Microbot Medical(US:MBOT)2020-08-14 17:12markdown [Part I - Financial Information](index=3&type=section&id=Part%20I-%20Financial%20Information) [Item 1 - Financial Statements](index=3&type=section&id=Item%201%20-%20Financial%20Statements) This section presents the unaudited interim consolidated financial statements for Microbot Medical Inc. and its subsidiaries, including balance sheets, statements of operations, comprehensive loss, shareholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, lease obligations, commitments, contingencies, share capital developments, and subsequent events [Interim Consolidated Balance Sheets](index=4&type=section&id=Interim%20Consolidated%20Balance%20Sheets) Interim Consolidated Balance Sheets Data | Metric | June 30, 2020 (Unaudited, in thousands) | December 31, 2019 (Audited, in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $28,233 | $28,771 | | Total current assets | $28,768 | $35,936 | | Total assets | $29,907 | $37,126 | | Total current liabilities | $851 | $4,826 | | Total liabilities | $1,518 | $5,586 | | Total stockholders' equity | $28,389 | $31,540 | - **Total assets** decreased from **$37,126 thousand** at December 31, 2019, to **$29,907 thousand** at June 30, 2020[9](index=9&type=chunk) - **Total liabilities** significantly decreased from **$5,586 thousand** to **$1,518 thousand**, primarily due to the elimination of a **$3,604 thousand** provision for extinguishment dispute[9](index=9&type=chunk) [Interim Consolidated Statements of Operations](index=5&type=section&id=Interim%20Consolidated%20Statements%20of%20Operations) Interim Consolidated Statements of Operations Data | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $669 | $741 | $1,360 | $1,364 | | General and administrative | $1,215 | $804 | $2,687 | $2,097 | | Operating loss | $(1,884) | $(1,545) | $(4,047) | $(3,461) | | Net loss | $(1,855) | $(1,542) | $(4,060) | $(3,503) | | Basic and diluted net loss per share | $(0.26) | $(0.36) | $(0.57) | $(0.83) | - **Net loss** increased for both the three-month period (from **$(1,542)k** to **$(1,855)k**) and the six-month period (from **$(3,503)k** to **$(4,060)k**) year-over-year[11](index=11&type=chunk) - **General and administrative expenses** increased significantly for both periods, while **research and development expenses** slightly decreased for the three-month period and remained stable for the six-month period[11](index=11&type=chunk) [Interim Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Interim%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Interim Consolidated Statements of Comprehensive Loss Data | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(1,855) | $(1,542) | $(4,060) | $(3,503) | | Comprehensive loss | $(1,855) | $(1,542) | $(4,060) | $(3,503) | - The comprehensive loss for both the three and six months ended June 30, 2020, was equal to the **net loss**, indicating no significant other comprehensive income or loss components[14](index=14&type=chunk) [Interim Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Interim%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Interim Consolidated Statements of Shareholders' Equity Data | Metric (in thousands) | December 31, 2019 | June 30, 2020 | | :-------------------- | :---------------- | :------------ | | Common Stock Shares | 7,185,628 | 7,103,260 | | Common Stock Amount | $72 | $71 | | Additional Paid-In Capital | $69,954 | $67,489 | | Treasury Shares | $(3,375) | $0 | | Accumulated Deficit | $(35,111) | $(39,171) | | Total Stockholders' Equity | $31,540 | $28,389 | - **Total stockholders' equity** decreased from **$31,540 thousand** at December 31, 2019, to **$28,389 thousand** at June 30, 2020, primarily due to the **net loss** of **$4,060 thousand** and the cancellation of treasury shares[17](index=17&type=chunk) - **Share-based compensation** contributed **$909 thousand** to additional paid-in capital for the six months ended June 30, 2020[17](index=17&type=chunk) [Interim Consolidated Statements of Cash Flows](index=8&type=section&id=Interim%20Consolidated%20Statements%20of%20Cash%20Flows) Interim Consolidated Statements of Cash Flows Data | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,888) | $(3,200) | | Net cash from investing activities | $2,445 | $(2,496) | | Net cash from financing activities | $(3,375) | $9,562 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(4,818) | $3,866 | | Cash, cash equivalents and restricted cash at ending of period | $28,311 | $9,129 | - **Net cash used