Microbot Medical(MBOT) - 2021 Q3 - Quarterly Report

Part I - Financial Information This part details Microbot Medical Inc.'s unaudited interim consolidated financial statements, showing decreased assets and equity, increased net loss, and negative operating cash flows Item 1 - Financial Statements This section presents Microbot Medical Inc.'s unaudited interim consolidated financial statements, detailing decreased assets, increased net loss, and negative operating cash flows Interim Consolidated Balance Sheets This chapter provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates | Metric (U.S. dollars in thousands) | As of Sep 30, 2021 (Unaudited) | As of Dec 31, 2020 (Audited) | Change (2021 vs 2020) | | :------------------------------- | :----------------------------- | :--------------------------- | :-------------------- | | Total assets | $19,701 | $26,279 | $(6,578) | | Total current assets | $18,788 | $25,253 | $(6,465) | | Cash and cash equivalents | $13,428 | $19,650 | $(6,222) | | Total liabilities | $1,831 | $1,971 | $(140) | | Total stockholders' equity | $17,870 | $24,308 | $(6,438) | Interim Consolidated Statements of Comprehensive Loss This chapter outlines the company's financial performance, detailing revenues, expenses, and net loss over specific periods | Metric (U.S. dollars in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $1,389 | $1,037 | $3,897 | $2,397 | | General and administrative | $1,163 | $1,378 | $3,523 | $4,065 | | Operating loss | $(2,552) | $(2,415) | $(7,420) | $(6,462) | | Net loss | $(2,555) | $(2,472) | $(7,454) | $(6,532) | | Basic and diluted net loss per share | $(0.36) | $(0.35) | $(1.05) | $(0.92) | - Net loss increased for both the three-month period (from $(2,472) thousand to $(2,555) thousand) and the nine-month period (from $(6,532) thousand to $(7,454) thousand) ended September 30, 2021, compared to the same periods in 2020[12] - Research and development expenses increased significantly for both the three-month period (from $1,037 thousand to $1,389 thousand) and the nine-month period (from $2,397 thousand to $3,897 thousand) ended September 30, 2021, compared to the same periods in 2020[12] Interim Consolidated Statements of Shareholders' Equity This chapter tracks changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit | Metric (U.S. dollars in thousands) | As of Sep 30, 2021 (Unaudited) | As of Dec 31, 2020 (Audited) | Change (2021 vs 2020) | | :------------------------------- | :----------------------------- | :--------------------------- | :-------------------- | | Common Stock Amount | $72 | $72 | $0 | | Additional Paid-In Capital | $69,532 | $68,516 | $1,016 | | Accumulated Deficit | $(51,734) | $(44,280) | $(7,454) | | Total Stockholders' Equity | $17,870 | $24,308 | $(6,438) | - The accumulated deficit increased by $7,454 thousand from December 31, 2020, to September 30, 2021, reflecting the net loss incurred during the period[15] - Share-based compensation contributed $1,016 thousand to additional paid-in capital for the nine months ended September 30, 2021[15] Interim Consolidated Statements of Cash Flows This chapter details the company's cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity (U.S. dollars in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------------------------------- | :-------------------------- | :-------------------------- | | Net cash flows from operating activities | $(6,467) | $(5,382) | | Net cash flows from investing activities | $245 | $2,238 | | Net cash flows from financing activities | $0 | $(3,375) | | Decrease in cash, cash equivalents and restricted cash | $(6,222) | $(6,519) | - Net cash used in operating activities increased to $(6,467) thousand for the nine months ended September 30, 2021, from $(5,382) thousand in the prior year, primarily due to the increased net loss[17][93] - Net cash flows from investing activities decreased significantly to $245 thousand in 2021 from $2,238 thousand in 2020, mainly due to proceeds from marketable securities in 2020 not recurring at the same level[17][94] - Net cash flows from financing activities were $0 in 2021, compared to an outflow of $(3,375) thousand in 2020, related to the repayment of shareholder investments due to the Sabby litigation[17][95] Notes to Interim Consolidated Financial Statements This chapter provides essential disclosures and additional information supporting the interim consolidated financial statements NOTE 1 - GENERAL This note provides general information about Microbot Medical Inc., its business, and financial condition - Microbot Medical Inc. is a pre-clinical medical device company focused on micro-robotics assisted medical technologies for minimally invasive surgery[20][64] - The company has not generated revenues to date and expects to incur additional losses due to ongoing research and development activities[26][27] - As of September 30, 2021, the company had $18,427 thousand in unrestricted cash, cash equivalents, and marketable securities, which management believes is sufficient to fund operations for more than 12 months[26] - The COVID-19 pandemic may cause significant delays and disruptions to pre-clinical studies, supply chain, and overall business operations[28][29][30] NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and methods used in preparing the financial statements - The company uses a fair value hierarchy (Level 1, 2, 3) for financial instruments, with most cash equivalents and marketable securities classified as Level 1 (quoted prices in active markets)[32][33][34] Financial Instrument Fair Value as of Sep 30, 2021 | Financial Instrument (U.S. dollars in