Vicarious Surgical (RBOT) - 2023 Q2 - Quarterly Report

FORM 10-Q Registrant Information This section provides basic information about Vicarious Surgical Inc. as the registrant, including its registration, principal offices, stock and warrant tickers, and company status | Metric | Detail | | :--- | :--- | | Company Name | VICARIOUS SURGICAL INC. | | Jurisdiction of Incorporation | Delaware | | Stock Ticker | RBOT (Class A common stock) | | Warrant Ticker | RBOT WS (Warrants) | | Filing Status | Non-accelerated filer, Smaller reporting company, Emerging growth company | | Class A Common Stock Outstanding (as of July 13, 2023) | 107,684,617 Shares | | Class B Common Stock Outstanding (as of July 13, 2023) | 19,619,760 Shares | TABLE OF CONTENTS This section lists the detailed table of contents for the Form 10-Q report, divided into financial and other information, with corresponding page numbers - The report has a clear structure, divided into financial information (Part I) and other information (Part II), facilitating investor review[7] CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This section warns that forward-looking statements are based on management's beliefs and assumptions, subject to risks and uncertainties, and actual results may differ materially - Forward-looking statements are based on management's beliefs and assumptions, but inherent risks and uncertainties mean actual results may differ from expectations[8][11] - These statements cover benefits of business combination, NYSE listing, product development, regulatory approvals, market competition, financial performance, intellectual property protection, and macroeconomic impacts[8][10] - The company undertakes no obligation to publicly update or revise any forward-looking statements unless legally required[11] PART I: FINANCIAL INFORMATION Item 1. Financial Statements This section presents Vicarious Surgical Inc.'s unaudited condensed consolidated financial statements as of June 30, 2023, including balance sheets, statements of operations, stockholders' equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets As of June 30, 2023, total assets were $104,526 thousand, a decrease from $140,291 thousand on December 31, 2022, with significant changes in cash and short-term investments Condensed Consolidated Balance Sheets (as of June 30, 2023 vs. December 31, 2022): | Item | June 30, 2023 (Thousands of USD) | December 31, 2022 (Thousands of USD) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 32,807 | 116,208 | | Short-term investments | 49,976 | — | | Prepaid expenses and other current assets | 2,498 | 4,196 | | Total Current Assets | 85,281 | 120,404 | | Restricted cash | 936 | 936 | | Property and equipment, net | 6,254 | 6,586 | | Right-of-use assets | 11,875 | 12,273 | | Other long-term assets | 180 | 92 | | Total Assets | 104,526 | 140,291 | | Liabilities | | | | Accounts payable | 1,585 | 1,731 | | Accrued expenses | 4,937 | 5,808 | | Lease liabilities, current portion | 967 | 838 | | Equipment loan, current portion | — | 16 | | Total Current Liabilities | 7,489 | 8,393 | | Lease liabilities, non-current portion | 14,329 | 14,832 | | Warrant liabilities | 7,019 | 6,021 | | Total Liabilities | 28,837 | 29,246 | | Stockholders' Equity | | | | Class A common stock | 11 | 11 | | Class B common stock | 2 | 2 | | Additional paid-in capital | 179,703 | 172,673 | | Accumulated other comprehensive loss | (130) | — | | Accumulated deficit | (103,897) | (61,641) | | Total Stockholders' Equity | 75,689 | 111,045 | | Total Liabilities and Stockholders' Equity | 104,526 | 140,291 | Condensed Consolidated Statements of Operations For the six months ended June 30, 2023, the company reported a net loss of $42,256 thousand, compared to a net income of $41,074 thousand in the prior year, primarily due to changes in warrant liability fair value Condensed Consolidated Statements of Operations (as of June 30, 2023): | Item | 3 Months 2023 (Thousands of USD) | 3 Months 2022 (Thousands of USD) | 6 Months 2023 (Thousands of USD) | 6 Months 2022 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Research and development expenses | 12,714 | 10,055 | 26,070 | 19,903 | | Sales and marketing expenses | 1,666 | 1,311 | 3,626 | 2,713 | | General and administrative expenses | 7,078 | 7,760 | 14,077 | 14,690 | | Total Operating Expenses | 21,458 | 19,126 | 43,773 | 37,306 | | Operating Loss | (21,458) | (19,126) | (43,773) | (37,306) | | Change in fair value of warrant liabilities | 5,081 | 17,601 | (998) | 78,329 | | Interest and other income | 1,044 | 101 | 2,517 | 109 | | Interest expense | (1) | (29) | (2) | (58) | | Income/(Loss) Before Income Taxes | (15,334) | (1,453) | (42,256) | 41,074 | | Income tax provision | — | — | — | — | | Net Income/(Loss) | (15,334) | (1,453) | (42,256) | 41,074 | | Net income/(loss) per share (basic) | (0.12) | (0.01) | (0.33) | 0.34 | | Net income/(loss) per share (diluted) | (0.12) | (0.01) | (0.33) | 0.32 | | Other comprehensive income/(loss) | (195) | — | (130) | — | | Comprehensive Net Income/(Loss) | (15,529) | (1,453) | (42,386) | 41,074 | Condensed Consolidated Statements of Common Stock and Stockholders' Equity/(Deficit) This section details changes in common stock and stockholders' equity/(deficit) for the three and six months ended June 30, 2023 and 2022, including stock option exercises, RSU vesting, stock-based compensation, and net loss impact Stockholders' Equity Changes (as of June 30, 2023): | Item | 3 Months 2023 (Thousands of USD) | 6 Months 2023 (Thousands of USD) | 3 Months 2022 (Thousands of USD) | 6 Months 2022 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Beginning balance (Stockholders' Equity) | 87,728 | 111,046 | 128,231 | 83,091 | | Exercise of stock options | 166 | 251 | 221 | 557 | | Vesting of restricted stock | — | — | — | — | | Stock-based compensation | 3,324 | 6,578 | 