in operating activities** increased to **$(3,888) thousand** for the six months ended June 30, 2020, from **$(3,200) thousand** in the prior year[19](index=19&type=chunk) - **Investing activities** shifted from using cash (**$2,496 thousand**) in 2019 to providing cash (**$2,445 thousand**) in 2020, primarily due to proceeds from sales of marketable securities[19](index=19&type=chunk) - **Financing activities** used **$3,375 thousand** in 2020, a significant change from providing **$9,562 thousand** in 2019, mainly due to the repayment of shareholders' investment related to litigation[19](index=19&type=chunk) [Notes to Interim Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Interim%20Consolidated%20Financial%20Statements) [NOTE 1 - GENERAL](index=9&type=section&id=NOTE%201%20-%20GENERAL) - **Microbot Medical Inc.** is a **pre-clinical medical device company** focused on **micro-robotics assisted medical technologies** for **minimally invasive surgery**[22](index=22&type=chunk) - The company has not generated **revenues from operations** to date and expects to incur **additional losses** due to ongoing **R&D activities**[28](index=28&type=chunk)[29](index=29&type=chunk) - As of June 30, 2020, the company had **$28,311 thousand** in **unrestricted cash and cash equivalents**, which management believes is sufficient to fund operations for more than **12 months**[28](index=28&type=chunk) - The **COVID-19 pandemic** poses risks of **significant delays and disruptions** to **clinical trials**, **supply chain**, and **overall business operations**[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The company adopted **ASU 2018-13**, 'Changes to Disclosure Requirements for Fair Value Measurements,' effective January 1, 2020, with **no material effect** on financial statements[35](index=35&type=chunk) - **ASU No. 2016-13**, 'Financial Instruments – Credit Losses,' is effective for the company on January 1, 2023, and its **impact is currently being evaluated**[36](index=36&type=chunk) - **ASU 2019-12**, 'Simplifying the Accounting for Income Taxes,' is effective for the company on January 1, 2021, with **early adoption permitted**[37](index=37&type=chunk) [NOTE 3 - LEASES](index=11&type=section&id=NOTE%203%20-%20LEASES) - The company adopted **ASU 2016-02**, 'Leases (Topic 842),' on January 1, 2019, using the **modified retrospective approach**[38](index=38&type=chunk) Lease Obligations Summary | Metric (in thousands) | As of June 30, 2020 | | :-------------------- | :------------------ | | Operating lease right-of-use asset | $869 | | Operating lease - current | $188 | | Operating lease - non-current | $667 | | Total lease liability balance | $855 | | Weighted average remaining lease term | **2.5 years** | | Weighted average discount rate | **9%** | - **Cash payments for operating leases** totaled **$52 thousand** as of June 30, 2020[43](index=43&type=chunk) [NOTE 4 - COMMITMENTS AND CONTINGENCIES](index=14&type=section&id=NOTE%204%20-%20COMMITMENTS%20AND%20CONTINGENCIES) - Microbot Israel received approximately **$1,500 thousand** in **grants from the Israeli Innovation Authority (IIA)** from 2013 through June 30, 2020, with an obligation to pay **3%-3.5% royalties on future sales**[44](index=44&type=chunk) - The company has ongoing contract research agreements with Washington University and Wayne State University for the development of its **Self Cleaning Shunt (SCS)** product, involving joint and exclusive licensing options for inventions[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - The company lost an appeal in the **Sabby litigation**, resulting in a **$3,700 thousand** payment and rescission of a 2017 financing agreement; a new lawsuit from **Empery Asset Master Ltd.** and others seeks rescission of an additional **$6,750 thousand** from the same financing[54](index=54&type=chunk) - The company is pursuing **Alliance Investment Management, Ltd.