Item
1. Description of Business.
The
Company
Microbot
is a pre-clinical medical device company specializing in the research, design and development of next generation robotic endoluminal
surgery devices targeting the minimally invasive surgery space. Microbot is primarily focused on leveraging its micro-robotic
technologies with the goal of redefining surgical robotics while improving surgical outcomes for patients.
Microbot’s
current technological platforms, ViRobTM, TipCATTM, LIBERTY™ and certain CardioSert assets,
are comprised of proprietary innovative technologies. Using the ViRob platform, Microbot is currently developing the Self Cleaning
Shunt, or SCSTM, for the treatment of hydrocephalus and Normal Pressure Hydrocephalus, or NPH. Utilizing the LIBERTY
and CardioSert platforms, Microbot is developing the first ever fully disposable robot for various endovascular interventional
procedures. In addition, the Company is focused on the development of a Multi Generation Pipeline Portfolio utilizing all of its
proprietary technologies.
Microbot
has a patent portfolio of 42 issued/allowed patents and 23 patent applications pending worldwide.
We
were 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 our name to CytoTherapeutics, Inc. On May 24, 2000, the Certificate
of Incorporation as restated was further amended to change our name to StemCells, Inc. On November 28, 2016, C&RD Israel Ltd.,
a wholly-owned subsidiary of ours, completed its merger with and into Microbot Medical Ltd., or Microbot Israel, an Israeli corporation
that then owned our assets and operated our current business, with Microbot Israel surviving as a wholly-owned subsidiary of ours.
We refer to this transaction as the Merger. On November 28, 2016, in connection with the Merger, we changed our name from “StemCells,
Inc.” to Microbot Medical Inc., and each outstanding share of Microbot Israel capital stock was converted into the right
to receive shares of our common stock. In addition, all outstanding options to purchase the ordinary shares of Microbot Israel
were assumed by us and converted into options to purchase shares of the common stock of Microbot Medical Inc. On November 29,
2016, our common stock began trading on the Nasdaq Capital Market under the symbol “MBOT”. Prior to the Merger, we
were a biopharmaceutical company that operated in one segment, the research, development, and commercialization of stem cell therapeutics
and related technologies. Substantially all of the material assets relating to the stem cell business were sold on November 29,
2016.
In
May 2016, we effected a 1-for-12 reverse split of our common stock, and in November 2016, we effected a 1-for-9 reverse split
of our common stock in connection with the Merger. In September 2018, we effected a 1-for-15 reverse split of our common stock.
Technological
Platforms
ViRob
The
ViRob is an autonomous crawling micro-robot which can be controlled remotely or within the body. Its miniature dimensions are
expected to allow it to navigate and crawl in different natural spaces within the human body, including blood vessels, the digestive
tract and the respiratory system as well as artificial spaces such as shunts, catheters, ports, etc. Its unique structure is expected
to give it the ability to move in tight spaces and curved passages as well as the ability to remain within the human body for
prolonged time. The SCS product was developed using the ViRob technology.
TipCAT
The
TipCAT is a disposable self-propelled locomotive device that is specially designed to advance in tubular anatomies. The TipCAT
is a mechanism comprising a series of interconnected balloons at the device’s tip that provides the TipCAT with its forward
locomotion capability. The device can self-propel within natural tubular lumens such as the blood vessels, respiratory and the
urinary and GI tracts. A single channel of air/fluid supply sequentially inflates and deflates a series of balloons creating an
inchworm like forward motion. The TipCAT maintains a standard working channel for treatments. Unlike standard access devices such
as guidewires, catheters for vascular access and endoscopes, the TipCAT does not need to be pushed into the patient’s lumen
using external pressure; rather, it will gently advance itself through the organ’s anatomy. As a result, the TipCAT is designed
to be able to reach every part of the lumen under examination regardless of the topography, be less operator dependent, and greatly
reduce the likelihood of damage to lumen structure. The TipCAT thus offers functionality features equivalent to modern tubular
access devices, along with advantages associated with its physiologically adapted self-propelling mechanism, flexibility, and
design.
CardioSert
Technology
On
April 8, 2018, Microbot acquired a patent-protected technology from CardioSert Ltd., a privately-held medical device company
based in Israel that was part of a technological incubator supported by the Israel Innovation Authorities. The CardioSert technology
contemplates a combination of a guidewire and microcatheter, technologies that are broadly used for surgery within a tubular organ
or structure such as a blood vessel or duct. The CardioSert technology features a unique guidewire delivery system with steering
and stiffness control capabilities which when developed is expected to give the physician the ability to control the tip curvature,
to adjust tip load to varying degrees of stiffness in a gradually continuous manner. The CardioSert technology was originally
developed to support interventional cardiologists in crossing chronic total occlusions (CTO) during percutaneous coronary intervention
(PCI) procedures and has the potential to be used in other spaces and applications, such as peripheral intervention, and neurosurgery.
LIBERTY
On
January 13, 2020, Microbot unveiled what it believes is the world’s first fully disposable robotic system for use in Endovascular
Interventional procedures, such as cardiovascular, peripheral and neurovascular. The LIBERTY robotic system features a unique
compact design with the capability to be operated remotely, reduce radiation exposure and physical strain to the physician, reduce
the risk of cross contamination, as well as the potential to eliminate the use of multiple consumables when used with its
“One & Done” capabilities, which would be based in part on the CardioSert platform or possibly other
guidewire/microcatheter technologies.
LIBERTY
is designed to maneuver guidewires and over-the-wire devices (such as microcatheters) within the body’s vasculature. It
eliminates the need for extensive capital equipment requiring dedicated Cath-lab rooms as well as dedicated staff. In addition,
when combined with CardioSert technology or possibly other guidewire/microcatheter technologies, it is being designed to
streamline Cath-lab procedures with our proprietary “One & Done” tool that combines guidewire and microcatheter
into a single device. With control over tip curvature and stiffness for maneuverability and access – and without the need
for constant tool exchanges – the “One & Done” feature, when integrated into the LIBERTY device,
may drastically reduce procedure time and costs while enhancing the operator experience.
On
August 17, 2020, Microbot announced the successful conclusion of its feasibility animal study using the LIBERTY robotic system.
The study met all of its end points with no intraoperative adverse events, which supports Microbot’s objectives to allow
physicians to conduct a catheter-based procedure from outside the catheterization laboratory (cath-lab), avoiding radiation exposure,
physical strain and the risk of cross contamination. The study was performed by two leading physicians in the neuro vascular and
peripheral vascular intervention spaces, and the results demonstrated robust navigation capabilities, intuitive usability and
accurate deployment of embolic agents, most of which was conducted remotely from the cath-lab’s control room.
We
are continuously exploring and evaluating additional innovative guidewire/microcatheter technologies to be integrated and combined
with the LIBERTY robotic platform.
Recent
Developments
On
January 14, 2021, Microbot announced the successful completion of an additional feasibility animal study using the LIBERTY robotic
system. The study end points included navigating to a clot, crossing the clot, deploying a stent retriever, and manually retrieving
an arterial clot in a live pig. All the end points were met with no intraoperative adverse events. This and earlier animal feasibility
studies support Microbot’s assertion that LIBERTY will potentially allow physicians to safely and easily conduct catheter-based
peripheral and neurovascular procedures remotely, avoiding radiation exposure, physical strain and the risk of cross contamination.
On
January 21, 2021, Microbot announced the continued enhancement of its thought leadership capabilities with the addition of several
new Scientific Advisory Board members:
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Stephen
B. Solomon, MD, a board-certified radiologist with clinical expertise in Interventional Radiology with a focus in Tumor Ablation;
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Ajay
K. Wakhloo, MD PhD FAHA, an internationally recognized expert in acute stroke therapy and the isolation of intracranial aneurysms
and arteriovenous malformations;
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Gal
Yaniv, MD, PhD, an endovascular neurosurgeon and leading authority on Artificial Intelligence;
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Dmitry
J. Rabkin, MD, PhD, FSIR, a vascular and Interventional Radiology Specialist; and
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Ziv
Neeman, MD, a vascular and interventional radiology clinician and researcher with a wide array of expertise, particularly
in the field of navigation systems for minimally invasive image-guided interventional procedures.
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On
January 27, 2021, Microbot announced the completion of successful discussions with the U.S. Food and Drug Administration, or FDA,
for the SCSTM. After review of Microbot’s existing pre-clinical data, the FDA’s feedback will allow Microbot
to apply for a limited clinical investigation known as an Early Feasibility Study, or EFS. Microbot expects to continue to work
with the FDA towards finalizing the SCSTM design, and to incorporate their feedback prior to submitting the Investigational
Device Exemption, or IDE, to seek authorization to begin the EFS clinical trial. While there can be no assurance that the FDA
will approve the EFS study, the agency’s recent feedback indicates that the agency will be receptive to allowing a first-in-human
study to proceed based on existing data. After completing the EFS, Microbot would then seek FDA input on the device design as
finalized through the EFS process in a subsequent IDE filing for approval of a clinical study proposal. Consequently, the timeline
for the First-in-Human clinical trial under the EFS is expected to commence following IDE approval, estimated in the third quarter
of 2022.
On
February 4, 2021, Microbot announced that it has received official notification from the Japan Patent Office (JPO) that it intends
to grant Microbot a patent for its ‘One & Done’ guidewire technology for use with endoluminal interventions. Japan
is the second jurisdiction to grant a patent for the ‘One & Done’ guidewire technology and further protects the
novel technology Microbot is currently developing.
Industry
Overview
CSF
Management
Hydrocephalus
is a medical condition in which there is an abnormal accumulation of cerebrospinal fluid, or CSF, in the brain that can cause
increased intracranial pressure. It is estimated that one in every 500 babies are born with hydrocephalus, and over 1,000,000
people in the United States currently live with hydrocephalus.
Symptoms
of hydrocephalus vary with age, disease progression and individual tolerance to the condition, but they can include convulsion,
tunnel vision, mental disability or dementia-like symptoms and even death. NPH is a type of hydrocephalus that usually occurs
in older adults. NPH is generally treated as distinct from other types of hydrocephalus because it develops slowly over time.
In NPH, the drainage of CSF is blocked gradually and the excess fluid builds up slowly. This slow accumulation means that the
fluid pressure may not be as high as in other types of hydrocephalus. It is estimated that more than 700,000 Americans have NPH,
but less than 20% receive an appropriate diagnosis.
Hydrocephalus
is most often treated by the surgical insertion of a shunt system. The shunt system diverts the flow of CSF from the brain’s
ventricles (or the lumbar subarachnoid space) to another part of the body where the fluid can be more readily absorbed. Hydrocephalus
shunt designs have changed little since their introduction in the 1950s. A shunt system typically consists of three parts: the
distal tubing or shunt (a flexible and sturdy plastic tube), the ventricular catheter (the proximal catheter), and a valve. The
end of the shunt system with the proximal catheter is placed in the ventricles (within the CSF) and the distal catheter is placed
in the site of the body where the CSF can be drained. A valve is located along the shunt to maintain and regulate the rate of
CSF flow. Current systems can be created from separate components or bought as complete units.
The
treatment of hydrocephalus with existing shunt systems often includes complications. For example, approximately 50% of shunts
used in the pediatric population fail within two years of placement and repeated neurosurgical operations are often required.
Ventricular catheter blockage, or occlusion, is by far the most frequent event that results in shunt failure. Shunt occlusion
occurs when there is a partial or complete blockage of the shunt that causes it to function intermittently or not at all. Such
a shunt blockage can be caused by the accumulation of blood cells, tissue, or bacteria in any part of the shunt system. In the
event of shunt occlusion, CSF begins to accumulate in the brain or lumbar region again and the symptoms of untreated hydrocephalus
can reappear until a shunt replacement surgery is performed.
Although
several companies are active in the field of hydrocephalus treatment and the manufacturing of shunt systems and shunt components,
Microbot believes that the majority of those companies are focusing on the development of valves. The development of a “smart
shunt” – a shunt that could provide data to the physician on patient conditions and shunt function with sensor-based
controls, or correct the high failure rate of existing shunt systems – is for the most part at an academic and conceptual
level only. Reports of smart shunt technologies are typically focused on a subset of components with remaining factors left unspecified,
such as hardware, control algorithms or power management. Microbot does not believe that a smart shunt that can prevent functional
failures has been developed to date. Because of the limited innovation in this area, Microbot believes an opportunity exists to
provide patients suffering from hydrocephalus or NPH with a more effective instrument for treating their condition.
An
alternative, short-term solution to hydrocephalus is the implantation of an External Ventricular Drainage, or EVD, an implanted
device used in neurosurgery for the short-term treatment and monitoring of elevated intracranial pressure when the normal flow
of CSF inside the brain is obstructed. If after using an EVD, the underlying hydrocephalus does not eventually resolve, the EVD
may then be replaced with a cerebral shunt, a fully internalized, long-term treatment for hydrocephalus.
EVDs
are also used in other instances when the normal flow of CSF inside the brain is obstructed, such as a result of head trauma,
intracerebral hemorrhage, brain tumors and infection. The EVD serves to divert excess fluids from the brain and allows for the
monitoring of intracranial pressure. An EVD must be placed in a center with full neurosurgical capabilities because immediate
neurosurgical intervention may be needed if a complication of EVD placement, such as bleeding, is encountered. EVD is one of the
most commonly used and most important life-saving procedures in the neurologic ICU, with more than 200,000 neuro-intensive patients
requiring EVD insertions annually.
Similar
to shunts, EVDs are also prone to occlusion, mostly due to cellular debris, such as blood clots and/or tissue fragments. Studies
have shown that approximately 1-7% of EVDs require replacement secondary to occlusion. Current solutions for EVD occlusion include
irrigation and replacement, which we believe may be ineffective (in the case of irrigation) or costly (in the case of replacement)
and in either case, put the patient at risk of unintended side effects. Microbot believes that with its portfolio of technologies,
and its initial pre-clinical results, it is well-positioned to explore and expand its offerings as an alternative solution for
EVD occlusion.
Minimally
Invasive Robot-Assisted Endovascular Interventions
Minimally
Invasive Surgery, or MIS, refers to surgical procedures performed through tiny incisions instead of a single large opening. Because
the incisions are small, patients tend to have quicker recovery times and experience less trauma than with conventional surgery.
The global MIS surgery is expected to grow from $24 billion in 2020 to $42 billion in 2026, representing a CAGR of 9.85%.
MIS involves three major categories of devices: surgical, monitoring and visualization, and endoscopy. The market for surgical
devices, including ablation, electrosurgery and medical robotic systems, accounts for the largest share of revenue and is also
expected to show the highest rate of growth. According to the Society of Robotic Surgery, the US market growth in endoluminal
robotic surgery is projected to be 15-25% by 2025.
Vascular
disease is the most common precursor to ischemic heart disease and stroke, which are two of the leading causes of death worldwide.
Advances in endovascular intervention in recent years have transformed patient survival rates and post-surgical quality of life.
It is estimated that more than three million percutaneous coronary interventions (PCI) and over two million of peripheral vascular
interventions are performed annually worldwide. The incidence of stroke in the US alone is estimated at 900,000 cases annually.
Compared to open surgery, it has the advantages of faster recovery, reduced need for general anesthesia, reduced blood loss and
significantly lower mortality. However, the current practice of endovascular procedures, which virtually has remained unchanged
since the introduction of Intervention four decades ago, is limited by a number of factors, including physical strain and exposure
to X-Ray radiation of the operator, and involves complex maneuvering of intervention tools, such as guidewires and catheters,
to reach target areas in the vasculature. Despite recent advancements in technology and devices, manual procedures are still highly
dependent on the technical skills and training of the operator, what makes the access to expert medical centers and advanced emergent
treatments, such as endovascular thrombectomy for acute ischemic stroke, geographically limited. In addition, we believe that
demand for physicians continues to grow faster than supply.
Endovascular
robotic systems are aimed to increase the stability and precision of guidewires and catheters, protecting the physicians from
ionizing radiation and physical strain by removing them from the radiation source, helping in closing shortages of skilled physicians
and skill gaps and enable tele-interventions (e.g. the Hub & Spoke hospital model).
Today,
there are only few commercially available robotic systems for endovascular interventions. We believe these systems have major
drawbacks, such as limited maneuverability, the requirement to exchange and use multiple expensive surgical tools, being cumbersome
to set-up and operate, and requiring significant capital expenditures.