thousands) | As of Sep 30, 2021 (Total) | Level 1 | Level 2 | Level 3 | | :--------------------------------------------- | :------------------------- | :------ | :------ | :------ | | Money market funds (Cash equivalents) | $8,587 | $8,587 | $- | $- | | Other money market funds (Marketable securities) | $1,999 | $1,999 | $- | $- | | US Treasury Bond (Marketable securities) | $3,000 | $3,000 | $- | $- | | Convertible loan investment | $- | $- | $- | $- | Financial Instrument Fair Value as of Dec 31, 2020 | Financial Instrument (U.S. dollars in thousands) | As of Dec 31, 2020 (Total) | Level 1 | Level 2 | Level 3 | | :--------------------------------------------- | :------------------------- | :------ | :------ | :------ | | Money market funds (Cash equivalents) | $8,585 | $8,585 | $- | $- | | Other money market funds (Marketable securities) | $2,000 | $2,000 | $- | $- | | US Treasury Bond (Marketable securities) | $2,998 | $2,998 | $- | $- | | Convertible loan investment | $270 | $- | $- | $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[38] NOTE 3 - LEASES This note details the company's lease arrangements, including right-of-use assets and lease liabilities Lease Metrics | Lease Metric (U.S. dollars in thousands) | As of Sep 30, 2021 | As of Dec 31, 2020 | | :--------------------------------------- | :----------------- | :----------------- | | Operating lease right of use asset | $685 | $775 | | Operating lease - current | $267 | $187 | | Operating lease - non-current | $436 | $626 | | Total lease liability balance | $703 | $813 | | Weighted average remaining lease term (years) | 2.7 | 4.0 | | Weighted average discount rate | 9% | 9% | Future Lease Payments | Future Lease Payments (U.S. dollars in thousands) | Amount | | :------------------------------------------------ | :----- | | 2021 (Remainder of the year) | $86 | | 2022 | $301 | | 2023 | $247 | | 2024 | $155 | | Total future lease payments | $789 | | Less imputed interest | $(86) | | Total lease liability balance | $703 | NOTE 4 - COMMITMENTS AND CONTINGENCIES This note describes the company's contractual obligations, grants, and ongoing legal disputes - Microbot Israel received approximately $1,500 thousand in grants from the Israeli Innovation Authority (IIA) through September 30, 2021, obligating the company to pay 3.0%-3.5% royalties on future sales from funded R&D, up to the grant amount[41][89] - The company has a royalty-bearing license agreement with Technion Research and Development Foundation (TRDF) for 1.5%-3.0% royalties on net sales and sublicense income[43] - In 2018, Microbot acquired patent-protected technology from CardioSert Ltd., involving an initial payment of $50 thousand, an additional $250 thousand cash, and 6,738 shares of common stock, plus ongoing monthly consultation fees[44][45][46][48] - The company entered into an At-the-Market (ATM) Offering Agreement on June 10, 2021, with H.C. Wainwright & Co. LLC, to sell up to $10,000 thousand of common stock at market prices[49] - The company lost an appeal in the Sabby lawsuit, resulting in a $3,700 thousand payment in 2020 and rescission of a 2017 financing agreement[51][88] - A new lawsuit from Empery Asset Master Ltd. and Hudson Bay Master Fund Ltd. seeks rescission of the 2017 SPA and return of $6,750 thousand; a motion to dismiss was denied, and the potential outcome is uncertain[51][52][105] - In the Alliance Litigation, the company obtained a judgment of $484,614.30 against Joseph Mona for short-swing profits, which Mona has appealed, and the company is pursuing execution of the judgment while Mona filed an amended counterclaim[54][55][56][57][109][110][111][112] NOTE 5 - SHARE CAPITAL This note provides information on the company's common stock and share-based compensation activities - As of September 30, 2021, and December 31, 2020, the company had 7,108,133 shares of common stock issued and outstanding[58] - During the nine months ended September 30, 2021, the company granted options to purchase 396,426 shares of common stock to executives, employees, and directors, resulting in $562 thousand in share-based compensation expense[60] Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, and micro-robotic device development, highlighting its pre-revenue stage and capital reliance Overview This chapter provides a high-level introduction to Microbot's business and strategic focus on micro-robotic medical devices - Microbot is a pre-clinical medical device company specializing in the research, design, and development of next-generation robotic endoluminal surgery devices for minimally invasive surgery[64] - The company's technological platforms include ViRob, TipCAT, and LIBERTY™ (incorporating CardioSert assets), focusing on redefining surgical robotics and improving patient outcomes[65] Technological Platforms This chapter describes Microbot's core technological platforms, including LIBERTY, ViRob, TipCAT, and CardioSert - LIBERTY is a fully disposable robotic system for endovascular interventional procedures, designed for remote operation, reduced radiation exposure, and potential elimination of multiple consumables with its 'One & Done' capabilities[66][67] - The LIBERTY system successfully concluded feasibility animal studies in August 2020, demonstrating robust navigation, intuitive usability, and accurate deployment of embolic agents remotely[68] - The timeline for LIBERTY includes a design freeze in Q4 2021, FDA pre-submission in Q1 2022, clinical trials in H2 2022, and FDA submission in H1 2023[70] - ViRob is an autonomous crawling micro-robot designed for navigation in various human body spaces, including blood vessels