Microbot Medical(MBOT) - 2021 Q1 - Quarterly Report

Part I - Financial Information Item 1 - Financial Statements This section presents the unaudited interim consolidated financial statements for Microbot Medical Inc. and its subsidiaries, including the Balance Sheets, Statements of Operations, Comprehensive Loss, Shareholders' Equity, and Cash Flows, along with detailed notes explaining the company's business, accounting policies, commitments, contingencies, and share capital developments Interim Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, at specific dates | Metric | March 31, 2021 (Unaudited, $ thousands) | December 31, 2020 (Audited, $ thousands) | | :-------------------------- | :-------------------------------------- | :------------------------------------- | | Cash and cash equivalents | $17,924 | $19,650 | | Marketable securities | $4,998 | $4,998 | | Total current assets | $23,207 | $25,253 | | Total assets | $24,170 | $26,279 | | Total current liabilities | $1,275 | $1,345 | | Total liabilities | $1,840 | $1,971 | | Total stockholders' equity | $22,330 | $24,308 | Interim Consolidated Statements of Operations Details the company's revenues, expenses, and net loss over specific reporting periods | Metric | Three Months Ended March 31, 2021 ($ thousands) | Three Months Ended March 31, 2020 ($ thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Research and development | $1,119 | $691 | | General and administrative | $1,273 | $1,472 | | Operating loss | $(2,392) | $(2,163) | | Financing income (expenses), net | $4 | $(42) | | Net loss | $(2,388) | $(2,205) | | Basic and diluted net loss per share | $(0.34) | $(0.31) | Interim Consolidated Statements of Comprehensive Loss Reports the company's net loss and other comprehensive income or loss for the period | Metric | Three Months Ended March 31, 2021 ($ thousands) | Three Months Ended March 31, 2020 ($ thousands) | | :------- | :---------------------------------------------- | :---------------------------------------------- | | Net loss | $(2,388) | $(2,205) | | Comprehensive loss | $(2,388) | $(2,205) | Interim Consolidated Statements of Shareholders' Equity Outlines changes in the company's equity accounts, including common stock and accumulated deficit Changes in Shareholders' Equity ($ thousands) | Metric | December 31, 2020 (Audited) | March 31, 2021 (Unaudited) | | :-------------------------- | :-------------------------- | :-------------------------- | | Common Stock (Shares) | 7,108,133 | 7,108,133 | | Common Stock (Amount) | $72 | $72 | | Additional Paid-In Capital | $68,516 | $68,926 | | Accumulated Deficit | $(44,280) | $(46,668) | | Total Stockholders' Equity | $24,308 | $22,330 | Changes for Three Months Ended March 31, 2021: * Share-based compensation: $410 thousand * Net loss: $(2,388) thousand Interim Consolidated Statements of Cash Flows Summarizes the cash inflows and outflows from operating, investing, and financing activities | Metric | Three Months Ended March 31, 2021 ($ thousands) | Three Months Ended March 31, 2020 ($ thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net cash flows from operating activities | $(1,994) | $(2,346) | | Net cash flows from investing activities | $265 | $2,253 | | Net cash flows from financing activities | $0 | $(3,375) | | Decrease in cash, cash equivalents and restricted cash | $(1,729) | $(3,468) | | Cash, cash equivalents and restricted cash at ending of period | $18,005 | $29,661 | Notes to Interim Consolidated Financial Statements Provides detailed explanations and disclosures supporting the interim consolidated financial statements NOTE 1 - GENERAL Describes the company's business, operational context, and going concern considerations - Microbot Medical Inc. is a pre-clinical medical device company focused on micro-robotics assisted medical technologies for minimally invasive surgery[23] - The Company has not generated revenues to date and expects to incur additional losses due to ongoing R&D activities[29][30] - As of March 31, 2021, the Company had $17,924 thousand in unrestricted cash and cash equivalents, believed to be sufficient for over 12 months of operations[29] - The COVID-19 pandemic poses risks of significant delays and disruptions to pre-clinical studies, supply chain, and regulatory approvals[31][33][34] NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Outlines the key accounting principles and methods used in preparing the financial statements - The Company classifies financial assets and liabilities subject to fair value measurements into a three-level hierarchy based on the observability of inputs[36][37][38] Fair Value of Financial Instruments (As of March 31, 2021, $ thousands): | Asset Category | Total | Level 1 | Level 2 | Level 3 | | :--------------------- | :---- | :------ | :------ | :------ | | Cash equivalents: Money market funds | $8,585 | $8,585 | $0 | $0 | | Marketable securities: Other money market funds | $1,999 | $1,999 | $0 | $0 | | Marketable securities: US Treasury Bond | $2,999 | $2,999 | $0 | $0 | | Total marketable securities | $4,998 | $4,998 | $0 | $0 | Fair Value of Financial Instruments (As of December 31, 2020, $ thousands): | Asset Category | Total | Level 1 | Level 2 | Level 3 | | :--------------------- | :---- | :------ | :------ | :------ | | Cash equivalents: Money market funds | $8,585 | $8,585 | $0 | $0 | | Marketable securities: Other money market funds | $2,000 | $2,000 | $0 | $0 | | Marketable securities: US Treasury Bond | $2,998 | $2,998 | $0 | $0 | | Total marketable securities | $4,998 | $4,998 | $0 | $0 | | Other assets: Convertible loan investment | $270 | $0 | $0 | $270 | - The adoption of ASU 2019-12, 'Simplifying the Accounting