 2 robotic platform and its capabilities later in the year [14] - Management highlighted the importance of differentiation in the robotic surgery market and the positive reception of their technology at industry conferences [20][21] Q&A Session Summary Question: Updates on FDA discussions regarding trial design for Ventral Hernia Indication - Management reported positive and collaborative discussions with the FDA, but refrained from providing specific timelines for trial design finalization [24] Question: Impact of supply chain challenges on Beta 2 unit design - Management indicated that sourcing challenges have impacted design and development efforts, but they have successfully adapted by redesigning components [30][31] Question: Availability of the simulator to hospitals and testing of other use cases - The simulator is currently available for internal testing and close partners, with plans to expand access in the future [36] Question: Insights on Center of Excellence agreements and future collaboration - Management noted a positive reception from hospital systems and emphasized the long-term nature of these partnerships for system development and patient care improvement [40][41]

[PART I: FINANCIAL INFORMATION](index=6&type=section&id=PART%20I:%20FINANCIAL%20INFORMATION) Presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) Presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed notes on accounting policies [Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | (in thousands) | June 30, 2022 | December 31, 2021 | | :--------------- | :------------ | :---------------- | | **Assets:** | | | | Cash and cash equivalents | $141,315 | $173,507 | | Total current assets | $143,634 | $178,374 | | Property and equipment, net | $5,616 | $2,250 | | Total assets | $164,052 | $181,679 | | **Liabilities & Equity:** | | | | Total current liabilities | $6,894 | $6,245 | | Warrant liabilities | $11,691 | $90,021 | | Total liabilities | $34,273 | $98,588 | | Total stockholders' equity | $129,779 | $83,091 | | Total liabilities and stockholders' equity | $164,052 | $181,679 | [Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | (in thousands, except per share data) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $10,055 | $4,008 | $19,903 | $7,616 | | Sales and marketing | $1,311 | $325 | $2,713 | $551 | | General and administrative | $7,760 | $2,279 | $14,690 | $3,676 | | Total operating expenses | $19,126 | $6,612 | $37,306 | $11,843 | | Loss from operations | $(19,126) | $(6,612) | $(37,306) | $(11,843) | | Change in fair value of warrant liabilities | $17,601 | $0 | $78,329 | $0 | | Net income/(loss) | $(1,453) | $(6,638) | $41,074 | $(11,869) | | Net income/(loss) per share, basic | $(0.01) | $(0.08) | $0.34 | $(0.14) | | Net income/(loss) per share, diluted | $(0.01) | $(0.08) | $0.32 | $(0.14) | [Condensed Consolidated Statements of Convertible Preferred Stock, Common Stock and Stockholders' Equity/(Deficit) for the Three and Six Months Ended June 30, 2022 and 2021](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Convertible%20Preferred%20Stock%2C%20Common%20Stock%20and%20Stockholders%27%20Equity/%28Deficit%29) Stockholders' Equity (in thousands) - Six Months Ended June 30, 2022 | Item | Shares (Class A & B) | Common Stock Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Equity | | :--- | :------------------- | :------------------ | :------------------------- | :------------------ | :------------------------- | | Balance, January 1, 2022 | 119,769,067 | $12 | $149,877 | $(66,798) | $83,091 | | Exercise of common stock options | 1,702,183 | $0 | $557 | $0 | $557 | | Stock-based compensation | — | $0 | $5,057 | $0 | $5,057 | | Net income | — | $0 | $0 | $41,074 | $41,074 | | Balance, June 30, 2022 | 121,631,735 | $12 | $155,491 | $(25,724) | $129,779 | Stockholders' Equity (in thousands) - Three Months Ended June 30, 2022 | Item | Shares (Class A & B) | Common Stock Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Equity | | :--- | :------------------- | :------------------ | :------------------------- | :------------------ | :------------------------- | | Balance, March 31, 2022 | 121,168,655 | $12 | $152,490 | $(24,271) | $128,231 | | Stock-based compensation | — | $0 | $2,780 | $0 | $2,780 | | Net loss | — | $0 | $0 | $(1,453) | $(1,453) | | Balance, June 30, 2022 | 121,631,735 | $12 | $155,491 | $(25,724) | $129,779 | [Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------- | :----------------------------- | :----------------------------- | | Net income/(loss) | $41,074 | $(11,869) | | Net cash used in operating activities | $(28,966) | $(9,904) | | Net cash used in investing activities | $(3,578) | $(340) | | Net cash provided by financing activities | $233 | $1,587 | | Change in cash, cash equivalents and restricted cash | $(32,311) | $(8,657) | | Cash, cash equivalents and restricted cash, end of period | $142,251 | $8,328 | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations of accounting policies, significant transactions, and specific financial statement line items [1. NATURE OF BUSINESS AND BASIS OF PRESENTATION](index=11&type=section&id=1.