Item
1. Financial Statements
MICROBOT
MEDICAL INC.
INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S.
dollars in thousands
(Except
share data)
|
|
Note
|
|
|
As
of
September 30, 2017
|
|
|
As
of
December 31, 2016
|
|
|
|
|
|
|
Unaudited
|
|
|
Audited
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
|
|
|
$
|
11,729
|
|
|
$
|
2,709
|
|
Other
receivables
|
|
|
|
|
|
|
472
|
|
|
|
606
|
|
Total
current assets
|
|
|
|
|
|
|
12,201
|
|
|
|
3,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Cash
|
|
|
|
|
|
|
27
|
|
|
|
-
|
|
Fixed
assets, net
|
|
|
|
|
|
|
66
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
|
|
$
|
12,294
|
|
|
$
|
3,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
|
|
|
|
$
|
21
|
|
|
$
|
512
|
|
Accrued
liabilities
|
|
|
|
|
|
|
486
|
|
|
|
271
|
|
Total
current liabilities
|
|
|
|
|
|
|
507
|
|
|
|
783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long
term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
|
3
|
|
|
|
-
|
|
|
|
76
|
|
Derivative
warrant liability
|
|
|
4
|
|
|
|
39
|
|
|
|
313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
|
|
|
|
546
|
|
|
|
1,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary
equity:
|
|
|
6
|
|
|
|
|
|
|
|
|
|
Common
stock of $0.01 par value;
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
and outstanding: 10,702,838 shares as of September 30, 2017 and December 31, 2016
|
|
|
|
|
|
|
500
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity:
|
|
|
6
|
|
|
|
|
|
|
|
|
|
Preferred
stock of $0.01 par value;
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized:
1,000,000 shares as of September 30, 2017 and December 31, 2016; Issued and outstanding: 7,037 and 9,736 shares of Series
A Convertible Preferred Stock as of September 30, 2017 and December 31, 2016, respectively
|
|
|
|
|
|
|
(*
|
)
|
|
|
(*
|
)
|
Common
stock of $0.01 par value;
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized:
220,000,000 shares as of September 30, 2017 and December 31, 2016; Issued and outstanding: 26,302,495 and 15,848,136 shares
as of September 30, 2017 and December 31, 2016, respectively
|
|
|
|
|
|
|
370
|
|
|
|
266
|
|
Additional
paid-in capital
|
|
|
|
|
|
|
29,915
|
|
|
|
14,465
|
|
Accumulated
deficit
|
|
|
|
|
|
|
(19,037
|
)
|
|
|
(13,035
|
)
|
Total
shareholders’ equity
|
|
|
|
|
|
|
11,248
|
|
|
|
1,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
|
|
|
|
$
|
12,294
|
|
|
$
|
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)
|
|
|
|
|
Nine
months ended
September 30,
|
|
|
Three
months ended
September 30,
|
|
|
|
Note
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development expenses, net
|
|
|
|
|
|
$
|
900
|
|
|
$
|
603
|
|
|
$
|
339
|
|
|
$
|
340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
|
|
|
|
2,830
|
|
|
|
1,120
|
|
|
|
896
|
|
|
|
305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
|
|
|
|
(3,730
|
)
|
|
|
(1,723
|
)
|
|
|
(1,235
|
)
|
|
|
(645
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
income (expenses), net
|
|
|
|
|
|
|
(2,272
|
)
|
|
|
(241
|
)
|
|
|
48
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
$
|
(6,002
|
)
|
|
$
|
(1,964
|
)
|
|
$
|
(1,187
|
)
|
|
$
|
(652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
|
7
|
|
|
$
|
(0.15
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.08
|
)
|
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
MICROBOT
MEDICAL INC.
