NOTES
TO 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 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 redefining surgical robotics while improving surgical
outcomes for patients.
The
Company 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 Cyto Therapeutics, 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”),
pursuant to which, among other things, Microbot Israel became a wholly-owned subsidiary of the Company. 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”.
The
Company and its subsidiaries, where applicable, are collectively referred to as the “Company”.
To
date, the Company has not generated revenues from its operations. As of December 31, 2020, the Company had unrestricted cash and
cash equivalent balance of approximately $19,650, which management believes is sufficient to fund its operations for more than
12 months from the date of issuance of these financial statements and sufficient to fund its operations necessary to continue
development activities of its current proposed products.
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 for more than 12 months, the Company may 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.
An
epidemic of the coronavirus disease (“COVID-19”) is ongoing throughout the world. As the outbreak is still evolving,
much of its impact remains unknown. As of this filing, it is impossible to predict the effect and potential spread of the coronavirus
disease globally. The coronavirus disease may cause significant delays and disruptions to our pre-clinical studies.
Additionally,
travel restrictions have been implemented with respect to certain countries in an effort to contain the coronavirus disease, and
several countries have expanded screenings of travelers. As travel restrictions are increasingly implemented and extended to other
countries, the Company and its contract research organizations may be unable to visit its clinical trial sites and monitor the
data from its clinical trials on timely basis. The Company’s employees may also face travel restrictions, which would impact
its business. Furthermore, some of the Company’s manufacturers and suppliers are in Europe and may be impacted by port closures
and other restrictions resulting from the coronavirus outbreak, which may disrupt the Company’s supply chain or limit its
ability to obtain sufficient materials for our products.
The
ultimate impact of the COVID-19 outbreak or similar health epidemics are highly uncertain and subject to changes, and the Company
cannot presently predict the scope and severity of any potential business shutdowns or disruptions. However, if the Company or
any of the third parties with whom the Company’s engages, including the suppliers, animal trial sites, contract research
organizations, regulators, including the FDA health care providers and other third parties with whom the Company conducts business,
were to experience shutdowns or other business disruptions, the Company’s ability to conduct our business and operations
could be materially and negatively impacted, which could prevent or delay the Company from obtaining approval for its devices.
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.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
significant accounting policies applied in the preparation of the financial statements are as follows:
|
A.
|
Basis
of presentation:
|
The
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America
(“US GAAP”).
|
B.
|
Financial
statement in U.S. dollars:
|
The
functional currency of the Company is the U.S. dollar (“dollar”) since the dollar is the currency of the primary economic
environment in which the Company has operated and expects to continue to operate in the foreseeable future.
Transactions
and balances denominated in dollars are presented at their original amounts. Transactions and balances denominated in foreign
currencies have been re-measured to dollars in accordance with the provisions of ASC 830-10, “Foreign Currency Translation”.
All
transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected
in the statement of operations as financial income or expenses, as appropriate.
|
C.
|
Principles
of consolidation:
|
The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Inter-company balances
and transactions have been eliminated in consolidation.
|
D.
|
Cash
and cash equivalents:
|
Cash
and cash equivalents consist of cash and demand deposits in banks, and other short-term liquid investments (primarily interest-bearing
time deposits) with original maturities of less than three months.
Restricted
cash as of December 31, 2020 included an $84 collateral account for the Company’s lease agreements and credit line from
its commercial bank.
|
F.
|
Fair
value of financial instruments:
|
The
carrying values of cash and cash equivalents, other assets and accounts payable and accrued liabilities approximate their fair
value due to the short-term maturity of these instruments.
The
Company measures the fair value of certain of its financial instruments (such as marketable securities) on a recurring basis.
Marketable securities are discussed in Note 3.
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.
|
G.
|
Concentrations
of credit risk
|
Financial
instruments which potentially subject the Company to credit risk consist primarily of cash and cash equivalents. The Company holds
these investments in highly rated financial institutions. These amounts at times may exceed federally insured limits. The Company
has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these
funds. The Company has no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option
contracts, or other hedging arrangements.
|
H.
|
Property
and equipment:
|
Fixed
assets are presented at costs less accumulated depreciation. Depreciation is calculated based on the straight-line method over
the estimated useful lives of the assets, at the following annual rates:
|
|
%
|
|
|
|
|
|
Research
equipment and software
|
|
|
25-33
|
|
Furniture
and office equipment
|
|
|
7
|
|
Leasehold
improvements
|
|
|
Over
the lease period
|
|
|
I.
|
Liabilities
due to termination of employment agreements:
|
Under
Israeli employment laws, employees of Microbot Israel are included under Article 14 of the Severance Compensation Act, 1963 (“Article
14”). According to Article 14, these employees are entitled to monthly deposits made by Microbot Israel on their behalf
with insurance companies. Payments in accordance with Article 14 release Microbot Israel from any future severance payments (under
the Israeli Severance Compensation Act, 1963) with respect of those employees. The aforementioned deposits are not recorded as
an asset in the Company’s consolidated balance sheets.
|
J.
|
Basic
and diluted net loss per share:
|
Basic
net loss per share is computed by dividing net loss, as adjusted to include the weighted average number of shares of common stock
outstanding during the year.