%20NATURE%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) - Vicarious Surgical Inc. (formerly D8 Holdings Corp.) consummated a Business Combination on September 17, 2021, with Legacy Vicarious Surgical surviving as a wholly-owned subsidiary. The company is developing a virtual reality surgical system using proprietary human-like surgical robots[29](index=29&type=chunk)[30](index=30&type=chunk) - For accounting purposes, the Business Combination was treated as a reverse recapitalization, with Legacy Vicarious Surgical deemed the accounting acquirer. Its historical financial statements became the combined company's historical financial statements, and the equity structure was restated retroactively[32](index=32&type=chunk)[33](index=33&type=chunk)[35](index=35&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The financial statements are prepared in conformity with US GAAP, requiring management to make estimates and assumptions affecting reported amounts. Key estimates include going concern, depreciation, fair value of financial instruments, and contingencies[36](index=36&type=chunk)[40](index=40&type=chunk) - Warrant liabilities are recognized as derivative liabilities at fair value and re-measured each reporting period, with changes recognized in the statement of operations. Public Warrants are valued based on trading value, while Private Placement Warrants use the Black-Scholes model[49](index=49&type=chunk)[50](index=50&type=chunk) - Effective January 1, 2022, the company adopted ASC 842 for leases, recording lease liabilities and right-of-use assets on the balance sheet, with a single straight-line lease expense. This adoption had no effect on the consolidated statement of operations or cash flows[53](index=53&type=chunk)[54](index=54&type=chunk) - The company operates as a single segment, focused on the development of its virtual reality surgical system. As an 'emerging growth company,' it intends to adopt new accounting standards within the same time periods as private companies[68](index=68&type=chunk)[69](index=69&type=chunk) [3. ACQUISITION](index=17&type=section&id=3.%20ACQUISITION) - On September 17, 2021, the Business Combination with D8 Holdings Corp. was consummated, resulting in Legacy Vicarious Surgical becoming a wholly-owned subsidiary. Legacy Vicarious Surgical shares were converted into Class A and Class B common stock of the combined entity[72](index=72&type=chunk) - The Business Combination included a PIPE financing of **$142.0 million** from the sale of 14,200,000 shares of Class A common stock at $10.00 per share[74](index=74&type=chunk) Net Assets and Liabilities Assumed in Reverse Recapitalization (in thousands) | Item | Amount | | :--- | :----- | | Cash - D8's trust and cash (net of redemptions) | $77,993 | | Cash - PIPE financing | $142,000 | | Less: Transaction costs and advisory fees | $(29,569) | | Net proceeds from reverse recapitalization | $190,424 | | Less: Warrant liabilities assumed | $(93,110) | | Net assets and liabilities assumed | $97,314 | [4. PROPERTY AND EQUIPMENT, NET](index=18&type=section&id=4.%20PROPERTY%20AND%20EQUIPMENT%2C%20NET) Property and Equipment, Net (in thousands) | Category | June 30, 2022 | December 31, 2021 | | :--- | :------------ | :---------------- | | Machinery and equipment | $1,347 | $957 | | Furniture and fixed assets | $320 | $186 | | Computer hardware and software | $626 | $259 | | Leasehold improvements | $4,277 | $1,432 | | Total property and equipment | $6,570 | $2,834 | | Less accumulated depreciation | $(954) | $(584) | | Property and equipment, net | $5,616 | $2,250 | - Depreciation expense increased significantly, from **$64 thousand** for the three months ended June 30, 2021, to **$186 thousand** for the same period in 2022, and from **$105 thousand** to **$371 thousand** for the six-month periods, respectively[80](index=80&type=chunk) [5. FAIR VALUE MEASUREMENTS](index=18&type=section&id=5.