and shunts, with the Self Cleaning Shunt (SCS) product developed using this technology[71] - TipCAT is a disposable self-propelled locomotive device that advances through tubular anatomies using a series of interconnected balloons, designed to reduce operator dependence and potential damage to lumen structures[72] - CardioSert technology, acquired in 2018, combines a guidewire and microcatheter with steering and stiffness control capabilities, initially for crossing chronic total occlusions (CTO) and adaptable for other interventional procedures[73] Financial Operations Overview This chapter summarizes the company's financial performance, focusing on key expense categories and its pre-revenue status - Research and development expenses increased primarily due to new hires, professional services, materials, and intellectual property related to the LIBERTY device, with further increases expected as development programs advance[84] - General and administrative expenses decreased due to reduced bonuses for the CEO and lower share-based compensation, but are expected to increase over time with program advancement, headcount, and public company expenses[85] - The company has incurred net losses since inception and has not recorded income tax benefits, as it is in the development stage without generated revenues[77] Critical Accounting Policies and Significant Judgments and Estimates This chapter outlines the critical accounting policies and significant management judgments and estimates used in financial reporting - Management's financial statements rely on estimates and assumptions, particularly for legal contingencies and fair value measurements, which could differ from actual results[78][80] - The company classifies financial assets and liabilities subject to fair value measurements into a three-level hierarchy based on the observability of inputs[81][82][83] Results of Operations This chapter provides a detailed analysis of the company's operating expenses and their changes over the reporting periods | Expense (U.S. dollars in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Increase/(Decrease) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Increase/(Decrease) | | :-------------------------------- | :-------------------------- | :-------------------------- | :------------------ | :-------------------------- | :-------------------------- | :------------------ | | Research and development | $1,389 | $1,037 | $352 | $3,897 | $2,397 | $1,500 | | General and administrative | $1,163 | $1,378 | $(215) | $3,523 | $4,065 | $(542) | | Financing expenses, net | $3 | $57 | $(54) | $34 | $70 | $(36) | - Research and development expenses increased by $352 thousand for the three months and $1,500 thousand for the nine months ended September 30, 2021, driven by payroll, professional services, materials, and intellectual property for the LIBERTY device[84] - General and administrative expenses decreased by $215 thousand for the three months and $542 thousand for the nine months ended September 30, 2021, primarily due to reduced CEO bonuses and share-based compensation, partially offset by other increases[85] - Financing expenses decreased due to the settlement of the Sabby litigation liability in 2020, which eliminated related interest expenses in 2021[86] Liquidity and Capital Resources This chapter assesses the company's ability to meet its short-term and long-term financial obligations and its funding strategies Liquidity Metrics | Metric (U.S. dollars in thousands) | As of Sep 30, 2021 | As of Dec 31, 2020 | | :------------------------------- | :----------------- | :----------------- | | Net working capital | $17,393 | $23,908 | | Cumulative loss since inception | $(51,734) | $(44,280) | - The company has incurred losses and negative cash flows from operating activities since inception, with a cumulative loss of approximately $51,734 thousand as of September 30, 2021[87][88] - Microbot believes its current cash will fund operations for at least 24 months, but this period would be less than 24 months if the company loses the ongoing $6,750 thousand litigation with Empery and Hudson Bay[90] - The company plans to fund future operations through existing cash, potential additional grants from the Israeli Innovation Authority, and future issuances of debt and/or equity securities, including its $10 million ATM offering[91] Cash Flows This chapter analyzes the company's cash generation and usage across operating, investing, and financing activities | Cash Flow Activity (U.S. dollars in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------------------------------- | :-------------------------- | :-------------------------- | | Net cash flows from operating activities | $(6,467) | $(5,382) | | Net cash flows from investing activities | $245 | $2,238 | | Net cash flows from financing activities | $0 | $(3,375) | | Decrease in cash and cash equivalents and restricted cash | $(6,222) | $(6,519) | - Net cash used in operating activities increased by $1,085 thousand for the nine months ended September 30, 2021, primarily due to the higher net loss[93] - Net cash from investing activities decreased by $1,993 thousand, mainly due to lower proceeds from marketable securities compared to the prior year[94] - Net cash from financing activities shifted from an outflow of $3,375 thousand in 2020 (due to Sabby litigation repayment) to $0 in 2021[95] Off-Balance Sheet Arrangements This chapter discloses any off-balance sheet arrangements that could materially impact 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, revenues, results of operations, liquidity, capital expenditures, or