Microbot Medical Inc. — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018. Unaudited consolidated financial statements; amounts below are U.S. dollars in thousands unless stated otherwise. Microbot is a pre-clinical medical-device company developing micro-robotics technologies. It has no products approved for sale and has generated no product revenue.
Financial results and liquidity
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $747 | $377 | $1,130 | $561 |
| General and administrative expense | $1,145 | $885 | $2,277 | $1,934 |
| Operating loss | $(1,892) | $(1,262) | $(3,407) | $(2,495) |
| Financing income (expense), net | $(1) | $(2,246) | $45 | $(2,320) |
| Net loss | $(1,893) | $(3,508) | $(3,362) | $(4,815) |
| Net loss per share | $(0.04) | $(0.09) | $(0.08) | $(0.13) |
| Cash used in operating activities | $(1,349) | $(1,431) | $(2,543) | $(2,198) |
Margins are not meaningful because the company reported no revenue. At June 30, cash and cash equivalents were $8,020, restricted cash was $27, and current assets were $8,301. Current liabilities were $580; management reported net working capital of approximately $7,721. Total liabilities were $594, including a $14 derivative warrant liability; no conventional debt balance is presented. Total assets were $8,592. Cash and restricted cash fell $2,767 during the first half to $8,047.
Changes and notable items
- Operating loss widened versus both comparable 2017 periods as R&D and G&A spending increased. Management attributed the six-month R&D increase mainly to share-based compensation and intellectual-property purchases; higher G&A share-based compensation was partly offset by lower public-company and professional-service costs.
- Net loss improved year over year despite higher operating losses, primarily because 2017 included substantial financing expense, including a debt-extinguishment loss. The 2018 six-month financing result included a $14 gain from revaluation of warrant liabilities.
- No financing cash was raised in the first half of 2018, compared with $12,622 provided in the first half of 2017. The company issued 100,000 shares to CardioSert as part of an IP acquisition and converted 3,000 preferred shares into 3,000,000 common shares. Common shares outstanding, including shares classified as temporary equity, totaled 43,720,427 at June 30.
- In May 2018, Microbot completed its election to acquire CardioSert technology, paying an additional $250 and issuing shares valued at $74, following an initial $50 payment. The company also reported acquisition-related consulting commitments.
Outlook, risks and contingencies
- Management expects continuing losses and rising expenses as it advances the Self-Cleaning Shunt, TipCAT and CardioSert programs, and said available cash should fund operations for at least 12 months from the financial-statement issuance date. Development costs and timing are uncertain; no revenue or profitability guidance was provided.
- Management expects to seek additional equity or debt financing and grants. Future funding may dilute shareholders or impose debt-service obligations and covenants; financing may not be available on acceptable terms. Failure to obtain capital could require spending cuts or suspension of research programs.
- The company is defending a lawsuit by two investors in the 2017 financing seeking rescission and return of their $3,375 purchase price, plus damages alleged to exceed $1,000. Both sides filed summary-judgment motions on August 3, 2018. Management disputes the claims but cannot assess likelihood or potential damages. Other financing investors have a tolling and standstill agreement that could extend settlement terms to them.
- Israeli Innovation Authority grants carry contingent royalties on future sales and restrictions on transferring grant-funded technology outside Israel. The CardioSert license and other technology arrangements also involve potential royalties. A roughly $400 former-executive compensation commitment is described as remote and is not accrued.
- Management reported disclosure controls and internal control over financial reporting were effective at June 30, 2018. The company noted that significant cash balances at financial institutions may exceed federally insured limits and that foreign-currency movements could affect expenses.
Key facts for investors to verify
- Cash burn, actual development milestones and whether management’s stated 12-month cash runway remains adequate.
- Outcome and possible financial exposure of the Sabby litigation, including implications for other financing investors.
- Future financing needs, potential dilution, grant availability and grant-related restrictions or royalties.
- CardioSert acquisition costs, development obligations, royalty terms and progress across the product pipeline.
- Share-count and equity-award disclosures: the filing presents common shares in temporary equity separately from shareholders’ equity.