%20FAIR%20VALUE%20MEASUREMENTS) Fair Value Hierarchy (in thousands) - June 30, 2022 | Item | Level 1 | Level 2 | Level 3 | Total | | :--- | :------ | :------ | :------ | :---- | | **Assets:** | | | | | | Money market funds | $139,156 | $0 | $0 | $139,156 | | **Liabilities:** | | | | | | Warrant liabilities - public warrants | $5,347 | $0 | $0 | $5,347 | | Warrant liabilities - private warrants | $0 | $0 | $6,344 | $6,344 | | Total liabilities | $5,347 | $0 | $6,344 | $11,691 | - The company recognized a **$17.6 million gain** for the three months ended June 30, 2022, and a **$78.3 million gain** for the six months ended June 30, 2022, due to a decrease in the fair value of warrant liabilities, primarily driven by a decrease in the company's stock price[85](index=85&type=chunk) Quantitative Information for Level 3 Liabilities (Private Placement Warrants) | Input | As of June 30, 2022 | As of December 31, 2021 | | :--- | :------------------ | :---------------------- | | Volatility | 65% | 60.0% | | Stock price | $2.94 | $10.62 | | Expected life of options to convert | 4.2 years | 4.7 years | | Risk-free rate | 3.0% | 1.2% | | Dividend yield | 0.00% | 0.00% | [6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES](index=20&type=section&id=6.%20ACCRUED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) Accrued Expenses and Other Current Liabilities (in thousands) | Category | June 30, 2022 | December 31, 2021 | | :--- | :------------ | :---------------- | | Compensation and benefits related | $3,882 | $3,233 | | Professional services and other | $383 | $865 | | Total accrued expenses | $4,265 | $4,098 | [7. DEBT](index=20&type=section&id=7.%20DEBT) - The company has a term loan agreement from October 2020, with **$1.5 million** borrowed in March 2021. The outstanding balance was **$1.1 million** at June 30, 2022, and **$1.4 million** at December 31, 2021. The loan bears interest at a floating rate (Prime Rate, min 3.25%) plus a deferred interest payment of 7.5% of the borrowed amount[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - Deferred financing costs of **$0.1 million** related to the term loan are amortized over the life of the borrowing, with **$17 thousand** amortized to interest expense for the six months ended June 30, 2022[97](index=97&type=chunk) Future Equipment Loan Payments (in thousands) | Year | Amount | | :--- | :----- | | 2022, remaining six months | $25 | | 2023 | $17 | | Total future equipment payments | $42 | [8. COMMITMENTS AND CONTINGENCIES](index=21&type=section&id=8.%20COMMITMENTS%20AND%20CONTINGENCIES) - The company may face legal claims in the normal course of business but has not experienced any losses related to indemnification obligations through June 30, 2022, and expects the fair value of these obligations to be negligible[101](index=101&type=chunk) [9. LEASES](index=22&type=section&id=9.%20LEASES) - Effective January 1, 2022, the company adopted ASC Topic 842, recording right-of-use (ROU) leased assets of **$14.3 million** and lease liabilities of **$15.9 million**. This adoption had an immaterial impact on current and deferred income taxes and no effect on retained earnings[102](index=102&type=chunk) - Operating lease costs for the six months ended June 30, 2022, were **$1.131 million**, compared to **$0.528 million** for the same period in 2021[104](index=104&type=chunk) Maturity of Operating Lease Liabilities as of June 30, 2022 (in thousands) | Year | Amount | | :--- | :----- | | 2022, remaining six months | $975 | | 2023 | $2,162 | | 2024 | $2,286 | | 2025 | $2,358 | | 2026 | $2,430 | | Thereafter | $13,932 | | Total future minimum lease payments | $24,143 | | Less imputed interest | $(8,183) | | Carrying value of lease liabilities | $15,960 | [10. INCOME TAXES](index=22&type=section&id=10.%20INCOME%20TAXES) - The company did not record a tax provision for the three and six-month periods ended June 30, 2022, or for the year ended December 31, 2021, due to not earning taxable income and maintaining a full valuation allowance against its net deferred tax assets[108](index=108&type=chunk) [11. STOCKHOLDERS' EQUITY](index=23&type=section&id=11.