Navigating
and placing access devices through tortuous and highly delicate brain arteries is a complex procedure that requires high-level
surgical skills with specialist training. In many procedures, surgeons exchange numerous access devices before reaching the target
and applying the therapeutic agent or device, increasing the risk of adverse events and the exposure of both patient and physician
to radiation. Adverse events, such as perforation of brain arteries or the release of embolies from a thrombus or atherosclerotic
lesion can have devastating or even fatal results.
Microbot
believes that with its portfolio of CardioSert and LIBERTY technologies, it is well-positioned to explore and develop such
technologies as neurovascular access devices, with a focus on improving the ease and access and enhancing the safety of endovascular
interventions.
Our
Product Pipeline
Self-Cleaning
Shunt
The
SCS device is designed to act as the ventricular catheter portion of a CSF shunt system that is used to treat hydrocephalus and
NPH. It is designed to work as an alternative to any ventricular catheter options currently on the market and to connect to all
existing shunt system valves currently on the market; therefore, the successful commercialization of the SCS is not dependent
on any single shunt system. Initially, Microbot expects the SCS device to be an aftermarket purchase that would be deployed to
modify existing products by the end user. Microbot believes that the use of its SCS device will be able to reduce, and potentially
eliminate, shunt occlusions, and by doing so, Microbot believes its SCS has the potential to become the gold standard ventricular
shunt in the treatment of hydrocephalus and NPH.
The
SCS device embeds an internal robotic cleaning mechanism in the lumen, or inside space, of the ventricular catheter which prevents
cell accumulation and tissue ingrowth into the catheter. The SCS device consists of a silicone tube with a perforated titanium
tip, which connects to a standard shunt valve at its distal end. The internal cleaning mechanism is embedded in the lumen of the
titanium tip. Once activated, the cleaning mechanism keeps tissue from entering the catheter perforations while maintaining the
CSF flow in the ventricular catheter.
The
internal cleaning mechanism of the SCS device is activated by means of an induced magnetic field, which is currently designed
to be externally generated by the patient through a user-friendly headset that transmits the magnetic field at a pre-determined
frequency and operating sequence protocol. The magnetic field that is created by the headset is then captured by a flexible coil
and circuit board that is placed just under the patient’s scalp in the location where the valve is located. The circuit
board assembly converts the magnetic field into the power necessary to activate the cleaning mechanism within the proximal part
of the ventricular catheter.
Microbot
has completed the development of an SCS prototype and is currently continuing the safety testing, general proof of concept testing
and performance testing for the device, which Microbot began in mid-2013. In May 2018, Microbot announced the results of two pre-clinical
studies assessing the SCS, an in-vitro study and a small animal study. The in-vitro study, which was performed at Wayne State
University by Dr. Carolyn Harris, supports the SCS’s potential as a viable technology for preventing occlusion in shunts
used to treat hydrocephalus. The first stage animal study designed to assess the safety profile of the SCS, which was performed
by James Patterson McAllister, PhD, a Professor of Neurosurgery at Washington University School of Medicine in St. Louis, met
the primary goal to determine the safety of the SCS device that aims to prevent obstruction in CSF catheters. Following the completion
of the first stage initial studies, Microbot commenced a follow-up study to further evaluate the safety of the SCS. The follow-up
study was also conducted by leading hydrocephalus experts at Washington University. The study, included a larger sample size compared
to the initial studies and the primary and secondary endpoints were to validate the safety of the activated SCS in-vivo (animal)
models. In that in-vivo study the major finding was that the SCS system is as safe to use as currently marketed devices. The study
also mentions, that in the animal model, contact of the shunt with the choroid plexus is impossible to avoid and that it may lead
to shunt obstruction due to hemorrhage of this highly vascular structure
In
parallel with the in-vivo study, Microbot also contracted with Envigo CRS Israel, a leading provider of non-clinical contract
research services, to conduct an in-vitro study designed to evaluate the operational performance of the SCS. Human brain glioblastoma
cells were used in order to assess performance of the SCSTM in a test system with accelerated cell growth, accumulation
and obstruction rates. In 2018, Microbot and Envigo conducted an in-vitro trial that its final conclusion was:
While
significant cell growth and accumulation were seen in the non-operating SCS™ group after 30 days, the shunt openings remained
clear in the constantly operating SCS™ group, with little to no cell attachment on the robotic cleaning mechanism (the ViRob™
system) and on the shunt openings.
The
SCS™ was further validated in a broader follow-up in-vitro study which commenced in July 2019 and concluded on August 14,
2019 and clearly demonstrated that the SCS™ prevented shunt occlusions under the parameters of that study. This follow-up
study was also conducted by Envigo CRS Israel using Human brain glioblastoma cells Specifically, the study demonstrated:
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Significant
cell growth and accumulation in a non-operating SCS™ as well as in a standard of care ventricular catheters (control
group).
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A
significant inhibition in cell growth in daily (5-10 minutes) or weekly (up to 2 hours over the week) operating regimes of
the SCS™, with little cell attachment on the ViRob mechanism.
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The
effectiveness of the SCS™ device in preventing cells blockage as compare to standard of care surgical ventricular catheters.
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To
further investigate the efficacy of the SCS™, Microbot conducted a follow-up in-vitro study at Wayne State University.
The study included a larger sample size compared to the initial study and the primary and secondary end points aimed to validate
the efficacy of the SCS in comparison to commercially available devices. After careful analysis of the results the final conclusion
was that the data from this study did not reveal statistically significant differences between the study’s groups.
Microbot
used the findings of the second stage of the animal study combined with additional experimental data that was acquired in the
past year for initial regulatory FDA pre-submissions.
On
January 27, 2021, we announced the completion of successful discussions with the FDA, for the SCSTM. After review
of Microbot existing pre-clinical data, the FDA’s feedback will allow us to apply for the EFS (Early Feasibility Study)
without further animal studies.
We
expect to continue to work with the FDA towards finalizing the SCSTM design, and to incorporate their feedback
prior to submitting the IDE to seek authorization to begin the EFS clinical trial. While there can be no assurance that the FDA
will approve the EFS study, the agency’s recent feedback indicates that the agency will be receptive to allowing a first-in-human
study to proceed based on existing data. After completing the EFS, we would then seek FDA input on the device design as finalized
through the EFS process in a subsequent IDE filing for approval of a clinical study proposal. Consequently, the timeline for the
First-in-Human clinical trial under the EFS is expected to commence in the third quarter of 2022.
In
spite of the above, there is still a possibility that Microbot may conduct clinical trials if they are requested by the FDA or
if Microbot decides that the data from such trials would improve the marketability of the product candidate.
The
proposed indication for use of the SCS™ device would be for the treatment of hydrocephalus and/or NPH as a component of
commercially available shunt systems. It continues to be possible that the FDA could require us to conduct a human clinical study
to support the safety and efficacy of the SCS and that such clinical data would need to be part of the future regulatory submission
to authorize marketing of the medical device in the U.S.
TipCAT
A
TipCAT prototype was shown to self-propel and self-navigate in curved plastic pipes and curved ex-vivo colon. In addition, in
its first feasibility study, the prototype device was tested in a live animal experiment and successfully self-propelled through
segments of the animal’s colon, with no post-procedural damage. All tests were conducted at AMIT (Alfred Mann Institute
of Technology at the Technion), prior to the licensing of TipCAT by Microbot.
Currently,
Microbot is not pursuing the development of the TipCAT as a colonoscopy tool due to its focus on the neurosurgical and endovascular
intervention spaces, and as such it is currently exploring the use of the TipCAT for minimally invasive neurosurgical and endovascular
applications to complement its other technologies.
LIBERTY
The
LIBERTY robotic system features a unique compact design with the capability to be operated remotely, reduce radiation exposure
and physical strain to the physician, reduce the risk of cross contamination, as well as the potential to eliminate the
use of multiple consumables when used with its “One & Done” capabilities, which would be based in
part on the CardioSert platform or possibly other guidewire/microcatheter technologies. LIBERTY is being designed to have
the following attributes:
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Compact
size - Eliminates the need for large capital equipment in dedicated cath-lab rooms with dedicated staff.
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Fully
disposable - To our knowledge, the first and only fully disposable, robotic system for endovascular procedures.
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Streamlines
Cath-lab procedures - Compatible with Microbot’s unique “One & Done” tool, which would be based
in part on the CardioSert platform or possibly other guidewire/microcatheter technologies, that combines guidewire
and microcatheter into a single device. The “One & Done” tool, when integrated into the system, is
expected to provide full control over tip curvature and stiffness for maneuverability and access without the need for constant
tool exchanges, while enhancing the operator experience.
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State
of the art maneuverability - Provides linear, rotational and tip control of its “One & Done” tool when
integrated into the system, as well as linear motion for an additional “over the wire” device.
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Enhanced
operator safety and comfort - Reduces exposure to ionizing radiation and the need for heavy lead vests otherwise to be worn
during procedures.
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Ease
of use - LIBERTY’s intuitive remote controls simplify advanced procedures while shortening the physician’s
learning curve.
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Telemedicine
compatible - Capable of tele-catheterization, carried out remotely by highly trained specialists.
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We
are continuing our feasibility animal trials with respect to the LIBERTY device, with a planned pre-submission to the FDA
as early as the fourth quarter of 2021, with submission to the FDA planned in the fourth quarter of 2022.
Strategy
Microbot’s
goal is to generate sales of its products, once they have received regulatory approval, by establishing SCS, LIBERTY and
additional devices from its technological platforms, as the standard-of-care in the eyes of doctors, surgeons, patients and medical
facilities, as well as getting the support of payors and insurance companies. Microbot believes that it can achieve this objective
by working with hospitals to demonstrate the key benefits of its products. Microbot’s strategy includes the following key
elements:
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Continue
to refine existing product candidates and develop additional micro-robotic solutions. As Microbot prepares to bring its
initial product candidates through pre-clinical and clinical trials, if necessary, and eventually to market, it continues
to focus on improving its product candidates to respond to clinical data and patient and physician feedback. Microbot also
expects to continue to innovate in the micro-robotics field by continuing to find ways of using its technology to solve unmet
needs, with the overarching goal of providing a safer, more effective and more efficient surgical environment for patients
and physicians.
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Establish
and leverage relationships with key institutions and leading clinicians. Microbot intends to develop relationships with
a relatively small number of hospitals and clinics through its clinical stage. Microbot’s objective will be to maintain
clinical focus with such hospitals and clinics so as to establish the SCS, as well as other future products, as the standard
of care in such institutions for their respective procedures. Microbot also expects to identify key clinicians with hydrocephalus
specialties with the expectation that such clinical focus will accelerate the adoption of its candidate products.
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Continuously
invest in research and development. Microbot’s most significant expense has historically been research and development,
and Microbot expects that this will continue in the foreseeable future, including expenses it expects to incur to improve
on its prototype products in order to respond to clinical data, to develop additional applications using its technologies
and to develop future product candidates.
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Explore
partnerships for the introduction of Microbot’s products. Microbot intends to focus its marketing and sales efforts
initially on pursuing collaborations with global medical device companies that have established sales and distribution networks.
Microbot will seek to enter collaborations and partnerships with strategic players that offer synergies with Microbot’s
product candidates and expertise.
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Seek
additional IP and technologies to complement and strengthen Microbot’s current IP portfolio. Microbot intends to
continue exploring new technologies, IP and know-how to add to its current portfolio through licensing, mergers and/or acquisitions
and to allow Microbot to enter new spaces and strengthen its overall product portfolio.
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SCS
Opportunities
The
SCS is designed to prevent shunt occlusions in hydrocephalus and NPH patients who have undergone or are undergoing the surgical
insertion of a shunt system. For purposes of its marketing strategy, Microbot has split the market for shunt systems into two
sub-markets:
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Primary
shunt placement; and
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Shunt
replacement.
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Microbot’s
SCS device is universal (meaning that it is designed to be attachable to any valve on the market); therefore, Microbot’s
initial go-to-market strategy is the development of strategic partnerships with leading global medical device companies with ready
sales and distribution channels. Outside of a strategic partnership, it is most likely that Microbot’s SCS product will
be initially used in shunt replacement surgeries to replace occluded ventricular catheters. Accordingly, Microbot intends to establish
key hospital and clinic relationships that will allow it to diffuse the technology among experts and other stakeholders. Microbot
is also planning to apply for the SCS device to be covered under the current reimbursement codes in the United States for use
in hydrocephalus and NPH shunt procedures.
TipCAT
Opportunities
Microbot
is currently exploring the use of the TipCAT for minimally invasive neurological and endovascular applications.
CardioSert
Technology Opportunities
Microbot
is currently exploring the integration of the CardioSert technology into the LIBERTY endovascular robotic system for a
range of potential applications in the cardiovascular, peripheral vascular and neurovascular spaces.
LIBERTY
Opportunities
The
LIBERTY endovascular robotic system is being designed to remotely maneuvering guidewires, microcatheters and over-the-wire
devices within the body’s vasculature. The device is being designed to be the size of a personal device and to be fully
disposable and affordable. We are aiming LIBERTY to be capable of supporting whole-endovascular procedures by providing
“One & Done” solutions which would be based in part on CardioSert’s proprietary technology or possibly
other guidewire/microcatheter technologies. With control over tip curvature and stiffness for maneuverability and access –
and without the need for constant tool exchanges – the “One & Done” feature, when integrated into the
system, is expected to drastically reduce the procedure time and costs, while enhancing the operator experience. We believe
LIBERTY’s addressable markets are the Interventional Cardiology, Interventional Radiology and Interventional Neuroradiology
markets.
The
unique characteristics of LIBERTY – compact, mobile, disposable and remotely controlled - open the opportunity of
expanding telerobotic interventions to patients with limited access to life-saving procedures, such as mechanical thrombectomy
in ischemic stroke.
Competition
SCS
Competitive Landscape
Several
academic research groups, such as at the New Jersey Institute of Technology, are currently researching sensing and obstruction-resistant
catheter designs, and the Smart Sensors and Integrated Microsystems (SSIM) Program at Wayne State University has publicized that
it is engaging in smart shunt development activity. However, based in part on its knowledge of the patented technologies, Microbot
believes that these technologies are still early in the research and development cycle. Although we believe the SCS may face direct
competition from Anuncia Inc., a spin-off of Alycone Lifesciences Inc., which received a CE Mark and FDA 510k clearance for the
Alivio ReFlow™ Ventricular System for the treatment of hydrocephalus, the commercialization status of the device is not
clear. The SCS also faces non-direct competition from Aqueduct Neurosciences, Inc., which we believe is developing a non-shunt,
electro-mechanical technology platform to control the draining of cerebrospinal fluid, and from Cerevasc Inc., which is developing
the eShuntTM System that aims to eliminate the need for passing a rigid catheter through cerebral cortex and subcortical
white matter.
Microbot
does not expect its SCS device to directly compete against shunt systems currently available in the market. The SCS device is
designed to replace a component of existing shunt systems and is expected to be an aftermarket purchase that would be used to
modify existing products by the end user. However, there can be no assurance that Microbot’s product candidate will be accepted
by the shunt market as an alternative component.
TipCAT
Competitive Landscape
Microbot
has not at this time completed its evaluation of the current competitive landscape in the endovascular space for potential uses
of the TipCAT.
CardioSert
Technology Competitive Landscape
Competition
includes moveable-core guidewires from companies such as Boston Scientific and Rapid Medical, and steerable and deflectable sheaths
and catheters from companies such as Bendit Technologies and Merit Medical. To our knowledge, the CardioSert device is the only
device that combines an inner moveable guidewire and an outer microcatheter, with the ability to control the shape and stiffness
of the distal tip in a continuous, gradual manner, and intends to compete on that basis.
LIBERTY
Competitive Landscape
We
believe the main competitor to the LIBERTY system is the CorPath GRX vascular robotics system by Corindus Vascular Robotics,
a Siemens Helathineers company. The CorPath GRX system has FDA approvals for percutaneous coronary interventions (PCI) and peripheral
vascular interventions (PVI) and is pending an approval for neurovascular interventions. Other competitors include Robocath (CE
Marked for PCI only) and Hansen Medical (a J&J Company with FDA approval for PVI). We believe these systems have drawbacks,
such as limited maneuverability, the requirement to exchange and use multiple expensive surgical tools, being cumbersome to set-up
and operate, and requiring significant capital expenditures. We further believe that these systems have captured a marginal
market share to date.
Microbot’s
existing and planned products could also be rendered obsolete or uneconomical by technological advances developed in the future
by existing or new competitors. Some of Microbot’s competitors currently have significantly greater resources than Microbot
does; have established relationships with healthcare professionals, customers and third-party payors; and have long-term contracts
with group purchasing organizations in the United States. In addition, many of Microbot’s competitors have established distributor
networks, greater resources for product development, sales and marketing, additional lines of products and the ability to offer
financial incentives such as rebates, bundled products or discounts on other product lines that Microbot cannot provide.
