Item
1. Financial Statements
MICROBOT
MEDICAL INC.
INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S.
dollars in thousands
(Except
share data)
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As
of
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As
of
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March
31, 2017
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December
31, 2016
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Note
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Unaudited
|
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Audited
|
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ASSETS
|
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Current assets:
|
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|
|
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|
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|
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|
Cash and cash equivalents
|
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|
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|
$
|
5,002
|
|
|
$
|
2,709
|
|
Other receivables
|
|
|
3
|
|
|
|
606
|
|
|
|
606
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|
Total current assets
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5,608
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|
|
3,315
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|
|
|
|
|
|
|
|
|
|
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|
Fixed
assets, net
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|
4
|
|
|
|
69
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|
|
|
53
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|
|
|
|
|
|
|
|
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Total
assets
|
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|
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|
$
|
5,677
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|
|
$
|
3,368
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|
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|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
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Current liabilities:
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|
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|
|
|
|
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Trade payables
|
|
|
|
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$
|
300
|
|
|
$
|
512
|
|
Accrued liabilities
|
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|
5
|
|
|
|
518
|
|
|
|
271
|
|
Total
current liabilities
|
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|
|
|
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|
818
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|
|
|
783
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|
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Long term liabilities:
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|
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Convertible notes
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6
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|
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|
245
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|
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|
76
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|
Derivative warrant liability
|
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|
7
|
|
|
|
225
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|
|
|
313
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
liabilities
|
|
|
|
|
|
|
1,288
|
|
|
|
1,172
|
|
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|
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Commitments
|
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|
8
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|
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Temporary equity:
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9
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|
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|
Common stock
of $0.01 par value; issued and outstanding: 10,702,838 shares as of March 31, 2017
|
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500
|
|
|
|
500
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Shareholders’
equity (deficit):
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Preferred stock of $0.01 par value (Microbot Medical Inc.);
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Authorized: 1,000,000 shares as of
March 31, 2017 and December 31, 2016; Issued and outstanding: 9,736 shares as of March 31, 2017 and December 31, 2016;
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9
|
|
|
|
(*)
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(*)
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Common stock of $0.01 par value;
|
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Authorized: 220,000,000 shares as
of March 31, 2017 and December 31, 2016; Issued and outstanding: 16,548,495 and 15,848,136 shares as of March 31, 2017, and
December 31, 2016, respectively
|
|
|
|
|
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|
273
|
|
|
|
266
|
|
Additional paid-in capital
|
|
|
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|
17,958
|
|
|
|
14,465
|
|
Accumulated deficit
|
|
|
|
|
|
|
(14,342
|
)
|
|
|
(13,035
|
)
|
|
|
|
|
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|
3,889
|
|
|
|
1,696
|
|
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|
|
|
|
|
|
|
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|
|
|
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|
|
|
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$
|
5,677
|
|
|
$
|
3,368
|
|
(*) Less
than 1
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
MICROBOT
MEDICAL INC.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
U.S.
dollars in thousands
(Except
share data)
|
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|
Three
Months ended
|
|
|
|
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|
March
31,
|
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|
Note
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|
2017
|
|
|
2016
|
|
|
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Research and development
expenses, net
|
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|
11
|
|
|
$
|
184
|
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|
$
|
219
|
|
|
|
|
|
|
|
|
|
|
|
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|
General and administrative
expenses
|
|
|
12
|
|
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|
1,049
|
|
|
|
66
|
|
|
|
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|
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|
|
|
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|
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Operating loss
|
|
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(1,233
|
)
|
|
|
(285
|
)
|
|
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|
|
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|
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Financing income
(expenses), net
|
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|
13
|
|
|
|
(74
|
)
|
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9
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net
loss
|
|
|
|
|
|
$
|
(1,307
|
)
|
|
$
|
(276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
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Basic
and diluted loss per share
|
|
|
10
|
|
|
$
|
(0.04
|
)
|
|
$
|
(0.01
|
)
|
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
MICROBOT
MEDICAL INC.
INTERIM
CONDENSED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) (AUDITED)
U.S.
dollars in thousands
(Except
share data)
|
|
Preferred
A Shares –
Microbot Medical
Ltd.
(Pre
- merger) *
|
|
|
Preferred
A Shares
– Microbot Medical
Inc.
(Post
- merger) *
|
|
|
Common
Stock
|
|
|
Additional
paid-in
|
|
|
Accumulated
|
|
|
Total
shareholders’ equity
|
|
|
Temporary
equity
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
(deficit)
|
|
|
(Note
10)
|
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|
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|
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|
|
|
|
|
|
|
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Balances,
December 31, 2015
|
|
|
8,708,132
|
|
|
$
|
87
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,182,660
|
|
|
$
|
132
|
|
|
$
|
3,089
|
|
|
$
|
(3,372
|
)
|
|
$
|
(64
|
)
|
|
$
|
-
|
|
|
|
|
|
|
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|
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|
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|
Conversion of convertible
notes and exercise of warrants issued upon conversion
|
|
|
4,746,237
|
|
|
|
48
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,803
|
|
|
|
-
|
|
|
|
1,851
|
|
|
|
-
|
|
Effect of reverse recapitalization
|
|
|
(13,454,369
|
)
|
|
|
(135
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
15,301,675
|
|
|
|
153
|
|
|
|
454
|
|
|
|
-
|
|
|
|
472
|
|
|
|
-
|
|
Common Stock classified
as temporary equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(500
|
)
|
|
|
-
|
|
|
|
(500
|
)
|
|
|
500
|
|
Beneficial Conversion
Feature recorded on convertible debt acquired in reverse recapitalization
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,029
|
|
|
|
-
|
|
|
|
2,029
|
|
|
|
-
|
|
Transaction costs incurred
in reverse recapitalization
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,802,639
|
|
|
|
78
|
|
|
|
6,817
|
|
|
|
-
|
|
|
|
6,895
|
|
|
|
-
|
|
Cancellation of ordinary shares and issuance
of preferred shares
|
|
|
-
|
|
|
|
-
|
|
|
|
9,736
|
|
|
|
-
|
|
|
|
(9,736,000
|
)
|
|
|
(97
|
)
|
|
|
97
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Share based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
676
|
|
|
|
-
|
|
|
|
676
|
|
|
|
-
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,663
|
)
|
|
|
(9,663
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
9,736
|
|
|
$
|
-
|
|
|
|
**26,550,974
|
|
|
$
|
266
|
|
|
$
|
14,465
|
|
|
$
|
(13,035
|
)
|
|
$
|
1,696
|
|
|
$
|
500
|
|
(*) Less
than 1
*
Share data for periods prior to the reverse recapitalization represents the legal equity structure of Microbot Ltd. with the number
of shares adjusted to retroactively reflect the one-to-nine Reverse Stock Split effected on November 28, 2016 as well as the reverse
recapitalization consummated on November 28 2016
**
Includes 10,702,838 common stock classified as temporary equity.
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
MICROBOT
MEDICAL INC.
INTERIM
CONDENSED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) (UNAUDITED)
U.S.
dollars in thousands
(Except
share data)
|
|
Preferred
A Shares –
Microbot
Medical
Ltd.
(Pre - merger) *
|
|
|
Preferred
A Shares
– Microbot
Medical
Inc.
(Post - merger) *
|
|
|
Common
Stock
|
|
|
Additional
paid-in
|
|
|
Accumulated
|
|
|
Total
shareholders’
|
|
|
Temporary
equity
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
equity
|
|
|
(Note
10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
9,736
|
|
|
$
|
-
|
|
|
|
**26,550,974
|
|
|
$
|
266
|
|
|
$
|
14,465
|
|
|
$
|
(13,035
|
)
|
|
$
|
1,696
|
|
|
$
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700,000
|
|
|
|
7
|
|
|
|
3,493
|
|
|
|
|
|
|
|
3,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,307
|
)
|
|
|
(1,307
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
9,736
|
|
|
$
|
-
|
|
|
|
**27,251,333
|
|
|
$
|
273
|
|
|
$
|
17,958
|
|
|
$
|
(14,342
|
)
|
|
$
|
3,889
|
|
|
$
|
500
|
|
(*) Less
than 1
**
Includes 10,702,838 common stock classified as temporary equity.
