Microbot Medical Inc 10-Q for FY2023 Q3
Microbot Medical Inc. (MBOT)
About this 10-Q
Microbot Medical Inc filed this 10-Q on November 14, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $2.45M
- compared with a net loss of $3.47M a year earlier
- Diluted EPS
- -$0.21
- compared with -$0.49 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | ||
| For
the quarterly period ended | ||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from ____ to _____
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file number:
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| State
or Other Jurisdiction of Incorporation or Organization) |
(I.R.S.
Employer Identification No.) |
(Address of principal executive offices)
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Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of exchange on which registered | ||
Indicate
by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
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Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act).
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company |
Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of Common Stock, $0.01 par value at November 13, 2023.
MICROBOT MEDICAL INC. AND SUBSIDIARY
Index
| i |
MICROBOT MEDICAL INC.
Interim Consolidated Balance Sheets
U.S. dollars in thousands
(Except share and per share data)
| Notes | As of September 30, 2023 | As of December 31, 2022 | ||||||||||
| Unaudited | Audited | |||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||
| Marketable securities | 2 | |||||||||||
| Short-term deposit | ||||||||||||
| Restricted cash | ||||||||||||
| Prepaid expenses and other current assets | ||||||||||||
| Total current assets | ||||||||||||
| Property and equipment, net | ||||||||||||
| Operating right-of-use assets | 3 | |||||||||||
| Total assets | $ | $ | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | $ | ||||||||||
| Lease liabilities | 3 | |||||||||||
| Accrued liabilities | ||||||||||||
| Total current liabilities | ||||||||||||
| Non-current liabilities: | ||||||||||||
| Long-term lease liabilities | 3 | |||||||||||
| Total liabilities | ||||||||||||
| Shareholders’ equity: | ||||||||||||
| Common stock; $ par value; shares authorized as of September 30, 2023 and December 31, 2022; and shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively. | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||||
| Total shareholders’ equity | ||||||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 1 |
MICROBOT MEDICAL INC.
Interim Consolidated Statements of Comprehensive Loss
U.S. dollars in thousands
(Except share and per share data)
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Research and development, net | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| General and administrative | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Financing income, net | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted net loss per share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Basic and diluted weighted average common shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 2 |
MICROBOT MEDICAL INC.
Interim Consolidated Statements of Shareholders’ Equity
U.S. dollars in thousands
(Except share and per share data)
| Common Stock | Additional Paid-In | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balances, December 31, 2021 (Audited) | $ | $ | $ | ( | ) | $ | | |||||||||||||
| Share-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balances, March 31, 2022 (Unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Share-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balances, June 30, 2022 (Unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Share-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balances, September 30, 2022 (Unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Additional Paid-In | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balances, December 31, 2022 (Audited) | $ | $ | $ | ( | ) | $ | | |||||||||||||
| Share-based compensation | - | |||||||||||||||||||
| Issuance of common stock upon exercise of warrants | ( | ) | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balances, March 31, 2023 (Unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Share-based compensation | - | |||||||||||||||||||
| Issuance of common stock and warrants net of issuance costs (*) | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balances, June 30, 2023 (Unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Share-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balances, September 30, 2023 (Unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| (*) |
The accompanying notes are an integral part of these consolidated financial statements.
| 3 |
MICROBOT MEDICAL INC.
Interim Consolidated Statements of Cash Flows
U.S. dollars in thousands
| 2023 | 2022 | |||||||
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Unaudited | Unaudited | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash flows used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Interest income and unrealized gains from marketable securities, net | ( | ) | ||||||
| Share-based compensation expense | ||||||||
| Changes in assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ||||||||
| Other payables and accrued liabilities | ( | ) | ( | ) | ||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ||||
| Investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Sale of property and equipment | ||||||||
| Purchases of marketable securities | ( | ) | ||||||
| Proceeds from sales of a marketable securities | ||||||||
| Proceeds from maturities of marketable securities | ||||||||
| Short term deposit | ||||||||
| Net cash flows used in investing activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Issuance of common stock and warrants, net of issuance costs | ||||||||
| Net cash flows provided by financing activities | ||||||||
| Decrease in cash, cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents and restricted cash at beginning of period | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash received from interest | $ | $ | ||||||
| Right-of-use asset and lease liability | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
MICROBOT MEDICAL INC.
Notes to Interim Consolidated Financial Statements
U.S. dollars in thousands
(Except share and per share data)
NOTE 1 – GENERAL
A. Description of business
Microbot Medical Inc. (the “Company”) is a pre-clinical medical device company specializing in the research, design and development of next generation robotic endoluminal surgery devices targeting the minimally invasive surgery space. The Company is primarily focused on leveraging its robotic technologies with the goal of redefining surgical robotics while improving surgical outcomes for patients.
The
Company incorporated on
On November 28, 2016, the Company consummated a transaction pursuant to an Agreement and Plan of Merger, dated August 15, 2016, with Microbot Medical Ltd., a private medical device company organized under the laws of the State of Israel (“Microbot Israel”). On the same day and in connection with the Merger, the Company changed its name from StemCells, Inc. to Microbot Medical Inc. On November 29, 2016, the Company’s common stock, par value $ per share (the “Common Stock”) began trading on the Nasdaq Capital Market under the symbol “MBOT”.
The Company and Microbot Israel, its sole subsidiary, are sometimes collectively referred to as the “Company” as the context may require.
B. Risk Factors
To
date, the Company has not generated revenues from its operations. As of September 30, 2023, the Company had cash equivalents and marketable
securities balance of approximately $
Due to continuing research and development activities, the Company expects to continue to incur additional losses for the foreseeable future. While management of the Company believes that it has sufficient funds until approximately April 2024, partially as a result of the Company’s cost reduction program implemented in May 2023 and capital raises in May and June 2023, the Company will seek to raise additional funds through future issuances of either debt and/or equity securities and possibly additional grants from the Israeli Innovation Authority and other government institutions. The Company’s ability to raise additional capital in the equity and debt markets is dependent on a number of factors, including, but not limited to, the market demand for the Company’s stock, which itself is subject to a number of development and business risks and uncertainties, as well as the uncertainty that the Company would be able to raise such additional capital at a price or on terms that are favorable to the Company. See Note 6 for additional risk factors which have developed subsequent to September 30, 2023.
C. Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions pertaining to transactions and matters whose ultimate effect on the financial statements cannot precisely be determined at the time of financial statements preparation. Although these estimates are based on management’s best judgment, actual results may differ from these estimates.
| 5 |
D. Unaudited Interim Financial Statements
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission (“SEC”) regulations. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed).
Operating results for the nine and three-month periods ended September 30, 2023, are not necessarily indicative of the results that may be expected for the year ended December 31, 2023.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed in the preparation of these unaudited interim consolidated financial statements are identical to those applied in the preparation of the latest annual audited financial statements.
Fair value of financial instruments
The carrying values of cash and cash equivalents, other receivables and other accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of these instruments.
A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following tables summarizes the Company’s financial assets subject to fair value measurement and the level of inputs used in such measurements as of September 30, 2023 and December 31, 2022:
SCHEDULE OF FINANCIAL ASSETS FAIR VALUE MEASUREMENT
| As of September 30, 2023 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Marketable securities: | ||||||||||||||||
| U.S. treasury securities | $ | $ | $ | $ | ||||||||||||
| Money market mutual funds | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| 6 |
| As of December 31, 2022 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Cash equivalents: | ||||||||||||||||
| U.S. treasury securities | $ | $ | $ | $ | ||||||||||||
| Marketable securities: | ||||||||||||||||
| U.S. treasury securities | $ | $ | $ | $ | ||||||||||||
| Money market mutual funds | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The Company’s financial assets are measured at fair value on a recurring basis by level within the fair value hierarchy. The Company’s securities and money market funds are classified as Level 1. Other than that, the Company doesn’t have any other financial assets or financial liabilities marked to market at fair value as of September 30, 2023 and December 31, 2022.
Contingencies
Management records and discloses legal contingencies in accordance with ASC Topic 450, Contingencies. Accordingly, management of the Company will recognize a liability for a legal contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company monitors the stage of progress of its litigation matters in each reporting period in order to determine if any adjustments are required.
Recently issued accounting pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.
NOTE 3 – LEASES
The Company has lease agreements with lease and non-lease components, which it accounts for as a single lease component. The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on the Company’s ROU assets and lease liabilities was not material for the periods presented. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. In addition, the Company does not have any related party leases.
Supplemental cash flow information related to operating leases was as follows:
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO OPERATING LEASES
| 2023 | 2022 | |||||||
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash payments and expenses | $ | $ | ||||||
Undiscounted maturities of operating lease payments as of September 30, 2023 are summarized as follows:
SCHEDULE OF MATURITIES OF LEASE LIABILITIES
| 2023 (Remainder of the year) | $ | |||
| 2024 | ||||
| 2025 | ||||
| Total future lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total lease liability balance | $ |
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Operating leases weighted average remaining lease term (in years) | | |||||||
| Operating leases weighted average discount rate | % | % | ||||||
| 7 |
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Israeli Innovation Authority Grants
Microbot
Israel has received grants from the Israeli Innovation Authority (“IIA”) for participation in research and development since
2013 through September 30, 2023 totaling approximately $
In
addition, as a result of the agreement with CardioSert Ltd. (“CardioSert”) on January 4, 2018, Microbot Israel took over
the liability to repay CardioSert’s IIA grants in the aggregate amount of approximately $
As
a result of the agreement with Nitiloop Ltd., an Israeli limited liability company (“Nitiloop”), on October 6, 2022, Microbot
Israel took over the liability to repay Nitiloop’s IIA grants in the aggregate amount of approximately $
In
relation to the IIA grants described above, the Company is obligated to pay royalties amounting to
The grants are linked to the exchange rate of the dollar to the New Israeli Shekel and bears interest of Libor per annum.
The repayment of the grants is contingent upon the successful completion of the Company’s research and development programs and generating sales. The Company has no obligation to repay these grants, if the project fails, is unsuccessful or aborted or if no sales are generated. The financial risk is assumed completely by the Government of Israel. The grants are received from the Government on a project-by-project basis.
Approval for Grant from Ministry of Economy
On
March 2, 2023, the Company announced that it received approval for a grant from the Ministry of Economy of the State of Israel in the
amount of approximately NIS
On November 1,
2023, the Company received NIS
In
relation to the Ministry of Economy grant, the Company is obligated to pay royalties amounting to between
TRDF Agreement
Microbot
Israel signed an agreement with the Technion Research and Development Foundation (“TRDF”) in June 2012 by which TRDF transferred
to Microbot Israel a global, exclusive, royalty-bearing license (as amended, the “License Agreement”) with respect to the
Company’s Self-Cleaning Shunt (SCS) project and its TipCat assets in addition to certain technology relating to the Company’s
LIBERTY device. As partial consideration for the license, Microbot Israel shall pay TRDF royalties on net sales (between
The Company in October 2022 suspended the SCS project while it evaluated alternatives for the SCS assets (mainly related patents), including seeking buyers for the assets, joint ventures or licensing arrangements, spinning off the assets into a new operating company or discontinuing the project altogether, and as a result of the Company’s May 2023 implementation of its core-business focus program and cost reduction plan, the Company returned the licensed intellectual property for the TipCat back to TRDF in June 2023, and returned the licensed intellectual property for the SCS (ViRob) back to TRDF in July 2023.
| 8 |
Agreement with CardioSert Ltd.
On
January 4, 2018, Microbot Israel entered into an agreement with CardioSert (the “CardioSert Agreement”) to acquire certain
of its patent-protected technology (the “Technology”). Pursuant to the CardioSert Agreement, Microbot Israel made aggregate
payments of $
The
CardioSert Agreement may be terminated by Microbot Israel at any time for convenience upon 90-days’ notice. The CardioSert Agreement
may be terminated by CardioSert in case the first commercial sale does not occur by the third anniversary of the date of signing of the
CardioSert Agreement except if Microbot Israel has invested more than $
In
each of the above termination events, or in case of breach by Microbot Israel, CardioSert shall have the right to buy back the Technology
from Microbot Israel for $
As of the filing date of this Quarterly Report on Form 10-Q, CardioSert has not purchased back the Technology; however, the Company is in discussions with CardioSert with respect to post-termination matters.