Intellectual
Property
General
The
SCS and TipCAT are based on technological platforms licensed from The Technion Research and Development Foundation Ltd., or TRDF,
as further discussed below. The LIBERTY platform core technology is co-owned by Microbot and TRDF. The CardioSert device
is based on technologies acquired by Microbot. Microbot plans to develop other micro-robotic solutions through internal research
and development, to strengthen its intellectual property position, and to continue exploring strategic collaborations and accretive
acquisition opportunities. Microbot currently holds an intellectual property portfolio of 42 patents issued/allowed and
23 patent applications pending worldwide. It also has registered trademarks in Israel and Europe relating to its LIBERTY
platform, and also has trademark applications pending in Israel, US, Europe and China relating to its proprietary Microbot
Medical tradename and logo.
Microbot
relies or intends to rely on intellectual property licensed or developed, including patents, trade secrets, trademarks, technical
innovations, laws of unfair competition and various licensing agreements, to provide its future growth, to build its competitive
position and to protect its technology. As Microbot continues to expand its intellectual property portfolio, it is critical for
Microbot to continue to invest in filing patent applications to protect its technology, inventions, and improvements.
Microbot
requires its employees and consultants to execute confidentiality agreements in connection with their employment or consulting
relationships with Microbot. Microbot also requires its employees and consultants who work on its product candidates to agree
to disclose and assign to Microbot all inventions conceived during the term of their service, while using Microbot property, or
which relate to Microbot’s business.
Patent
applications in the United States and in foreign countries are maintained in secrecy for a period of time after filing, which
results in a delay between the filing date of the patent applications and the time when they are published. Patents issued and
patent applications filed relating to medical devices are numerous, and there can be no assurance that current and potential competitors
and other third parties have not filed or in the future will not file applications for, or have not received or in the future
will not receive, patents or obtain additional proprietary rights relating to product candidates, products, devices or processes
used or proposed to be used by Microbot. Microbot believes that the technologies it employs in its products and systems do not
infringe the valid claims of any third-party patents. There can be no assurance, however, that third parties will not seek to
assert that Microbot devices and systems infringe their patents or seek to expand their patent claims to cover aspects of Microbot’s
products and systems.
The
medical device industry in general has been characterized by substantial litigation regarding patents and other intellectual property
rights. Any such claims, regardless of their merit, could be time-consuming and expensive to respond to and could divert Microbot’s
technical and management personnel. Microbot may be involved in litigation to defend against claims of infringement by other patent
holders, to enforce patents issued to Microbot, or to protect Microbot’s trade secrets. If any relevant claims of third-party
patents are upheld as valid and enforceable in any litigation or administrative proceeding, Microbot could be prevented from practicing
the subject matter claimed in such patents, or would be required to obtain licenses from the patent owners of each such patent,
or to redesign Microbot’s products, devices or processes to avoid infringement. There can be no assurance that such licenses
would be available or, if available, would be available on terms acceptable to Microbot or that Microbot would be successful in
any attempt to redesign products or processes to avoid infringement. Accordingly, an adverse determination in a judicial or administrative
proceeding or failure to obtain necessary licenses, could potentially prevent Microbot from manufacturing and selling its products.
Microbot’s
issued U.S. patents, which cover Microbot’s product candidates, will expire between 2026 and 2033, not including any patent
term adjustments that may be available. Issued patents outside of the United States directed to Microbot’s product candidates
will expire between 2026 and 2036.
License
Agreement with the Technion
In
June 2012, Microbot entered into a license agreement with TRDF, the technology transfer subsidiary of The Technion Institute of
Technology, pursuant to which it obtained an exclusive, worldwide, royalty-bearing, sub-licensable license to certain patents
and inventions relating to the SCS and TipCAT technology platforms invented by Professor Moshe Shoham, a former director of and
an advisor to the Company, and in certain circumstances other TRDF-related persons. Pursuant to the terms of the license agreement,
in order to maintain the license with respect to each platform, Microbot must use commercially reasonable efforts to develop products
covered by the license, including meeting certain agreed upon development milestones. The milestones for both SCS and TipCAT include
commencing first in human clinical trials by December 2021. Failure to meet any development milestone will give TRDF the right
to terminate the license with respect to the technology underlying the missed milestone.
As
partial consideration for the grant of the licenses under the agreement, Microbot issued a number of shares to TRDF equal to 3%
of its issued and outstanding shares at such time on a fully diluted basis. Such shares were initially subject to antidilution
protections but are no longer subject to adjustment. In addition, as partial consideration for the licenses granted, Microbot
agreed to pay TRDF royalties of between 1.5% and 3.0% of net sales of products covered by the licenses, subject to certain reductions,
and certain percentages of amounts received by Microbot in the event of sublicensing.
In
the case of termination of the license by Microbot without cause or by TRDF for cause, TRDF has the right to receive a non-exclusive
license from Microbot with respect to improvements to the licensed technologies made by Microbot. In such cases, TRDF would pay
a royalty of 10% of the income received by TRDF in connection its sublicensing of such patent right and related intellectual property.
If the license from TRDF were to be terminated with respect with either of the technology platforms underlying the SCS or the
TipCAT, Microbot would no longer be able to continue its development of the related product candidate. However, Microbot believes
that its current intellectual property portfolio, and its ongoing efforts to expand into other micro-robotic surgical technologies,
will give it the flexibility to shift its resources towards developing and commercializing related products.
In
addition to the licensed SCS and TipCAT technologies, the LIBERTY platform, which was invented by employees of Microbot
together with Professor Moshe Shoham of the Technion, in his capacity as a consultant to Microbot, is co-owned by Microbot and
TRDF, and a process is being conducted for establishing the LIBERTY platform as a “Joint Invention” in accordance
with the terms of the License Agreement. Once the Joint Invention is established, Microbot will have to pay TRDF royalties of
between 1.5% and 3.0% of net sales of products covered by this Joint Invention.
Research
and Development
Microbot’s
research and development programs are generally pursued by engineers and scientists employed by Microbot in its offices in Israel
on a full-time basis or as consultants, or through partnerships with industry leaders in manufacturing and design and researchers
in academia. Microbot is also working with subcontractors in developing specific components of its technologies.
The
primary objectives of Microbot’s research and development efforts are to continue to introduce incremental enhancements
to the capabilities of its candidate products and to advance the development of proposed products.
Microbot
has obtained grants from the Israeli Innovation Authority (“IIA”) for participation in research and development activities
since 2013 through 2020. During this time, Microbot has received grant revenues of approximately $1,500,000. In return, Microbot
is obligated to pay royalties amounting to 3%-3.5% 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 USD LIBOR per annum.
Under
the terms of the grants and applicable law, Microbot is restricted from transferring any technologies, know-how, manufacturing
or manufacturing rights developed using the grant outside of Israel without the prior approval of the Israel Innovation Authority.
Microbot has no obligation to repay the grant, if the SCS project fails, is unsuccessful or aborted before any sales are generated.
The financial risk is assumed completely by the IIA.
Microbot
expects to continue to access government funding in the future.
For
the fiscal year ended December 31, 2020, Microbot incurred research and development expenses of approximately $3,396,000 compared
to research and development expenses of approximately $3,048,000 for the fiscal year ended December 31, 2019.
SCS
Microbot
has already made plans to develop a second version of its SCS device that will have an embedded controller and battery, initially
to support its animal trials. This alternative design will allow the cleaning mechanism to be automatically activated, without
the need for the patient’s involvement in the activation process.
Microbot
has completed the development of an SCS prototype and is currently continuing the safety testing, general proof of concept testing
and performance testing for the device, which Microbot began in mid-2013. In May 2018, Microbot previously announced the results
of two pre-clinical studies assessing the SCS, an in-vitro study and a small animal study. The in-vitro study, which was performed
at Wayne State University, supports the SCS’s potential as a viable technology for preventing occlusion in shunts used to
treat hydrocephalus. The animal study designed to assess the safety profile of the SCS, which was performed at Washington University
School of Medicine in St. Louis, met the primary goal to determine the safety of the SCS device that aims to prevent obstruction
in CSF catheters. Since the completion of these initial studies, Microbot conducted a follow-up study to further evaluate the
safety of the SCS. The follow-up study was also conducted by leading hydrocephalus experts at Washington University and Wayne
State University. The study included a larger sample size compared to the initial studies and the primary and secondary endpoints
seek to validate the safety and efficacy of the SCS that will be activated in both in-vitro (lab) and in-vivo (animal) models.
In that in-vivo study, the major finding was that the SCS system is as safe to use as currently marketed devices.
In
conjunction with conducting the follow-up study, Microbot also contracted with Envigo CRS Israel, to conduct an in-vitro study
designed to evaluate the operational performance of the SCS. The first Envigo study that was conducted in 2018 used human brain
glioblastoma cells to assess the performance of the SCS in a test system with accelerated cell growth, accumulation, and obstruction
rates. The performance of a constantly activated (always-on) SCS to prevent shunt occlusion in the laboratory study was compared
with a non-operating SCS after 30 days, and the results were captured with photographs shared by Microbot in a press release issued
on January 14, 2019. While significant cell growth and accumulation was seen in the cell cultures with a non-operating SCS, the
shunt openings within the cells seeded with a constantly operating SCS remained clear, with little to no cell attachment on the
robotic brush (ViRob) and on the opening where the robotic brush (ViRob) operates after 30 days of cell culturing and growth.
We believe this experiment validates the operational effectiveness of the SCS to prevent shunt occlusion and provides additional
data to support the device’s proof of concept. We believe the in-vitro laboratory study further confirms that the SCS has
the ability to operate after cells have accumulated on the catheter holes and the robotic brush (ViRob) and to potentially disintegrate
existing occlusions formed on the robotic brush (ViRob) and on the opening where the robotic brush (ViRob) operates, based on
the results from a third test group in which cells were allowed to grow for four weeks and then exposed to an activated SCS device.
We believe the images captured by Envigo and Microbot demonstrate that the cleaning mechanism of the SCS is powerful enough to
clear accumulated cells at blocked pores, as significant improvements were observed in the degree of shunt obstruction after only
a short period of time following activation of the SCS.
The
SCS™ was further validated in a broader follow-up in-vitro lab study which commenced in July 2019 and concluded on August
14, 2019 and clearly demonstrated the device prevented shunt occlusion under the parameters of that study. This follow-up study
was also conducted by Envigo CRS Israel. Human brain glioblastoma cells were used in order to assess performance of the SCSTM
in a test system with accelerated cell growth rate, accumulation and obstruction rates. Specifically, the study demonstrated:
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Significant
cell growth and accumulation in a non-operating SCS as well as a standard of care surgical shunt.
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A
significant inhibition in cell growth in daily (5-10 minutes) or weekly (up to 2 hours over the week) operating SCS with little
cell attachment on the robotic brush (ViRob) and on the opening where the robotic brush (ViRob) operates.
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The
effectiveness of the Company’s SCS devices in preventing cells blockage as compare to standard of care surgical shunts.
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The
follow-up in vitro (lab) study at Wayne State University included a larger sample size compared to the initial study and the primary
and secondary end points seek to validate the efficacy of the SCS while being activated in-vitro (lab). Generally, the data from
this study did not reveal statistically significant trends indicating a strong preference for any of the designs tested, including
the SCS; therefore, these tests as they stand are inconclusive but have provided us with trends which Microbot may decide to further
explore.
After
submitting the existing data to the FDA, on January 27, 2021 we announced the completion of successful discussions with the FDA,
for the SCSTM. After review of our existing pre-clinical data, the FDA’s feedback will allow us to apply for
the EFS. We expect to continue to work with the FDA towards finalizing the SCSTM design, and to incorporate their feedback
prior to submitting the IDE to seek authorization to begin the EFS clinical trial. While there can be no assurance that the FDA
will approve the EFS study, the agency’s recent feedback indicates that the agency will be receptive to allowing a first-in-human
study to proceed based on existing data. After completing the EFS, we would then seek FDA input on the device design as finalized
through the EFS process in a subsequent IDE filing for approval of a clinical study proposal. Consequently, the timeline for the
First-in-Human clinical trial under the EFS is expected to commence in the third quarter of 2022.
At
this time, we can give no assurance that the FDA will agree that an EFS is warranted, in which case we will have to re-commence
animal trials or otherwise re-evaluate the FDA approval process, which could delay and hinder our ability to commercialize the
SCS device.
LIBERTY
The
LIBERTY prototype system was tested at our laboratories in an in-vitro silicone model, using off-the-shelf guidewires and
microcatheters, and showing an ability to successfully provide linear and rotational movements of the guidewires and linear motion
of the microcatheters. We also conducted a single preliminary animal trial with the LIBERTY prototype.
The
LIBERTY prototype is designed to control the CardioSert device; however, the CardioSert technology is not currently expected
to be integrated into the next version of the LIBERTY device. Additionally, we are exploring and evaluating additional
innovative guidewire/microcatheter technologies to be integrated and combined with the LIBERTY robotic platform to further
enhance the performance of the system.
Since
the CardioSert device was originally designed for chronic total occlusion, we are currently working with subcontractors and guidewire
design-houses to perfect the performance of the CardioSert device to the indication that will be selected for the LIBERTY
platform. These may include procedures in the peripheral, coronary or neurovascular spaces.
Manufacturing
Microbot
does not have any manufacturing facilities or manufacturing personnel. Microbot currently relies, and expects to continue to rely,
on third parties for the manufacturing of its product candidates for preclinical and clinical testing, as well as for commercial
manufacturing if its product candidates receive marketing approval.
Commercialization
Microbot
has not yet established a sales, marketing or product distribution infrastructure for its product candidates, which are still
in development stages. Microbot plans to access the U.S. markets with its initial device offerings through strategic partnerships
but may develop its own focused, specialized sales force or distribution channels once it has several commercialized products
in its portfolio. Microbot has not yet developed a commercial strategy outside of the United States.
Government
Regulation
General
Microbot’s
medical technology products and operations are subject to extensive regulation in the United States and other countries. Most
notably, if Microbot seeks to sell its products in the United States, its products will be subject to the Federal Food, Drug,
and Cosmetic Act (FDCA) as implemented and enforced by the U.S. Food and Drug Administration (FDA). The FDA regulates the development,
bench and clinical testing, manufacturing, labeling, storage, record-keeping, promotion, marketing, sales, distribution and post-market
support and reporting of medical devices in the United States to ensure that medical products distributed domestically are safe
and effective for their intended uses. Regulatory policy affecting its products can change at any time.
Advertising
and promotion of medical devices in the United States, in addition to being regulated by the FDA, are also regulated by the Federal
Trade Commission and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products
of other companies have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection
statutes. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating
to advertising claims.
Foreign
countries where Microbot wishes to sell its products may require similar or more onerous approvals to manufacture or market its
products. Government agencies in those countries also enforce laws and regulations that govern the development, testing, manufacturing,
labeling, advertising, marketing and distribution, and market surveillance of medical device products. These regulatory requirements
can change rapidly with relatively short notice.
Other
regulations Microbot encounters in the United States and in other jurisdictions are the regulations that are common to all businesses,
such as employment legislation, implied warranty laws, and environmental, health and safety standards, to the extent applicable.
In the future, Microbot will also encounter industry-specific government regulations that would govern its products, if and when
they are developed for commercial use.
U.S.
Regulation
The
FDA governs the following activities that Microbot performs, will perform, upon the clearance or approval of its product candidates,
or that are performed on its behalf, to ensure that medical products distributed domestically or exported internationally are
safe and effective for their intended uses:
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product
design, and development;
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product
safety, testing, labeling and storage;
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record
keeping procedures; and
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product
marketing.
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There
are numerous FDA regulatory requirements governing the approval or clearance and subsequent commercial marketing of Microbot’s
products. These include:
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the
timely submission of product listing and establishment registration information, along with associated establishment user
fees;
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continued
compliance with the Quality System Regulation, or QSR, which require specification developers and manufacturers, including
third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures
during all aspects of the manufacturing process;
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labeling
regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication;
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clearance
or approval of product modifications that could significantly affect the safety or effectiveness of the device or that would
constitute a major change in intended use;
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Medical
Device Reporting regulations (MDR), which require that manufacturers keep detailed records of investigations or complaints
against their devices and to report to the FDA if their device may have caused or contributed to a death or serious injury
or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur;
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adequate
use of the Corrective and Preventive Actions process to identify and correct or prevent significant systemic failures of products
or processes or in trends which suggest same;
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post-approval
restrictions or conditions, including post-approval study commitments;
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post-market
surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness
data for the device; and
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notices
of correction or removal and recall regulations.