2,780 | 5,057 | | Short-swing profit | — | 200 | — | — | | Net loss/(income) | (15,334) | (42,256) | (1,453) | 41,074 | | Other comprehensive income/(loss) | (195) | (130) | — | — | | Ending balance (Stockholders' Equity) | 75,689 | 75,689 | 129,779 | 129,779 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2023, operating activities used $33,652 thousand, investing activities used $50,184 thousand, and financing activities provided $435 thousand, resulting in an $83,401 thousand decrease in cash and restricted cash Condensed Consolidated Statements of Cash Flows (as of June 30, 2023): | Item | 6 Months 2023 (Thousands of USD) | 6 Months 2022 (Thousands of USD) | | :--- | :--- | :--- | | Cash Flows from Operating Activities | | | | Net income/(loss) | (42,256) | 41,074 | | Adjustments (non-cash) | 8,421 | (72,449) | | Changes in operating assets and liabilities | 183 | 2,409 | | Net Cash Used in Operating Activities | (33,652) | (28,966) | | Cash Flows from Investing Activities | | | | Purchases of property and equipment | (514) | (3,578) | | Purchases of available-for-sale investments | (62,205) | — | | Proceeds from sales and maturities of available-for-sale investments | 12,535 | — | | Net Cash Used in Investing Activities | (50,184) | (3,578) | | Cash Flows from Financing Activities | | | | Repayments of equipment loan | (16) | (24) | | Repayments of term loan | — | (300) | | Short-swing profit | 200 | — | | Proceeds from exercise of stock options | 251 | 557 | | Net Cash Provided by Financing Activities | 435 | 233 | | Change in Cash, Cash Equivalents, and Restricted Cash | (83,401) | (32,311) | | Beginning cash, cash equivalents, and restricted cash | 117,144 | 174,562 | | Ending Cash, Cash Equivalents, and Restricted Cash | 33,743 | 142,251 | Notes to the Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, explaining the company's business, accounting policies, asset and liability composition, equity structure, and stock-based compensation plans 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION Vicarious Surgical Inc. develops differentiated surgical robotic systems and currently generates no operating revenue, expecting existing funds to cover 12 months but requiring additional financing for commercialization - The company is developing a differentiated surgical robotic system designed to bring surgeons "inside" the patient through minimally invasive surgery[27] - The company currently generates no revenue from operations[28] - Management expects existing cash, cash equivalents, and short-term investments ($82,783 thousand) to support operations for the next 12 months, but not product development through commercialization, requiring additional financing[28] - Financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (US GAAP) and SEC rules for interim financial reporting[29][30] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines key accounting policies used in financial statement preparation, including estimates, fair value measurement, cash, investments, debt, R&D, stock-based compensation, and income taxes - The company makes estimates and assumptions in preparing financial statements, such as going concern, property and equipment depreciation, and fair value of financial instruments[34] - Fair value measurement for financial instruments uses a three-level hierarchy, with publicly traded warrants valued at market prices and private warrants using the Black-Scholes option pricing model[35][36] - Cash and cash equivalents include checking accounts, money market funds, U.S. Treasury bills, and U.S. government agency securities, with investments having original maturities of 90 days or less considered cash equivalents[37] - All investments (U.S. Treasury bills and U.S. government agency securities) are classified as available-for-sale, reported at fair value, with unrealized gains and losses included in accumulated other comprehensive income[39] - Research and development expenses are expensed as incurred, including personnel costs, consulting fees, and material costs[48] - Stock-based compensation (including stock options and restricted stock units) is accounted for at fair value and recognized as expense over the service period, typically the vesting period[49] - The company operates as a single segment, focused on developing a differentiated humanoid surgical robotic system[58] - As an "emerging growth company," the company has elected to use the same compliance period as private companies for new or revised accounting standards[59] 3. SHORT-TERM INVESTMENTS Short-term investments consist of U.S. Treasury bills and government agency securities, classified as available-for-sale, reported at fair value, with a $130 thousand unrealized loss as of June 30, 2023 - Short-term investments include U.S. Treasury bills and U.S. government agency securities, classified as available-for-sale[61] Short-Term Investments (as of June 30, 2023): | Item | Amortized Cost (Thousands of USD) | Unrealized Gains (Thousands of USD) | Unrealized Losses (Thousands of USD) | Fair Value (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | U.S. Treasury bills and U.S. government securities | 50,106 | — | (130) | 49,976 | | Total Assets | 50,106 | — | (130) | 49,976 | - As of June 30, 2023, total unrealized losses on available-for-sale debt securities were $130 thousand, but the company believes the cost basis is recoverable and has not recorded an allowance for credit losses[62] 4. PROPERTY AND EQUIPMENT, NET Net property and equipment was $6,254 thousand as of June 30, 2023, a slight decrease from $6,586 thousand on December 31, 2022, with increased depreciation expenses Property and Equipment, Net (as of June 30, 2023 vs. December 31, 2022): | Item | June 30, 2023 (Thousands of USD) | December 31, 2022 (Thousands of USD) | | :--- | :--- | :--- | | Machinery and equipment | 2,173 | 1,906 | | Furniture and fixtures | 1,165 | 1,059 | | Computer hardware and software | 1,204 | 1,155 | | Leasehold improvements | 4,288 | 4,161 | | Total Property and Equipment | 8,830 | 8,281 | | Less: Accumulated depreciation | (2,576) | (1,695) | | Property and Equipment, Net | 6,254 | 6,586 | Depreciation Expense: | Period | Amount (Thousands of USD) | | :--- | :--- | | Three months ended June 30, 2023 | 440 | | Six months ended June 30, 2023 | 882 | | Three months ended June 30, 2022 | 186 | | Six months ended June 30, 2022 | 371 | 5. FAIR VALUE MEASUREMENTS This section provides fair value measurements for financial assets and liabilities, categorized by fair value hierarchy, including money market funds, U.S. Treasury bills, and warrant liabilities, with fair value changes impacting the statements of operations Fair Value Measurements (as of June 30, 2023): | Item | Level 1 (Thousands of USD) | Level 2 (Thousands of USD) | Level 3 (Thousands of USD) | Total (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Assets: | | | | | | Money market funds | 24,859 | — | — | 24,859 | | U.S. Treasury bills | — | 49,976 | — | 49,976 | | Total Assets | 24,859 | 49,976 | — | 74,835 | | Liabilities: | | | | | | Warrant liabilities - Public warrants | 3,795 | — | — | 3,795 | | Warrant liabilities - Private warrants | — | — | 3,224 | 3,224 | | Total Liabilities | 3,795 | — | 3,224 | 7,019 | Fair Value Measurements (as of December 31, 2022): | Item | Level 1 (Thousands of USD) | Level 2 (Thousands of USD) | Level 3 (Thousands of USD) | Total (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Assets: | | | | | | Money market funds | 114,409 | — | — | 114,409 | | Total Assets | 114,409 | — | — | 114,409 | | Liabilities: | | | | | | Warrant liabilities - Public warrants | 2,589 | — | — | 2,589 | | Warrant liabilities - Private warrants | — | — | 3,432 | 3,432 | | Total Liabilities | 2,589 | — | 3,432 | 6,021 | - In the second quarter of 2023, the company recognized a $5,081 thousand gain due to a decrease in the fair value of warrant liabilities; for the first half of 2023, a $998 thousand loss was recognized due to an increase in fair value[71] Level 3 Liabilities Fair Value Measurement Input Parameters (Private Warrants): | Parameter | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Volatility | 81.0% | 72.0% | | Stock Price | $1.83 | $2.02 | | Expected Life | 3.2 Years | 3.7 Years | | Risk-Free Rate | 4.4% | 4.1% | | Dividend Yield | 0.00% | 0.00% | 6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses totaled $4,937 thousand as of June 30, 2023, primarily for compensation and professional services, a decrease from December 31, 2022 Accrued Expenses and Other Current Liabilities (as of June 30, 2023 vs. December 31, 2022): | Item | June 30, 2023 (Thousands of USD) | December 31, 2022 (Thousands of USD) | | :--- | :--- | :--- | | Compensation and benefits related | 4,117 | 5,240 | | Professional services and other | 820 | 568 | | Total Accrued Expenses | 4,937 | 5,808 | 7. DEBT The company fully repaid its term loan in October 2022 and equipment loan in April 2023, resulting in zero outstanding debt as of June 30, 2023 - The company in October 2022 fully repaid its term loan, which was entered into in October 2020 and originally due in April 2024[78][80] - $100 thousand of deferred financing costs related to the term loan were amortized over the loan's life, with $0 amortized in the first half of 2023 and $75 thousand in 2022[82] - The company in April 2023 fully repaid its equipment loan, which was entered into in March 2019 for manufacturing machinery purchases[83] - As of June 30, 2023, and December 31, 2022, the outstanding principal balance for the equipment loan was $0 thousand and $16 thousand, respectively[83] 8. COMMITMENTS AND CONTINGENCIES The company may face legal claims in the normal course of business but has no material pending litigation as of the report date, and indemnifies officers and directors without expecting significant claims - The company may face legal claims or lawsuits in the normal course of business, but as of the report date, it is not involved in any material pending legal proceedings[84][189] - The company indemnifies its officers, directors, consultants, and employees, but does not expect to incur significant claims and has not recognized related liabilities[47] 9. LEASES The company leases office facilities under an operating lease expiring March 2032, adopted ASC Topic 842, and recognized right-of-use assets and lease liabilities, with operating lease costs of $1,069 thousand in the first half of 2023 - The company's irrevocable operating lease agreement for office facilities expires in March 2032[86] - The company adopted ASC Topic 842 "Leases" on January 1, 2022, recording $14,302 thousand in right-of-use assets and $15,933 thousand in lease liabilities[85] Lease Costs (as of June 30, 2023): | Period | Operating Lease Cost (Thousands of USD) | | :--- | :--- | | Six months ended June 30, 2023 | 1,069 | | Six months ended June 30, 2022 | 1,131 | Lease Liability Maturities (as of June 30, 2023): | Year | Amount (Thousands of USD) | | :--- | :--- | | 2023 (excluding first half) | 1,116 | | 2024 | 2,286 | | 2025 | 2,358 | | 2026 | 2,430 | | 2027 | 2,502 | | Thereafter | 11,430 | | Total Future Minimum Lease Payments | 22,122 | | Less: Imputed Interest | (6,826) | | Carrying Value of Lease Liabilities | 15,296 | 10. INCOME TAXES No income tax provision was recognized for the first half of 2023 or 2022 due to no taxable income and accumulated losses, with a full valuation allowance maintained on net deferred tax assets - The company recognized no income tax provision for the first half of 2023 and 2022 due to no taxable income[91] - A full valuation allowance is maintained on net deferred tax assets due to accumulated losses[91] 11. STOCKHOLDERS' EQUITY As of June 30, 