for Income Taxes,' on January 1, 2021, did not have a material impact on the Company's consolidated financial statements[44] NOTE 3 - LEASES Details the company's operating lease arrangements, liabilities, and related financial impacts Operating Lease Information: | Metric | March 31, 2021 | | :------------------------------------------ | :------------- | | Operating leases weighted average remaining lease term (in years) | 3.75 | | Operating leases weighted average discount rate | 9% | Lease Liabilities on Balance Sheet ($ thousands): | Metric | March 31, 2021 | December 31, 2020 | | :------------------------ | :------------- | :---------------- | | Operating lease right of use asset | $725 | $775 | | Operating lease - current | $173 | $187 | | Operating lease - non-current | $565 | $626 | | Total lease liability balance | $738 | $813 | Undiscounted Maturities of Operating Lease Payments (as of March 31, 2021, $ thousands): | Year | Amount ($ thousands) | | :---------------------- | :------------------- | | 2021 (Remainder) | $241 | | 2022 | $186 | | 2023 | $180 | | 2024 | $182 | | 2025 | $160 | | Total future lease payments | $949 | | Less imputed interest | $(211) | | Total lease liability balance | $738 | NOTE 4 - COMMITMENTS AND CONTINGENCIES Discloses the company's contractual obligations, legal proceedings, and potential future liabilities - Microbot Israel received approximately $1,500 thousand in grants from the Israeli Innovation Authority (IIA) since 2013, obligating it to pay 3%-3.5% royalties on future sales up to the grant amount, contingent on successful commercialization[49][50][99] - The Company is involved in ongoing litigation related to its 2017 equity financing, with a lawsuit seeking rescission of the SPA and return of $6,750 thousand, following a previous loss in a similar case[58][59][98] - In the Alliance Litigation, the Court entered judgment of $484,614.30 in the Company's favor against Joseph Mona for short-swing profits, which Mona has appealed[61][62] NOTE 5 - SHARE CAPITAL Provides information on the company's common stock, stock options, and changes in share capital - As of March 31, 2021, and December 31, 2020, the Company had 7,108,133 shares of common stock issued and outstanding[66] - On February 1, 2021, the Company granted 190,000 stock options to its CEO, Mr. Harel Gadot, at an exercise price of $8.48 per share, resulting in $118 thousand in compensation expenses for the quarter[67] Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Microbot Medical Inc.'s business, technological platforms, and a detailed analysis of its financial condition and results of operations for the three months ended March 31, 2021, compared to the same period in 2020 Forward Looking Statements Highlights the inherent uncertainties and risks associated with forward-looking information presented in the report - The discussion includes forward-looking statements based on current expectations and projections, which involve assumptions and describe future plans, strategies, and expectations[69][70] - Actual results may differ materially due to various risks and uncertainties, and investors should not place undue reliance on these statements[69][71] Overview Introduces the company's core business, technological platforms, and strategic development milestones - Microbot is a pre-clinical medical device company specializing in micro-robotics for minimally invasive surgery, aiming to redefine surgical robotics and improve patient outcomes[72] - The Company's technological platforms include ViRob (for Self Cleaning Shunt), TipCAT (disposable self-propelled locomotive device), CardioSert (guidewire/microcatheter technology), and LIBERTY (first fully disposable robotic system for endovascular procedures)[73][75][77][78][79] - LIBERTY robotic system successfully concluded feasibility animal studies, demonstrating robust navigation, intuitive usability, and remote operation capabilities[81] - Key development milestones for LIBERTY include design freeze in Q4 2021, pre-submission to FDA in Q1 2022, clinical trials in Q3 2022, and FDA submission in Q4 2022[82] Financial Operations Overview Summarizes the company's key financial policies, expense categories, and critical accounting estimates - Research and development expenses primarily cover salaries, overhead for R&D personnel, prototype materials, and patent portfolio maintenance, expensed as incurred[83] - General and administrative expenses include management salaries, professional fees (accounting, auditing, legal), and allocated overhead, expected to increase with expanded operations and public company compliance[84][85] - The Company has incurred net losses and has not recorded income tax benefits, as it is in the development stage without generated revenues[86] - Critical accounting policies involve estimates and judgments, particularly for contingencies and fair value measurements of financial instruments, classified into a three-level hierarchy[87][89][90][91][92] Results of Operations Analyzes the company's financial performance, including changes in expenses and net loss, over comparative periods Comparison of Three Months Ended March 31, 2021 and 2020 ($ thousands): | Expense Category | 2021 | 2020 | Increase/(Decrease) | | :------------------------------ | :--- | :--- | :------------------ | | Research and development expenses | $1,119 | $691 | $428 | | General and administrative expenses | $1,273 | $1,472 | $(199) | | Financing (income) expenses, net | $4 | $(42) | $(46) | - Research and development expenses increased by $428 thousand (61.9%) primarily due to new hires, professional services, materials, and intellectual property related to the LIBERTY