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Unless
an exemption applies, before Microbot can commercially distribute medical devices in the United States, Microbot must obtain,
depending on the classification of the device, either prior 510(k) clearance, 510(k) de-novo clearance or premarket approval (PMA),
from the FDA. The FDA classifies medical devices into one of three classes based on the degree of risk associated with each medical
device and the extent of regulatory controls needed to ensure the device’s safety and effectiveness:
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Class
I devices, which are low risk and subject to only general controls (e.g., registration and listing, medical device labeling
compliance, MDRs, Quality System Regulations, and prohibitions against adulteration and misbranding) and, in some cases, to
the 510(k) premarket clearance requirements;
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Class
II devices, which are moderate risk and generally require 510(k) or 510(k) de-novo premarket clearance before they may be
commercially marketed in the United States as well as general controls and potentially special controls like performance standards
or specific labeling requirements; and
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Class
III devices, which are devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable
devices, or devices deemed not substantially equivalent to a predicate device. Class III devices generally require the submission
and approval of a PMA supported by clinical trial data.
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Microbot
expects the medical products in its pipeline currently to be classified as Class II. Class II devices are those for which general
controls alone are insufficient to provide reasonable assurance of safety and effectiveness and there is sufficient information
to establish special controls. Special controls can include performance standards, post-market surveillance, patient histories
and FDA guidance documents. Premarket review and clearance by the FDA for these devices is generally accomplished through the
510(k) or 510(k) de-novo premarket notification process. As part of the 510(k) or 510(k) de-novo notification process, FDA may
require the following:
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Development
of comprehensive product description and indications for use;
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Comprehensive
review of predicate devices and development of data supporting the new product’s substantial equivalence to one or more
predicate devices; and
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If
appropriate and required, certain types of clinical trials (IDE submission and approval may be required for conducting a clinical
trial in the US).
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When
clinical evidence is necessary because non-clinical or animal testing is unavailable or inadequate to provide the information
needed to advance device development, an Early Feasibility Study (EFS) for a limited clinical investigation of the device may
be applicable and which we are evaluating with respect to the SCS device. If the FDA agrees to the EFS approach in general, we
will work to finalize the design of the device, to resolve any questions from the FDA, and to incorporate the FDA’s feedback
prior to submitting the IDE to seek authorization to begin the EFS clinical trial. After completing the EFS study, we will then
seek FDA input on the device design as finalized through the EFS process in a subsequent IDE filing for approval of a pivotal
clinical study proposal.
Clinical
trials involve use of the medical device on human subjects under the supervision of qualified investigators in accordance with
current Good Clinical Practices (GCPs), including the requirement that all research subjects provide informed consent for their
participation in the clinical study. A written protocol with predefined end points, an appropriate sample size and pre-determined
patient inclusion and exclusion criteria, is required before initiating and conducting a clinical trial. All clinical investigations
of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s Investigational device Exemption,
or IDE, regulations that among other things, govern investigational device labeling, prohibit promotion of the investigational
device, and specify recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the
device presents a “significant risk,” as defined by the FDA, the agency requires the device sponsor to submit an IDE
application, which must become effective prior to commencing human clinical trials. The IDE will automatically become effective
30 days after receipt by the FDA, unless the FDA denies the application or notifies the company that the investigation is on hold
and may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE that requires modification,
the FDA may permit a clinical trial to proceed under a conditional approval. In addition, the study must be approved by, and conducted
under the oversight of, an Institutional Review Board (IRB) for each clinical site. If the device presents a non-significant risk
to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate
approval from the FDA, but it must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that
the investigators obtain informed consent, and labeling and record-keeping requirements. 510(k) clearance typically involves the
following:
Assuming
successful completion of all required testing, a detailed 510(k) premarket notification or 510(k) de-novo is submitted to the
FDA requesting clearance to market the product. The notification includes all relevant data from pertinent preclinical and clinical
trials, together with detailed information relating to the product’s manufacturing controls and proposed labeling, and other
relevant documentation.
A
510(k) clearance letter from the FDA will authorize commercial marketing of the device for one or more specific indications for
use.
After
510(k) clearance, Microbot will be required to comply with a number of post-clearance requirements, including, but not limited
to, Medical Device Reporting and complaint handling, and, if applicable, reporting of corrective actions. Also, quality control
and manufacturing procedures must continue to conform to QSRs. The FDA periodically inspects manufacturing facilities to assess
compliance with QSRs, which impose extensive procedural, substantive, and record keeping requirements on medical device manufacturers.
In addition, changes to the manufacturing process are strictly regulated, and, depending on the change, validation activities
may need to be performed. Accordingly, manufacturers must continue to expend time, money and effort in the area of production
and quality control to maintain compliance with QSRs and other types of regulatory controls.
After
a device receives 510(k) clearance from the FDA, any modification that could significantly affect its safety or effectiveness,
or that would constitute a major change in its intended use or technological characteristics, requires a new 510(k) clearance
or could require a PMA. The FDA requires each manufacturer to make the determination of whether a modification requires a new
510(k) notification or PMA in the first instance, but the FDA can review any such decision. If the FDA disagrees with a manufacturer’s
decision not to seek a new 510(k) clearance or PMA for a particular change, the FDA may retroactively require the manufacturer
to seek 510(k) clearance or PMA. The FDA can also require the manufacturer to cease U.S. marketing and/or recall the modified
device until additional 510(k) clearance or PMA approval is obtained.
The
FDA and the Federal Trade Commission, or FTC, will also regulate the advertising claims of Microbot’s products to ensure
that the claims Microbot makes are consistent with its regulatory clearances, that there is scientific data to substantiate the
claims and that product advertising is neither false nor misleading.
To
obtain 510(k) clearance, Microbot must submit a notification to the FDA demonstrating that its proposed device is substantially
equivalent to a predicate device (i.e., a device that was in commercial distribution before May 28, 1976, a device that has been
reclassified from Class III to Class I or Class II, or a 510(k)-cleared device). The FDA’s 510(k) clearance process generally
takes from three to 12 months from the date the application is submitted but also can take significantly longer. If the FDA determines
that the device or its intended use is not substantially equivalent to a predicate device, the device is automatically placed
into Class III, requiring the submission of a PMA.
There
is no guarantee that the FDA will grant Microbot 510(k) clearance for its pipeline medical device products, and failure to obtain
the necessary clearances for its products would adversely affect Microbot’s ability to grow its business. Delays in receipt
or failure to receive the necessary clearances, or the failure to comply with existing or future regulatory requirements, could
reduce its business prospects.
Devices
that cannot be cleared through the 510(k) process due to lack of a predicate device but would be considered low or moderate risk
may be eligible for the 510(k) de-novo process. In 1997, the Food and Drug Administration Modernization Act, or FDAMA added the
de novo classification pathway now codified in section 513(f)(2) of the FD&C Act. This law established an alternate pathway
to classify new devices into Class I or II that had automatically been placed in Class III after receiving a Not Substantially
Equivalent, or NSE, determination in response to a 510(k) submission. Through this regulatory process, a sponsor who receives
an NSE determination may, within 30 days of receipt, request FDA to make a risk-based classification of the device through what
is called a “de novo request.” In 2012, section 513(f)(2) of the FD&C Act was amended by section 607 of the Food
and Drug Administration Safety and Innovation Act (FDASIA), in order to provide a second option for de novo classification. Under
this second pathway, a sponsor who determines that there is no legally marketed device upon which to base a determination of substantial
equivalence can submit a de novo request to FDA without first submitting a 510(k).
In
the event that Microbot receives a Not Substantially Equivalent determination for either of its device candidates in response
to a 510(k) submission, the Microbot device may still be eligible for the 510(k) de-novo classification process.
Devices
that cannot be cleared through the 510(k) or 510(k) de-novo classification process require the submission of a PMA. The PMA process
is much more time consuming and demanding than the 510(k) notification process. A PMA must be supported by extensive data, including
but not limited to data obtained from preclinical and/or clinical studies and data relating to manufacturing and labeling, to
demonstrate to the FDA’s satisfaction the safety and effectiveness of the device. After a PMA application is submitted,
the FDA’s in-depth review of the information generally takes between one and three years and may take significantly longer.
If the FDA does not grant 510(k) clearance to its products, there is no guarantee that Microbot will submit a PMA or that if Microbot
does, that the FDA would grant a PMA approval of Microbot’s products, either of which would adversely affect Microbot’s
business.
Microbot
is currently evaluating whether it is appropriate for it to seek 510(k) clearance, given the technological features of the SCS
device and the FDA’s recent announcements about enhancing the 510(k) process to further ensure safety and efficacy. However,
the Company believes that given the similarities between the SCS and some cleared predicate devices, there is a reasonable likelihood
that a de novo application might be acceptable to the FDA.
Foreign
Regulation
In
addition to regulations in the United States, Microbot will be subject to a variety of foreign regulations governing clinical
trials, marketing authorization and commercial sales and distribution of its products in foreign countries. The approval process
varies from country to country, and the time may be longer or shorter than that required for FDA approval or clearance. The requirements
governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
International
sales of medical devices are subject to foreign governmental regulations which vary substantially from country to country. Whether
or not Microbot obtains FDA approval or clearance for its products, Microbot will be required to make new regulatory submissions
to the comparable regulatory authorities of foreign countries before Microbot can commence clinical trials or marketing of the
product in such countries. The time required to obtain certification or approval by a foreign country may be longer or shorter
than that required for FDA clearance or approval, and the requirements may differ. Below are summaries of the regulatory systems
for medical devices in Europe and Israel, where Microbot currently anticipates marketing its products. However, its products may
also be marketed in other countries that have different systems or minimal requirements for medical devices.
Europe.
The primary regulatory body in Europe is the European Union, or E.U., which consists of 27 member states and has a coordinated
system for the authorization of medical devices.
The
E.U. has adopted legislation, in the form of directives to be implemented in each member state, concerning the regulation of medical
devices within the European Union. The directives include, among others, the Medical Device Regulation, or MDR, that establishes
certain requirements with which medical devices must comply before they can be commercialized in the European Economic Area, or
EEA (which comprises the member states of the E.U. plus Norway, Liechtenstein and Iceland). Under the MDR, medical devices are
classified into four Classes, I, IIa, IIb, and III, with Class I being the lowest risk and Class III being the highest risk.
In
order to commercialize medical devices in the European Union, a CE Mark certificate is needed. This certification verifies that
a device meets all regulatory requirements for medical devices, which will soon change under the new Medical Devices Regulation
(MDR 2017/745). The CE approval process in Europe is summarized below:
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1.
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To
obtain CE Marking certification, comply with European Commission Regulation (EU) No. 2017/745, commonly known as the Medical
Device Regulation (MDR).
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2.
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Appoint
a Person Responsible for regulatory compliance. Determine classification of device - Class I (self-certified); Class I (sterile,
measuring or reusable surgical instrument); Class IIa, Class IIb, or Class III.
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3.
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For
all devices except Class I (self-certified), implement a Quality Management System (QMS) in accordance with the MDR. Companies
usually apply the EN ISO 13485 standard to achieve compliance. The QMS must include Clinical Evaluation, Post-Market Surveillance
(PMS) and Post Market Clinical Follow-up (PMCF) plans. Make arrangements with suppliers about unannounced Notified Body audits.
For Class I (self-certified), implement a QMS though Notified Body intervention is not required.
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4.
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Prepare
a CE Technical File or Design Dossier (Class III) providing information about the device and its intended use plus testing
reports, Clinical Evaluation Report (CER), risk management file, Instruction For Use (IFU), labeling and more. Obtain a Unique
Device Identifier (UDI) for the device. All devices, even legacy products in use for decades, will require clinical data.
Most of these data should refer to the subject device. Clinical studies are generally required for implantable and Class III
devices. Existing clinical data may be acceptable. Clinical trials in Europe must be pre-approved by a European Competent
Authority.
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5.
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If
the company does not have a location in Europe, appoint an Authorized Representative (EC REP) located in the EU who is qualified
to handle regulatory issues. Place the EC REP name and address on device label. Obtain a Single Registration Number from the
regulators.
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6.
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For
all devices except Class I (self-certified), the QMS and Technical File or Design Dossier must be audited by a Notified Body,
a third party accredited by European authorities to audit medical device companies and products.
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7.
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For
all devices except Class I (self-certified), the company will be issued a European CE Marking Certificate for the device and
an ISO 13485 certificate for the company’s facility following successful completion of the Notified Body audit. ISO
13485 certification must be renewed every year. CE Marking certificates are typically valid for a maximum of 5 years, but
are typically reviewed during the annual surveillance audit.
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8.
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Prepare
a Declaration of Conformity, a legally binding document prepared by the manufacturer stating that the device is in compliance
with the applicable European requirements. At this time, the CE Marking may be affixed.
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9.
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Register
the device and its Unique Device Identifier (UDI) in the EUDAMED database. UDI must be on label and associated with the regulatory
documents.
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10.
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For
Class I (self-certified), annual NB audits are not required. However, CER, Technical File, and PMS activities must be kept
updated. For all other classes, the company will be audited each year by a Notified Body to ensure ongoing compliance with
the MDR. Failure to pass the audit will invalidate the CE Marking certificate. The company must perform Clinical Evaluation,
PMS, and PMCF.
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Microbot
intends to apply for the CE Mark for each of its medical device products. There is no guarantee that Microbot will be granted
a CE Mark for all or any of its pipeline products and failure to obtain the CE Mark would adversely affect its ability to grow
its business.
Israel.
Israel’s Medical Devices Law generally requires the registration of all medical products with the Ministry of Health, or
MOH, Registrar as a precondition for production and distribution in Israel. Special exemptions may apply under limited circumstances
and for purposes such as the provision of essential medical treatment, research and development of the medical device, and personal
use, among others.
Registration
of medical devices requires the submission of an application to the Ministry of Health Medical Institutions and Devices Licensing
Department, or AMAR. An application for the registration of a medical device includes the following:
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Name
and address of the manufacturer, and of the importer as applicable;
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Description
of the intended use of the medical device and of its medical indications;
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Technical
details of the medical device and of its components, and in the event that the device or the components are not new, information
should be provided on the date or renovation;
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Certificate
attesting to the safety of the device, issued by a competent authority of one of the following countries: Australia, Canada,
European Community (EC), Member States (MSs), Israel, Japan, or the United States;
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Information
on any risk which may be associated with the use of the device (including precautionary measures to be taken);
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Instructions
for use of the device in Hebrew; the MOH may allow the instructions to be in English for certain devices;
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Details
of the standards to which the device complies;
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Description
of the technical and maintenance services, including periodic checks and inspections; and
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Declaration,
as appropriate: of the local manufacturer/importer, and of the foreign manufacturer.
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If
the application includes a certificate issued by a competent authority of one of the following “recognized” countries:
Australia, Canada, European Community (CE) Member States (MSs), Japan, or the United States, the registration process is generally
expedited, but could still take 6-9 months for approval. If such certificate is not available, the registration process will take
significantly longer and a license is rarely issued. Furthermore, the MOH will determine what type of testing is needed. In general,
in the case of Israeli manufactured devices that are not registered or authorized in any “recognized” country, the
application requires presentation of a risk analysis, a clinical evaluation, a summary of the clinical trials, and expert opinions
regarding the device’s safety and effectiveness. Additional requirements may apply during the registration period, including
follow-up reviews, to improve the quality and safety of the devices.
According
to regulations issued by Israel’s Minister of Health in June 2013, a decision on a request to register a medical device
must be delivered by AMAR within 120 days from the date of the request, although this rarely occurs. The current rules for the
registration of medical devices do not provide for an expedited approval process.
Once
granted by the MOH, a license (marketing authorization) for a medical device is valid for five years from the date of registration
of the device, except for implants with a life-supporting function, for which the validity is for only two years from the date
of registration. Furthermore, the holder of the license, the Israeli Registration Holder, or IRH, must do the following to maintain
its license:
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Reside
and maintain a place of business in Israel and serve as the regulatory representative.
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Respond
to questions from AMAR concerning the registered products.
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Report
adverse events to AMAR.
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Renew
the registration on time to keep the market approval active.
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Comply
with post-marketing requirements, including reporting of adverse and unexpected events occurring in Israel or in other countries
where the device is in use.
Getting
a device listed on Israel’s four major Sick Funds (health insurance entities) is also necessary in order for Israeli hospitals
and health care providers to order such products.
