Vicarious Surgical Inc.

Previous wording

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this Annual Report on Form 10-K. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to “we”, “us”, “our”, and “the Company” are intended to mean the business and operations of Vicarious Surgical Inc. and its consolidated subsidiaries.

Current wording

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this Annual Report on Form 10-K. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to “we”, “us”, “our”, and “the Company” are intended to mean the business and operations of Vicarious Surgical Inc. and its consolidated subsidiaries.

Previous wording

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

Current wording

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

Previous wording

We incurred a net loss of $71,071 and generated net income of $5,157 for the years ended December 31, 2023 and 2022, respectively. The 2023 net loss is inclusive of a gain of $5,191 related to the change in valuation of our warrant obligations. The 2022 net income is inclusive of a gain of $84,000 related to the change in valuation of our warrant obligations. Our loss from operations prior to the warrant gain and other income and expense items was $80,666 and $80,078 for the years ended December 31, 2023 and 2022, respectively, representing a period-over-period loss of 1%, which was primarily due to increases of $1,997 in development costs, $320 in personnel-related expenses, $744 in depreciation expense, and partially offset by a $2,343 decrease in insurance expense. The increase in personnel-related expenses includes $1,205 in severance related to our reductions in force, $1,011 in stock compensation, other increases in wages and benefits and is partially offset by a 14% decrease in average headcount, from an average of 204 people in 2022 to an average of 175 people in 2023.

Current wording

We incurred net losses of $63,223 and $71,071 for the years ended December 31, 2024 and 2023, respectively. The 2024 net loss is inclusive of a gain of $43 related to the change in valuation of our warrant obligations. The 2023 net loss is inclusive of a gain of $5,191 related to the change in valuation of our warrant obligations. Our loss from operations prior to the warrant gain and other income and expense items was $66,555 and $80,666 for the years ended December 31, 2024 and 2023, respectively, representing a period-over-period decrease in expenses of 17%, which was primarily due to decreases of $11,022 in personnel-related expenses, $1,435 in insurance expense, $797 in materials and supplies and $578 in software expense. The decrease in personnel-related expenses was due primarily to a 28% decrease in average headcount, from an average of 177 people in 2023 to an average of 127 people in 2024.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Interest expense consists primarily of interest incurred on our equipment loans that were paid off in April 2023.

Previous wording

Research and Development Expenses. R&D expenses increased $3,678, or 8%, to $47,578 during the year ended December 31, 2023, compared to $43,900 during the year ended December 31, 2022. This increase was primarily due to increases of $1,745 of personnel-related expenses, $270 in professional services, $381 in facility expenses, $722 in materials and supplies, $708 in depreciation expense, and offset by a decrease of $194 in travel expenses. The increase in personnel-related expenses was due primarily to $729 in severance related to our reductions in force, $468 in stock compensation and other increases in wages and benefits, and partially offset by a decrease in average headcount of 7%, from an average of 152 people in 2022 to an average of 142 people in 2023.

Current wording

Research and Development Expenses. R&D expenses decreased $7,423, or 16%, to $40,155 during the year ended December 31, 2024, compared to $47,578 during the year ended December 31, 2023. This decrease was primarily due to decreases of $8,283 of personnel-related expenses, $740 in materials and supplies, $377 in software expense, $130 in facilities and partially offset by increases of $1,899 in professional services and $252 in depreciation expense. The decrease in personnel-related expenses was due primarily to a decrease in average headcount of 25%, from an average of 137 people in 2023 to an average of 103 people in 2024.

Previous wording

Sales and Marketing Expenses. S&M expenses decreased $233, or 4%, from $6,463 in the year ended 2022 to $6,230 during the year ended December 31, 2023. This decrease was primarily due to decreases of $372 in personnel-related expenses, $149 in conferences and materials, $61 in travel expenses and partially offset by a $323 increase in professional fees. The decrease in personnel-related expenses was primarily due to a decrease in average headcount of 33%, from an average of 18 people in 2022 to an average of 12 people in 2023, and partially offset by $256 in severance related to our reductions in force, and other increases in wages and benefits.