Diluted
net loss per share is computed by dividing net loss, as adjusted, by the weighted average number of shares of common stock outstanding
during the year, plus the number of shares of common stock that would have been outstanding if all potentially dilutive shares
of common stock had been issued, using the treasury stock method, in accordance with ASC 260-10 “Earnings per Share”.
All
outstanding stock options and warrants have been excluded from the calculation of the diluted loss per share for the years ended
December 31, 2020 and December 31, 2019, since all such securities have an anti-dilutive effect.
|
K.
|
Research
and development expenses, net:
|
Research
and development expenses are charged to the consolidated statements of operations as incurred. Grants for funding of approved
research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs
incurred and applied as a deduction from the research and development expenses.
|
L.
|
Share-based
compensation:
|
The
Company applies ASC 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation
expenses for all share-based payment awards made to employees and directors including stock options under the Company’s
stock plans based on estimated fair values.
ASC
718-10 requires companies to estimate the fair value of stock options using an option-pricing model. The value of the portion
of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s
statement of operations, which is recognized based on a straight line method.
The
Company accounts for shares and warrant grants issued to non-employees using the guidance of ASU No. 2018-07 “Compensation
- Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” which expand the scope of
Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based
payments issued to nonemployees for goods or services.
The
Company estimates the fair value of stock options granted as share-based payment awards using a Black-Scholes options pricing
model. The option-pricing model requires a number of assumptions, of which the most significant are expected volatility and the
expected option term (the time from the grant date until the options are exercised or expire). Expected volatility is estimated
based on volatility of similar companies in the technology sector for equity awards granted prior to the Merger and on the Company’s
trading share price for equity awards granted subsequent to the Merger. The Company has historically not paid dividends and has
no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds
with an equivalent term. The expected stock option term is calculated for stock options granted to employees and directors using
the “simplified” method. Grants to non-employees are based on the contractual term. Changes in the determination of
each of the inputs can affect the fair value of the stock options granted and the results of operations of the Company.
Certain
prior year amounts have been reclassified to conform to the current year presentation.
The
Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based
on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these
differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available
evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2020,
and 2019, the Company had a full valuation allowance against deferred tax assets.
|
O.
|
Marketable
securities:
|
Marketable
securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses net of tax, if any,
are reported as a separate component of shareholders’ equity. The cost of marketable debt securities classified as available–for-sale
is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included
in finance income. Realized gains and losses and declines in value judged to be other than temporary, if any, are also included
in other income, net. Interest earned on securities classified as available-for-sale is included in interest income. The cost
of securities sold is based on the specific identification method.
Management
evaluates whether available-for-sale securities are other-than-temporarily impaired (OTTI) on a quarterly basis. Debt securities
with unrealized losses are considered OTTI if the Company intends to sell the security or if it is more likely than not that the
Company will be required to sell such security prior to any anticipated recovery. If management determines that a security is
OTTI under these circumstances, the impairment recognized in earnings is measured as the entire difference between the amortized
cost and the then-current fair value. During the years 2020 and 2019, no investment OTTI losses were realized.
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (“ASU 2016-02”).
ASU 2016-02 requires entities that leased assets be recognized on the balance sheet as assets and liabilities for the rights and
obligations created by leases with lease terms of more than 12 months. The Company adopted this ASU effective January 1, 2019
using the modified retrospective application, applying the new standard to leases in place as of the adoption date. Prior periods
have not been adjusted.
Arrangements
that are determined to be leases at inception are recognized as long-term right-of-use assets (“ROU”) and lease liabilities
in the consolidated balance sheets as of the lease commencement date. Operating lease ROU assets and operating lease liabilities
are recognized based on the present value of the future fixed lease payments over the lease term at the lease commencement date.
As most of the Company’s leases do not provide an implicit rate, the Company applies its incremental borrowing rate based
on the economic environment at the lease commencement date in determining the present value of future payments. Lease terms may
include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease
expense for operating leases or payments are recognized on a straight-line basis over the lease term.
ASU
2016-02 provided a number of optional practical expedients upon implementation. The Company elected the transition package of
practical expedients available in the standard, which permitted the Company to not reassess under the new standard the Company’s
prior conclusions about lease identification, lease classification, and initial direct costs and the practical expedient to not
account for lease and non-lease components separately.
Management
records and discloses legal contingencies in accordance with ASC Topic 450 Contingencies. A provision is recorded 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 to determine if any adjustments are required.
|
R.
|
Recently
issued accounting pronouncements:
|
From
time to time, new accounting pronouncements are issued by the FASB, 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 our financial position or results of operations upon adoption.
In
August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which
will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard
removes, modifies, and adds certain disclosure requirements, and is effective for the Company beginning on January 1, 2020. The
adoption of ASU 2018-13 on January 1, 2020 did not have a material impact on the Company’s consolidated financial statements.
|
S.
|
Recently
issued accounting pronouncements not yet adopted:
|
In
June 2016, the FASB issued ASU 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 ASU is effective for smaller reporting
companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 (January 1, 2023
for the Company) with early adoption permitted. The Company is currently evaluating the
impact this guidance may have on its consolidated financial statements and related disclosures.