ATM Agreement
On
June 10, 2021, the Company entered into an At-the-Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright &
Co. LLC (“Wainwright”), as sales agent, in connection with an “at the market offering” under which the Company
may offer and sell, from time to time in its sole discretion, shares of its Common Stock having an aggregate offering price of up to
$
Engagement Letter with H.C. Wainwright
On
May 16, 2023 and in connection with the registered direct and private placement offerings referred to in Note 5 below, the Company entered
into an engagement letter (the “Engagement Letter”) with Wainwright, pursuant to which Wainwright agreed to serve as the
exclusive placement agent for the issuance and sale of securities of the Company. As compensation for such placement agent services,
the Company has agreed to pay Wainwright an aggregate cash fee equal to
| 9 |
Acquisition of Nitiloop’s Assets
On October 6, 2022, Microbot Israel purchased substantially all of the assets, including intellectual property, devices, components and product related materials (the “Assets”), of Nitiloop Ltd., an Israeli limited liability company (“Nitiloop”). The Assets include intellectual property and technology in the field of intraluminal revascularization devices with anchoring mechanism and integrated microcatheter (the “Nitiloop Technology”) and the products or potential products incorporating the Nitiloop Technology owned by Nitiloop and designated by Nitiloop as “NovaCross”, “NovaCross Xtreme” and “NovaCross BTK” and any enhancements, modifications and improvements thereof (“Devices”). Microbot Israel did not assume any material liabilities of Nitiloop other than obligations Nitiloop has to the IIA and relating to certain renewal/maintenance fees for a European patent application.
In
consideration for the acquisition of the Assets, Microbot Israel shall pay royalties to Nitiloop, which shall not, in the aggregate,
exceed $
| ● | Royalties
at a rate of | |
| ● | Royalties
at a rate of |
Litigation
Litigation Resulting from the 2017 Financing
The
Company was named as the defendant in a lawsuit captioned Empery Asset Master Ltd., Empery Tax Efficient, LP, Empery Tax Efficient II,
LP, Hudson Bay Master Fund Ltd., Plaintiffs, against Microbot Medical Inc., Defendant, in the Supreme Court of the State of New York,
County of New York (Index No. 651182/2020). The complaint alleges, among other things, that the Company breached multiple representations
and warranties contained in the Securities Purchase Agreement (the “SPA”) related to the Company’s June 8, 2017 equity
financing (the “2017 Financing”), of which the Plaintiffs participated, and fraudulently induced Plaintiffs into signing
the SPA. The complaint seeks rescission of the SPA and return of the Plaintiffs’ $
Mona Litigation
On
April 28, 2019, the Company brought an action against Alliance Investment Management, Ltd. (“Alliance”), later amended to
add Joseph Mona (“Mona”) as a defendant, in the Southern District of New York under Section 16(b) of the Securities Exchange
Act of 1934 (the “Exchange Act”), to compel Alliance and/or Mona to disgorge short swing profits realized from purchases
and sales of the Company’s securities within a period of less than six months. The amount of profits was estimated in the complaint to be approximately $
On
October 28, 2019, Alliance filed a motion for summary judgment requesting that the Court dismiss the claims against Alliance, which was
subsequently granted by the Court. On February 4, 2020, Mona answered the 16(b) claim and filed a counterclaim against the Company under
Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, claiming a net loss on trading the Company’s stock of
approximately $
On
March 31, 2021, the Court entered a judgment against Mona and in favor of the Company in the amount of approximately $
On
August 4, 2023, the Magistrate Judge issued a Report & Recommendation, which recommended that the District Court dismiss Mona’s
Section 10(b) counterclaim in the entirety. On August 22, 2023, the District Court adopted the Report and Recommendation
in full and dismissed the Section 10(b) counterclaim in its entirety. The time for appeal has expired and the Company
is proceeding with collection efforts for the $
| 10 |
NOTE 5 - SHARE CAPITAL
Share Capital Developments
As of September 30, 2023 and December 31, 2022, the Company had, respectively, and shares of Common Stock issued and outstanding.
On
February 13, 2023,
Employee Stock Option Grants
During the nine months ended September 30, 2023, the Company granted stock option awards to certain officers, directors and employees to purchase an aggregate of shares of the Common Stock, at a weighted average exercise price per share of $ and with a vesting period of three years.
Registered Direct and Private Placement Offerings
On
May 22, 2023, the Company entered into a securities purchase agreement with an institutional investor, pursuant to which it agreed to
issue and sell in a registered direct offering an aggregate of shares of Common Stock, at an offering price of $ per share,
for aggregate gross proceeds of $
On
May 23, 2023, the Company entered into a securities purchase agreement with an institutional investor, pursuant to which it agreed
to issue and sell in a registered direct offering (i) an aggregate of
shares of Common Stock, at an offering price of $
per share and (ii) pre-funded warrants exercisable for up to
On
June 2, 2023, the Company entered into a securities purchase agreement with institutional investors, pursuant to which it agreed to issue
and sell in a registered direct offering an aggregate of shares of Common Stock, at an offering price of $ per share, for
aggregate gross proceeds, with the concurrent private placement described below, of $
On
June 26, 2023, the Company entered into a securities purchase agreement with institutional investors, pursuant to which it agreed to
issue and sell in a registered direct offering an aggregate of shares of its Common Stock, at an offering price of $ per
share, for aggregate gross proceeds, with the concurrent private placement described below, of $
| 11 |
Preferred Investment Options Amendment
In
connection with the Second May Offering, the Company amended the terms of (i) the Series A preferred investment options to purchase
shares of its Common Stock for an exercise price of $
per share which are scheduled to expire on and (ii) the Series B preferred investment options to purchase
shares of its Common Stock for an exercise price of $
per share which were initially scheduled to expire on (the “Series B Preferred Investment Options”), in each case previously issued to the investor in October
2022 under the securities purchase agreement dated October 21, 2022 (collectively, the “Existing Preferred Investment
Options”), which investor also participated in the Second May Offering, such that effective upon the closing of the Second May
Offering, the Existing Preferred Investment Options have a reduced exercise price of $
per share and the Series B Preferred Investment Options expire on . These modifications to the Existing Preferred Investment Options represent issuance costs associated with the
Second May Offering. The amount of the effect of the modifications is approximately $
NOTE 6 - SUBSEQUENT EVENTS
On October 7, 2023, subsequent to the reporting period, the State of Israel, where the Company’s operations are primarily based, suffered a surprise attack by hostile forces from Gaza, which led to the declaration by Israel of the “Iron Swords” military operation. This military operation and related activities are on-going as of the issuance date of these financial statements. Consequently:
| ● | Some of the Company’s Israeli subcontractors, vendors, suppliers and other companies in which the Company relies, are currently only partially active, as instructed by the relevant authorities, which has caused delays in aspects of our development and regulatory activities; | |
| ● | The lack of international flights in and out of Israel may affect the Company’s ability to import materials that are required to construct the Company’s devices which are required to complete development and regulatory activities; and | |
| ● | The lack of international flights in and out of Israel may affect the Company’s commercial and regulatory activities. |
The Company is currently assessing whether there are any material adverse effects on its anticipated milestones and results of operations in the fourth quarter of 2023 and perhaps beyond due to the military operation and related matters, the extent of which cannot be estimated at this stage.
| 12 |
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statements
The following discussion should be read in conjunction with our unaudited financial statements and related notes included in Item 1, “Financial Statements,” of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Certain information contained in this MD&A includes “forward-looking statements.” Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition and results of operations, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our existing and proposed business, including many assumptions regarding future events. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including those risks described in detail in the section entitled “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022 and in Item 1A. Risk Factors, of our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023.
Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “will,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology.
In light of these risks and uncertainties, and especially given the nature of our existing and proposed business, there can be no assurance that the forward-looking statements contained in this section and elsewhere in this Quarterly Report on Form 10-Q will in fact occur. Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
Overview
Microbot is a pre-clinical medical device company specializing in the research, design and development of next generation robotic endoluminal surgery devices targeting the minimally invasive surgery space. Microbot is primarily focused on leveraging its robotic technologies with the goal of redefining surgical robotics while improving surgical outcomes for patients.
Core-Business Focus Program
On May 15, 2023, the Board of Directors of the Company authorized, and the Company commenced, a core-business focus program while the Company seeks to raise additional capital to continue development of the LIBERTY robotic system. This core-business focus program includes the cessation of research and development activities not related to LIBERTY, including terminating the Company’s agreement with CardioSert for that technology, and returning intellectual property relating to the SCS (ViRob) and TipCat to Technion Research and Development Foundation.
Cost Reduction Plan
In addition to the core-business focus program described above, the Board of Directors of the Company authorized, and the Company commenced, a cost reduction plan while the Company seeks to raise additional capital to continue development of the LIBERTY robotic system.
In May and June 2023, we raised sufficient capital that, together with the ongoing savings from the cost reduction plan, has enabled us to continue our operations through approximately April of 2024, including completion of the V&V study, perform the GLP study and submit the IDE to the US Food & Drug Administration. We also, retroactive to November 1, 2023, recommenced paying Rachel Vaknin, our CFO, and Simon Sharon, our CTO and General Manager, their regular salaries and benefits that were previously reduced as a result of the cost reduction plan. Continuing the continuing commitment of Harel Gadot, our CEO, to the Company to support it financially while it completes its current development and regulatory activities, his compensation will continue to be subject to his 50% reduction as part of the cost reduction plan. We continue to seek new sources of capital to stabilize our finances and provide operating runway subsequent to April of 2024. In the event the Company is not successful in raising additional capital by April of 2024, or if the results of the V&V study and first-in-human trials are not promising, the Company may be forced to take more drastic actions to conserve capital or shut down operations entirely.
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First-In-Human Clinical Cases
Subject to the final report from our recently completed pivotal pre-clinical study using the LIBERTY Robotic Surgical System which is expected before the end of 2023, and the completion of the verification and validation (V&V) process of which certain phases have been completed but others are ongoing and may be subject to delays indirectly caused by the Israel-Hamas war described below, we plan on submitting the Investigational Device Exemption (IDE) application to the U.S. Food and Drug Administration in the first quarter of 2024, in order to commence a pivotal clinical trial in humans. In addition, we are considering secondary options and contingencies in the event the IDE application is delayed. After initially considering potential First-In-Human cases in Brazil, by engaging with interventional radiologist Prof. Francisco Cesar Carnevale from University of Sao Paulo Medical School Hospital, we determined that first-in-human clinical trials in Brazil have similar requirements as in the United States. Furthermore, we are still in the process of evaluating the potential of utilizing Greece as an option to carry our First-In Human Cases. However, although we believe Brazil and Greece remain strategically important for commercialization of our LIBERTY device, we decided not to pursue First-In-Human trials or cases outside of the United States at this time to avoid conflict with our FDA submission process.
Israel-Hamas War
On October 7, 2023, the State of Israel, where the Company’s operations are primarily based, suffered a surprise attack by hostile forces from Gaza, which led to the declaration by Israel of the “Iron Swords” military operation. This military operation and related activities are on-going as of the issuance date of this Quarterly Report on Form 10-Q. Consequently:
| ● | Some of the Company’s Israeli subcontractors, vendors, suppliers and other companies in which the Company relies, are currently only partially active, as instructed by the relevant authorities, which has caused delays in aspects of our development and regulatory activities; | |
| ● | The lack of international flights in and out of Israel may affect the Company’s ability to import materials that are required to construct the Company’s devices which are required to complete development and regulatory activities; and | |
| ● | The lack of international flights in and out of Israel may affect the Company’s commercial and regulatory activities. |
The Company is currently assessing whether there are any material adverse effects on its anticipated milestones and results of operations in the fourth quarter of 2023 and perhaps beyond due to the military operation and related matters, the extent of which cannot be estimated at this stage.
Technological Platforms
LIBERTY®
On January 13, 2020, Microbot unveiled what it believes is the world’s first fully disposable robotic system for use in endovascular interventional procedures, such as cardiovascular, peripheral and neurovascular. The LIBERTY robotic system features a unique compact design with the capability to be operated remotely, reduce radiation exposure and physical strain to the physician, reduce the risk of cross contamination, as well as the potential to eliminate the use of multiple consumables when used with its NovaCross platform or possibly other guidewire/microcatheter technologies.
LIBERTY is designed to maneuver guidewires and over-the-wire devices (such as microcatheters) within the body’s vasculature. It eliminates the need for extensive capital equipment requiring dedicated Cath-lab rooms as well as dedicated staff.
We believe LIBERTY’s addressable markets are the Interventional Cardiology, Interventional Radiology and Interventional Neuroradiology markets.
The unique characteristics of LIBERTY – compact, mobile, disposable and remotely controlled - open the opportunity of expanding telerobotic interventions to patients with limited access to life-saving procedures, such as mechanical thrombectomy in ischemic stroke.
