Microbot Medical Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Financial amounts below are in U.S. dollars, in thousands, unless otherwise indicated. The interim financial statements are unaudited.
Business context
Microbot is a pre-clinical medical-device company developing micro-robotic technologies for minimally invasive procedures. Its programs include the Self Cleaning Shunt for hydrocephalus and the Liberty disposable robotic system for endovascular procedures. The company reported no operating revenue to date.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | None to date | None to date |
| Research and development expense | $691 | $587; up $104 |
| General and administrative expense | $1,472 | $1,329; up $143 |
| Operating loss | $(2,163) | $(1,916) |
| Net loss | $(2,205) | $(1,961) |
| Basic and diluted loss per share | $(0.31) | $(0.48) |
| Cash used in operating activities | $(5,921) | $(2,723) |
| Cash, cash equivalents and restricted cash at quarter-end | $29,661 | $9,606 |
Quarter-end balance-sheet cash and cash equivalents were $29,585, with $76 of restricted cash; the cash-flow statement reports combined cash, cash equivalents and restricted cash of $29,661. The company sold its $2,521 marketable security during the quarter. Net investing cash inflow was $2,453, primarily reflecting those proceeds, less $68 of property and equipment purchases. Financing cash flow was zero.
Net working capital was approximately $29,176, compared with $31,110 at December 31, 2019. Total assets were $31,298, total liabilities $1,620, and stockholders’ equity $29,678. The company reported $869 of lease liabilities, including $176 current and $693 long-term; no other financial debt balance is clearly provided. Profit margins are not meaningful because the company has no revenue.
Changes, outlook and material items
- Net loss increased by $244 year over year. R&D expense rose mainly because of lower Israeli Innovation Authority grant support and increased development-related professional services. G&A increased primarily due to a one-time CEO bonus, public-relations costs and rent, partly offset by lower legal fees.
- Operating cash use increased by $3,198 year over year. The filing attributes cash-flow movements in part to changes in payables and accrued liabilities; the 2020 cash-flow statement shows a $3,966 outflow from changes in other payables and accrued liabilities.
- In February 2020, the company lost its appeal in litigation arising from its 2017 financing, rescinded the relevant purchase agreement as to Sabby, and paid approximately $3,700 in exchange for 83,333 post-split shares. The year-end $3,604 provision for the dispute was no longer recorded at March 31.
- Other investors in the 2017 financing seek rescission and return of $6,750, plus interest. The company moved to dismiss; the motion was pending. Management said it could not assess the likelihood of success. An adverse outcome could shorten the company’s expected funding runway.
- Management expects continuing losses as it advances development programs and says cash should fund operations for at least 24 months; elsewhere, it states funding is sufficient for at least 12 months from the filing date. Management cautions that the pending $6,750 claim could reduce the runway to less than 24 months. Future equity or debt financing may be pursued and could dilute shareholders or impose debt-service obligations and covenants.
- COVID-19 could delay clinical-trial enrollment, site activity, regulatory interactions, supplier deliveries and other development work. The company said the ultimate impact was uncertain.
- The CEO’s annual salary was increased from $360 to $450, retroactive to January 1, 2020; his target bonus rose from 40% to 60% of salary, and he received a one-time bonus equal to 60% of the new salary. He was also granted options for 166,666 shares at $9.64, vesting after one year. Total options outstanding were 537,061 at quarter-end.
- The company reported 37 issued or allowed patents and 15 pending patent applications. It also disclosed IIA grants of approximately $1,500, repayable through royalties of 3%–3.5% on future sales up to the grant amount; grant-funded technology transfers outside Israel may require approval.
No formal revenue or earnings guidance was provided. Management expects R&D and potentially G&A expenses to increase as programs advance. The company stated that disclosure controls were effective; it also disclosed that it amended a March 2020 Form 8-K after identifying an inconsistency with an incorporated press release and implemented additional review procedures.
Important facts for investors to verify
- Current status, expected timing and potential financial exposure of the $6,750 financing-related lawsuit, including any interest or settlement terms.
- Cash runway assumptions, including the difference between management’s stated 24-month funding view and the 12-month minimum noted elsewhere, and the potential impact of litigation and development spending.
- Progress, milestones and funding needs for the Self Cleaning Shunt, Liberty and other pre-clinical programs, including any COVID-19-related delays.
- Reconciliation of quarter-end cash balances and the substantial year-over-year increase in operating cash use.
- Potential dilution from outstanding options and warrants, and any future capital raises; quarter-end common shares outstanding were 7,103,260.
- Status and possible outcomes of the Alliance/Mona litigation, including the company’s claim for approximately $468 of short-swing profits and Mona’s counterclaim.