Microbot Medical Inc. — FY2018 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2018. This is an annual report, not a separate fourth-quarter filing. Financial statement amounts below are in U.S. dollars; figures shown in thousands unless otherwise stated.
Business context
Microbot is a preclinical medical-device company developing micro-robotic technologies for minimally invasive procedures. It had no product revenue and was focused primarily on its Self-Cleaning Shunt (SCS), intended to reduce catheter blockage in hydrocephalus and normal-pressure hydrocephalus. It was also evaluating CardioSert and TipCAT technologies for endovascular neurosurgical uses. The company had no commercial products, sales infrastructure, or manufacturing facilities.
Financial results and liquidity
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $2,515 | $1,100 |
| General and administrative expense | $4,729 | $4,167 |
| Operating loss | $7,244 | $5,267 |
| Financing expense (income), net | ($4) | $2,322 |
| Net loss | $7,240 | $7,589 |
| Net loss per share, basic and diluted | ($2.41) | ($2.76) |
| Net cash used in operating activities | $5,310 | $4,856 |
Research and development expense rose about 129%, reflecting higher payroll, stock compensation, professional services, and patent costs. General and administrative expense increased about 13%; higher stock-based compensation was partly offset by lower public-relations and other professional-services costs. Net loss narrowed despite the higher operating loss, principally because 2017 included a $2,364 debt-extinguishment loss and other financing costs.
At year-end, cash and cash equivalents were $5,238, restricted cash was $25, and working capital was approximately $1,071. Total assets were $6,090 and total liabilities were $4,768, including a $3,375 current liability associated with the Sabby litigation. The balance sheet reported no convertible loan balance at year-end; it included an $8 derivative warrant liability. Accumulated deficit was $27,864. No revenue margins are available because the company had no revenue.
Cash used in investing activities was $223, primarily for office move-related improvements; financing activities used $18, principally deferred offering costs. The audited cash-flow statement reports operating cash use of $5,310, while the MD&A cash-flow table states $4,916 for 2018; the filing text does not reconcile this difference.
Developments, outlook, and material risks
- Product development: Initial SCS preclinical work included an in-vitro study and a small animal safety study. Follow-up testing was underway to assess safety and efficacy. Management expected first-generation animal-study results in the second half of 2019 and planned to seek an FDA presubmission meeting. These were expectations, not completed milestones.
- Regulatory and commercial uncertainty: FDA pathway and evidence requirements were unresolved; the company was considering 510(k) and de novo routes. FDA could require human clinical studies, increasing cost and delaying commercialization. The product pipeline had not received marketing clearance or approval.
- Funding: Management expected continuing losses and stated that year-end cash, together with approximately $11 million of gross proceeds from January 2019 stock and warrant offerings, was expected to fund operations for at least 12 months from the financial-statement issuance date and support ongoing development. The company had no committed external funding source and anticipated needing further capital; equity financing could dilute shareholders.
- Litigation: In February 2019, a court ordered rescission of the 2017 financing agreement with Sabby, requiring repayment of $3.375 million against return of the purchased shares. Microbot appealed and obtained a stay pending appeal; management could not assess the appeal’s likelihood of success. If unsuccessful, interest at 9% per year and potential similar claims by other investors could increase the cash burden. The company recorded the $3.375 million liability at year-end.
- Other exposures: Development depends on third-party manufacturers and research organizations, regulatory approvals, market acceptance, and licensed intellectual property. Technion license milestones included commencing initial human studies by December 2019; missing milestones could give the licensor termination rights. Israeli operations and expenses also expose the company to geopolitical, grant-related, and currency risks.
- Controls and audit: Management reported effective disclosure controls and internal control over financial reporting as of December 31, 2018. The auditor issued an unqualified opinion on the financial statements but did not audit or opine on internal control effectiveness.
Most important facts for investors to verify
- Reconcile the conflicting 2018 operating-cash-use figures in the MD&A and audited cash-flow statement.
- Confirm the status and cash impact of the Sabby appeal, including any interest or claims by other financing participants.
- Track actual SCS safety and efficacy results, FDA feedback, required clinical evidence, and progress against Technion license milestones.
- Verify the company’s cash runway against ongoing spending and subsequent financing needs; distinguish the 2018 year-end cash balance from 2019 offering proceeds.
- Monitor dilution from 2019 offerings, outstanding options and warrants, and any future capital raises.