In
December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” which eliminates the need
for an organization to analyze whether the following apply in a given period: (1) exception to the incremental approach for intraperiod
tax allocation; (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and
(3) exceptions in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The ASU also is
designed to improve financial statement preparers’ application of income tax-related guidance and simplify GAAP for (1)
franchise taxes that are partially based on income, (2) transactions with a government that result in a step-up in the tax basis
of goodwill, (3) separate financial statements of legal entities that are not subject to tax, and (4) enacted changes in tax laws
in interim periods. The standard is effective for the Company on January 1, 2021 with early
adoption permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements
and related disclosures.
NOTE
3 – FAIR VALUE MEASUREMENTS
The
following table summarizes the Company’s financial assets subject to fair value measurement and the level of inputs used
in such measurements as of December 31, 2020 and 2019:
|
|
As
of December 31, 2020
|
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
market funds
|
|
$
|
8,585
|
|
|
$
|
8,585
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
cash equivalents
|
|
|
8,585
|
|
|
|
8,585
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
money market funds
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
-
|
|
US
Treasury Bond
|
|
|
2,998
|
|
|
|
2,998
|
|
|
|
-
|
|
|
|
-
|
|
Total
marketable securities:
|
|
|
4,998
|
|
|
|
4,998
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
loan investment (see Note 4)
|
|
|
270
|
|
|
|
-
|
|
|
|
-
|
|
|
|
270
|
|
|
|
|
270
|
|
|
|
-
|
|
|
|
-
|
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
13,853
|
|
|
$
|
13,583
|
|
|
$
|
-
|
|
|
$
|
270
|
|
|
|
As
of December 31, 2019
|
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
market funds
|
|
$
|
1,052
|
|
|
$
|
1,052
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
cash equivalents
|
|
|
1,052
|
|
|
|
1,052
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Treasury Bond
|
|
|
2,521
|
|
|
|
2,521
|
|
|
|
-
|
|
|
|
-
|
|
Total
marketable securities:
|
|
|
2,521
|
|
|
|
2,521
|
|
|
|
-
|
|
|
|
-
|
|
Total
assets
|
|
|
3,573
|
|
|
|
3,573
|
|
|
|
-
|
|
|
|
-
|
|
The
contractual maturity of the marketable securities noted above are one year.
NOTE
4 - OTHER CURRENT ASSETS
|
|
As
of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Amounts
due from government institutions
|
|
$
|
70
|
|
|
$
|
101
|
|
Convertible
loan investment (1)
|
|
|
270
|
|
|
|
-
|
|
Prepaid
expenses and others
|
|
|
181
|
|
|
|
185
|
|
|
|
$
|
521
|
|
|
$
|
286
|
|
(1)
|
During
2020, the Company granted a convertible loan in the amount of $200 bearing annual interest of 5%. The loan and accumulated
interest will be converted under certain terms and conditions as detailed in the agreement. Also, the Company has the right
to receive back the loan and accumulated interest in cash as detailed in the agreement. In March 2021, the Company converted
this loan and received total consideration of $270.
|
NOTE
5 - LEASES
We
have lease agreements with lease and non-lease components, which we account for as a single lease component. Variable lease payments
based on an index or rate are initially measured using the index or rate in effect at the lease commencement and included in the
measurement of the lease liability; thereafter, changes to lease payments due to rate or index updates are recorded as rent expense
in the period incurred. We have 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 our ROU assets and lease liabilities was not material. Our lease agreements
do not contain any material residual value guarantees or material restrictive covenants. In addition, we do not have any related
party leases and our sublease transactions are de minimis.