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
MICROBOT
MEDICAL INC.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
U.S.
dollars in thousands
|
|
Three
Months ended
|
|
|
|
March
31,
|
|
|
|
2017
|
|
|
2016
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
$
|
(1,307
|
)
|
|
$
|
(276
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to
net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
6
|
|
|
|
4
|
|
Interest and revaluation
of convertible notes, net
|
|
|
169
|
|
|
|
22
|
|
Changes in fair
value of derivative warrant liability
|
|
|
(88
|
)
|
|
|
-
|
|
Changes in assets
and liabilities:
|
|
|
|
|
|
|
|
|
Increase (decrease)
in other receivables
|
|
|
(104
|
)
|
|
|
7
|
|
Increase
in other payables and accrued liabilities
|
|
|
557
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(767
|
)
|
|
|
(293
|
)
|
|
|
|
|
|
|
|
|
|
INVESTMENT
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(22
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(22
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outflow in connection with current assets
and liabilities acquired in reverse recapitalization, net
|
|
|
(208
|
)
|
|
|
-
|
|
Issuance of common
stock, net of issuance costs
|
|
|
3,290
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
3,082
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cashless exercise
of warrants issued upon conversion of notes
|
|
|
(*)
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
in cash and cash equivalents
|
|
|
2,293
|
|
|
|
(293
|
)
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the beginning of the year
|
|
|
2,709
|
|
|
|
437
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the end of the year
|
|
$
|
5,002
|
|
|
$
|
144
|
|
(*) Less
than 1
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes
to the Interim Condensed Consolidated Financial Statements
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 micro-robotics assisted medical technologies targeting the minimally invasive surgery space.
The Company is primarily focused on leveraging its micro-robotic technologies with the goal of improving surgical outcomes
for patients.
|
|
|
|
|
|
It
was incorporated on August 2, 1988 in the State of Delaware under the name Cellular Transplants, Inc. The original Certificate
of Incorporation was restated on February 14, 1992 to change the name of the Company to CytoTherapeutics, Inc. On May 24,
2000, the Certificate of Incorporation as restated was further amended to change the name of the Company to StemCells, Inc.
|
|
|
|
|
|
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”), and C&RD Israel Ltd. (“Merger Sub”), an Israeli corporation and wholly-owned subsidiary of
the Company, whereby Merger Sub merged with and into Microbot Israel and Microbot Israel surviving as a wholly-owned subsidiary
of the Company (the “Merger”). Pursuant to the terms of the Merger, at the effective time of the Merger, each
outstanding ordinary share of Microbot Israel capital stock was converted into the right to receive approximately 2.9 shares
of the Company’s common stock, par value $0.01 per share, after giving effect to a one for nine reverse stock split
(the “Reverse Stock Split”), for an aggregate of 26,550,974 shares of Company’s common Stock issued to the
former Microbot Israel shareholders. In addition, all outstanding options to purchase the ordinary shares of Microbot Israel
were assumed by the Company and converted into options to purchase an aggregate of 2,614,916 shares of the Company’s
common Stock. Additionally, the Company issued an aggregate of 7,802,639 restricted shares of its common stock or rights to
receive the Company’s common stock, to certain advisers. 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 began
trading on the Nasdaq Capital Market under the symbol “MBOT”.
|
|
|
|
|
|
As
a result of the Merger Microbot Israel became a wholly owned subsidiary of the Company. The transaction between the Company
and Microbot Israel was accounted for as a reverse recapitalization. As the shareholders of Microbot Israel received the largest
ownership interest in the Company, Microbot Israel was determined to be the “accounting acquirer” in the reverse
recapitalization. As a result, the historical financial statements of the Company were replaced with the historical financial
statements of Microbot Israel. Unless indicated otherwise, pre-acquisition share, options and warrants data included in these
financial statements have been retroactively adjusted to reflect the Reverse Stock Split and the Merger.
|
|
|
|
|
|
Prior
to the Merger, the Company was a biopharmaceutical company that conducted research, development, and commercialization of
stem cell therapeutics and related technologies. The sale of all material assets relating to the stem cell business was substantially
completed on November 29, 2016.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to
the Interim Condensed Consolidated Financial Statements
(Cont’d)
|
|
The
Company and its subsidiaries are collectively referred to as the “Company”. “StemCells” or “StemCells,
Inc.” refers to the Company prior to the Merger.
|
|
|
|
|
B.
|
Risk
Factors:
|
|
|
|
|
|
To
date the Company has not generated revenues from its operations. As of March 31, 2017, the Company had cash and cash equivalents
totaling $5,002, which the Company believes is sufficient to fund its operations for more than 12 months from such
date and sufficient to fund its operations necessary to continue development activities of its current proposed products.
The Company plans to continue to fund its current operations as well as other development activities relating to additional
product candidates, through future issuances of either debt and/or equity securities and possibly additional grants from the
Israeli Innovation Authority.
|
|
|
|
|
C.
|
Use
of estimates:
|
|
|
|
|
|
The
preparation of interim consolidated condensed financial statements in conformity with U.S. generally accepted accounting principles
(“GAAP”) requires management to make estimates and assumptions pertaining to transactions and matters whose ultimate
effect on the interim consolidated condensed financial statements cannot precisely be determined at the time of interim consolidated
condensed financial statements preparation. Although these estimates are based on management’s best judgment, actual
results may differ from these estimates.
|
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
A.
|
Unaudited
Interim Financial Statements
|
|
|
|
|
|
The
accompanying unaudited interim condensed 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 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).
|
|
|
|
|
|
For
further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 21, 2017.
|
|
|
|
|
|
Operating
results for the three months ended March 31, 2017, are not necessarily indicative of the results that may be expected for
the year ended December 31, 2017.
|
|
|
|
|
B.
|
Significant
Accounting Policies
|
|
|
|
|
|
The
significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements
are identical to those applied in the preparation of the latest annual financial statements.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to the Interim
Condensed Consolidated Financial Statements
(Cont’d)
|
C.
|
Recent
Accounting Standards:
|
|
|
|
|
|
In
May 2014, the Financial Accounting Standards Board (the “FASB”) issued a new standard to achieve a consistent
application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies
under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains
control of the promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services.
|
|
|
|
|
|
In
addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue
and cash flows arising from contracts with customers. The new standard is effective for the Company beginning in the
first quarter of 2018; early adoption is permitted. The new standard is required to be applied retrospectively to each prior
reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of
initial application. As the Company has not incurred revenues to date, it is unable to determine the expected impact the new
standard will have on its consolidated financial statements.
|
|
|
|
|
|
In
January 2016, the FASB issued ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities”,
which provides targeted improvements to the recognition, measurement, presentation and disclosure of financial assets and
financial liabilities. Specific accounting areas addressed include, equity investments, financial liabilities reported under
the fair value option and valuation allowance assessment resulting from unrealized losses on available-for-sale securities.
The standard also changes certain presentation and disclosure requirements for financial instruments. This ASU is effective
for the Company in its first quarter of fiscal year 2019. Early adoption, with certain exceptions, is not permitted. The Company
does not expect that the adoption of this standard will have a significant impact on the financial position or results of
operations.
|
|
|
|
|
|
In
February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which
amends, among other things, the existing guidance by requiring lessees to recognize lease assets (right-to-use) and liabilities
(for reasonably certain lease payments) arising from operating leases on the balance sheet. For leases with a term of twelve
months or less, ASU 2016-02 permits an entity to make an accounting policy election to recognize such leases as lease expense,
generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2018 using a modified retrospective approach, with early adoption permitted.