INTERIM
CONDENSED STATEMENTS OF CHANGES IN EQUITY (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
6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
as of December 31, 2015
|
|
|
8,708,132
|
|
|
$
|
87
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
13,182,660
|
|
|
$
|
132
|
|
|
$
|
3,089
|
|
|
$
|
(3,372
|
)
|
|
$
|
(64
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
as of 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 Medical 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 (UNAUDITED)
U.S.
dollars in thousands
(Except
share data)
|
|
Preferred
A Shares
|
|
|
Common
Stock
|
|
|
Additional
paid-in
|
|
|
Accumulated
|
|
|
Total
shareholders’
|
|
|
Temporary
equity
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
equity
|
|
|
(Note
6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2016
|
|
|
9,736
|
|
|
$
|
-
|
|
|
|
**26,550,974
|
|
|
$
|
266
|
|
|
$
|
14,465
|
|
|
$
|
(13,035
|
)
|
|
$
|
1,696
|
|
|
$
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
4,450,000
|
|
|
|
45
|
|
|
|
12,657
|
|
|
|
-
|
|
|
|
12,702
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
1
|
|
|
|
175
|
|
|
|
-
|
|
|
|
176
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless
exercise of warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
359
|
|
|
|
(*
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(*
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment
of convertible notes and issuance of preferred A shares
|
|
|
3,255
|
|
|
|
(*
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
2,676
|
|
|
|
-
|
|
|
|
2,676
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of preferred A shares to common stock
|
|
|
(5,954
|
)
|
|
|
(*
|
)
|
|
|
5,954,000
|
|
|
|
58
|
|
|
|
(58
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,002
|
)
|
|
|
(6,002
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of September 30, 2017
|
|
|
7,037
|
|
|
$
|
(*
|
)
|
|
|
**37,005,333
|
|
|
$
|
370
|
|
|
$
|
29,915
|
|
|
$
|
(19,037
|
)
|
|
$
|
11,248
|
|
|
$
|
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
|
|
Nine
months ended
September 30,
|
|
|
Three
months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
$
|
(6,002
|
)
|
|
$
|
(1,964
|
)
|
|
$
|
(1,187
|
)
|
|
$
|
(652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
15
|
|
|
|
8
|
|
|
|
3
|
|
|
|
3
|
|
Interest
and amortization of discount on convertible notes
|
|
|
237
|
|
|
|
260
|
|
|
|
-
|
|
|
|
27
|
|
Financing
loss on debt extinguishment
|
|
|
2,364
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based
compensation expense
|
|
|
176
|
|
|
|
675
|
|
|
|
22
|
|
|
|
-
|
|
Changes
in fair value of derivative warrant liability
|
|
|
(274
|
)
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in other receivables
|
|
|
29
|
|
|
|
(2
|
)
|
|
|
72
|
|
|
|
(12
|
)
|
Increase
(decrease) in other payables and accrued liabilities
|
|
|
(92
|
)
|
|
|
256
|
|
|
|
(260
|
)
|
|
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(3,547
|
)
|
|
|
(767
|
)
|
|
|
(1,349
|
)
|
|
|
(421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in restricted cash
|
|
|
(27
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Purchase
of property and equipment
|
|
|
(28
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(55
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inflow
in connection with current assets and liabilities acquired in reverse recapitalization, net
|
|
|
(82
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuance
of convertible notes
|
|
|
-
|
|
|
|
750
|
|
|
|
-
|
|
|
|
-
|
|
Exercise
of warrants
|
|
|
-
|
|
|
|
154
|
|
|
|
-
|
|
|
|
154
|
|
Issuance
of common stock, net of issuance costs
|
|
|
12,704
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
12,622
|
|
|
|
904
|
|
|
|
-
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
9,020
|
|
|
|
137
|
|
|
|
(1,349
|
)
|
|
|
(267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the beginning of the period
|
|
|
2,709
|
|
|
|
437
|
|
|
|
13,078
|
|
|
|
841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the end of the period
|
|
$
|
11,729
|
|
|
$
|
574
|
|
|
$
|
11,729
|
|
|
$
|
574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
financing transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless
exercise of warrants
|
|
$
|
(*
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Conversion
of preferred A shares
|
|
$
|
60
|
|
|
$
|
-
|
|
|
$
|
27
|
|
|
$
|
-
|
|
Extinguishment
of convertible notes in exchange for preferred A shares
|
|
$
|
2,083
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
(*)
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.
|
|
|
|
|
|
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 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 (“Common Stock”), after giving effect to a one
for nine reverse stock split (the “Reverse Stock Split”), for an aggregate of 26,550,974 shares of 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
Common Stock. Additionally, the Company issued an aggregate of 7,802,639 restricted shares of its Common Stock or rights to
receive the 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 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.