Supplemental
cash flow information related to operating leases was as follows:
|
|
For
the Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Cash
payments for operating leases
|
|
$
|
229
|
|
|
$
|
354
|
|
Undiscounted
maturities of operating lease payments as December 31, 2020 and December 31,2019 are summarized as follows:
|
|
As
of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
2020
|
|
$
|
-
|
|
|
$
|
216
|
|
2021
|
|
|
248
|
|
|
|
234
|
|
2022
|
|
|
193
|
|
|
|
180
|
|
2023
|
|
|
187
|
|
|
|
174
|
|
2024
|
|
|
188
|
|
|
|
176
|
|
2025
|
|
|
166
|
|
|
|
154
|
|
Total
future lease payments
|
|
|
982
|
|
|
|
1,134
|
|
Less
imputed interest
|
|
|
(169
|
)
|
|
|
(231
|
)
|
Total
lease liability balance
|
|
$
|
813
|
|
|
$
|
903
|
|
Leases
recorded on the consolidated balance sheets consist of the following:
|
|
As
of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Operating
lease right-of -use asset
|
|
$
|
775
|
|
|
$
|
962
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Operating
lease - current
|
|
$
|
187
|
|
|
$
|
143
|
|
Operating
lease - non-current
|
|
|
626
|
|
|
|
760
|
|
|
|
$
|
813
|
|
|
$
|
903
|
|
|
|
As
of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Operating
leases weighted average remaining lease term (in years)
|
|
|
4
|
|
|
|
2.5
|
|
Operating
leases weighted average discount rate
|
|
|
9
|
%
|
|
|
9
|
%
|
NOTE
6 - PROPERTY AND EQUIPMENT, NET
|
|
As
of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
Research
equipment and software
|
|
$
|
63
|
|
|
$
|
52
|
|
Leasehold
improvements
|
|
|
211
|
|
|
|
161
|
|
Furniture
and office equipment
|
|
|
190
|
|
|
|
160
|
|
|
|
|
464
|
|
|
|
373
|
|
Accumulated
Depreciation:
|
|
|
|
|
|
|
|
|
Research
equipment and software
|
|
|
54
|
|
|
|
38
|
|
Leasehold
improvements
|
|
|
47
|
|
|
|
4
|
|
Furniture
and office equipment
|
|
|
112
|
|
|
|
103
|
|
|
|
|
213
|
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
251
|
|
|
$
|
228
|
|
NOTE
7 - ACCRUED LIABILITIES
|
|
As
of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Employee-related
liabilities
|
|
$
|
619
|
|
|
$
|
187
|
|
Accrued
expenses from the merger
|
|
|
131
|
|
|
|
131
|
|
Accrued
expenses
|
|
|
264
|
|
|
|
464
|
|
|
|
$
|
883
|
|
|
$
|
795
|
|
NOTE
8 - COMMITMENTS AND CONTINGENCIES
Government
Grants:
Microbot
Israel has received grants from the Israeli Innovation Authority (“IIA”) for participation in research and development
since 2013 through 2020, totaling approximately $1,500. In return, the Company is obligated to pay royalties amounting to 3%-3.5%
of its future sales from commercialization of the funded research and development, up to the amount of the grants received.
The
payment of royalties with respect to 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.
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 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.
Agreement
with CardioSert Ltd.:
On
January 4, 2018, Microbot Israel entered into an agreement with CardioSert Ltd. (“CardioSert”) to acquire certain
patent-protected technology owned by CardioSert (the “Technology”).
Pursuant
to the Agreement, Microbot Israel made an initial payment of $50 to CardioSert and had 90-days to elect to complete the acquisition.
At the end of the 90-day period, at Microbot Israel’s sole option, CardioSert shall assign and transfer the Technology to
Microbot Israel and Microbot Israel shall pay to CardioSert additional amounts and securities as determined in the agreement.
On
May 25, 2018, Microbot delivered an Exercise Notice to CardioSert Ltd., notifying it
that Microbot elected to exercise the option to acquire the Technology owned by CardioSert
and therefore made an additional cash payment of $250 and 6,738 shares of common stock
estimated at $74.
The
agreement may be terminated by Microbot Israel at any time for convenience upon 90-days’ notice. The 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 agreement
except if Microbot Israel has invested more than $2,000 in certain development stages, or the first commercial sale does not occur
within 50 months. 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 $1.00, upon 60 days prior written notice, but only 1 year after such
termination. Additionally, the agreement may be terminated by either party upon breach of the other (subject to cure).
CardioSert
agreed to assist Microbot Israel in the development of the Technology for a minimum of one year, for a monthly consultation fee
of NIS 40,000 (or approximately US$12.40, based on an exchange rate of NIS3.215 to the dollar) covering up to 60 consulting hours
per month.
Litigation:
Litigation
Resulting from 2017 Financing
The
Company lost its appeal of an adverse judgment in the lawsuit captioned Sabby Healthcare Master Fund Ltd. and Sabby Volatility
Warrant 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. 654581/2017). As a result, the Securities Purchase Agreement (the “SPA”) related to
the Company’s June 8, 2017 equity financing (the “Financing”) was rescinded as it related to Sabby Healthcare
Master Fund Ltd. and Sabby Volatility Warrant Master Fund Ltd. (“Sabby”), and the Company paid approximately $3,700
to Sabby in return for the 83,333 shares of common stock Sabby purchased pursuant to the SPA. Soon after, 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 (the “Court”) (Index No. 651182/2020). The complaint alleges, among other things, that the Company breached
multiple representations and warranties contained in the SPA, 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’ $6,750 purchase price with
respect to the Financing. The Company filed a Motion to Dismiss on March 16, 2020, which was denied in February 2021.
The
Company’s management is unable to assess the likelihood that it would be successful in any trial with respect to the SPA
or the Financing, having previously lost the Sabby lawsuit. Accordingly, no assurance can be given that if the Company goes to
trial and ultimately loses, or if the Company decides to settle at any time, such an adverse outcome would not be material to
the Company’s consolidated financial position.
Alliance
Litigation
On
April 28, 2019, the Company brought an action against Alliance Investment Management, Ltd. (“Alliance”), later amended
to include Joseph Mona (“Mona”) as a defendant, in the Southern District of New York under Section 16(b) of the Securities
Exchange Act of 1934, 15 U.S.C. 78p(b), to compel Alliance and 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 case is Microbot Medical Inc. v. Alliance
Investment Management, Ltd., No. 19-cv-3782-GBD (SDNY). The amount of profits was estimated in the complaint to be approximately
$468.