** and **Joseph Mona** for approximately **$468 thousand** in **short-swing profits**, while **Mona** has filed a counterclaim for **$151 thousand** in **net losses** due to alleged misrepresentations[55](index=55&type=chunk)[59](index=59&type=chunk) - The CEO, **Harel Gadot**, received a **salary increase** to **$450 thousand**, an increased **annual bonus potential** (**60%** of salary), a **one-time special bonus**, and a grant of **166,666 stock options**[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) [NOTE 5 - SHARE CAPITAL](index=17&type=section&id=NOTE%205%20-%20SHARE%20CAPITAL) - As of June 30, 2020, the company had **7,103,260 shares** of **common stock issued and outstanding**[68](index=68&type=chunk) - The company completed several **equity offerings** in January and December 2019, raising significant **gross proceeds** through the issuance of common stock and warrants[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) Stock Options and Compensation Data | Metric | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Stock options outstanding at end of period | 537,061 | 371,360 | | Vested at end of period | 303,509 | 270,827 | | Aggregate intrinsic value of outstanding options | $689 | $403 | | Total unrecognized compensation costs | $1,884 | N/A | - **Compensation expense** for **stock-based awards** was **$909 thousand** for the six months ended June 30, 2020, compared to **$610 thousand** for the same period in 2019[84](index=84&type=chunk) [NOTE 6 - SUBSEQUENT EVENTS](index=21&type=section&id=NOTE%206%20-%20SUBSEQUENT%20EVENTS) - On July 14, 2020, the Board approved grants of **25,000 stock options** to an executive officer and **6,493 stock options** to a director, with an **exercise price** of **$6.16** per share, **vesting over three years**[87](index=87&type=chunk) [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Microbot Medical Inc.'s business, its proprietary technological platforms, and a detailed analysis of its financial condition and results of operations for the three and six months ended June 30, 2020, compared to the prior year, also discussing liquidity, capital resources, and critical accounting policies [Overview](index=22&type=section&id=Overview) - Microbot is a **pre-clinical medical device company** focused on developing next-generation robotic endoluminal surgery devices for minimally invasive procedures[91](index=91&type=chunk) - The company leverages its micro-robotic technologies (**ViRob**, **TipCAT**, **Liberty**, and **CardioSert** assets) to redefine surgical robotics and improve patient outcomes[92](index=92&type=chunk) - Microbot holds a **patent portfolio** of **37 issued/allowed patents** and **15 pending patent applications** worldwide[93](index=93&type=chunk) [Technological Platforms](index=22&type=section&id=Technological%20Platforms) - **ViRob** is an autonomous crawling micro-robot designed for navigation in natural and artificial spaces within the human body, used in the **Self Cleaning Shunt (SCS)** product[94](index=94&type=chunk) - **TipCAT** is a **disposable, self-propelled locomotive device** that advances in tubular anatomies using an **inchworm-like motion**, aiming to reduce external pressure and operator dependence[96](index=96&type=chunk) - **CardioSert** technology, acquired in 2018, combines a **guidewire and microcatheter** with **steering and stiffness control**, initially developed for **chronic total occlusions (CTO)** in **percutaneous coronary intervention (PCI)** procedures[97](index=97&type=chunk)[98](index=98&type=chunk) - **Liberty** is presented as the world's first **fully disposable robotic system** for **Endovascular Interventional procedures**, featuring **remote operation**, **reduced radiation exposure**, and a **'One & Done' tool** combining **guidewire and microcatheter**[99](index=99&type=chunk)[100](index=100&type=chunk) [Financial Operations Overview](index=24&type=section&id=Financial%20Operations%20Overview) - **General and administrative expenses** are expected to increase due to **expanding operations**, patent portfolio maintenance, and **public company compliance costs**[104](index=104&type=chunk) - The company has incurred **net losses** and has not recorded **income tax benefits**, as it is in the **development stage** without generated **revenues**[105](index=105&type=chunk) - **Research and development expenses are recognized as incurred**, with estimates based on the progress of specific tasks and vendor information[111](index=111&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Operating Expenses and Financing Data | Expense Category (in thousands) | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change (YoY) | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change (YoY) | | :------------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Research and development | $669 | $741 | $(72) | $1,360 | $1,364 | $(4) | | General and administrative | $1,215 | $804 | $411 | $2,687 | $2,097 | $590 | | Financing expenses/(income), net | $(29) | $(3) | $26 | $13 | $42 | $(29) | - **Research and development