|
|
|
|
|
|
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 September 30, 2017, the Company had cash and cash equivalents
totaling approximately $11,729, which the Company 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. 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 (the “IIA”).
|
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.
|
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 (“SEC”)
regulations. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting
only of normal recurring adjustments except as otherwise discussed).
|
|
|
|
|
|
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 with the SEC on March 21, 2017.
|
|
|
|
|
|
Operating
results for the nine and three-month periods ended September 30, 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 audited financial statements. Certain prior year amounts
have been reclassified for consistency with the current period presentation.
|
|
|
|
|
C.
|
Recent
Accounting Standards:
|
|
|
|
|
|
The
Company assesses the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board
on its financial statements. Following are newly issued standards or material updates to the Company’s previous assessments
from its Annual Report on Form 10-K for the fiscal year ended December 31, 2016:
|
|
|
|
|
|
In
May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers” to provide a single comprehensive
model for entities to use in accounting for revenue arising from contracts with customers. The ASU supersedes most current
revenue recognition guidance, including industry-specific guidance. The FASB subsequently issued ASU 2015-14, ASU 2016-08
and ASU 2016-12, which clarified the guidance, provided scope improvements and amended the effective date of ASU 2014-09.
As a result, ASU 2014-09 becomes effective for the Company in the first quarter of 2018, with early adoption permitted.
The
company has not yet generated revenues to date, and thus does not expect the standard to have a material impact on its consolidated
financial statements.
|
|
|
|
|
|
In
February 2016, the FASB issued ASU 2016-02 “Leases” to increase transparency and comparability among organizations
by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.
For operating leases, the ASU requires a lessee to recognize a right-of-use asset and a lease liability, initially measured
at the present value of the lease payments, on its balance sheet. The ASU retains the current accounting for lessors and does
not make significant changes to the recognition, measurement, and presentation of expenses and cash flows by a lessee. This
ASU is effective for the Company in the first quarter of 2019, with early adoption permitted. The Company continues to evaluate
the effect of the adoption of this ASU and expects the adoption will result in an increase in the assets and liabilities on
the consolidated balance sheets for operating leases (refer to Note 5) and will likely have an insignificant impact on the
consolidated statements of comprehensive loss.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except
share data and exercise prices)
Notes
to the Interim Condensed Consolidated Financial Statements
(Cont’d)
|
|
In
June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit Losses” to improve information on
credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income.
The ASU replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses.
This ASU is effective for the Company in the first quarter of 2020, with early adoption permitted. The Company is currently
evaluating the effect the adoption of this ASU will have on its consolidated financial statements.
|
|
|
|
|
|
In
November 2016, the FASB issued ASU 2016-18 “Restricted Cash” to provide guidance on the presentation of restricted
cash in the statement of cash flows. Currently, the statement of cash flows explained the change in cash and cash equivalents
for the period. The ASU requires that the statement of cash flows explain the change in cash, cash equivalents and restricted
cash for the period. The ASU is effective for the Company in the first quarter of 2018, with early adoption permitted. The
Company does not expect the adoption to have a material effect on the statements of cash flows as the Company’s restricted
cash is not expected to be material.
|
|
|
|
|
|
In
May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting,” which clarifies
when a change to terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance
requires modification accounting if the vesting condition, fair value or the award classification is not the same both before
and after a change to the terms and conditions of the award. The new guidance is effective for the Company on a prospective
basis beginning on January 1, 2018 and early adoption is permitted. The Company does not expect to change terms or conditions
of share-based payment awards, and therefore, does not expect the adoption of this standard to have a material impact on its
consolidated financial statements.
|
|
|
|
|
|
In
July 2017, the FASB issued ASU 2017-11, which includes Part I “Accounting for Certain Financial Instruments with Down
Round Features” and Part II “Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments
of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-Controlling Interests with a Scope Exception”.
The ASU makes limited changes to the Board’s guidance on classifying certain financial instruments as either liabilities
or equity. The ASU’s objective is to improve (1) the accounting for instruments with “down-round” provisions
and (2) the readability of the guidance in ASC 480 on distinguishing liabilities from equity by replacing the indefinite deferral
of certain pending content with scope exceptions. The ASU is effective for the Company in the first quarter of 2019, with
early adoption permitted. The Company has derivative warranty liabilities as discussed in Note 4 which upon adoption of the
new standard are expected to be classified as equity.
|
NOTE
3 -
|
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 warrants to purchase Series A Preferred Shares (as defined below in this Note 3) 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 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.
|
|
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.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except
share data and exercise prices)
Notes
to the Interim Condensed Consolidated Financial Statements
(Cont’d)
On November 28, 2016, upon the consummation of the Merger, the loan was converted into an aggregate of 2,242,939 shares of 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 was 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 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 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.