The Company is currently evaluating ASU 2016-02 and its impact on its consolidated financial statements.
|
|
|
|
|
|
In
March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements
to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies certain provisions associated with
the accounting for stock compensation. Among other things, ASU 2016-09 requires companies to record excess tax benefits and
tax deficiencies as income tax benefit or expense in the statement of income and eliminates the requirement to reclassify
cash flows related to excess tax benefits from operating activities to financing activities in the statement of cash flows.
ASU 2016-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016,
with early adoption permitted.
|
|
|
|
|
|
In
June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses – Measurement
of Credit Losses on Financial Instruments, which introduces a model based on expected losses to estimate credit losses for
most financial assets and certain other instruments. In addition, for available-for-sale debt securities with unrealized losses,
the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. The standard is
effective for annual reporting periods beginning after December 15, 2019, with early adoption permitted for annual reporting
periods beginning after December 15, 2018. The Company is evaluating the impact of the adoption on our consolidated balance
sheet, results of operations, cash flows and disclosures.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to
the Interim Condensed Consolidated Financial Statements
(Cont’d)
NOTE
3 - OTHER RECEIVABLES
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
|
Unaudited
|
|
|
Audited
|
|
Deposit in escrow account
(*)
|
|
$
|
400
|
|
|
$
|
505
|
|
Government institutions
|
|
|
28
|
|
|
|
15
|
|
Prepaid expenses
|
|
|
178
|
|
|
|
86
|
|
|
|
$
|
606
|
|
|
$
|
606
|
|
|
(*)
Purchase Agreement with BOCO
|
|
|
|
On
November 11, 2016, the Company together with two of its wholly-owned subsidiaries, Stem Cell Sciences Holdings Limited and
StemCells California, Inc. (collectively, with the Company, the “Sellers”), entered into an Asset Purchase Agreement
(the “Asset Purchase Agreement”) with BOCO Silicon Valley, Inc., a California corporation and wholly-owned subsidiary
of Bright Oceans Corporation (“BOCO US”).
|
|
|
|
Pursuant
to the terms and subject to the conditions set forth in the Asset Purchase Agreement, the Sellers sold to BOCO US certain
stem and progenitor cell lines that have been researched, studied or manufactured by the Company since 2007 (the “Cell
Lines”) and certain other tangible and intangible assets, including intellectual property and books and records, related
to the foregoing (together with the Cell Lines, the “Assets”) in exchange for $4,000 in cash (the “Asset
Consideration”).
|
|
|
|
Of
the Asset Consideration, $300 was provided to the Company prior to November 11, 2016 in exchange for the Sellers’
agreement not to solicit or reach any agreement with any third party pertaining to the sale of the Assets, and $400
will remain in a twelve-month escrow for the benefit of BOCO US to satisfy certain indemnification obligations of the Sellers
which may arise and which, subject to any valid indemnification claims of BOCO US, will be released to the Company at the
end of such 12-month period. In addition, sixteen former employees of the Company received, in the aggregate, $495
in accordance with their June 2016 agreements with the Company under which each accepted a more than 50% reduction in his
or her severance award otherwise payable.
|
|
|
|
The
Asset Purchase Agreement contains certain covenants prohibiting the Sellers from, during the four-year period immediately
following the completion of the Asset Sale, (a) engaging in or having certain financial interests in a business that is engaged
in the research, development or commercialization of the Cell Lines, or (b) soliciting for employment employees of BOCO US.
|
|
|
|
On
November 29, 2016, the Sellers completed the sale of the Assets.
|
|
|
|
The
opening balance sheet as of the Merger date included a receivable balance with respect to sale of the Assets of $3,500
from which $3,100 were collected prior to December 31, 2016 and $400 were deposit in escrow account for
12 month from the closing date.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to the Interim
Condensed Consolidated Financial Statements
(Cont’d)
NOTE
4 - FIXED ASSETS, NET
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
|
Unaudited
|
|
|
Audited
|
|
Cost:
|
|
|
|
|
|
|
|
|
Research equipment and software
|
|
$
|
56
|
|
|
$
|
54
|
|
Furniture and
office equipment
|
|
|
83
|
|
|
|
63
|
|
|
|
|
139
|
|
|
|
117
|
|
Accumulated Depreciation:
|
|
|
|
|
|
|
|
|
Research equipment and software
|
|
|
26
|
|
|
|
22
|
|
Furniture and
office equipment
|
|
|
44
|
|
|
|
42
|
|
|
|
|
70
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
69
|
|
|
$
|
53
|
|
NOTE
5 - ACCRUED LIABILITIES
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
|
|
|
|
|
Employees
|
|
$
|
96
|
|
|
$
|
102
|
|
Government institution
|
|
|
34
|
|
|
|
24
|
|
Other current
liabilities
|
|
|
388
|
|
|
|
145
|
|
|
|
$
|
518
|
|
|
$
|
271
|
|
NOTE
6 -
|
CONVERTIBLE
LOAN FROM SHAREHOLDERS
|
|
|
|
On
October 8, 2015, Microbot Israel entered into a convertible loan agreement with several investors who were also existing shareholders.
According to the loan agreement, Microbot Israel received an amount of $419. The loan bore interest of 10%, and was
converted to both equity shares and preferred shares warrants of Microbot Israel on the nine-month anniversary of the loan.
The Company concluded the conversion feature is not a Beneficial Conversion Feature pursuant to the provisions of ASC 470-20,
“Debt with Conversion and Other Options”. Accordingly, the proceeds were recorded in liabilities in their entirety
at the date of issuance.
|
|
|
|
On
July 7, 2016, the outstanding principal and accrued interest were converted into 1,315,023 Series A preferred shares, of Microbot
Israel (the “Series A Preferred Shares”) and 1,188,275 warrants to purchase the Series A Preferred Shares, at
an exercise price of $1.00 per share. The preferred shares warrants were exercised in full in September 2016 for total gross
proceeds to Microbot Israel of approximately $410.
|
|
|
|
On
May 11, 2016, Microbot Israel entered into a convertible loan agreement with several investors who were also existing shareholders.
The loan bore interest at a fixed rate of 10% per annum beginning on the issuance date.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to
the Interim Condensed Consolidated Financial Statements
(Cont’d)
|
At
maturity, all of the outstanding principal and accrued interest was converted into Microbot Israel’s ordinary shares
subject to the conversion or default events specified in the loan agreement, based on a conversion price that represents a
20% discount on Microbot Israel’s valuation upon such default events. Furthermore, in the event of a reverse merger
transaction or a qualified financing, each as defined in the convertible loan agreement with respect to such loans, all of
the outstanding principal and accrued interest would be converted into the securities issued in the reverse merger or the
qualified financing, as the case may be.
|
|
|
|
On
November 28, 2016, upon the consummation of the Merger, the loan was converted into an aggregate of 2,242,939 shares of Company’s
common stock.
|
|
|
|
The
Company concluded the value of the loan is predominantly based on a fixed monetary amount known at the date of issuance as
represented by the 20% discount on the Company’s valuation. Accordingly, the loan was classified as debt and is measured
at its fair value, pursuant to the provisions of ASC 480-10, “Accounting for Certain Financial instruments with Characteristics
of both Liabilities and Equity”.
|
|
|
|
The
fair value of the loan is measured based on observable inputs as the fixed monetary value of the variable number of shares
to be issued upon conversion (level 2 measurement).
|
|
|
|
Secured
Note to Alpha Capital Anstalt:
|
|
|
|
On
August 15, 2016, concurrent with the execution of the Agreement and Plan of Merger (see Note 1A), StemCells Inc. issued
a 6.0% secured note (the “Note”) to Alpha Capital Anstalt (“Alpha Capital”), in the principal amount
of $2,000, for value received, payable upon the earlier of (i) 30 days following the consummation of the Merger and
(ii) December 31, 2016. Proceeds from the Note were used for the payment of costs and expenses in connection with the Merger
and operational expenses leading to such Closing.