Current wording

Sales and Marketing Expenses. S&M expenses decreased $1,705, or 27%, from $6,230 in the year ended 2023 to $4,525 during the year ended December 31, 2024. This decrease was primarily due to decreases of $940 in personnel-related expenses, $658 in professional services, $88 in travel expenses and partially offset by a $103 increase in software expenses. The decrease in personnel-related expenses was primarily due to a decrease in average headcount of 44%, from an average of 16 people in 2023 to an average of 9 people in 2024.

Previous wording

General and Administrative Expenses. G&A expenses decreased $2,857, or 10%, to $26,858 during the year ended December 31, 2023, compared to $29,715 during the year ended December 31, 2022. This decrease was primarily due to decreases of $1,054 in personnel-related expenses, $2,395 in insurance expenses, $125 in professional services and partially offset by increases of $444 in facility expenses and $338 in other miscellaneous operating costs. The decrease in personnel-related expenses was primarily due to a decrease in average headcount of 38%, from an average of 34 people in 2022 to an average of 21 people in 2023, and partially offset by $220 in severance related to our reductions in force, and other increases in wages and benefits.

Current wording

General and Administrative Expenses. G&A expenses decreased $4,983, or 19%, to $21,875 during the year ended December 31, 2024, compared to $26,858 during the year ended December 31, 2023. This decrease was primarily due to decreases of $1,799 in personnel-related expenses, $1,478 in insurance expenses, $974 in professional services, $304 in software expenses, $77 in travel expenses and $346 in other operating costs. The decrease in personnel-related expenses was primarily due to a decrease in average headcount of 36%, from an average of 25 people in 2023 to an average of 16 people in 2024.

Previous wording

Change in Fair Value of Warrant Liabilities. The change in fair value of warrant liabilities during the year ended December 31, 2023 was a $5,191 gain. The change in fair value of warrant liability resulted from the remeasurement of the public and private placement warrant liabilities between December 31, 2022 and the end of the reporting period, December 31, 2023.

Current wording

Change in Fair Value of Warrant Liabilities. The change in fair value of warrant liabilities during the year ended December 31, 2024 was a $43 gain. The change in fair value of warrant liability resulted from the remeasurement of the Public Warrant and Private Placement Warrant liabilities between December 31, 2023 and the end of the reporting period, December 31, 2024.

Previous wording

Interest and Other Income. Interest and other income increased by $2,994 to $4,429 during the year ended December 31, 2023, compared to $1,435 during the year ended December 31, 2022. The increase was primarily due to an increase in interest income from short-term investments.

Current wording

Interest and Other Income. Interest and other income decreased by $1,140 to $3,289 during the year ended December 31, 2024, compared to $4,429 during the year ended December 31, 2023. The decrease was primarily due to a decrease in interest income from short-term investments.

Previous wording

Interest Expense. Interest expense decreased by $175 to $25 during the year ended December 31, 2023, compared to $200 during the year ended December 31, 2022. The decrease was primarily due to our term loan being paid off in full during the fourth quarter of 2022.

Current wording

Interest Expense. Interest expense decreased by $25 to $0 during the year ended December 31, 2024, compared to $25 during the year ended December 31, 2023. The decrease was primarily due to the equipment loans being paid off in April 2023.

Previous wording

To date, our primary sources of capital have been private placements of preferred stock prior to the Business Combination, the recapitalization with D8 and the issuance of common stock. Net cash used in our operating activities for the years ended December 31, 2023 and 2022 was $62,305 and $61,211, respectively. As of December 31, 2023, we held cash and cash equivalents of $52,822, short-term investments of $45,355 and had an accumulated deficit of $132,712.

Current wording

To date, our primary sources of capital have been private placements of preferred stock prior to the Business Combination, public and private sales of securities and the issuance of common stock. Net cash used in our operating activities for the years ended December 31, 2024 and 2023 was $49,956 and $62,305, respectively. As of December 31, 2024, we held cash and cash equivalents of $9,737, short-term investments of $39,360 and had an accumulated deficit of $195,935.