capital resources[96] Item 3 - Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, including interest rate and foreign exchange fluctuations, and the impact of inflation on its operations Interest Rate Risk This chapter discusses the company's exposure to interest rate fluctuations, primarily from its cash and cash equivalents - Microbot's primary market risk exposure is interest income sensitivity from cash, cash equivalents, and money market funds[97] - Due to the short-term nature of its financial instruments, a sudden change in market interest rates is not expected to have a material impact on the company's financial condition or results of operations[97] Foreign Exchange Risks This chapter addresses the company's exposure to foreign currency exchange rate fluctuations due to international operations - The company's financial statements are in U.S. dollars, but a significant portion of its operating expenses are in other currencies, exposing it to foreign exchange rate fluctuations[98] - Future revenues or expenses could be adversely impacted by exchange rate fluctuations, and the company may use financial instruments like forward foreign currency contracts to manage this exposure[99] Effects of Inflation This chapter examines the potential impact of inflation on the company's operating costs and financial results - Inflation generally affects Microbot by increasing its clinical trial costs[100] - The company does not believe that inflation and changing prices had a significant impact on its results of operations for the periods presented[100] Item 4 - Controls and Procedures This section confirms the effectiveness of disclosure controls and reports no material changes in internal control over financial reporting Disclosure Controls and Procedures This chapter assesses the effectiveness of the company's controls for timely and accurate financial disclosure - As of September 30, 2021, the company's disclosure controls and procedures were effective to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[101] Changes in Internal Control Over Financial Reporting This chapter reports on any material changes in the company's internal control over financial reporting - 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[102] Part II - Other Information This part covers ongoing legal proceedings, including a $6.75 million lawsuit and an appeal in a short-swing profits case, with uncertain financial outcomes Item 1 - Legal Proceedings This section details ongoing legal proceedings, including a $6.75 million lawsuit and an appeal in a short-swing profits case, with uncertain financial outcomes Litigation Resulting from 2017 Financing This chapter details the lawsuit seeking rescission of a 2017 financing agreement and the return of $6.75 million - The company is a defendant in a lawsuit by Empery Asset Master Ltd. and Hudson Bay Master Fund Ltd., seeking rescission of a 2017 Securities Purchase Agreement (SPA) and return of $6.75 million[105] - The company's motion to dismiss the lawsuit was denied in February 2021, and management is unable to assess the likelihood of success at trial, having previously lost a similar lawsuit related to the same financing[105] Alliance Litigation This chapter describes the company's lawsuit to disgorge short-swing profits and the ongoing appeal process - The company brought an action against Joseph Mona under Section 16(b) to disgorge approximately $484,614.30 in short-swing profits[106][109] - On March 31, 2021, a judgment was entered in favor of Microbot against Joseph Mona for $484,614.30, which Mona has appealed to the U.S. Court of Appeals for the Second Circuit[110] - Microbot obtained a writ of execution to enforce the judgment against Mona, but a magistrate judge later permitted Mona to file an amended counterclaim and rejected Microbot's request to execute on the judgment[111][112] Item 1A - Risk Factors This section notes that a detailed discussion of risk factors is not required for a Smaller Reporting Company in this quarterly report - The company is a Smaller Reporting Company and is not required to provide a detailed discussion of risk factors in this Form 10-Q[114] Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales of equity securities or use of proceeds were reported for the period - There were no unregistered sales of equity securities or use of proceeds to report[115] Item 3 - Defaults Upon Senior Securities This section confirms no defaults upon senior securities occurred during the reporting period - There were no defaults upon senior securities[116] Item 4 - Mine Safety Disclosures This section clarifies that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the company[117] Item 5 - Other Information This section indicates no other information is required to be reported for the period - There is no other information to report[118] Item 6 - Exhibits This section lists the exhibits accompanying the Form 10-Q, including CEO/CFO certifications and Inline XBRL documents - Exhibits include certifications from the Chairman, President and CEO (Harel Gadot) and Chief Financial Officer (David Ben Naim) as per Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[119] - The report also includes Inline XBRL Instance, Taxonomy Extension Schema, Calculation, Definition, Labels, Presentation, and Cover Page Interactive Data File[119] Signatures This chapter provides the official signatures of the company's executive officers, certifying the report's accuracy - The report was signed on November 15, 2021, by Harel Gadot, Chairman, President and Chief Executive Officer, and David Ben Naim, Chief Financial Officer[121][122]