%20STOCKHOLDERS%27%20EQUITY) - As of June 30, 2022, authorized shares included **300,000,000 Class A common stock**, **22,000,000 Class B common stock**, and **1,000,000 preferred stock**. Legacy Convertible Preferred Stock was converted into Class A common stock and reclassified to permanent equity as part of the Business Combination[109](index=109&type=chunk)[110](index=110&type=chunk) - Class A common stock carries **one vote per share**, while Class B common stock carries **20 votes per share** and is convertible to Class A on a one-to-one basis. Both classes are entitled to ratable dividends and share in assets upon liquidation[112](index=112&type=chunk)[113](index=113&type=chunk) - As of June 30, 2022, the company had **17,248,601 Public Warrants** and **10,400,000 Private Placement Warrants** outstanding. Public Warrants became exercisable 30 days after the Business Combination closing at **$11.50 per share**[119](index=119&type=chunk) [12. STOCK-BASED COMPENSATION](index=25&type=section&id=12.%20STOCK-BASED%20COMPENSATION) - The 2021 Equity Incentive Plan, approved by stockholders, reserved **24,974,074 shares** of common stock for awards. On June 1, 2022, an amendment approved an additional **6,590,000 shares**[125](index=125&type=chunk)[127](index=127&type=chunk) - Total stock-based compensation expense for the six months ended June 30, 2022, was **$5.057 million**, significantly up from **$0.625 million** in the prior year. As of June 30, 2022, **$18.463 million** of unrecognized stock-based compensation expense related to unvested stock options is expected to be recognized over **2.77 years**[132](index=132&type=chunk)[129](index=129&type=chunk) Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $526 | $145 | $999 | $256 | | Sales and marketing | $268 | $21 | $562 | $36 | | General and administrative | $1,986 | $203 | $3,496 | $333 | | Total | $2,780 | $369 | $5,057 | $625 | [13. EMPLOYEE RETIREMENT PLAN](index=28&type=section&id=13.%20EMPLOYEE%20RETIREMENT%20PLAN) - The company maintains a 401(k) plan for eligible employees, offering company-funded matching contributions. These contributions totaled **$399 thousand** for the six months ended June 30, 2022, up from **$168 thousand** for the same period in 2021[138](index=138&type=chunk) [14. NET INCOME/(LOSS) PER SHARE](index=28&type=section&id=14.%20NET%20INCOME/%28LOSS%29%20PER%20SHARE) Net Income/(Loss) Per Share | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income/(loss) | $(1,453) | $(6,638) | $41,074 | $(11,869) | | Weighted average shares (basic) | 121,341,460 | 87,841,781 | 120,813,572 | 87,676,277 | | Weighted average shares (diluted) | 121,341,460 | 87,841,781 | 127,847,825 | 87,676,277 | | Net income/(loss) per share – basic | $(0.01) | $(0.08) | $0.34 | $(0.14) | | Net income/(loss) per share – diluted | $(0.01) | $(0.08) | $0.32 | $(0.14) | - For the six months ended June 30, 2022, **31,307,459 shares** of common stock were excluded from diluted EPS calculation as their exercise prices were greater than or equal to the average common share price, making them anti-dilutive[140](index=140&type=chunk) [Item 2. Management´s Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%C2%B4s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial condition, results of operations, key factors, liquidity, and critical accounting policies [Overview](index=29&type=section&id=Overview) - Vicarious Surgical is developing a new category of intelligent, affordable, single-incision surgical robot that uses miniaturized robotics, computer science, and 3D visualization to virtually transport surgeons inside the patient for minimally invasive surgery (MIS)[143](index=143&type=chunk)[149](index=149&type=chunk) - The company estimates over **39 million** soft tissue surgical procedures are addressable by its technology, with over **50%** currently performed via open surgery and less than **5%** by current robot-assisted MIS[143](index=143&type=chunk) - Existing robotic systems face challenges including: * Significant Capital Investment: High upfront costs (up to **$2.0 million**) and annual service contracts (10-20%) * Low Utilization: Large size, limited portability, dedicated ORs, extensive setup/turnover times * Limited Capabilities: Restricted degrees of freedom, difficulty in multiple quadrants, collision issues * Difficult to Use: Device-specific training, complex kinematic motion design, extensive training required [Financial Highlights](index=30&type=section&id=Financial%20Highlights) - The company is pre-revenue generating as of June 30, 2022. It generated a net gain of **$41.1 million** for the six months ended June 30, 2022, compared to a net loss of **$11.9 million** for the same period in 2021, primarily due to a **$78.3 million gain** from the mark-to-market value of warrants[150](index=150&type=chunk) - Operating expenses increased due to a **$15.9 million** rise in personnel-related expenses, a **$3.8 million** increase