Microbot
intends to apply for a license from the MOH for each of its medical devices. There is no guarantee that Microbot will be granted
licenses for its pipeline products and failure to obtain such licenses would adversely affect its ability to grow its business.
Employees
Microbot’s
Chief Executive Officer, President and Chairman, Harel Gadot, along with 2 full-time employees, are based in Microbot’s
U.S. office located in Hingham, Massachusetts. Additionally, Microbot currently has 12 full-time employees based in its office
located in Yokneam, Israel. These employees oversee day-to-day operations of the Company supporting management and leading engineering,
manufacturing, intellectual property and administration functions of the Company. As required, Microbot also engages consultants
to provide services to the Company, including regulatory, legal and corporate services. We are subject to labor laws and regulations
within our locations in the U.S. and Israel. These laws and regulations principally concern matters such as pensions, paid annual
vacation, paid sick days, length of the workday and work week, minimum wages, overtime pay, insurance for work-related accidents,
severance pay and other conditions of employment. Microbot has no unionized employees.
Item
1A. Risk Factors
This
Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Our business, operating results,
financial performance, and share price may be materially adversely affected by a number of factors, including but not limited
to the following risk factors, any one of which could cause actual results to vary materially from anticipated results or from
those expressed in any forward-looking statements made by us in this Annual Report on Form 10-K or in other reports, press releases
or other statements issued from time to time. Additional factors that may cause such a difference are set forth elsewhere in this
Annual Report on Form 10-K. Forward-looking statements speak only as of the date of this report. We do not undertake any obligation
to publicly update any forward-looking statements.
Risks
Relating to Microbot’s Financial Position and Need for Additional Capital
Microbot
has had no revenue and has incurred significant operating losses since inception and is expected to continue to incur significant
operating losses for the foreseeable future. The Company may never become profitable or, if achieved, be able to sustain profitability.
Microbot
has incurred significant operating losses since its inception and expects to incur significant losses for the foreseeable future
as Microbot continues its preclinical and clinical development programs for its existing product candidates, primarily the SCS
and LIBERTY devices; its research and development of any other future product candidates; and all other work necessary
to obtain regulatory clearances or approvals for its product candidates in the United States and other markets. In the future,
Microbot intends to continue conducting micro-robotics research and development; performing necessary animal and clinical testing;
working towards medical device regulatory compliance; and, if SCS, LIBERTY or other future product candidates are approved
or cleared for commercial distribution, engaging in appropriate sales and marketing activities that, together with anticipated
general and administrative expenses, will likely result in Microbot incurring further significant losses for the foreseeable future.
Microbot
is a development-stage medical device company and currently generates no revenue from product sales, and may never be able to
commercialize SCS, LIBERTY, TipCAT or other future product candidates. Microbot does not currently have the required approvals
or clearances to market or test in humans the SCS, LIBERTY, TipCAT, or any other future product candidates and Microbot
may never receive them. Microbot does not anticipate generating significant revenues until it can successfully develop, commercialize
and sell products derived from its product pipeline, of which Microbot can give no assurance. Even if Microbot or any of its future
development partners succeed in commercializing any of its product candidates, Microbot may never generate revenues significant
enough to achieve profitability.
Because
of the numerous risks and uncertainties associated with its product development pipeline and strategy, Microbot cannot accurately
predict when it will achieve profitability, if ever. Failure to become and remain profitable would depress the value of the Company
and could impair its ability to raise capital, which may force the Company to curtail or discontinue its research and development
programs and/or day-to-day operations. Furthermore, there can be no assurance that profitability, if achieved, can be sustained
on an ongoing basis.
Microbot
has a limited operating history, which may make it difficult to evaluate the prospects for the Company’s future viability.
Microbot
has a limited operating history upon which an evaluation of its business plan or performance and prospects can be made. The business
and prospects of Microbot must be considered in the light of the potential problems, delays, uncertainties and complications that
may be encountered in connection with a newly established business. The risks include, but are not limited to, the possibility
that Microbot will not be able to develop functional and scalable products, or that although functional and scalable, its products
will not be economical to market; that its competitors hold proprietary rights that may preclude Microbot from marketing such
products; that its competitors market a superior or equivalent product; that Microbot is not able to upgrade and enhance its technologies
and products to accommodate new features and expanded service offerings; or the failure to receive necessary regulatory clearances
or approvals for its products. To successfully introduce and market its products at a profit, Microbot must establish brand name
recognition and competitive advantages for its products. There are no assurances that Microbot can successfully address these
challenges. If it is unsuccessful, Microbot and its business, financial condition and operating results could be materially and
adversely affected.
Microbot’s
operations to date have been limited to organizing the company, entering into licensing arrangements to initially obtain rights
to its technologies, developing and securing its technologies, raising capital, developing regulatory and reimbursement strategies
for its product candidates and preparing for pre-clinical and clinical trials of the SCS, LIBERTY and TipCAT. Microbot
has not yet demonstrated its ability to successfully complete development of any product candidate, obtain marketing clearance
or approval, manufacture a commercial-scale product or arrange for a third party to do so on its behalf, or conduct sales and
marketing activities necessary for successful product commercialization. Consequently, any predictions made about Microbot’s
future success or viability may not be as accurate as they could be if Microbot had a longer operating history.
Microbot
may need additional funding. If Microbot is unable to raise capital when needed, it could be forced to delay, reduce or eliminate
its product development programs or commercialization efforts.
To
date, Microbot has funded its operations primarily through offerings of debt and equity securities, grants and loans. Microbot
does not know when, or if, it will generate any revenue, but does not expect to generate significant revenue unless and until
it obtains regulatory clearance or approval of and commercializes one of its current or future product candidates. It is anticipated
that the Company will continue to incur losses for the foreseeable future, and that losses will increase as it continues the development
of, and seeks regulatory review of, its product candidates, and begins to commercialize any approved or cleared products following
a successful regulatory review.
Microbot
expects the research and development expenses of the Company to increase substantially in future periods as it conducts pre-clinical
studies in large animals and potentially clinical trials for its product candidates, and especially if it initiates additional
research programs for future product candidates, including LIBERTY. In addition, if the Company obtains marketing clearance
or approval for any of its product candidates, it expects to incur significant commercialization expenses related to product manufacturing,
marketing and sales. Microbot may also require additional funds for operations if it loses its current lawsuit with Empery and
Hudson Bay, discussed in great detail elsewhere in this Annual Report on Form 10-K. Furthermore, Microbot incurs substantial costs
associated with operating as a public company in the United States. Accordingly, the Company may need to obtain substantial additional
funding in connection with its continuing operations through its projected profitability, of which it can give no assurance of
success. If the Company is unable to raise capital when needed or on attractive terms, it could be forced to delay, reduce or
eliminate its research and development programs or any future commercialization efforts.
The
Company intends to continue to opportunistically strengthen
its balance sheet by raising additional funds through equity offerings, including possibly through an At-the-Market
offering, or otherwise in order to meet expected future liquidity needs, including the introduction of the SCS device into the
hydrocephalus and NPH market, and the introduction of LIBERTY. The Company’s future capital requirements, generally,
will depend on many factors, including:
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the
timing and outcomes of the product candidates’ regulatory reviews, subsequent approvals or clearances, or other regulatory
actions;
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the
final outcome of the Company’s existing lawsuit with Empery and Hudson Bay;
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the
costs, design, duration and any potential delays of the clinical trials that could be conducted at the FDA’s request
using Microbot’s product candidates;
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the
costs of acquiring, licensing or investing in new and existing businesses, product candidates and technologies;
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the
costs to maintain, expand and defend the scope of Microbot’s intellectual property portfolio;
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the
costs to secure or establish sales, marketing and commercial manufacturing capabilities or arrangements with third parties
regarding same;
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the
Company’s need and ability to hire additional management and scientific and medical personnel; and
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the
costs to operate as a public company in the United States.
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An
epidemic of the coronavirus disease is ongoing and may result in significant disruptions to our clinical trials or other business
operations, which could have a material adverse effect on our business.
An
epidemic of the coronavirus disease is ongoing throughout the world. Although we have not yet commenced clinical trials, in
the event the pandemic is continuing when we are prepared to commence such trials, the coronavirus disease may cause significant
delays and disruptions to our clinical trials and our interactions with the FDA. If the patients involved with any such
clinical trials become infected with the coronavirus disease, we may have more AEs and deaths in our clinical trials as a result.
We may also face difficulties enrolling patients in our clinical trials if the patient populations that are eligible for our clinical
trials are impacted by the coronavirus disease. Additionally, if our clinical trial patients are unable to travel to our clinical
trial sites as a result of quarantines or other restrictions resulting from the coronavirus disease, we may experience higher
drop-out rates or delays in our clinical trials, and some patients may not be able to comply with clinical trial protocols if
quarantines impede patient movement or interrupt healthcare services, which could impact our ability to determine the efficacy
or safety of our SCS or LIBERTY device. Site initiation and patient enrollment may also be delayed due to prioritization
of hospital resources toward the coronavirus disease outbreak.
Additionally,
travel restrictions and expanded screenings have been implemented worldwide in an effort to contain the coronavirus
disease. As such, we and our contract research organizations may be unable to visit our trial sites and monitor the data
from our trials on timely basis. Our employees may also face travel restrictions, which would impact our business. Furthermore,
some of our manufacturers and suppliers are in Europe and may be impacted by port closures and other restrictions resulting from
the coronavirus outbreak, which may disrupt our supply chain or limit our ability to obtain sufficient materials for our products.
The
ultimate impact of the coronavirus disease outbreak or a similar health epidemic is highly uncertain and subject to change,
and we cannot presently predict the scope and severity of any further potential business shutdowns or disruptions, but
if we or any of the third parties with whom we engage, including the suppliers, clinical trial sites, contract research organizations,
regulators, including the FDA health care providers and other third parties with whom we conduct business, were to experience
shutdowns or other business disruptions, our ability to conduct our business and operations could be materially and negatively
impacted, which could prevent or delay us from obtaining approval for our SCS and LIBERTY devices.
Risks
Relating to the Development and Commercialization of Microbot’s Product Candidates
Unsuccessful
animal studies, clinical trials or procedures relating to product candidates under development could have a material adverse effect
on Microbot’s prospects.
The
regulatory approval process for new products and new indications for existing products requires extensive data and procedures,
including the development of regulatory and quality standards and, potentially, certain clinical studies. Unfavorable or inconsistent
data from current or future clinical trials or other studies conducted by Microbot or third parties, or perceptions regarding
such data, could adversely affect Microbot’s ability to obtain necessary device clearance or approval and the market’s
view of Microbot’s future prospects. Specifically, the interim data of our animal trial with respect to the SCS device suggests
that the animal trial results are inconclusive to assess safety. As a result, we have submitted the existing data to the FDA as
part of a pre-submission meeting and we intend to apply for a limited clinical investigation of the device known as an Early Feasibility
Study (EFS).
Failure
to successfully complete these studies, or any similar studies with respect to any of our other product candidates, in a timely
and cost-effective manner could have a material adverse effect on Microbot’s prospects with respect to the SCS device or
such other product candidates. Because animal trials, clinical trials and other types of scientific studies are inherently uncertain,
there can be no assurance that these trials or studies will be completed in a timely or cost-effective manner or result in a commercially
viable product. Clinical trials or studies may experience significant setbacks even if earlier preclinical or animal studies have
shown promising results. Furthermore, preliminary results from clinical trials may be contradicted by subsequent clinical analysis.
Results from clinical trials may also not be supported by actual long-term studies or clinical experience. If preliminary clinical
results are later contradicted, or if initial results cannot be supported by actual long-term studies or clinical experience,
Microbot’s business could be adversely affected. Clinical trials also may be suspended or terminated by us, the FDA or other
regulatory authorities at any time if it is believed that the trial participants face unacceptable health risks. The FDA may disagree
with our interpretation of the data from our clinical trials, or may find the clinical trial design, conduct or results inadequate
to demonstrate safety and effectiveness of the product candidate. The FDA may also require additional pre-clinical studies or
clinical trials which could further delay approval of our product candidates.
Microbot’s
business depends heavily on the success of its lead product candidates, the SCS and LIBERTY. If Microbot is unable to commercialize
the SCS or LIBERTY, or experiences significant delays in doing so, Microbot’s business will be materially harmed.
As
stated above, we intend to apply for an EFS for the SCS device. After completing the EFS, we would then seek FDA input on the
device design as finalized through the EFS process in a subsequent IDE filing for approval of a clinical study proposal. Consequently,
the timeline for the First-in-Human clinical trial under the EFS is expected to commence in the third quarter of 2022.
Generally,
after all necessary clinical and performance data supporting the safety and effectiveness of the SCS or LIBERTY devices,
or any other product candidate, are collected, Microbot must still obtain FDA clearance or approval to market the device and those
regulatory processes can take several months to several years to be completed. Therefore, Microbot’s ability to generate
product revenues will not occur for at least the next few years, if at all, and will depend heavily on the successful commercialization
of SCS device and/or the LIBERTY device, or any of our other product candidates from time to time. The success of commercializing
any of our product candidates, include the SCS and LIBERTY devices, will depend on a number of factors, including the following:
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our
ability to obtain additional capital;
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With
respect to the SCS device, approval of the FDA to participate in an EFS program and/or successful completion of animal studies
and, if necessary, additional human clinical trials (beyond the EFS trials) and the collection of sufficient data to demonstrate
that the device is safe and effective for its intended use;
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With
respect to all of our product candidates, successful completion of animal studies and, if necessary, human clinical trials
and the collection of sufficient data to demonstrate that the device is safe and effective for its intended use;
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receipt
of marketing approvals or clearances from the FDA and other applicable regulatory authorities;
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establishing
commercial manufacturing arrangements with one or more third parties;
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obtaining
and maintaining patent and trade secret protections;
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protecting
Microbot’s rights in its intellectual property portfolio;
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establishing
sales, marketing and distribution capabilities;
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generating
commercial sales, if and when approved, whether alone or in collaboration with other entities;
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acceptance
of our product candidates, if and when commercially launched, by the medical community, patients and third-party payors;
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effectively
competing with existing and competitive products on the market and any new competing products that may enter the market; and
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maintaining
quality and an acceptable safety profile of our products following clearance or approval.
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If
Microbot does not achieve one or more of these factors in a timely manner or at all, it could experience significant delays or
an inability to successfully commercialize the SCS, LIBERTY or any other product candidate, which would materially harm
its business.
Microbot’s
ability to expand its technology platforms for other uses, including endovascular neurosurgery other than for the treatment of
hydrocephalus, may be limited.
After
spending time working with experts in the field, Microbot has decided to no longer pursue the use of TipCAT in colonoscopy and
has instead committed to focus on expanding all of its technology platforms for use in segments of the endovascular neurosurgery
market, including traumatic brain injury, to capitalize on its existing competencies in hydrocephalus and the market’s needs.
Microbot’s ability to expand its technology platforms for use in the endovascular neurosurgery market will be limited by
its ability to develop and/or refine the necessary technology, obtain the necessary regulatory approvals for their use on humans,
and the marketing of its products and otherwise obtaining market acceptance of its product in the United States and in other countries.
At
this time, Microbot does not know whether the FDA will require it to submit clinical data in support of its future marketing applications
for its SCS product candidate, particularly in light of recent initiatives by the FDA to enhance and modernize its approach to
medical device safety and innovation, which creates uncertainty for Microbot as well as the possibility of increased product development
costs and time to market.
Although
Microbot has identified a predicate device for its lead product candidate, the SCS, which it intended to use in its 510(k) application,
it may determine that a 510(k) de novo application is more appropriate for the SCS. If the Company determines to proceed with
the 510(k) application and the FDA agrees with the Company’s determination, the SCS will be classified by the FDA as Class
II and eligible for marketing pursuant to FDA clearance through the 510(k) application. However, in light of recent initiatives
by the FDA relating to safety, efficacy and the inconclusive results of the animal and laboratory trial, there is no guarantee
that the FDA will agree with the Company’s determination or that the FDA would accept the predicate device that Microbot
intends to submit in its 510(k). The FDA also may request additional data in response to a 510(k), or require Microbot to conduct
further testing or compile more data in support of its 510(k). Such additional data could include clinical data that must be derived
from human clinical studies that are designed appropriately to address the potential questions from the FDA regarding a proposed
product’s safety or effectiveness. It is unclear at this time whether and how various activities recently initiated or announced
by the FDA to modernize the U.S. medical device regulatory system could affect the marketing pathway or timeline for our product
candidate, given the timing and the undeveloped nature of some of the FDA’s new medical device safety and innovation initiatives.
