Microbot Medical Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Financial amounts below are in U.S. dollars, thousands, unless stated otherwise. Microbot is a pre-clinical medical-device company developing minimally invasive surgical technologies; it has not generated operating revenue.
Financial results and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $741 | $747 | $1,364 | $1,243 |
| General and administrative expense | $804 | $1,145 | $2,097 | $2,164 |
| Operating loss | $(1,545) | $(1,892) | $(3,461) | $(3,407) |
| Net loss | $(1,542) | $(1,894) | $(3,503) | $(3,376) |
| Basic and diluted loss per share | $(0.36) | $(0.66) | $(0.83) | $(1.20) |
- Margins are not meaningful because the company reported no revenue. Losses reflect ongoing development and corporate costs.
- For the first half, operating cash use was $3,200, compared with $2,543 in 2018. Investing cash use was $2,496, primarily for a Treasury security; financing provided $9,562 from stock and warrant offerings. Cash, cash equivalents and restricted cash ended at $9,129, versus $8,047 a year earlier.
- At June 30, cash and cash equivalents were $4,879, short-term investments were $2,503, and restricted cash was $4,250. Management reported net working capital of $7,443, versus $1,071 at December 31, 2018. The filing describes approximately $7,382 as unrestricted cash and cash equivalents, including short-term investments.
- Total liabilities were $4,594, including $492 of operating lease liabilities. No borrowings are reported. Stockholders’ equity was $7,981; accumulated deficit was $31,367.
Changes versus the prior comparable period
- Q2 net loss narrowed by $352, mainly as general and administrative expense fell $341, principally due to lower Sabby-litigation legal costs. First-half net loss increased $127, as higher R&D expense and lower net financing income outweighed lower G&A.
- First-half R&D expense rose $121. Management expects development spending to rise as programs advance and pre-clinical and clinical work begins.
- January 2019 equity offerings generated approximately $11.37 million gross proceeds and issued 1,295,323 common shares and related securities. The pre-funded warrants were exercised in January; common shares outstanding rose to 4,307,666 from 3,012,343 at year-end.
Outlook, risks and unusual items
- Management said available funds were expected to support operations for more than 12 months from issuance of the statements and continue development of the Self-Cleaning Shunt (SCS). The company expects further losses and may seek additional equity, debt or grants; financing may be unavailable or dilutive, and spending could need to be curtailed.
- The principal development program is the SCS for hydrocephalus and normal pressure hydrocephalus. Microbot also describes the ViRob, CardioSert and TipCAT technology platforms; it is no longer pursuing TipCAT as a colonoscopy tool and is exploring endovascular neurosurgical uses. Washington University’s SCS study was extended to March 2020. The filing gives no specific commercialization or revenue guidance.
- Sabby litigation: A court ordered rescission of the 2017 financing, potentially requiring repayment of $3,375 in exchange for return of shares. Microbot appealed and deposited approximately $4,200 in escrow to stay execution, restricting access to those funds. It recorded $101 of judgment interest through June 30. Management could not assess the appeal’s likelihood of success; an adverse result could materially affect finances and prompt earlier fundraising. Other investors have tolling and standstill rights, and potential related claims are not provided for.
- Microbot’s separate Section 16(b) case seeks approximately $480 from Alliance Investment Management; recovery is uncertain.
- Israeli Innovation Authority grants received totaled approximately $1,524. Repayment is contingent on successful commercialization and generally takes the form of royalties of 3%–3.5% of future sales up to the grant amount, plus interest. Technology-transfer restrictions apply.
- The company adopted lease-accounting guidance in 2019, recognizing $492 of operating lease assets and liabilities at quarter-end. It also retrospectively adopted ASU 2017-11, reclassifying warrants from liabilities to equity. Disclosure controls were reported effective, with no material quarterly change in internal control over financial reporting.
Investor verification priorities
- Check subsequent developments in the Sabby appeal, escrow, interest and any claims by the other 2017 financing investors.
- Reconcile available liquidity: unrestricted cash and investments, restricted escrow, working capital, and the company’s projected cash runway and burn rate.
- Track SCS development milestones, the extended university study, clinical plans and any evidence supporting future commercialization.
- Review the terms and dilution effects of 2019 offerings, outstanding warrants and options, and any future capital raises.
- Confirm grant royalty and technology-transfer obligations, lease payments, and the status and collectability of the Alliance claim.