device[93] - General and administrative expenses decreased by $199 thousand (13.5%) mainly due to lower bonus expenses for the CEO and reduced travel, partially offset by increased salaries[94] - Financing expenses decreased by $46 thousand, shifting to income, primarily because interest paid on litigation in Q1 2020 did not recur in Q1 2021[96] Liquidity and Capital Resources Assesses the company's ability to meet short-term obligations and fund future operations through its cash and capital - The Company has incurred losses and negative cash flows from operations since inception, with a cumulative loss of approximately $46,668 thousand through March 31, 2021[97][98] Working Capital ($ thousands): | Metric | March 31, 2021 | December 31, 2020 | | :---------------- | :------------- | :---------------- | | Net working capital | $21,932 | $23,908 | - Microbot believes its existing net cash is sufficient to fund operations for at least 24 months, but this could be reduced if the ongoing litigation seeking $6,750 thousand is unsuccessful[100] - Future funding plans include existing cash, potential additional grants from the Israeli Innovation Authority, and future issuances of debt and/or equity securities, which may cause dilution[101] Cash Flows Details the movement of cash across operating, investing, and financing activities for the reporting periods Summary of Net Cash Flow Activity ($ thousands): | Activity | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash flows from operating activities | $(1,994) | $(2,346) | | Net cash flows from investing activities | $265 | $2,253 | | Net cash flows from financing activities | $0 | $(3,375) | | Decrease in cash and cash equivalents and restricted cash | $(1,729) | $(3,468) | - Net cash used in operating activities decreased from $2,346 thousand in 2020 to $1,994 thousand in 2021[103][104] - Net cash from investing activities significantly decreased from $2,253 thousand in 2020 (due to marketable security sales) to $265 thousand in 2021[103][105] - Net cash from financing activities was nil in 2021, compared to a $3,375 thousand outflow in 2020 due to repayment of shareholder investments related to litigation[103][106] Off-Balance Sheet Arrangements Confirms the absence of material off-balance sheet arrangements impacting the company's financial position - 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 or results of operations[107] Item 3 - Quantitative and Qualitative Disclosures About Market Risk This section outlines Microbot Medical Inc.'s exposure to market risks, including interest rate risk, foreign exchange risk, and the effects of inflation, and how these factors might impact its financial condition and results of operations - The Company's primary exposure to market risk is interest income sensitivity from cash and cash equivalents, but due to the short-term nature of instruments, a sudden change in interest rates is not expected to have a material impact[108] - Foreign exchange risks arise because a significant portion of business and operating expenses are in currencies other than the U.S. dollar, potentially impacting future revenues or expenses[109][110] - Inflation generally affects clinical trial costs, but the Company does not believe it had a significant impact on its results of operations for the periods presented[111] Item 4 - Controls and Procedures 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 during the last fiscal quarter - As of March 31, 2021, the Company's disclosure controls and procedures were deemed effective to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[112] - 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[113] Part II - Other Information Item 1 - Legal Proceedings This section provides updates on Microbot Medical Inc.'s ongoing legal proceedings, including a lawsuit related to its 2017 equity financing and the Alliance Litigation concerning short-swing profits - The Company is a defendant in a lawsuit seeking rescission of a 2017 Securities Purchase Agreement and return of $6.75 million, with a motion to dismiss denied and an appeal filed[116] - Management is unable to estimate the potential outcome of the 2017 financing litigation, having previously lost a similar lawsuit[116] - In the Alliance Litigation, a judgment of $484,614.30 was entered in the Company's favor against Joseph Mona for short-swing profits, which is currently under appeal[121][122] - The Company obtained a writ of execution to enforce the judgment against Mona and filed a motion to register the judgment in other districts, while Mona filed a motion to amend his counterclaim[123][124] Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds Confirms no unregistered equity sales or proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[127] Item 3 - Defaults Upon Senior Securities Confirms no defaults on senior securities during the reporting period - No defaults upon senior securities to report[127] Item 4 - Mine Safety Disclosures States that mine safety disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable[127] Item 5 - Other Information Indicates that no additional material information requires disclosure for the period - No other information to report[128] Item 6 - Exhibits Lists all supplementary documents and certifications filed as part of the report - Exhibits include By-Laws, Employment Agreements, Certifications of CEO and CFO, and XBRL Instance and Taxonomy Extensions[129] Signatures Certifies the report's accuracy and completeness with authorized company officer signatures - The report is signed by Harel Gadot, Chairman, President and Chief Executive Officer, and David Ben Naim, Chief Financial Officer, on May 17, 2021[131][133]