|
|
|
|
The
Note bore interest at 6% per annum, payable monthly in arrears on the first of the month, beginning on January 1, 2017
until the principal amount is paid in full. In addition, the Note was secured by a first priority security interest
in all of StemCells intellectual property and certain other general assets pursuant to a Security Agreement.
|
|
|
|
Securities
Exchange Agreement with Alpha Capital:
|
|
|
|
As
of the effective time of the Merger, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”)
with Alpha Capital, providing for the issuance to the Alpha Capital of a convertible promissory note by the Company (the “Convertible
Note”) in a principal amount of approximately $2,029, which is equal to the principal and accrued interest under
the Note, in exchange for (a) the full satisfaction, termination and cancellation of the Note and (b) the release and termination
of the Security Agreement and the first priority security interest granted thereunder.
|
|
|
|
The
Convertible Note is convertible into the Company’s Common Stock any time after November 28, 2017 and until the maturity
date of November 28, 2019, based on a conversion price of $0.64, subject to adjustments as provided in the Exchange Agreement.
|
|
|
|
Pursuant
to the terms of the Convertible Note, the Company is obligated to pay interest on the outstanding principal amount owed under
the Convertible Note at a fixed rate per annum of 6.0%, payable at maturity or earlier upon conversion. The Exchange Agreement
contains customary representations and warranties and usual and customary affirmative and negative covenants. The Convertible
Note also contains certain customary events of default.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to
the Interim Condensed Consolidated Financial Statements
(Cont’d)
|
As
the Exchange Agreement represented the consummation of the original intent of the Company and Alpha Capital, as of the date
of execution of the Merger Agreement (August 2016), to enter into a $2,000 convertible note sale transaction, upon
the consummation of the Merger, the Company accounted for the Convertible Note in accordance with such economic
substance, as if it had been issued for a cash consideration equal to the principal and accrued interest on the Note, as
of the effective date of the Merger, in the amount of approximately $2,029 (the “Assumed
Consideration”), which is equal to the principal amount of the Convertible Note as determined in the Exchange
Agreement.
|
|
|
|
The
Company concluded the conversion feature of the Convertible Note, based on the commitment date of November 28, 2016
(the Exchange Agreement date), is a Beneficial Conversion Feature pursuant to the provisions of ASC 470-20, “Debt with
Conversion and Other Options”. Accordingly, the Assumed Consideration was recorded in equity with a corresponding
discount on the Convertible Note, to be amortized over its term through maturity.
|
|
|
|
The
amortization of the Convertible Note as of March 31, 2017 is as follow:
|
|
|
Balance
at
|
|
|
Balance
at
|
|
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
|
|
|
|
|
Convertible note
|
|
$
|
2,029
|
|
|
$
|
2,029
|
|
BCF
|
|
|
(1,804
|
)
|
|
|
(1,963
|
)
|
Accrued interest
|
|
|
20
|
|
|
|
10
|
|
|
|
$
|
245
|
|
|
$
|
76
|
|
NOTE
7 -
|
DERIVATIVE
WARRANT LIABILITIES
|
|
|
|
As
part of StemCell’s obligations under the Merger Agreement, in August 2016, StemCells negotiated with certain institutional
holders of its 2016 Series A and Series B Warrants, issued by prior to the Merger, to have such holders surrender their 2016
Series B Warrants in exchange for a reduced exercise price of $0.30 per share on their existing 2016 Series A Warrants and
the elimination of the anti-dilution price protection in the 2016 Series A Warrants. As a result, the exercise price for all
outstanding 2011 Series A Warrants and 2016 Series A and Series B Warrants was reset to $0.30 per share. Upon exercise of
these warrants, StemCells issued 531,814 shares of its common stock prior to the Merger.
|
|
|
|
The
remaining outstanding warrants as of March 31, 2017 are as follows:
|
Issuance
Date
|
|
Outstanding
as
of
December
31, 2016
|
|
|
Outstanding
as
of
March
31, 2017
|
|
|
Exercise
Price
|
|
|
Exercisable
as
of
March
31, 2017
|
|
|
Exercisable
Through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A (2011)
|
|
|
64,230
|
|
|
|
-
|
|
|
$
|
151.20
|
|
|
|
-
|
|
|
|
December
2016
|
|
Series A (2013)
|
|
|
57,814
|
|
|
|
57,814
|
|
|
$
|
194.40
|
|
|
|
57,814
|
|
|
|
October
2018
|
|
Series A (2013)
|
|
|
2,718
|
|
|
|
2,718
|
|
|
$
|
183.60
|
|
|
|
2,718
|
|
|
|
April
2023
|
|
Series A (2015)
|
|
|
10,139
|
|
|
|
10,139
|
|
|
$
|
91.80
|
|
|
|
10,139
|
|
|
|
April
2020
|
|
Series A (2016) (a)(b)
|
|
|
10,047
|
|
|
|
9,279
|
|
|
$
|
2.70
|
|
|
|
10,047
|
|
|
|
March
2018
|
|
Series B (2016) (a)
|
|
|
41,116
|
|
|
|
41,116
|
|
|
$
|
2.70
|
|
|
|
41,116
|
|
|
|
March
2022
|
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to the Interim
Condensed Consolidated Financial Statements
(Cont’d)
|
(a)
|
These
warrants contain a full ratchet anti-dilution price protection so that, in most situations upon the issuance of any common
stock or securities convertible into common stock at a price below the then-existing exercise price of the outstanding warrants,
the warrant exercise price will be reset to the lower common stock sales price.
|
|
|
|
|
(b)
|
On
March 2017, an institutional holder executed a cashless exercise of 768 warrants and 359 shares of common stock were issued
in connection therewith.
|
|
As
such anti-dilution price protection, does not meet the specific conditions for equity classification, the Company is required
to classify the fair value of these warrants as a liability, with changes in fair value to be recorded as income (loss) due
to change in fair value of warrant liability. The estimated fair value of the Company’s warrant liability at
March 31, 2017 and December 31, 2016, was approximately $313 and $225, respectively.
|
|
|
|
As
quoted prices in active markets for identical or similar warrants are not available, the Company uses directly observable
inputs in the valuation of its derivative warrant liabilities (level 2 measurement).
|
|
|
|
The
Company uses the Black-Scholes valuation model to estimate fair value of these warrants. In using this model, the Company
makes certain assumptions about risk-free interest rates, dividend yields, volatility, expected term of the warrants and other
assumptions. Risk-free interest rates are derived from the yield on U.S. Treasury debt securities. Dividend yields are based
on the Company’s historical dividend payments, which have been zero to date. Volatility is estimated from the
historical volatility of the Company’s common stock as traded on NASDAQ. The expected term of the warrants is
based on the time to expiration of the warrants from the date of measurement.