in professional fees, and higher insurance and lease costs. Average R&D headcount increased by **93%** (from 68 to 131), and G&A headcount increased by **383%** (from 6 to 29) for the six months ended June 30, 2022[150](index=150&type=chunk) - For the year ended December 31, 2021, the net loss was **$35.2 million**, an increase of **173%** from **$12.9 million** in 2020, driven by a **70%** increase in average headcount, particularly in R&D, and a **467%** increase in G&A expenses due to becoming a public company[151](index=151&type=chunk) [COVID-19](index=30&type=section&id=COVID-19) - The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on the company's operations. The full impact on future results, liquidity, and financial condition remains uncertain[152](index=152&type=chunk) [Factors Affecting Results of Operations](index=30&type=section&id=Factors%20Affecting%20Results%20of%20Operations) - Key factors impacting future results include: * **Revenue**: No revenue generated to date; not expected until at least 2023, contingent on FDA approval * **Research and Development Expenses**: Expected to vary based on new product development, clinical studies, and regulatory activities * **General and Administrative Expenses**: Expected to increase due to infrastructure expansion and costs associated with being a public company * **Sales and Marketing Expenses**: Expected to increase as the company prepares for product launch and increases market awareness * **Change in Fair Value of Warrant Liabilities**: Fluctuations driven by changes in stock price affecting mark-to-market adjustments of public and private warrants * **Interest Income/Expense**: Interest income from cash and cash equivalents; interest expense from equipment loans [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Operating Results Comparison (Three Months Ended June 30, 2022 vs. 2021) | (in thousands) | 2022 | 2021 | Change | % Change | | :--------------- | :--- | :--- | :----- | :------- | | R&D Expenses | $10,055 | $4,008 | $6,047 | 151% | | S&M Expenses | $1,311 | $325 | $986 | 303% | | G&A Expenses | $7,760 | $2,279 | $5,481 | 241% | | Total Operating Expenses | $19,126 | $6,612 | $12,514 | 189% | | Loss from Operations | $(19,126) | $(6,612) | $(12,514) | 189% | | Change in Fair Value of Warrant Liabilities | $17,601 | $0 | $17,601 | N/M | | Net Loss | $(1,453) | $(6,638) | $5,185 | (78)% | Operating Results Comparison (Six Months Ended June 30, 2022 vs. 2021) | (in thousands) | 2022 | 2021 | Change | % Change | | :--------------- | :--- | :--- | :----- | :------- | | R&D Expenses | $19,903 | $7,616 | $12,287 | 161% | | S&M Expenses | $2,713 | $551 | $2,162 | 392% | | G&A Expenses | $14,690 | $3,676 | $11,014 | 300% | | Total Operating Expenses | $37,306 | $11,843 | $25,463 | 215% | | Loss from Operations | $(37,306) | $(11,843) | $(25,463) | 215% | | Change in Fair Value of Warrant Liabilities | $78,329 | $0 | $78,329 | N/M | | Net Income/(Loss) | $41,074 | $(11,869) | $52,943 | (446)% | - Increases in R&D, S&M, and G&A expenses for both periods were primarily driven by higher personnel-related expenses due to increased headcount, professional services, insurance costs (for G&A), and lease/facility expenses (for R&D). The significant net income for the six months ended June 30, 2022, was largely due to the **$78.3 million gain** from the change in fair value of warrant liabilities[163](index=163&type=chunk)[164](index=164&type=chunk)[166](index=166&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) - The company's primary capital sources have been private placements of preferred stock and recapitalization with D8. It has incurred net losses in all annual periods since inception, with an accumulated deficit of **$25.7 million** as of June 30, 2022[177](index=177&type=chunk) - As of June 30, 2022, the company held **$141.3 million** in cash and cash equivalents, which management expects to be sufficient to support operations beyond the next twelve months[177](index=177&type=chunk)[179](index=179&type=chunk) - Future capital requirements may necessitate additional financing through equity, convertible debt, credit facilities, or collaborations, which could result in dilution or impose restrictions[178](index=178&type=chunk) [Cash Flows Summary](index=35&type=section&id=Cash%20Flows%20Summary) Net Cash Flows (in millions) - Six Months Ended June 30 | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(29.0) | $(9.9) | | Net cash used in investing activities | $(3.6) | $(0.3) | | Net cash provided by