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LIBERTY is being designed to have the following attributes:
| ● | Compact size - Eliminates the need for large capital equipment in dedicated cath-lab rooms with dedicated staff. | |
| ● | Fully disposable - To our knowledge, the first and only fully disposable, robotic system for endovascular procedures. | |
| ● | One & Done® – Can be made compatible with Microbot’s NitiLoop’s NovaCross products or possibly other guidewire/microcatheter technologies, that combines guidewire and microcatheter into a single device. | |
| ● | State of the art maneuverability - Provides linear, rotational and tip control of its guidewire, as well as linear motion for an additional “over the wire” device. | |
| ● | Compatibility with a wide range of commercially-available guidewires, microcatheters and guide-catheters. | |
| ● | Enhanced operator safety and comfort – Aims to reduce exposure to ionizing radiation and the need for heavy lead vests otherwise to be worn during procedures, as well as reducing the exposure to Hospital Acquired Infections (HAI). | |
| ● | Ease of use - LIBERTY’s intuitive remote controls aims to simplify advanced procedures while shortening the physician’s learning curve. | |
| ● | Telemedicine compatible - Capable of supporting tele-catheterization, carried out remotely by highly trained specialists. |
On August 17, 2020, Microbot announced the successful conclusion of its feasibility animal study using the LIBERTY robotic system. The study met all of its end points with no intraoperative adverse events, which supports Microbot’s objectives to allow physicians to conduct a catheter-based procedure from outside the catheterization laboratory (cath-lab), avoiding radiation exposure, physical strain and the risk of cross contamination. The study was performed by two leading physicians in the neuro vascular and peripheral vascular intervention spaces, and the results demonstrated robust navigation capabilities, intuitive usability and accurate deployment of embolic agents, most of which was conducted remotely from the cath-lab’s control room.
On December 22, 2021, we entered into a strategic collaboration agreement for technology co-development with Stryker Corporation, acting through its Neurovascular Division. Pursuant to the agreement, the collaborative development program between Stryker and us aims to integrate certain of Stryker’s instruments with our LIBERTY Robotic System to address certain neurovascular procedures. The activities contemplated by the Agreement shall be specified in one or more development plans derived from the terms and conditions set forth in the Agreement. We are still determining scheduling to move the collaboration forward.
In December 2021, we achieved design freeze of the LIBERTY device.
In the first quarter of 2022, we filed our pre-submission package for the LIBERTY Robotic System with the FDA, addressing the regulatory pathway for the LIBERTY Robotic System. On July 22, 2022, the Company completed a pre-submission process with the FDA regarding the LIBERTY device. Formal feedback from the FDA included a recommendation to perform a clinical study and a human factors validation study, to support clearance through the 510(k) notification process.
In September and October 2022, the Company conducted an animal study at an FDA accredited European-based MedTech research laboratory, which was performed by a team of seasoned Key Opinion Leaders (KOLs) in the endovascular space, using porcine model.
During the animal study, the physicians conducted 63 navigations to the targeted sites using the investigational LIBERTY Robotic System and performed an equal number of procedures manually. The LIBERTY Robotic System received positive feedback from participating physicians, and there were no observable immediate intraoperative adverse events, or harm, to the test subjects.
The report from the animal study, which included histopathology data (the microscopic examination of tissue to study the manifestations of disease), exhibited equivocal results which were identified as related to unusual physiological animal responses in both manual and robotic test groups.
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The Company believes the results of the study allow it to move forward and focus on the next phases to ultimately include a U.S.-based pivotal pre-clinical study.
The Company, together with its regulatory experts and consultants, believe a larger sample size and robust data generated by this study will advance the Company’s efforts towards the submission of an Investigational Device Exemption (IDE) with the U.S. Food and Drug Administration (FDA).
On May 3, 2023, we announced that the LIBERTY Robotic system has surpassed its 100th catheterization during multiple pre-clinical studies, with a 95% success rate of reaching pre-determined vascular targets, such as distal branches of hepatic, gastric, splenic, mesenteric, renal and hypogastric arteries. Moreover, all of the procedures were completed without notable signs of intraoperative injury.
On June 29, 2023, we announced the successful completion of a two-day pre-clinical study held by leading key opinion leaders at a New York-based research lab, where they performed dozens of catheterizations, including the utilization of the LIBERTY Robotic Surgical System’s remote operation capabilities, to pre-determined vascular targets, with a 100% success rate of reaching the intended target with no observable on-site complications.
In October 2023, we announced the successful initial outcomes from our pivotal pre-clinical study with the LIBERTY Robotic Surgical System. The pivotal study was conducted by three leading interventional radiologists that utilized the LIBERTY Robotic Surgical System to reach a total of 48 animal targets. A total of 6 LIBERTY Systems were used in the study, and each was used to reach a total of 8 targets. All 6 LIBERTY Systems performed flawlessly, with 100% usability and technical success. No acute adverse events or complications were visually observed intra-operative. We expect to receive the comprehensive final report later in the fourth quarter of 2023. Subject to the final report, and the completion of the verification and validation process which is ongoing but subject to delays indirectly caused by the Israel-Hamas war described above, we plan on submitting the Investigational Device Exemption application to the FDA in the first quarter of 2024, in order to commence our pivotal clinical trial in humans.
On October 24, 2023, we announced that we received confirmation for the commencement of the process to support our future CE Mark approval, and to ultimately allow us to market the LIBERTY® Robotic Surgical System in Europe as well as other regions who accept the CE Mark. According to the confirmation, we will commence audits for ISO 13485 certification to ensure our compliance with the Quality Management System (QMS) requirements of the EU Medical Devices Regulation (MDR 2017/745), during the first half of 2024. We had previously taken the first step to advance our European program by engaging with a leading Notified Body, who recently confirmed dates for conducting the required audits.
NovaCrossTM
On October 6, 2022, we purchased substantially all of the assets, including intellectual property, devices, components and product related materials of Nitiloop Ltd., an Israeli limited liability company. The assets include intellectual property and technology in the field of intraluminal revascularization devices with anchoring mechanism and integrated microcatheter, and the products or potential products incorporating the technology owned by Nitiloop and designated by Nitiloop as “NovaCross”, “NovaCross Xtreme” and “NovaCross BTK” and any enhancements, modifications and improvements. This technology is also expected to be incorporated in our One & Done® feature.
Other Technologies and Platforms
During the second and third quarters of 2023, as a result of our core-business focus program and our cost reduction plan, we ceased research and development activities relating to the technology we acquired from CardioSert, and with respect to our SCS and TipCat platforms. As a result, we terminated the Company’s agreement with CardioSert for that technology, and returned intellectual property relating to the SCS (ViRob) and TipCat to Technion Research and Development Foundation.