|
|
|
|
The
following table summarizes the observable inputs used in the valuation of the derivative warrant liabilities as of December
31, 2016 and March 31, 2017:
|
|
|
As
of
March 31, 2017
|
|
|
As
of
December 31, 2016
|
|
|
|
Series
A (2016)
|
|
|
Series
B (2016)
|
|
|
Series
A (2016)
|
|
|
Series
B (2016)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share price
|
|
$
|
5.81
|
|
|
$
|
5.81
|
|
|
$
|
6.10
|
|
|
$
|
6.10
|
|
Exercise price
|
|
$
|
2.70
|
|
|
$
|
2.70
|
|
|
$
|
2.70
|
|
|
$
|
2.70
|
|
Expected volatility
|
|
|
90
|
%
|
|
|
90
|
%
|
|
|
380
|
%
|
|
|
380
|
%
|
Risk-free interest
|
|
|
1.03
|
%
|
|
|
1.93
|
%
|
|
|
0.85
|
%
|
|
|
1.93
|
%
|
Dividend yield
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Expected life of up to (years)
|
|
|
1
|
|
|
|
5
|
|
|
|
1.2
|
|
|
|
5.2
|
|
Activity
in such liabilities measured on a recurring basis is as follows:
|
|
Derivative
warrant liabilities
|
|
As
of December 31, 2016
|
|
$
|
313
|
|
Revaluation
of warrants
|
|
|
(88
|
)
|
Exercise
warrants (see note 7(b))
|
|
|
(*)
|
|
As
of March 31, 2017
|
|
$
|
225
|
|
|
In
accordance with ASC-820-10-50-2(g), the Company has performed a sensitivity analysis of the derivative warrant liabilities
of the Company which are classified as level 3 financial instruments. The Company recalculated the value of warrants by applying
a +/- 5% changes to the input variables in the Black-Scholes model that vary over time, namely, the volatility and
the risk-free rate. A 5.0% decrease in volatility would decrease the value of the warrants to $221; a 5.0% increase in volatility
would increase the value of the warrants to $229. A 5.0% decrease or increase in the risk-free rate would not have materially
changed the value of the warrants; the value of the warrants is not strongly correlated with small changes in interest rates.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to
the Interim Condensed Consolidated Financial Statements
(Cont’d)
NOTE
8 -
|
COMMITMENTS
|
|
|
|
Microbot
Israel obtained from the Israeli Innovation Authority (the “IIA”) grants for participation in research and development
for the years 2013 through March 31, 2017 in the total amount of approximately $0.9 million, and, in return, Microbot Israel
is obligated to pay royalties amounting to 3% of its future sales up to the amount of the grant. The grant is 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 IIA. The grants are received from IIA on a project-by-project
basis.
|
|
|
|
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 partial consideration for the license,
Microbot Israel shall pay TRDF royalties on net sales (between 1.5%-3%) and on sublicense income as detailed in the agreement.
|
|
|
|
Lease
Agreements
|
|
|
|
In
June 2016, the Company entered into an office lease agreement, with a term ending on September 30, 2017. According to the
lease agreement, the monthly office lease payment is approximately $3.
|
|
|
|
In
May 2017, the Company entered into an office lease agreement effective from January 1, 2018, with a term ending on
December 31, 2020. According to the lease agreement, the monthly office lease payment is approximately $14.
|
|
|
|
In
December 2016, the Company entered into an automobile lease agreement, which expires on December 31, 2019. According to the
lease agreement, the monthly car lease payment is approximately $2.5.
|
|
|
|
Compensation
liability
|
|
|
|
The
Company incurred compensation commitments of approximately $400 to a former executive that management estimates as
remote as therefore is not reflected in these interim consolidated condensed consolidated financial statements.
|
|
|
|
Contract
Research Agreement
|
|
|
|
On
January 27, 2017, the Company entered into a Contract Research Agreement (the “Research Agreement”) with The Washington
University (“Washington U.”), pursuant to which the parties will collaborate to determine the effectiveness of
the Company’s self-cleaning shunt.
|
|
|
|
The
initial research to be performed by Washington U. is expected to be completed within 6 months, with a comprehensive study
to follow and be completed in 2018.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to the Interim
Condensed Consolidated Financial Statements
(Cont’d)
|
The
cost of the initial study, to be paid by the Company, is expected to be approximately $130, with the cost of any further studies
to be determined. Pursuant to the Research Agreement, all rights, title and interest in the data, information and results
obtained or arrived at by Washington U. in the performance of its services under the Research Agreement, as well as any patentable
inventions obtained or arrived at in the performance of such services, will be jointly owned by the Company and Washington
U., and each will have full right to practice and grant licenses in joint inventions. Additionally, Washington U. granted
to the Company: (a) a non-exclusive, worldwide, royalty-free, fully paid-up, perpetual and irrevocable license to use and
practice patentable inventions (other than joint inventions and improvements to Washington U.’s animal models) obtained
or arrived at by Washington U. in the provision of its services under the Research Agreement (“University Inventions”)
with respect to the self-cleaning shunt; and (b) an exclusive option to obtain an exclusive worldwide license in University
Inventions, on terms to be negotiated between the parties.
|
|
|
NOTE
9 -
|
SHARE
CAPITAL
|
|
|
|
Ordinary
shares confer upon the holders voting rights and the right to receive cash and stock dividends.
|
|
|
|
Each
share of the Series A Convertible Preferred Stock issued by the Company in December 2016, is convertible, at the option of
the holder, into 1,000 shares of Common Stock, and confer upon the holder dividend rights on an as converted basis. The shares
of Series A Preferred Stock do not confer upon the holder voting rights and do not confer upon the holder a preference upon
a liquidation event.
|
|
|
|
Exercise
of warrants
|
|
|
|
On
March 2017, an institutional holder exercised, in a cashless transaction, 768 warrants and 359 shares
of common stock were issued in connection therewith.
|
|
|
|
Share
capital developments
|
|
|
|
The
authorized capital stock consists of 221,000,000 shares of capital stock, which consists of 220,000,000 shares of common stock,
par value $0.01 (the “Common Stock”), and 1,000,000 shares of undesignated preferred stock, par value $0.01
(the “Preferred Stock”). As of March 31, 2017, the Company had 27,251,333 shares of Common Stock issued and outstanding,
and 9,736 shares of Series A Convertible Preferred Stock issued and outstanding.
|
|
|
|
On
November 28, 2016, the Company filed a Certificate of Amendment to its Restated Certificate of Incorporation, as amended,
with the Secretary of State of the State of Delaware to (i) effect the Reverse Stock Split, (ii) change its name from “StemCells,
Inc.” to “Microbot Medical Inc.” and (iii) increase the number of authorized shares of the Common Stock
from 200,000,000 to 220,000,000 shares (the ”Certificate of Amendment”).
|
|
|
|
As
a result of the Reverse Stock Split, the number of issued and outstanding shares of the Common Stock immediately prior to
the Reverse Stock Split were reduced into a smaller number of shares, such that every nine shares of the Common Stock held
by a stockholder immediately prior to the Reverse Stock Split were combined and reclassified into one share of the Common
Stock.
|
|
|
|
Immediately
following the Reverse Stock Split and the Merger, there were 36,254,240 shares of the Common Stock issued and outstanding,
which included certain rights to receive shares of Common Stock or equivalent securities but excludes shares underlying outstanding
stock options and warrants and the Convertible Note.
|
|
|
|
On
December 27, 2016, the Company exchanged 9,735,925 shares or rights to acquire shares of its Common Stock, for 9,736 shares
of a newly designated class of Series A Convertible Preferred Stock. See “- Se
curities Exchange
Agreement with Alpha Capital” below.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to the Interim
Condensed Consolidated Financial Statements
(Cont’d)
|
Employee
stock option grant
|
|
|
|
In
September 2014, Microbot Israel’s board of directors approved a grant of 403,592 stock options (1,167,693 stock options
as retroactively adjusted to reflect the Merger) to its CEO, through MEDX Venture Group LLC. Each option was exercisable into
an ordinary share, at an exercise price of $0.80 ($0.28 as retroactively adjusted to reflect the Merger). The stock options
were fully vested at the date of grant.
|
|
|
|
On
May 2, 2016, Microbot Israel’s board of directors approved a grant of 500,000 stock options (1,447,223 as retroactively
adjusted to reflect the Merger) to certain of its employees and directors. Each stock option was exercisable into an ordinary
share, NIS 0.001 par value, of Microbot Israel, at an exercise price equal to the ordinary share’s par value. The stock
options were fully vested at the date of grant. As a result, the Company recognized compensation expenses in the amount of
$675 included in general and administrative expenses. As the exercise price of the stock options is nominal, Microbot Israel
estimated the fair value of the options as equal to the Company’s share price of $1.35 ($0.47 as retroactively adjusted
to reflect the Merger) at the date of grant.