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.
See
also Note 6 – Securities Exchange Agreements with Alpha Capital.
The
carrying value of the Convertible Note as of the periods below was calculated as follow:
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except
share data and exercise prices)
Notes
to the Interim Condensed Consolidated Financial Statements
(Cont’d)
|
|
Balance
at
September 30, 2017
|
|
|
Balance
at
December 31, 2016
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
|
|
|
|
|
Convertible
note
|
|
$
|
-
|
|
|
$
|
2,029
|
|
Unamortized
discount
|
|
|
-
|
|
|
|
(1,963
|
)
|
Accrued
interest
|
|
|
-
|
|
|
|
10
|
|
|
|
$
|
-
|
|
|
$
|
76
|
|
NOTE
4 -
|
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 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 $0.30 per share exercise price
was later adjusted to $2.70 as a result of the Company’s Reverse Stock Split.
|
The
remaining outstanding warrants as of December 31, 2016 and September 30, 2017 are as follows:
Issuance
Date
|
|
Outstanding
as
of
December
31, 2016
|
|
|
Outstanding
as
of
September
30, 2017
|
|
|
Exercise
Price
|
|
|
Exercisable
as
of
September
30, 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
|
|
|
|
9,279
|
|
|
March
2018
|
Series
B (2016) (a)
|
|
|
41,116
|
|
|
|
41,116
|
|
|
$
|
2.70
|
|
|
|
41,116
|
|
|
March
2022
|
|
(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.
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 September 30, 2017 and December 31, 2016, was approximately $39 and $313,
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 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.
|
|
|
|
|
(b)
|
In
March 2017, an institutional holder executed a cashless exercise of 768 warrants and 359 shares of Common Stock were issued
in connection therewith.
|
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
following table summarizes the observable inputs used in the valuation of the derivative warrant liabilities as of September 30,
2017 and December 31, 2016:
|
|
As
of
September 30, 2017
|
|
|
As
of
December 31, 2016
|
|
|
|
Series
A (2016)
|
|
|
Series
B (2016)
|
|
|
Series
A (2016)
|
|
|
Series
B (2016)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
price
|
|
$
|
1.17
|
|
|
$
|
1.17
|
|
|
$
|
6.10
|
|
|
$
|
6.10
|
|
Exercise
price
|
|
$
|
2.70
|
|
|
$
|
2.70
|
|
|
$
|
2.70
|
|
|
$
|
2.70
|
|
Expected
volatility
|
|
|
137
|
%
|
|
|
131
|
%
|
|
|
380
|
%
|
|
|
380
|
%
|
Risk-free
interest
|
|
|
1.24
|
%
|
|
|
1.89
|
%
|
|
|
0.85
|
%
|
|
|
1.93
|
%
|
Dividend
yield
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Expected
life of up to (years)
|
|
|
0.50
|
|
|
|
4.50
|
|
|
|
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
|
|
|
(274
|
)
|
Exercise
warrants
|
|
|
(*)
|
|
As
of September 30, 2017
|
|
$
|
39
|
|
|
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 or increase in volatility would not cause a material change in the value of the warrants. 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.
|
NOTE
5 -
|
COMMITMENTS
|
|
|
|
Microbot
Israel obtained from the IIA grants for participation in research and development for the years 2013 through September 30,
2017 in the total amount of approximately $1,183, 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 February 28, 2018. According to the lease
agreement, the monthly office lease payment is approximately $3.
|
|
|
|
In
December 2016, the Company entered into an automobile lease agreement, which expires on December 31, 2019. According to the
lease agreement, the monthly lease payment is approximately $2.5.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except
share data and exercise prices)
Notes
to the Interim Condensed Consolidated Financial Statements
(Cont’d)
|
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.
|
|
|
|
Compensation
Liability
|
|
|
|
The
Company incurred compensation commitments of approximately $400 to a former executive that management estimates as remote,
and therefore, is not reflected in these interim 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 by the end of 2017, with a comprehensive study
to follow and be completed in 2018.