2023, the company authorized 300 million Class A, 22 million Class B common shares, and 1 million preferred shares, with Class A having one vote and Class B twenty votes, and 27,648,601 total warrants outstanding Authorized Shares (as of June 30, 2023): | Share Type | Authorized Quantity | | :--- | :--- | | Class A Common Stock | 300,000,000 Shares | | Class B Common Stock | 22,000,000 Shares | | Preferred Stock | 1,000,000 Shares | - Class A common stock carries one vote per share, while Class B common stock carries 20 votes per share and is convertible into Class A common stock on a one-for-one basis[94][95] Unvested Restricted Stock Units (RSUs) Activity: | Item | Number of Shares | Weighted-Average Grant Date Fair Value ($) | | :--- | :--- | :--- | | Balance at January 1, 2023 | 3,085,123 | 5.01 | | Granted | 2,397,010 | 2.19 | | Vested | (279,656) | 4.99 | | Forfeited | (17,188) | 5.85 | | Balance at June 30, 2023 | 4,991,317 | 3.58 | - As of June 30, 2023, the company had 17,248,601 public warrants and 10,400,000 private warrants outstanding[101] - Public warrants are redeemable by the company if the Class A common stock price equals or exceeds $18.00 or $10.00[102] - Private warrants have similar terms to public warrants but are non-redeemable while held by the initial purchasers or their permitted transferees and are exercisable on a cashless basis[103] 12. STOCK-BASED COMPENSATION The company grants stock options and RSUs under its 2021 plan, with $17,934 thousand in unrecognized stock-based compensation expected to be recognized over 2.56 years, and total expenses of $6,578 thousand in the first half of 2023 - The 2021 Equity Incentive Plan authorizes the company to issue up to 31,944,891 shares of common stock (Class A or Class B)[107] - Stock options are granted at an exercise price no less than 100% of the fair market value of the company's common stock on the grant date[106] Stock Option Grant Assumptions (Black-Scholes Model): | Parameter | 6 Months 2023 | 6 Months 2022 | | :--- | :--- | :--- | | Risk-Free Interest Rate | 3.42% - 4.17% | 1.95% - 2.86% | | Expected Life (Years) | 6.07 - 6.08 | 5.67 - 6.07 | | Dividend Yield | —% | —% | - As of June 30, 2023, total unrecognized stock-based compensation expense related to unvested stock options was $17,934 thousand, expected to be recognized over a weighted-average period of 2.56 years[111] Stock-Based Compensation Expense (Thousands of USD): | Expense Category | 3 Months 2023 | 3 Months 2022 | 6 Months 2023 | 6 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development | 805 | 526 | 1,666 | 999 | | Sales and marketing | 302 | 268 | 595 | 562 | | General and administrative | 2,217 | 1,986 | 4,317 | 3,496 | | Total | 3,324 | 2,780 | 6,578 | 5,057 | - As of June 30, 2023, 9,059,154 shares were available for future equity awards under the 2021 Plan[115] Common Stock Reserved for Future Issuance (Thousands of Shares, as of June 30, 2023 vs. December 31, 2022): | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Stock options issued | 12,275 | 14,192 | | Restricted stock units issued | 4,991 | 3,085 | | Shares available for issuance under 2021 Plan | 9,059 | 3,465 | | Public warrants | 17,249 | 17,249 | | Private warrants | 10,400 | 10,400 | | Total Common Stock Reserved for Issuance | 53,974 | 48,391 | 13. EMPLOYEE RETIREMENT PLAN The company offers a 401(k) plan with matching contributions, totaling $571 thousand in the first half of 2023, an increase from the prior year - The company maintains the Vicarious Surgical Inc. 401(k) Plan, covering all eligible employees[120] Company Matching Contributions (Thousands of USD): | Period | Amount | | :--- | :--- | | Three months ended June 30, 2023 | 213 | | Six months ended June 30, 2023 | 571 | | Three months ended June 30, 2022 | 192 | | Six months ended June 30, 2022 | 399 | 14. NET INCOME/(LOSS) PER SHARE This section details basic and diluted net income/(loss) per share calculations, showing a net loss of $0.33 per share for the six months ended June 30, 2023, compared to a net income of $0.34 (basic) and $0.32 (diluted) in the prior year Net Income/(Loss) Per Share (as of June 30, 2023): | Item | 3 Months 2023 | 3 Months 2022 | 6 Months 2023 | 6 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income/(loss) | (15,334) | (1,453) | (42,256) | 41,074 | | Weighted-average shares outstanding (basic) | 126,992,152 | 121,341,460 | 126,563,552 | 120,813,572 | | Weighted-average shares outstanding (diluted) | 126,992,152 | 121,341,460 | 126,563,552 | 127,847,825 | | Net income/(loss) per share (basic) | (0.12) | (0.01) | (0.33) | 0.34 | | Net income/(loss) per share (diluted) | (0.12) | (0.01) | (0.33) | 0.32 | - For the six months ended June 30, 2023, 41,433,712 potential common shares (stock options and warrants) were excluded from diluted earnings per share calculation because their exercise price was greater than or equal to the average common stock price, making them anti-dilutive[122] Item 2. Management´s Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of the company's financial condition and operating results, covering business overview, financial highlights, global economic impacts, factors affecting results, operating results comparisons, liquidity, cash flows, off-balance sheet arrangements, and critical accounting policies Overview Vicarious Surgical Inc. develops an intelligent, cost-effective single-port surgical robotic system, aiming to improve patient outcomes and surgical efficiency by bringing surgeons inside the patient, targeting a $150 billion soft tissue surgery market - The company is developing a novel single-port surgical robotic system combining micro-robotics, computer science, sensing, and 3D visualization to improve minimally invasive surgery[125] - The company estimates over 45 million soft tissue surgical cases globally annually could be addressed by