|
|
|
|
A
summary of the Company’s option activity related to options to employees and directors, and related information is as
follows:
|
|
|
For
the three month period ended
March
31, 2017
|
|
|
|
Number
of
stock options
|
|
|
Weighted
average
exercise price
|
|
|
Aggregate
intrinsic value
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of period
|
|
2,614,916
|
|
|
$
|
0.13
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period
|
|
|
2,614,916
|
|
|
$
|
0.13
|
|
|
$
|
14,852,723
|
|
Vested and expected-to-vest
at end of period
|
|
|
2,614,916
|
|
|
$
|
0.13
|
|
|
$
|
14,852,723
|
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to the Interim
Condensed Consolidated Financial Statements
(Cont’d)
|
|
For
the year ended
December
31, 2016
|
|
|
|
Number
of
stock options
|
|
|
Weighted
average
exercise price
|
|
|
Aggregate
intrinsic
value
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of period
|
|
|
1,167,693
|
|
|
$
|
0.28
|
|
|
|
|
|
Granted
|
|
|
1,447,223
|
|
|
|
(*)
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period
|
|
|
2,614,916
|
|
|
$
|
0.13
|
|
|
$
|
15,611,049
|
|
Vested and expected-to-vest
at end of period
|
|
|
2,614,916
|
|
|
$
|
0.39
|
|
|
$
|
15,611,049
|
|
(*) Less
than 1
|
The
aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market
value of the Company’s and Microbot Israel’s common shares on March 31, 2017 and December 31, 2016 respectively
and the exercise price, multiplied by the number of in-the-money stock options on those dates) that would have been received
by the stock option holders had all stock option holders exercised their stock options on those dates.
|
|
|
|
The
stock options outstanding as of March 31, 2017, and December 31, 2016, have been separated into exercise prices, as follows:
|
Exercise price
|
|
Stock
options
outstanding
as of
March 31,
|
|
|
Stock
options
outstanding
as of
December 31,
|
|
|
Weighted
average
remaining
contractual
life – years
as of
March 31,
|
|
|
Weighted
average
remaining
contractual
life – years
as of
December 31,
|
|
|
Stock
options
exercisable
as of
March 31,
|
|
|
Stock
options
exercisable
as of
December 31,
|
|
$
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.28
|
|
|
1,167,693
|
|
|
|
1,167,693
|
|
|
|
7.75
|
|
|
|
8.0
|
|
|
|
1,167,693
|
|
|
|
1,167,693
|
|
(*)
|
|
|
1,447,223
|
|
|
|
1,447,223
|
|
|
|
9.25
|
|
|
|
9.5
|
|
|
|
1,447,223
|
|
|
|
1,447,223
|
|
|
|
|
2,614,916
|
|
|
|
2,614,916
|
|
|
|
7.15
|
|
|
|
7.4
|
|
|
|
2,614,916
|
|
|
|
2,614,916
|
|
(*) Less
than 1
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to the Interim
Condensed Consolidated Financial Statements
(Cont’d)
|
Compensation
expense recorded by the Company in respect of its stock-based employee compensation awards in accordance with ASC 718-10 for
the period ended March 31, 2017 and 2016 was $0.
|
|
|
|
The
fair value of the stock options is estimated at the date of grant using Black-Scholes options pricing model with the following
weighted-average assumptions:
|
|
|
Year
ended
|
|
|
|
December
31, 2016
|
|
Expected volatility
|
|
|
77.3
|
%
|
Risk-free interest
|
|
|
0.6
|
%
|
Dividend yield
|
|
|
0
|
%
|
Expected life of up to (years)
|
|
|
5.0
|
|
|
Shares
issued to service provider
|
|
|
|
In
connection with the Merger, the Company issued an aggregate of 7,802,639 restricted shares of its common stock to certain
advisors. The fair value of the award of approximately $10,000 was estimated based on the Company’s common share
price of $1.28 as of the date of grant. The portion of the expense in excess of the cash and other current assets acquired
in the Merger, in the amount of $7,300, was included in general and administrative expenses in the Statement of Operations.
|
|
|
|
Securities
Exchange Agreement with Alpha Capital
|
|
|
|
On
December 16, 2016, the Company entered into a Securities Exchange Agreement with Alpha Capital, pursuant to which Alpha Capital
exchanged 9,735,925 shares of common stock or rights to acquire shares of the common stock held by it, for 9,736 shares
of a newly designated class of Series A Convertible Preferred Stock, par value $0.01 per share (the “Preferred Stock”).
The common stock and common stock underlying the rights to acquire common stock include all of the shares of common stock
issued or issuable to Alpha Capital pursuant to the Merger. The 9,735,925 shares of common stock and the rights to acquire
common stock were cancelled and the Company’s issued and outstanding shares of Common Stock were reduced to 26,518,315.
|
|
|
|
Purchase
Agreement
|
|
|
|
On
January 5, 2017, the Company entered into a definitive securities purchase agreement with an institutional investor (the “Purchaser”)
for the purchase and sale of an aggregate of 700,000 shares of the Company’s common stock in a registered direct offering
for $5.00 per share or gross proceeds of $3,500. The Company paid the placement agent a fee of $210 plus reimbursement
of out-of-pocket expenses, as well as other offering-related expenses.
|
Repurchase
of Shares
The
Company intends to enter into a definitive agreement with up to three Israeli shareholders that were former shareholders of Microbot
Medical Ltd., pursuant to which the Company would repurchase, at a discount on the fair value of the share at the date of repurchase,
up to $500,000 of the Company’s common stock held by them, in the aggregate, if and to the extent such shareholders are
unable to sell enough of their shares to cover certain of their Israeli tax liabilities resulting from the Merger. Such repurchase(s),
if any, would occur only after the two year anniversary of the Merger. The transaction is subject to negotiating final terms and
entering into definitive agreements with such shareholders.
The
Company evaluated whether an embedded derivative that requires bifurcation exists within such shares that may be subject to repurchase.
The Company concluded the fair value of such derivative instrument would be nominal and in any case would represent an asset to
the Company as (a) the settlement requires acquiring the shares at a discount on the fair market value of the share at the time
of re purchase and in no circumstances the acquisition price will be higher than approximately one dollar per share (representing
25% discount on the fair market value of the share at the merger closing date) and (b)it is assumed that the selling shareholders
would use such right as last resort as such repurchase at a discount on the fair market value of such shares results in a loss
to be incurred by the selling shareholders.
In
accordance with ASC 480-10-S99-3A (formerly EITF D-98), the Company classified the maximum amount it may be required to pay in
the event the repurchase right is exercised ($500,000) as temporary equity.
NOTE
10 -
|
BASIC
AND DILUTED NET LOSS PER SHARE
|
|
|
|
The
basic and diluted net loss per share and weighted average number of common shares used in the calculation of basic and diluted
net loss per share are as follows:
|
|
|
Three
Months
Ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Unaudited
|
|
|
Audited
|
|
Net loss attributable to shareholders of the company
|
|
$
|
963
|
|
|
$
|
276
|
|
Net
loss attributable to shareholders of preferred shares
|
|
|
344
|
|
|
|
110
|
|
Net loss used
in the calculation of basic net loss per share
|
|
$
|
1,307
|
|
|
$
|
166
|
|
Net loss per share
|
|
$
|
0.04
|
|
|
$
|
0.01
|
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to
the Interim Condensed Consolidated Financial Statements
(Cont’d)
|
As
the inclusion of common share equivalents in the calculation would be anti-dilutive for all periods presented, diluted net
loss per share is the same as basic net loss per share.
|
|
|
|
The
weighted average number of common shares outstanding has been retroactively restated for the equivalent number of common shares
received by the accounting acquirer as a result of the reverse recapitalization and reverse stock split as if these common
shares had been outstanding as of the beginning of the earliest period presented.