financing activities | $0.2 | $1.6 | - Net cash used in operating activities increased to **$29.0 million** in 2022 (from **$9.9 million** in 2021), primarily due to a **$78.3 million** non-cash gain from warrant liabilities, partially offset by net income and changes in operating assets/liabilities[182](index=182&type=chunk)[183](index=183&type=chunk) - Net cash used in investing activities increased to **$3.6 million** in 2022 (from **$0.3 million** in 2021) due to higher fixed asset purchases, mainly leasehold improvements and R&D equipment. Net cash provided by financing activities decreased to **$0.2 million** in 2022 (from **$1.6 million** in 2021), mainly from stock option exercises offset by loan repayments[185](index=185&type=chunk)[186](index=186&type=chunk) [Off-Balance Sheet Arrangements](index=36&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company did not have any relationships with unconsolidated organizations or financial partnerships for off-balance sheet arrangements during the reported periods[187](index=187&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Stock-based compensation is a critical accounting policy, accounted for at fair value and recognized over the vesting period. The fair value of stock options is determined using a Black-Scholes pricing model, with assumptions based on stock price, expected volatility (from peer companies), expected term (simplified method), and zero dividend yield[190](index=190&type=chunk)[191](index=191&type=chunk) [Recently Adopted Accounting Pronouncements](index=37&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) - A description of recently issued accounting pronouncements that may impact financial position and results of operations is disclosed in Note 2, 'Summary of Significant Accounting Policies – Recently Issued Accounting Pronouncements,' within the condensed consolidated financial statements[193](index=193&type=chunk) [Emerging Growth Company](index=37&type=section&id=Emerging%20Growth%20Company) - As an 'emerging growth company' under the JOBS Act, Vicarious Surgical intends to adopt new or revised accounting standards within the same time periods as private companies and leverage reduced regulatory and reporting requirements, including exemptions from auditor attestation requirements of Section 404(b) of Sarbanes-Oxley Act[194](index=194&type=chunk)[195](index=195&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Vicarious Surgical Inc. is not required to provide detailed market risk disclosures - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[196](index=196&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Addresses disclosure controls and procedures, including identified material weaknesses in internal control over financial reporting and remediation efforts [Background and Remediation of Material Weakness](index=37&type=section&id=Background%20and%20Remediation%20of%20Material%20Weakness) - The company identified material weaknesses in its internal control over financial reporting as of December 31, 2020 and 2021, specifically lacking necessary business processes, personnel, and internal controls for public company accounting and financial reporting[197](index=197&type=chunk) - These weaknesses included improper segregation of duties for journal entries and account reconciliations, and insufficient analysis of certain transactions. Remediation efforts include hiring additional accounting, finance, and legal resources with public company experience and implementing new review controls[197](index=197&type=chunk)[199](index=199&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=38&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The CEO and CFO concluded that the company's disclosure controls and procedures were **not effective** as of June 30, 2022, to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[201](index=201&type=chunk) [Changes in Internal Control over Financial Reporting](index=38&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - Other than the material weaknesses described, there have been no changes in internal control over financial reporting during the quarter ended June 30, 2022, that materially affected or are reasonably likely to materially affect internal control over financial reporting[203](index=203&type=chunk) [PART II: OTHER INFORMATION](index=39&type=section&id=PART%20II:%20OTHER%20INFORMATION) Covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently party to any material pending legal proceedings, though it may face claims in the ordinary course