its technology, representing a $150 billion market opportunity[126] - Existing robotic surgical systems suffer from high capital investment, low utilization, limited capabilities, and operational difficulties[126][127][128][129] - The Vicarious Surgical System aims to overcome existing system limitations through a unique architecture and "decoupled actuators," offering unprecedented flexibility, sensing, and visualization capabilities[130] - The system has not yet received FDA authorization; a de novo application for abdominal hernia repair is planned for early 2025, with a 30-60 patient clinical trial expected to commence in mid-2024[131] Financial Highlights For the six months ended June 30, 2023, the company reported a net loss of $42,256 thousand, a significant change from the prior year's net income, primarily due to warrant liability fair value changes and increased R&D expenses - The company remained in a no-revenue stage as of June 30, 2023[132] Net Income/(Loss) Comparison (Six Months Ended June 30, 2023): | Item | 2023 (Thousands of USD) | 2022 (Thousands of USD) | Change (%) | | :--- | :--- | :--- | :--- | | Net income/(loss) | (42,256) | 41,074 | -203% | | Operating loss (excluding warrant changes) | (43,773) | (37,306) | 17% | | Change in fair value of warrant liabilities | (998) | 78,329 | -101% | | Average R&D personnel growth | 21% | | | Other Global Developments Macroeconomic factors like interest rate hikes, high inflation, and supply chain disruptions may adversely affect the company's future financing and operations, with the Russia-Ukraine conflict indirectly impacting material costs - Global central bank interest rate hikes, high inflation, and supply chain disruptions may make future financing more difficult and expensive for the company[133] - The Russia-Ukraine conflict has indirectly led to limited availability and increased costs for materials and supplies, though its impact on the company's business has been limited to date[134] Factors Affecting Results of Operations This section discusses key factors influencing operating results, including no current revenue, expected increases in R&D, G&A, and S&M expenses, and the impact of warrant liability fair value changes and interest income/expense Revenue The company currently generates no revenue and anticipates revenue only after FDA authorization, with initial revenue likely insufficient to offset ongoing net losses from R&D and marketing - The company currently generates no revenue and expects to begin generating revenue only after obtaining FDA authorization[136] - Even with successful commercialization, initial revenue may only moderately reduce ongoing net losses, as R&D and marketing activities are expected to continue increasing[136] Research and Development Expenses R&D expenses, including engineering, product development, and regulatory costs, are expected to fluctuate based on new product development, clinical development, and trial activities - R&D expenses primarily include costs for engineering, product development, regulatory affairs, medical affairs, and other costs associated with products and technologies under development[137] - R&D expenses are expected to fluctuate based on the level and timing of new product development, clinical development, clinical trials, and related activities[137] General and Administrative Expenses G&A expenses, primarily compensation for executive, finance, and HR staff, are expected to increase with infrastructure expansion and additional public company legal, accounting, and insurance costs - General and administrative expenses primarily include compensation for personnel in executive, finance, accounting, information technology, and human resources functions[138] - General and administrative expenses are expected to continue increasing with the expansion of the company's infrastructure and additional legal, accounting, insurance, and other expenses required as a public company[138] Sales and Marketing Expenses Sales and marketing expenses, mainly compensation and physician education, are projected to rise as the company builds customer awareness and prepares for future product launches - Sales and marketing expenses primarily include compensation for personnel in sales and marketing functions and physician education programs[139] - Sales and marketing expenses are expected to continue increasing as the company builds awareness among potential customers and prepares for future product launches[139] Change in Fair Value of Warrant Liabilities Changes in warrant liability fair value reflect market-to-market adjustments for public and private warrants, with private warrant changes driven by underlying stock price and public warrants by NYSE prices - Changes in the fair value of warrant liabilities reflect market-to-market adjustments for both public and private warrants[140] - Fair value changes for private warrants are primarily influenced by changes in the underlying stock price used in the Black-Scholes option pricing model, while public warrants are revalued based on their NYSE price[140] Interest Income Interest income primarily derives from interest earned on the company's cash, cash equivalents, and short-term investments - Interest income primarily derives from interest earned on the company's cash, cash equivalents, and short-term investments[141] Interest Expense Interest expense primarily includes interest from equipment loans and, in 2022, from a term loan fully repaid in October 2022 - Interest expense primarily includes interest generated from the equipment loan[142] - In 2022, interest expense also included interest generated from the term loan, which was fully repaid in October 2022[142] Results of Operations This section compares the company's operating results for the three and six months ended June 30, 2023 and 2022, analyzing changes in R&D, sales and