|
|
|
|
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.
|
|
|
|
Litigation
The
Company is named as the defendant in a lawsuit, captioned Sabby Healthcare Master Fund Ltd. and Sabby Volatility Warrant
Master Fund Ltd., Plaintiffs, against Microbot Medical Inc., Defendant, pending in the Supreme Court of the State of New
York, County of New York. The complaint alleges, among other things, that the Company breached multiple representations
and warranties contained in the Securities Purchase Agreement (the “SPA”) related to the June 8, 2017 equity
financing of the Company (the “Financing”), of which the Plaintiffs participated. The complaint seeks rescission
of the SPA and return of the Plaintiffs’ $3,375 purchase price with respect to the Financing, and damages in an
amount to be determined at trial, but to exceed $1 million.
Due
to the early stage in the ligation process, management is unable to assess the likelihood of the claim and the amount
of potential damages, if any, to be awarded.
|
|
|
NOTE
6 -
|
SHARE
CAPITAL
|
|
|
|
Each
share of the Series A Convertible Preferred Stock, par value $0.01 per share, issued by the Company in December 2016 and in
May 2017 (the “Series A Convertible Preferred Stock”), 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.
|
|
|
|
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
and 1,000,000 shares of undesignated preferred stock, par value $0.01 (the “Preferred Stock”). As of September
30, 2017, the Company had 37,005,333 shares of Common Stock issued and outstanding, and 7,037 shares of Series A Convertible
Preferred Stock issued and outstanding.
|
MICROBOT
MEDICAL INC.
U.S.
dollars in thousands
(Except
share data and exercise prices)
Notes
to the Interim Condensed Consolidated Financial Statements
(Cont’d)
|
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 “- Securities Exchange Agreement with Alpha
Capital” below. See also Note 3 – Securities Exchange Agreement with Alpha Capital, above.
|
|
|
|
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 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.
|
|
|
|
On
June 5, 2017, the Company entered into a Securities Purchase Agreement with certain institutional
investors (the “Investors”) providing for the issuance and sale by the Company
to the Investors of an aggregate of 3,750,000 shares of Common Stock, at a purchase price
per share of $2.70. The gross proceeds to the Company was $10,125 before deducting placement
agent fees and offering expenses of $922.
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
September 12, 2017, the Company adopted the 2017 Equity Incentive Plan (the “Plan”),
which Plan authorizes, among other things, the grant of options to purchase shares of
Common Stock to directors, officers and employees of the Company and to other individuals.
On
September 14, 2017, the board of directors approved a grant of stock options to purchase an aggregate of up to 1,812,712
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 $1.05. The stock options vest over a period of 3-5 years as outlined in the option agreements. As a
result, the Company recognized compensation expenses in the amount of $22 included in general and administrative expenses
for the period ended September 30, 2017.
On
September 14, 2017, the board of directors approved a grant of stock options to purchase an aggregate of up to 1,087,627
shares of Common Stock to Mr. Hezi Himelfarb, the company’s General Manager, COO and a member of the Board, at an
exercise price per share of $1.29. The grant was subject to the Israeli Tax Authority’s approval of the plan which
occurred on October 14, 2017. In accordance with the option agreement, the options began vesting as of the grant date
for a period of 3 years.
