Microbot Medical Inc. — Q3 2018 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018. The unaudited financial statements are presented in U.S. dollars in thousands, except per-share and share data. Microbot is a pre-clinical medical-device developer focused on micro-robotic technologies for minimally invasive surgery; it reported no product revenue.
Key financial metrics
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense, net | $623 | $339 | $1,753 | $900 |
| General and administrative expense | $1,130 | $896 | $3,407 | $2,830 |
| Operating loss | $(1,753) | $(1,235) | $(5,160) | $(3,730) |
| Net loss | $(1,749) | $(1,187) | $(5,111) | $(6,002) |
| Net loss per share, basic and diluted | $(0.58) | $(0.45) | $(1.69) | $(2.25) |
- Gross margin and operating margin are not meaningful because the company had no revenue.
- Cash and cash equivalents were $6,673 at September 30, 2018, down from $10,787 at December 31, 2017; restricted cash was $27. Net working capital was approximately $6,291.
- For the nine months, operating cash use was $3,875, investing cash use was $239, and financing cash flow was zero. Cash and restricted cash declined by $4,114 to $6,700.
- Total liabilities were $562, comprising $557 of current liabilities and a $5 derivative warrant liability. No conventional borrowing balance is reported.
- Total assets were $7,128; shareholders’ equity was $6,066, with an additional $500 classified as temporary equity.
Changes versus prior comparable periods
- Q3 net loss increased by $562 year over year, as higher operating expenses outweighed a small financing-income contribution. Nine-month net loss improved by $891, largely because 2017 included a $2,360 financing loss related to extinguishing convertible notes and issuing preferred shares.
- R&D expense rose $284 in Q3 and $853 for the nine months, primarily due to increased share-based compensation and intellectual-property costs.
- G&A expense rose $234 in Q3 and $577 for the nine months. Management attributed the year-to-date increase primarily to higher share-based compensation, partly offset by lower public-company expenses and professional services.
- Operating cash use increased from $3,547 to $3,875 for the nine months, while 2017’s $12,622 of financing inflows—principally equity proceeds—did not recur in 2018.
Outlook, risks and unusual items
- Management expects continuing losses and significant development spending. It stated that September cash should fund operations for at least 12 months, but also said the company hoped to raise capital within four months to cover anticipated needs for approximately the following 36 months. Additional funding is not assured and could dilute shareholders; failure to obtain it could force spending reductions or suspension of programs and raise substantial going-concern concerns.
- The lead Self-Cleaning Shunt (SCS) remains in preclinical development. Follow-up animal and laboratory studies are underway; management expected results in the second half of 2019 and planned to use them in FDA discussions or submissions. FDA clearance, additional testing, or human clinical trials may be required, adding time and cost.
- Microbot acquired CardioSert technology in 2018 and is exploring applications for its platforms in endovascular neurosurgery. It no longer plans to develop TipCAT as a colonoscopy tool. The company reported 25 issued or allowed patents and 15 pending applications.
- A New York lawsuit by two 2017 financing investors seeks rescission and return of $3.375 million, among other relief. The court denied plaintiffs’ summary-judgment motion and granted the company summary judgment on monetary damages, but left the rescission claim for trial; no trial date was set. The company says it cannot assess the likelihood or amount of any remaining exposure. Other financing investors have tolling and standstill arrangements.
- Israeli Innovation Authority grants are repayable through royalties on future sales, subject to grant terms, and include restrictions on transferring grant-funded technology outside Israel. A proposed share repurchase of up to $500 for certain former shareholders remained subject to definitive agreements and is classified as temporary equity.
- The company effected a 1-for-15 reverse stock split on September 4, 2018; historical share and per-share figures were adjusted retroactively. Management reported disclosure controls and internal control over financial reporting were effective at quarter-end.
Important facts for investors to verify
- Cash runway and the timing, amount, terms, and dilution impact of any planned financing; reconcile management’s stated 12-month runway with its plan to raise capital within four months.
- Progress and results of SCS follow-up studies, the expected regulatory pathway, and whether FDA or other regulators require human trials.
- Status and potential financial exposure of the unresolved rescission claim and related claims covered by the tolling agreement.
- Reconcile operating cash use: the cash-flow statement and accompanying narrative report $3,547 for nine-month 2017, while the MD&A summary table shows $3,457.
- Future costs, milestones, royalty obligations, and transfer restrictions associated with SCS, CardioSert, and government grants.