One of the recent initiatives was announced in April 2018, when the FDA Commissioner issued a statement with the release of a
Medical Device Safety Action Plan. Among other key areas of the Medical Device Safety Action Plan, the Commissioner stated that
the FDA is “exploring what further actions we can take to spur innovation towards technologies that can make devices and
their use safer. For instance, our Breakthrough Device Program that helps address unmet medical needs can be used to facilitate
patient access to innovative new devices that have important improvements to patient safety. We’re considering developing
a similar program to support the development of safer devices that do not otherwise meet the Breakthrough Program criteria, but
are clearly intended to be safer than currently available technologies.” This type of program may negatively affect our
existing development plan for the SCS or any other product candidate or it may benefit Microbot, but at this time those potential
impacts from recent FDA medical device initiatives are unknown and uncertain. Similarly, the FDA Commissioner announced various
agency goals under a Medical Innovation Access Plan in 2017.
If
the FDA does require clinical data to be submitted as part of the SCS marketing submission, any type of clinical study performed
in humans will require the investment of substantial expense, professional resources and time. In order to conduct a clinical
investigation involving human subjects for the purpose of demonstrating the safety and effectiveness of a medical device, a company
must, among other things, apply for and obtain Institutional Review Board, or IRB, approval of the proposed investigation. In
addition, if the clinical study involves a “significant risk” (as defined by the FDA) to human health, the sponsor
of the investigation must also submit and obtain FDA approval of an Investigational Device Exemption, or IDE, application. Microbot
may not be able to obtain FDA and/or IRB approval to undertake clinical trials in the United States for any new devices Microbot
intends to market in the United States in the future. Moreover, the timing of the commencement, continuation and completion of
any future clinical trial may be subject to significant delays attributable to various causes, including scheduling conflicts
with participating clinicians and clinical institutions, difficulties in identifying and enrolling patients who meet trial eligibility
criteria, failure of patients to complete the clinical trial, delay in or failure to obtain IRB approval to conduct a clinical
trial at a prospective site, and shortages of supply in the investigational device.
Thus,
the addition of one or more mandatory clinical trials to the development timeline for the SCS, LIBERTY or any other product
candidate would significantly increase the costs associated with developing and commercializing the product and delay the timing
of U.S. regulatory authorization. The current uncertainty regarding near-term medical device regulatory changes by the FDA could
further affect our development plans for the SCS, LIBERTY or any other product candidate, depending on their nature, scope
and applicability. Microbot and its business, financial condition and operating results could be materially and adversely affected
as a result of any such costs, delays or uncertainty.
The
FDA may disagree with Microbot’s determination that the SCS is a Class II device or that the chosen predicate device (or
any predicate device) is appropriate for a substantial equivalence comparison to the SCS.
Although
the Company intended to submit a 501(k) application for the SCS, the Company is now considering that the FDA may determine that
the SCS is a Class III device because there is no appropriate predicate device for substantial equivalence comparison, which would
require Microbot to submit a De Novo classification request or an application for premarket approval (“PMA”). Both
De Novo requests and PMA applications require applicants to prepare information and data about device safety and efficacy in addition
to the 510(k) requirements, including a benefit-risk analysis, a discussion of proposed general and special controls to eliminate
or mitigate device risks, and additional testing data. PMA applications almost always require data from human clinical studies,
and while De Novo requests do not require human clinical study data, in most cases, such data is necessary to demonstrate that
the FDA can appropriately classify the device as Class II.
Any
type of clinical study performed in humans (including the EFS) will require the investment of substantial expense, professional
resources and time. In order to conduct a clinical investigation involving human subjects for the purpose of demonstrating the
safety and effectiveness of a medical device, a company must, among other things, apply for and obtain Institutional Review Board,
or IRB, approval of the proposed investigation. In addition, if the clinical study involves a “significant risk” (as
defined by the FDA) to human health, the sponsor of the investigation must also submit and obtain FDA approval of an Investigational
Device Exemption, or IDE, application. Microbot may not be able to obtain FDA and/or IRB approval to undertake clinical trials
in the United States for any new devices Microbot intends to market in the United States in the future. Moreover, the timing of
the commencement, continuation and completion of any future clinical trial may be subject to significant delays attributable to
various causes, including scheduling conflicts with participating clinicians and clinical institutions, difficulties in identifying
and enrolling patients who meet trial eligibility criteria, failure of patients to complete the clinical trial, delay in or failure
to obtain IRB approval to conduct a clinical trial at a prospective site, and shortages of supply in the investigational device.
Thus, the addition of one or more mandatory clinical trials to the development timeline for the SCS would significantly increase
the costs associated with developing and commercializing the product and delay the timing of U.S. regulatory authorization.
Furthermore,
if Microbot is required to submit a De Novo request or PMA application instead of a 510(k), the FDA review process may take significantly
more time. While the FDA commits to reviewing 510(k)s in 90 days, the review period for De Novo requests and PMA applications
is 150 days and 180 days, respectively. After an initial review of our De Novo request or PMA application, the FDA may request
additional information or data which can significantly delay an ultimate decision on our submission.
Thus,
submitting a De Novo request or PMA application for the SCS would significantly increase the costs associated with developing
and commercializing the product and delay the timing of U.S. regulatory authorization. Microbot and its business, financial condition
and operating results could be materially and adversely affected as a result of any such costs or delays.
Microbot’s
CardioSert technology is subject to a buy-back clause which, if triggered, could cause us to lose rights to the technology and
delay or curtail the development of our products.
Pursuant
to the Agreement we entered into in January 2018 to acquire the CardioSert technology, we are required to meet certain commercialization
deadlines or CardioSert may terminate the agreement and buy back the technology for $1.00, subject to certain limited exceptions.
The next such commercialization deadline is in 2022. At this time, we can give no assurance that we will meet the commercialization
deadlines.
Failure
to meet the applicable commercialization deadlines and any resulting sale back of the technology to CardioSert could materially
adversely affect our ability to develop and commercialize, or materially delay the development and commercialization of, our planned
LIBERTY device.
Microbot
has no prior experience in conducting clinical trials and will depend upon the ability of third parties, including contract research
organizations, collaborative academic groups, future clinical trial sites and investigators, to conduct or to assist the Company
in conducting clinical trials for its product candidates, if such trials become necessary.
As
a development-stage, pre-clinical company, Microbot has no prior experience in designing, initiating, conducting and monitoring
human clinical trials. Microbot will depend upon its ability and/or the ability of future collaborators, contract research organizations,
clinical trial sites and investigators to successfully design, initiate, conduct and monitor such clinical trials.
Failure
by Microbot or by any of these future collaborating parties to timely and effectively initiate, conduct and monitor a future clinical
trial could significantly delay or materially impair Microbot’s ability to complete those clinical trials and/or obtain
regulatory clearance or approval of its product candidates and, consequently, could delay or materially impair its ability to
generate revenues from the commercialization of those products.
If
the commercial opportunity for SCS, LIBERTY and any other commercial products that may be developed by Microbot is smaller
than Microbot anticipates, Microbot’s future revenue from SCS, LIBERTY and such other products will be adversely
affected and Microbot’s business will suffer.
If
the size of the commercial opportunities in any of Microbot’s target markets is smaller than it anticipates, Microbot may
not be able to achieve profitability and growth. For instance, Microbot is developing SCS as a device for the treatment of hydrocephalus
and NPH. It is difficult to predict the penetration, future growth rate or size of the market for Microbot’s product candidate.
The
commercial success of the SCS, LIBERTY or any other product candidates will require broad acceptance of the devices by
the doctors and other medical professionals who specialize in the procedures targeted by each device, a limited number of whom
may be able to influence device selection and purchasing decisions. If Microbot’s technologies are not broadly accepted
and perceived as having significant advantages over existing medical devices, then it will not meet its business objectives. Such
perceptions are likely to be based on a determination by medical facilities and physicians that Microbot’s product candidates
are safe and effective, are cost-effective in comparison to existing devices, and represent acceptable methods of treatment. Microbot
cannot assure that it will be able to establish the relationships and arrangements with medical facilities and physicians necessary
to support the market uptake of its product candidates. In addition, its competitors may develop new technologies for the same
markets Microbot is targeting that are more attractive to medical facilities and physicians. If doctors and other medical professionals
do not consider Microbot product candidates to be suitable for application in the procedures we are targeting and an improvement
over the use of existing or competing products, Microbot’s business goals will not be realized.
Customers
will be unlikely to buy the SCS, LIBERTY or any other product candidates unless Microbot can demonstrate that they can
be produced for sale to consumers at attractive prices.
To
date, Microbot has focused primarily on research and development of the first generation versions of the SCS, as well as initial
development of the LIBERTY device. Consequently, Microbot has no experience in manufacturing its product candidates, and
intends to manufacture its product candidates through third-party manufacturers. Microbot can offer no assurance that either it
or its manufacturing partners will develop efficient, automated, low-cost manufacturing capabilities and processes to meet the
quality, price, engineering, design and production standards or production volumes required to successfully mass produce its commercial
products. Even if its manufacturing partners are successful in developing such manufacturing capability and quality processes,
including the assurance of GMP-compliant device manufacturing, there can be no assurance that Microbot can timely meet its product
commercialization schedule or the production and delivery requirements of potential customers. A failure to develop such manufacturing
processes and capabilities could have a material adverse effect on Microbot’s business and financial results.
The
proposed price of Microbot’s product candidates, once approved for sale, will be dependent on material and other manufacturing
costs. Microbot cannot offer any assurances that its manufacturing partner will be able manufacture its product candidates at
a competitive price or that achieving cost reductions will not cause a reduction in the performance, reliability and longevity
of its product candidates.
Microbot
will rely on third party design houses for the redesign of the CardioSert guidewire to other specific indications.
Since
the CardioSert Guidewire was originally designed for treating chronic total occlusions, the design will need to be modified to
treat other indications. As we do not specialize in the design of guidewires and microcatheters, Microbot is currently working
with two leading third party design houses that specialize in this type of design. Such designs may require several design and
regulatory iterations prolonging the product release and certification, which could delay the commercialization of our planned
LIBERTY device.
Microbot
has relied on, and intends to continue to rely on, third-party manufacturers to produce its product candidates.
Microbot
currently relies, and expects to rely for the foreseeable future, on third-party manufacturers to produce and supply its product
candidates, and it expects to rely on third parties to manufacture the commercialized products as well, should they receive the
necessary regulatory clearance or approval. Reliance on third-party manufacturers entails risks to which Microbot would not be
subject if Microbot manufactured its product candidates or future commercial products itself, including:
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limitations
on supply availability resulting from capacity, internal operational problems or scheduling constraints of third parties;
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potential
regulatory non-compliance or other violations by the third-party manufacturer that could result in quality assurance issues
or government enforcement action that has a negative effect on Microbot’s product candidates and distribution strategy;
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the
possible breach of manufacturing agreements by third parties because of various factors beyond Microbot’s control; and
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the
possible termination or non-renewal of manufacturing agreements by third parties for various reasons beyond Microbot’s
control, at a time that is costly or inconvenient to Microbot.
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If
Microbot is not able to maintain its key manufacturing relationships, Microbot may fail to find replacement manufacturers or develop
its own manufacturing capabilities, which could delay or impair Microbot’s ability to obtain regulatory clearance or approval
for its product candidates and could substantially increase its costs or deplete profit margins, if any. If Microbot does find
replacement manufacturers, Microbot may not be able to enter into agreements with them on terms and conditions favorable to it
and there could be a substantial delay before new facilities could be qualified and registered with the FDA and other foreign
regulatory authorities.
Additionally,
the existing design of the CardioSert device was produced in very low quantities by the seller of the technology. Accordingly,
the scaling-up to high volume production may require significant changes to the existing design and production methods. These
changes are currently being carried out by two leading third party companies that specialize in design and high volume production
of guidewires and microcatheters. These design changes/modifications may have significant negative implications in price and time
to market of the CardioSert system.
If
Microbot’s product candidates are not considered to be a safe and effective alternative to existing technologies, Microbot
will not be commercially successful.
The
SCS, LIBERTY and TipCAT rely on new technologies, and Microbot’s success will depend on acceptance of these technologies
by the medical community as safe, clinically effective, cost effective and a preferred device as compared to products of its competitors.
Microbot does not have long-term data regarding efficacy, safety and clinical outcomes associated with the use of SCS, LIBERTY
or TipCAT. Any data that is generated in the future may not be positive or may not support the product candidates’ regulatory
dossiers, which would negatively affect market acceptance and the rate at which its product candidates are adopted. Equally important
will be physicians’ perceptions of the safety of Microbot’s product candidates because Microbot’s technologies
are relatively new. If, over the long term, Microbot’s product candidates do not meet surgeons’ expectations as to
safety, efficacy and ease of use, they may not become widely adopted.
Market
acceptance of Microbot’s product candidates will also be affected by other factors, including Microbot’s ability to
convince key opinion leaders to provide recommendations regarding its product candidates; convince distributors that its technologies
are attractive alternatives to existing and competing technologies; supply and service sufficient quantities of products directly
or through marketing alliances; and price products competitively in light of the current macroeconomic environment, which is becoming
increasingly price sensitive.
Microbot
may be subject to penalties and may be precluded from marketing its product candidates if Microbot fails to comply with extensive
governmental regulations.
Microbot
believes that its medical device product candidates will be categorized as Class II devices, which typically require a 510(k)
or 510(k) de-novo premarket submission to the FDA. However, the FDA has not made any determination about whether Microbot’s
medical product candidates are Class II medical devices and may disagree with that classification. If the FDA determines that
Microbot’s product candidates should be reclassified as Class III medical devices, Microbot could be precluded from marketing
the devices for clinical use within the United States for months, years or longer, depending on the specifics of the change in
classification. Reclassification of any of Microbot’s product candidates as Class III medical devices could significantly
increase Microbot’s regulatory costs, including the timing and expense associated with required clinical trials and other
costs.
The
FDA and non-U.S. regulatory authorities require that Microbot product candidates be manufactured according to rigorous standards.
These regulatory requirements significantly increase Microbot’s production costs, which may prevent Microbot from offering
products within the price range and in quantities necessary to meet market demands. If Microbot or one of its third-party manufacturers
changes an approved manufacturing process, the FDA may need to review the process before it may be used. Failure to comply with
applicable pre-market and post-market regulatory requirements could subject Microbot to enforcement actions, including warning
letters, fines, injunctions and civil penalties, recall or seizure of its products, operating restrictions, partial suspension
or total shutdown of its production, and criminal prosecution.
If
Microbot is not able to both obtain and maintain adequate levels of third-party reimbursement for procedures involving its product
candidates after they are approved for marketing and launched commercially, it would have a material adverse effect on Microbot’s
business.
Healthcare
providers and related facilities are generally reimbursed for their services through payment systems managed by various governmental
agencies worldwide, private insurance companies, and managed care organizations. The manner and level of reimbursement in any
given case may depend on the site of care, the procedure(s) performed, the final patient diagnosis, the device(s) utilized, available
budget, or a combination of these factors, and coverage and payment levels are determined at each payor’s discretion. The
coverage policies and reimbursement levels of these third-party payors may impact the decisions of healthcare providers and facilities
regarding which medical products they purchase and the prices they are willing to pay for those products. Microbot cannot assure
you that its sales will not be impeded and its business harmed if third-party payors fail to provide reimbursement for Microbot
products that healthcare providers view as adequate.
In
the United States, Microbot expects that its product candidates, once approved, will be purchased primarily by medical institutions,
which then bill various third-party payors, such as the Centers for Medicare & Medicaid Services, or CMS, which administers
the Medicare program through Medicare Administrative Contractors, and other government health care programs and private insurance
plans, for the healthcare products and services provided to their patients. The process involved in applying for coverage and
incremental reimbursement from CMS is lengthy and expensive. Moreover, many private payors look to CMS in setting their reimbursement
policies and amounts. If CMS or other agencies limit coverage for procedures utilizing Microbot’s products or decrease or
limit reimbursement payments for doctors and hospitals utilizing Microbot’s products, this may affect coverage and reimbursement
determinations by many private payors.
If
a procedure involving a medical device is not reimbursed separately by a government or private insurer, then a medical institution
would have to absorb the cost of Microbot’s products as part of the cost of the procedure in which the products are used.
At this time, Microbot does not know the extent to which medical institutions would consider insurers’ payment levels adequate
to cover the cost of its products. Failure by hospitals and surgeons to receive an amount that they consider to be adequate reimbursement
for procedures in which Microbot products are used could deter them from purchasing Microbot products and limit sales growth for
those products.