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Financial Operations Overview
Research and Development Expenses
Research and development expenses consist primarily of salaries and related expenses and overhead for Microbot’s research, development and engineering personnel, prototype materials and research studies, obtaining and maintaining Microbot’s patent portfolio, net of government grants. Microbot expenses its research and development costs as incurred.
General and Administrative Expenses
General and administrative expenses consist primarily of the costs associated with management salaries and benefits, professional fees for accounting, auditing, consulting and legal services, and allocated overhead expenses.
Microbot has cut its general and administrative expenses in May 2023 as a result of its core-business focus program and cost reduction program; however, Microbot expects that its general and administrative expenses may increase in the future as it incurs expenses relating to its operating activities, maintains and expands its patent portfolio and maintain compliance with exchange listing and public company requirements. Microbot expects these potential increases will likely include management costs, legal fees, accounting fees, directors’ and officers’ liability insurance premiums and expenses associated with investor relations.
Income Taxes
Microbot has incurred net losses and has not recorded any income tax benefits for the losses. It is still in its development stage and has not yet generated revenues, therefore, it is more likely than not that sufficient taxable income will not be available for the tax losses to be fully utilized in the future.
Critical Accounting Policies and Significant Judgments and Estimates
Management’s discussion and analysis of Microbot’s financial condition and results of operations are based on its consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements requires Microbot to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Microbot bases its estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
While Microbot’s significant accounting policies are described in more detail in the notes to its consolidated financial statements, Microbot believes the following accounting policies are the most critical for fully understanding and evaluating its consolidated financial condition and results of operations.
Contingencies
Management records and discloses legal contingencies in accordance with ASC Topic 450 Contingencies. Accordingly, Management will recognize a liability for a legal contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company monitors the stage of progress of its litigation matters in each reporting period in order to determine if any adjustments are required.
Fair Value of Financial Instruments
The Company measures the fair value of certain of its financial instruments on a recurring basis.
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A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Results of Operations
Comparison of Three and Nine Months Ended September 30, 2023 and 2022
The following table sets forth the key components of Microbot’s results of operations for the three and nine month periods ended September 30, 2023 and 2022 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||||||
| Research and development expenses, net | $ | (1,612 | ) | $ | (1,953 | ) | $ | 341 | $ | (4,594 | ) | $ | (5,852 | ) | $ | 1,258 | ||||||||
| General and administrative expenses | (932 | ) | (1,521 | ) | 589 | (3,193 | ) | (4,361 | ) | 1,168 | ||||||||||||||
| Financing income, net | 98 | 6 | 92 | 201 | 43 | 158 | ||||||||||||||||||
Research and Development Expenses. The decrease in research and development expenses for both periods presented was primarily due to the Company’s cost reduction plan (the “Plan”), which commenced in the second quarter of 2023. The Plan involved cutting expenses by implementing employee terminations, reducing management salaries, and eliminating bonus accruals. Furthermore, the Company has also reduced costs by decreasing expenses related to subcontractors, advisory board members, and patents. Additionally, in comparison to the same period in 2022, the Company incurred expenses in 2022 due to the development of the SCS technology, whereas in 2023, low expenses were recorded for that project as it was suspended in October 2022 and thereafter terminated.
General and Administrative Expenses. The decrease in general and administrative expenses for the periods presented was primarily due to lower D&O insurance premiums in 2023 and execution of the Plan, which among other things, involved cutting expenses by implementing employee terminations, reducing management salaries, eliminating bonus accruals and pausing independent directors’ payments. Additionally, during the three and nine months ended September 30, 2023, the Company recorded lower share -based compensation expenses compared to the comparable period in 2022, due to older options becoming fully vested.
Financing Income, net. The increase in financing income net for the three and nine-month periods presented was primarily due to interest income, which has increased in 2023 due to overall rise in market interest rates earned on the Company’s marketable securities, as well as unrealized gains from marketable securities, also due to rising interest rates.
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Liquidity and Capital Resources
Microbot has incurred losses since inception and negative cash flows from operating activities for all periods presented. As of September 30, 2023, Microbot had a net working capital of approximately $6,916,000, consisting primarily of cash and cash equivalents and marketable securities. This compares to net working capital of approximately $6,745,000 as of December 31, 2022. Microbot anticipates that it will continue to incur net losses for the foreseeable future as it continues research and development efforts of its primary product candidate and continues to incur costs associated with being a public company.
Microbot has funded its operations through the issuance of capital stock, grants from the Israeli Innovation Authority, and convertible debt. Since inception (November 2010) through September 30, 2023, Microbot has raised cash proceeds of approximately $66,560,000 and incurred a total cumulative loss of approximately $76,347,000. Microbot returned $3,375,000 (before interest) to an investor as a result of an adverse outcome in a litigation that concluded in the first quarter of 2020 and is now subject to an additional lawsuit seeking the return of an additional $6,750,000 of such proceeds. This litigation is in its discovery stages and recently completed court-ordered mediation, and though management has been defending its position that no return of capital is warranted, we cannot predict what the eventual outcome will be, whether as a result of a court’s judgment or a prior settlement. We believe that the uncertainty relating the outcome of this litigation could adversely affect our ability to raise capital.
Microbot Israel obtained from the Israeli Innovation Authority (“IIA”) grants for participation in research and development for the years 2013 through September 30, 2023 in the total amount of approximately $1,656,000. This amount includes advance payment in the third quarter of 2023 of approximately $156,000, which is a portion of additional grants from the IIA in the amount of approximately NIS 1,620,000, which based on an exchange rate on September 30, 2023 of NIS 1.00 = $0.2614, would be approximately $423,000, to further finance the development of our manufacturing process of the LIBERTY robotic surgical system. On January 4, 2018, Microbot Israel entered into an agreement with CardioSert to acquire certain of its patent-protected technology. CardioSert received grants from the IIA in the aggregate amount of approximately $530,000 and Microbot Israel took over the liability to repay such grants, which remains Microbot Israel’s responsibility for so long as it owns the CardioSert assets. On October 6, 2022, Microbot Israel entered into an agreement with Nitiloop Ltd. to acquire substantially all of its assets. Nitiloop received grants from the IIA in the aggregate amount of approximately $925,000 and Microbot Israel took over the liability to repay such grants.
