Microbot Medical Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; filed April 14, 2020. Although the request refers to 2019 Q4, this is an annual report with full-year results and comparative 2018 figures. Unless noted, financial amounts below are in U.S. dollars.
Business context
Microbot is a pre-clinical medical-device company developing micro-robotic technologies for minimally invasive procedures. It had no product revenue and remained focused on research and development. Its principal programs were the Self-Cleaning Shunt (SCS) for hydrocephalus and NPH, and Liberty, a disposable endovascular robotic system; TipCAT development was not a current priority. The company reported 37 issued or allowed patents and 15 pending applications.
Financial results and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $3.048 million | $2.515 million |
| General and administrative expense | $4.192 million | $4.729 million |
| Operating loss | $7.240 million | $7.244 million |
| Net loss | $7.247 million | $7.260 million |
| Net loss per share | $1.70 | $2.41 |
| Cash used in operating activities | $6.451 million | $5.310 million |
| Cash used in investing activities | $2.453 million | $0.223 million |
| Cash from financing activities | $36.770 million | Cash used: $0.018 million |
At year-end, cash and cash equivalents were $28.771 million, short-term marketable securities were $2.521 million, and restricted cash was $4.358 million. Current assets were $35.936 million and current liabilities $4.826 million; management reported working capital of approximately $31.110 million. Total liabilities were $5.586 million, including $0.903 million of lease liabilities. The filing reports no conventional borrowings in the balance sheet. No revenue-based margins are meaningful.
Management said net cash was expected to fund operations for at least 24 months, but warned that an adverse result in the Empery/Hudson Bay litigation could reduce that runway. The company raised $36.770 million net through common-stock and warrant issuances in 2019, increasing shares outstanding from 3.012 million at year-end 2018 to 7.186 million at year-end 2019.
Changes and operating developments
- R&D expense increased $0.533 million, primarily due to materials and professional services; G&A expense fell $0.537 million, primarily due to lower share-based compensation and public-relations costs.
- Operating loss was essentially unchanged. Net loss was also nearly unchanged, while loss per share improved as weighted-average shares increased.
- Operating cash outflow rose to $6.451 million from $5.310 million. Financing proceeds drove the $27.866 million increase in cash, cash equivalents and restricted cash during 2019.
- The company reported encouraging results from an Envigo laboratory study of SCS, but a separate Wayne State efficacy study was inconclusive. Interim animal-study data were inconclusive for assessing safety.
- In January 2020, Microbot unveiled Liberty. It planned to pursue animal trials as early as Q1 2021 and an FDA submission as early as Q4 2021. These are forward-looking plans, not completed milestones.
Outlook, risks and unusual items
- Development and regulation: SCS had not reached human trials or received marketing clearance. The company was discussing a possible FDA Early Feasibility Study; it hoped to begin controlled human trials as early as Q3 2022 if the FDA supported that approach. Additional animal studies or clinical data could delay development and increase costs. Liberty was also in development and required regulatory review.
- Funding and dilution: Microbot expected continued losses and rising development costs, had no committed external funding source, and might need further equity, debt, grants or partnerships. Further financing could dilute shareholders or impose other constraints.
- Litigation: Following an adverse judgment and lost appeal concerning the 2017 financing, the company paid approximately $3.7 million to Sabby and recorded a $3.604 million provision for the dispute. Empery and Hudson Bay sought rescission and return of $6.75 million; the company’s motion to dismiss was pending. The filing says the outcome and potential financial effect were uncertain. Separately, Microbot sought approximately $0.480 million in short-swing trading profits in Alliance-related litigation, which included a counterclaim against the company.
- Other contingencies: A CardioSert agreement contains commercialization deadlines and a potential $1 buy-back provision; the company said it had not met the deadlines as of the filing. Technion licenses for SCS and TipCAT include development milestones, including first human trials by December 2021, and royalty obligations. Israeli Innovation Authority grants total approximately $1.5 million and carry future-sales royalties and restrictions on transferring supported technology outside Israel.
- COVID-19 and execution: The filing warned that the emerging COVID-19 outbreak could disrupt trials, site enrollment, FDA interactions, travel and supply chains. Microbot also relied on third parties for manufacturing and had no commercial sales or distribution infrastructure.
- Accounting and controls: The independent auditor issued an unqualified opinion on the financial statements. Management reported effective disclosure controls and internal control over financial reporting, while noting a Form 8-K amendment in March 2020 after an inconsistency was identified. The auditor did not attest to internal-control effectiveness.
Important facts for investors to verify
- Available, unrestricted liquidity and actual cash burn, distinguishing cash equivalents, marketable securities and the $4.358 million restricted litigation collateral.
- Developments and potential exposure in the Empery/Hudson Bay case, including whether the recorded provision reflects the eventual outcome.
- FDA feedback and the status, results and timing of SCS safety and efficacy studies, and whether an EFS or additional animal testing is required.
- Liberty’s progress toward animal testing, FDA engagement and integration of CardioSert; confirm compliance with CardioSert commercialization deadlines.
- Future financing needs, share and warrant dilution, and the effect of litigation or development delays on management’s stated runway.