|
|
|
|
A
summary of the Company’s option activity related to options to employees and directors, and related information is as
follows:
|
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 nine-month period ended September 30, 2017
|
|
|
|
Number
of
stock options
|
|
|
Weighted
average
exercise price
|
|
|
Aggregate
intrinsic value
|
|
Outstanding
at beginning of period
|
|
|
2,614,916
|
|
|
$
|
0.13
|
|
|
$
|
3,739
|
|
Granted
|
|
|
1,812,712
|
|
|
|
1.05
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at end of period
|
|
|
4,427,628
|
|
|
$
|
0.51
|
|
|
$
|
2,922
|
|
Options
vested end of period
|
|
|
2,614,916
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
For
the twelve months 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
|
|
|
$
|
3,739
|
|
Vested
and expected-to-vest at end of period
|
|
|
2,614,916
|
|
|
$
|
0.39
|
|
|
$
|
3,739
|
|
(*)
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 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 September 30, 2017 and December 31, 2016 respectively,
|
|
The
stock options outstanding as of September 30, 2017, and December 31, 2016, have been separated into exercise prices, as follows:
|
Exercise
price
|
|
|
Stock
options
outstanding
as
of
September 30,
|
|
|
Stock
options
outstanding
as
of
December 31,
|
|
|
Weighted
average
remaining
contractual
life – years
as of
September
30,
|
|
|
Weighted
average
remaining
contractual
life – years
as of
December
31,
|
|
|
Stock
options
exercisable
as
of
September 30,
|
|
|
Stock
options
exercisable
as
of
December 31,
|
|
$
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.28
|
|
|
|
1,167,693
|
|
|
|
1,167,693
|
|
|
|
7.25
|
|
|
|
8.0
|
|
|
|
1,167,693
|
|
|
|
1,167,693
|
|
|
1.05
|
|
|
|
1,812,712
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(*)
|
|
|
|
1,447,223
|
|
|
|
1,447,223
|
|
|
|
8.75
|
|
|
|
9.5
|
|
|
|
1,447,223
|
|
|
|
1,447,223
|
|
|
|
|
|
|
4,427,628
|
|
|
|
2,614,916
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, 2017 and 2016 was $22 and $675, respectively which were included in general and administrative
expenses.
|
|
|
|
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:
|
|
|
Nine-month
period ended
September 30, 2017
|
|
|
Year
ended
December 31, 2016
|
|
|
|
|
|
|
|
|
Expected
volatility
|
|
|
133.9
|
%
|
|
|
77.3
|
%
|
Risk-free
interest
|
|
|
1.5
|
%
|
|
|
0.6
|
%
|
Dividend
yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected
life of up to (years)
|
|
|
6.71
|
|
|
|
5
|
|
|
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 share price of the Common Stock 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 Statements of Comprehensive Loss.
On
May 26, 2017, the Company issued an aggregate of 50,000 nonrefundable shares of Common Stock to a consultant as part of
investor relations services. The Company recorded expenses of approximately $154 with respect to the issuance of these
shares included in general and administrative expenses.
|
|
|
|
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 the Series A Convertible 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.
|
|
|
|
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 the Series A Convertible Preferred Stock, in exchange for the full satisfaction, termination and
cancellation of the 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 Series A Convertible Preferred Stock is the same series of securities
as the Company’s existing Series A Convertible Preferred Stock issued in December 2016. As a result of the extinguishment
of the convertible note and issuance of the preferred shares, the Company recorded a financial loss in the amount of $2.36
million
|
|
|
|
On
May 11, 2017, the holder of the Series A Convertible Preferred Stock delivered to the Company a request to convert 700 shares
of the Series A Convertible Preferred Stock for 700,000 shares of Common Stock, pursuant to the terms of conversion of the
Series A Convertible Preferred Stock. On May 12, 2017, the Company issued the 700,000 shares of Common Stock.
|
|
|
|
Between
May 18, 2017 and June 30, 2017, the holder of the Series A Convertible Preferred Stock converted an aggregate of 2,554 shares
of the Series A Convertible Preferred Stock for an aggregate of 2,554,000 shares of Common Stock.
|
|
|
|
Between
July 10, 2017 and September 20, 2017, the holder of the Series A Convertible Preferred Stock converted an aggregate of 2,700
shares of the Series A Convertible Preferred Stock for an aggregate of 2,700,000 shares of Common Stock.
|
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 intends to enter into a definitive agreement with up to three Israeli shareholders, some of whom are directors of the
Company, that were former shareholders of Microbot Israel, 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 of 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) as temporary equity.