|
|
|
NOTE
11 -
|
RESEARCH
AND DEVELOPMENT EXPENSES, NET
|
|
|
Three
months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Payroll and related expenses
|
|
$
|
151
|
|
|
$
|
121
|
|
Materials
|
|
|
58
|
|
|
|
25
|
|
Patents
|
|
|
8
|
|
|
|
11
|
|
Office and maintenance
|
|
|
9
|
|
|
|
5
|
|
Rent
|
|
|
8
|
|
|
|
28
|
|
Professional services
|
|
|
16
|
|
|
|
14
|
|
Depreciation
|
|
|
4
|
|
|
|
4
|
|
Other
|
|
|
18
|
|
|
|
11
|
|
Less grants received
from Israeli Innovation Authority
|
|
|
(88
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total research
and development expenses, net
|
|
$
|
184
|
|
|
$
|
219
|
|
NOTE
12 - GENERAL AND ADMINISTRATIVE EXPENSES
|
|
Three
months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Payroll and related expenses
|
|
$
|
266
|
|
|
$
|
-
|
|
Professional services
|
|
|
407
|
|
|
|
60
|
|
Travel
|
|
|
58
|
|
|
|
3
|
|
Depreciation
|
|
|
2
|
|
|
|
3
|
|
Insurance
|
|
|
57
|
|
|
|
-
|
|
Fees
|
|
|
202
|
|
|
|
-
|
|
Other
|
|
|
57
|
|
|
|
-
|
|
Total general
and administrative expenses
|
|
$
|
1,049
|
|
|
$
|
66
|
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to the Interim
Condensed Consolidated Financial Statements
(Cont’d)
NOTE
13 - FINANCE EXPENSES, NET
|
|
Three
months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Bank fees and interest
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
Change in fair value of derivative warrant
liability
|
|
|
88
|
|
|
|
-
|
|
Exchange rate differences
|
|
|
8
|
|
|
|
10
|
|
Revaluation and
interest on convertible loans
|
|
|
(169
|
)
|
|
|
-
|
|
Total finance
expenses, net
|
|
$
|
(74
|
)
|
|
$
|
9
|
|
NOTE
14
-
|
|
TRANSACTIONS
AND BALANCES WITH RELATED PARTIES
|
|
|
|
|
A.
|
Transactions
|
|
|
Three
months ended
|
|
|
|
March
31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Payroll and related expenses
|
|
$
|
330
|
|
|
$
|
-
|
|
Directors fees
|
|
|
104
|
|
|
|
-
|
|
Subcontracted
work and consulting
|
|
|
13
|
|
|
|
51
|
|
|
|
$
|
447
|
|
|
$
|
51
|
|
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Other
accounts payable
|
|
$
|
313
|
|
|
$
|
-
|
|
|
|
$
|
313
|
|
|
$
|
-
|
|
NOTE
15
-
|
|
TAXES
ON INCOME
|
The
Company is subject to income taxes under the Israeli and U.S. tax laws:
|
Corporate
tax rates
|
|
|
|
|
|
The
Company is subject to Israeli corporate tax rate of 25% in the year 2016, 24% in year 2017 and 23% from year 2018.
|
|
|
|
|
|
The
Company is subject to a blended U.S. tax rate (Federal as well as state corporate tax) of 35%.
|
|
|
|
|
A.
|
As
of March 31, 2017, the Company generated net operating losses in Israel of approximately $6,000, which may be carried
forward and offset against taxable income in the future for an indefinite period.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except share data
and exercise prices)
Notes to
the Interim Condensed Consolidated Financial Statements
(Cont’d)
|
|
As
of March 31, 2017, the Company generated net operating losses in the U.S. of approximately $475. Net operating losses in the
United States are available through 2035. Utilization of U.S. net operating losses may be subject to substantial annual limitation
due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions.
The annual limitation may result in the expiration of net operating losses before utilization.
|
|
|
|
|
B.
|
The
Company 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 utilized in the future. Therefore, a valuation allowance was
recorded to reduce the deferred tax assets to its recoverable amounts.
|
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
Net loss carry-forward
|
|
$
|
482
|
|
|
$
|
481
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax
assets
|
|
|
482
|
|
|
|
481
|
|
Valuation allowance
|
|
|
(482
|
)
|
|
|
(481
|
)
|
Net
deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
C.
|
Reconciliation
of Income Taxes
|
|
|
|
|
|
The
following is a reconciliation of the taxes on income assuming that all income is taxed at the ordinary statutory corporate
tax rate in Israel and the effective income tax rate:
|
|
|
As
of March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Net loss as reported in
the statements of operations
|
|
$
|
1,307
|
|
|
$
|
276
|
|
Statutory tax rate
|
|
|
24
|
%
|
|
|
25
|
%
|
Income Tax under statutory tax rate
|
|
|
314
|
|
|
|
69
|
|
Less full valuation
allowance
|
|
|
(314
|
)
|
|
|
(69
|
)
|
Actual income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE
16
|
SUBSEQUENT
EVENT
|
|
|
|
On
May 9, 2017, the Company entered into a Securities Exchange Agreement with Alpha Capital pursuant to which the Company agreed
to issue 3,254 shares of Preferred Stock, in exchange for the full satisfaction, termination and cancellation of that outstanding
6% convertible promissory note of the Company in the principal amount of approximately $2,029, issued on November 28,
2016 and held by Alpha Capital. The Preferred Stock is the same series of securities as the Company’s existing Series
A Convertible Preferred Stock issued in December 2016.
|
|
|
|
On
May 11, 2017, Alpha Capital delivered to the Company a request to convert 700 shares of the Preferred Stock held by Alpha
Capital for 700,000 shares of the Company’s Common Stock, pursuant to the terms of conversion of the Preferred Stock.
On May 12, 2017, the Company issued the 700,000 shares to Alpha Capital.
|
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, 2016. 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, 2016.
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 micro-robotics
assisted medical technologies targeting the minimally invasive surgery space. Microbot is primarily focused on leveraging its
micro-robotic technologies with the goal of improving surgical outcomes for patients.
Microbot
is currently developing its first two product candidates: the Self Cleaning Shunt, or SCS, for the treatment of hydrocephalus
and Normal Pressure Hydrocephalus, or NPH; and TipCAT, a self-propelling, semi-disposable endoscope that is being developed initially
for use in colonoscopy procedures. Microbot’s product candidates are being designed to bring greater functionality to conventional
medical devices and to reduce the known risks associated with such devices. Microbot is currently aiming to complete pre-clinical
studies required for regulatory submission for both product candidates within the next 24 months.
Microbot
has no products approved for commercial sale and has not generated any revenues from product sales since its inception in 2010.
From inception to March 31, 2017, Microbot has raised cash proceeds of approximately $8,970,000 to fund operations, primarily
from government grants, loans, and private placement offerings of debt and equity securities.
Microbot
has never been profitable and has incurred significant operating losses in each year since inception. Net losses for the quarters
ended March 31, 2017 and 2016 were approximately $1,307,000 and $276,000, respectively. Substantially all of Microbot’s
operating losses resulted from expenses incurred in connection with its research and development programs and from general and
administrative costs associated with its operations. As of March 31, 2017, Microbot had a net working capital of approximately
$4,790,000, consisting primarily of cash and cash equivalents. Microbot expects to continue to incur significant expenses and
increasing operating losses for at least the next several years as it continues the clinical development of, and seeks regulatory
approval for its product candidates. Accordingly, Microbot will continue to require substantial additional capital to continue
its clinical development and potential commercialization activities, however, at this time it believes that its net cash will
be sufficient to fund its operations for at least 12 months and fund operations necessary to continue development activities of
the SCS and TipCAT. The amount and timing of Microbot’s future funding requirements will depend on many factors, including
the timing and results of its clinical development efforts.