Microbot
has no control over payor decision-making with respect to coverage and payment levels for its medical device product candidates,
once they are approved. Additionally, Microbot expects many payors to continue to explore cost-containment strategies (e.g., comparative
and cost-effectiveness analyses, so-called “pay-for-performance” programs implemented by various public government
health care programs and private third-party payors, and expansion of payment bundling initiatives, and other such methods that
shift medical cost risk to providers) that may potentially impact coverage and/or payment levels for Microbot’s current
product candidates or products Microbot develops in the future.
As
Microbot’s product offerings are used across diverse healthcare settings, they will be affected to varying degrees by the
different payment systems.
Clinical
outcome studies for the SCS may not provide sufficient data to make Microbot’s product candidates the standard of care.
Microbot’s
business plan relies on the broad adoption by surgeons of the SCS for primary shunt placement procedures to prevent shunt occlusions.
Although Microbot believes the occurrence of shunt occlusion complications is well known among physicians practicing in the relevant
medical fields, SCS may be adopted for replacement shunt surgeries only. Neurosurgeons may adopt SCS for primary shunt placement
procedures only upon additional clinical studies with longer follow up periods, if at all. It may also be necessary to provide
outcome studies on the preventative capabilities of the SCS in order to convince the medical community of its safety and efficacy.
Clinical studies may not show an advantage in SCS based procedures in a timely manner, or at all, and outcome studies have not
been designed at this time, and may be too large and too costly for Microbot to conduct. Both situations could prevent broad adoption
of the SCS and materially impact Microbot’s business.
Microbot
products may in the future be subject to mandatory product recalls that could harm its reputation, business and financial results.
The
FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event
of material deficiencies or defects in design or manufacture that could pose a risk of injury to patients. In the case of the
FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device
would cause serious injury or death, although in most cases this mandatory recall authority is not used because manufacturers
typically initiate a voluntary recall when a device violation is discovered. In addition, foreign governmental bodies have the
authority to require the recall of Microbot products in the event of material deficiencies or defects in design or manufacture.
Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated
or voluntary recall by Microbot or one of its distributors could occur as a result of component failures, manufacturing errors,
design or labeling defects or other deficiencies and issues. Recalls of any Microbot products would divert managerial and financial
resources and have an adverse effect on Microbot’s financial condition and results of operations, and any future recall
announcements could harm Microbot’s reputation with customers and negatively affect its sales. In addition, the FDA could
take enforcement action, including any of the following sanctions for failing to timely report a recall to the FDA:
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letters, warning letters, fines, injunctions, consent decrees and civil penalties;
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or seizure of Microbot products;
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restrictions or partial suspension or total shutdown of production;
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refusing
or delaying requests for 510(k) clearance or premarket approval of new products or modified products;
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withdrawing
510(k) clearances or other types of regulatory authorizations -that have already been granted;
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refusing
to grant export approval for Microbot products; or
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criminal
prosecution.
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If
Microbot’s future commercialized products cause or contribute to a death or a serious injury, Microbot will be subject to
Medical Device Reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.
Under
FDA regulations, Microbot will be required to report to the FDA any incident in which a marketed medical device product may have
caused or contributed to a death or serious injury or in which a medical device malfunctioned and, if the malfunction were to
recur, would likely cause or contribute to death or serious injury. In addition, all manufacturers placing medical devices in
European Union markets are legally bound to report any serious or potentially serious incidents involving devices they produce
or sell to the relevant authority in whose jurisdiction the incident occurred.
Microbot
anticipates that in the future it is likely that we may experience events that would require reporting to the FDA pursuant to
the Medical Device Reporting (MDR) regulations. Any adverse event involving a Microbot product could result in future voluntary
corrective actions, such as product actions or customer notifications, or agency actions, such as inspection, mandatory recall
or other enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending Microbot in a lawsuit,
will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation
and financial results.
Microbot
could be exposed to significant liability claims if Microbot is unable to obtain insurance at acceptable costs and adequate levels
or otherwise protect itself against potential product liability claims.
The
testing, manufacture, marketing and sale of medical devices entail the inherent risk of liability claims or product recalls. Product
liability insurance is expensive and may not be available on acceptable terms, if at all. A successful product liability claim
or product recall could inhibit or prevent the successful commercialization of Microbot’s products, cause a significant
financial burden on Microbot, or both, which in any case could have a material adverse effect on Microbot’s business and
financial condition.
The
results of Microbot’s research and development efforts are uncertain and there can be no assurance of the commercial success
of Microbot’s product candidates.
Microbot
believe that its success will depend in part on its ability to expand its product offerings and continue to improve its existing
product candidates in response to changing technologies, customer demands and competitive pressures. As such, Microbot expects
to continue dedicating significant resources in research and development. The product candidates and services being developed
by Microbot may not be technologically successful. In addition, the length of Microbot’s product candidates and service
development cycle may be greater than Microbot originally expected.
If
Microbot fails to retain certain of its key personnel and attract and retain additional qualified personnel, Microbot might not
be able to pursue its growth strategy effectively.
Microbot
is dependent on its senior management, in particular Harel Gadot, Microbot’s Chairman, President and Chief Executive Officer.
Although Microbot believes that its relationship with members of its senior management is positive, there can be no assurance
that the services of any of these individuals will continue to be available to Microbot in the future. Microbot’s future
success will depend in part on its ability to retain its management and scientific teams, to identify, hire and retain additional
qualified personnel with expertise in research and development and sales and marketing, and to effectively provide for the succession
of senior management, when necessary. Competition for qualified personnel in the medical device industry is intense and finding
and retaining qualified personnel with experience in the industry is very difficult. Microbot believes that there are only a limited
number of individuals with the requisite skills to serve in key positions at Microbot, particularly in Israel, and it competes
for key personnel with other medical equipment and technology companies, as well as research institutions.
Microbot
does not carry, and does not intend to carry, any key man life insurance policies on any of its existing executive officers.
Risks
Relating to International Business
If
Microbot fails to obtain regulatory clearances in other countries for its product candidates under development, Microbot will
not be able to commercialize these product candidates in those countries.
In
order for Microbot to market its product candidates in countries other than the United States, it must comply with the safety
and quality regulations in such countries.
In
Europe, these regulations, including the requirements for approvals, clearance or grant of Conformité Européenne,
or CE, Certificates of Conformity and the time required for regulatory review, vary from country to country. Failure to obtain
regulatory approval, clearance or CE Certificates of Conformity (or equivalent) in any foreign country in which Microbot plans
to market its product candidates may harm its ability to generate revenue and harm its business. Approval and CE marking procedures
vary among countries and can involve additional product testing and additional administrative review periods. The time required
to obtain approval or CE Certificate of Conformity in other countries might differ from that required to obtain FDA clearance.
The regulatory approval or CE marking process in other countries may include all of the risks detailed above regarding FDA clearance
in the United States. Regulatory approval or the CE marking of a product candidate in one country does not ensure regulatory approval
in another, but a failure or delay in obtaining regulatory approval or a CE Certificate of Conformity in one country may negatively
impact the regulatory process in others. Failure to obtain regulatory approval or a CE Certificate of Conformity in other countries
or any delay or setback in obtaining such approval could have the same adverse effects described above regarding FDA clearance
in the United States.
Microbot
cannot be certain that it will be successful in complying with the requirements of the CE Certificate of Conformity and receiving
a CE Mark for its product candidates or in continuing to meet the requirements of the Medical Devices Directive in the European
Economic Area (EEA).
Israel’s
Medical Devices Law generally requires the registration of all medical products with the Ministry of Health, or MOH, Registrar
through the submission of an application to the Ministry of Health Medical Institutions and Devices Licensing Department, or AMAR.
If the application includes a certificate issued by a competent authority of a “recognized” country, which includes
Australia, Canada, the European Community Member States, Japan or the United States, the registration process is expedited, but
is generally still expected to take 6 to 9 months for approval. If certification from a recognized country is not available, the
registration process takes significantly longer and a license is rarely issued under such circumstances, as the MOH may require
the presentation of significant additional clinical data. Once granted, a license (marketing authorization) for a medical device
is valid for five years from the date of registration of the device, except for implants with a life-supporting function, for
which the validity is for only two years from the date of registration. Furthermore, the holder of the license must meet several
additional requirements to maintain the license. Microbot cannot be certain that it will be successful in applying for a license
from the MOH for its product candidates.
Risks
Relating to Microbot’s Intellectual Property
Microbot’s
right to develop and commercialize the SCS and TipCAT product candidates are subject to the terms and condition of a license granted
to Microbot by Technion Research and Development Foundation Ltd. and termination of the license with respect to one or both of
the technology platforms underlying the product candidates would result in Microbot ceasing its development efforts for the applicable
product candidate(s).
Microbot
entered into a license agreement with Technion Research and Development Foundation Ltd., or TRDF, in 2012 pursuant to which Microbot
obtained an exclusive, worldwide, royalty-bearing, sub-licensable license to certain patents and inventions relating to the SCS
and TipCAT technology platforms. Pursuant to the terms of the license agreement, in order to maintain the license with respect
to each platform, Microbot must use commercially reasonable efforts to develop products covered by the license, including meeting
certain agreed upon development milestones. TRDF has the option to terminate a license granted with respect a particular technology
in the event Microbot fails to meet a development milestone associated with such technology. Therefore, the failure to meet development
milestones may lead to a complete termination of the applicable license agreement and result in Microbot ceasing its development
efforts for the applicable product candidate. The milestones for both SCS and TipCAT include commencing first in human clinical
trials by December 2021. Failure to meet any development milestone will give TRDF the right to terminate the license with respect
to the technology underlying the missed milestone. TRDF has previously demonstrated flexibility with respect to amending the terms
of the license to extend the milestone dates, although we can give no assurance at this time that TRDF will continue to be so
flexible with respect to amending the terms of the license.
Under
the license agreement, Microbot is also subject to various other obligations, including obligations with respect to payment upon
the achievement of certain milestones and royalties on product sales. TRDF may terminate the license agreement under certain circumstances,
including material breaches by Microbot or under certain bankruptcy or insolvency events. In the case of termination of the license
by Microbot without cause or by TRDF for cause, TRDF has the right to receive a non-exclusive license from Microbot with respect
to improvements to the licensed technologies made by Microbot.
If
TRDF were to terminate the license agreement or if Microbot was to otherwise lose the ability to exploit the licensed patents,
Microbot’s competitive advantage could be reduced or terminated, and Microbot will likely not be able to find a source to
replace the licensed technology.
Additionally,
if there is any future dispute between Microbot and TRDF regarding the respective parties’ rights under the license agreement,
Microbot’s ability to develop and commercialize the SCS and TipCAT may be materially harmed.
Microbot
may not meet its product candidates’ development and commercialization objectives in a timely manner or at all.
Microbot
has established internal goals, based upon expectations with respect to its technologies, which Microbot has used to assess its
progress toward developing its product candidates. These goals relate to technology and design improvements as well as to dates
for achieving specific development results. If the product candidates exhibit technical defects or are unable to meet cost or
performance goals, Microbot’s commercialization schedule could be delayed and potential purchasers of its initial commercialized
products may decline to purchase such products or may opt to pursue alternative products, which would materially harm its business.
Intellectual
property litigation and infringement claims could cause Microbot to incur significant expenses or prevent Microbot from selling
certain of its product candidates.
The
medical device industry is characterized by extensive intellectual property litigation. From time to time, Microbot might be the
subject of claims by third parties of potential infringement or misappropriation. Regardless of outcome, such claims are expensive
to defend and divert the time and effort of Microbot’s management and operating personnel from other business issues. A
successful claim or claims of patent or other intellectual property infringement against Microbot could result in its payment
of significant monetary damages and/or royalty payments or negatively impact its ability to sell current or future products in
the affected category and could have a material adverse effect on its business, cash flows, financial condition or results of
operations.
If
Microbot or TRDF are unable to protect the patents or other proprietary rights relating to Microbot’s product candidates,
or if Microbot infringes on the patents or other proprietary rights of others, Microbot’s competitiveness and business prospects
may be materially damaged.
Microbot’s
success depends on its ability to protect its intellectual property (including its licensed intellectual property) and its proprietary
technologies. Microbot’s commercial success depends in part on its ability to obtain and maintain patent protection and
trade secret protection for its product candidates, proprietary technologies, and their uses, as well as its ability to operate
without infringing upon the proprietary rights of others.
Microbot
currently holds, through licenses or otherwise, an intellectual property portfolio that includes U.S. and international patents
and pending patents, and other patents under development. Microbot intends to continue to seek legal protection, primarily through
patents, including the TRDF licensed patents, for its proprietary technology. Seeking patent protection is a lengthy and costly
process, and there can be no assurance that patents will be issued from any pending applications, or that any claims allowed from
existing or pending patents will be sufficiently broad or strong to protect its proprietary technology. There is also no guarantee
that any patents Microbot holds, through licenses or otherwise, will not be challenged, invalidated or circumvented, or that the
patent rights granted will provide competitive advantages to Microbot. Microbot’s competitors have developed and may continue
to develop and obtain patents for technologies that are similar or superior to Microbot’s technologies. In addition, the
laws of foreign jurisdictions in which Microbot develops, manufactures or sells its product candidates may not protect Microbot’s
intellectual property rights to the same extent as do the laws of the United States.
Adverse
outcomes in current or future legal disputes regarding patent and other intellectual property rights could result in the loss
of Microbot’s intellectual property rights, subject Microbot to significant liabilities to third parties, require Microbot
to seek licenses from third parties on terms that may not be reasonable or favorable to Microbot, prevent Microbot from manufacturing,
importing or selling its product candidates, or compel Microbot to redesign its product candidates to avoid infringing third parties’
intellectual property. As a result, Microbot may be required to incur substantial costs to prosecute, enforce or defend its intellectual
property rights if they are challenged. Any of these circumstances could have a material adverse effect on Microbot’s business,
financial condition and resources or results of operations.
Microbot
has the first right, but not the obligation, to control the prosecution, maintenance or enforcement of the licensed patents from
TRDF. However, there may be situations in which Microbot will not have control over the prosecution, maintenance or enforcement
of the patents that Microbot licenses, or may not have sufficient ability to consult and input into the patent prosecution and
maintenance process with respect to such patents. If Microbot does not control the patent prosecution and maintenance process
with respect to the TRDF licensed patents, TRDF may elect to do so but may fail to take the steps that are necessary or desirable
in order to obtain, maintain and enforce the licensed patents.
Microbot’s
ability to develop intellectual property depends in large part on hiring, retaining and motivating highly qualified design and
engineering staff and consultants with the knowledge and technical competence to advance its technology and productivity goals.
To protect Microbot’s trade secrets and proprietary information, Microbot has entered into confidentiality agreements with
its employees, as well as with consultants and other parties. If these agreements prove inadequate or are breached, Microbot’s
remedies may not be sufficient to cover its losses.
Dependence
on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to such rights
may result in Microbot’s payment of significant monetary damages or impact offerings in its product portfolios.
Microbot’s
long-term success largely depends on its ability to market technologically competitive product candidates. If Microbot fails to
obtain or maintain adequate intellectual property protection, it may not be able to prevent third parties from using its proprietary
technologies or may lose access to technologies critical to our product candidates. Also, Microbot currently pending or future
patent applications may not result in issued patents, and issued patents are subject to claims concerning priority, scope and
other issues.
Furthermore,
Microbot has not filed applications for all of our patents internationally and it may not be able to prevent third parties from
using its proprietary technologies or may lose access to technologies critical to its product candidates in other countries.
Risks
Relating to Operations in Israel
Microbot
has facilities located in Israel, and therefore, political conditions in Israel may affect Microbot’s operations and results.
Microbot
has facilities located in Israel. In addition, one of its seven directors, its Chief Medical Officer and its Chief Financial Officer,
as well as substantially all of its research and development team and non-management employees, are residents of Israel. Accordingly,
political, economic and military conditions in Israel will directly or indirectly affect Microbot’s operations and results.
Since the establishment of the State of Israel, a number of armed conflicts have taken place between Israel and its Arab neighbors.
An ongoing state of hostility, varying in degree and intensity has led to security and economic problems for Israel. For a number
of years there have been continuing hostilities between Israel and the Palestinians. This includes hostilities with the Islamic
movement Hamas in the Gaza Strip, which have adversely affected the peace process and at times resulted in armed conflicts. Such
hostilities have negatively influenced Israel’s economy as well as impaired Israel’s relationships with several other
countries. Israel also faces threats from Hezbollah militants in Lebanon, from ISIS and rebel forces in Syria, from the government
of Iran and other potential threats from additional countries in the region. Moreover, some of Israel’s neighboring countries
have recently undergone or are undergoing significant political changes. These political, economic and military conditions in
Israel could have a material adverse effect on Microbot’s business, financial condition, results of operations and future
growth.