NOTE
7 -
|
BASIC
AND DILUTED NET LOSS PER SHARE
|
|
|
|
The
basic and diluted net loss per share and weighted average number of shares of Common Stock used in the calculation of basic
and diluted net loss per share are as follows:
|
|
|
Nine
months
ended
September 30,
|
|
|
Three
months
ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
Unaudited
|
|
Net
loss attributable to shareholders of the company
|
|
$
|
(6,002
|
)
|
|
$
|
(1,964
|
)
|
|
$
|
(1,187
|
)
|
|
$
|
(652
|
)
|
Net
loss attributable to shareholders of preferred shares
|
|
|
(1,442
|
)
|
|
|
(821
|
)
|
|
|
(234
|
)
|
|
|
(297
|
)
|
Net
loss used in the calculation of basic net loss per share
|
|
$
|
(4,560
|
)
|
|
$
|
(1,143
|
)
|
|
$
|
(953
|
)
|
|
$
|
(355
|
)
|
Net
loss per share
|
|
$
|
(0.15
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.03
|
)
|
Weighted
average number of common shares
|
|
|
30,594,686
|
|
|
|
13,182,660
|
|
|
|
35,373,811
|
|
|
|
13,182,660
|
|
|
As
the inclusion of Common Stock 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 shares of Common Stock outstanding has been retroactively restated for the equivalent number of
shares of Common Stock received by the accounting acquirer as a result of the reverse recapitalization and Reverse Stock Split
as if these shares of Common Stock had been outstanding as of the beginning of the earliest period presented.
|
NOTE
8 - TAXES ON INCOME
|
|
|
The
Company is subject to income taxes under the Israeli and U.S. tax laws:
|
|
|
|
Corporate
Tax Rates
|
|
|
|
|
|
Microbot
Israel is subject to Israeli corporate tax rate of 25% in the year 2016, 24% in year 2017 and 23% from year 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 Company is subject to a blended U.S. tax rate (Federal as well as state corporate tax) of 35%.
|
A.
|
As
of September 30, 2017, the Company generated net operating losses in Israel of approximately $7,049, which may be carried
forward and offset against taxable income in the future for an indefinite period.
|
|
|
|
|
|
As
of September 30, 2017, the Company generated net operating losses in the U.S. of approximately $480,000. 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, which the Company is currently evaluating. The annual limitation may result in the expiration of
net operating losses before utilization.
|
|
|
|
|
B.
|
The
Company is 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
September 30, 2017
|
|
|
As
of
December 31, 2016
|
|
Net
loss carry-forward
|
|
$
|
487,017
|
|
|
$
|
481,015
|
|
Total
deferred tax assets
|
|
|
487,017
|
|
|
|
481,015
|
|
Valuation
allowance
|
|
|
(487,017
|
)
|
|
|
(481,015
|
)
|
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:
|
|
|
For
the nine-month ended September 30,
|
|
|
For
the three-month ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss as reported in the statements of operations
|
|
$
|
(6,002
|
)
|
|
$
|
(1,964
|
)
|
|
$
|
(1,187
|
)
|
|
$
|
(652
|
)
|
Statutory
tax rate
|
|
|
24
|
%
|
|
|
25
|
%
|
|
|
24
|
%
|
|
|
25
|
%
|
Income
Tax under statutory tax rate
|
|
|
1,440
|
|
|
|
491
|
|
|
|
285
|
|
|
|
163
|
|
Change
in valuation allowance
|
|
|
(1,440
|
)
|
|
|
(491
|
)
|
|
|
(285
|
)
|
|
|
(163
|
)
|
Actual
income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE
9 – SUBSEQUENT EVENTS
From
October 4, 2017 through October 25, 2017, the holder of the Series A Convertible Preferred Stock of the Company, converted an
aggregate of 1,600 shares of the Series A Convertible Preferred Stock for an aggregate of 1,600,000 shares of Common Stock.
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 the SCS as well as the TipCAT within the next 21 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 September 30, 2017, Microbot has raised cash proceeds of approximately $18,000,000 to fund operations, primarily
from government grants, loans, and private placement offerings of debt and equity securities.
Net
losses for the nine and three months ended September 30, 2017 and 2016 were approximately $6,002,000 and $1,187,000 and $1,964,000
and $652,000, 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 September
30, 2017, Microbot had a net working capital of approximately $11,694,000, 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, and obtaining and maintaining Microbot’s patent portfolio.
Research
and development expenses are charged to the statement 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.
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.
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, 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.