expenses** decreased by **$72 thousand** for the three months ended June 30, 2020, primarily due to a decrease in **professional services**[113](index=113&type=chunk) - **General and administrative expenses** increased by **$590 thousand** for the six months ended June 30, 2020, driven by higher **salaries, insurance, rent, and share-based compensation**, partially offset by lower **legal and travel expenses**[114](index=114&type=chunk) - **Financing income (expenses)** shifted from income to expense for the six months ended June 30, 2020, primarily due to **interest related to litigation**[115](index=115&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) - The company has incurred **net losses** and **negative cash flows from operating activities** since inception[116](index=116&type=chunk) Working Capital and Cumulative Loss Data | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------- | :------------ | :---------------- | | Net working capital | $27,917 | $31,110 | | Cumulative loss (since inception) | $39,171 | N/A | - Microbot believes its **current cash** of **$28,311 thousand** is sufficient to **fund operations for at least 24 months**, or at least **12 months** if the **ongoing $6,750 thousand litigation** is lost[119](index=119&type=chunk) - The company may seek **additional funding** through **debt, equity issuances, or grants** from the **Israeli Innovation Authority**, which could result in **shareholder dilution**[120](index=120&type=chunk) [Cash Flows](index=27&type=section&id=Cash%20Flows) Cash Flow Activities Summary | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,888) | $(3,200) | | Net cash from investing activities | $2,445 | $(2,496) | | Net cash from financing activities | $(3,375) | $9,562 | | Net (decrease) increase in cash and cash equivalents and restricted cash | $(4,818) | $3,866 | - **Net cash used in operating activities** increased by **$688 thousand** year-over-year, reflecting **higher operational expenses**[121](index=121&type=chunk)[122](index=122&type=chunk) - **Investing activities** generated **$2,445 thousand** in cash in 2020, a significant improvement from using **$2,496 thousand** in 2019, primarily due to **proceeds from marketable security sales**[121](index=121&type=chunk)[123](index=123&type=chunk) - **Financing activities** used **$3,375 thousand** in 2020, a reversal from providing **$9,562 thousand** in 2019, mainly due to the **repayment of shareholders' investment related to litigation**[121](index=121&type=chunk)[124](index=124&type=chunk) [Off-Balance Sheet Arrangements](index=27&type=section&id=Of%20-Balance%20Sheet%20Arrangements) - Microbot has no **off-balance sheet arrangements** that have or are reasonably likely to have a **material current or future effect** on its **financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources**[125](index=125&type=chunk) [Item 3 – Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines Microbot Medical Inc.'s exposure to market risks, specifically interest rate risk and foreign exchange risk, and discusses the potential impact of inflation on its operations [Interest Rate Risk](index=27&type=section&id=Interest%20Rate%20Risk) - Microbot's primary exposure to market risk is **interest income sensitivity**, but due to the **short-term nature of its cash and cash equivalents**, a sudden change in interest rates is not expected to have a **material impact**[126](index=126&type=chunk) [Foreign Exchange Risks](index=28&type=section&id=Foreign%20Exchange%20Risks) - The company's **financial statements are in U.S. dollars**, but a significant portion of **operating expenses are in other currencies**, exposing it to **foreign exchange rate fluctuations**[128](index=128&type=chunk) - Microbot may use **financial instruments like forward foreign currency contracts** in the future to **manage foreign currency exposure**[129](index=129&type=chunk) [Effects of Inflation](index=28&type=section&id=Ef%20ects%20of%20Inflation) - **Inflation** generally affects the company by increasing **clinical trial costs**, but it has not had a **significant impact on results of operations** for the periods presented[130](index=130&type=chunk) [Item 4 - Controls and Procedures](index=28&type=section&id=Item%204%20-%20Controls%20and%20Procedures) This section details the effectiveness of Microbot Medical Inc.'s disclosure controls and procedures and reports on any changes in internal control over financial reporting [Disclosure Controls and