marketing, G&A expenses, warrant liability fair value, and interest income/expense Comparison of the Three Months ended June 30, 2023 and 2022 For the three months ended June 30, 2023, the company reported a net loss of $15,334 thousand, compared to a net loss of $1,453 thousand in the prior year, with R&D and sales and marketing expenses increasing, G&A decreasing, and a significant reduction in warrant liability fair value gain Operating Results Comparison (Three Months Ended June 30, 2023): | Item | 2023 (Thousands of USD) | 2022 (Thousands of USD) | Change (Thousands of USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development expenses | 12,714 | 10,055 | 2,659 | 26% | | Sales and marketing expenses | 1,666 | 1,311 | 355 | 27% | | General and administrative expenses | 7,078 | 7,760 | (682) | (9)% | | Total Operating Expenses | 21,458 | 19,126 | 2,332 | 12% | | Operating Loss | (21,458) | (19,126) | (2,332) | 12% | | Change in fair value of warrant liabilities | 5,081 | 17,601 | (12,520) | (71)% | | Interest and other income | 1,044 | 101 | 943 | N/M | | Interest expense | (1) | (29) | 28 | (97)% | | Net Income/(Loss) | (15,334) | (1,453) | (13,881) | N/M | | Net income/(loss) per share (basic) | (0.12) | (0.01) | (0.11) | N/M | | Net income/(loss) per share (diluted) | (0.12) | (0.01) | (0.11) | N/M | | Other comprehensive income/(loss) | (195) | — | (195) | N/M | | Comprehensive Net Income/(Loss) | (15,529) | (1,453) | (14,076) | N/M | - Research and development expenses increased by $2,659 thousand, primarily due to a $1,168 thousand increase in personnel-related costs (driven by an 11% increase in average headcount) and a $761 thousand increase in materials and supplies[146] - Sales and marketing expenses increased by $355 thousand, primarily due to a $341 thousand increase in professional services fees[147] - General and administrative expenses decreased by $682 thousand, primarily due to a $666 thousand decrease in insurance costs[149] - Interest and other income increased by $943 thousand, primarily due to increased interest income from short-term investments[149] Comparison of the Six Months ended June 30, 2023 and 2022 For the six months ended June 30, 2023, the company reported a net loss of $42,256 thousand, a significant shift from the prior year's net income, primarily due to the change in warrant liability fair value from gain to loss, alongside increased R&D and sales and marketing expenses Operating Results Comparison (Six Months Ended June 30, 2023): | Item | 2023 (Thousands of USD) | 2022 (Thousands of USD) | Change (Thousands of USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development expenses | 26,070 | 19,903 | 6,167 | 31% | | Sales and marketing expenses | 3,626 | 2,713 | 913 | 34% | | General and administrative expenses | 14,077 | 14,690 | (613) | (4)% | | Total Operating Expenses | 43,773 | 37,306 | 6,467 | 17% | | Operating Loss | (43,773) | (37,306) | (6,467) | 17% | | Change in fair value of warrant liabilities | (998) | 78,329 | (79,327) | (101)% | | Interest and other income | 2,517 | 109 | 2,408 | N/M | | Interest expense | (2) | (58) | 56 | (97)% | | Net Income/(Loss) | (42,256) | 41,074 | (83,330) | (203)% | | Net income/(loss) per share (basic) | (0.33) | 0.34 | (0.67) | (197)% | | Net income/(loss) per share (diluted) | (0.33) | 0.32 | (0.65) | (203)% | | Other comprehensive income/(loss) | (130) | — | (130) | N/M | | Comprehensive Net Income/(Loss) | (42,386) | 41,074 | (83,460) | (203)% | - Research and development expenses increased by $6,167 thousand, primarily due to a $4,058 thousand increase in personnel-related costs (driven by a 21% increase in average headcount) and a $1,308 thousand increase in materials and supplies[153] - Sales and marketing expenses increased by $913 thousand, primarily due to a $494 thousand increase in personnel-related costs (driven by a 50% increase in average headcount) and a $386 thousand increase in professional services fees[154] - General and administrative expenses decreased by $613 thousand, primarily due to a $1,297 thousand decrease in insurance costs, partially offset by a $383 thousand increase in personnel-related costs[155] - Interest and other income increased by $2,408 thousand, primarily due to increased interest income from short-term investments[156] Liquidity and Capital Resources As of June 30, 2023, the company held $32,807 thousand in cash and $49,976 thousand in short-term investments, with an accumulated deficit of $103,897 thousand, expecting existing funds to cover 12 months but requiring substantial additional capital for product commercialization Liquidity Overview (as of June 30, 2023): | Item | Amount (Thousands of USD) | | :--- | :--- | | Cash and cash equivalents | 32,807 | | Short-term investments | 49,976 | | Total Cash, Cash Equivalents, and Short-Term Investments | 82,783 | | Accumulated deficit | (103,897) | | Net cash used in operating activities (H1 2023) | (33,652) | | Net cash used in operating activities (Full Year 2022) | (61,211) | - The company expects existing cash, cash equivalents, and short-term investments to support operations for the next 12 months, but substantial additional capital is required to complete clinical trials, obtain market authorization, and commercialize its product[159][160] - The company may meet future cash needs through equity security sales, debt financing, corporate collaborations, or other agreements[160] - On October 7, 2022, the company filed a universal shelf registration statement (Form S-3) registering up to $400 million of Class A common stock, preferred stock, debt securities, warrants, rights, and/or units, including up to $100 million of Class A common stock through an "at-the-market" equity program[161] - In December 2022, the company issued 3,048,781 shares of Class A common stock through a sales agreement with Cowen and