Microbot Medical Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. Unaudited financial statements; amounts below are in U.S. dollars, thousands, except per-share and share data.
Business context
Microbot is a pre-clinical medical-device company developing micro-robotics-assisted technologies for minimally invasive surgery. It had no approved products and generated no product revenue. Its lead candidates are the Self-Cleaning Shunt (SCS) for hydrocephalus and Normal Pressure Hydrocephalus, and TipCAT, a self-propelling endoscope initially intended for colonoscopy.
Financial performance and liquidity
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense, net | $383 | $184; up $199 |
| General and administrative expense | $1,132 | $1,049; up $83 |
| Operating loss | $(1,515) | $(1,233) |
| Net loss | $(1,469) | $(1,307) |
| Net loss per share, basic and diluted | $0.03 | $0.04 |
| Cash used in operating activities | $(1,194) | $(767) |
| Cash used in investing activities | $(133) | $(22) |
| Cash provided by financing activities | None | $3,082 |
At March 31, cash and cash equivalents were $9,460, restricted cash was $27, and total assets were $9,894. Net working capital was approximately $9,213. Total liabilities were $483, including $468 of current liabilities and a $15 derivative warrant liability; the balance sheet reports no conventional debt outstanding. The company reported accumulated deficit of $22,093.
No revenue or meaningful operating margin was reported. Management expects continuing losses and stated that cash should fund operations for at least 12 months from the financial-statement issuance date, including continued development of SCS and TipCAT.
Material changes and notable items
- Net loss increased by $162 year over year, while operating loss increased by $282. R&D expense rose primarily with professional services, share-based compensation, and intellectual-property maintenance.
- G&A expense increased by $83: higher share-based compensation was largely offset by lower public-company and professional-services costs. Share-based compensation was $416 in Q1 2018.
- Financing results shifted from $74 of expense in Q1 2017 to $46 of income in Q1 2018, primarily due to the change in fair value of warrant liabilities.
- Cash and cash equivalents declined from $10,787 at year-end 2017 to $9,460 at March 31, 2018. Operating cash use increased, and Q1 2018 had no financing inflows, unlike the prior-year quarter.
- Common shares issued and outstanding were reported as 42,120,427 at May 14, 2018. Preferred-stock conversions issued 1.537 million common shares during Q1; a further 800,000 shares were issued in May after quarter-end.
Outlook, risks, and contingencies
- Management aimed to complete pre-clinical studies required for regulatory submissions for SCS and TipCAT within the next 12 months. Development timing and costs remain uncertain; the company expects expenses and losses to increase.
- Management expects to seek additional capital through debt, equity, and potentially grants. Financing may be unavailable or unfavorable, could dilute shareholders, or could impose debt-service and covenant constraints. Insufficient funding could require spending reductions or suspension of planned research.
- In January 2018, Microbot agreed to acquire CardioSert technology and paid $50 initially. It exercised its option to acquire the technology on April 10, 2018; the filing describes additional consideration under the agreement but does not provide a clear total acquisition cost.
- A lawsuit by two investors alleges breaches of representations and warranties related to the June 2017 financing. Plaintiffs seek return of their $3,375 purchase price and damages alleged to exceed $1,000. The case was in discovery; management disputes the claims but could not assess the likelihood or amount of any loss. No provision is described in the supplied filing text.
- Other financing investors agreed under an April 4, 2018 tolling and standstill agreement not to bring related claims while the specified conditions remain in effect; if the company settles with the plaintiffs, it must offer the other investors the same pro rata terms.
- Israeli Innovation Authority grants are generally repayable through royalties only if products generate sales; transfer of grant-funded technology outside Israel may require approval. The company also has royalty obligations under a technology license. A former-executive compensation commitment of approximately $400 was described as remote and was not recorded.
- Management reported effective disclosure controls and internal control over financial reporting as of March 31, 2018. The auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Cash runway assumptions, quarterly cash burn, and the timing and cost of planned SCS and TipCAT development.
- Regulatory and pre-clinical milestones, and whether the stated 12-month study timetable remains achievable.
- Final CardioSert acquisition consideration, development commitments, and any associated funding needs.
- Potential exposure, settlement developments, and any effects on other investors arising from the financing-related lawsuit.
- Share-count and dilution effects from preferred conversions, options, warrants, and any future capital raises.