Political
relations could limit Microbot’s ability to sell or buy internationally.
Microbot
could be adversely affected by the interruption or reduction of trade between Israel and its trading partners. Some countries,
companies and organizations continue to participate in a boycott of Israeli firms and others doing business with Israel, with
Israeli companies or with Israeli-owned companies operating in other countries. Foreign government defense export policies towards
Israel could also make it more difficult for us to obtain the export authorizations necessary for Microbot’s activities.
Also, over the past several years there have been calls in the United States, Europe and elsewhere to reduce trade with Israel.
There can be no assurance that restrictive laws, policies or practices directed towards Israel or Israeli businesses will not
have an adverse impact on Microbot’s business.
Israel’s
economy may become unstable.
From
time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world
commodity prices, military conflicts and civil unrest. For these and other reasons, the government of Israel has intervened in
the economy employing fiscal and monetary policies, import duties, foreign currency restrictions, controls of wages, prices and
foreign currency exchange rates and regulations regarding the lending limits of Israeli banks to companies considered to be in
an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previous destabilizing
factors could make it more difficult for Microbot to operate its business and could adversely affect its business.
Exchange
rate fluctuations between the U.S. dollar and the NIS currencies may negatively affect Microbot’s operating costs.
A
significant portion of Microbot’s expenses are paid in New Israeli Shekels, or NIS, but its financial statements are denominated
in U.S. dollars. As a result, Microbot is exposed to the risks that the NIS may appreciate relative to the U.S. dollar, or the
NIS instead devalues relative to the U.S. dollar, and the inflation rate in Israel may exceed such rate of devaluation of the
NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the U.S. dollar cost of Microbot’s
operations in Israel would increase and Microbot’s U.S. dollar-denominated results of operations would be adversely affected.
Microbot cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation (if any) of the NIS against
the U.S. dollar.
Microbot’s
primary expenses paid in NIS that are not linked to the U.S. dollar are employee expenses in Israel and lease payments on its
Israeli facility. If Microbot is unsuccessful in hedging against its position in NIS, a change in the value of the NIS compared
to the U.S. dollar could increase Microbot’s research and development expenses, labor costs and general and administrative
expenses, and as a result, have a negative impact on Microbot’s profits.
Funding
and other benefits provided by Israeli government programs may be terminated or reduced in the future and the terms of such funding
may have a significant impact on future corporate decisions.
Microbot
participates in programs under the auspices of the Israeli Innovation Authority, for which it receives funding for the development
of its technologies and product candidates. If Microbot fails to comply with the conditions applicable to this program, it may
be required to pay additional penalties or make refunds and may be denied future benefits. From time to time, the government of
Israel has discussed reducing or eliminating the benefits available under this program, and therefore these benefits may not be
available in the future at their current levels or at all.
Microbot’s
research and development efforts from inception until now have been financed in part through such Israeli Innovation Authority
royalty bearing grants in an aggregate amount of approximately $1,500,000 through December 31, 2020. With respect to such
grants Microbot is committed to pay royalties at a rate of between 3% to 3.5% on sales proceeds up to the total amount of grants
received, linked to the dollar, plus interest at an annual rate of USD LIBOR. In addition, as a recipient of Israeli Innovation
Authority grants, Microbot must comply with the requirements of the Israeli Encouragement of Industrial Research and Development
Law, 1984, or the R&D Law, and related regulations. Under the terms of the grants and the R&D Law, Microbot is restricted
from transferring any technologies, know-how, manufacturing or manufacturing rights developed using Israeli Innovation Authority
grants outside of Israel without the prior approval of Israeli Innovation Authority. Therefore, if aspects of its technologies
are deemed to have been developed with Israeli Innovation Authority funding, the discretionary approval of an Israeli Innovation
Authority committee would be required for any transfer to third parties outside of Israel of the technologies, know-how, manufacturing
or manufacturing rights related to such aspects. Furthermore, the Israeli Innovation Authority may impose certain conditions on
any arrangement under which it permits Microbot to transfer technology or development outside of Israel or may not grant such
approvals at all.
If
approved, the transfer of Israeli Innovation Authority-supported technology or know-how outside of Israel may involve the payment
of significant fees, which will depend on the value of the transferred technology or know-how, the total amount Israeli Innovation
Authority funding received by Microbot, the number of years since the funding and other factors. These restrictions and requirements
for payment may impair Microbot’s ability to sell its technology assets outside of Israel or to outsource or transfer development
or manufacturing activities with respect to any product or technology outside of Israel. Furthermore, the amount of consideration
available to Microbot’s shareholders in a transaction involving the transfer of technology or know-how developed with Israeli
Innovation Authority funding outside of Israel (such as through a merger or other similar transaction) may be reduced by any amounts
that Microbot is required to pay to the Israeli Innovation Authority.
Some
of Microbot’s employees and officers are obligated to perform military reserve duty in Israel.
Generally,
Israeli adult male citizens and permanent residents are obligated to perform annual military reserve duty up to a specified age.
They also may be called to active duty at any time under emergency circumstances, which could have a disruptive impact on Microbot’s
workforce.
It
may be difficult to enforce a non-Israeli judgment against Microbot or its officers and directors.
The
operating subsidiary of the Company is incorporated in Israel. Some of Microbot’s executive officers and directors are not
residents of the United States, and a substantial portion of Microbot’s assets and the assets of its executive officers
and directors are located outside the United States. Therefore, a judgment obtained against Microbot, or any of these persons,
including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the
United States and may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on
these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Additionally,
it may be difficult for an investor, or any other person or entity, to initiate an action with respect to U.S. securities laws
in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel
is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim,
it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content
of applicable U.S. law often involves the testimony of expert witnesses, which can be a time consuming and costly process. Certain
matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters
described above. As a result of the difficulty associated with enforcing a judgment against Microbot in Israel, it may be impossible
to collect any damages awarded by either a U.S. or foreign court.
Risks
Relating to Microbot’s Securities, Governance and Other Matters
If
we fail to comply with the continued listing requirements of The Nasdaq Capital Market, our common stock may be delisted and the
price of our common stock and our ability to access the capital markets could be negatively impacted.
Our
common stock is currently listed on the Nasdaq Capital Market. In order to maintain that listing, we must satisfy minimum financial
and other continued listing requirements and standards, including those regarding director independence and independent committee
requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. There can
be no assurances that we will be able to comply with the applicable listing standards. In 2018, we effected a 1:15 reverse stock
split to address our stock price falling below the minimum share price required by Nasdaq. Failure to meet applicable Nasdaq continued
listing standards could result in a delisting of our common stock. A delisting of our common stock from The Nasdaq Capital Market
could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our
common stock. In addition, delisting could harm our ability to raise capital on terms acceptable to us, or at all, and may result
in the potential loss of confidence by investors, employees and fewer business opportunities. Additionally, if we are not eligible
for quotation or listing on another exchange, trading of our common stock could be conducted only in the over-the-counter market
or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such
event, it could become more difficult to dispose of, or obtain accurate price quotations for, our common stock, and there would
likely also be a reduction in our coverage by securities analysts and the news media, which could cause the price of our common
stock to decline further.
We
do not expect to pay cash dividends on our common stock.
We
anticipate that we will retain our earnings, if any, for future growth and therefore do not anticipate paying cash dividends on
our Common Stock in the future. Investors seeking cash dividends should not invest in our Common Stock for that purpose.
Anti-takeover
provisions in the Company’s charter and bylaws under Delaware law may prevent or frustrate attempts by stockholders to change
the board of directors or current management and could make a third-party acquisition of the Company difficult.
Provisions
in the Company’s certificate of incorporation and bylaws may delay or prevent an acquisition or a change in management.
These provisions include a classified board of directors. In addition, because the Company is incorporated in Delaware, it is
governed by the provisions of Section 203 of the DGCL, which prohibits stockholders owning in excess of 15% of outstanding voting
stock from merging or combining with the Company. Although the Company believes these provisions collectively will provide for
an opportunity to receive higher bids by requiring potential acquirers to negotiate with the Company’s board of directors,
they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate
or prevent any attempts by the Company’s stockholders to replace or remove then current management by making it more difficult
for stockholders to replace members of the board of directors, which is responsible for appointing members of management.
We
are subject to litigation, which may divert management’s attention and have a material adverse effect on our business, financial
condition and results of operations.
We
are the defendant in a lawsuit captioned Empery Asset Master Ltd., Empery Tax Efficient, LP, Empery Tax Efficient II, LP, Hudson
Bay Master Fund Ltd., Plaintiffs, against Microbot Medical Inc., Defendant, in the Supreme Court of the State of New York, County
of New York (Index No. 651182/2020). The complaint alleged, among other things, that we breached multiple representations and
warranties contained in the Securities Purchase Agreement (the “SPA”) related to our June 8, 2017 equity financing
(the “Financing”), of which the Plaintiffs participated. The complaint sought rescission of the SPA and return of
the Plaintiffs’ $6.75 million purchase price with respect to the Financing. We filed a Motion to Dismiss on March 16, 2020,
which Motion was denied in February 2021.
Management
is unable to assess the likelihood that we would be successful in any trial with respect to the SPA or the Financing, having previously
lost another lawsuit with respect to the Financing. Accordingly, no assurance can be given that if we go to trial and ultimately
lose, or if we decide to settle at any time, such an adverse outcome would not be material to our consolidated financial position.
Additionally, in any such case, we will likely be required to use available cash, or the proceeds from future offerings,
towards the rescission or settlement, that we otherwise would have used to build our business and develop our technologies into
commercial products. In such event, we would be required to raise additional capital sooner than we otherwise would, of which
we can give no assurance of success, or delay, curtail or cease the commercialization of some or all of our product candidates.
General
Risks
Raising
additional capital may cause dilution to the Company’s investors, restrict its operations or require it to relinquish rights
to its technologies or product candidates.
Until
such time, if ever, as the Company can generate substantial product revenues, it expects to finance its cash needs through a combination
of equity offerings, including through a possible At-the-Market offering, licensing, collaboration or similar arrangements, grants
and debt financings. The Company does not have any committed external source of funds. To the extent that the Company raises additional
capital through the sale of equity or convertible debt securities, the ownership interest of its stockholders will be diluted,
and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holder of the
Company’s common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting
the Company’s ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring
dividends or other distributions, selling or licensing intellectual property rights, and other operating restrictions that could
adversely affect the Company’s ability to conduct its business.
If
the Company raises additional funds through licensing, collaboration or similar arrangements, it may have to relinquish valuable
rights to its technologies, future revenue streams, research and development programs or product candidates or to grant licenses
on terms that may not be favorable to the Company. If the Company is unable to raise additional funds through equity or debt financings
or other arrangements when needed, it may be required to delay, limit, reduce or terminate its product development or future commercialization
efforts or grant rights to develop and market product candidates that it would otherwise prefer to develop and market itself.
Microbot
operates in a competitive industry and if its competitors have products that are marketed more effectively or develop products,
treatments or procedures that are similar, more advanced, safer or more effective, its commercial opportunities will be reduced
or eliminated, which would materially harm its business.
Our
competitors may develop products, treatments or procedures that directly compete with our products and potential products and
which are similar, more advanced, safer or more effective than ours. The medical device industry is very competitive and subject
to significant technological and practice changes. Microbot expects to face competition from many different sources with respect
to the SCS, LIBERTY and other products that it is seeking to develop or commercialize with respect to its other product candidates
in the future.
Competing
against large established competitors with significant resources may make establishing a market for any products that it develops
difficult which would have a material adverse effect on Microbot’s business. Microbot’s commercial opportunities could
also be reduced or eliminated if its competitors develop and commercialize products, treatments or procedures quicker, that are
safer, more effective, are more convenient or are less expensive than the SCS, LIBERTY or any product that Microbot may develop.
Many of Microbot’s potential competitors have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products
than Microbot may have. Mergers and acquisitions in the medical device industry market may result in even more resources being
concentrated among a smaller number of Microbot’s potential competitors.
Our
business strategy in part relies on identifying, acquiring and developing complementary technologies and products, which entails
risks which could negatively affect our business, operations and financial condition.
We
may pursue other acquisitions of businesses and technologies. Acquisitions entail numerous risks, including:
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difficulties
in the integration of acquired operations, services and products;
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failure to achieve
expected synergies;
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diversion of
management’s attention from other business concerns;
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assumption of
unknown material liabilities of acquired companies;
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amortization
of acquired intangible assets, which could reduce future reported earnings;
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potential loss
of clients or key employees of acquired companies; and
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dilution to existing
stockholders.
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As
part of our growth strategy, we may consider, and from time to time may engage in, discussions and negotiations regarding transactions,
such as acquisitions, mergers and combinations within our industry. The purchase price for possible acquisitions could be paid
in cash, through the issuance of common stock or other securities, borrowings or a combination of these methods.
We
cannot be certain that we will be able to identify, consummate and successfully integrate acquisitions, and no assurance can be
given with respect to the timing, likelihood or business effect of any possible transaction. For example, we could begin negotiations
that we subsequently decide to suspend or terminate for a variety of reasons. However, opportunities may arise from time to time
that we will evaluate. Any transactions that we consummate would involve risks and uncertainties to us. These risks could cause
the failure of any anticipated benefits of an acquisition to be realized, which could have a material adverse effect on our business,
financial condition, results of operations and prospects.
Microbot
operations in international markets involve inherent risks that Microbot may not be able to control.
Microbot’s
business plan includes the marketing and sale of its proposed product candidates internationally, and specifically in Europe and
Israel. Accordingly, Microbot’s results could be materially and adversely affected by a variety of factors relating to international
business operations that it may or may not be able to control, including:
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adverse macroeconomic
conditions affecting geographies where Microbot intends to do business;
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closing of international
borders, including as a result of biohazards or pandemics;
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foreign currency
exchange rates;
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political or
social unrest or economic instability in a specific country or region;
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higher costs
of doing business in certain foreign countries;
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infringement
claims on foreign patents, copyrights or trademark rights;
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difficulties
in staffing and managing operations across disparate geographic areas;
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difficulties
associated with enforcing agreements and intellectual property rights through foreign legal systems;
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trade protection
measures and other regulatory requirements, which affect Microbot’s ability to import or export its product candidates
from or to various countries;
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adverse tax consequences;
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unexpected changes
in legal and regulatory requirements;
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military conflict,
terrorist activities, natural disasters and medical epidemics; and
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Microbot’s
ability to recruit and retain channel partners in foreign jurisdictions.
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Microbot’s
financial results may be affected by fluctuations in exchange rates and Microbot’s current currency hedging strategy may
not be sufficient to counter such fluctuations.
Microbot’s
financial statements are denominated in U.S. dollars and the financial results of the Company are denominated in U.S. dollars,
while a significant portion of Microbot’s business is conducted, and a substantial portion of its operating expenses are
payable, in currencies other than the U.S. dollar. Exchange rate fluctuations may have an adverse impact on Microbot’s future
revenues or expenses as presented in the financial statements. Microbot may in the future use financial instruments, such as forward
foreign currency contracts, in its management of foreign currency exposure. These contracts would primarily require Microbot to
purchase and sell certain foreign currencies with or for U.S. dollars at contracted rates. Microbot may be exposed to a credit
loss in the event of non-performance by the counterparties of these contracts. In addition, these financial instruments may not
adequately manage Microbot’s foreign currency exposure. Microbot’s results of operations could be adversely affected
if Microbot is unable to successfully manage currency fluctuations in the future.
The
market price for our Common Stock may be volatile.
The
market price for our Common Stock may be volatile and subject to wide fluctuations in response to factors including the following:
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actual or anticipated
fluctuations in our quarterly or annual operating results;
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changes in financial
or operational estimates or projections;
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conditions in
markets generally;
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changes in the
economic performance or market valuations of companies similar to ours;
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announcements
by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments;
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our intellectual
property position; and
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general economic
or political conditions in the United States, Israel or elsewhere.
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addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related
to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market
price of shares of our Common Stock.
The
issuance of shares upon exercise of outstanding warrants and options could cause immediate and substantial dilution to existing
stockholders.
The
issuance of shares upon exercise of warrants and options could result in substantial dilution to the interests of other stockholders
since the holders of such securities may ultimately convert and sell the full amount issuable on conversion.