Company, LLC, generating $10 million in gross proceeds, with no common stock issued under this shelf registration statement in the first half of 2023[161] Cash Flows Summary This section summarizes the company's cash flows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 Cash Flows Summary (Six Months Ended June 30, 2023): | Activity Type | 2023 (Thousands of USD) | 2022 (Thousands of USD) | | :--- | :--- | :--- | | Net cash used in operating activities | (33,652) | (28,966) | | Net cash used in investing activities | (50,184) | (3,578) | | Net cash provided by financing activities | 435 | 233 | Cash flows used in Operating Activities In the first half of 2023, net cash used in operating activities was $33,652 thousand, driven by net loss, partially offset by non-cash items and working capital changes, while 2022 saw $28,966 thousand used, influenced by non-cash gains from warrant liability fair value changes - In the first half of 2023, net cash used in operating activities was $33,652 thousand, comprising a $42,256 thousand net loss, $8,421 thousand in non-cash items (including $6,578 thousand in stock-based compensation and a $998 thousand loss from warrant liability fair value changes), and $183 thousand in net changes in operating assets and liabilities[166] - In the first half of 2022, net cash used in operating activities was $28,966 thousand, comprising a $41,074 thousand net income, $72,449 thousand in non-cash items (including a $78,329 thousand gain from warrant liability fair value changes), and $2,409 thousand in net changes in operating assets and liabilities[167] Cash flows used in Investing Activities In the first half of 2023, net cash used in investing activities was $50,184 thousand, primarily for purchasing available-for-sale investments and fixed assets, partially offset by proceeds from sales and maturities, while 2022 used $3,578 thousand mainly for fixed asset acquisitions - In the first half of 2023, net cash used in investing activities was $50,184 thousand, including $62,205 thousand for purchases of available-for-sale investments and $514 thousand for property and equipment, partially offset by $12,535 thousand in proceeds from sales and maturities of available-for-sale investments[169] - In the first half of 2022, net cash used in investing activities was $3,578 thousand, primarily for purchases of property and equipment, including leasehold improvements and R&D equipment[169] Cash flows provided by Financing Activities In the first half of 2023, net cash provided by financing activities was $435 thousand, mainly from stock option exercises and short-swing profit, partially offset by equipment loan repayment, while 2022 provided $233 thousand from stock option exercises, offset by term and equipment loan repayments - In the first half of 2023, net cash provided by financing activities was $435 thousand, including $251 thousand from stock option exercises and $200 thousand from short-swing profit, partially offset by $16 thousand in equipment loan repayments[170] - In the first half of 2022, net cash provided by financing activities was $233 thousand, including $557 thousand from stock option exercises, partially offset by $300 thousand in term loan repayments and $24 thousand in equipment loan repayments[170] Off-Balance Sheet Arrangements The company has not entered into any off-balance sheet arrangements with unconsolidated entities or financial partnerships during the reporting period - The company has not entered into any off-balance sheet arrangements with unconsolidated entities or financial partnerships during the reporting period[171] Critical Accounting Policies and Estimates This section highlights critical accounting policies requiring significant judgment and estimates in preparing consolidated financial statements, particularly regarding stock-based compensation Stock-Based Compensation The company accounts for all stock-based compensation at fair value, recognizing expense over the service period, with stock option fair value determined using the Black-Scholes model based on stock price, expected volatility, and expected term - The company accounts for all stock-based compensation at fair value, recognizing expense over the service period[174] - The fair value of stock options is determined using the Black-Scholes pricing model, with key assumptions including stock price, expected volatility, and expected term[175] - The company uses publicly traded stock prices for the fair value of common stock and a simplified method for calculating expected term, with volatility based on a combination of comparable companies and its own stock[175] Recently Adopted Accounting Pronouncements This section refers to recently issued accounting pronouncements that may impact the company's financial condition and operating results, with details provided in Note 2 to the condensed consolidated financial statements - Recently issued accounting pronouncements may impact the company's financial condition and operating results, with details provided in Note 2 to the financial statements[177] Emerging Growth Company As an 'emerging growth company,' the company has elected to use the same compliance period as private companies for new or revised accounting standards and utilizes simplified regulatory and reporting requirements under the JOBS Act - As an "emerging growth company," the company has elected to use the same compliance period as private companies for new or revised accounting standards[178] - The company utilizes simplified regulatory and reporting requirements under the JOBS Act, including not complying with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley and reduced executive compensation disclosure obligations[179] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company, as a smaller reporting company, is not required to provide quantitative and qualitative