Microbot Israel is obligated to pay royalties amounting to 3%-5% of its future sales up to the amount of the grants. The grants are linked to the exchange rate of the dollar to the New Israeli Shekel and bears interest at an annual rate of USD LIBOR. Under the terms of the grants and applicable law, Microbot is restricted from transferring any technologies, know-how, manufacturing or manufacturing rights developed using the grant outside of Israel without the prior approval of the Israel Innovation Authority. Microbot has no obligation to repay the grants, if the applicable project fails, is unsuccessful or aborted before any sales are generated. The financial risk is assumed completely by the IIA.
On March 2, 2023, the Company announced that it received approval for a grant from the Ministry of Economy in the amount of approximately NIS 300,000, which based on an exchange rate on such date of NIS 1.00 = $0.27457, would be approximately $82,000, to further finance the marketing activities of the LIBERTY Robotic System in the US market. On November 1, 2023, we received NIS 109,474 (approximately US$27,000) of such amount.
In relation to the Ministry of Economy grant, the Company is obligated to pay royalties amounting to between 3%-5% of future sales of the LIBERTY product up to the grant amount plus interest.
To date, we have not generated revenues from our operations. As of September 30, 2023, we had unrestricted cash, cash equivalents and marketable securities of approximately $8,153,000, excluding restricted cash, which management believes is sufficient to fund our operations for approximately five months from the filing date of this Quarterly Report on Form 10-Q, or through approximately April of 2024, as a result of our recently enacted cost reduction plan. However, in the event we are unsuccessful in our current litigation discussed above, pursuant to which certain investors are seeking the return of $6,750,000 in proceeds we received from them in a 2017 stock offering, we will not have funds to continue our operation. As a result of the foregoing and our current cash position, these conditions raise substantial doubt about Microbot’s ability to continue as a going concern beyond approximately the next five months (or earlier in the event of an adverse judgment or settlement in the litigation), which could adversely affect our ability to raise capital, expand our business and develop our planned products.
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During the second fiscal quarter of 2023, Microbot commenced a core-business focus program and a cost reduction plan while it seeks to raise sufficient additional capital to continue development of the LIBERTY robotic system. In May and June 2023, Microbot raised aggregate gross proceeds of approximately $7.56 million, before fees and expenses of approximately $1.1 million, from investors, to continue to fund its operations and research and development activities, and will need additional funds to continue the FDA approval process for the Liberty device after the first quarter of 2024. To the extent available, Microbot intends to raise capital through future public and private issuances of debt and/or equity securities. The capital raises from issuances of convertible debt and equity securities could result in additional dilution to Microbot’s shareholders. In addition, to the extent Microbot determines to incur additional indebtedness, Microbot’s incurrence of additional debt could result in debt service obligations and operating and financing covenants that would restrict its operations. Microbot can provide no assurance that financing will be available in the amounts it needs, at the times it needs it or on terms acceptable to it, if at all.
As a result of the foregoing, we are unable to fully implement our business plan without raising additional capital, if at all, and these conditions raise substantial doubt about Microbot’s ability to continue as a going concern. The accompanying consolidated interim financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Cash Flows
The following table provides a summary of the net cash flow activity for each of the periods presented (in thousands):
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash flows used in operating activities | $ | (6,712 | ) | $ | (9,086 | ) | ||
| Net cash flows used in investing activities | (984 | ) | (83 | ) | ||||
| Net cash flows provided by financing activities | 6,558 | - | ||||||
| Decrease in cash, cash equivalents and restricted cash | $ | (1,138 | ) | $ | (9,169 | ) | ||
Net cash flows used in operating activities for the nine months ended September 30, 2023 were approximately $6,712,000, calculated by adjusting our net loss from operations by approximately $874,000 in the aggregate. Cash used in operating activities for the nine months ended September 30, 2022 was approximately $9,086,000, similarly adjusted by approximately $1,084,000. The decrease in net cash flows used in operating activities was mainly due to the reduction in operating expenses from implementation of the Plan and the closure of our SCS research and development program.
Net cash flows used in investing activities for the nine months ended September 30, 2023 were approximately $984,000, resulting mainly from purchase of property and equipment, proceeds from sales of a marketable securities and proceeds from maturities of marketable securities off set by purchases of marketable securities compared to net cash flows used in investing activities in the prior comparable period as a result of purchase of property and equipment in the amount of $83,000.
Net cash flows from financing activities for the nine months ended September 30, 2023 were approximately $6,558,000, resulting from net proceeds received due to the issuance of common stock, and other securities in a series of offerings in May and June 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Microbot’s cash and cash equivalents and marketable securities as of September 30, 2023 and December 31, 2022 consisted of readily available checking, U.S. treasuries and money market funds. Microbot’s primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in Microbot’s portfolio, a sudden change in market interest rates would not be expected to have a material impact on Microbot’s financial condition and/or results of operations. Microbot does not believe that its cash or cash equivalents and marketable securities have significant risk of default or illiquidity. While Microbot believes its cash and cash equivalents do not contain excessive risk, Microbot cannot provide absolute assurance that in the future its investments will not be subject to adverse changes in market value. In addition, Microbot maintains significant amounts of cash and cash equivalents and marketable securities at one or more financial institutions that are in excess of federally insured limits.
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Foreign Exchange Risks
Our financial statements are denominated in U.S. dollars and financial results are denominated in U.S. dollars, while a significant portion of our business is conducted, and a substantial portion of our operating expenses are payable, in currencies other than the U.S. dollar.
Exchange rate fluctuations may have an adverse impact on our future revenues, if any, or expenses as presented in the financial statements. We may in the future use financial instruments, such as forward foreign currency contracts, in its management of foreign currency exposure. These contracts would primarily require us to purchase and sell certain foreign currencies with or for U.S. dollars at contracted rates. We may be exposed to a credit loss in the event of non-performance by the counterparties of these contracts. In addition, these financial instruments may not adequately manage our foreign currency exposure. Our results of operations could be adversely affected if we are unable to successfully manage currency fluctuations in the future.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). As required by Rule 13a-15(b) under the Exchange Act, management of the Company, under the direction of our Chief Executive Officer and Chief Financial Officer, reviewed and performed an evaluation of the effectiveness of design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 2023. Based on that review and evaluation, the Chief Executive Officer and Chief Financial Officer, along with the management of the Company, have determined that as of September 30, 2023, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.