Estimated
completion dates and costs for Microbot’s clinical development and research programs can vary significantly for each current
and future product candidate and are difficult to predict. As a result, Microbot cannot estimate with any degree of certainty
the costs it will incur in connection with development of its product candidates at this point in time. Microbot anticipates it
will make determinations as to which programs and product candidates to pursue and how much funding to direct to each program
and product candidate on an ongoing basis in response to the scientific success of early research programs, results of ongoing
and future clinical trials, its ability to enter into collaborative agreements with respect to programs or potential product candidates,
as well as ongoing assessments as to each current or future product candidate’s commercial potential.
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.
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 costs, salaries, professional fees for accounting,
auditing, consulting and legal services, and allocated overhead expenses.
Microbot
expects that its general and administrative expenses may increase in the future as it expands its operating activities, maintains
and expands its patent portfolio and incurs additional costs associated with the Merger, the cost of being a public company and
maintaining compliance with exchange listing and SEC requirements. These additional costs 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 utilized in the future.
Critical
Accounting Policies and Significant Judgments and Estimates
Microbot’s
management’s discussion and analysis of its financial condition and results of operations are based on its financial statements,
which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these 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 financial statements. On an ongoing basis, Microbot
evaluates its estimates and judgments, including those related to accrued research and development expenses. 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 financial statements, Microbot
believes the following accounting policies are the most critical for fully understanding and evaluating its financial condition
and results of operations.
Foreign
Currency Translation
Microbot’s
functional currency is the U.S. dollars, and its reporting currency is the U.S. dollar.
Government
Grant and Input Tax Credit Recoveries
Microbot
from time to time has received, and may in the future continue to receive, grants from the Israeli Innovation Authority to
cover eligible company expenditures. These are deducted from research and development expenses and therefore research and
development expenses are presented in the net amount. The recoveries are recognized in the corresponding period when such
expenses are incurred.
Research
and Development Expenses
Microbot
recognizes research and development expenses as incurred, typically estimated based on an evaluation of the progress to completion
of specific tasks using data such as clinical site activations, manufacturing steps completed, or information provided by vendors
on their actual costs incurred. Microbot determines the estimates by reviewing contracts, vendor agreements and purchase orders,
and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion
of trials or services and the agreed-upon fee to be paid for such services. These estimates are made as of each balance sheet
date based on facts and circumstances known to Microbot at that time. If the actual timing of the performance of services or the
level of effort varies from the estimate, Microbot will adjust the estimate accordingly. Nonrefundable advance payments for goods
and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used
in future research and development activities, are capitalized as prepaid expenses and recognized as expense in the period that
the related goods are consumed or services are performed.
Microbot
may pay fees to third-parties for manufacturing and other services that are based on contractual milestones that may result in
uneven payment flows. There may be instances in which payments made to vendors will exceed the level of services provided and
result in a prepayment of the research and development expense.
Results
of Operations
Comparison
of Quarter Ended March 31, 2017 and 2016
The
following table sets forth the key components of Microbot’s results of operations for the quarterly periods ended March
31, 2017 and 2016 (in thousands):
|
|
Quarter
Ended March 31,
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Increase/(Decrease)
|
|
Research
and development expenses, net
|
|
$
|
184
|
|
|
$
|
219
|
|
|
$
|
(35
|
)
|
General and administrative
expenses
|
|
|
1,049
|
|
|
|
66
|
|
|
|
983
|
|
Financing income (expenses),
net
|
|
|
74
|
|
|
|
(9
|
)
|
|
|
83
|
|
Research
and Development Expenses
. Microbot’s research and development expenses were approximately $184,000 for the quarter ended
March 31, 2017, compared to approximately $219,000 for the same period in 2016. The decrease in research and development expenses
of approximately $35,000 in 2017 was primarily due to grants received from Israeli Innovation Authority. Microbot expects its
research and development expenses to increase over time as Microbot advances its development programs and begins pre-clinical
and clinical trials for SCS and TipCAT.
General
and Administrative Expenses
. General and administrative expenses were approximately $1,049,000 for the quarter ended March
31, 2017, compared to approximately $66,000 for the same period in 2016. The increase in general and administrative expenses of
approximately $983,000 in 2016 was primarily due to Microbot becoming a public company and therefore incurring higher professional
fees and public company fees. Microbot believes its general and administrative expenses may increase over time as it advances its
programs, increases its headcount and operating activities and incurs expenses associated with being a public company.
Financing
Expenses
. Financing expenses were approximately $74,000 for the quarter ended March 31, 2017, compared to finance income approximately
$9,000 for the same period in 2016. The increase in financial expenses was primarily due to revaluation and interest on convertible
loans and change in fair value of derivative warrant liabilities.
Liquidity
and Capital Resources
Microbot
has incurred losses since inception and negative cash flows from operating activities for the quarterly periods ended March 31,
2017 and 2016. As of March 31, 2017, Microbot had a net working capital of approximately $4,790,000, consisting primarily of cash
and cash equivalents. Microbot anticipates that it will continue to incur net losses for the foreseeable future as it continues
research and development efforts of its product candidates, hires additional staff, including clinical, scientific, operational,
financial and management personnel, and incurs additional 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. As of March 31, 2017, Microbot raised total cash proceeds of approximately $8,970,000, and incurred a total cumulative
loss of approximately $14,342,000 from inception (November 2010) to March 31, 2017.
As
a result of the sale of certain of the assets of StemCells, on November 29, 2016, Microbot raised approximately $3,100,000
in cash, after taking into account the payment of $495,000 to certain StemCells employees but excluding $400,000 held in escrow
to satisfy any indemnification claims of the buyer of the assets. Additionally, in January 2017, we sold an aggregate of 700,000
shares of our common stock for net proceeds, after deducting placement agent fees and expenses, of approximately $3,290,000. As a result of such cash, Microbot believes that its net cash will be sufficient to fund its operations for at least
12 months and fund operations necessary to continue development activities of the SCS and TipCAT.
Microbot
plans to continue to fund its research and development and other operating expenses, other development activities relating to
additional product candidates, and the associated losses from operations, through future issuances of debt and/or equity securities
and possibly additional grants from the Israeli Innovation Authority. 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 or on terms acceptable to it, if at all. If Microbot is not able to secure adequate additional
working capital when it becomes needed, it may be required to make reductions in spending, extend payment terms with suppliers,
liquidate assets where possible and/or suspend or curtail planned research programs. Any of these actions could materially harm
Microbot’s business.
Cash
Flows
The
following table provides a summary of the net cash flow activity for each of the periods set forth below (in thousands):
|
|
Quarter
ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Net cash used in operating
activities
|
|
$
|
(767
|
)
|
|
$
|
(293
|
)
|
Net cash used in investing activities
|
|
|
(22
|
)
|
|
|
–
|
|
Net cash provided by financing activities
|
|
|
3,082
|
|
|
|
–
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
|
2,293
|
|
|
|
(293
|
)
|
Comparison
of the Quarterly Periods Ended March 31, 2017 and 2016
Cash
used in operating activities for the quarter ended March 31, 2017 was approximately $767,000, calculated by adjusting net loss
from operations by approximately $540,000 to eliminate non-cash and expense items not involving cash flows such as depreciation
and accumulated interest on convertible loans, as well as other changes in assets and liabilities resulting in non-cash adjustments
in the income statement. Cash used in operating activities for the quarter ended March 31, 2016 was approximately $293,000, similarly
adjusted by approximately $17,000.
Net
cash used in investing activities for the quarter ended March 31, 2017 was approximately $22,000, consisting of purchase of property
and equipment, compared to approximately $0 for the quarter ended March 31, 2016.
Net
cash provided by financing activities of approximately $3,082,000 for the quarter ended March 31, 2017 consisted of issuance of
common stock and outflow amounts related to the merger recapitalization, compared to approximately $0 in the quarter ended March
31, 2016.
Off-Balance
Sheet Arrangements
Microbot
has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.