disclosures about market risk under Exchange Act Rule 12b-2 - The company, as a smaller reporting company, is not required to provide quantitative and qualitative disclosures about market risk[180] Item 4. Controls and Procedures The company's disclosure controls and procedures were deemed ineffective as of June 30, 2023, following identified material weaknesses in internal control at December 31, 2022, for which remediation efforts are ongoing Background and Remediation of Material Weaknesses The company identified material weaknesses in internal control at December 31, 2022, including inadequate segregation of duties, insufficient IT controls, and ineffective risk assessment, and is actively implementing remediation measures - The company identified material weaknesses in internal control at December 31, 2022, including inadequate segregation of duties, insufficient information technology controls, ineffective risk assessment processes, and inadequate documentation and monitoring of control processes[181] - The company is implementing remediation measures, including hiring additional accounting, finance, and legal resources with public company experience, and implementing additional review controls and processes[183] Evaluation of Disclosure Controls and Procedures As of June 30, 2023, the company's CEO and CFO concluded that disclosure controls and procedures were ineffective, failing to provide reasonable assurance for timely recording, processing, summarizing, and reporting of required information - As of June 30, 2023, the company's Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures were ineffective[185] - Disclosure controls and procedures are designed to ensure that required information is recorded, processed, summarized, and reported timely, in accordance with SEC rules and forms[186] Changes in Internal Control over Financial Reporting No changes in internal control over financial reporting occurred during the three months ended June 30, 2023, that materially affected or are reasonably likely to materially affect internal control - No changes in internal control over financial reporting occurred during the three months ended June 30, 2023, that materially affected or are reasonably likely to materially affect internal control[187] PART II: OTHER INFORMATION Item 1. Legal Proceedings As of the filing date, the company is not involved in any material pending legal proceedings, though routine legal claims could adversely affect it through defense costs and management distraction - As of the filing date of this quarterly report, the company is not involved in any material pending legal proceedings[189] - Legal proceedings or claims in the normal course of business could adversely affect the company due to defense and settlement costs, and diversion of management resources[189] Item 1A. Risk Factors This section details various risks, including inability to obtain market authorization for the Vicarious Surgical System, lengthy and uncertain clinical research, potential FDA rejection of foreign clinical trial data, reliance on third parties for trials, IT system failures, and risks from using open-source software - The company cannot obtain market authorization for or sell the Vicarious Surgical System unless its design is validated and verified according to current good manufacturing practices[191] - The clinical research process required for market authorization is lengthy, expensive, and uncertain, potentially leading to failure or delay in obtaining market authorization[192] - The FDA may not accept clinical trial data conducted outside the U.S., which would delay development plans and increase costs[199][200] - The company relies on third parties for clinical trials and preclinical studies, and their failure to perform or comply with regulatory requirements could delay development plans or increase costs[204][205] - The company's and its third-party service providers' information technology systems may fail or suffer security breaches, potentially causing business disruption, data loss or compromise, and significant liability and reputational harm[208][209][212] - The use of "open source" software could result in the general release of the company's proprietary software, impacting its ability to sell products, and may expose it to litigation risks[213][214] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company states it has not engaged in unregistered equity security sales and did not repurchase any equity securities during the six months ended June 30, 2023 - The company has not engaged in unregistered equity security sales[216] - The company did not repurchase any equity securities during the six months ended June 30, 2023[216] Item 3. Defaults Upon Senior Securities The company states it has not experienced any defaults upon senior securities - The company has not experienced any defaults upon senior securities[216] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company's business - Mine safety disclosures are not applicable to the company's business[216] Item 5. Other Information The company states it has no other information to provide - The company has no other information to provide[216] Item 6. Exhibits This section lists all exhibits filed with the quarterly report, including articles of incorporation, equity incentive plans, director compensation policies, executive certifications, and XBRL interactive data files - Exhibits include articles of incorporation, equity incentive plans, director compensation policies, executive certifications, and XBRL interactive data files[218] SIGNATURES This section contains the quarterly report signed by CEO and President Adam Sachs and CFO William Kelly on July 28, 2023 - The quarterly report was signed by Chief Executive Officer and President Adam Sachs and Chief Financial Officer William Kelly on July 28, 2023[221][222]