On
October 28, 2019, Alliance filed a motion for summary judgment requesting that the Court dismiss the claims against Alliance.
On February 4, 2020, Mona answered the 16(b) claim the Company asserted against him by claiming various equitable defenses, and
filed a counterclaim against the Company under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder, claiming a net loss on trading the Company’s stock of approximately $151.
On
March 6, 2020, the Company filed a motion for judgment on the pleadings with respect to the Company’s 16(b) claim against
Mona, together with a motion to dismiss Mona’s 10(b) counterclaim.
On
September 17, 2020, the Court issued a Memorandum Decision & Order that, among other things, granted Alliance’s summary
judgment motion. The Company’s Section 16(b) claim against Mona remained pending following the Court’s dismissal of
the Section 16(b) claim against Alliance.
On
December 18, 2020, the Magistrate Judge issued a Report & Recommendation, which recommended that: (i) judgment of $484,614.30
be entered in the Company’s favor on its Section 16(b) claim against Mona; and (ii) Mona’s Section 10(b) claim be
dismissed with prejudice (except as to allegations regarding statements purportedly made by employees of Integra Consulting, an
outside investor relations firm, which the Magistrate recommended be dismissed without prejudice). On January 4, 2021, Mona filed
Objections to the Magistrate’s Report & Recommendation, which is pending.
NOTE
9 - SHARE CAPITAL
Share
Capital Developments:
As
of December 31, 2020, and December 31, 2019, the Company had 7,108,133 and 7,185,628
shares of common stock issued and outstanding, respectively.
On
January 14, 2019, the Company entered into a Securities Purchase Agreement with an accredited institutional investor providing
for the issuance and sale by the Company to the purchaser of an aggregate of (i) 330,000 shares of the Company’s common
stock, at a purchase price per share of $6.50 and (ii) 125,323 pre-funded warrants each to purchase one share of common stock,
at a purchase price per Pre-Funded Warrant of $6.49. The gross proceeds to the Company were approximately $3,000 before deducting
placement agent fees and other offering expenses of approximately $688. The closing of the offering took place on January 15,
2019. The pre-funded warrants were exercised in full in January 2019. As part of the offering the company issued to the underwriter
22,767 warrants for 3.5 years with an exercise price of $8.125 for total value of $165.
On
January 15, 2019, the Company entered into a Securities Purchase Agreement with certain accredited institutional investors providing
for the issuance and sale by the Company to the purchasers of an aggregate of 590,000 shares of the Company’s common stock,
at a purchase price per share of $10.00. The gross proceeds to the Company were approximately $5,900 before deducting placement
agent fees and other offering expenses of approximately $720. The closing of the offering took place on January 17, 2019. As part
of the offering the company issued to the underwriter 29,500 warrants for 3.5 years with exercise price of $12.50 for total value
of $221.
On
January 23, 2019 the Company entered into a Securities Purchase Agreement with accredited institutional investors providing for
the issuance and sale by the Company to the purchasers of an aggregate of 250,000 shares of the Company’s common stock,
at a purchase price per share of $9.875. The investors also purchased warrants to purchase an aggregate of up to 250,000 shares
of the Company’s common stock, at a purchase price per warrant of $0.125. The warrants were exercisable for 1 year and had
an exercise price of $10.00 per share, for a total value of $2,019. The gross proceeds to the Company from the sale of the shares
and warrants were approximately $2,500 before deducting placement agent fees and other offering expenses of approximately $370.
The closing of the offering took place on January 25, 2019. As part of the offering the company issued to the underwriter 12,500
warrants for 1 year with an exercise price of $12.50 for total value of $99.
On
December 25, 2019 the Company entered into a Securities Purchase Agreement with accredited institutional investors providing for
the issuance and sale by the Company to the purchasers of an aggregate of 912,858 shares of the Company’s common stock,
at a purchase price per share of $10.50. The gross proceeds to the Company were approximately $9,585 before deducting placement
agent fees and other offering expenses of approximately $1,090. The closing of the offering took place on December 27, 2019. As
part of the offering the Company issued to the underwriter 45,643 warrants for 3.5 years with an exercise price of $13.125 for
total value of $371.
On
December 27, 2019 the Company entered into a Securities Purchase Agreement with accredited institutional investors providing for
the issuance and sale by the Company to the purchasers of an aggregate of 952,383 shares of the Company’s common stock,
at a purchase price per share of $10.50. The gross proceeds to the Company were approximately $10,000 before deducting placement
agent fees and other offering expenses of approximately $1,010. The closing of the offering took place on December 30, 2019. As
part of the offering the Company issued to the underwriter 47,619 warrants for 3.5 years with an exercise price of $13.125 for
total value of $366.
On
December 30, 2019 the Company entered into a Securities Purchase Agreement with accredited institutional investors providing for
the issuance and sale by the Company to the purchasers of an aggregate of 900,901 shares of the Company’s common stock,
at a purchase price per share of $11.10. The gross proceeds to the Company were approximately $10,000 before deducting placement
agent fees and other offering expenses of approximately $1,010. The closing of the offering took place on December 31, 2019. As
part of the offering the Company issued to the underwriter 45,045 warrants for 3.5 years with an exercise price of $13.875 for
total value of $343.