Results
of Operations
Comparison
of Nine and Three Months Ended September 30, 2017 and 2016
The
following table sets forth the key components of Microbot’s results of operations for the nine and three month periods ended
September 30, 2017 and 2016 (in thousands):
|
|
Nine
months ended
September
30,
|
|
|
Increase/
|
|
|
Three
months ended
September
30,
|
|
|
Increase/
|
|
|
|
2017
|
|
|
2016
|
|
|
(Decrease)
|
|
|
2017
|
|
|
2016
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development expenses, net
|
|
$
|
900
|
|
|
$
|
603
|
|
|
$
|
297
|
|
|
$
|
339
|
|
|
$
|
340
|
|
|
$
|
(1
|
)
|
General
and administrative expenses
|
|
|
2,830
|
|
|
|
1,120
|
|
|
|
1,710
|
|
|
|
896
|
|
|
|
305
|
|
|
|
591
|
|
Financing
income (expenses), net
|
|
|
(2,272
|
)
|
|
|
(241
|
)
|
|
|
2,031
|
|
|
|
48
|
|
|
|
(7
|
)
|
|
|
55
|
|
Research
and Development Expenses
. Microbot’s research and development expenses for the nine and three-month periods ended September
30, 2017 were approximately $900,000 and $339,000, respectively, compared to approximately $603,000 and $340,000, respectively,
for the nine and three months period ended September 30, 2016. The increase in research and development expenses for the nine
and three month periods ended September 30, 2017 was primarily due to payroll, materials and professional services. 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 for the nine and three-month periods ended September 30,
2017 were approximately $2,830,000 and $896,000, respectively, compared to approximately $1,120,000 and $305,000, respectively,
for the nine and three month periods ended September 30, 2016. The increase in general and administrative expenses for the nine
and three month periods ended September 30, 2017 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 for the nine-month period ended September 30, 2017 were approximately $2,272,000 and for the
three month period ended September 30, 2017 were approximately $48,000 compared to approximately $241,000 and $7,000 for the nine
and three months period ended September 30, 2016, respectively. The increase in financial expenses for the nine and three month
periods ended September 30, 2017 was primarily due to revaluation and extinguishment of the convertible note and change in fair
value of derivative warrant liabilities. As a result of the extinguishment of the convertible note and issuance of the Series
A preferred stock, the Company recorded a financial loss in the amount of approximately $2,360,000 and $0 for the nine and three-month
periods, respectively, ended September 30, 2017.
Liquidity
and Capital Resources
Microbot
has incurred losses since inception and negative cash flows from operating activities for the nine and three months periods ended
September 30, 2017 and for the fiscal year ended December 31, 2016. As of September 30, 2017, Microbot had a net working capital
of approximately $11,694,000, 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. From inception (November 2010) through September 30, 2017, Microbot raised total cash proceeds of approximately $18,000,000,
and incurred a total cumulative loss of approximately $19,037,000.
As
a result of the sale of certain of the assets of StemCells, Inc., Microbot’s predecessor company, 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
and June 2017, we sold an aggregate of 700,000 and 3,750,000 shares, respectively, of our common stock for aggregate net proceeds,
after deducting placement agent fees and expenses, of approximately $12,701,000. 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 it may develop internally or through acquisitions, 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):
|
|
Nine
months ended
September 30,
|
|
|
Three
months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net
cash used in operating activities
|
|
$
|
(3,547
|
)
|
|
$
|
(767
|
)
|
|
$
|
(1,349
|
)
|
|
$
|
(421
|
)
|
Net
cash used in investing activities
|
|
|
(55
|
)
|
|
|
–
|
|
|
|
-
|
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
12,622
|
|
|
|
904
|
|
|
|
-
|
|
|
|
154
|
|
Net
increase in cash and cash equivalents
|
|
$
|
9,020
|
|
|
$
|
137
|
|
|
$
|
(1,349
|
)
|
|
$
|
(267
|
)
|
Cash
used in operating activities for the nine months ended September 30, 2017 was approximately $3,547,000, calculated by adjusting
net loss from operations by approximately $2,455,000 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. Cash used in operating
activities for the nine months ended September 30, 2016 was approximately $767,000, similarly adjusted by approximately $1,197,000.
Net
cash used in investing activities for the nine months ended September 30, 2017 was approximately $55,000, consisting of purchase
of property and equipment and restricted cash which was deposited for the benefit of lease agreements, compared to approximately
$0 for the nine months ended September 30, 2016.
Net
cash provided by financing activities of approximately $12,622,000 for the nine months ended September 30, 2017 consisted of issuance
of common stock and outflow amounts related to the merger recapitalization, compared to approximately $904,000 in the nine months
ended September 30, 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 its financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.