Procedures](index=28&type=section&id=Disclosure%20Controls%20and%20Procedures) - As of June 30, 2020, management, under the direction of the CEO and CFO, determined that the company's **disclosure controls and procedures** were effective[131](index=131&type=chunk) [Changes in Internal Control Over Financial Reporting](index=28&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There were no changes in **internal control over financial reporting** during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's **internal control over financial reporting**[132](index=132&type=chunk) [Part II - Other Information](index=28&type=section&id=Part%20II%20-%20Other%20Information) [Item 1 - Legal Proceedings](index=28&type=section&id=Item%201%20-%20Legal%20Proceedings) This section provides updates on significant legal proceedings involving Microbot Medical Inc., including litigation related to its 2017 financing and a separate action to recover short-swing profits [Litigation Resulting from 2017 Financing](index=29&type=section&id=Litigation%20Resulting%20from%202017%20Financing) - The company lost an appeal in the **Sabby litigation**, leading to the rescission of a 2017 **Securities Purchase Agreement (SPA)** for Sabby and a payment of approximately **$3.7 million**[136](index=136&type=chunk) - A new lawsuit by **Empery Asset Master Ltd.** and others seeks rescission of the **SPA** and return of **$6.75 million** from the same 2017 financing, with the company's motion to dismiss currently pending[136](index=136&type=chunk) [Alliance Litigation](index=29&type=section&id=Alliance%20Litigation) - Microbot initiated an action against **Alliance Investment Management, Ltd.** to compel disgorgement of approximately **$468 thousand** in **short-swing profits**[137](index=137&type=chunk) - **Joseph Mona**, identified as the beneficial owner of shares traded by Alliance, filed a counterclaim against Microbot for **$150,954** in **net losses**, alleging company misrepresentations[140](index=140&type=chunk) - Motions for judgment on Microbot's claim against **Mona** and to dismiss **Mona's** counterclaim are pending, with a court appearance scheduled for October 13, 2020[141](index=141&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) As a Smaller Reporting Company, Microbot Medical Inc. is not required to provide a detailed discussion of risk factors in this quarterly report - The company is a **Smaller Reporting Company** and is **not required to provide risk factors** in this filing[144](index=144&type=chunk) [Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - There were no **unregistered sales of equity securities** and **use of proceeds** to report[145](index=145&type=chunk) [Item 3 – Defaults Upon Senior Securities](index=30&type=section&id=Item%203%20%E2%80%93%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities to report for the period - There were **no defaults upon senior securities** to report[145](index=145&type=chunk) [Item 4 – Mine Safety Disclosures](index=30&type=section&id=Item%204%20%E2%80%93%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to Microbot Medical Inc.'s operations - **Mine safety disclosures are not applicable** to the company[145](index=145&type=chunk) [Item 5 - Other Information](index=30&type=section&id=Item%205%20-%20Other%20Information) This section indicates that there is no other information to report for the period - There is **no other information to report**[146](index=146&type=chunk) [Item 6 – Exhibits](index=30&type=section&id=Item%206%20%E2%80%93%20Exhibits) This section lists the exhibits furnished as part of the report, including certifications from the CEO and CFO, and XBRL taxonomy extensions - The report includes **certifications** from the **Chairman, President, and CEO** (**Harel Gadot**) and the **Chief Financial Officer** (**David Ben Naim**) as exhibits[147](index=147&type=chunk) - **XBRL Instance**, **Taxonomy Extension Schema**, **Calculation**, **Definition**, **Labels**, and **Presentation files** are furnished as exhibits[147](index=147&type=chunk) [Signatures](index=31&type=section&id=Signatures) This section contains the duly authorized signatures of Microbot Medical Inc.'s principal executive officer and principal financial and accounting officer, affirming the submission of the report - The report is signed by **Harel Gadot**, **Chairman, President and Chief Executive Officer**, and **David Ben Naim**, **Chief Financial Officer**, on **August 14, 2020**[149](index=149&type=chunk)[151](index=151&type=chunk)