Employee
Stock Option Grants
On
January 21, 2019, the board of directors approved a grant of 11,630 stock options to purchase an aggregate of up to 11,630 shares
of common stock to certain of its directors, at an exercise price per share of $8.60. The stock options vest over a period of
3 years as outlined in the option agreements. As a result, the Company recognized compensation expenses as of December
31, 2020 and 2019 in the total amount of $25 and $43, respectively, included in general and administrative expenses.
On
August 12, 2019, the board of directors approved a grant of 17,503 stock options to purchase an aggregate of up to 17,503 shares
of common stock to certain of its employees, at an exercise price per share of $5.95. The stock options vest over a period of
3 years as outlined in the option agreements. As a result, the Company recognized compensation expenses as of December
31, 2020 and 2019 in the total amount of $32 and $12, respectively, included in general and administrative expenses.
On
October 23, 2019, the board of directors approved a grant of 19,760 stock options to purchase an aggregate of up to 19,760 shares
of common stock to certain of its directors, at an exercise price per share of $5.06. The stock options vest over a period of
3 years as outlined in the option agreements. As a result, the Company recognized compensation expenses as of December
31, 2020 and 2019 in the total amount of $27 and $6, respectively, included in general and administrative expenses.
On
February 25, 2020, the board of directors approved a grant of 166,666 stock options to purchase an aggregate of up to 166,666
shares of common stock to Mr. Harel Gadot, the Company’s Chairman of the Board, President and CEO, at an exercise price
per share of $9.64. The stock options vest over a period of 1 years as outlined in the option agreements. As a result, the Company
recognized compensation expenses as of December 31, 2020 in the total amount of $1,237
included in general and administrative expenses.
On
July 14, 2020, the board of directors approved grants of stock options to purchase an aggregate of up to 31,492 shares of common
stock to an independent director and to an officer, each at an exercise price per share of $6.16. The stock options vest over
a period of 3 years as outlined in the option agreements. As a result, the Company recognized compensation expenses as of December
31, 2020 in the total amount of $27, included in general and administrative expenses.
On
August 14, 2020, the board of directors approved a grant of stock options to purchase up to 4,902 shares of common stock to an
independent director, at an exercise price per share of $8.16. The stock options vest over a period of 3 years as outlined in
the option agreements. As a result, the Company recognized compensation expenses as of December
31, 2020 in the total amount of $4, included in general and administrative expenses.
On
November 5, 2020, the Company granted to independent directors of the Company, options to purchase an aggregate of 11,084 shares
of the Company’s common stock, at an exercise price per share of $7.22. The stock options vest over a period of 3 years
as outlined in the option agreements. As a result, the Company recognized compensation expenses as of December
31, 2020 in the total amount of $3 included in general and administrative expenses.
A
summary of the Company’s option activity related to options to employees and directors, and related information is as follows:
|
|
For
the Year ended December 31, 2020
|
|
|
|
Number
of stock options
|
|
|
Weighted
average exercise price
|
|
|
|
|
|
|
|
|
Outstanding
as of December 31, 2019
|
|
|
371,360
|
|
|
$
|
9.19
|
|
Granted
|
|
|
214,145
|
|
|
|
9.0
|
|
Exercised
|
|
|
(965
|
)
|
|
|
(*
|
)
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
(8,818
|
)
|
|
|
9.10
|
|
Outstanding
as of December 31, 2020
|
|
|
575,722
|
|
|
$
|
9.14
|
|
|
|
|
|
|
|
|
|
|
Vested
at end of period
|
|
|
332,104
|
|
|
$
|
9.13
|
|
|
|
For
the Year ended December 31, 2019
|
|
|
|
Number
of stock options
|
|
|
Weighted
average exercise price
|
|
|
|
|
|
|
|
|
Outstanding
as of December 31, 2018
|
|
|
398,308
|
|
|
$
|
11.50
|
|
Granted
|
|
|
48,893
|
|
|
|
6.20
|
|
Forfeited
|
|
|
(28,690
|
)
|
|
|
15.30
|
|
Cancelled
|
|
|
(47,151
|
)
|
|
|
19.35
|
|
Outstanding
as of December 31, 2019
|
|
|
371,360
|
|
|
$
|
9.19
|
|
|
|
|
|
|
|
|
|
|
Vested
at end of period
|
|
|
270,827
|
|
|
$
|
8.48
|
|
(*)
Less than $0.01.
The
intrinsic value is calculated as the difference between the fair market value of the common stock 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 as of December 31, 2020
and December 31, 2019, respectively.
As
of December 31, 2020, and 2019, the aggregate intrinsic value of the outstanding options is $702 and $1,305 respectively, and
the aggregate intrinsic value of the exercisable options is $657 and $1,115, respectively.