Previous wording

Excluding the non-cash impact of potential changes in the fair value of warrant liabilities, we expect net losses to continue in connection with our ongoing activities, particularly as we continue to invest in commercialization and new product development. We believe our current cash, cash equivalents and short-term investments balance of $98,177 as of December 31, 2023 will be sufficient to support our operations beyond the next twelve months from the date of issuance of these financial statements. Our future capital requirements will depend on many factors, including, but not limited to, any changes in the size, number and scope of clinical trials we may be required to conduct, the timing and conditions of market authorization (if any) for the Vicarious Surgical System, whether we are able to successfully commercialize the Vicarious Surgical System, if approved, additional product candidates we may choose to develop, fluctuations in the cost and timing of our business activities, including manufacturing, hiring and protection of our intellectual property portfolio, and the other risks and uncertainties described herein, under the caption “Risk Factors” in Part I, Item 1A and in other filings that we make with the Securities and Exchange Commission from time to time.

Current wording

Our future capital requirements will depend on many factors, including, but not limited to, any changes in the size, number and scope of clinical trials we may be required to conduct, the timing and conditions of market authorization (if any) for the Vicarious Surgical System, whether we are able to successfully commercialize the Vicarious Surgical System, if approved, additional product candidates we may choose to develop, fluctuations in the cost and timing of our business activities, including manufacturing, hiring and protection of our intellectual property portfolio, and the other risks and uncertainties described herein, under the caption “Risk Factors” in Part I, Item 1A and in other filings that we make with the Securities and Exchange Commission from time to time.

Previous wording

Our cash and cash equivalents and short-term investments balance as of December 31, 2023 was $52,822 and $45,355, respectively. Our future capital requirements may vary from those currently planned and will depend on various factors, including the timing and extent of R&D spending and spending on other strategic business initiatives.

Current wording

Our cash and cash equivalents and short-term investments balance as of December 31, 2024 was $9,737 and $39,360, respectively. Our future capital requirements may vary from those currently planned and will depend on various factors, including the timing and extent of R&D spending and spending on other strategic business initiatives.

Previous wording

Net cash used in operating activities during the year ended December 31, 2022 was $61,211, attributable to net income of $5,157 plus a net change in our net operating assets and liabilities of $3,362 and offset by non-cash items of $69,730. Non-cash items consisted of an $84,000 gain from our warrant liabilities, partially offset by $12,255 in stock-based compensation, $1,111 of depreciation and amortization and $829 for non-cash lease expenses. The $3,362 change in our net operating assets and liabilities was primarily due to a $1,711 increase in accrued expenses, a $937 increase in lease liabilities, a $671 decrease in prepaid and other current assets, and a $135 increase in accounts payable partially offset by a $92 increase in other non-current assets.

Current wording

Net cash used in operating activities during the year ended December 31, 2024 was $49,956, attributable to a net loss of $63,223 less a net change in our net operating assets and liabilities of $594 and plus non-cash items of $13,861. Non-cash items consisted of $11,904 in stock-based compensation, $2,107 of depreciation and $899 for non-cash lease expenses, partially offset by a $43 gain from our warrant liabilities and a change in accrued interest and net accretion of discounts on marketable securities of $1,008. The $594 change in our net operating assets and liabilities was primarily due to decreases of $1,047 in lease liabilities, $96 in accounts payable, partially offset by an $175 decrease in prepaid and other current assets, a $309 increase in accrued expenses, and a $65 decrease in other non-current assets.

Previous wording

Cash flows used in Investing Activities

Current wording

Cash flows provided by (used in) Investing Activities

Previous wording

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

Current wording

While our significant accounting policies are described in the notes to our historical financial statements (see Note 2, “Summary of Significant Accounting Policies – Recently Issued Accounting Pronouncements” in our financial statements contained in this Annual Report on Form 10-K), we believe the following critical accounting policy requires significant judgment and estimates in the preparation of our financial statements:

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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