of business - As of the report date, the company is not a party to any material pending legal proceedings, but may become involved in legal proceedings or claims in the ordinary course of business[204](index=204&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the Annual Report on Form 10-K filed on March 31, 2022 - There have been no material changes in risk factors from those disclosed in the Annual Report on Form 10-K filed on March 31, 2022[204](index=204&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms no unregistered sales of equity securities and no issuer purchases of equity securities during the reported period [Unregistered Sales of Equity Securities](index=39&type=section&id=Unregistered%20Sales%20of%20Equity%20Securities) - Not applicable; no unregistered sales of equity securities were reported[205](index=205&type=chunk) [Issuer Purchases of Equity Securities](index=39&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) - The company did not repurchase any of its equity securities during the six months ended June 30, 2022[205](index=205&type=chunk) [Item 3. Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities were reported[205](index=205&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable to the company's operations - Not applicable; no mine safety disclosures were reported[205](index=205&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No other information to report - No other information was reported[205](index=205&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Quarterly Report on Form 10-Q, including the 2021 Equity Incentive Plan and certifications Selected Exhibits | Exhibit Number | Exhibit Description | Incorporated by Reference | Filing Date | SEC File / Registration Number | | :------------- | :------------------ | :------------------------ | :---------- | :----------------------------- | | 10.1+ | Vicarious Surgical Inc. 2021 Equity Incentive Plan, as amended | Form 8-K (Exhibit 10.1) | 6/3/2022 | 001-39384 | | 10.2+ | Amended and Restated Non-Employee Director Compensation Policy | Form 10-Q (Exhibit 10.1) | 5/9/2022 | 001-39384 | | 31.1* | Certification of Principal Executive Officer (Section 302) | Filed herewith | N/A | N/A | | 31.2* | Certification of Principal Financial Officer and Principal Accounting Officer (Section 302) | Filed herewith | N/A | N/A | | 32*† | Certifications of Principal Executive Officer and Principal Financial Officer and Principal Accounting Officer (Section 906) | Filed herewith | N/A | N/A | [SIGNATURES](index=41&type=section&id=SIGNATURES) Official signatures of the Principal Executive Officer and Principal Financial Officer, certifying the report - The Quarterly Report on Form 10-Q is duly signed by Adam Sachs, Chief Executive Officer and President (Principal Executive Officer), and William Kelly, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), on August 8, 2022[208](index=208&type=chunk)[209](index=209&type=chunk)

Call Start: 16:30 January 1, 0000 5:02 PM ET Vicarious Surgical Inc. (NYSE:RBOT) Q1 2022 Earnings Conference Call May 9, 2022 16:30 ET Company Participants Marissa Bych - Gilmartin Group Adam Sachs - Co Founder & Chief Executive Officer Bill Kelly - Chief Financial Officer Conference Call Participants Ryan Zimmerman - BTIG Matt Miksic - Credit Suisse Operator Good afternoon, and welcome to Vicarious Surgical's First Quarter 2022 Earnings Conference Call. My name is Amber, and I will be your moderator for to ...

Financial Performance and Losses - The company has incurred net losses of $35.2 million and $12.9 million for the years ended December 31, 2021, and 2020, respectively, with an accumulated deficit of $66.8 million as of December 31, 2021[132]. - The company has not generated any revenue from the sale of the Vicarious System to date and anticipates continuing to incur significant losses for at least the next several years[128][129]. - The company expects to expend substantial additional amounts to commercialize the Vicarious System and develop new surgical applications[134]. - As of December 31, 2021, the company had federal net operating loss carry forwards (NOLs) of approximately $67.3 million, with $2.8 million set to expire between 2034 and 2037 if not utilized[205]. - NOLs generated in taxable years beginning after December 31, 2017, may offset no more than 80% of the taxable income for that year, and cannot be carried back to prior years[206]. Product Development and Market Strategy - The company plans to use funds from the Business Combination to scale