As
of December 31, 2020, there were approximately $730 of total unrecognized compensation costs, net of expected forfeitures, related
to unvested share-based compensation awards granted under the Share Incentive Plan. The costs are expected to be recognized over
a weighted average period of 0.75 years
The
stock options outstanding as of December 31, 2020 and December 31, 2019, summarized
by exercise prices, are as follows:
Exercise
price $
|
|
|
Stock
options outstanding as of December 31, 2020
|
|
|
Stock
options outstanding as of December 31, 2019
|
|
|
Weighted
average remaining contractual life – years as of December 31, 2020
|
|
|
Weighted
average remaining contractual life – years as of December 31, 2019
|
|
|
Stock
options exercisable as of December 31, 2020
|
|
|
Stock
options exercisable as of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.20
|
|
|
|
77,846
|
|
|
|
77,846
|
|
|
|
4.0
|
|
|
|
6.0
|
|
|
|
77,846
|
|
|
|
77,846
|
|
|
6.16
|
|
|
|
31,492
|
|
|
|
-
|
|
|
|
9.5
|
|
|
|
-
|
|
|
|
6,250
|
|
|
|
-
|
|
|
8.16
|
|
|
|
4,902
|
|
|
|
-
|
|
|
|
9.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
7.22
|
|
|
|
11,084
|
|
|
|
-
|
|
|
|
9.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
15.75
|
|
|
|
131,007
|
|
|
|
133,546
|
|
|
|
6.7
|
|
|
|
7.8
|
|
|
|
118,308
|
|
|
|
90,641
|
|
|
8.60
|
|
|
|
9,304
|
|
|
|
11,630
|
|
|
|
8.1
|
|
|
|
9.9
|
|
|
|
7,208
|
|
|
|
5,515
|
|
|
9.00
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
7.6
|
|
|
|
8.8
|
|
|
|
7,750
|
|
|
|
4,750
|
|
|
9.64
|
|
|
|
166,666
|
|
|
|
-
|
|
|
|
9.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
5.95
|
|
|
|
17,503
|
|
|
|
17,503
|
|
|
|
8.6
|
|
|
|
9.7
|
|
|
|
8,312
|
|
|
|
-
|
|
|
5.06
|
|
|
|
15,808
|
|
|
|
19,760
|
|
|
|
8.8
|
|
|
|
9.8
|
|
|
|
6,320
|
|
|
|
-
|
|
|
15.30
|
|
|
|
38,533
|
|
|
|
38,533
|
|
|
|
7.0
|
|
|
|
8.0
|
|
|
|
38,533
|
|
|
|
29,533
|
|
|
(*)
|
|
|
|
61,577
|
|
|
|
62,542
|
|
|
|
5.3
|
|
|
|
6.8
|
|
|
|
61,577
|
|
|
|
62,542
|
|
|
|
|
|
|
575,722
|
|
|
|
371,360
|
|
|
|
7.3
|
|
|
|
8.3
|
|
|
|
332,104
|
|
|
|
270,827
|
|
(*)
Less than $0.01.
Compensation
expense recorded by the Company for its stock-based employee compensation awards in accordance with ASC 718-10 for the Years ended
December 31, 2020 and 2019 was $1,937 and $1,099, respectively.
The
grant date fair values of stock options granted in the years ended December 31, 2020 and 2019 were estimated using the Black-Scholes
valuation model with the following:
|
|
Year
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Expected
volatility
|
|
|
113.86%-135.21
|
%
|
|
|
132.63%-144.4
|
%
|
Risk-free
interest
|
|
|
0.33%-1.62
|
%
|
|
|
1.49%-2.62
|
%
|
Dividend
yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected
life of up to (years)
|
|
|
5.5-5.8
|
|
|
|
5.3
|
|
Warrants
The
remaining outstanding warrants and terms as of December 31, 2020 and December 31,
2019 are as follows:
Issuance
date
|
|
Outstanding
as of December 31, 2020
|
|
|
Outstanding
as of December 31, 2019
|
|
|
Exercise
Price
|
|
|
Exercisable
as of December 31, 2020
|
|
|
Exercisable
Through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
A (2013)
|
|
|
183
|
|
|
|
183
|
|
|
$
|
2,754.00
|
|
|
|
183
|
|
|
April
9, 2023
|
Series
A (2015)
|
|
|
-
|
|
|
|
683
|
|
|
$
|
1,377.00
|
|
|
|
-
|
|
|
April
30, 2020
|
Series
B (2016)
|
|
|
2,770
|
|
|
|
2,770
|
|
|
$
|
40.50
|
|
|
|
2,770
|
|
|
March
14, 2022
|
Warrant
to underwriters 1.2019
|
|
|
8,082
|
|
|
|
22,767
|
|
|
$
|
8.13
|
|
|
|
8,082
|
|
|
July
14, 2022
|
Warrant
to underwriters 1.2019
|
|
|
29,500
|
|
|
|
29,500
|
|
|
$
|
12.50
|
|
|
|
29,500
|
|
|
July
15, 2022
|
Warrant
to underwriters 1.2019
|
|
|
-
|
|
|
|
12,500
|
|
|
$
|
12.50
|
|
|
|
-
|
|
|
January
15, 2020
|
Warrant
to underwriters 12.2019
|
|
|
45,643
|
|
|
|
45,643
|
|
|
$
|
13.13
|
|
|
|
45,643
|
|
|
June
25, 2023
|
Warrant
to underwriters 12.2019
|
|
|
47,619
|
|
|
|
47,619
|
|
|
$
|
13.13
|
|
|
|
47,619
|
|
|
June
27, 2023
|
Warrant
to underwriters 12.2019
|
|
|
45,045
|
|
|
|
45,045
|
|
|
$
|
13.88
|
|
|
|
45,045
|
|
|
June
30, 2023
|
In
December 2019, 125,000 outstanding warrants at an exercise price per share of $10.00, were exercised on a “net exercise”
or “cashless” basis into 61,677 shares of common stock, and 125,000 outstanding warrants at an exercise price per
share of $10.00, were exercised on a “net exercise” or “cashless” basis into 50,143 shares of common stock.
All of such warrants were issued in January 2019.
In
August 2020, 14,685 outstanding warrants at an exercise price per share of $8.13, were exercised on a “net exercise”
or “cashless” basis into 4,873 shares of common stock All of such warrants were issued in January 2019.
NOTE
10 - RESEARCH AND DEVELOPMENT EXPENSES, NET
|
|
Years
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Payroll
and related expenses
|
|
$
|
1,596
|
|
|
$
|
1,404
|
|
Share-based
compensation
|
|
|
121
|
|
|
|
131
|
|
Professional
services
|
|
|
761
|
|
|
|
585
|
|
Materials
|
|
|
273
|
|
|
|
545
|
|
Patents
|
|
|
255
|
|
|
|
79
|
|
Rent
|
|
|
195
|
|
|
|
178
|
|
Office
and maintenance expenses
|
|
|
94
|
|
|
|
61
|
|
Depreciation
|
|
|
64
|
|
|
|
76
|
|
Other
|
|
|
37
|
|
|
|
17
|
|
Less:
Grants received from IIA & EC
|
|
|
-
|
|
|
|
(28
|
)
|
|
|
$
|
3,396
|
|
|
$
|
3,048
|
|
NOTE
11 - GENERAL AND ADMINISTRATIVE EXPENSES
|
|
Years
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Payroll
and related expenses
|
|
$
|
1,500
|
|
|
$
|
850
|
|
Government
fees
|
|
|
334
|
|
|
|
199
|
|
Share-based
compensation
|
|
|
1,816
|
|
|
|
968
|
|
Professional
services
|
|
|
1,036
|
|
|
|
1,282
|
|
Insurance
|
|
|
500
|
|
|
|
266
|
|
Public
and investor relations
|
|
|
272
|
|
|
|
169
|
|
Office
and maintenance expenses
|
|
|
126
|
|
|
|
157
|
|
Travel
|
|
|
62
|
|
|
|
246
|
|
Other
|
|
|
43
|
|
|
|
47
|
|
Depreciation
|
|
|
4
|
|
|
|
8
|
|
|
|
$
|
5,693
|
|
|
$
|
4,192
|
|
NOTE
12 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES
|
|
Year
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Transactions:
|
|
|
|
|
|
|
|
|
Payroll
and related expenses
|
|
$
|
2,974
|
|
|
$
|
1,094
|
|
Directors’
fees and insurance
|
|
|
807
|
|
|
|
569
|
|
|
|
$
|
3,781
|
|
|
$
|
1,663
|
|
|
|
As
of December 31,
|
|
|
|
|
2020
|
|
|
|
2019
|
|
Balances:
|
|
|
|
|
|
|
|
|
Other
accounts payable
|
|
$
|
313
|
|
|
$
|
228
|
|
MICROBOT
MEDICAL INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands
(Except
share and per share data)
NOTE
13 - 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 23% for the years ended 2020 and 2019.
The
Company is subject to a U.S. Federal tax of 21% for the years ended December 31, 2020 and 2019.
As
of December 31, 2020, the Company generated net operating losses in Israel of approximately $19,773 which may be carried forward
and offset against taxable income in the future for an indefinite period.
As
of December 31, 2020, the Company incurred net operating losses in the U.S. of approximately $492,487. 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.
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.
|
|
Year
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
Net
operating loss carry-forwards
|
|
$
|
512,260
|
|
|
$
|
503,065
|
|
|
|
|
|
|
|
|
|
|
Other
net deferred tax assets
|
|
|
107,574
|
|
|
|
115,705
|
|
Valuation
allowance
|
|
|
(107,574
|
)
|
|
|
(115,705
|
)
|
Net
deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
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:
|
|
Year
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net loss in Israel
|
|
$
|
4,042
|
|
|
$
|
3,972
|
|
Net loss in U.S.
|
|
|
5,127
|
|
|
|
3,275
|
|
Statutory tax rate
|
|
|
21-23
|
%
|
|
|
21-23
|
%
|
Income Tax under statutory tax rate
|
|
|
2,005
|
|
|
|
1,601
|
|
Change in valuation
allowance
|
|
|
(2,005
|
)
|
|
|
(1,601
|
)
|
Actual provision
for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|