Microbot Medical Inc. — Q3 2019 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2019. Dollar amounts are in thousands unless stated otherwise. Microbot is a pre-clinical medical-device company developing micro-robotics technologies for minimally invasive procedures; it reported no revenue.
Financial results and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $843 | $623 | $2,207 | $1,866 |
| General and administrative expense | $948 | $1,130 | $3,045 | $3,294 |
| Operating loss | $(1,791) | $(1,753) | $(5,252) | $(5,160) |
| Net loss | $(1,874) | $(1,758) | $(5,377) | $(5,134) |
| Basic and diluted loss per share | $(0.44) | $(0.60) | $(1.27) | $(1.79) |
Margins are not meaningful because the company had no revenue. Q3 R&D rose $220 year over year, while G&A fell $182. For the nine months, R&D increased $341, primarily from materials and subcontractor costs for new product development; G&A declined $249, mainly due to lower aggregate salaries and share-based compensation. Nine-month financing expense was $125, versus financing income of $26 in 2018, mainly reflecting interest accrued on the Sabby judgment, partly offset by investment interest.
- Assets and liquidity: At September 30, cash and cash equivalents were $3,548, short-term U.S. Treasury investment was $2,503, and restricted cash was $4,250. Current assets totaled $10,487; current liabilities were $4,589; reported working capital was approximately $5,898. Cash, cash equivalents and restricted cash totaled $7,798.
- Cash flows, nine months: Operating cash use was $4,531, compared with $3,875 in 2018; investing cash use was $2,496, primarily for marketable debt securities, versus $239 in 2018; financing cash provided was $9,562, versus none in 2018. Financing came from common-stock and warrant offerings. January 2019 offerings generated approximately $11,370 gross proceeds.
- Debt and other obligations: No borrowings are reported. Lease liabilities totaled $445 ($314 current and $131 non-current). Current liabilities also included a $3,553 provision related to the Sabby dispute, including $178 of additional interest expense recorded through September 30.
Material changes, outlook and risks
- Common shares outstanding increased from 3,012,343 at December 31, 2018 to 4,307,666 at September 30, 2019, following 2019 financing; the January offering included common shares and pre-funded warrants.
- Management expects continued losses and anticipates R&D spending to rise as development advances and pre-clinical and clinical trials begin for the Self-Cleaning Shunt and other platforms. G&A may also rise with expanded operations, staffing and public-company costs. No specific revenue, earnings or cash-flow guidance was provided.
- Going concern: The company has incurred recurring losses and negative operating cash flows and states it does not have an established source of funds sufficient to cover operating costs for more than the next 12 months. Management plans to seek additional debt or equity financing and possibly grants, but availability and terms are uncertain. The filing says these conditions raise substantial doubt about the company’s ability to continue as a going concern.
- Sabby litigation: A New York court ordered rescission of the 2017 financing and return of $3,375 to plaintiffs. Microbot appealed and placed approximately $4,200 in escrow, including estimated interest and fees. Management could not assess the likelihood of success; an adverse outcome could require use of operating funds and prompt further capital raising. Other investors have a tolling and standstill agreement, and potential related claims remain a risk.
- Other contingencies: Microbot is pursuing an approximately $480,000 short-swing-profit claim against Alliance Investment Management; the outcome is uncertain. Israeli Innovation Authority grants received totaled approximately $1,524 and may require royalties of 3%–3.5% of future sales up to the grant amount, plus interest, if products are commercialized. Grant-funded technology transfers may require prior approval.
- The company is developing the Self-Cleaning Shunt and other technology platforms; it is no longer pursuing TipCAT as a colonoscopy tool and is exploring endovascular neurosurgical applications. Development, clinical testing, commercialization, financing and foreign-currency risks could affect plans and results.
Important facts for investors to verify
- Current cash runway, restricted-cash availability and the timing and terms of any additional financing.
- Status and potential financial impact of the Sabby appeal, escrow and any claims by other investors.
- Development, pre-clinical and clinical milestones for the Self-Cleaning Shunt and other product candidates.
- Potential dilution from future equity or equity-linked financing and outstanding warrants or options.
- Any changes in grant obligations, technology-transfer restrictions, or the Alliance litigation.