operations, develop the Vicarious System for ventral hernia repair, and expand into new surgical applications[134]. - The company aims to launch the Vicarious System for ventral hernia repair and later expand to other abdominal surgical applications, with FDA clearance expected in 2023[139]. - The success of the Vicarious System depends on market acceptance and the ability to demonstrate its value compared to competing products[141][146]. - The market for robotic-assisted surgical technology is rapidly evolving, making it difficult to forecast demand for the Vicarious System[140]. - The success of the Vicarious System depends on training sufficient numbers of surgeons and hospital staff, which poses a significant challenge[154]. Competition and Market Risks - The company faces competition from established companies in robotic-assisted surgery, which may impact its ability to generate future revenue[145]. - The company may face significant competition from established manufacturers like Intuitive Surgical and Johnson & Johnson, which have greater financial and marketing resources[157]. - Future revenue growth is expected to come increasingly from international markets, which involves various risks including compliance with foreign regulations and political instability[168]. - The introduction of new products by competitors could make the company's future offerings obsolete, adversely affecting its business and financial condition[191]. Regulatory and Compliance Challenges - The company is subject to extensive government regulation, including pre-market and post-market regulation by the FDA, which could restrict the development and marketing of its products[212]. - The FDA's review process for 510(k) clearance typically takes 90 to 180 days, while the PMA process can take from 180 days to over a year[215][216]. - Regulatory changes could result in higher costs or lower sales than anticipated, impacting the company's operations[213]. - The company must comply with varying international regulations for marketing authorization, including CE mark in the EU, which could delay revenue generation[231]. Operational and Manufacturing Risks - The company relies on limited suppliers for key components of the Vicarious System, which could disrupt operations if those suppliers fail to meet requirements[173]. - Manufacturing problems or delays could limit revenue growth or increase losses, particularly if production does not meet regulatory standards[171]. - Quality issues could lead to recalls or safety alerts, adversely impacting the company's business, financial condition, and cash flows[184]. - A recall of the Vicarious System could significantly impact the company's financial condition and operational results[236]. Intellectual Property and Legal Risks - The company faces risks related to the protection of its intellectual property, which may not adequately shield against competition[257]. - Patent applications may not result in granted patents, and existing patents may not provide sufficient protection against competitors[258]. - The company may face costly litigation if competitors infringe on its patents, which could result in significant financial liabilities and resource diversion[279]. - The company may be subject to claims regarding the wrongful use of trade secrets by employees or contractors, leading to costly litigation[284]. Internal Controls and Financial Reporting - The company has identified material weaknesses in its internal control over financial reporting for the years ended December 31, 2021, and 2020, which could lead to misstatements in financial statements[199]. - The company expects to incur additional costs to remediate control deficiencies, with no assurance that these efforts will be successful[203]. - A material weakness in internal controls over financial reporting was identified, leading to a restatement of previously issued financial statements for the period ended December 31, 2021[314]. Market and Stock Performance - The company has 17,249,991 outstanding public warrants and 8,900,000 private placement warrants, all exercisable at $11.50 per share, which could lead to dilution for existing shareholders[310]. - The trading market for D8's securities is influenced by analyst coverage; a lack of coverage or adverse opinions could lead to declines in stock price and trading volume[321]. - Anti-takeover provisions in Delaware law and D8's organizational documents may limit stockholder actions and discourage beneficial takeover attempts, potentially affecting stock price[325].