Litigation Resulting from the 2017 Financing
We were named as the defendant in a lawsuit captioned Empery Asset Master Ltd., Empery Tax Efficient, LP, Empery Tax Efficient II, LP, Hudson Bay Master Fund Ltd., Plaintiffs, against Microbot Medical Inc., Defendant, in the Supreme Court of the State of New York, County of New York (Index No. 651182/2020). The complaint alleges, among other things, that we breached multiple representations and warranties contained in the SPA, of which the Plaintiffs participated, and fraudulently induced Plaintiffs into signing the Securities Purchase Agreement (the “SPA”) related to our June 8, 2017 equity financing (the “2017 Financing”). The complaint seeks rescission of the SPA and return of the Plaintiffs’ $6.75 million purchase price with respect to the 2017 Financing. The lawsuit is currently in the discovery phase, and a court-ordered mediation was completed. Management is unable to assess the likelihood that we will succeed at trial, having previously lost another lawsuit with respect to the 2017 Financing.
Mona Litigation
On April 28, 2019, we brought an action against Alliance Investment Management, Ltd. (“Alliance”), later amended to add Joseph Mona (“Mona”) as a defendant, in the Southern District of New York under Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), to compel Alliance and/or Mona to disgorge short swing profits realized from purchases and sales of our securities within a period of less than six months. The case is Microbot Medical Inc. v. Mona, No. 19-cv-3782-GBD (SDNY). The amount of profits was estimated in the complaint to be approximately $468,000.
On October 28, 2019, Alliance filed a motion for summary judgment requesting that the Court dismiss the claims against Alliance, which was subsequently granted by the Court. On February 4, 2020, Mona answered the 16(b) claim and filed a counterclaim against Microbot under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, claiming a net loss on trading Microbot stock of approximately $151,000.
On March 31, 2021, the Court entered a judgement against Mona and in favor of Microbot in the amount of $484,614.30. Collection of the judgment was deferred pending resolution of Mona’s counterclaim.
On August 4, 2023, the Magistrate Judge issued a Report & Recommendation, which recommended that the District Court dismiss Mona’s Section 10(b) counterclaim in the entirety. On August 22, 2023, the District Court adopted the Report and Recommendation in full and dismissed the Section 10(b) counterclaim in its entirety.
The time for appeal has expired and we are proceeding with collection efforts for the $485,000 judgment against Mona.
Other than the foregoing, we are not currently a party in any legal proceeding or governmental regulatory proceeding nor are we currently aware of any pending or potential legal proceeding or governmental regulatory proceeding proposed to be initiated against us that would have a material adverse effect on us or our business.
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Item 1A. Risk Factors.
Existing and historical risks relating to our operations in Israel are being exacerbated by the current military actions and operations, and related activities, that commenced with the surprise attack on the State of Israel on October 7, 2023.
The ongoing risks of operating in Israel are being exacerbated as a result of the October 7, 2023 surprise attack by hostile forces from Gaza, which led to the declaration by Israel of the “Iron Swords” military operation. These include security and economic risks, risks relating to our ability to sell or buy internationally, risk of economic instability, risk of exchange rate fluctuation negatively affecting operating costs, and the risk of employees leaving to perform military service. This military operation and related activities are on-going as of the issuance date of this Quarterly Report on Form 10-Q and, consequently:
| ● | Some of our Israeli subcontractors, vendors, suppliers and other companies which we rely, are currently only partially active, as instructed by the relevant authorities, which has caused delays in aspects of our development and regulatory activities; | |
| ● | The lack of international flights in and out of Israel may affect our ability to import materials that are required to construct our devices which are required to complete development and regulatory activities; and | |
| ● | The lack of international flights in and out of Israel may affect our commercial and regulatory activities. |
We are currently assessing whether there are any material adverse effects on our anticipated milestones and results of operations in the fourth quarter of 2023 and perhaps beyond due to the military operation and related matters, the extent of which cannot be estimated at this stage.
Our research and development program is dependent on the availability of certain components from suppliers, the delay in delivery of which could materially adversely affect our ability to submit our IDE application with the U.S. FDA in the timeframe currently expected.
Our research and development program is dependent on the availability of the component parts that we use to manufacture our LIBERTY device and packaging. Our business, therefore, could be adversely impacted by factors affecting our suppliers (such as the lack of employees due to military actions, a work stoppage or strike by our suppliers’ employees or the failure of our suppliers to provide materials of the requisite quality).
As a result of the Israel-Hamas war, we are currently experiencing delays in the supply for certain components from Israeli-based vendors that are important to complete our V&V process. We cannot determine with any certainty as to whether these shortages will continue and if so, for how long. Consequently, our operational and development timeline could be adversely affected if we were unable to obtain these components from our suppliers in the quantities or based on the timeline we require. Although we believe in most cases that we could identify alternative suppliers, we can give no assurance that our research and development timelines will not be delayed while we identify and retain replacement suppliers. Accordingly, any material delay in delivery of any component parts or packaging could materially adversely affect our ability to submit our IDE application with the U.S. FDA.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
| 23 |
Item 6. Exhibits
| 24 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 14th day of November, 2023.
| MICROBOT MEDICAL INC. | ||
| By: | /s/ Harel Gadot | |
| Name: | Harel Gadot | |
| Title: | Chairman, President and Chief Executive Officer | |
| (Principal Executive Officer) | ||
| By: | /s/ Rachel Vaknin | |
| Name: | Rachel Vaknin | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
| 25 |
Exhibit 31.1
Certifications of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Harel Gadot, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Microbot Medical Inc.; | |
| 2. | Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based upon my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: November 14, 2023 | |
| /s/ Harel Gadot | |
| Chairman, President and Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
Certifications of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Rachel Vaknin, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Microbot Medical Inc.; | |
| 2. | Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based upon my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
| Dated: November 14, 2023 | |
| /s/ Rachel Vaknin | |
| Chief Financial Officer | |
| (Principal Financial And Accounting Officer) |
Exhibit 32.1
Certification of Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
I, Harel Gadot, Chairman, President and Chief Executive Officer of Microbot Medical Inc., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge, the quarterly report on Form 10-Q for the period ending September 30, 2023 of Microbot Medical Inc. (the “Form 10-Q”) fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Microbot Medical Inc.
| Dated: November 14, 2023 | /s/ Harel Gadot |
| Harel Gadot | |
| Chairman, President and Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 32.2
Certification of Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
I, Rachel Vaknin, Chief Financial Officer of Microbot Medical Inc., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge, the quarterly report on Form 10-Q for the period ending September 30, 2023 of Microbot Medical Inc. (the “Form 10-Q”) fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Microbot Medical Inc.
| Dated: November 14, 2023 | /s/ Rachel Vaknin |
| Rachel Vaknin | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |