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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
(Mark
One)
|
☒ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For
the fiscal year ended
December 31, 2021
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For
the transition period from ____ to _____
Commission
file number:
000-19871
MICROBOT MEDICAL INC.
(Exact
name of registrant as specified in its charter)
|
Delaware |
94-3078125 |
|
|
(State
of |
(I.R.S.
Identification |
25 Recreation Park Drive,
Unit 108
Hingham,
MA
02043
(Address
including zip code of registrant’s Principal Executive
Offices)
(781)
875-3605
(Registrant’s
Telephone Number, Including Area Code)
Securities
registered under Section 12(b) of the Act:
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
||
|
Common Stock, Par value $0.01 |
MBOT |
NASDAQ Capital Market |
Securities
registered under Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes ☐
No ☒
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
No ☒
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data file required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company”, and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
Large accelerated filer ☐ |
Accelerated filer ☐ |
Non-accelerated filer ☒ |
Smaller reporting company ☒ |
| Emerging Growth Company ☐ |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
State
the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked
price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter:
approximately $56,438,576.
Common
stock outstanding as of March 29, 2022: shares
INFORMATION
CONCERNING FORWARD-LOOKING STATEMENTS
This
report contains forward-looking statements. Forward-looking
statements are projections in respect of future events or our
future financial performance. In some cases, you can identify
forward-looking statements by terminology such as “may”, “should”,
“intends”, “expects”, “will”, “plans”, “anticipates”, “believes”,
“estimates”, “predicts”, “potential”, or “continue” or the negative
of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks listed under
the section entitled “Risk Factors” commencing on page 20 of this
report, which may cause our or our industry’s actual results,
levels of activity or performance to be materially different from
any future results, levels of activity or performance expressed or
implied by these forward-looking statements.
Table
of Contents
NOTE
REGARDING REFERENCES TO OUR COMPANY
Throughout
this Form 10-K, the words “we,” “us,” “our,” the “Company” and
“Microbot” refer to Microbot Medical Inc., including our directly
and indirectly wholly-owned subsidiaries and, unless the context
otherwise requires, the historical business, financial statements
and operations of Microbot are of Microbot Medical Ltd., an Israeli
corporation (“Microbot Israel”) which became a wholly-owned
subsidiary of the Company on November 28, 2016.
Risk
Factors Summary
The
following is a summary of the principal risks that could adversely
affect our business, operations, and financial results. A more
thorough discussion of these and other risks are listed under the
section entitled “Risk Factors” commencing on page 20.
Risks
Relating to Microbot’s Financial Position and Need for Additional
Capital
| ● |
Microbot has had no revenue and has incurred significant operating losses since inception and is expected to continue to incur significant operating losses for the foreseeable future. The Company may never become profitable or, if achieved, be able to sustain profitability. |
|
| ● |
Microbot has a limited operating history, which may make it difficult to evaluate the prospects for the Company’s future viability. |
|
| ● |
Microbot may need additional funding. If Microbot is unable to raise capital when needed, it could be forced to delay, reduce or eliminate its product development programs or commercialization efforts. |
|
| ● |
An epidemic of the coronavirus disease is ongoing and may result in significant disruptions to our clinical trials or other business operations, which could have a material adverse effect on our business. |
Risks
Relating to the Development and Commercialization of Microbot’s
Product Candidates
| ● |
Unsuccessful animal studies, clinical trials or procedures relating to product candidates under development could have a material adverse effect on Microbot’s prospects. |
|
| ● |
Microbot’s business depends heavily on the success of its lead product candidates, the LIBERTY® and SCS. If Microbot is unable to commercialize the LIBERTY or SCS, or experiences significant delays in doing so, Microbot’s business will be materially harmed. |
|
| ● |
Microbot’s ability to expand its technology platforms for other uses, including endovascular neurosurgery other than for the treatment of hydrocephalus, may be limited. |
|
| ● |
At this time, Microbot does not know whether the FDA will require it to submit clinical data in support of its future marketing applications for its SCS product candidate, particularly in light of recent initiatives by the FDA to enhance and modernize its approach to medical device safety and innovation, which creates uncertainty for Microbot as well as the possibility of increased product development costs and time to market. |
|
| ● |
The FDA may disagree with Microbot’s determination that the SCS is a Class II device or that the chosen predicate device (or any predicate device) is appropriate for a substantial equivalence comparison to the SCS. |
|
| ● |
Microbot’s CardioSert technology is subject to a buy-back clause which, if triggered, could cause us to lose rights to the technology and delay or curtail the development of our products. |
|
| ● |
If the commercial opportunity for SCS, LIBERTY and any other commercial products that may be developed by Microbot is smaller than Microbot anticipates, Microbot’s future revenue from SCS, LIBERTY and such other products will be adversely affected and Microbot’s business will suffer. |
|
| ● |
Customers will be unlikely to buy the SCS, LIBERTY or any other product candidates unless Microbot can demonstrate that they can be produced for sale to consumers at attractive prices. |
|
| ● |
Microbot will rely on third party design houses for the redesign of the CardioSert guidewire to other specific indications. |
|
| ● |
Microbot has relied on, and intends to continue to rely on, third-party manufacturers to produce its product candidates. |
|
| ● |
If Microbot’s product candidates are not considered to be a safe and effective alternative to existing technologies, Microbot will not be commercially successful. |
|
| ● |
Microbot may be subject to penalties and may be precluded from marketing its product candidates if Microbot fails to comply with extensive governmental regulations. |
|
| ● |
If Microbot is not able to both obtain and maintain adequate levels of third-party reimbursement for procedures involving its product candidates after they are approved for marketing and launched commercially, it would have a material adverse effect on Microbot’s business. |
|
| ● |
Clinical outcome studies for the SCS may not provide sufficient data to make Microbot’s product candidates the standard of care. |
|
| ● |
Microbot products may in the future be subject to mandatory product recalls that could harm its reputation, business and financial results. |
|
| ● |
If Microbot’s future commercialized products cause or contribute to a death or a serious injury, Microbot will be subject to Medical Device Reporting regulations, which can result in voluntary corrective actions or agency enforcement actions. |
|
| ● |
Microbot could be exposed to significant liability claims if Microbot is unable to obtain insurance at acceptable costs and adequate levels or otherwise protect itself against potential product liability claims. |
|
| ● |
The results of Microbot’s research and development efforts are uncertain and there can be no assurance of the commercial success of Microbot’s product candidates. |
|
| ● |
If Microbot fails to retain certain of its key personnel and attract and retain additional qualified personnel, Microbot might not be able to pursue its growth strategy effectively. |
Risks
Relating to Microbot’s Intellectual Property
| ● |
Microbot’s right to develop and commercialize the SCS and TipCAT product candidates are subject to the terms and condition of a license granted to Microbot by Technion Research and Development Foundation Ltd. and termination of the license with respect to one or both of the technology platforms underlying the product candidates would result in Microbot ceasing its development efforts for the applicable product candidate(s). |
|
| ● |
Microbot may not meet its product candidates’ development and commercialization objectives in a timely manner or at all. |
|
| ● |
Intellectual property litigation and infringement claims could cause Microbot to incur significant expenses or prevent Microbot from selling certain of its product candidates. |
|
| ● |
If Microbot or TRDF are unable to protect the patents or other proprietary rights relating to Microbot’s product candidates, or if Microbot infringes on the patents or other proprietary rights of others, Microbot’s competitiveness and business prospects may be materially damaged. |
|
| ● |
Dependence on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to such rights may result in Microbot’s payment of significant monetary damages or impact offerings in its product portfolios. |
Risks
Relating to Operations in Israel
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Microbot has facilities located in Israel, and therefore, political conditions in Israel may affect Microbot’s operations and results. |
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Political relations could limit Microbot’s ability to sell or buy internationally. |
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Israel’s economy may become unstable. |
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Exchange rate fluctuations between the U.S. dollar and the NIS currencies may negatively affect Microbot’s operating costs. |
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Funding and other benefits provided by Israeli government programs may be terminated or reduced in the future and the terms of such funding may have a significant impact on future corporate decisions. |
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Some of Microbot’s employees and officers are obligated to perform military reserve duty in Israel. |
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It may be difficult to enforce a non-Israeli judgment against Microbot or its officers and directors. |
Risks
Relating to Microbot’s Securities, Governance and Other
Matters
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If we fail to comply with the continued listing requirements of The Nasdaq Capital Market, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted. |
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We do not expect to pay cash dividends on our common stock. |
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Anti-takeover provisions in the Company’s charter and bylaws under Delaware law may prevent or frustrate attempts by stockholders to change the board of directors or current management and could make a third-party acquisition of the Company difficult. |
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We are subject to litigation, which may divert management’s attention and have a material adverse effect on our business, financial condition and results of operations. |
General Risks
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Raising additional capital may cause dilution to the Company’s investors, restrict its operations or require it to relinquish rights to its technologies or product candidates. |
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Microbot operates in a competitive industry and if its competitors have products that are marketed more effectively or develop products, treatments or procedures that are similar, more advanced, safer or more effective, its commercial opportunities will be reduced or eliminated, which would materially harm its business. |
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Our business strategy in part relies on identifying, acquiring and developing complementary technologies and products, which entails risks which could negatively affect our business, operations and financial condition. |
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Microbot operations in international markets involve inherent risks that Microbot may not be able to control. |
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Microbot’s financial results may be affected by fluctuations in exchange rates and Microbot’s current currency hedging strategy may not be sufficient to counter such fluctuations. |
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The market price for our Common Stock may be volatile. |
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The issuance of shares upon exercise of outstanding warrants and options could cause immediate and substantial dilution to existing stockholders. |
PART I
Item
1. Description of
Business.
The
Company
Microbot
is a pre-clinical medical device company specializing in the
research, design and development of next generation robotic
endoluminal surgery devices targeting the minimally invasive
surgery space. Microbot is primarily focused on leveraging its
micro-robotic technologies with the goal of redefining surgical
robotics while improving surgical outcomes for patients.
Microbot’s
current technological platforms, ViRobTM,
TipCATTM, LIBERTY® and certain CardioSert
assets, are comprised of proprietary innovative technologies. Using
the ViRob platform, Microbot is currently developing the
Self-Cleaning Shunt, or SCSTM, for the treatment of
hydrocephalus and Normal Pressure Hydrocephalus, or NPH. Utilizing
the LIBERTY and CardioSert platforms, Microbot is developing the
first ever fully disposable robot for various endovascular
interventional procedures. In addition, the Company is focused on
the development of a Multi Generation Pipeline Portfolio utilizing
all of its proprietary technologies.
Microbot
has a patent portfolio of 47 issued/allowed patents and 29 patent
applications pending worldwide.
We
were incorporated on August 2, 1988 in the State of Delaware under
the name Cellular Transplants, Inc. The original Certificate of
Incorporation was restated on February 14, 1992 to change our name
to CytoTherapeutics, Inc. On May 24, 2000, the Certificate of
Incorporation as restated was further amended to change our name to
StemCells, Inc. On November 28, 2016, C&RD Israel Ltd., a
wholly-owned subsidiary of ours, completed its merger with and into
Microbot Medical Ltd., or Microbot Israel, an Israeli corporation
that then owned our assets and operated our current business, with
Microbot Israel surviving as a wholly-owned subsidiary of ours. We
refer to this transaction as the Merger. On November 28, 2016, in
connection with the Merger, we changed our name from “StemCells,
Inc.” to Microbot Medical Inc., and each outstanding share of
Microbot Israel capital stock was converted into the right to
receive shares of our common stock. In addition, all outstanding
options to purchase the ordinary shares of Microbot Israel were
assumed by us and converted into options to purchase shares of the
common stock of Microbot Medical Inc. On November 29, 2016, our
common stock began trading on the Nasdaq Capital Market under the
symbol “MBOT”. Prior to the Merger, we were a biopharmaceutical
company that operated in one segment, the research, development,
and commercialization of stem cell therapeutics and related
technologies. Substantially all of the material assets relating to
the stem cell business were sold on November 29, 2016.
Technological
Platforms
ViRob
The
ViRob is an autonomous crawling micro-robot which can be controlled
remotely or within the body. Its miniature dimensions are expected
to allow it to navigate and crawl in different natural spaces
within the human body, including blood vessels, the digestive tract
and the respiratory system as well as artificial spaces such as
shunts, catheters, ports, etc. Its unique structure is expected to
give it the ability to move in tight spaces and curved passages as
well as the ability to remain within the human body for prolonged
time. The SCS product was developed using the ViRob
technology.
TipCAT
The
TipCAT is a disposable self-propelled locomotive device that is
specially designed to advance in tubular anatomies. The TipCAT is a
mechanism comprising a series of interconnected balloons at the
device’s tip that provides the TipCAT with its forward locomotion
capability. The device can self-propel within natural tubular
lumens such as the blood vessels, respiratory and the urinary and
GI tracts. A single channel of air/fluid supply sequentially
inflates and deflates a series of balloons creating an inchworm
like forward motion. The TipCAT maintains a standard working
channel for treatments. Unlike standard access devices such as
guidewires, catheters for vascular access and endoscopes, the
TipCAT does not need to be pushed into the patient’s lumen using
external pressure; rather, it will gently advance itself through
the organ’s anatomy. As a result, the TipCAT is designed to be able
to reach every part of the lumen under examination regardless of
the topography, be less operator dependent, and greatly reduce the
likelihood of damage to lumen structure. The TipCAT thus offers
functionality features equivalent to modern tubular access devices,
along with advantages associated with its physiologically adapted
self-propelling mechanism, flexibility, and design.
One
& DoneTM (CardioSert) Technology
On
April 8, 2018, Microbot acquired a patent-protected technology from
CardioSert Ltd., a privately-held medical device company based in
Israel that was part of a technological incubator supported by the
Israel Innovation Authorities. The CardioSert technology
contemplates a combination of a guidewire and microcatheter,
technologies that are broadly used for surgery within a tubular
organ or structure such as a blood vessel or duct. The CardioSert
technology features a unique guidewire delivery system with
steering and stiffness control capabilities which when developed is
expected to give the physician the ability to control the tip
curvature, to adjust tip load to varying degrees of stiffness in a
gradually continuous manner. The CardioSert technology was
originally developed to support interventional cardiologists in
crossing chronic total occlusions (CTO) during percutaneous
coronary intervention (PCI) procedures and has the potential to be
used in other spaces and applications, such as peripheral
intervention, and neurosurgery. Our CardioSert tool is now
trademarked as “One & DoneTM”.
LIBERTY®
On
January 13, 2020, Microbot unveiled what it believes is the world’s
first fully disposable robotic system for use in endovascular
interventional procedures, such as cardiovascular, peripheral and
neurovascular. The LIBERTY robotic system features a unique compact
design with the capability to be operated remotely, reduce
radiation exposure and physical strain to the physician, reduce the
risk of cross contamination, as well as the potential to eliminate
the use of multiple consumables when used with its “One & Done”
capabilities, which would be based in part on the CardioSert
platform or possibly other guidewire/microcatheter
technologies.
LIBERTY
is designed to maneuver guidewires and over-the-wire devices (such
as microcatheters) within the body’s vasculature. It eliminates the
need for extensive capital equipment requiring dedicated Cath-lab
rooms as well as dedicated staff. In addition, when combined with
CardioSert technology or possibly other guidewire/microcatheter
technologies, it is being designed to streamline Cath-lab
procedures with tools that combines guidewire and microcatheter
into a single device. With control over tip curvature and stiffness
for maneuverability and access – and without the need for constant
tool exchanges – when integrated into the LIBERTY device, the
device may drastically reduce procedure time and costs while
enhancing the operator experience.
On
August 17, 2020, Microbot announced the successful conclusion of
its feasibility animal study using the LIBERTY robotic system. The
study met all of its end points with no intraoperative adverse
events, which supports Microbot’s objectives to allow physicians to
conduct a catheter-based procedure from outside the catheterization
laboratory (cath-lab), avoiding radiation exposure, physical strain
and the risk of cross contamination. The study was performed by two
leading physicians in the neuro vascular and peripheral vascular
intervention spaces, and the results demonstrated robust navigation
capabilities, intuitive usability and accurate deployment of
embolic agents, most of which was conducted remotely from the
cath-lab’s control room.
On
December 22, 2021, we entered into a strategic collaboration
agreement for technology co-development with Stryker Corporation,
acting through its Neurovascular Division. Pursuant to the
agreement, the collaborative development program between Stryker
and us aims to integrate certain of Stryker’s instruments with our
LIBERTY Robotic System to address certain neurovascular procedures.
The activities contemplated by the Agreement shall be specified in
one or more development plans derived from the terms and conditions
set forth in the Agreement.
We
are continuously exploring and evaluating additional innovative
guidewire/microcatheter technologies to be integrated and combined
with the LIBERTY robotic platform.
Industry
Overview
CSF
Management
Hydrocephalus
is a medical condition in which there is an abnormal accumulation
of cerebrospinal fluid, or CSF, in the brain that can cause
increased intracranial pressure. It is estimated that one in every
500 babies are born with hydrocephalus, and over 1,000,000 people
in the United States currently live with hydrocephalus.
Symptoms
of hydrocephalus vary with age, disease progression and individual
tolerance to the condition, but they can include convulsion, tunnel
vision, mental disability or dementia-like symptoms and even death.
NPH is a type of hydrocephalus that usually occurs in older adults.
NPH is generally treated as distinct from other types of
hydrocephalus because it develops slowly over time. In NPH, the
drainage of CSF is blocked gradually and the excess fluid builds up
slowly. This slow accumulation means that the fluid pressure may
not be as high as in other types of hydrocephalus. It is estimated
that more than 700,000 Americans have NPH, but less than 20%
receive an appropriate diagnosis.
Hydrocephalus
is most often treated by the surgical insertion of a shunt system.
The shunt system diverts the flow of CSF from the brain’s
ventricles (or the lumbar subarachnoid space) to another part of
the body where the fluid can be more readily absorbed.
Hydrocephalus shunt designs have changed little since their
introduction in the 1950s. A shunt system typically consists of
three parts: the distal tubing or shunt (a flexible and sturdy
plastic tube), the ventricular catheter (the proximal catheter),
and a valve. The end of the shunt system with the proximal catheter
is placed in the ventricles (within the CSF) and the distal
catheter is placed in the site of the body where the CSF can be
drained. A valve is located along the shunt to maintain and
regulate the rate of CSF flow. Current systems can be created from
separate components or bought as complete units.
The
treatment of hydrocephalus with existing shunt systems often
includes complications. For example, approximately 50% of shunts
used in the pediatric population fail within two years of placement
and repeated neurosurgical operations are often required.
Ventricular catheter blockage, or occlusion, is by far the most
frequent event that results in shunt failure. Shunt occlusion
occurs when there is a partial or complete blockage of the shunt
that causes it to function intermittently or not at all. Such a
shunt blockage can be caused by the accumulation of blood cells,
tissue, or bacteria in any part of the shunt system. In the event
of shunt occlusion, CSF begins to accumulate in the brain or lumbar
region again and the symptoms of untreated hydrocephalus can
reappear until a shunt replacement surgery is performed.
Although
several companies are active in the field of hydrocephalus
treatment and the manufacturing of shunt systems and shunt
components, Microbot believes that the majority of those companies
are focusing on the development of valves. The development of a
“smart shunt” – a shunt that could provide data to the physician on
patient conditions and shunt function with sensor-based controls,
or correct the high failure rate of existing shunt systems – is for
the most part at an academic and conceptual level only. Reports of
smart shunt technologies are typically focused on a subset of
components with remaining factors left unspecified, such as
hardware, control algorithms or power management. Microbot does not
believe that a smart shunt that can prevent functional failures has
been developed to date. Because of the limited innovation in this
area, Microbot believes an opportunity exists to provide patients
suffering from hydrocephalus or NPH with a more effective
instrument for treating their condition.
An
alternative, short-term solution to hydrocephalus is the
implantation of an External Ventricular Drainage, or EVD, an
implanted device used in neurosurgery for the short-term treatment
and monitoring of elevated intracranial pressure when the normal
flow of CSF inside the brain is obstructed. If after using an EVD,
the underlying hydrocephalus does not eventually resolve, the EVD
may then be replaced with a cerebral shunt, a fully internalized,
long-term treatment for hydrocephalus.
EVDs
are also used in other instances when the normal flow of CSF inside
the brain is obstructed, such as a result of head trauma,
intracerebral hemorrhage, brain tumors and infection. The EVD
serves to divert excess fluids from the brain and allows for the
monitoring of intracranial pressure. An EVD must be placed in a
center with full neurosurgical capabilities because immediate
neurosurgical intervention may be needed if a complication of EVD
placement, such as bleeding, is encountered. EVD is one of the most
commonly used and most important life-saving procedures in the
neurologic ICU, with more than 200,000 neuro-intensive patients
requiring EVD insertions annually.
Similar
to shunts, EVDs are also prone to occlusion, mostly due to cellular
debris, such as blood clots and/or tissue fragments. Studies have
shown that approximately 1-7% of EVDs require replacement secondary
to occlusion. Current solutions for EVD occlusion include
irrigation and replacement, which we believe may be ineffective (in
the case of irrigation) or costly (in the case of replacement) and
in either case, put the patient at risk of unintended side effects.
Microbot believes that with its portfolio of technologies, and its
initial pre-clinical results, it is well-positioned to explore and
expand its offerings as an alternative solution for EVD
occlusion.
Minimally
Invasive Robot-Assisted Endovascular Interventions
Minimally
Invasive Surgery, or MIS, refers to surgical procedures performed
through tiny incisions instead of a single large opening. Because
the incisions are small, patients tend to have quicker recovery
times and experience less trauma than with conventional surgery.
The global MIS surgery is expected to grow from $24 billion in 2020
to $42 billion in 2026, representing a CAGR of 9.85%. MIS involves
three major categories of devices: surgical, monitoring and
visualization, and endoscopy. The market for surgical devices,
including ablation, electrosurgery and medical robotic systems,
accounts for the largest share of revenue and is also expected to
show the highest rate of growth. According to the Society of
Robotic Surgery, the US market growth in endoluminal robotic
surgery is projected to be 15-25% by 2025.
Vascular
disease is the most common precursor to ischemic heart disease and
stroke, which are two of the leading causes of death worldwide.
Advances in endovascular intervention in recent years have
transformed patient survival rates and post-surgical quality of
life. It is estimated that more than three million percutaneous
coronary interventions (PCI) and over two million of peripheral
vascular interventions are performed annually worldwide. The
incidence of stroke in the US alone is estimated at 900,000 cases
annually. Compared to open surgery, it has the advantages of faster
recovery, reduced need for general anesthesia, reduced blood loss
and significantly lower mortality. However, the current practice of
endovascular procedures, which virtually has remained unchanged
since the introduction of Intervention four decades ago, is limited
by a number of factors, including physical strain and exposure to
X-Ray radiation of the operator, and involves complex maneuvering
of intervention tools, such as guidewires and catheters, to reach
target areas in the vasculature. Despite recent advancements in
technology and devices, manual procedures are still highly
dependent on the technical skills and training of the operator,
what makes the access to expert medical centers and advanced
emergent treatments, such as endovascular thrombectomy for acute
ischemic stroke, geographically limited. In addition, we believe
that demand for physicians continues to grow faster than
supply.
Endovascular
robotic systems are aimed to increase the stability and precision
of guidewires and catheters, protecting the physicians from
ionizing radiation and physical strain by removing them from the
radiation source, helping in closing shortages of skilled
physicians and skill gaps and enable tele-interventions (e.g. the
Hub & Spoke hospital model).
Today,
there are only a few commercially available robotic systems for
endovascular interventions. We believe these systems have major
drawbacks, such as limited maneuverability, the requirement to
exchange and use multiple expensive surgical tools, being
cumbersome to set-up and operate, and requiring significant capital
expenditures.
Navigating
and placing access devices through tortuous and highly delicate
brain arteries is a complex procedure that requires high-level
surgical skills with specialist training. In many procedures,
surgeons exchange numerous access devices before reaching the
target and applying the therapeutic agent or device, increasing the
risk of adverse events and the exposure of both patient and
physician to radiation. Adverse events, such as perforation of
brain arteries or the release of embolies from a thrombus or
atherosclerotic lesion can have devastating or even fatal
results.
Microbot
believes that with its portfolio of CardioSert and LIBERTY
technologies, it is well-positioned to explore and develop such
technologies as neurovascular access devices, with a focus on
improving the ease and access and enhancing the safety of
endovascular interventions.
Our
Product Pipeline
Self-Cleaning
Shunt
The
SCS device is designed to act as the ventricular catheter portion
of a CSF shunt system that is used to treat hydrocephalus and NPH.
It is designed to work as an alternative to any ventricular
catheter options currently on the market and to connect to all
existing shunt system valves currently on the market; therefore,
the successful commercialization of the SCS is not dependent on any
single shunt system. Initially, Microbot expects the SCS device to
be an aftermarket purchase that would be deployed to modify
existing products by the end user. Microbot believes that the use
of its SCS device will be able to reduce, and potentially
eliminate, shunt occlusions, and by doing so, Microbot believes its
SCS has the potential to become the gold standard ventricular shunt
in the treatment of hydrocephalus and NPH.
The
SCS device embeds an internal robotic cleaning mechanism in the
lumen, or inside space, of the ventricular catheter which prevents
cell accumulation and tissue ingrowth into the catheter. The SCS
device consists of a silicone tube with a perforated titanium tip,
which connects to a standard shunt valve at its distal end. The
internal cleaning mechanism is embedded in the lumen of the
titanium tip. Once activated, the cleaning mechanism keeps tissue
from entering the catheter perforations while maintaining the CSF
flow in the ventricular catheter.
The
internal cleaning mechanism of the SCS device is activated by means
of an induced magnetic field, which is currently designed to be
externally generated by the patient through a user-friendly headset
that transmits the magnetic field at a pre-determined frequency and
operating sequence protocol. The magnetic field that is created by
the headset is then captured by a flexible coil and circuit board
that is placed just under the patient’s scalp in the location where
the valve is located. The circuit board assembly converts the
magnetic field into the power necessary to activate the cleaning
mechanism within the proximal part of the ventricular
catheter.
Microbot
has completed the development of an SCS prototype and is currently
continuing the safety testing, general proof of concept testing and
performance testing for the device, which Microbot began in
mid-2013. In May 2018, Microbot announced the results of two
pre-clinical studies assessing the SCS, an in-vitro study and a
small animal study. The in-vitro study, which was performed at
Wayne State University by Dr. Carolyn Harris, supports the SCS’s
potential as a viable technology for preventing occlusion in shunts
used to treat hydrocephalus. The first stage animal study designed
to assess the safety profile of the SCS, which was performed by
James Patterson McAllister, PhD, a Professor of Neurosurgery at
Washington University School of Medicine in St. Louis, met the
primary goal to determine the safety of the SCS device that aims to
prevent obstruction in CSF catheters. Following the completion of
the first stage initial studies, Microbot commenced a follow-up
study to further evaluate the safety of the SCS. The follow-up
study was also conducted by leading hydrocephalus experts at
Washington University. The study, included a larger sample size
compared to the initial studies and the primary and secondary
endpoints were to validate the safety of the activated SCS in-vivo
(animal) models. In that in-vivo study the major finding was that
the SCS system is as safe to use as currently marketed devices. The
study also mentions, that in the animal model, contact of the shunt
with the choroid plexus is impossible to avoid and that it may lead
to shunt obstruction due to hemorrhage of this highly vascular
structure.
In
parallel with the in-vivo study, Microbot also contracted with
Envigo CRS Israel, a leading provider of non-clinical contract
research services, to conduct an in-vitro study designed to
evaluate the operational performance of the SCS. Human brain
glioblastoma cells were used in order to assess performance of the
SCSTM in a test system with accelerated cell growth,
accumulation and obstruction rates. In 2018, Microbot and Envigo
conducted an in-vitro trial that its final conclusion
was:
While
significant cell growth and accumulation were seen in the
non-operating SCS™ group after 30 days, the shunt openings remained
clear in the constantly operating SCS™ group, with little to no
cell attachment on the robotic cleaning mechanism (the ViRob™
system) and on the shunt openings.
The
SCS™ was further validated in a broader follow-up in-vitro study
which commenced in July 2019 and concluded on August 14, 2019 and
clearly demonstrated that the SCS™ prevented shunt occlusions under
the parameters of that study. This follow-up study was also
conducted by Envigo CRS Israel using Human brain glioblastoma cells
Specifically, the study demonstrated:
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Significant cell growth and accumulation in a non-operating SCS™ as well as in a standard of care ventricular catheters (control group). |
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A significant inhibition in cell growth in daily (5-10 minutes) or weekly (up to 2 hours over the week) operating regimes of the SCS™, with little cell attachment on the ViRob mechanism. |
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The effectiveness of the SCS™ device in preventing cells blockage as compare to standard of care surgical ventricular catheters. |
To
further investigate the efficacy of the SCS™, Microbot conducted a
follow-up in-vitro study at Wayne State University. The study
included a larger sample size compared to the initial study and the
primary and secondary end points aimed to validate the efficacy of
the SCS in comparison to commercially available devices. After
careful analysis of the results the final conclusion was that the
data from this study did not reveal statistically significant
differences between the study’s groups.
Microbot
used the findings of the second stage of the animal study combined
with additional experimental data that was acquired in the past
year for initial regulatory FDA pre-submissions.
On
January 27, 2021, we announced the completion of successful
discussions with the FDA, for the SCSTM. After review of
Microbot existing pre-clinical data, the FDA’s feedback will allow
us to apply for the EFS (Early Feasibility Study) without further
animal studies.
We
expect to continue to work with the FDA towards finalizing the
SCSTM design, and to incorporate their feedback prior to
submitting the IDE to seek authorization to begin the EFS clinical
trial. While there can be no assurance that the FDA will approve
the EFS study, the agency’s recent feedback indicates that the
agency will be receptive to allowing a first-in-human study to
proceed based on existing data. After completing the EFS, we would
then seek FDA input on the device design as finalized through the
EFS process in a subsequent IDE filing for approval of a clinical
study proposal. Consequently, the timeline for the submission of
the IDE for First-in-Human clinical trial under the EFS is expected
to commence in the first quarter of 2023.
In
spite of the above, there is still a possibility that Microbot may
conduct clinical trials if they are requested by the FDA or if
Microbot decides that the data from such trials would improve the
marketability of the product candidate.
The
proposed indication for use of the SCS™ device would be for the
treatment of hydrocephalus and/or NPH as a component of
commercially available shunt systems. It continues to be possible
that the FDA could require us to conduct a human clinical study to
support the safety and efficacy of the SCS and that such clinical
data would need to be part of the future regulatory submission to
authorize marketing of the medical device in the U.S.
TipCAT
A
TipCAT prototype was shown to self-propel and self-navigate in
curved plastic pipes and curved ex-vivo colon. In addition, in its
first feasibility study, the prototype device was tested in a live
animal experiment and successfully self-propelled through segments
of the animal’s colon, with no post-procedural damage. All tests
were conducted at AMIT (Alfred Mann Institute of Technology at the
Technion), prior to the licensing of TipCAT by Microbot.
Currently,
Microbot is not pursuing the development of the TipCAT as a
colonoscopy tool due to its focus on the neurosurgical and
endovascular intervention spaces, and as such it is currently
exploring the use of the TipCAT for minimally invasive
neurosurgical and endovascular applications to complement its other
technologies.
LIBERTY
The
LIBERTY robotic system features a unique compact design with the
capability to be operated remotely, reduce radiation exposure and
physical strain to the physician, reduce the risk of cross
contamination, as well as the potential to eliminate the use of
multiple consumables when used with the One & DoneTM
tool or possibly other guidewire/microcatheter technologies.
LIBERTY is being designed to have the following
attributes:
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Compact size – Eliminates the need for large capital equipment in dedicated cath-lab rooms with dedicated staff. |
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Fully disposable – To our knowledge, the first and only fully disposable, robotic system for endovascular procedures. |
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Streamlines Cath-lab procedures – Compatible with Microbot’s unique One & DoneTM tool or possibly other guidewire/microcatheter technologies, that combines guidewire and microcatheter into a single device. The “One & Done” tool, when integrated into the system, is expected to provide full control over tip curvature and stiffness for maneuverability and access without the need for constant tool exchanges, while enhancing the operator experience. |
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State of the art maneuverability – Provides linear, rotational and tip control of its One & DoneTM tool when integrated into the system, as well as linear motion for an additional “over the wire” device. |
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Compatibility with a wide range of commercially-available guidewires, microcatheters and guide-catheters. |
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Enhanced operator safety and comfort – Reduces exposure to ionizing radiation and the need for heavy lead vests otherwise to be worn during procedures, as well as reducing the exposure to Hospital Acquired Infections (HAI). |
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Ease of use – LIBERTY’s intuitive remote controls simplify advanced procedures while shortening the physician’s learning curve. |
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Telemedicine compatible – Capable of tele-catheterization, carried out remotely by highly trained specialists. |
We
are continuing our feasibility animal trials with respect to the
LIBERTY device, with a planned pre-submission to the FDA as early
as the first quarter of 2022, and planned submission to the FDA in
the first half of 2023.
Strategy
Microbot’s
goal is to generate sales of its products, once they have received
regulatory approval, by establishing SCS, LIBERTY and additional
devices from its technological platforms, as the standard-of-care
in the eyes of doctors, surgeons, patients and medical facilities,
as well as getting the support of payors and insurance companies.
Microbot believes that it can achieve this objective by working
with hospitals to demonstrate the key benefits of its products.
Microbot’s strategy includes the following key elements:
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Continue to refine existing product candidates and develop additional micro-robotic solutions. As Microbot prepares to bring its initial product candidates through pre-clinical and clinical trials, if necessary, and eventually to market, it continues to focus on improving its product candidates to respond to clinical data and patient and physician feedback. Microbot also expects to continue to innovate in the micro-robotics field by continuing to find ways of using its technology to solve unmet needs, with the overarching goal of providing a safer, more effective and more efficient surgical environment for patients and physicians. |
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Establish and leverage relationships with key institutions and leading clinicians. Microbot’s objective will be to maintain clinical focus with leading hospitals and clinics so as to establish the SCS, LIBERTY, as well as other future products, as the standard of care in such institutions for their respective procedures. Microbot also expects to identify key clinicians with the relevant specialties (for instance, neurosurgery or interventional radiology) with the expectation that such clinical focus will accelerate the adoption of its candidate products. |
|
| ● |
Continuously invest in research and development. Microbot’s most significant expense has historically been research and development, and Microbot expects that this will continue in the foreseeable future, including expenses it expects to incur to improve on its prototype products in order to respond to clinical data, to develop additional applications using its technologies and to develop future product candidates. |
|
| ● |
Explore partnerships for the introduction of Microbot’s products. Microbot intends to focus its marketing and sales efforts initially on pursuing collaborations with global medical device companies that have established sales and distribution networks. Microbot will seek to enter collaborations and partnerships with strategic players that offer synergies with Microbot’s product candidates and expertise. |
|
| ● |
Seek additional IP and technologies to complement and strengthen Microbot’s current IP portfolio. Microbot intends to continue exploring new technologies, IP and know-how to add to its current portfolio through licensing, mergers and/or acquisitions and to allow Microbot to enter new spaces and strengthen its overall product portfolio. |
SCS
Opportunities
The
SCS is designed to prevent shunt occlusions in hydrocephalus and
NPH patients who have undergone or are undergoing the surgical
insertion of a shunt system. For purposes of its marketing
strategy, Microbot has split the market for shunt systems into two
sub-markets:
| ● | Primary shunt placement; and |
|
| ● | Shunt replacement. |
Microbot’s
SCS device is universal (meaning that it is designed to be
attachable to any valve on the market); therefore, Microbot’s
initial go-to-market strategy is the development of strategic
partnerships with leading global medical device companies with
ready sales and distribution channels. Outside of a strategic
partnership, it is most likely that Microbot’s SCS product will be
initially used in shunt replacement surgeries to replace occluded
ventricular catheters. Accordingly, Microbot intends to establish
key hospital and clinic relationships that will allow it to diffuse
the technology among experts and other stakeholders. Microbot is
also planning to apply for the SCS device to be covered under the
current reimbursement codes in the United States for use in
hydrocephalus and NPH shunt procedures.
TipCAT
Opportunities
Microbot
is currently exploring the use of the TipCAT for minimally invasive
neurological and endovascular applications.
One
& DoneTM (CardioSert) Opportunities
Microbot
is currently exploring the integration of the One &
DoneTM technology into the LIBERTY endovascular robotic
system for a range of potential applications in the cardiovascular,
peripheral vascular and neurovascular spaces.
LIBERTY
Opportunities
The
LIBERTY endovascular robotic system is being designed to remotely
maneuver guidewires, microcatheters and over-the-wire devices
within the body’s vasculature. The device is being designed to be
the size of a hand-held personal device and to be fully disposable
and affordable. We are aiming LIBERTY to be capable of supporting
whole-endovascular procedures by providing solutions which would be
based in part on the One & DoneTM proprietary
technology or possibly other guidewire/microcatheter technologies.
With control over tip curvature and stiffness for maneuverability
and access – and without the need for constant tool exchanges – the
One & DoneTM tool, when integrated into the system,
is expected to drastically reduce the procedure time and costs,
while enhancing the operator experience. We believe LIBERTY’s
addressable markets are the Interventional Cardiology,
Interventional Radiology and Interventional Neuroradiology
markets.
The
unique characteristics of LIBERTY – compact, mobile, disposable and
remotely controlled – open the opportunity of expanding telerobotic
interventions to patients with limited access to life-saving
procedures, such as mechanical thrombectomy in ischemic
stroke.
Competition
SCS
Competitive Landscape
Several
academic research groups, such as at the New Jersey Institute of
Technology, are currently researching sensing and
obstruction-resistant catheter designs, and the Smart Sensors and
Integrated Microsystems (SSIM) Program at Wayne State University
has publicized that it is engaging in smart shunt development
activity. However, based in part on its knowledge of the patented
technologies, Microbot believes that these technologies are still
early in the research and development cycle. Although we believe
the SCS may face direct competition from Anuncia Inc., a spin-off
of Alycone Lifesciences Inc., which received a CE Mark and FDA 510k
clearance for the Alivio ReFlow™ Ventricular System for the
treatment of hydrocephalus, the commercialization status of the
device is not clear. The SCS also faces non-direct competition from
Aqueduct Neurosciences, Inc., which we believe is developing a
non-shunt, electro-mechanical technology platform to control the
draining of cerebrospinal fluid, and from Cerevasc Inc., which is
developing the eShuntTM System that aims to eliminate
the need for passing a rigid catheter through cerebral cortex and
subcortical white matter.
Microbot
does not expect its SCS device to directly compete against shunt
systems currently available in the market. The SCS device is
designed to replace a component of existing shunt systems and is
expected to be an aftermarket purchase that would be used to modify
existing products by the end user. However, there can be no
assurance that Microbot’s product candidate will be accepted by the
shunt market as an alternative component.
TipCAT
Competitive Landscape
Microbot
has not at this time completed its evaluation of the current
competitive landscape in the endovascular space for potential uses
of the TipCAT.
One
& DoneTM (CardioSert) Competitive
Landscape
Competition
includes moveable-core guidewires from companies such as Boston
Scientific and Rapid Medical, and steerable and deflectable sheaths
and catheters from companies such as Bendit Technologies, Agile
Devices and Merit Medical. To our knowledge, the CardioSert device
is the only device that combines an inner moveable guidewire and an
outer microcatheter, with the ability to control the shape and
stiffness of the distal tip in a continuous, gradual manner, and
intends to compete on that basis.
LIBERTY
Competitive Landscape
We
believe the main competitor to the LIBERTY system is the CorPath
GRX vascular robotics system by Corindus Vascular Robotics, a
Siemens Healthineers company. The CorPath GRX system has FDA
approvals for percutaneous coronary interventions (PCI) and
peripheral vascular interventions (PVI) and is pending an approval
for neurovascular interventions. Other competitors include Robocath
(CE Marked for PCI only) and Hansen Medical (a J&J Company with
FDA approval for PVI). We believe these systems have drawbacks,
such as limited maneuverability, the requirement to exchange and
use multiple expensive surgical tools, being cumbersome to set-up
and operate, and requiring significant capital expenditures. We
further believe that these systems have captured a marginal market
share to date.
Microbot’s
existing and planned products could also be rendered obsolete or
uneconomical by technological advances developed in the future by
existing or new competitors. Some of Microbot’s competitors
currently have significantly greater resources than Microbot does;
have established relationships with healthcare professionals,
customers and third-party payors; and have long-term contracts with
group purchasing organizations in the United States. In addition,
many of Microbot’s competitors have established distributor
networks, greater resources for product development, sales and
marketing, additional lines of products and the ability to offer
financial incentives such as rebates, bundled products or discounts
on other product lines that Microbot cannot provide.
Intellectual
Property
General
The
SCS and TipCAT are based on technological platforms licensed from
The Technion Research and Development Foundation Ltd., or TRDF, as
further discussed below. The LIBERTY platform core technology is
co-owned by Microbot and TRDF. The One & DoneTM
device is based on technologies acquired by Microbot from
CardioSert. Microbot plans to develop other medical-robotic
solutions through internal research and development, to strengthen
its intellectual property position, and to continue exploring
strategic collaborations and accretive acquisition opportunities.
Microbot currently holds an intellectual property portfolio of 47
patents issued/allowed and 29 patent applications pending
worldwide. It also has registered trademarks in Israel, Europe and
the US relating to its LIBERTY platform, and also has trademarks
relating to its proprietary Microbot Medical tradename and logo
registered in Israel, Europe, and the UK, and pending in the US and
China, in addition to having registered trademarks for the “One
& Done” name in Israel, allowed in Europe and pending in the
US, UK, China, and Japan.
Microbot
relies or intends to rely on intellectual property licensed or
developed, including patents, trade secrets, trademarks, technical
innovations, laws of unfair competition and various licensing
agreements, to provide its future growth, to build its competitive
position and to protect its technology. As Microbot continues to
expand its intellectual property portfolio, it is critical for
Microbot to continue to invest in filing patent applications to
protect its technology, inventions, and improvements.
Microbot
requires its employees and consultants to execute confidentiality
agreements in connection with their employment or consulting
relationships with Microbot. Microbot also requires its employees
and consultants who work on its product candidates to agree to
disclose and assign to Microbot all inventions conceived during the
term of their service, while using Microbot property, or which
relate to Microbot’s business.
Patent
applications in the United States and in foreign countries are
maintained in secrecy for a period of time after filing, which
results in a delay between the filing date of the patent
applications and the time when they are published. Patents issued
and patent applications filed relating to medical devices are
numerous, and there can be no assurance that current and potential
competitors and other third parties have not filed or in the future
will not file applications for, or have not received or in the
future will not receive, patents or obtain additional proprietary
rights relating to product candidates, products, devices or
processes used or proposed to be used by Microbot. Microbot
believes that the technologies it employs in its products and
systems do not infringe the valid claims of any third-party
patents. There can be no assurance, however, that third parties
will not seek to assert that Microbot devices and systems infringe
their patents or seek to expand their patent claims to cover
aspects of Microbot’s products and systems.
The
medical device industry in general has been characterized by
substantial litigation regarding patents and other intellectual
property rights. Any such claims, regardless of their merit, could
be time-consuming and expensive to respond to and could divert
Microbot’s technical and management personnel. Microbot may be
involved in litigation to defend against claims of infringement by
other patent holders, to enforce patents issued to Microbot, or to
protect Microbot’s trade secrets. If any relevant claims of
third-party patents are upheld as valid and enforceable in any
litigation or administrative proceeding, Microbot could be
prevented from practicing the subject matter claimed in such
patents, or would be required to obtain licenses from the patent
owners of each such patent, or to redesign Microbot’s products,
devices or processes to avoid infringement. There can be no
assurance that such licenses would be available or, if available,
would be available on terms acceptable to Microbot or that Microbot
would be successful in any attempt to redesign products or
processes to avoid infringement. Accordingly, an adverse
determination in a judicial or administrative proceeding or failure
to obtain necessary licenses, could potentially prevent Microbot
from manufacturing and selling its products.
Microbot’s
issued U.S. patents, which cover Microbot’s product candidates,
will expire between 2026 and 2040, not including any patent term
adjustments that may be available. Issued patents outside of the
United States directed to Microbot’s product candidates will expire
between 2026 and 2036.
License Agreement with the Technion
In
June 2012, Microbot entered into a license agreement with TRDF, the
technology transfer subsidiary of The Technion Institute of
Technology, pursuant to which it obtained an exclusive, worldwide,
royalty-bearing, sub-licensable license to certain patents and
inventions relating to the SCS and TipCAT technology platforms
invented by Professor Moshe Shoham, a former director of and an
advisor to the Company, and in certain circumstances other
TRDF-related persons. Pursuant to the terms of the license
agreement, in order to maintain the license with respect to each
platform, Microbot must use commercially reasonable efforts to
develop products covered by the license, including meeting certain
agreed upon development milestones. The milestones for both SCS and
TipCAT include commencing first in human clinical trials by
December 2021. Failure to meet any development milestone will give
TRDF the right to terminate the license with respect to the
technology underlying the missed milestone.
As
partial consideration for the grant of the licenses under the
agreement, Microbot issued a number of shares to TRDF equal to 3%
of its issued and outstanding shares at such time on a fully
diluted basis. Such shares were initially subject to antidilution
protections but are no longer subject to adjustment. In addition,
as partial consideration for the licenses granted, Microbot agreed
to pay TRDF royalties of between 1.5% and 3.0% of net sales of
products covered by the licenses, subject to certain reductions,
and certain percentages of amounts received by Microbot in the
event of sublicensing.
In
the case of termination of the license by Microbot without cause or
by TRDF for cause, TRDF has the right to receive a non-exclusive
license from Microbot with respect to improvements to the licensed
technologies made by Microbot. In such cases, TRDF would pay a
royalty of 10% of the income received by TRDF in connection its
sublicensing of such patent right and related intellectual
property. If the license from TRDF were to be terminated with
respect with either of the technology platforms underlying the SCS
or the TipCAT, Microbot would no longer be able to continue its
development of the related product candidate. However, Microbot
believes that its current intellectual property portfolio, and its
ongoing efforts to expand into other micro-robotic surgical
technologies, will give it the flexibility to shift its resources
towards developing and commercializing related products.
In
addition to the licensed SCS and TipCAT technologies, the LIBERTY
platform, which was invented by employees of Microbot together with
Professor Moshe Shoham of the Technion, in his capacity as a
consultant to Microbot, is co-owned by Microbot and TRDF, and a
process is being conducted for establishing the LIBERTY platform as
a “Joint Invention” in accordance with the terms of the License
Agreement. Once the Joint Invention is established, Microbot will
have to pay TRDF royalties of between 1.5% and 3.0% of net sales of
products covered by this Joint Invention.
Research
and Development
Microbot’s
research and development programs are generally pursued by
engineers and scientists employed by Microbot in its offices in
Israel on a full-time basis or as consultants, or through
partnerships with industry leaders in manufacturing and design and
researchers in academia. Microbot is also working with
subcontractors in developing specific components of its
technologies.
The
primary objectives of Microbot’s research and development efforts
are to continue to introduce incremental enhancements to the
capabilities of its candidate products and to advance the
development of proposed products.
Microbot
has obtained grants from the Israeli Innovation Authority (“IIA”)
for participation in research and development activities since 2013
through 2021. During this time, Microbot has received grant
revenues of approximately $1,500,000. In return, Microbot is
obligated to pay royalties amounting to 3%-3.5% of its future sales
up to the amount of the grant. The grant is linked to the exchange
rate of the dollar to the New Israeli Shekel and bears interest of
USD LIBOR per annum.
Under
the terms of the grants and applicable law, Microbot is restricted
from transferring any technologies, know-how, manufacturing or
manufacturing rights developed using the grant outside of Israel
without the prior approval of the Israel Innovation Authority.
Microbot has no obligation to repay the grant, if the SCS project
fails, is unsuccessful or aborted before any sales are generated.
The financial risk is assumed completely by the IIA.
Microbot
expects to continue to access government funding in the
future.
For
the fiscal year ended December 31, 2021 and 2020, respectively,
Microbot incurred research and development expenses of
approximately $6,153,000 compared to approximately
$3,396,000.
SCS
Microbot
has already made plans to develop a second version of its SCS
device that will have an embedded controller and battery, initially
to support its animal trials. This alternative design will allow
the cleaning mechanism to be automatically activated, without the
need for the patient’s involvement in the activation
process.
Microbot
has completed the development of an SCS prototype and is currently
continuing the safety testing, general proof of concept testing and
performance testing for the device, which Microbot began in
mid-2013. In May 2018, Microbot previously announced the results of
two pre-clinical studies assessing the SCS, an in-vitro study and a
small animal study. The in-vitro study, which was performed at
Wayne State University, supports the SCS’s potential as a viable
technology for preventing occlusion in shunts used to treat
hydrocephalus. The animal study designed to assess the safety
profile of the SCS, which was performed at Washington University
School of Medicine in St. Louis, met the primary goal to determine
the safety of the SCS device that aims to prevent obstruction in
CSF catheters. Since the completion of these initial studies,
Microbot conducted a follow-up study to further evaluate the safety
of the SCS. The follow-up study was also conducted by leading
hydrocephalus experts at Washington University and Wayne State
University. The study included a larger sample size compared to the
initial studies and the primary and secondary endpoints seek to
validate the safety and efficacy of the SCS that will be activated
in both in-vitro (lab) and in-vivo (animal) models. In that in-vivo
study, the major finding was that the SCS system is as safe to use
as currently marketed devices.
In
conjunction with conducting the follow-up study, Microbot also
contracted with Envigo CRS Israel, to conduct an in-vitro study
designed to evaluate the operational performance of the SCS. The
first Envigo study that was conducted in 2018 used human brain
glioblastoma cells to assess the performance of the SCS in a test
system with accelerated cell growth, accumulation, and obstruction
rates. The performance of a constantly activated (always-on) SCS to
prevent shunt occlusion in the laboratory study was compared with a
non-operating SCS after 30 days, and the results were captured with
photographs shared by Microbot in a press release issued on January
14, 2019. While significant cell growth and accumulation was seen
in the cell cultures with a non-operating SCS, the shunt openings
within the cells seeded with a constantly operating SCS remained
clear, with little to no cell attachment on the robotic brush
(ViRob) and on the opening where the robotic brush (ViRob) operates
after 30 days of cell culturing and growth. We believe this
experiment validates the operational effectiveness of the SCS to
prevent shunt occlusion and provides additional data to support the
device’s proof of concept. We believe the in-vitro laboratory study
further confirms that the SCS has the ability to operate after
cells have accumulated on the catheter holes and the robotic brush
(ViRob) and to potentially disintegrate existing occlusions formed
on the robotic brush (ViRob) and on the opening where the robotic
brush (ViRob) operates, based on the results from a third test
group in which cells were allowed to grow for four weeks and then
exposed to an activated SCS device. We believe the images captured
by Envigo and Microbot demonstrate that the cleaning mechanism of
the SCS is powerful enough to clear accumulated cells at blocked
pores, as significant improvements were observed in the degree of
shunt obstruction after only a short period of time following
activation of the SCS.
The
SCS was further validated in a broader follow-up in-vitro lab study
which commenced in July 2019 and concluded on August 14, 2019 and
clearly demonstrated the device prevented shunt occlusion under the
parameters of that study. This follow-up study was also conducted
by Envigo CRS Israel. Human brain glioblastoma cells were used in
order to assess performance of the SCS in a test system with
accelerated cell growth rate, accumulation and obstruction rates.
Specifically, the study demonstrated:
| ● |
Significant cell growth and accumulation in a non-operating SCS as well as a standard of care surgical shunt. |
|
| ● |
A significant inhibition in cell growth in daily (5-10 minutes) or weekly (up to 2 hours over the week) operating SCS with little cell attachment on the robotic brush (ViRob) and on the opening where the robotic brush (ViRob) operates. |
|
| ● |
The effectiveness of the Company’s SCS devices in preventing cells blockage as compare to standard of care surgical shunts. |
The
follow-up in vitro (lab) study at Wayne State University included a
larger sample size compared to the initial study and the primary
and secondary end points seek to validate the efficacy of the SCS
while being activated in-vitro (lab). Generally, the data from this
study did not reveal statistically significant trends indicating a
strong preference for any of the designs tested, including the SCS;
therefore, these tests as they stand are inconclusive but have
provided us with trends which Microbot may decide to further
explore.
After
submitting the existing data to the FDA, on January 27, 2021 we
announced the completion of successful discussions with the FDA,
for the SCSTM. After review of our existing pre-clinical
data, the FDA’s feedback will allow us to apply for the EFS. We
expect to continue to work with the FDA towards finalizing the
SCSTM design, and to incorporate their feedback prior to
submitting the IDE to seek authorization to begin the EFS clinical
trial. While there can be no assurance that the FDA will approve
the EFS study, the agency’s recent feedback indicates that the
agency will be receptive to allowing a first-in-human study to
proceed based on existing data. After completing the EFS, we would
then seek FDA input on the device design as finalized through the
EFS process in a subsequent IDE filing for approval of a clinical
study proposal. Consequently, the timeline for the submission of
the IDE for First-in-Human clinical trial under the EFS is expected
to commence in the first quarter of 2023.
Although
the FDA agreed that the SCS is suitable to apply for an EFS
program, we can give no assurance that the FDA will agree that an
EFS is warranted, in which case we will have to re-commence animal
trials or otherwise re-evaluate the FDA approval process, which
could delay and hinder our ability to commercialize the SCS
device.
LIBERTY
The
LIBERTY prototype system was tested at our laboratories in an
in-vitro silicone model, using off-the-shelf guidewires and
microcatheters, and showing an ability to successfully provide
linear and rotational movements of the guidewires and linear motion
of the microcatheters. We also conducted a single preliminary
animal trial with the LIBERTY prototype.
The
LIBERTY prototype is designed to control the One &
DoneTM tool; however, the One & DoneTM
tool is not currently expected to be integrated into the next
version of the LIBERTY device. Additionally, we are exploring and
evaluating additional innovative guidewire/microcatheter
technologies to be integrated and combined with the LIBERTY robotic
platform to further enhance the performance of the
system.
Since
the One & DoneTM tool was originally designed for
chronic total occlusion, we are currently working with
subcontractors and guidewire design-houses to perfect the
performance of the One & DoneTM tool to the
indication that will be selected for the LIBERTY platform. These
may include procedures in the peripheral, coronary or neurovascular
spaces.
Manufacturing
Microbot
does not have any manufacturing facilities or manufacturing
personnel. Microbot currently relies, and expects to continue to
rely, on third parties for the manufacturing of its product
candidates for preclinical and clinical testing, as well as for
commercial manufacturing if its product candidates receive
marketing approval.
Commercialization
Microbot
has not yet established a sales, marketing or product distribution
infrastructure for its product candidates, which are still in
development stages. Microbot plans to access the U.S. markets with
its initial device offerings through strategic partnerships but may
develop its own focused, specialized sales force or distribution
channels once it has several commercialized products in its
portfolio. Microbot has not yet developed a commercial strategy
outside of the United States.
Government
Regulation
General
Microbot’s
medical technology products and operations are subject to extensive
regulation in the United States and other countries. Most notably,
if Microbot seeks to sell its products in the United States, its
products will be subject to the Federal Food, Drug, and Cosmetic
Act (FDCA) as implemented and enforced by the U.S. Food and Drug
Administration (FDA). The FDA regulates the development, bench and
clinical testing, manufacturing, labeling, storage, record-keeping,
promotion, marketing, sales, distribution and post-market support
and reporting of medical devices in the United States to ensure
that medical products distributed domestically are safe and
effective for their intended uses. Regulatory policy affecting its
products can change at any time.
Advertising
and promotion of medical devices in the United States, in addition
to being regulated by the FDA, are also regulated by the Federal
Trade Commission and by state regulatory and enforcement
authorities. Recently, promotional activities for FDA-regulated
products of other companies have been the subject of enforcement
action brought under healthcare reimbursement laws and consumer
protection statutes. In addition, under the federal Lanham Act and
similar state laws, competitors and others can initiate litigation
relating to advertising claims.
Foreign
countries where Microbot wishes to sell its products may require
similar or more onerous approvals to manufacture or market its
products. Government agencies in those countries also enforce laws
and regulations that govern the development, testing,
manufacturing, labeling, advertising, marketing and distribution,
and market surveillance of medical device products. These
regulatory requirements can change rapidly with relatively short
notice.
Other
regulations Microbot encounters in the United States and in other
jurisdictions are the regulations that are common to all
businesses, such as employment legislation, implied warranty laws,
and environmental, health and safety standards, to the extent
applicable. In the future, Microbot will also encounter
industry-specific government regulations that would govern its
products, if and when they are developed for commercial
use.
U.S.
Regulation
The
FDA governs the following activities that Microbot performs, will
perform, upon the clearance or approval of its product candidates,
or that are performed on its behalf, to ensure that medical
products distributed domestically or exported internationally are
safe and effective for their intended uses:
| ● |
product design, and development; |
|
| ● |
product safety, testing, labeling and storage; |
|
| ● |
record keeping procedures; and |
|
| ● |
product marketing. |
There
are numerous FDA regulatory requirements governing the approval or
clearance and subsequent commercial marketing of Microbot’s
products. These include:
| ● |
the timely submission of product listing and establishment registration information, along with associated establishment user fees; |
|
| ● |
continued compliance with the Quality System Regulation, or QSR, which require specification developers and manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process; |
|
| ● |
labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication; |
|
| ● |
clearance or approval of product modifications that could significantly affect the safety or effectiveness of the device or that would constitute a major change in intended use; |
|
| ● |
Medical Device Reporting regulations (MDR), which require that manufacturers keep detailed records of investigations or complaints against their devices and to report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; |
|
| ● |
adequate use of the Corrective and Preventive Actions process to identify and correct or prevent significant systemic failures of products or processes or in trends which suggest same; |
|
| ● |
post-approval restrictions or conditions, including post-approval study commitments; |
|
| ● |
post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device; and |
|
| ● |
notices of correction or removal and recall regulations. |
Unless
an exemption applies, before Microbot can commercially distribute
medical devices in the United States, Microbot must obtain,
depending on the classification of the device, either prior 510(k)
clearance, 510(k) de-novo clearance or premarket approval (PMA),
from the FDA. The FDA classifies medical devices into one of three
classes based on the degree of risk associated with each medical
device and the extent of regulatory controls needed to ensure the
device’s safety and effectiveness:
| ● |
Class I devices, which are low risk and subject to only general controls (e.g., registration and listing, medical device labeling compliance, MDRs, Quality System Regulations, and prohibitions against adulteration and misbranding) and, in some cases, to the 510(k) premarket clearance requirements; |
|
| ● |
Class II devices, which are moderate risk and generally require 510(k) or 510(k) de-novo premarket clearance before they may be commercially marketed in the United States as well as general controls and potentially special controls like performance standards or specific labeling requirements; and |
|
| ● |
Class III devices, which are devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a predicate device. Class III devices generally require the submission and approval of a PMA supported by clinical trial data. |
Microbot
expects the medical products in its pipeline currently to be
classified as Class II. Class II devices are those for which
general controls alone are insufficient to provide reasonable
assurance of safety and effectiveness and there is sufficient
information to establish special controls. Special controls can
include performance standards, post-market surveillance, patient
histories and FDA guidance documents. Premarket review and
clearance by the FDA for these devices is generally accomplished
through the 510(k) or 510(k) de-novo premarket notification
process. As part of the 510(k) or 510(k) de-novo notification
process, FDA may require the following:
| ● |
Development of comprehensive product description and indications for use; |
|
| ● |
Comprehensive review of predicate devices and development of data supporting the new product’s substantial equivalence to one or more predicate devices; and |
|
| ● |
If appropriate and required, certain types of clinical trials (IDE submission and approval may be required for conducting a clinical trial in the US). |
When
clinical evidence is necessary because non-clinical or animal
testing is unavailable or inadequate to provide the information
needed to advance device development, an Early Feasibility Study
(EFS) for a limited clinical investigation of the device may be
applicable and which we are evaluating with respect to the SCS
device. If the FDA agrees to the EFS approach in general, we will
work to finalize the design of the device, to resolve any questions
from the FDA, and to incorporate the FDA’s feedback prior to
submitting the IDE to seek authorization to begin the EFS clinical
trial. After completing the EFS study, we will then seek FDA input
on the device design as finalized through the EFS process in a
subsequent IDE filing for approval of a pivotal clinical study
proposal.
Clinical
trials involve use of the medical device on human subjects under
the supervision of qualified investigators in accordance with
current Good Clinical Practices (GCPs), including the requirement
that all research subjects provide informed consent for their
participation in the clinical study. A written protocol with
predefined end points, an appropriate sample size and
pre-determined patient inclusion and exclusion criteria, is
required before initiating and conducting a clinical trial. All
clinical investigations of devices to determine safety and
effectiveness must be conducted in accordance with the FDA’s
Investigational device Exemption, or IDE, regulations that among
other things, govern investigational device labeling, prohibit
promotion of the investigational device, and specify recordkeeping,
reporting and monitoring responsibilities of study sponsors and
study investigators. If the device presents a “significant risk,”
as defined by the FDA, the agency requires the device sponsor to
submit an IDE application, which must become effective prior to
commencing human clinical trials. The IDE will automatically become
effective 30 days after receipt by the FDA, unless the FDA denies
the application or notifies the company that the investigation is
on hold and may not begin. If the FDA determines that there are
deficiencies or other concerns with an IDE that requires
modification, the FDA may permit a clinical trial to proceed under
a conditional approval. In addition, the study must be approved by,
and conducted under the oversight of, an Institutional Review Board
(IRB) for each clinical site. If the device presents a
non-significant risk to the patient, a sponsor may begin the
clinical trial after obtaining approval for the trial by one or
more IRBs without separate approval from the FDA, but it must still
follow abbreviated IDE requirements, such as monitoring the
investigation, ensuring that the investigators obtain informed
consent, and labeling and record-keeping requirements. 510(k)
clearance typically involves the following:
| ● | Assuming successful completion of all required testing, a detailed 510(k) premarket notification or 510(k) de-novo is submitted to the FDA requesting clearance to market the product. The notification includes all relevant data from pertinent preclinical and clinical trials, together with detailed information relating to the product’s manufacturing controls and proposed labeling, and other relevant documentation. |
| ● | A 510(k) clearance letter from the FDA will authorize commercial marketing of the device for one or more specific indications for use. |
| ● | After 510(k) clearance, Microbot will be required to comply with a number of post-clearance requirements, including, but not limited to, Medical Device Reporting and complaint handling, and, if applicable, reporting of corrective actions. Also, quality control and manufacturing procedures must continue to conform to QSRs. The FDA periodically inspects manufacturing facilities to assess compliance with QSRs, which impose extensive procedural, substantive, and record keeping requirements on medical device manufacturers. In addition, changes to the manufacturing process are strictly regulated, and, depending on the change, validation activities may need to be performed. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with QSRs and other types of regulatory controls. |
| ● | After a device receives 510(k) clearance from the FDA, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use or technological characteristics, requires a new 510(k) clearance or could require a PMA. The FDA requires each manufacturer to make the determination of whether a modification requires a new 510(k) notification or PMA in the first instance, but the FDA can review any such decision. If the FDA disagrees with a manufacturer’s decision not to seek a new 510(k) clearance or PMA for a particular change, the FDA may retroactively require the manufacturer to seek 510(k) clearance or PMA. The FDA can also require the manufacturer to cease U.S. marketing and/or recall the modified device until additional 510(k) clearance or PMA approval is obtained. |
| ● | The FDA and the Federal Trade Commission, or FTC, will also regulate the advertising claims of Microbot’s products to ensure that the claims Microbot makes are consistent with its regulatory clearances, that there is scientific data to substantiate the claims and that product advertising is neither false nor misleading. |
To
obtain 510(k) clearance, Microbot must submit a notification to the
FDA demonstrating that its proposed device is substantially
equivalent to a predicate device (i.e., a device that was in
commercial distribution before May 28, 1976, a device that has been
reclassified from Class III to Class I or Class II, or a
510(k)-cleared device). The FDA’s 510(k) clearance process
generally takes from three to 12 months from the date the
application is submitted but also can take significantly longer. If
the FDA determines that the device or its intended use is not
substantially equivalent to a predicate device, the device is
automatically placed into Class III, requiring the submission of a
PMA.
There
is no guarantee that the FDA will grant Microbot 510(k) clearance
for its pipeline medical device products, and failure to obtain the
necessary clearances for its products would adversely affect
Microbot’s ability to grow its business. Delays in receipt or
failure to receive the necessary clearances, or the failure to
comply with existing or future regulatory requirements, could
reduce its business prospects.
Devices
that cannot be cleared through the 510(k) process due to lack of a
predicate device but would be considered low or moderate risk may
be eligible for the 510(k) de-novo process. In 1997, the Food and
Drug Administration Modernization Act, or FDAMA added the de novo
classification pathway now codified in section 513(f)(2) of the
FD&C Act. This law established an alternate pathway to classify
new devices into Class I or II that had automatically been placed
in Class III after receiving a Not Substantially Equivalent, or
NSE, determination in response to a 510(k) submission. Through this
regulatory process, a sponsor who receives an NSE determination
may, within 30 days of receipt, request FDA to make a risk-based
classification of the device through what is called a “de novo
request.” In 2012, section 513(f)(2) of the FD&C Act was
amended by section 607 of the Food and Drug Administration Safety
and Innovation Act (FDASIA), in order to provide a second option
for de novo classification. Under this second pathway, a sponsor
who determines that there is no legally marketed device upon which
to base a determination of substantial equivalence can submit a de
novo request to FDA without first submitting a 510(k).
In
the event that Microbot receives a Not Substantially Equivalent
determination for either of its device candidates in response to a
510(k) submission, the Microbot device may still be eligible for
the 510(k) de-novo classification process.
Devices
that cannot be cleared through the 510(k) or 510(k) de-novo
classification process require the submission of a PMA. The PMA
process is much more time consuming and demanding than the 510(k)
notification process. A PMA must be supported by extensive data,
including but not limited to data obtained from preclinical and/or
clinical studies and data relating to manufacturing and labeling,
to demonstrate to the FDA’s satisfaction the safety and
effectiveness of the device. After a PMA application is submitted,
the FDA’s in-depth review of the information generally takes
between one and three years and may take significantly longer. If
the FDA does not grant 510(k) clearance to its products, there is
no guarantee that Microbot will submit a PMA or that if Microbot
does, that the FDA would grant a PMA approval of Microbot’s
products, either of which would adversely affect Microbot’s
business.
Microbot
is currently evaluating whether it is appropriate for it to seek
510(k) clearance, given the technological features of the SCS
device and the FDA’s recent announcements about enhancing the
510(k) process to further ensure safety and efficacy. However, the
Company believes that given the similarities between the SCS and
some cleared predicate devices, there is a reasonable likelihood
that a de novo application might be acceptable to the
FDA.
Foreign
Regulation
In
addition to regulations in the United States, Microbot will be
subject to a variety of foreign regulations governing clinical
trials, marketing authorization and commercial sales and
distribution of its products in foreign countries. The approval
process varies from country to country, and the time may be longer
or shorter than that required for FDA approval or clearance. The
requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursement vary greatly from country to
country.
International
sales of medical devices are subject to foreign governmental
regulations which vary substantially from country to country.
Whether or not Microbot obtains FDA approval or clearance for its
products, Microbot will be required to make new regulatory
submissions to the comparable regulatory authorities of foreign
countries before Microbot can commence clinical trials or marketing
of the product in such countries. The time required to obtain
certification or approval by a foreign country may be longer or
shorter than that required for FDA clearance or approval, and the
requirements may differ. Below are summaries of the regulatory
systems for medical devices in Europe and Israel, where Microbot
currently anticipates marketing its products. However, its products
may also be marketed in other countries that have different systems
or minimal requirements for medical devices.
Europe.
The primary regulatory body in Europe is the European Union, or
E.U., which consists of 27 member states and has a coordinated
system for the authorization of medical devices.
The
E.U. has adopted legislation, in the form of directives to be
implemented in each member state, concerning the regulation of
medical devices within the European Union. The directives include,
among others, the Medical Device Regulation, or MDR, that
establishes certain requirements with which medical devices must
comply before they can be commercialized in the European Economic
Area, or EEA (which comprises the member states of the E.U. plus
Norway, Liechtenstein and Iceland). Under the MDR, medical devices
are classified into four Classes, I, IIa, IIb, and III, with Class
I being the lowest risk and Class III being the highest
risk.
In
order to commercialize medical devices in the European Union, a CE
Mark certificate is needed. This certification verifies that a
device meets all regulatory requirements for medical devices, which
will soon change under the new Medical Devices Regulation (MDR
2017/745). The CE approval process in Europe is summarized
below:
| 1. |
To obtain CE Marking certification, comply with European Commission Regulation (EU) No. 2017/745, commonly known as the Medical Device Regulation (MDR). |
|
| 2. |
Appoint a Person Responsible for regulatory compliance. Determine classification of device – Class I (self-certified); Class I (sterile, measuring or reusable surgical instrument); Class IIa, Class IIb, or Class III. |
|
| 3. |
For all devices except Class I (self-certified), implement a Quality Management System (QMS) in accordance with the MDR. Companies usually apply the EN ISO 13485 standard to achieve compliance. The QMS must include Clinical Evaluation, Post-Market Surveillance (PMS) and Post Market Clinical Follow-up (PMCF) plans. Make arrangements with suppliers about unannounced Notified Body audits. For Class I (self-certified), implement a QMS though Notified Body intervention is not required. |
|
| 4. |
Prepare a CE Technical File or Design Dossier (Class III) providing information about the device and its intended use plus testing reports, Clinical Evaluation Report (CER), risk management file, Instruction For Use (IFU), labeling and more. Obtain a Unique Device Identifier (UDI) for the device. All devices, even legacy products in use for decades, will require clinical data. Most of these data should refer to the subject device. Clinical studies are generally required for implantable and Class III devices. Existing clinical data may be acceptable. Clinical trials in Europe must be pre-approved by a European Competent Authority. |
|
| 5. |
If the company does not have a location in Europe, appoint an Authorized Representative (EC REP) located in the EU who is qualified to handle regulatory issues. Place the EC REP name and address on device label. Obtain a Single Registration Number from the regulators. |
|
| 6. |
For all devices except Class I (self-certified), the QMS and Technical File or Design Dossier must be audited by a Notified Body, a third party accredited by European authorities to audit medical device companies and products. |
|
| 7. |
For all devices except Class I (self-certified), the company will be issued a European CE Marking Certificate for the device and an ISO 13485 certificate for the company’s facility following successful completion of the Notified Body audit. ISO 13485 certification must be renewed every year. CE Marking certificates are typically valid for a maximum of 5 years, but are typically reviewed during the annual surveillance audit. |
|
| 8. |
Prepare a Declaration of Conformity, a legally binding document prepared by the manufacturer stating that the device is in compliance with the applicable European requirements. At this time, the CE Marking may be affixed. |
|
| 9. |
Register the device and its Unique Device Identifier (UDI) in the EUDAMED database. UDI must be on label and associated with the regulatory documents. |
|
| 10. |
For Class I (self-certified), annual NB audits are not required. However, CER, Technical File, and PMS activities must be kept updated. For all other classes, the company will be audited each year by a Notified Body to ensure ongoing compliance with the MDR. Failure to pass the audit will invalidate the CE Marking certificate. The company must perform Clinical Evaluation, PMS, and PMCF. |
Microbot
intends to apply for the CE Mark for each of its medical device
products. There is no guarantee that Microbot will be granted a CE
Mark for all or any of its pipeline products and failure to obtain
the CE Mark would adversely affect its ability to grow its
business.
Israel.
Israel’s Medical Devices Law generally requires the registration of
all medical products with the Ministry of Health, or MOH, Registrar
as a precondition for production and distribution in Israel.
Special exemptions may apply under limited circumstances and for
purposes such as the provision of essential medical treatment,
research and development of the medical device, and personal use,
among others.
Registration
of medical devices requires the submission of an application to the
Ministry of Health Medical Institutions and Devices Licensing
Department, or AMAR. An application for the registration of a
medical device includes the following:
| ● |
Name and address of the manufacturer, and of the importer as applicable; |
|
| ● |
Description of the intended use of the medical device and of its medical indications; |
|
| ● |
Technical details of the medical device and of its components, and in the event that the device or the components are not new, information should be provided on the date or renovation; |
|
| ● |
Certificate attesting to the safety of the device, issued by a competent authority of one of the following countries: Australia, Canada, European Community (EC), Member States (MSs), Israel, Japan, or the United States; |
|
| ● |
Information on any risk which may be associated with the use of the device (including precautionary measures to be taken); |
|
| ● |
Instructions for use of the device in Hebrew; the MOH may allow the instructions to be in English for certain devices; |
|
| ● |
Details of the standards to which the device complies; |
|
| ● |
Description of the technical and maintenance services, including periodic checks and inspections; and |
|
| ● |
Declaration, as appropriate: of the local manufacturer/importer, and of the foreign manufacturer. |
If
the application includes a certificate issued by a competent
authority of one of the following “recognized” countries:
Australia, Canada, European Community (CE) Member States (MSs),
Japan, or the United States, the registration process is generally
expedited, but could still take 6-9 months for approval. If such
certificate is not available, the registration process will take
significantly longer and a license is rarely issued. Furthermore,
the MOH will determine what type of testing is needed. In general,
in the case of Israeli manufactured devices that are not registered
or authorized in any “recognized” country, the application requires
presentation of a risk analysis, a clinical evaluation, a summary
of the clinical trials, and expert opinions regarding the device’s
safety and effectiveness. Additional requirements may apply during
the registration period, including follow-up reviews, to improve
the quality and safety of the devices.
According
to regulations issued by Israel’s Minister of Health in June 2013,
a decision on a request to register a medical device must be
delivered by AMAR within 120 days from the date of the request,
although this rarely occurs. The current rules for the registration
of medical devices do not provide for an expedited approval
process.
Once
granted by the MOH, a license (marketing authorization) for a
medical device is valid for five years from the date of
registration of the device, except for implants with a
life-supporting function, for which the validity is for only two
years from the date of registration. Furthermore, the holder of the
license, the Israeli Registration Holder, or IRH, must do the
following to maintain its license:
| ● |
Reside and maintain a place of business in Israel and serve as the regulatory representative. |
|
| ● |
Respond to questions from AMAR concerning the registered products. |
|
| ● |
Report adverse events to AMAR. |
|
| ● |
Renew the registration on time to keep the market approval active. |
Comply
with post-marketing requirements, including reporting of adverse
and unexpected events occurring in Israel or in other countries
where the device is in use.
Getting
a device listed on Israel’s four major Sick Funds (health insurance
entities) is also necessary in order for Israeli hospitals and
health care providers to order such products.
Microbot
intends to apply for a license from the MOH for each of its medical
devices. There is no guarantee that Microbot will be granted
licenses for its pipeline products and failure to obtain such
licenses would adversely affect its ability to grow its
business.
Employees
Microbot’s
Chief Executive Officer, President and Chairman, Harel Gadot, along
with 3 full-time employees, are based in Microbot’s U.S. office
located in Hingham, Massachusetts. Additionally, Microbot currently
has 17 full-time employees based in its office located in Yokneam,
Israel. These employees oversee day-to-day operations of the
Company supporting management and leading engineering,
manufacturing, intellectual property and administration functions
of the Company. As required, Microbot also engages consultants to
provide services to the Company, including regulatory, legal and
corporate services. We are subject to labor laws and regulations
within our locations in the U.S. and Israel. These laws and
regulations principally concern matters such as pensions, paid
annual vacation, paid sick days, length of the workday and work
week, minimum wages, overtime pay, insurance for work-related
accidents, severance pay and other conditions of employment.
Microbot has no unionized employees.
Item
1A. Risk Factors
This
Annual Report on Form 10-K contains forward-looking statements that
involve risks and uncertainties. Our business, operating results,
financial performance, and share price may be materially adversely
affected by a number of factors, including but not limited to the
following risk factors, any one of which could cause actual results
to vary materially from anticipated results or from those expressed
in any forward-looking statements made by us in this Annual Report
on Form 10-K or in other reports, press releases or other
statements issued from time to time. Additional factors that may
cause such a difference are set forth elsewhere in this Annual
Report on Form 10-K. Forward-looking statements speak only as of
the date of this report. We do not undertake any obligation to
publicly update any forward-looking statements.
Risks
Relating to Microbot’s Financial Position and Need for Additional
Capital
Microbot has had no revenue and has incurred significant operating
losses since inception and is expected to continue to incur
significant operating losses for the foreseeable future. The
Company may never become profitable or, if achieved, be able to
sustain profitability.
Microbot
has incurred significant operating losses since its inception and
expects to incur significant losses for the foreseeable future as
Microbot continues its preclinical and clinical development
programs for its existing product candidates, primarily the SCS and
LIBERTY devices; its research and development of any other future
product candidates; and all other work necessary to obtain
regulatory clearances or approvals for its product candidates in
the United States and other markets. In the future, Microbot
intends to continue conducting micro-robotics research and
development; performing necessary animal and clinical testing;
working towards medical device regulatory compliance; and, if SCS,
LIBERTY or other future product candidates are approved or cleared
for commercial distribution, engaging in appropriate sales and
marketing activities that, together with anticipated general and
administrative expenses, will likely result in Microbot incurring
further significant losses for the foreseeable future.
Microbot
is a development-stage medical device company and currently
generates no revenue from product sales, and may never be able to
commercialize SCS, LIBERTY, TipCAT or other future product
candidates. Microbot does not currently have the required approvals
or clearances to market or test in humans the SCS, LIBERTY, TipCAT,
or any other future product candidates and Microbot may never
receive them. Microbot does not anticipate generating significant
revenues until it can successfully develop, commercialize and sell
products derived from its product pipeline, of which Microbot can
give no assurance. Even if Microbot or any of its future
development partners succeed in commercializing any of its product
candidates, Microbot may never generate revenues significant enough
to achieve profitability.
Because
of the numerous risks and uncertainties associated with its product
development pipeline and strategy, Microbot cannot accurately
predict when it will achieve profitability, if ever. Failure to
become and remain profitable would depress the value of the Company
and could impair its ability to raise capital, which may force the
Company to curtail or discontinue its research and development
programs and/or day-to-day operations. Furthermore, there can be no
assurance that profitability, if achieved, can be sustained on an
ongoing basis.
Microbot has a limited operating history, which may make it
difficult to evaluate the prospects for the Company’s future
viability.
Microbot
has a limited operating history upon which an evaluation of its
business plan or performance and prospects can be made. The
business and prospects of Microbot must be considered in the light
of the potential problems, delays, uncertainties and complications
that may be encountered in connection with a newly established
business. The risks include, but are not limited to, the
possibility that Microbot will not be able to develop functional
and scalable products, or that although functional and scalable,
its products will not be economical to market; that its competitors
hold proprietary rights that may preclude Microbot from marketing
such products; that its competitors market a superior or equivalent
product; that Microbot is not able to upgrade and enhance its
technologies and products to accommodate new features and expanded
service offerings; or the failure to receive necessary regulatory
clearances or approvals for its products. To successfully introduce
and market its products at a profit, Microbot must establish brand
name recognition and competitive advantages for its products. There
are no assurances that Microbot can successfully address these
challenges. If it is unsuccessful, Microbot and its business,
financial condition and operating results could be materially and
adversely affected.
Microbot’s
operations to date have been limited to organizing the company,
entering into licensing arrangements to initially obtain rights to
its technologies, developing and securing its technologies, raising
capital, developing regulatory and reimbursement strategies for its
product candidates and preparing for pre-clinical and clinical
trials of the SCS, LIBERTY and TipCAT. Microbot has not yet
demonstrated its ability to successfully complete development of
any product candidate, obtain marketing clearance or approval,
manufacture a commercial-scale product or arrange for a third party
to do so on its behalf, or conduct sales and marketing activities
necessary for successful product commercialization. Consequently,
any predictions made about Microbot’s future success or viability
may not be as accurate as they could be if Microbot had a longer
operating history.
Microbot may need additional funding. If Microbot is unable to
raise capital when needed, it could be forced to delay, reduce or
eliminate its product development programs or commercialization
efforts.
To
date, Microbot has funded its operations primarily through
offerings of debt and equity securities, grants and loans. Microbot
does not know when, or if, it will generate any revenue, but does
not expect to generate significant revenue unless and until it
obtains regulatory clearance or approval of and commercializes one
of its current or future product candidates. It is anticipated that
the Company will continue to incur losses for the foreseeable
future, and that losses will increase as it continues the
development of, and seeks regulatory review of, its product
candidates, and begins to commercialize any approved or cleared
products following a successful regulatory review.
Microbot
expects the research and development expenses of the Company to
increase substantially in future periods as it conducts
pre-clinical studies in large animals and potentially clinical
trials for its product candidates, and especially if it initiates
additional research programs for future product candidates,
including LIBERTY. In addition, if the Company obtains marketing
clearance or approval for any of its product candidates, it expects
to incur significant commercialization expenses related to product
manufacturing, marketing and sales. Microbot may also require
additional funds for operations if it loses its current lawsuit
with Empery and Hudson Bay, discussed in great detail elsewhere in
this Annual Report on Form 10-K. Furthermore, Microbot incurs
substantial costs associated with operating as a public company in
the United States. Accordingly, the Company may need to obtain
substantial additional funding in connection with its continuing
operations through its projected profitability, of which it can
give no assurance of success. If the Company is unable to raise
capital when needed or on attractive terms, it could be forced to
delay, reduce or eliminate its research and development programs or
any future commercialization efforts.
The
Company intends to continue to opportunistically strengthen its
balance sheet by raising additional funds through equity offerings,
including possibly through its existing At-the-Market offering, or
otherwise in order to meet expected future liquidity needs,
including the introduction of the SCS device into the hydrocephalus
and NPH market, and the introduction of LIBERTY. The Company’s
future capital requirements, generally, will depend on many
factors, including:
| ● |
the timing and outcomes of the product candidates’ regulatory reviews, subsequent approvals or clearances, or other regulatory actions; |
|
| ● |
the final outcome of the Company’s existing lawsuit with Empery and Hudson Bay; |
|
| ● |
the costs, design, duration and any potential delays of the clinical trials that could be conducted at the FDA’s request using Microbot’s product candidates; |
|
| ● |
the costs of acquiring, licensing or investing in new and existing businesses, product candidates and technologies; |
|
| ● |
the costs to maintain, expand and defend the scope of Microbot’s intellectual property portfolio; |
|
| ● |
the costs to secure or establish sales, marketing and commercial manufacturing capabilities or arrangements with third parties regarding same; |
|
| ● |
the Company’s need and ability to hire additional management and scientific and medical personnel; and |
|
| ● |
the costs to operate as a public company in the United States. |
An
epidemic of the coronavirus disease is ongoing and may result in
significant disruptions to our clinical trials or other business
operations, which could have a material adverse effect on our
business.
An
epidemic of the coronavirus disease is ongoing throughout the
world. Although we have not yet commenced clinical trials, in the
event the pandemic is continuing when we are prepared to commence
such trials, the coronavirus disease may cause significant delays
and disruptions to our clinical trials and our interactions with
the FDA. If the patients involved with any such clinical trials
become infected with the coronavirus disease, we may have more AEs
and deaths in our clinical trials as a result. We may also face
difficulties enrolling patients in our clinical trials if the
patient populations that are eligible for our clinical trials are
impacted by the coronavirus disease. Additionally, if our clinical
trial patients are unable to travel to our clinical trial sites as
a result of quarantines or other restrictions resulting from the
coronavirus disease, we may experience higher drop-out rates or
delays in our clinical trials, and some patients may not be able to
comply with clinical trial protocols if quarantines impede patient
movement or interrupt healthcare services, which could impact our
ability to determine the efficacy or safety of our SCS or LIBERTY
device. Site initiation and patient enrollment may also be delayed
due to prioritization of hospital resources toward the coronavirus
disease outbreak.
Additionally,
travel restrictions and expanded screenings have been implemented
worldwide in an effort to contain the coronavirus disease. As such,
we and our contract research organizations may be unable to visit
our trial sites and monitor the data from our trials on timely
basis. Our employees may also face travel restrictions, which would
impact our business. Furthermore, some of our manufacturers and
suppliers are in Europe and may be impacted by port closures and
other restrictions resulting from the coronavirus outbreak, which
may disrupt our supply chain or limit our ability to obtain
sufficient materials for our products.
The
ultimate impact of the coronavirus disease outbreak or a similar
health epidemic is highly uncertain and subject to change, and we
cannot presently predict the scope and severity of any further
potential business shutdowns or disruptions, but if we or any of
the third parties with whom we engage, including the suppliers,
clinical trial sites, contract research organizations, regulators,
including the FDA health care providers and other third parties
with whom we conduct business, were to experience shutdowns or
other business disruptions, our ability to conduct our business and
operations could be materially and negatively impacted, which could
prevent or delay us from obtaining approval for our SCS and LIBERTY
devices.
Risks
Relating to the Development and Commercialization of Microbot’s
Product Candidates
Unsuccessful animal studies, clinical trials or procedures relating
to product candidates under development could have a material
adverse effect on Microbot’s prospects.
The
regulatory approval process for new products and new indications
for existing products requires extensive data and procedures,
including the development of regulatory and quality standards and,
potentially, certain clinical studies. Unfavorable or inconsistent
data from current or future clinical trials or other studies
conducted by Microbot or third parties, or perceptions regarding
such data, could adversely affect Microbot’s ability to obtain
necessary device clearance or approval and the market’s view of
Microbot’s future prospects. Specifically, the interim data of our
animal trial with respect to the SCS device suggests that the
animal trial results are inconclusive to assess safety. As a
result, we have submitted the existing data to the FDA as part of a
pre-submission meeting and we intend to apply for a limited
clinical investigation of the device known as an Early Feasibility
Study (EFS).
Failure
to successfully complete these studies, or any similar studies with
respect to any of our other product candidates, in a timely and
cost-effective manner could have a material adverse effect on
Microbot’s prospects with respect to the SCS device or such other
product candidates. Because animal trials, clinical trials and
other types of scientific studies are inherently uncertain, there
can be no assurance that these trials or studies will be completed
in a timely or cost-effective manner or result in a commercially
viable product. Clinical trials or studies may experience
significant setbacks even if earlier preclinical or animal studies
have shown promising results. Furthermore, preliminary results from
clinical trials may be contradicted by subsequent clinical
analysis. Results from clinical trials may also not be supported by
actual long-term studies or clinical experience. If preliminary
clinical results are later contradicted, or if initial results
cannot be supported by actual long-term studies or clinical
experience, Microbot’s business could be adversely affected.
Clinical trials also may be suspended or terminated by us, the FDA
or other regulatory authorities at any time if it is believed that
the trial participants face unacceptable health risks. The FDA may
disagree with our interpretation of the data from our clinical
trials, or may find the clinical trial design, conduct or results
inadequate to demonstrate safety and effectiveness of the product
candidate. The FDA may also require additional pre-clinical studies
or clinical trials which could further delay approval of our
product candidates.
Microbot’s business depends heavily on the success of its lead
product candidates, the SCS and LIBERTY. If Microbot is unable to
commercialize the SCS or LIBERTY, or experiences significant delays
in doing so, Microbot’s business will be materially
harmed.
As
stated above, we applied for an EFS for the SCS device and the FDA
agreed that the SCS is suitable to apply for the submission of the
IDE for the EFS program. After completing the EFS, we would then
seek FDA input on the device design as finalized through the EFS
process in a subsequent IDE filing for approval of a clinical study
proposal. Consequently, the timeline for the submission of the IDE
for First-In-Human clinical trials under the EFS is expected to
commence in the first quarter of 2023.
Generally,
after all necessary clinical and performance data supporting the
safety and effectiveness of the SCS or LIBERTY devices, or any
other product candidate, are collected, Microbot must still obtain
FDA clearance or approval to market the device and those regulatory
processes can take several months to several years to be completed.
Therefore, Microbot’s ability to generate product revenues will not
occur for at least the next few years, if at all, and will depend
heavily on the successful commercialization of SCS device and/or
the LIBERTY device, or any of our other product candidates from
time to time. The success of commercializing any of our product
candidates, include the SCS and LIBERTY devices, will depend on a
number of factors, including the following:
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our ability to obtain additional capital; |
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With respect to the SCS device, approval of the FDA to participate in an EFS program and/or successful completion of animal studies and, if necessary, additional human clinical trials (beyond the EFS trials) and the collection of sufficient data to demonstrate that the device is safe and effective for its intended use; |
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With respect to all of our product candidates, successful completion of animal studies and, if necessary, human clinical trials and the collection of sufficient data to demonstrate that the device is safe and effective for its intended use; |
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receipt of marketing approvals or clearances from the FDA and other applicable regulatory authorities; |
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establishing commercial manufacturing arrangements with one or more third parties; |
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obtaining and maintaining patent and trade secret protections; |
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protecting Microbot’s rights in its intellectual property portfolio; |
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establishing sales, marketing and distribution capabilities; |
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generating commercial sales, if and when approved, whether alone or in collaboration with other entities; |
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acceptance of our product candidates, if and when commercially launched, by the medical community, patients and third-party payors; |
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effectively competing with existing and competitive products on the market and any new competing products that may enter the market; and |
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maintaining quality and an acceptable safety profile of our products following clearance or approval. |
If
Microbot does not achieve one or more of these factors in a timely
manner or at all, it could experience significant delays or an
inability to successfully commercialize the SCS, LIBERTY or any
other product candidate, which would materially harm its
business.
Microbot’s ability to expand its technology platforms for other
uses, including endovascular neurosurgery other than for the
treatment of hydrocephalus, may be limited.
After
spending time working with experts in the field, Microbot has
decided to no longer pursue the use of TipCAT in colonoscopy and
has instead committed to focus on expanding all of its technology
platforms for use in segments of the endovascular neurosurgery
market, including traumatic brain injury, to capitalize on its
existing competencies in hydrocephalus and the market’s needs.
Microbot’s ability to expand its technology platforms for use in
the endovascular neurosurgery market will be limited by its ability
to develop and/or refine the necessary technology, obtain the
necessary regulatory approvals for their use on humans, and the
marketing of its products and otherwise obtaining market acceptance
of its product in the United States and in other
countries.
At this time, Microbot does not know whether the FDA will require
it to submit clinical data in support of its future marketing
applications for its SCS product candidate, particularly in light
of recent initiatives by the FDA to enhance and modernize its
approach to medical device safety and innovation, which creates
uncertainty for Microbot as well as the possibility of increased
product development costs and time to market.
Although
Microbot has identified a predicate device for its lead product
candidate, the SCS, which it intended to use in its 510(k)
application, it may determine that a 510(k) de novo application is
more appropriate for the SCS. If the Company determines to proceed
with the 510(k) application and the FDA agrees with the Company’s
determination, the SCS will be classified by the FDA as Class II
and eligible for marketing pursuant to FDA clearance through the
510(k) application. However, in light of recent initiatives by the
FDA relating to safety, efficacy and the inconclusive results of
the animal and laboratory trial, there is no guarantee that the FDA
will agree with the Company’s determination or that the FDA would
accept the predicate device that Microbot intends to submit in its
510(k). The FDA also may request additional data in response to a
510(k), or require Microbot to conduct further testing or compile
more data in support of its 510(k). Such additional data could
include clinical data that must be derived from human clinical
studies that are designed appropriately to address the potential
questions from the FDA regarding a proposed product’s safety or
effectiveness. It is unclear at this time whether and how various
activities recently initiated or announced by the FDA to modernize
the U.S. medical device regulatory system could affect the
marketing pathway or timeline for our product candidate, given the
timing and the undeveloped nature of some of the FDA’s new medical
device safety and innovation initiatives. One of the recent
initiatives was announced in April 2018, when the FDA Commissioner
issued a statement with the release of a Medical Device Safety
Action Plan. Among other key areas of the Medical Device Safety
Action Plan, the Commissioner stated that the FDA is “exploring
what further actions we can take to spur innovation towards
technologies that can make devices and their use safer. For
instance, our Breakthrough Device Program that helps address unmet
medical needs can be used to facilitate patient access to
innovative new devices that have important improvements to patient
safety. We’re considering developing a similar program to support
the development of safer devices that do not otherwise meet the
Breakthrough Program criteria, but are clearly intended to be safer
than currently available technologies.” This type of program may
negatively affect our existing development plan for the SCS or any
other product candidate or it may benefit Microbot, but at this
time those potential impacts from recent FDA medical device
initiatives are unknown and uncertain. Similarly, the FDA
Commissioner announced various agency goals under a Medical
Innovation Access Plan in 2017.
If
the FDA does require clinical data to be submitted as part of the
SCS marketing submission, any type of clinical study performed in
humans will require the investment of substantial expense,
professional resources and time. In order to conduct a clinical
investigation involving human subjects for the purpose of
demonstrating the safety and effectiveness of a medical device, a
company must, among other things, apply for and obtain
Institutional Review Board, or IRB, approval of the proposed
investigation. In addition, if the clinical study involves a
“significant risk” (as defined by the FDA) to human health, the
sponsor of the investigation must also submit and obtain FDA
approval of an Investigational Device Exemption, or IDE,
application. Microbot may not be able to obtain FDA and/or IRB
approval to undertake clinical trials in the United States for any
new devices Microbot intends to market in the United States in the
future. Moreover, the timing of the commencement, continuation and
completion of any future clinical trial may be subject to
significant delays attributable to various causes, including
scheduling conflicts with participating clinicians and clinical
institutions, difficulties in identifying and enrolling patients
who meet trial eligibility criteria, failure of patients to
complete the clinical trial, delay in or failure to obtain IRB
approval to conduct a clinical trial at a prospective site, and
shortages of supply in the investigational device.
Thus,
the addition of one or more mandatory clinical trials to the
development timeline for the SCS, LIBERTY or any other product
candidate would significantly increase the costs associated with
developing and commercializing the product and delay the timing of
U.S. regulatory authorization. The current uncertainty regarding
near-term medical device regulatory changes by the FDA could
further affect our development plans for the SCS, LIBERTY or any
other product candidate, depending on their nature, scope and
applicability. Microbot and its business, financial condition and
operating results could be materially and adversely affected as a
result of any such costs, delays or uncertainty.
The FDA may disagree with Microbot’s determination that the SCS is
a Class II device or that the chosen predicate device (or any
predicate device) is appropriate for a substantial equivalence
comparison to the SCS.
Although
the Company intended to submit a 501(k) application for the SCS,
the Company is now considering that the FDA may determine that the
SCS is a Class III device because there is no appropriate predicate
device for substantial equivalence comparison, which would require
Microbot to submit a De Novo classification request or an
application for premarket approval (“PMA”). Both De Novo requests
and PMA applications require applicants to prepare information and
data about device safety and efficacy in addition to the 510(k)
requirements, including a benefit-risk analysis, a discussion of
proposed general and special controls to eliminate or mitigate
device risks, and additional testing data. PMA applications almost
always require data from human clinical studies, and while De Novo
requests do not require human clinical study data, in most cases,
such data is necessary to demonstrate that the FDA can
appropriately classify the device as Class II.
Any
type of clinical study performed in humans (including the EFS) will
require the investment of substantial expense, professional
resources and time. In order to conduct a clinical investigation
involving human subjects for the purpose of demonstrating the
safety and effectiveness of a medical device, a company must, among
other things, apply for and obtain Institutional Review Board, or
IRB, approval of the proposed investigation. In addition, if the
clinical study involves a “significant risk” (as defined by the
FDA) to human health, the sponsor of the investigation must also
submit and obtain FDA approval of an Investigational Device
Exemption, or IDE, application. Microbot may not be able to obtain
FDA and/or IRB approval to undertake clinical trials in the United
States for any new devices Microbot intends to market in the United
States in the future. Moreover, the timing of the commencement,
continuation and completion of any future clinical trial may be
subject to significant delays attributable to various causes,
including scheduling conflicts with participating clinicians and
clinical institutions, difficulties in identifying and enrolling
patients who meet trial eligibility criteria, failure of patients
to complete the clinical trial, delay in or failure to obtain IRB
approval to conduct a clinical trial at a prospective site, and
shortages of supply in the investigational device. Thus, the
addition of one or more mandatory clinical trials to the
development timeline for the SCS would significantly increase the
costs associated with developing and commercializing the product
and delay the timing of U.S. regulatory authorization.
Furthermore,
if Microbot is required to submit a De Novo request or PMA
application instead of a 510(k), the FDA review process may take
significantly more time. While the FDA commits to reviewing 510(k)s
in 90 days, the review period for De Novo requests and PMA
applications is 150 days and 180 days, respectively. After an
initial review of our De Novo request or PMA application, the FDA
may request additional information or data which can significantly
delay an ultimate decision on our submission.
Thus,
submitting a De Novo request or PMA application for the SCS would
significantly increase the costs associated with developing and
commercializing the product and delay the timing of U.S. regulatory
authorization. Microbot and its business, financial condition and
operating results could be materially and adversely affected as a
result of any such costs or delays.
Microbot’s CardioSert technology is subject to a buy-back clause
which, if triggered, could cause us to lose rights to the
technology and delay or curtail the development of our
products.
Pursuant
to the Agreement we entered into in January 2018 to acquire the
CardioSert technology, we are required to meet certain
commercialization deadlines or CardioSert may terminate the
agreement and buy back the technology for $1.00, subject to certain
limited exceptions. The next such commercialization deadline is in
2022. At this time, we can give no assurance that we will meet the
commercialization deadlines.
Failure
to meet the applicable commercialization deadlines and any
resulting sale back of the technology to CardioSert could
materially adversely affect our ability to develop and
commercialize, or materially delay the development and
commercialization of, our planned LIBERTY device.
Microbot has no prior experience in conducting clinical trials and
will depend upon the ability of third parties, including contract
research organizations, collaborative academic groups, future
clinical trial sites and investigators, to conduct or to assist the
Company in conducting clinical trials for its product candidates,
if such trials become necessary.
As a
development-stage, pre-clinical company, Microbot has no prior
experience in designing, initiating, conducting and monitoring
human clinical trials. Microbot will depend upon its ability and/or
the ability of future collaborators, contract research
organizations, clinical trial sites and investigators to
successfully design, initiate, conduct and monitor such clinical
trials.
Failure
by Microbot or by any of these future collaborating parties to
timely and effectively initiate, conduct and monitor a future
clinical trial could significantly delay or materially impair
Microbot’s ability to complete those clinical trials and/or obtain
regulatory clearance or approval of its product candidates and,
consequently, could delay or materially impair its ability to
generate revenues from the commercialization of those
products.
If the commercial opportunity for SCS, LIBERTY and any other
commercial products that may be developed by Microbot is smaller
than Microbot anticipates, Microbot’s future revenue from SCS,
LIBERTY and such other products will be adversely affected and
Microbot’s business will suffer.
If
the size of the commercial opportunities in any of Microbot’s
target markets is smaller than it anticipates, Microbot may not be
able to achieve profitability and growth. For instance, Microbot is
developing SCS as a device for the treatment of hydrocephalus and
NPH. It is difficult to predict the penetration, future growth rate
or size of the market for Microbot’s product candidate.
The
commercial success of the SCS, LIBERTY or any other product
candidates will require broad acceptance of the devices by the
doctors and other medical professionals who specialize in the
procedures targeted by each device, a limited number of whom may be
able to influence device selection and purchasing decisions. If
Microbot’s technologies are not broadly accepted and perceived as
having significant advantages over existing medical devices, then
it will not meet its business objectives. Such perceptions are
likely to be based on a determination by medical facilities and
physicians that Microbot’s product candidates are safe and
effective, are cost-effective in comparison to existing devices,
and represent acceptable methods of treatment. Microbot cannot
assure that it will be able to establish the relationships and
arrangements with medical facilities and physicians necessary to
support the market uptake of its product candidates. In addition,
its competitors may develop new technologies for the same markets
Microbot is targeting that are more attractive to medical
facilities and physicians. If doctors and other medical
professionals do not consider Microbot product candidates to be
suitable for application in the procedures we are targeting and an
improvement over the use of existing or competing products,
Microbot’s business goals will not be realized.
Customers will be unlikely to buy the SCS, LIBERTY or any other
product candidates unless Microbot can demonstrate that they can be
produced for sale to consumers at attractive
prices.
To
date, Microbot has focused primarily on research and development of
the first generation versions of the SCS, as well as initial
development of the LIBERTY device. Consequently, Microbot has no
experience in manufacturing its product candidates, and intends to
manufacture its product candidates through third-party
manufacturers. Microbot can offer no assurance that either it or
its manufacturing partners will develop efficient, automated,
low-cost manufacturing capabilities and processes to meet the
quality, price, engineering, design and production standards or
production volumes required to successfully mass produce its
commercial products. Even if its manufacturing partners are
successful in developing such manufacturing capability and quality
processes, including the assurance of GMP-compliant device
manufacturing, there can be no assurance that Microbot can timely
meet its product commercialization schedule or the production and
delivery requirements of potential customers. A failure to develop
such manufacturing processes and capabilities could have a material
adverse effect on Microbot’s business and financial
results.
The
proposed price of Microbot’s product candidates, once approved for
sale, will be dependent on material and other manufacturing costs.
Microbot cannot offer any assurances that its manufacturing partner
will be able manufacture its product candidates at a competitive
price or that achieving cost reductions will not cause a reduction
in the performance, reliability and longevity of its product
candidates.
Microbot will rely on third party design houses for the redesign of
the CardioSert guidewire to other specific
indications.
Since
the CardioSert Guidewire was originally designed for treating
chronic total occlusions, the design will need to be modified to
treat other indications. As we do not specialize in the design of
guidewires and microcatheters, Microbot is currently working with
two leading third party design houses that specialize in this type
of design. Such designs may require several design and regulatory
iterations prolonging the product release and certification, which
could delay the commercialization of our planned LIBERTY
device.
Microbot has relied on, and intends to continue to rely on,
third-party manufacturers to produce its product
candidates.
Microbot
currently relies, and expects to rely for the foreseeable future,
on third-party manufacturers to produce and supply its product
candidates, and it expects to rely on third parties to manufacture
the commercialized products as well, should they receive the
necessary regulatory clearance or approval. Reliance on third-party
manufacturers entails risks to which Microbot would not be subject
if Microbot manufactured its product candidates or future
commercial products itself, including:
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limitations on supply availability resulting from capacity, internal operational problems or scheduling constraints of third parties; |
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potential regulatory non-compliance or other violations by the third-party manufacturer that could result in quality assurance; |
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the possible breach of manufacturing agreements by third parties because of various factors beyond Microbot’s control; and |
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the possible termination or non-renewal of manufacturing agreements by third parties for various reasons beyond Microbot’s control, at a time that is costly or inconvenient to Microbot. |
If
Microbot is not able to maintain its key manufacturing
relationships, Microbot may fail to find replacement manufacturers
or develop its own manufacturing capabilities, which could delay or
impair Microbot’s ability to obtain regulatory clearance or
approval for its product candidates and could substantially
increase its costs or deplete profit margins, if any. If Microbot
does find replacement manufacturers, Microbot may not be able to
enter into agreements with them on terms and conditions favorable
to it and there could be a substantial delay before new facilities
could be qualified and registered with the FDA and other foreign
regulatory authorities.
Additionally,
the existing design of the CardioSert device was produced in very
low quantities by the seller of the technology. Accordingly, the
scaling-up to high volume production may require significant
changes to the existing design and production methods. These
changes are currently being carried out by two leading third party
companies that specialize in design and high volume production of
guidewires and microcatheters. These design changes/modifications
may have significant negative implications in price and time to
market of the CardioSert system.
If Microbot’s product candidates are not considered to be a safe
and effective alternative to existing technologies, Microbot will
not be commercially successful.
The
SCS, LIBERTY and TipCAT rely on new technologies, and Microbot’s
success will depend on acceptance of these technologies by the
medical community as safe, clinically effective, cost effective and
a preferred device as compared to products of its competitors.
Microbot does not have long-term data regarding efficacy, safety
and clinical outcomes associated with the use of SCS, LIBERTY or
TipCAT. Any data that is generated in the future may not be
positive or may not support the product candidates’ regulatory
dossiers, which would negatively affect market acceptance and the
rate at which its product candidates are adopted. Equally important
will be physicians’ perceptions of the safety of Microbot’s product
candidates because Microbot’s technologies are relatively new. If,
over the long term, Microbot’s product candidates do not meet
surgeons’ expectations as to safety, efficacy and ease of use, they
may not become widely adopted.
Market
acceptance of Microbot’s product candidates will also be affected
by other factors, including Microbot’s ability to convince key
opinion leaders to provide recommendations regarding its product
candidates; convince distributors that its technologies are
attractive alternatives to existing and competing technologies;
supply and service sufficient quantities of products directly or
through marketing alliances; and price products competitively in
light of the current macroeconomic environment, which is becoming
increasingly price sensitive.
Microbot may be subject to penalties and may be precluded from
marketing its product candidates if Microbot fails to comply with
extensive governmental regulations.
Microbot
believes that its medical device product candidates will be
categorized as Class II devices, which typically require a 510(k)
or 510(k) de-novo premarket submission to the FDA. However, the FDA
has not made any determination about whether Microbot’s medical
product candidates are Class II medical devices and may disagree
with that classification. If the FDA determines that Microbot’s
product candidates should be reclassified as Class III medical
devices, Microbot could be precluded from marketing the devices for
clinical use within the United States for months, years or longer,
depending on the specifics of the change in classification.
Reclassification of any of Microbot’s product candidates as Class
III medical devices could significantly increase Microbot’s
regulatory costs, including the timing and expense associated with
required clinical trials and other costs.
The
FDA and non-U.S. regulatory authorities require that Microbot
product candidates be manufactured according to rigorous standards.
These regulatory requirements significantly increase Microbot’s
production costs, which may prevent Microbot from offering products
within the price range and in quantities necessary to meet market
demands. If Microbot or one of its third-party manufacturers
changes an approved manufacturing process, the FDA may need to
review the process before it may be used. Failure to comply with
applicable pre-market and post-market regulatory requirements could
subject Microbot to enforcement actions, including warning letters,
fines, injunctions and civil penalties, recall or seizure of its
products, operating restrictions, partial suspension or total
shutdown of its production, and criminal prosecution.
If Microbot is not able to both obtain and maintain adequate levels
of third-party reimbursement for procedures involving its product
candidates after they are approved for marketing and launched
commercially, it would have a material adverse effect on Microbot’s
business.
Healthcare
providers and related facilities are generally reimbursed for their
services through payment systems managed by various governmental
agencies worldwide, private insurance companies, and managed care
organizations. The manner and level of reimbursement in any given
case may depend on the site of care, the procedure(s) performed,
the final patient diagnosis, the device(s) utilized, available
budget, or a combination of these factors, and coverage and payment
levels are determined at each payor’s discretion. The coverage
policies and reimbursement levels of these third-party payors may
impact the decisions of healthcare providers and facilities
regarding which medical products they purchase and the prices they
are willing to pay for those products. Microbot cannot assure you
that its sales will not be impeded and its business harmed if
third-party payors fail to provide reimbursement for Microbot
products that healthcare providers view as adequate.
In
the United States, Microbot expects that its product candidates,
once approved, will be purchased primarily by medical institutions,
which then bill various third-party payors, such as the Centers for
Medicare & Medicaid Services, or CMS, which administers the
Medicare program through Medicare Administrative Contractors, and
other government health care programs and private insurance plans,
for the healthcare products and services provided to their
patients. The process involved in applying for coverage and
incremental reimbursement from CMS is lengthy and expensive.
Moreover, many private payors look to CMS in setting their
reimbursement policies and amounts. If CMS or other agencies limit
coverage for procedures utilizing Microbot’s products or decrease
or limit reimbursement payments for doctors and hospitals utilizing
Microbot’s products, this may affect coverage and reimbursement
determinations by many private payors.
If a
procedure involving a medical device is not reimbursed separately
by a government or private insurer, then a medical institution
would have to absorb the cost of Microbot’s products as part of the
cost of the procedure in which the products are used. At this time,
Microbot does not know the extent to which medical institutions
would consider insurers’ payment levels adequate to cover the cost
of its products. Failure by hospitals and surgeons to receive an
amount that they consider to be adequate reimbursement for
procedures in which Microbot products are used could deter them
from purchasing Microbot products and limit sales growth for those
products.
Microbot
has no control over payor decision-making with respect to coverage
and payment levels for its medical device product candidates, once
they are approved. Additionally, Microbot expects many payors to
continue to explore cost-containment strategies (e.g., comparative
and cost-effectiveness analyses, so-called “pay-for-performance”
programs implemented by various public government health care
programs and private third-party payors, and expansion of payment
bundling initiatives, and other such methods that shift medical
cost risk to providers) that may potentially impact coverage and/or
payment levels for Microbot’s current product candidates or
products Microbot develops in the future.
As
Microbot’s product offerings are used across diverse healthcare
settings, they will be affected to varying degrees by the different
payment systems.
Clinical outcome studies for the SCS and LIBERTY may not provide
sufficient data to make such product candidates the standard of
care.
Microbot’s
business plan with respect to the SCS and LIBERTY relies on the
broad adoption by surgeons of the products for their respective
planned applications. For instance, although Microbot believes the
occurrence of shunt occlusion complications is well known among
physicians practicing in the relevant medical fields, SCS may be
adopted for replacement shunt surgeries only. Neurosurgeons may
adopt SCS for primary shunt placement procedures only upon
additional clinical studies with longer follow up periods, if at
all. It may also be necessary to provide outcome studies on the
preventative capabilities of the SCS in order to convince the
medical community of its safety and efficacy.
Clinical
studies may not show an advantage in SCS or LIBERTY based
procedures in a timely manner, or at all, and outcome studies have
not been designed at this time, and may be too large and too costly
for Microbot to conduct. Both situations could prevent broad
adoption of the SCS and LIBERTY and materially impact Microbot’s
business.
Microbot products may in the future be subject to mandatory product
recalls that could harm its reputation, business and financial
results.
The
FDA and similar foreign governmental authorities have the authority
to require the recall of commercialized products in the event of
material deficiencies or defects in design or manufacture that
could pose a risk of injury to patients. In the case of the FDA,
the authority to require a recall must be based on an FDA finding
that there is a reasonable probability that the device would cause
serious injury or death, although in most cases this mandatory
recall authority is not used because manufacturers typically
initiate a voluntary recall when a device violation is discovered.
In addition, foreign governmental bodies have the authority to
require the recall of Microbot products in the event of material
deficiencies or defects in design or manufacture. Manufacturers
may, under their own initiative, recall a product if any material
deficiency in a device is found. A government-mandated or voluntary
recall by Microbot or one of its distributors could occur as a
result of component failures, manufacturing errors, design or
labeling defects or other deficiencies and issues. Recalls of any
Microbot products would divert managerial and financial resources
and have an adverse effect on Microbot’s financial condition and
results of operations, and any future recall announcements could
harm Microbot’s reputation with customers and negatively affect its
sales. In addition, the FDA could take enforcement action,
including any of the following sanctions for failing to timely
report a recall to the FDA:
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untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; |
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detention or seizure of Microbot products; |
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operating restrictions or partial suspension or total shutdown of production; |
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refusing or delaying requests for 510(k) clearance or premarket approval of new products or modified products; |
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withdrawing 510(k) clearances or other types of regulatory authorizations -that have already been granted; |
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refusing to grant export approval for Microbot products; or |
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criminal prosecution. |
If Microbot’s future commercialized products cause or contribute to
a death or a serious injury, Microbot will be subject to Medical
Device Reporting regulations, which can result in voluntary
corrective actions or agency enforcement
actions.
Under
FDA regulations, Microbot will be required to report to the FDA any
incident in which a marketed medical device product may have caused
or contributed to a death or serious injury or in which a medical
device malfunctioned and, if the malfunction were to recur, would
likely cause or contribute to death or serious injury. In addition,
all manufacturers placing medical devices in European Union markets
are legally bound to report any serious or potentially serious
incidents involving devices they produce or sell to the relevant
authority in whose jurisdiction the incident occurred.
Microbot
anticipates that in the future it is likely that we may experience
events that would require reporting to the FDA pursuant to the
Medical Device Reporting (MDR) regulations. Any adverse event
involving a Microbot product could result in future voluntary
corrective actions, such as product actions or customer
notifications, or agency actions, such as inspection, mandatory
recall or other enforcement action. Any corrective action, whether
voluntary or involuntary, as well as defending Microbot in a
lawsuit, will require the dedication of our time and capital,
distract management from operating our business, and may harm our
reputation and financial results.
Microbot could be exposed to significant liability claims if
Microbot is unable to obtain insurance at acceptable costs and
adequate levels or otherwise protect itself against potential
product liability claims.
The
testing, manufacture, marketing and sale of medical devices entail
the inherent risk of liability claims or product recalls. Product
liability insurance is expensive and may not be available on
acceptable terms, if at all. A successful product liability claim
or product recall could inhibit or prevent the successful
commercialization of Microbot’s products, cause a significant
financial burden on Microbot, or both, which in any case could have
a material adverse effect on Microbot’s business and financial
condition.
The results of Microbot’s research and development efforts are
uncertain and there can be no assurance of the commercial success
of Microbot’s product candidates.
Microbot
believe that its success will depend in part on its ability to
expand its product offerings and continue to improve its existing
product candidates in response to changing technologies, customer
demands and competitive pressures. As such, Microbot expects to
continue dedicating significant resources in research and
development. The product candidates and services being developed by
Microbot may not be technologically successful. In addition, the
length of Microbot’s product candidates and service development
cycle may be greater than Microbot originally expected.
If Microbot fails to retain certain of its key personnel and
attract and retain additional qualified personnel, Microbot might
not be able to pursue its growth strategy
effectively.
Microbot
is dependent on its senior management, in particular Harel Gadot,
Microbot’s Chairman, President and Chief Executive Officer.
Although Microbot believes that its relationship with members of
its senior management is positive, there can be no assurance that
the services of any of these individuals will continue to be
available to Microbot in the future. Microbot’s future success will
depend in part on its ability to retain its management and
scientific teams, to identify, hire and retain additional qualified
personnel with expertise in research and development and sales and
marketing, and to effectively provide for the succession of senior
management, when necessary. Competition for qualified personnel in
the medical device industry is intense and finding and retaining
qualified personnel with experience in the industry is very
difficult. Microbot believes that there are only a limited number
of individuals with the requisite skills to serve in key positions
at Microbot, particularly in Israel, and it competes for key
personnel with other medical equipment and technology companies, as
well as research institutions.
Microbot
does not carry, and does not intend to carry, any key man life
insurance policies on any of its existing executive
officers.
Risks
Relating to International Business
If Microbot fails to obtain regulatory clearances in other
countries for its product candidates under development, Microbot
will not be able to commercialize these product candidates in those
countries.
In
order for Microbot to market its product candidates in countries
other than the United States, it must comply with the safety and
quality regulations in such countries.
In
Europe, these regulations, including the requirements for
approvals, clearance or grant of Conformité Européenne, or CE,
Certificates of Conformity and the time required for regulatory
review, vary from country to country. Failure to obtain regulatory
approval, clearance or CE Certificates of Conformity (or
equivalent) in any foreign country in which Microbot plans to
market its product candidates may harm its ability to generate
revenue and harm its business. Approval and CE marking procedures
vary among countries and can involve additional product testing and
additional administrative review periods. The time required to
obtain approval or CE Certificate of Conformity in other countries
might differ from that required to obtain FDA clearance. The
regulatory approval or CE marking process in other countries may
include all of the risks detailed above regarding FDA clearance in
the United States. Regulatory approval or the CE marking of a
product candidate in one country does not ensure regulatory
approval in another, but a failure or delay in obtaining regulatory
approval or a CE Certificate of Conformity in one country may
negatively impact the regulatory process in others. Failure to
obtain regulatory approval or a CE Certificate of Conformity in
other countries or any delay or setback in obtaining such approval
could have the same adverse effects described above regarding FDA
clearance in the United States.
Microbot
cannot be certain that it will be successful in complying with the
requirements of the CE Certificate of Conformity and receiving a CE
Mark for its product candidates or in continuing to meet the
requirements of the Medical Devices Directive in the European
Economic Area (EEA).
Israel’s
Medical Devices Law generally requires the registration of all
medical products with the Ministry of Health, or MOH, Registrar
through the submission of an application to the Ministry of Health
Medical Institutions and Devices Licensing Department, or AMAR. If
the application includes a certificate issued by a competent
authority of a “recognized” country, which includes Australia,
Canada, the European Community Member States, Japan or the United
States, the registration process is expedited, but is generally
still expected to take 6 to 9 months for approval. If certification
from a recognized country is not available, the registration
process takes significantly longer and a license is rarely issued
under such circumstances, as the MOH may require the presentation
of significant additional clinical data. Once granted, a license
(marketing authorization) for a medical device is valid for five
years from the date of registration of the device, except for
implants with a life-supporting function, for which the validity is
for only two years from the date of registration. Furthermore, the
holder of the license must meet several additional requirements to
maintain the license. Microbot cannot be certain that it will be
successful in applying for a license from the MOH for its product
candidates.
Risks
Relating to Microbot’s Intellectual Property
Microbot’s right to develop and commercialize the SCS and TipCAT
product candidates are subject to the terms and condition of a
license granted to Microbot by Technion Research and Development
Foundation Ltd. and termination of the license with respect to one
or both of the technology platforms underlying the product
candidates would result in Microbot ceasing its development efforts
for the applicable product candidate(s).
Microbot
entered into a license agreement with Technion Research and
Development Foundation Ltd., or TRDF, in 2012 pursuant to which
Microbot obtained an exclusive, worldwide, royalty-bearing,
sub-licensable license to certain patents and inventions relating
to the SCS and TipCAT technology platforms. Pursuant to the terms
of the license agreement, in order to maintain the license with
respect to each platform, Microbot must use commercially reasonable
efforts to develop products covered by the license, including
meeting certain agreed upon development milestones. TRDF has the
option to terminate a license granted with respect a particular
technology in the event Microbot fails to meet a development
milestone associated with such technology. Therefore, the failure
to meet development milestones may lead to a complete termination
of the applicable license agreement and result in Microbot ceasing
its development efforts for the applicable product candidate. The
milestones for both SCS and TipCAT include commencing first in
human clinical trials by December 2021. Failure to meet any
development milestone will give TRDF the right to terminate the
license with respect to the technology underlying the missed
milestone. TRDF has previously demonstrated flexibility with
respect to amending the terms of the license to extend the
milestone dates, although we can give no assurance at this time
that TRDF will continue to be so flexible with respect to amending
the terms of the license.
Under
the license agreement, Microbot is also subject to various other
obligations, including obligations with respect to payment upon the
achievement of certain milestones and royalties on product sales.
TRDF may terminate the license agreement under certain
circumstances, including material breaches by Microbot or under
certain bankruptcy or insolvency events. In the case of termination
of the license by Microbot without cause or by TRDF for cause, TRDF
has the right to receive a non-exclusive license from Microbot with
respect to improvements to the licensed technologies made by
Microbot.
If
TRDF were to terminate the license agreement or if Microbot was to
otherwise lose the ability to exploit the licensed patents,
Microbot’s competitive advantage could be reduced or terminated,
and Microbot will likely not be able to find a source to replace
the licensed technology.
Additionally,
if there is any future dispute between Microbot and TRDF regarding
the respective parties’ rights under the license agreement,
Microbot’s ability to develop and commercialize the SCS and TipCAT
may be materially harmed.
Microbot may not meet its product candidates’ development and
commercialization objectives in a timely manner or at
all.
Microbot
has established internal goals, based upon expectations with
respect to its technologies, which Microbot has used to assess its
progress toward developing its product candidates. These goals
relate to technology and design improvements as well as to dates
for achieving specific development results. If the product
candidates exhibit technical defects or are unable to meet cost or
performance goals, Microbot’s commercialization schedule could be
delayed and potential purchasers of its initial commercialized
products may decline to purchase such products or may opt to pursue
alternative products, which would materially harm its
business.
Intellectual property litigation and infringement claims could
cause Microbot to incur significant expenses or prevent Microbot
from selling certain of its product candidates.
The
medical device industry is characterized by extensive intellectual
property litigation. From time to time, Microbot might be the
subject of claims by third parties of potential infringement or
misappropriation. Regardless of outcome, such claims are expensive
to defend and divert the time and effort of Microbot’s management
and operating personnel from other business issues. A successful
claim or claims of patent or other intellectual property
infringement against Microbot could result in its payment of
significant monetary damages and/or royalty payments or negatively
impact its ability to sell current or future products in the
affected category and could have a material adverse effect on its
business, cash flows, financial condition or results of
operations.
If Microbot or TRDF are unable to protect the patents or other
proprietary rights relating to Microbot’s product candidates, or if
Microbot infringes on the patents or other proprietary rights of
others, Microbot’s competitiveness and business prospects may be
materially damaged.
Microbot’s
success depends on its ability to protect its intellectual property
(including its licensed intellectual property) and its proprietary
technologies. Microbot’s commercial success depends in part on its
ability to obtain and maintain patent protection and trade secret
protection for its product candidates, proprietary technologies,
and their uses, as well as its ability to operate without
infringing upon the proprietary rights of others.
Microbot
currently holds, through licenses or otherwise, an intellectual
property portfolio that includes U.S. and international patents and
pending patents, and other patents under development. Microbot
intends to continue to seek legal protection, primarily through
patents, including the TRDF licensed patents, for its proprietary
technology. Seeking patent protection is a lengthy and costly
process, and there can be no assurance that patents will be issued
from any pending applications, or that any claims allowed from
existing or pending patents will be sufficiently broad or strong to
protect its proprietary technology. There is also no guarantee that
any patents Microbot holds, through licenses or otherwise, will not
be challenged, invalidated or circumvented, or that the patent
rights granted will provide competitive advantages to Microbot.
Microbot’s competitors have developed and may continue to develop
and obtain patents for technologies that are similar or superior to
Microbot’s technologies. In addition, the laws of foreign
jurisdictions in which Microbot develops, manufactures or sells its
product candidates may not protect Microbot’s intellectual property
rights to the same extent as do the laws of the United
States.
Adverse
outcomes in current or future legal disputes regarding patent and
other intellectual property rights could result in the loss of
Microbot’s intellectual property rights, subject Microbot to
significant liabilities to third parties, require Microbot to seek
licenses from third parties on terms that may not be reasonable or
favorable to Microbot, prevent Microbot from manufacturing,
importing or selling its product candidates, or compel Microbot to
redesign its product candidates to avoid infringing third parties’
intellectual property. As a result, Microbot may be required to
incur substantial costs to prosecute, enforce or defend its
intellectual property rights if they are challenged. Any of these
circumstances could have a material adverse effect on Microbot’s
business, financial condition and resources or results of
operations.
Microbot
has the first right, but not the obligation, to control the
prosecution, maintenance or enforcement of the licensed patents
from TRDF. However, there may be situations in which Microbot will
not have control over the prosecution, maintenance or enforcement
of the patents that Microbot licenses, or may not have sufficient
ability to consult and input into the patent prosecution and
maintenance process with respect to such patents. If Microbot does
not control the patent prosecution and maintenance process with
respect to the TRDF licensed patents, TRDF may elect to do so but
may fail to take the steps that are necessary or desirable in order
to obtain, maintain and enforce the licensed patents.
Microbot’s
ability to develop intellectual property depends in large part on
hiring, retaining and motivating highly qualified design and
engineering staff and consultants with the knowledge and technical
competence to advance its technology and productivity goals. To
protect Microbot’s trade secrets and proprietary information,
Microbot has entered into confidentiality agreements with its
employees, as well as with consultants and other parties. If these
agreements prove inadequate or are breached, Microbot’s remedies
may not be sufficient to cover its losses.
Dependence on patent and other proprietary rights and failing to
protect such rights or to be successful in litigation related to
such rights may result in Microbot’s payment of significant
monetary damages or impact offerings in its product
portfolios.
Microbot’s
long-term success largely depends on its ability to market
technologically competitive product candidates. If Microbot fails
to obtain or maintain adequate intellectual property protection, it
may not be able to prevent third parties from using its proprietary
technologies or may lose access to technologies critical to our
product candidates. Also, Microbot currently pending or future
patent applications may not result in issued patents, and issued
patents are subject to claims concerning priority, scope and other
issues.
Furthermore,
Microbot has not filed applications for all of our patents
internationally and it may not be able to prevent third parties
from using its proprietary technologies or may lose access to
technologies critical to its product candidates in other
countries.
Risks
Relating to Operations in Israel
Microbot has facilities located in Israel, and therefore, political
conditions in Israel may affect Microbot’s operations and
results.
Microbot
has facilities located in Israel. In addition, one of its seven
directors, its Chief Technology Officer, Chief Medical Officer and
its Chief Financial Officer, as well as substantially all of its
research and development team and non-management employees, are
residents of Israel. Accordingly, political, economic and military
conditions in Israel will directly or indirectly affect Microbot’s
operations and results. Since the establishment of the State of
Israel, a number of armed conflicts have taken place between Israel
and its Arab neighbors. An ongoing state of hostility, varying in
degree and intensity has led to security and economic problems for
Israel. For a number of years there have been continuing
hostilities between Israel and the Palestinians. This includes
hostilities with the Islamic movement Hamas in the Gaza Strip,
which have adversely affected the peace process and at times
resulted in armed conflicts. Such hostilities have negatively
influenced Israel’s economy as well as impaired Israel’s
relationships with several other countries. Israel also faces
threats from Hezbollah militants in Lebanon, from ISIS and rebel
forces in Syria, from the government of Iran and other potential
threats from additional countries in the region. Moreover, some of
Israel’s neighboring countries have recently undergone or are
undergoing significant political changes. These political, economic
and military conditions in Israel could have a material adverse
effect on Microbot’s business, financial condition, results of
operations and future growth.
Political relations could limit Microbot’s ability to sell or buy
internationally.
Microbot
could be adversely affected by the interruption or reduction of
trade between Israel and its trading partners. Some countries,
companies and organizations continue to participate in a boycott of
Israeli firms and others doing business with Israel, with Israeli
companies or with Israeli-owned companies operating in other
countries. Foreign government defense export policies towards
Israel could also make it more difficult for us to obtain the
export authorizations necessary for Microbot’s activities. Also,
over the past several years there have been calls in the United
States, Europe and elsewhere to reduce trade with Israel. There can
be no assurance that restrictive laws, policies or practices
directed towards Israel or Israeli businesses will not have an
adverse impact on Microbot’s business.
Israel’s economy may become unstable.
From
time to time, Israel’s economy may experience inflation or
deflation, low foreign exchange reserves, fluctuations in world
commodity prices, military conflicts and civil unrest. For these
and other reasons, the government of Israel has intervened in the
economy employing fiscal and monetary policies, import duties,
foreign currency restrictions, controls of wages, prices and
foreign currency exchange rates and regulations regarding the
lending limits of Israeli banks to companies considered to be in an
affiliated group. The Israeli government has periodically changed
its policies in these areas. Reoccurrence of previous destabilizing
factors could make it more difficult for Microbot to operate its
business and could adversely affect its business.
Exchange rate fluctuations between the U.S. dollar and the NIS
currencies may negatively affect Microbot’s operating
costs.
A
significant portion of Microbot’s expenses are paid in New Israeli
Shekels, or NIS, but its financial statements are denominated in
U.S. dollars. As a result, Microbot is exposed to the risks that
the NIS may appreciate relative to the U.S. dollar, or the NIS
instead devalues relative to the U.S. dollar, and the inflation
rate in Israel may exceed such rate of devaluation of the NIS, or
that the timing of such devaluation may lag behind inflation in
Israel. In any such event, the U.S. dollar cost of Microbot’s
operations in Israel would increase and Microbot’s U.S.
dollar-denominated results of operations would be adversely
affected. Microbot cannot predict any future trends in the rate of
inflation in Israel or the rate of devaluation (if any) of the NIS
against the U.S. dollar.
Microbot’s
primary expenses paid in NIS that are not linked to the U.S. dollar
are employee expenses in Israel and lease payments on its Israeli
facility. If Microbot is unsuccessful in hedging against its
position in NIS, a change in the value of the NIS compared to the
U.S. dollar could increase Microbot’s research and development
expenses, labor costs and general and administrative expenses, and
as a result, have a negative impact on Microbot’s
profits.
Funding and other benefits provided by Israeli government programs
may be terminated or reduced in the future and the terms of such
funding may have a significant impact on future corporate
decisions.
Microbot
participates in programs under the auspices of the Israeli
Innovation Authority, for which it receives funding for the
development of its technologies and product candidates. If Microbot
fails to comply with the conditions applicable to this program, it
may be required to pay additional penalties or make refunds and may
be denied future benefits. From time to time, the government of
Israel has discussed reducing or eliminating the benefits available
under this program, and therefore these benefits may not be
available in the future at their current levels or at
all.
Microbot’s
research and development efforts from inception until now have been
financed in part through such Israeli Innovation Authority royalty
bearing grants in an aggregate amount of approximately $1,500,000
through December 31, 2021. With respect to such grants Microbot is
committed to pay royalties at a rate of between 3% to 3.5% on sales
proceeds up to the total amount of grants received, linked to the
dollar, plus interest at an annual rate of USD LIBOR. In addition,
as a recipient of Israeli Innovation Authority grants, Microbot
must comply with the requirements of the Israeli Encouragement of
Industrial Research and Development Law, 1984, or the R&D Law,
and related regulations. Under the terms of the grants and the
R&D Law, Microbot is restricted from transferring any
technologies, know-how, manufacturing or manufacturing rights
developed using Israeli Innovation Authority grants outside of
Israel without the prior approval of Israeli Innovation Authority.
Therefore, if aspects of its technologies are deemed to have been
developed with Israeli Innovation Authority funding, the
discretionary approval of an Israeli Innovation Authority committee
would be required for any transfer to third parties outside of
Israel of the technologies, know-how, manufacturing or
manufacturing rights related to such aspects. Furthermore, the
Israeli Innovation Authority may impose certain conditions on any
arrangement under which it permits Microbot to transfer technology
or development outside of Israel or may not grant such approvals at
all.
If
approved, the transfer of Israeli Innovation Authority-supported
technology or know-how outside of Israel may involve the payment of
significant fees, which will depend on the value of the transferred
technology or know-how, the total amount Israeli Innovation
Authority funding received by Microbot, the number of years since
the funding and other factors. These restrictions and requirements
for payment may impair Microbot’s ability to sell its technology
assets outside of Israel or to outsource or transfer development or
manufacturing activities with respect to any product or technology
outside of Israel. Furthermore, the amount of consideration
available to Microbot’s shareholders in a transaction involving the
transfer of technology or know-how developed with Israeli
Innovation Authority funding outside of Israel (such as through a
merger or other similar transaction) may be reduced by any amounts
that Microbot is required to pay to the Israeli Innovation
Authority.
Some of Microbot’s employees and officers are obligated to perform
military reserve duty in Israel.
Generally,
Israeli adult male citizens and permanent residents are obligated
to perform annual military reserve duty up to a specified age. They
also may be called to active duty at any time under emergency
circumstances, which could have a disruptive impact on Microbot’s
workforce.
It may be difficult to enforce a non-Israeli judgment against
Microbot or its officers and directors.
The
operating subsidiary of the Company is incorporated in Israel. Some
of Microbot’s executive officers and directors are not residents of
the United States, and a substantial portion of Microbot’s assets
and the assets of its executive officers and directors are located
outside the United States. Therefore, a judgment obtained against
Microbot, or any of these persons, including a judgment based on
the civil liability provisions of the U.S. federal securities laws,
may not be collectible in the United States and may not necessarily
be enforced by an Israeli court. It also may be difficult to affect
service of process on these persons in the United States or to
assert U.S. securities law claims in original actions instituted in
Israel. Additionally, it may be difficult for an investor, or any
other person or entity, to initiate an action with respect to U.S.
securities laws in Israel. Israeli courts may refuse to hear a
claim based on an alleged violation of U.S. securities laws
reasoning that Israel is not the most appropriate forum in which to
bring such a claim. In addition, even if an Israeli court agrees to
hear a claim, it may determine that Israeli law and not U.S. law is
applicable to the claim. If U.S. law is found to be applicable, the
content of applicable U.S. law often involves the testimony of
expert witnesses, which can be a time consuming and costly process.
Certain matters of procedure will also be governed by Israeli law.
There is little binding case law in Israel that addresses the
matters described above. As a result of the difficulty associated
with enforcing a judgment against Microbot in Israel, it may be
impossible to collect any damages awarded by either a U.S. or
foreign court.
Risks
Relating to Microbot’s Securities, Governance and Other
Matters
If we fail to comply with the continued listing requirements of The
Nasdaq Capital Market, our common stock may be delisted and the
price of our common stock and our ability to access the capital
markets could be negatively impacted.
Our
common stock is currently listed on the Nasdaq Capital Market. In
order to maintain that listing, we must satisfy minimum financial
and other continued listing requirements and standards, including
those regarding director independence and independent committee
requirements, minimum stockholders’ equity, minimum share price,
and certain corporate governance requirements. There can be no
assurances that we will be able to comply with the applicable
listing standards. In 2018, we effected a 1:15 reverse stock split
to address our stock price falling below the minimum share price
required by Nasdaq. Failure to meet applicable Nasdaq continued
listing standards could result in a delisting of our common stock.
A delisting of our common stock from The Nasdaq Capital Market
could materially reduce the liquidity of our common stock and
result in a corresponding material reduction in the price of our
common stock. In addition, delisting could harm our ability to
raise capital on terms acceptable to us, or at all, and may result
in the potential loss of confidence by investors, employees and
fewer business opportunities. Additionally, if we are not eligible
for quotation or listing on another exchange, trading of our common
stock could be conducted only in the over-the-counter market or on
an electronic bulletin board established for unlisted securities
such as the Pink Sheets or the OTC Bulletin Board. In such event,
it could become more difficult to dispose of, or obtain accurate
price quotations for, our common stock, and there would likely also
be a reduction in our coverage by securities analysts and the news
media, which could cause the price of our common stock to decline
further.
We do not expect to pay cash dividends on our common
stock.
We
anticipate that we will retain our earnings, if any, for future
growth and therefore do not anticipate paying cash dividends on our
Common Stock in the future. Investors seeking cash dividends should
not invest in our Common Stock for that purpose.
Anti-takeover provisions in the Company’s charter and bylaws under
Delaware law may prevent or frustrate attempts by stockholders to
change the board of directors or current management and could make
a third-party acquisition of the Company
difficult.
Provisions
in the Company’s certificate of incorporation and bylaws may delay
or prevent an acquisition or a change in management. These
provisions include a classified board of directors. In addition,
because the Company is incorporated in Delaware, it is governed by
the provisions of Section 203 of the DGCL, which prohibits
stockholders owning in excess of 15% of outstanding voting stock
from merging or combining with the Company. Although the Company
believes these provisions collectively will provide for an
opportunity to receive higher bids by requiring potential acquirers
to negotiate with the Company’s board of directors, they would
apply even if the offer may be considered beneficial by some
stockholders. In addition, these provisions may frustrate or
prevent any attempts by the Company’s stockholders to replace or
remove then current management by making it more difficult for
stockholders to replace members of the board of directors, which is
responsible for appointing members of management.
We are subject to litigation, which may divert management’s
attention and have a material adverse effect on our business,
financial condition and results of operations.
We
are the defendant in a lawsuit captioned Empery Asset Master Ltd.,
Empery Tax Efficient, LP, Empery Tax Efficient II, LP, Hudson Bay
Master Fund Ltd., Plaintiffs, against Microbot Medical Inc.,
Defendant, in the Supreme Court of the State of New York, County of
New York (Index No. 651182/2020). The complaint alleged, among
other things, that we breached multiple representations and
warranties contained in the Securities Purchase Agreement (the
“SPA”) related to our June 8, 2017 equity financing (the
“Financing”), of which the Plaintiffs participated. The complaint
seeks rescission of the SPA and return of the Plaintiffs’ $6.75
million purchase price with respect to the Financing.
Management
is unable to assess the likelihood that we would be successful in
any trial with respect to the SPA or the Financing, having
previously lost another lawsuit with respect to the Financing.
Accordingly, no assurance can be given that if we go to trial and
ultimately lose, or if we decide to settle at any time, such an
adverse outcome would not be material to our consolidated financial
position. Additionally, in any such case, we will likely be
required to use available cash, or the proceeds from future
offerings, towards the rescission or settlement, that we otherwise
would have used to build our business and develop our technologies
into commercial products. In such event, we would be required to
raise additional capital sooner than we otherwise would, of which
we can give no assurance of success, or delay, curtail or cease the
commercialization of some or all of our product
candidates.
General
Risks
Raising additional capital may cause dilution to the Company’s
investors, restrict its operations or require it to relinquish
rights to its technologies or product
candidates.
Until
such time, if ever, as the Company can generate substantial product
revenues, it expects to finance its cash needs through a
combination of equity offerings, including through its existing
At-the-Market offering, licensing, collaboration or similar
arrangements, grants and debt financings. The Company does not have
any committed external source of funds. To the extent that the
Company raises additional capital through the sale of equity or
convertible debt securities, the ownership interest of its
stockholders will be diluted, and the terms of these securities may
include liquidation or other preferences that adversely affect the
rights of holder of the Company’s common stock. Debt financing, if
available, may involve agreements that include covenants limiting
or restricting the Company’s ability to take specific actions, such
as incurring additional debt, making capital expenditures,
declaring dividends or other distributions, selling or licensing
intellectual property rights, and other operating restrictions that
could adversely affect the Company’s ability to conduct its
business.
If
the Company raises additional funds through licensing,
collaboration or similar arrangements, it may have to relinquish
valuable rights to its technologies, future revenue streams,
research and development programs or product candidates or to grant
licenses on terms that may not be favorable to the Company. If the
Company is unable to raise additional funds through equity or debt
financings or other arrangements when needed, it may be required to
delay, limit, reduce or terminate its product development or future
commercialization efforts or grant rights to develop and market
product candidates that it would otherwise prefer to develop and
market itself.
Microbot operates in a competitive industry and if its competitors
have products that are marketed more effectively or develop
products, treatments or procedures that are similar, more advanced,
safer or more effective, its commercial opportunities will be
reduced or eliminated, which would materially harm its
business.
Our
competitors may develop products, treatments or procedures that
directly compete with our products and potential products and which
are similar, more advanced, safer or more effective than ours. The
medical device industry is very competitive and subject to
significant technological and practice changes. Microbot expects to
face competition from many different sources with respect to the
SCS, LIBERTY and other products that it is seeking to develop or
commercialize with respect to its other product candidates in the
future.
Competing
against large established competitors with significant resources
may make establishing a market for any products that it develops
difficult which would have a material adverse effect on Microbot’s
business. Microbot’s commercial opportunities could also be reduced
or eliminated if its competitors develop and commercialize
products, treatments or procedures quicker, that are safer, more
effective, are more convenient or are less expensive than the SCS,
LIBERTY or any product that Microbot may develop. Many of
Microbot’s potential competitors have significantly greater
financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials,
obtaining regulatory approvals and marketing approved products than
Microbot may have. Mergers and acquisitions in the medical device
industry market may result in even more resources being
concentrated among a smaller number of Microbot’s potential
competitors.
Our business strategy in part relies on identifying, acquiring and
developing complementary technologies and products, which entails
risks which could negatively affect our business, operations and
financial condition.
We
may pursue other acquisitions of businesses and technologies.
Acquisitions entail numerous risks, including:
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difficulties in the integration of acquired operations, services and products; |
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failure to achieve expected synergies; |
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diversion of management’s attention from other business concerns; |
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assumption of unknown material liabilities of acquired companies; |
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amortization of acquired intangible assets, which could reduce future reported earnings; |
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potential loss of clients or key employees of acquired companies; and |
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dilution to existing stockholders. |
As
part of our growth strategy, we may consider, and from time to time
may engage in, discussions and negotiations regarding transactions,
such as acquisitions, mergers and combinations within our industry.
The purchase price for possible acquisitions could be paid in cash,
through the issuance of common stock or other securities,
borrowings or a combination of these methods.
We
cannot be certain that we will be able to identify, consummate and
successfully integrate acquisitions, and no assurance can be given
with respect to the timing, likelihood or business effect of any
possible transaction. For example, we could begin negotiations that
we subsequently decide to suspend or terminate for a variety of
reasons. However, opportunities may arise from time to time that we
will evaluate. Any transactions that we consummate would involve
risks and uncertainties to us. These risks could cause the failure
of any anticipated benefits of an acquisition to be realized, which
could have a material adverse effect on our business, financial
condition, results of operations and prospects.
Microbot operations in international markets involve inherent risks
that Microbot may not be able to control.
Microbot’s
business plan includes the marketing and sale of its proposed
product candidates internationally, and specifically in Europe and
Israel. Accordingly, Microbot’s results could be materially and
adversely affected by a variety of factors relating to
international business operations that it may or may not be able to
control, including:
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adverse macroeconomic conditions affecting geographies where Microbot intends to do business; |
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closing of international borders, including as a result of biohazards or pandemics; |
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foreign currency exchange rates; |
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political or social unrest or economic instability in a specific country or region; |
|
| ● |
higher costs of doing business in certain foreign countries; |
|
| ● |
infringement claims on foreign patents, copyrights or trademark rights; |
|
| ● |
difficulties in staffing and managing operations across disparate geographic areas; |
|
| ● |
difficulties associated with enforcing agreements and intellectual property rights through foreign legal systems; |
|
| ● |
trade protection measures and other regulatory requirements, which affect Microbot’s ability to import or export its product candidates from or to various countries; |
|
| ● |
adverse tax consequences; |
|
| ● |
unexpected changes in legal and regulatory requirements; |
|
| ● |
military conflict, terrorist activities, natural disasters and medical epidemics; and |
|
| ● |
Microbot’s ability to recruit and retain channel partners in foreign jurisdictions. |
Microbot’s financial results may be affected by fluctuations in
exchange rates and Microbot’s current currency hedging strategy may
not be sufficient to counter such fluctuations.
Microbot’s
financial statements are denominated in U.S. dollars and the
financial results of the Company are denominated in U.S. dollars,
while a significant portion of Microbot’s business is conducted,
and a substantial portion of its operating expenses are payable, in
currencies other than the U.S. dollar. Exchange rate fluctuations
may have an adverse impact on Microbot’s future revenues or
expenses as presented in the financial statements. Microbot may in
the future use financial instruments, such as forward foreign
currency contracts, in its management of foreign currency exposure.
These contracts would primarily require Microbot to purchase and
sell certain foreign currencies with or for U.S. dollars at
contracted rates. Microbot may be exposed to a credit loss in the
event of non-performance by the counterparties of these contracts.
In addition, these financial instruments may not adequately manage
Microbot’s foreign currency exposure. Microbot’s results of
operations could be adversely affected if Microbot is unable to
successfully manage currency fluctuations in the future.
The market price for our Common Stock may be
volatile.
The
market price for our Common Stock may be volatile and subject to
wide fluctuations in response to factors including the
following:
| ● |
actual or anticipated fluctuations in our quarterly or annual operating results; |
|
| ● |
changes in financial or operational estimates or projections; |
|
| ● |
conditions in markets generally; |
|
| ● |
changes in the economic performance or market valuations of companies similar to ours; |
|
| ● |
announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments; |
|
| ● |
our intellectual property position; and |
|
| ● |
general economic or political conditions in the United States, Israel or elsewhere. |
In
addition, the securities market has from time to time experienced
significant price and volume fluctuations that are not related to
the operating performance of particular companies. These market
fluctuations may also materially and adversely affect the market
price of shares of our Common Stock.
The issuance of shares upon exercise of outstanding warrants and
options could cause immediate and substantial dilution to existing
stockholders.
The
issuance of shares upon exercise of warrants and options could
result in substantial dilution to the interests of other
stockholders since the holders of such securities may ultimately
convert and sell the full amount issuable on conversion.
Item
1B. Unresolved Staff
Comments
Not
Applicable.
Item
2. Description of
Property.
Microbot’s
principal executive office is located at 25 Recreation Drive, Unit
108, Hingham, MA 02043. Microbot also occupies facilities in
premises of approximately 6,975 square feet at 6 Hayozma St.,
Yokneam, P.O.B. 242, Israel. This facility is expected to provide
the space and infrastructure necessary to accommodate its
development work based on its current operating plan. Microbot does
not own any real property.
Item
3. Legal
Proceedings.
From
time to time, we may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to
time that may harm business.
Litigation Resulting from 2017 Financing
We
were named as the defendant in a lawsuit captioned Empery Asset
Master Ltd., Empery Tax Efficient, LP, Empery Tax Efficient II, LP,
Hudson Bay Master Fund Ltd., Plaintiffs, against Microbot Medical
Inc., Defendant, in the Supreme Court of the State of New York,
County of New York (Index No. 651182/2020). The complaint alleges,
among other things, that we breached multiple representations and
warranties contained in the SPA, of which the Plaintiffs
participated, and fraudulently induced Plaintiffs into signing the
Securities Purchase Agreement (the “SPA”) related to our June 8,
2017 equity financing (the “Financing”). The complaint seeks
rescission of the SPA and return of the Plaintiffs’ $6.75 million
purchase price with respect to the Financing. Management is unable
to assess the likelihood that we will succeed at trial with respect
to the SPA or the Financing, having previously lost another lawsuit
with respect to the Financing.
Alliance Litigation
On
April 28, 2019, we brought an action against Alliance Investment
Management, Ltd. (“Alliance”), later amended to include Joseph Mona
(“Mona”) as a defendant, in the Southern District of New York under
Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C.
78p(b), to compel Alliance and Mona to disgorge short swing profits
realized from purchases and sales of our securities within a period
of less than six months. The case is Microbot Medical Inc. v.
Alliance Investment Management, Ltd., No. 19-cv-3782-GBD (SDNY).
The amount of profits was estimated in the complaint to be
approximately $468,000.
On
October 28, 2019, Alliance filed a motion for summary judgment
requesting that the Court dismiss the claims against Alliance. On
February 4, 2020, Mona answered the 16(b) claim we asserted against
him by claiming various equitable defenses, and filed a
counterclaim against Microbot under Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder,
claiming a net loss on trading Microbot stock of
$150,954.
On
March 6, 2020, we filed a motion for judgment on the pleadings with
respect to our 16(b) claim against Mona, together with a motion to
dismiss Mona’s 10(b) counterclaim.
On
September 17, 2020, the Court issued a Memorandum Decision &
Order that, among other things, granted Alliance’s summary judgment
motion. Our Section 16(b) claim against Mona remained pending
following the Court’s dismissal of the 16(b) claim against
Alliance.
On
December 18, 2020, the Magistrate Judge issued a Report &
Recommendation, which recommended that: (i) judgment of $484,614.30
be entered in our favor on our Section 16(b) claim against Mona;
and (ii) Mona’s Section 10(b) claim be dismissed with prejudice
(except as to allegations regarding statements purportedly made by
employees of Integra Consulting, an outside investor relations
firm, which the Magistrate recommended be dismissed without
prejudice).
On
March 30, 2021, the Court issued an Order adopting the Magistrate
Judge’s Report & Recommendation; and on March 31, 2021, the
Clerk entered Judgement against Joseph Mona and in favor of
Microbot in the amount of $484,614.30. On April 27, 2021, Mona
filed an appeal of the Court’s Judgment, which is pending before
the U.S. Court of Appeals for the Second Circuit.
On
May 3, 2021, Microbot obtained a writ of execution to enforce the
Judgment against Mona, given Mona’s failure to post a bond or other
security in the full amount of the Judgment pending the appeal as
required by the Federal Rules of Civil Procedure. On May 7, 2021,
Microbot filed a motion to permit the registration of the Judgment
in districts outside the Southern District of New York in which
Mona may have assets available to satisfy the Judgment.
In
June 2021, the Magistrate issued an order permitting Mona to file
an Amended Counterclaim Complaint, and rejected our request to
execute on the Judgment. We filed a response to Mona’s amended
counterclaim on July 21, 2021, and are pursuing a renewed motion to
execute on the Judgment and dismiss the counterclaim in view of
case deficiencies revealed during discovery. A settlement
conference has been scheduled in April 2022 with respect to Mona’s
10(b) counterclaim.
Other
than the foregoing, we are not currently a party in any legal
proceeding or governmental regulatory proceeding nor are we
currently aware of any pending or potential legal proceeding or
governmental regulatory proceeding proposed to be initiated against
us that would have a material adverse effect on us or our
business.
Item
4. Mine Safety
Disclosures.
Not
applicable.
PART II
Item
5. Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our
common stock is listed on the NASDAQ Capital Market under the
symbol “MBOT” since November 29, 2016. Prior to that, our common
stock was traded under the symbol “STEM.”
As of
March 29, 2022, there were approximately 121 holders of record of
our common stock, and the closing sales price of our common stock
as reported on the NASDAQ Capital Market was $5.77.
Dividend
Policy
We
have never paid cash dividends on our common stock and we do not
anticipate paying cash dividends on common stock in the foreseeable
future. The payment of dividends on our common stock will depend on
earnings, financial condition, debt covenants in place, and other
business and economic factors affecting us at such time as our
Board of Directors may consider relevant. If we do not pay
dividends, our common stock may be less valuable because a return
on a stockholders’ investment will only occur if our stock price
appreciates.
Equity
Compensation Plan Information Table
The
following table provides information about shares of our common
stock that may be issued upon the exercise of options under all of
our existing compensation plans as of December 31, 2021.
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted- average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance | ||||||||||
| Plan Category | ||||||||||||
| Equity compensation plans approved by security holders: |
||||||||||||
| 2017 Equity Incentive Plan |
531,299 | $ | 10.48 | 92,419 | ||||||||
| 2020 Omnibus Performance Award Plan |
326,426 | $ | 7.86 | 1,094,226 | ||||||||
| Equity compensation plans not approved by security holders: |
||||||||||||
| Microbot Israel Employee Stock Option Plan(1) |
61,577 | $ | 0.01 | – | ||||||||
| Stock Options (2) |
77, 846 |
$ | 4.20 | – | ||||||||
| Total | 997,148 | 1,186,645 | ||||||||||
| (1) |
Such options were originally issued by Microbot Israel under its Employee Stock Option Plan, and represented the right to purchase an aggregate of 500,000 of Microbot Israel’s ordinary shares. As of the effective time of the Merger, such options were retroactively adjusted to reflect the Merger and now represent the right to purchase shares of our common stock. |
| (2) |
Such options were originally issued by Microbot Israel to MEDX Ventures Group LLC, of which Mr. Gadot is the Chief Executive Officer, Company Group Chairman and majority equity owner, and represented the right to purchase an aggregate of 403,592 of Microbot Israel’s ordinary shares. As of the effective time of the Merger, such options were retroactively adjusted to reflect the Merger and now represent the right to purchase shares of our common stock. |
Item
6. [Reserved]
Item
7. Management’s Discussion and Analysis of
Financial Condition and Results of
Operations.
Forward
Looking Statements
Certain
information contained in this MD&A includes “forward-looking
statements.” Statements which are not historical reflect our
current expectations and projections about our future results,
performance, liquidity, financial condition and results of
operations, prospects and opportunities and are based upon
information currently available to us and our management and their
interpretation of what is believed to be significant factors
affecting our existing and proposed business, including many
assumptions regarding future events. Actual results, performance,
liquidity, financial condition and results of operations, prospects
and opportunities could differ materially and perhaps substantially
from those expressed in, or implied by, these forward-looking
statements as a result of various risks, uncertainties and other
factors, including those risks described in detail in the section
of this Annual Report on Form 10-K entitled “Risk Factors” as well
as elsewhere in this Annual Report.
Forward-looking
statements, which involve assumptions and describe our future
plans, strategies, and expectations, are generally identifiable by
use of the words “may,” “should,” “would,” “will,” “could,”
“scheduled,” “expect,” “anticipate,” “estimate,” “believe,”
“intend,” “seek,” or “project” or the negative of these words or
other variations on these words or comparable
terminology.
In
light of these risks and uncertainties, and especially given the
nature of our existing and proposed business, there can be no
assurance that the forward-looking statements contained in this
section and elsewhere in this Annual Report on Form 10-K will in
fact occur. Potential investors should not place undue reliance on
any forward-looking statements. Except as expressly required by the
federal securities laws, there is no undertaking to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events, changed circumstances or any other
reason.
Overview
Microbot
is a pre-clinical medical device company specializing in the
research, design and development of next generation robotic
endoluminal surgery devices targeting the minimally invasive
surgery space. Microbot is primarily focused on leveraging its
micro-robotic technologies with the goal of redefining surgical
robotics while improving surgical outcomes for patients.
Microbot’s
current technological platforms, ViRobTM,
TipCATTM and LIBERTY® (including certain
CardioSert assets), are comprised of proprietary innovative
technologies. Using the ViRob platform, Microbot is currently
developing the Self-Cleaning Shunt for the treatment of
hydrocephalus and Normal Pressure Hydrocephalus, or NPH. Utilizing
the LIBERTY and CardioSert platforms, Microbot is developing the
first ever fully disposable robot for various endovascular
interventional procedures. In addition, the Company is focused on
the development of a Multi Generation Pipeline Portfolio utilizing
all of its proprietary technologies.
Microbot
has a patent portfolio of 47 issued/allowed patents and 29 patent
applications pending worldwide.
Technological
Platforms
ViRob
The
ViRob is an autonomous crawling micro-robot which can be controlled
remotely or within the body. Its miniature dimensions are expected
to allow it to navigate and crawl in different natural spaces
within the human body, including blood vessels, the digestive tract
and the respiratory system as well as artificial spaces such as
shunts, catheters, ports, etc. Its unique structure is expected to
give it the ability to move in tight spaces and curved passages as
well as the ability to remain within the human body for prolonged
time. The SCS product was developed using the ViRob
technology.
TipCAT
The
TipCAT is a disposable self-propelled locomotive device that is
specially designed to advance in tubular anatomies. The TipCAT is a
mechanism comprising a series of interconnected balloons at the
device’s tip that provides the TipCAT with its forward locomotion
capability. The device can self-propel within natural tubular
lumens such as the blood vessels, respiratory and the urinary and
GI tracts. A single channel of air/fluid supply sequentially
inflates and deflates a series of balloons creating an inchworm
like forward motion. The TipCAT maintains a standard working
channel for treatments. Unlike standard access devices such as
guidewires, catheters for vascular access and endoscopes, the
TipCAT does not need to be pushed into the patient’s lumen using
external pressure; rather, it will gently advance itself through
the organ’s anatomy. As a result, the TipCAT is designed to be able
to reach every part of the lumen under examination regardless of
the topography, be less operator dependent, and greatly reduce the
likelihood of damage to lumen structure. The TipCAT thus offers
functionality features equivalent to modern tubular access devices,
along with advantages associated with its physiologically adapted
self-propelling mechanism, flexibility, and design.
One
& DoneTM (CardioSert) Technology
On
May 25, 2018, Microbot acquired a patent-protected technology from
CardioSert Ltd., a privately-held medical device company based in
Israel that was part of a technological incubator supported by the
Israel Innovation Authorities. The CardioSert technology
contemplates a combination of a guidewire and microcatheter,
technologies that are broadly used for surgery within a tubular
organ or structure such as a blood vessel or duct. The CardioSert
technology features a unique guidewire delivery system with
steering and stiffness control capabilities which when developed is
expected to give the physician the ability to control the tip
curvature, to adjust tip load to varying degrees of stiffness in a
gradually continuous manner. The CardioSert technology was
originally developed to support interventional cardiologists in
crossing chronic total occlusions (CTO) during percutaneous
coronary intervention (PCI) procedures and has the potential to be
used in other spaces and applications, such as peripheral
intervention, and neurosurgery. The CardioSert tool is now
trademarked as “One & DoneTM.”
LIBERTY
On
January 13, 2020, Microbot unveiled what it believes is the world’s
first fully disposable robotic system for use in Endovascular
Interventional procedures, such as cardiovascular, peripheral and
neurovascular. The LIBERTY robotic system features a unique compact
design with the capability to be operated remotely, reduce
radiation exposure and physical strain to the physician, as well as
the potential to eliminate the use of multiple consumables when
used with its “One & Done” capabilities, based in part on the
CardioSert platform or possibly other guidewire/microcatheter
technologies.
On
August 17, 2020, Microbot announced the successful conclusion of
its feasibility animal study using the LIBERTY robotic system. The
study met all of its end points with no intraoperative adverse
events, which supports Microbot’s objectives to allow physicians to
conduct a catheter-based procedure from outside the catheterization
laboratory (cath-lab), avoiding radiation exposure, physical strain
and the risk of cross contamination. The study was performed by two
leading physicians in the neuro vascular and peripheral vascular
intervention spaces, and the results demonstrated robust navigation
capabilities, intuitive usability and accurate deployment of
embolic agents, most of which was conducted remotely from the
cath-lab’s control room.
On
December 22, 2021, we entered into a strategic collaboration
agreement for technology co-development with Stryker Corporation,
acting through its Neurovascular Division. Pursuant to the
agreement, the collaborative development program between Stryker
and us aims to integrate certain of Stryker’s instruments with our
LIBERTY Robotic System to address certain neurovascular procedures.
The activities contemplated by the Agreement shall be specified in
one or more development plans derived from the terms and conditions
set forth in the Agreement.
We
are continuously exploring and evaluating additional innovative
guidewire/microcatheter technologies to be integrated and combined
with the LIBERTY robotic platform.
Financial
Operations Overview
Research and Development Expenses
Research
and development expenses consist primarily of salaries and related
expenses and overhead for Microbot’s research, development and
engineering personnel, prototype materials and research studies,
obtaining and maintaining Microbot’s patent portfolio. Microbot
expenses its research and development costs as incurred.
General and Administrative Expenses
General
and administrative expenses consist primarily of the costs
associated with management salaries and benefits, professional fees
for accounting, auditing, consulting and legal services, and
allocated overhead expenses.
Microbot
expects that its general and administrative expenses will increase
over the long-term, even if a period-to-period comparison may show
a decrease, as it expands its operating activities, maintains and
expands its patent portfolio, and maintains compliance with
exchange listing and SEC requirements. Microbot expects these
potential increases will likely include management costs, legal
fees, accounting fees, directors’ and officers’ liability insurance
premiums and expenses associated with investor
relations.
Income Taxes
Microbot
has incurred net losses and has not recorded any income tax
benefits for the losses. It is still in its development stage and
has not yet generated revenues, therefore, it is more likely than
not that sufficient taxable income will not be available for the
tax losses to be fully utilized in the future.
Critical
Accounting Policies and Significant Judgments and
Estimates
Management’s
discussion and analysis of Microbot’s financial condition and
results of operations are based on its consolidated financial
statements, which have been prepared in accordance with U.S.
generally accepted accounting principles, or GAAP. The preparation
of these consolidated financial statements requires Microbot to
make estimates and judgments that affect the reported amounts of
assets, liabilities, and expenses and the disclosure of contingent
assets and liabilities at the date of the consolidated financial
statements. Microbot bases its estimates on historical experience,
known trends and events, and various other factors that are
believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying value
of assets and liabilities that are not readily apparent from other
sources. Actual results may differ materially from these estimates
under different assumptions or conditions.
While
Microbot’s significant accounting policies are described in more
detail in the notes to its consolidated financial statements,
Microbot believes the following accounting policies are the most
critical for fully understanding and evaluating its consolidated
financial condition and results of operations.
Contingencies
Management
records and discloses legal contingencies in accordance with ASC
Topic 450 Contingencies. A provision is recorded when it is
both probable that a liability has been incurred and the amount of
the loss can be reasonably estimated. The Company monitors the
stage of progress of its litigation matters to determine if any
adjustments are required.
Fair Value of Financial Instruments
The
Company measures the fair value of certain of its financial
instruments on a recurring basis.
A
fair value hierarchy is used to rank the quality and reliability of
the information used to determine fair values. Financial assets and
liabilities carried at fair value will be classified and disclosed
in one of the following three categories:
Level
1 – Quoted prices (unadjusted) in active markets for identical
assets and liabilities.
Level
2 – Inputs other than Level 1 that are observable, either directly
or indirectly, such as unadjusted quoted prices for similar assets
and liabilities, unadjusted quoted prices in the markets that are
not active, or other inputs that are observable or can be
corroborated by observable market data for substantially the full
term of the assets or liabilities.
Level
3 – Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities.
Results
of Operations
Comparison of Years Ended December 31, 2021 and
2020
The
following table sets forth the key components of Microbot’s results
of operations for the years ended December 31, 2021 and 2020 (in
thousands):
|
For the Years Ended December 31, |
||||||||||||
| 2021 | 2020 | Change | ||||||||||
| Research and development expenses |
$ | (6,153 | ) | $ | (3,396 | ) | $ | (2,757 | ) | |||
| General and administrative expenses |
(5,204 | ) | (5,693 | ) | 489 | |||||||
| Financing income (expenses), net | 44 | (80 | ) | 124 | ||||||||
Research
and Development Expenses. Microbot’s research and development
expenses were approximately $6,153,000 for the year ended December
31, 2021, compared to approximately $3,396,000 for the same period
in 2020. The increase in research and development expenses of
approximately $2,757,000 in 2021 as compared to 2020 was primarily
due to increased salaries and recruitment of employees,
professional services and material expenses relating to the LIBERTY
project. Microbot expects its research and development expenses to
continue to increase over time as Microbot advances its development
programs and begins pre-clinical and clinical trials for the SCS,
LIBERTY and TipCAT research programs.
General
and Administrative Expenses. General and administrative
expenses were approximately $5,204,000 for the year ended December
31, 2021, compared to approximately $5,693,000 for the same period
in 2020. The decrease in general and administrative expenses of
approximately $489,000 in 2021 as compared to 2020 was primarily
due to decreased salaries, share-based compensation and government
fees of $885,000, partially offset by an increase of $396,000 in
insurance costs and professional services. Microbot believes its
general and administrative expenses may increase over time as it
advances its programs, requiring additional investments in
headcount, facilities and other general and administrative
operating activities to support its growth, and as it continues to
incur expenses associated with public-company
compliance.
Financing
(income) Expenses. Financing income were approximately $44,000
for the year ended December 31, 2021, consisting of the reversal of
$131,000 of other liability stemming from our 2016 merger with
StemCells, offset by exchange rate expenses of $87,000, compared to
net financial expenses of approximately $80,000 for the same period
in 2020, consisting of approximately $80,000 in interest payments
related to the appeal of our Sabby litigation as well as $70,000
exchange rate expenses and net interest, offset by $70,000 capital
gain.
Liquidity
and Capital Resources
Microbot
has incurred losses since inception and negative cash flows from
operating activities for the years ended December 31, 2021 and
2020. As of December 31, 2021 and 2020, respectively, Microbot had
a net working capital of approximately $13,895,000 and $23,908,000,
consisting primarily of cash and cash equivalents. Microbot
anticipates that it will continue to incur net losses for the
foreseeable future as it continues research and development efforts
of its product candidates, hires additional staff, including
clinical, scientific, operational, financial and management
personnel, and continues to incur costs associated with being a
public company.
Microbot
has funded its operations through the issuance of capital stock,
grants from the Israeli Innovation Authority, and convertible debt.
Since inception (November 2010) through December 31, 2021, Microbot
has raised net cash proceeds of approximately $54,770,000, and
incurred a total cumulative loss of approximately $55,593,000.
Microbot returned $3,375,000 (before interest) of such proceeds to
an investor as a result of an adverse outcome in a litigation that
concluded in the first quarter of 2020, and is now subject to an
additional lawsuit seeking the return of an additional $6,750,000
of such proceeds. This litigation is in its early stages and we
cannot project what the eventual outcome will be, though management
is vigorously defending its position that no return of capital is
warranted.
Microbot
Israel obtained from the Israeli Innovation Authority (“IIA”)
grants for participation in research and development for the years
2013 through December 31, 2021 in the total amount of approximately
$1,500,000 and, in return, Microbot Israel is obligated to pay
royalties amounting to 3%-3.5% of its future sales up to the amount
of the grant. The grant is linked to the exchange rate of the
dollar to the New Israeli Shekel and bears interest at an annual
rate of USD LIBOR. Under the terms of the grant and applicable law,
Microbot is restricted from transferring any technologies,
know-how, manufacturing or manufacturing rights developed using the
grant outside of Israel without the prior approval of the Israel
Innovation Authority. Microbot has no obligation to repay the
grant, if the SCS project fails, is unsuccessful or aborted before
any sales are generated. The financial risk is assumed completely
by the IIA.
To
date, we have not generated revenues from our operations. As of
December 31, 2021, we had unrestricted cash, cash equivalents and
marketable securities of approximately $15,492,000, excluding
encumbered cash, which management believes is sufficient to fund
our operations for more than 12 months from the date of this Annual
Report on Form 10-K and sufficient to fund our operations necessary
to continue development activities of our current proposed products
with flexibility to adjust our costs to the cash needed for the
next 12 months. However, in the event we are unsuccessful in our
current litigation discussed above, pursuant to which certain
investors are seeking the return of $6,750,000 in proceeds we
received from them in a 2017 stock offering, we may have funds for
less than 12 months.
Microbot
plans to continue to fund its research and development and other
operating expenses, other development activities relating to
additional product candidates, and the associated losses from
operations, through its existing cash and possibly additional
grants from the Israeli Innovation Authority. Microbot intends to
also raise capital through future issuances of debt and/or equity
securities, including through its existing and as-yet-unused
At-the-Market offering or registered offerings under its existing
Registration Statement on Form S-3 for up to $75 million of
securities, which it may draw down from time to time. These
issuances may be opportunistic and even if the Company has enough
funds at such time for operations for more than 12 months. The
capital raises from issuances of convertible debt and equity
securities could result in additional dilution to Microbot’s
shareholders. In addition, to the extent Microbot determines to
incur additional indebtedness, Microbot’s incurrence of additional
debt could result in debt service obligations and operating and
financing covenants that would restrict its operations. Microbot
can provide no assurance that financing will be available in the
amounts it needs or on terms acceptable to it, if at all. If
Microbot is not able to secure adequate additional working capital
when it becomes needed, it may be required to make reductions in
spending, extend payment terms with suppliers, liquidate assets
where possible and/or suspend or curtail planned research programs.
Any of these actions could materially harm Microbot’s
business.
Cash Flows
The
following table provides a summary of the net cash flow activity
for each of the periods presented (in thousands):
|
For the Years Ended December 31, |
||||||||
| 2021 | 2020 | |||||||
| Net cash flows from operating activities |
$ | (9,354 | ) | $ | (7,252 | ) | ||
| Net cash flows from investing activities |
3,200 | (2,768 | ) | |||||
| Net cash flows from financing activities |
– | (3,375 | ) | |||||
| Net decrease in cash and cash equivalents |
$ | (6,154 | ) | $ | (13,395 | ) | ||
Comparison of the Years Ended December 31, 2021 and
2020
Cash
used in operating activities for the year ended December 31, 2021
was approximately $9,354,000, compared to $7,252,000 in 2020. The
increase was from higher net losses in 2021, mostly related to
increase in research and development relating to
LIBERTY.
Net
cash flows from investing activities increased in 2021 compared to
2020 primarily from the net purchases of marketable
securities.
Net
cash flows from financing activities decreased in 2021 due
primarily to a 2020 return of $3,375,000 of capital to investors as
a result of the adverse outcome of litigation discussed
above.
Item
7A. Quantitative and Qualitative
Disclosures About Market Risk.
Interest
Rate Risk
Microbot’s
cash and cash equivalents as of December 31, 2021 consisted of
readily available checking and money market funds. Microbot’s
primary exposure to market risk is interest income sensitivity,
which is affected by changes in the general level of U.S. interest
rates. However, because of the short-term nature of the instruments
in Microbot’s portfolio, a sudden change in market interest rates
would not be expected to have a material impact on Microbot’s
financial condition and/or results of operations. Microbot does not
believe that its cash or cash equivalents have significant risk of
default or illiquidity. While Microbot believes its cash and cash
equivalents do not contain excessive risk, Microbot cannot provide
absolute assurance that in the future its investments will not be
subject to adverse changes in market value. In addition, Microbot
maintains significant amounts of cash and cash equivalents at one
or more financial institutions that are in excess of federally
insured limits.
Foreign
Exchange Risks
Our
financial statements are denominated in U.S. dollars and financial
results are denominated in U.S. dollars, while a significant
portion of our business is conducted, and a substantial portion of
our operating expenses are payable, in currencies other than the
U.S. dollar.
Exchange
rate fluctuations may have an adverse impact on our future
revenues, if any, or expenses as presented in the financial
statements. We may in the future use financial instruments, such as
forward foreign currency contracts, in its management of foreign
currency exposure. These contracts would primarily require us to
purchase and sell certain foreign currencies with or for U.S.
dollars at contracted rates. We may be exposed to a credit loss in
the event of non-performance by the counterparties of these
contracts. In addition, these financial instruments may not
adequately manage our foreign currency exposure. Our results of
operations could be adversely affected if we are unable to
successfully manage currency fluctuations in the future.
Effects
of Inflation
Inflation
generally affects Microbot by increasing its research and
development expenses. Microbot does not believe that inflation and
changing prices had a significant impact on its results of
operations for any periods presented herein, but may have a
significant, adverse impact in 2022.
Item
8. Financial Statements and Supplementary
Data.
The
consolidated financial statements and supplementary data required
by this item are included in this Annual Report on Form 10-K
immediately following Part IV and are incorporated herein by
reference.
Item
9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure.
None.
Item
9A. Controls and
Procedures.
Disclosure Controls and Procedures. We maintain a system of
disclosure controls and procedures (as defined in Rule 13a-15(e)
under the Exchange Act). As required by Rule 13a-15(b) under the
Exchange Act, management of the Company, under the direction of our
Chief Executive Officer and Chief Financial Officer, reviewed and
performed an evaluation of the effectiveness of design and
operation of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act) as of December 31, 2021.
Based on that review and evaluation, the Chief Executive Officer
and Chief Financial Officer, along with the management of the
Company, have determined that as of December 31, 2021, the
disclosure controls and procedures were effective to provide
reasonable assurance that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms and were effective
to provide reasonable assurance that such information is
accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required
disclosures.
Management’s Annual Report on Internal Control Over Financial
Reporting. Our management is responsible for establishing
and maintaining effective internal control over financial reporting
(as defined in Rule 13a – 15(f) of the Exchange Act). There are
inherent limitations to the effectiveness of any internal control,
including the possibility of human error and the circumvention or
overriding of controls. Accordingly, even effective internal
controls can provide only reasonable assurance with respect to
financial statement preparation. Further, because of changes in
conditions, the effectiveness of internal control may vary over
time. We have assessed the effectiveness of our internal controls
over financial reporting (as defined in Rule 13a -15(f) of the
Exchange Act) as of December 31, 2021, and have concluded that, as
of December 31, 2021, our internal control over financial reporting
was effective.
This
annual report does not include an attestation report of our
registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to
attestation by our registered public accounting firm pursuant to
the rules of the Securities and Exchange Commission that permit us
to provide only management’s report in this annual
report.
Changes in Internal Control Over Financial Reporting. There
were no changes in our internal control over financial reporting,
identified in connection with the evaluation of such internal
control that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
Item
9B. Other
Information.
None.
Item
9C. Disclosure Regarding Foreign
Jurisdictions that Prevent Inspections.
None.
PART III
Item
10. Directors, Executive Officers, and
Corporate Governance.
Board of Directors
We
currently have seven directors serving on our Board. The following
table lists the names, ages and positions of the individuals who
serve as directors of the Company, as of March 29, 2022:
| Name | Age | Position | ||
|
Harel Gadot |
50 |
President, Chief Executive Officer and Chairman of the Board of Directors |
||
|
Yoseph Bornstein(1)(3) |
64 | Director | ||
|
Scott Burell(1)(2) |
57 | Director | ||
|
Martin Madden(1)(3) |
61 | Director | ||
|
Prattipati Laxminarain(2) |
64 | Director | ||
|
Aileen Stockburger(3) |
59 | Director | ||
|
Tal Wenderow(2) |
47 | Director |
| (1) | Member of Audit Committee. |
| (2) | Member of Corporate Governance Committee. |
| (3) | Member of Compensation Committee. |
We
have a classified Board, with each of our directors serving a
staggered three-year term. The following table shows the current
composition of the three classes of our Board:
Class
I Directors (terms scheduled to expire in 2022):
|
Harel Gadot |
|
|
Martin Madden |
|
|
Tal Wenderow |
Class
II Directors (term scheduled to expire in 2023):
|
Scott |
|
| Aileen Stockburger |
Class
III Directors (term scheduled to expire in 2024):
|
Yoseph Bornstein |
|
|
Prattipati Laxminarain |
Harel
Gadot, became President, Chief Executive Officer and Chairman
of the Company’s Board following the consummation of the merger of
C&RD Israel Ltd, a wholly owned subsidiary of the Company, with
and into Microbot Medical Ltd. (“Microbot Israel”), with Microbot
Israel surviving as a wholly owned subsidiary of the Company (the
“Merger”). Mr. Gadot is a co-founder of Microbot Israel and has
served as Microbot Israel’s Chief Executive Officer since Microbot
Israel was founded in November 2010. He has been the Chairman of
Microbot Israel’s board of directors since July 2014. He also
serves as the Chairman of XACT Robotics Ltd., an Israel-based
private company seeking to develop a novel platform technology for
robotic needle steering in minimally invasive interventional
procedures such as biopsies and ablations, since August 2013 and
MEDX Xelerator L.P., a medical device and digital health Israeli
incubator, since July 2016. From December 2007 to April 2010 Mr.
Gadot was a Worldwide Group Marketing Director at Ethicon Inc., a
Johnson and Johnson Company, where he was responsible for the
global strategic marketing of the Company. Mr. Gadot also held
management positions, as well as leading regional strategic
position for Europe, Middle-East and Africa, as well as In Israel,
while at Johnson and Johnson. Mr. Gadot served as director for
ConTIPI Ltd. from August 2010 until November 2013 when ConTIPI Ltd.
was acquired by Kimberly-Clark Corporation. Mr. Gadot holds a B.Sc.
in Business from Siena College, Loudonville NY, and an M.B.A. from
the University of Manchester, UK. The Company believes that Mr.
Gadot is qualified to serve as Chairman of the Board and as
President and Chief Executive Officer of the Company due to his
extensive experience in strategic marketing and general management
in the medical device industry.
Yoseph
Bornstein, became a director of the Company following the
Merger. Mr. Bornstein is a co-founder of Microbot Israel and has
been a member of the Board of Directors since Microbot Israel was
founded in November 2010. Mr. Bornstein founded Shizim Ltd., a life
science holding group in October 2000 and has served as its
president since then. Mr. Bornstein is the Chairman of GCP Clinical
Studies Ltd., a provider of clinical research services and
educational programs in Israel since January 2002. He is the
Chairman of Biotis Ltd., a service company for the
bio-pharmaceutical industry, since June 2000. In addition, he is
the Chairman of Dolphin Medical Ltd., which supplies the medical
device industry, since April 2012, and the Chairman of ASIS
Enterprises B.B.G. Ltd., a business development company focusing on
creating business ties between Israeli and Japanese entities, since
August 2007. Mr. Bornstein is a co-founder and director of XACT
Robotics, which is developing a novel platform technology for
robotic needle steering in minimally invasive interventional
procedures. In October 1992, Mr. Bornstein founded Pharmateam Ltd.,
an Israeli company that specialized in representing international
pharmaceutical companies which was sold in 2000. Mr. Bornstein is
also a founder of a number of other privately held life-science
companies. Mr. Bornstein served as the Biotechnology Committee
Chairman of the Unites States-Israel Science & Technology
Commission (the “USISTC”) from September 2002 to February 2005 as
well as a consultant for USISTC from September 2002 to February
2005. He is also the founder of ILSI-Israel Life Science Industry
Organization (who was integrated into IATI) and ITTN-Israel Tech
Transfer Organization. He founded in July 2014 ShizimXL Ltd., an
international medical device innovation center, and founded in
January 2020 ShizimVS Ltd., a digital health innovation center. Mr.
Bornstein was nominated in August 2021 to be an external director
in Can-fit BioPharma Ltd. (Nasdaq:CANF). The Company believes that
Mr. Bornstein is qualified to serve as a member of the Board due to
his extensive experience in, and knowledge of, the life sciences
industry and international business.
Scott
R. Burell, became a director of the Company following the
Merger. Since August 1, 2018, Mr. Burell has been the Chief
Financial Officer and Secretary of AIVITA Biomedical, Inc., an
Irvine California-based immuno-oncology company focused on the
advancement of commercial and clinical-stage programs utilizing
curative and regenerative medicines. From November 2006 until its
sale to Invitae Corp. (NYSE: NVTA) in November 2017, he was the
Chief Financial Officer, Secretary and Treasurer of CombiMatrix
Corporation (NASDAQ: CBMX), a family health-focused clinical
molecular diagnostic laboratory specializing in pre-implantation
genetic screening, prenatal diagnosis, miscarriage analysis, and
pediatric developmental disorders. He successfully led the
split-off of CombiMatrix in 2007 from its former parent, has led
several successful public and private debt and equity financing
transactions as well as CombiMatrix’s reorganization in 2010. Prior
to this, Mr. Burell had served as CombiMatrix’s Vice President of
Finance since November 2001 and as its Controller from February
2001 to November 2001. From May 1999 to first joining CombiMatrix
in February 2001, Mr. Burell was the Controller for Network
Commerce, Inc. (NASDAQ: SPNW), a publicly traded technology and
information infrastructure company located in Seattle. Prior to
this, Mr. Burell spent nine years with Arthur Andersen’s Audit and
Business Advisory practice in Seattle. During his tenure in public
accounting, Mr. Burell worked with many clients, both public and
private, in the high-tech and healthcare markets, and was involved
in numerous public offerings, spin-offs, mergers and acquisitions.
Mr. Burell obtained his Washington state CPA license in 1992 and is
a certified public accountant (currently inactive). He holds
Bachelor of Science degrees in Accounting and Business Finance from
Central Washington University. The Company believes Mr. Burell’s
qualifications to serve on the Board include his experience as an
executive of a public life sciences company and knowledge of
financial accounting in the medical technology field.
Martin
Madden, has been a director of the Company since February 6,
2017. Mr. Madden has held various positions at Johnson &
Johnson and its affiliates from 1986 to January 2017, most recently
as Vice President, Research & Development of DePuy Synthes, a
Johnson & Johnson Company, from February 2016 to January 2017.
Prior to that, from July 2015 to February 2016, Mr. Madden was the
Vice President, New Product Development of Johnson & Johnson
Medical Devices. From January 2012 to July 2015, Mr. Madden was the
Vice President, Research & Development of Johnson &
Johnson’s Global Surgery Group. During his thirty-year tenure with
Johnson & Johnson’s Medical Device organization, he was an
innovator and research leader for nearly every medical device
business including Cardiology, Electrophysiology, Peripheral
Vascular Surgery, General and Colorectal Surgery, Aesthetics,
Orthopaedics, Sports Medicine, Spine, and Trauma. As an executive
of Johnson & Johnson, Mr. Madden served on the management
boards of Johnson & Johnson’s Global Surgery Group, Ethicon,
Ethicon Endo-Surgery, DePuy-Synthes, and Cordis, with
responsibility for research and development – inclusive of organic
and licensed/acquired technology. He was also Chairman of J&J’s
Medical Device Research Council, with responsibility for talent
strategy and technology acceleration. Mr. Madden serves on the
Board of Directors of Novocure (NASDAQ: NVCR), a global oncology
company, and is an advisor to numerous medical device start-ups.
Mr. Madden holds a MBA from Columbia University, a M.S. from
Carnegie Mellon University in Mechanical Engineering, and a B.S.
from the University of Dayton in Mechanical Engineering. The
Company believes that Mr. Madden is qualified to serve as a member
of the Board due to his extensive experience in research and
development, portfolio planning, technology assessment and
assimilation, and project management and budgeting.
Prattipati
Laxminarain, has been a director of the Company since December
6, 2017. From April 2006 through October 2017, Mr. Laxminarain
served as Worldwide President at Codman Neuro, a global
neurosurgery and neurovascular company that offers a portfolio of
devices for hydrocephalus management, neuro intensive care and
cranial surgery and other technologies, and which was part of DePuy
Synthes Companies of Johnson & Johnson. Mr. Laxminarain is
currently the CEO of Deinde Medical Corporation, and is a Board
Member of Oculogica Inc., Millar Inc., and GT Medical Inc. He has a
degree in Mechanical Engineering from Osmania University,
Hyderabad, India and an MBA from Indian Institute of Management.
The Company believes that Mr. Laxminarain is qualified as a Board
member of the Company because of his extensive experience working
with medical device companies and knowledge of the industries in
which the Company intends to compete.
Aileen
Stockburger was appointed by the Board on March 26, 2020 to
fill a vacancy on the Board and to serve as a Class II director of
the Company, with a term commencing on April 1, 2020. Since
February 2018, Ms. Stockburger has provided M&A consulting and
advisory services through Aileen Stockburger LLC. Prior to that,
from 1989 through January 2018, Ms. Stockburger held various
positions in Johnson & Johnson, most recently as Vice
President, Worldwide Business Development & Strategic Planning
for the DePuy Synthes Group of Johnson & Johnson, and as a
member of its Worldwide Board and Group Operating Committee, from
2010-2018. In that role, she oversaw the group’s merger and
acquisition activities, including deal structuring, negotiations,
contract design and review, and deal terms. Before joining Johnson
& Johnson, Ms. Stockburger spent several years at
PriceWaterhouseCoopers, and earned her CPA certification. She is
also a Non-Executive Director of Next Science Limited (ASX: NXS), a
medical technology company headquartered in Sydney, Australia, with
a primary focus in the development and continued commercialization
of its proprietary technology to reduce the impact of biofilm based
infections in human health. She also serve on the Audit Committee
and the People, Culture and Remuneration Committee of the Board of
Directors of Next Science Limited. Ms. Stockburger received her MBA
and BS from The Wharton School, University of Pennsylvania. The
Company believes that Ms. Stockburger is qualified as a Board
member of the Company because of her extensive experience in
strategizing, managing and closing sizable, complex worldwide
mergers and acquisitions, licensing agreements and divestitures, as
well as her expertise in business development, strategic planning
and finance.
Tal
Wenderow was appointed by the Board on July 29, 2020 to fill a
vacancy on the Board and to serve as a Class I director of the
Company, with a term commencing on August 1, 2020. Since September
2021, Mr. Wenderow serves as the Venture Partner at Genesis
MedTech, a global medical device company. Previously, from February
2019, Mr. Wenderow served as the President and CEO of Vocalis
Health Inc., an AI healthtech company pioneering the development of
vocal biomarkers. Previously, Mr. Wenderow co-founded Corindus
Vascular Robotics in 2002, which was a New York Stock
Exchange-listed company upon its acquisition by Siemens
Healthineers in 2019. Mr. Wenderow held various positions at
Corindus from founder, Chief Executive Officer and director at
inception, Executive Vice President Product & Business
Development to his most recent role as Executive Vice President of
International & Business Development. Mr. Wenderow received a
B.Sc. in Mechanical Engineering at the Technion – Israel Institute
of Technology, Haifa, Israel. The Company believes that Mr.
Wenderow is qualified as a Board member of the Company because of
his extensive knowledge of the medical robotics space with specific
focus on interventional procedures, as well as his medical devices
start up experience.
Executive Officers
Following
are the name, age and other information for our executive officers,
as of March 29, 2022. All company officers have been appointed to
serve until their successors are elected and qualified or until
their earlier resignation or removal. Information regarding Harel
Gadot, our Chairman, President and Chief Executive Officer, is set
forth above under “Board of Directors.”
| Name | Age | Position | ||
|
Harel Gadot |
50 |
President, Chief Executive Officer and Chairman of the Board of Directors |
||
|
David Ben Naim |
53 |
Chief Financial Officer |
||
|
Simon Sharon |
62 |
Chief Technology Officer and General Manager, Microbot Israel |
||
|
Eyal Morag |
57 |
Chief Medical Officer |
David
Ben Naim, became the Company’s part-time Chief Financial
Officer following the consummation of the Merger. Mr. Ben Naim is
the general manager of DBN Finance Services Ltd., a company which
provides outsourcing financial services to public and private
companies, since 2014, including the Company. Through DBN Finance
Services, Mr. Ben Naim has acted as the outsourced CFO for Emerald
Medical Applications Corp. (OTC:MRLA), a digital health startup
company engaged in the development, sale and service of imaging
solutions, Tempramed Inc., a private medical device company,
Vonetize PLC (TASE:VNTZ), an Israeli company that offers video on
demand and over-the-top content services, Unet Credit Finance
Services Ltd. (TASE:UNCR-M), Todos Medical Ltd. (OTC:TOMDF), an
Israeli cancer in-vitro-diagnostic company engaging in the
development of a series of blood tests for the early detection of a
variety of cancers and 3DM Digital Manufacturing Ltd. (TASE:3DM),
an Israeli company which operates in the field of plastic polymers
industrial 3D printing. Prior to that, Mr. Ben Naim served as Chief
Financial Officer for several companies in the biomedical and
technology industries. From July 2012 to September 2014, Mr. Ben
Naim served as Chief Financial Officer for Insuline Medical Ltd.
(TASE: INSL), an Israel-based company focused on improving
performance of insulin treatment methods. From 2008 until 2011, Mr.
Ben Naim served as Chief Financial Officer of Crow Technologies
1977 Ltd. (OTC:CRWTF), a company that designs, develops,
manufactures and sells a broad range of security and alarm systems.
From 2007 to 2008, Mr. Ben Naim served as Chief Financial Officer
of Ilex Medical Ltd. (TASE:ILX), a leading company in the medical
diagnostics field. From 2003 to 2007, Mr. Ben Naim was the
Corporate Controller of Tadiran Telecom Ltd. He started his career
in 1998 at Deloitte & Touche where he left in 2003 as an Audit
Senior Manager. Mr. Ben Naim holds a B.A. in social sciences from
Open University, Israel, a CPA license from Ramat Gan College,
Israel, and an M.B.A. from Ono Academic College, Israel.
Simon
Sharon, has served as the Company’s Chief Technology Officer
since April 2018 and as the General Manager of Microbot Israel
since April 2021. From August 2016 to March 2018, Mr. Sharon served
as the Chief Technology Officer at MEDX Xelerator, an Israel-based
medical device and digital health incubator. He is also a director
of XACT Robotics Ltd., a private Israeli company developing a novel
platform robotic technology for needle steering in minimally
invasive interventional procedures. Mr. Harel Gadot, the Company’s
President, CEO and Chairman, is the Chairman of each of XACT and
MEDX Xelerator. Prior to this, Mr. Sharon held the position of
Chief Operating Officer at Microbot Israel before it became a
publicly traded company from February 2013 to August 2016. Prior to
joining Microbot Israel, Mr. Sharon was the Vice President of
Research & Development with IceCure Medical, a TASE traded
company developing a portfolio of cryogenic ablation systems. Prior
to IceCure, he held roles of increasing responsibility at Rockwell
Automation–Anorad Israel Ltd., a leading linear motor-based,
precision positioning equipment manufacturer. Prior to Rockwell,
Mr. Sharon was the Research & Development Manager at
Disc-O-Tech Medical Technologies Ltd., a private orthopedic venture
that was acquired by Kyphon (currently part of Medtronic), and
before this was the Research & Development Manager at CI
Systems, a worldwide supplier of a wide range of electro-optical
test and measurement equipment.
Eyal
Morag, has served as the Company’s Chief Medical Officer
(“CMO”) since May 2020. As CMO, Dr. Morag leads the development and
execution of the clinical strategy of the Company, including its
current development of the SCS and LIBERTY products as well as its
future pipeline. Dr. Morag is a member of the Company’s Scientific
Advisory Board since November 1, 2017. Dr. Morag is certified by
the American Board of Radiology, and from March 2017 through May
2020 has been the Chairman of Radiology at Assuta Ashdod Medical
Center, Ashdod, Israel. Previously, from July 2014 through March
2017, he was the senior Radiologist at URG Teleradiology LLC, the
largest provider of subspecialty radiology and teleradiology
services in New Jersey. He is a graduate of Boston University
School of Medicine and completed both his Radiology residency and
Fellowship in Cardiovascular & Interventional Radiology at the
Beth Israel Deaconess Medical Center & Harvard Medical School.
Following his clinical training, Dr. Morag then joined a private
practice in western Massachusetts, where he served as Chief of
Radiology at Holyoke Medical Center for several years. He has also
served as the Regional Radiology Director at Mercy Health Partners
Hospitals in Toledo, Ohio, and was a member of the University
Radiology Group where he headed the International Investment
efforts for the Ventures division. Dr. Morag’s international
experience developing and establishing radiology-related businesses
includes teleradiology, interventional Radiology services, and
free-standing imaging centers. During his fellowship, Dr. Morag
co-founded InTek Technology, a medical device startup company.
Later he founded Global Versa Radiology (“GVR”), an Israeli and
U.S. based teleradiology company. GVR has established imaging
centers in Russia and Ukraine and provided teleradiology services
in countries outside the U.S. and Israel. Dr. Morag served as GVR’s
Chief Medical Officer and Vice-President. He continues to be
involved in several startup companies ranging from AI to medical
devices. Dr. Morag is also a member of the Advisory Board of MEDX
Xelerator, a medical device and digital health incubator, of which
Mr. Gadot is Chairman.
Committees of the Board of Directors
Presently,
the Board has three standing committees — the Audit Committee, the
Compensation and Stock Option Committee (the “Compensation
Committee”), and the Corporate Governance and Nominating Committee
(the “Corporate Governance Committee”). All members of the Audit
Committee, the Compensation Committee, and the Corporate Governance
Committee are, and are required by the charters of the respective
committees to be, independent as determined under Nasdaq Listing
rules.
Audit
Committee
The
Audit Committee is composed of Messrs. Burell, Madden and
Bornstein. Each of the members of the Audit Committee is
independent, and the Board has determined that Mr. Burell is an
“audit committee financial expert,” as defined in SEC rules. The
Audit Committee acts pursuant to a written charter which is
available through our website at www.microbotmedical.com. The Audit
Committee held five meetings during the fiscal year ended December
31, 2021 and acted by unanimous written consent one
time.
The
primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities. The Audit
Committee does this primarily by reviewing the Company’s financial
reports and other financial information as well as the Company’s
systems of internal controls regarding finance, accounting, legal
compliance, and ethics that management and the Board of Directors
have established. The Audit Committee also assesses the Company’s
auditing, accounting and financial processes more generally. The
Audit Committee recommends to the Board of Directors the
appointment of a firm of independent auditors to audit the
financial statements of the Company and meets with such personnel
of the Company to review the scope and the results of the annual
audit, the amount of audit fees, the company’s internal accounting
controls, the Company’s financial statements contained in this
proxy statement, and other related matters.
Compensation
Committee
The
Compensation Committee is composed of Messrs. Madden (Chairman),
Bornstein and Stockburger. Each of the members of the Compensation
Committee is independent. The Compensation Committee acts pursuant
to a written charter which is available through our website at
www.microbotmedical.com. The Compensation Committee held four
meetings during the fiscal year ended December 31, 2021 and acted
by unanimous written consent two times.
The
Compensation Committee acts pursuant to a written charter. The
Compensation Committee makes recommendations to the Board of
Directors and management concerning salaries in general, determines
executive compensation and approves incentive compensation for
employees and consultants.
Corporate
Governance Committee
The
Corporate Governance Committee is composed of Messrs. Laxminarain,
Burell and Wenderow. Each of the members of the Corporate
Governance Committee is independent. The Corporate Governance
Committee acts pursuant to a written charter which is available
through our website at www.microbotmedical.com. The Corporate
Governance Committee acted by unanimous written consent one time
during the fiscal year ended December 31, 2021.
The
Corporate Governance Committee oversees nominations to the Board
and considers the experience, ability and character of potential
nominees to serve as directors, as well as particular skills or
knowledge that may be desirable in light of the Company’s position
at any time. From time to time, the Corporate Governance Committee
may engage the services of a paid search firm to help the Corporate
Governance Committee identify potential nominees to the Board. The
Corporate Governance Committee and Board seek to nominate and
appoint candidates to the Board who have significant business
experience, technical expertise or personal attributes, or a
combination of these, sufficient to suggest, in the Board’s
judgment, that the candidate would have the ability to help direct
the affairs of the Company and enhance the Board as a whole. The
Corporate Governance Committee may identify potential candidates
through any reliable means available, including recommendations of
past or current members of the Board from their knowledge of the
industry and of the Company. The Corporate Governance Committee
also considers past service on the Board or on the board of
directors of other publicly traded or technology focused companies.
The Corporate Governance Committee has not adopted a formulaic
approach to evaluating potential nominees to the Board; it does not
have a formal policy concerning diversity, for example. Rather, the
Corporate Governance Committee weighs and considers the experience,
expertise, intellect, and judgment of potential nominees
irrespective of their race, gender, age, religion, or other
personal characteristics. The Corporate Governance Committee may
look for nominees that can bring new skill sets or diverse business
perspectives. Potential candidates recommended by security holders
will be considered as provided in the company’s “Policy Regarding
Shareholder Candidates for Nomination as a Director,” which sets
forth the procedures and conditions for such recommendations. This
policy is available through our website at
www.microbotmedical.com.
Director Oversight and Qualifications
While
management is responsible for the day-to-day management of the
risks the company faces, the Board, as a whole and through its
committees, has responsibility for the oversight of risk
management. An important part of risk management is not only
understanding the risks facing the company and what steps
management is taking to manage those risks, but also understanding
what level of risk is appropriate for the company. In support of
this oversight function, the Board receives regular reports from
our Chief Executive Officer and members of senior management on
operational, financial, legal, and regulatory issues and risks. The
Audit Committee additionally is charged under its charter with
oversight of financial risk, including the company’s internal
controls, and it receives regular reports from management, the
company’s internal auditors and the company’s independent auditors.
The chairman of the Board and independent members of the Board work
together to provide strong, independent oversight of the company’s
management and affairs through its standing committees and, when
necessary, special meetings of directors.
Code of Business Conduct and Ethics
We
have adopted a Code of Ethics and Conduct that applies to all of
our directors, officers, employees, and consultants. A copy of our
code of ethics is posted on our website at www.microbotmedical.com.
We intend to disclose any substantive amendment or waivers to this
code on our website. There were no substantive amendments or
waivers to this code in 2021.
Section 16(a) Reports
Section
16(a) of the Exchange Act requires our executive officers,
directors, and persons who own more than 10% of a registered class
of our equity securities, to file with the SEC reports of ownership
of our securities and changes in reported ownership. Executive
officers, directors and greater than 10% beneficial owners are
required by SEC rules to furnish us with copies of all Section
16(a) reports they file. Based solely on a review of the copies of
such forms furnished to us, or written representations from the
reporting persons that no Form 5 was required, we believe that,
during the fiscal year ended December 31, 2021, with the exception
of one untimely Form 4 (detailing a single transaction) for each of
Messrs. Bornstein, Burell, Madden, Laxminarain and Wenderow and Ms.
Stockburger, all Section 16(a) filing requirements applicable to
our officers, directors and greater than 10% beneficial owners have
been met.
Item
11. Executive
Compensation.
The
following table sets forth information regarding each element of
compensation that was paid or awarded to the named executive
officers of the Company for the periods indicated.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) |
Total ($) |
||||||||||||||||||||||||
| Harel Gadot |
2021 | 500,000 | 300,000 | (2) | – | 959,618 | – | 13,800 | (3) | 1,555,800 | ||||||||||||||||||||||
| CEO, President & Chairman | 2020 | 450,000 | 270,000 | (4) | – | 1,622,446 | – | 13,800 | (3) | 2,356,246 | ||||||||||||||||||||||
| Simon Sharon(4) | 2021 | 365,472 | 110,293 | – | 58,142 | – | 26,106 | (5) | 560,013 | |||||||||||||||||||||||
| CTO and General Manager | 2020 | 311,216 | 56,250 | – | 53,069 | – | 23,210 | (5) | 443,745 | |||||||||||||||||||||||
| Eyal Morag(6) | 2021 | 453,000 | 91,000 | – | 46,000 | – | 23,059 | (5) | 613,059 | |||||||||||||||||||||||
| Chief Medical Officer | 2020 | 243,000 | – | – | 21,622 | – | 7,079 | (5) | 271,701 | |||||||||||||||||||||||
| David Ben Naim | 2021 | 81,754 | – | – | – | – | – | 81,754 | ||||||||||||||||||||||||
| Chief Financial Officer | 2020 | 82,242 | – | – | 20,308 | – | – | 102,550 | ||||||||||||||||||||||||
| (1) |
Amounts shown do not reflect cash compensation actually received by the named executive officer. Instead, the amounts shown are the non-cash aggregate grant date fair values of stock option awards made during the periods presented as determined pursuant to ASC Topic 718 and excludes the effect of forfeiture assumptions. The assumptions used to calculate the fair value of stock option awards are set forth under Note 9 to the Consolidated Financial Statements of the Company included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2021. |
| (2) |
Represents Mr. Gadot’s bonus of $300,000 for the 2021 fiscal year, which amount was actually paid in 2022. |
| (3) |
All Other Compensation includes Mr. Gadot’s monthly automobile allowance and tax gross-up. |
| (3) |
Represents Mr. Gadot’s bonus of $270,000 for the 2020 fiscal year, which amount was actually paid in 2021. |
| (4) |
Mr. Sharon commenced employment in April 2018, and was promoted to General Manager of Microbot Israel in April 2021. |
| (5) |
All Other Compensation includes the executive’s yearly automobile allowance. |
| (6) |
Dr. Morag commenced employment on May 1, 2020. Dr. Morag entered into an Employment Agreement with the Company as of February 18, 2020. |
Outstanding
Equity Awards at Fiscal Year-End
The
following table presents the outstanding equity awards held by each
of the named executive officers as of the end of the fiscal year
ended December 31, 2021.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||
| Name |
Number of Securities Underlying Unexercised Options Exercisable |
Number of Securities Underlying Unexercised Options Unexercisable |
Option Exercise Price | Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested |
Market value of Shares of Units of Stock That Have Not Vested |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested |
||||||||||||||||||||||
| Harel Gadot | 77,846 | – | $ | 4.20 | 1/01/2025 | – | – | – | – | |||||||||||||||||||||
| 114,497 | 6,350 | 15.75 | 9/14/2027 | |||||||||||||||||||||||||||
| 166,666 | – | 9.64 | 2/25/2030 | |||||||||||||||||||||||||||
|
– |
190,000 | 8.48 | 02/01/2031 | |||||||||||||||||||||||||||
| Simon Sharon | 10,000 | – | 9.00 | 08/13/2028 | – | – | – | – | ||||||||||||||||||||||
| 10,981 | 3,189 | 5.95 | 08/12/2029 | – | – | – | – | |||||||||||||||||||||||
| Eyal Morag | 13,750 | 11,250 | 6.16 | 7/14/2030 | – | – | – | – | ||||||||||||||||||||||
| David Ben Naim | 5,000 | – | 15.30 | 12/28/2027 | ||||||||||||||||||||||||||
Executive
Employment Agreements
The
Company entered into an employment agreement (the “Gadot
Agreement”) with Harel Gadot on November 28, 2016, to serve as the
Company’s Chairman of the Board of Directors and Chief Executive
Officer, on an indefinite basis subject to the termination
provisions described in the Agreement. The Gadot Agreement was
amended most recently on January 26, 2022. Mr. Gadot’s annual base
salary for 2021 was $500,000, and has been increased to $515,000
for 2022. The salary is reviewed on an annual basis by the
Compensation Committee of the Company to determine potential
increases taking into account such performance metrics and criteria
as established by Mr. Gadot and the Company.
Effective
as of January 1, 2020, Mr. Gadot shall also be entitled to receive
a target annual cash bonus of up to a maximum amount of 60% of base
salary, which maximum amount was paid for the 2021 fiscal
year.
Mr.
Gadot shall be further entitled to a monthly automobile allowance
and tax gross up on such allowance of $1,150, and shall be granted
options to purchase shares of common stock of the Company
representing 5% of the issued and outstanding shares of the
Company, based on vesting and other terms to be determined by the
Compensation Committee of the Board of Directors.
In
the event Mr. Gadot’s employment is terminated as a result of
death, Mr. Gadot’s estate would be entitled to receive any earned
annual salary, bonus, reimbursement of business expenses and
accrued vacation, if any, that is unpaid up to the date of Mr.
Gadot’s death.
In
the event Mr. Gadot’s employment is terminated as a result of
disability, Mr. Gadot would be entitled to receive any earned
annual salary, bonus, reimbursement of business expenses and
accrued vacation, if any, incurred up to the date of
termination.
In
the event Mr. Gadot’s employment is terminated by the Company for
cause, Mr. Gadot would be entitled to receive any compensation then
due and payable incurred up to the date of termination.
In
the event Mr. Gadot’s employment is terminated by the Company
without cause, he would be entitled to receive (i) any earned
annual salary; (ii) 12 months’ pay and full benefits, (iii) a pro
rata bonus equal to the maximum target bonus for that calendar
year; (iv) the dollar value of unused and accrued vacation days;
and (v) applicable premiums (inclusive of premiums for Mr. Gadot’s
dependents) pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1986, as amended, for twelve (12) months from
the date of termination for any benefits plan sponsored by the
Company. In addition, 100% of any unvested portion of his stock
options shall immediately vest and become exercisable.
The
agreement contains customary non-competition and non-solicitation
provisions pursuant to which Mr. Gadot agrees not to compete and
solicit with the Company. Mr. Gadot also agreed to customary terms
regarding confidentiality and ownership of intellectual
property.
David
Ben Naim Services Agreement
We
entered into a services agreement (the “Services Agreement”) with
DBN Finance Services effective October 31, 2016, to provide
outsourced CFO services. Pursuant to the terms of the Services
Agreement, DBN Finance Services will provide its services
exclusively through Mr. David Ben Naim, who will serve as the
principal financial and accounting officer of Microbot Israel and
the Company. Mr. Ben Naim’s engagement will continue on an
indefinite basis subject to the termination provisions described in
the Agreement.
Pursuant
to the Agreement, the Company shall pay the Service Provider a
fixed fee of NIS 22,000, or the equivalent of approximately $7,097
per month based on an exchange rate of $.32 for NIS1.0, plus VAT
per month, and the Company shall reimburse DBN Finance Services for
reasonable and customary out of pocket expenses incurred by it or
Mr. Ben Naim connection with the performance of the duties under
the Services Agreement. In addition, the Company shall maintain for
the benefit of Mr. Ben Naim, a Directors and Officers insurance
policy, according to the Company’s policy for other directors and
officers of the Company.
Both
the Company and DBN Finance Services shall have the right to
terminate the Agreement for any reason or without reason at any
time by furnishing the other party with a 30-day notice of
termination. The Company shall further be entitled to terminate the
Services Agreement for “cause” without notice, in which case
neither DBN Finance Services nor Mr. Ben Naim shall be entitled to
any compensation due to such early termination.
DBN
Finance Services and Mr. Ben Naim agreed to customary provisions
regarding confidentiality and intellectual property ownership. The
Services Agreement also contains customary non-competition and
non-solicitation provisions pursuant to which DBN Finance Services
and Mr. Ben Naim agree not to compete and solicit with the Company
during the term of the Agreement and for a period of twelve months
following the termination of the Agreement.
Simon
Sharon Employment Agreement
The
Company entered into an employment agreement, dated as of March 31,
2018 and amended pursuant to a First Amendment to Employment
Agreement dated as of April 19, 2021 (as so amended, the “Sharon
Agreement”), with Mr. Sharon, to serve as the Company’s Chief
Technology Officer and the General Manager of Microbot Israel, on
an indefinite basis subject to the termination provisions described
in the Sharon Agreement.
The
salary is reviewed on an annual basis by the Compensation Committee
of the Company to determine potential increases taking into account
such performance metrics and criteria as established by the
Company.
Pursuant
to the terms of the Sharon Agreement, Mr. Sharon will receive in
2022 a combined base salary and overtime payment of NIS72,000 per
month. Mr. Sharon is also entitled to receive an annual cash bonus
of up to 35% of the annual combined salary and overtime payment,
based on certain performance factors established and assessed by
the Compensation Committee of the Board of Directors of the
Company.
Mr.
Sharon shall be further entitled to a monthly automobile allowance
plus a tax gross up to cover taxes relating to the grant of such
motor vehicle, and pursuant to the Sharon Agreement was initially
granted options in 2018 to purchase 150,000 shares (pre-stock
split) of common stock of the Company.
Pursuant
to the Sharon Agreement, the Company pays to (unless agreed
otherwise by the parties) an insurance company or a pension fund,
for Mr. Sharon, an amount equal to 8.33% of the base salary and
overtime payments, which shall be allocated to a fund for severance
pay, and an additional amount equal to 6.5% of the base salary and
overtime payments, which shall be allocated to a provident fund or
pension plan. The Company also pays an additional sum for
disability insurance to insure Mr. Sharon for up to 75% of base
salary and overtime payments, and 7.5% of each monthly payment to
be allocated to an educational fund.
Either
the Company or Mr. Sharon may terminate the Sharon Agreement
without cause (as defined in the Sharon Agreement) by providing the
other party with ninety days prior written notice.
The
Company may terminate the Sharon Agreement for cause at any time by
written notice without any advance notice.
The
Sharon Agreement contains customary non-competition and non-solicit
provisions pursuant to which Mr. Sharon agrees not to compete and
solicit with the Company. Mr. Sharon also agreed to customary terms
regarding confidentiality and ownership of intellectual
property.
Eyal
Morag Employment Agreement
We
entered into an employment agreement (the “Morag Agreement”), as of
February 18, 2020, with Dr. Morag, to serve as the Company’s Chief
Medical Officer, on an indefinite basis subject to the termination
provisions described in the Morag Agreement. The salary is reviewed
on an annual basis by the Compensation Committee of the Company to
determine potential increases taking into account such performance
metrics and criteria as established by the Company. Pursuant to the
terms of the Morag Agreement, Dr. Morag shall receive a base salary
in 2022 of NIS64,000 per month plus Global Overtime (as defined in
the Morag Agreement) of NIS16,000 per month.
Dr.
Morag shall also be entitled to receive a target annual cash bonus,
based on certain milestones, of up to a maximum amount of 30% of
his annual salary.
Dr.
Morag shall be further entitled to a monthly automobile allowance
not to exceed NIS 4,800 per month plus expenses and applicable
taxes, and shall be granted options to purchase 25,000 shares of
common stock of the Company based on vesting and other terms set
forth in the Morag Agreement.
Pursuant
to the Morag Agreement, the Company shall pay an amount equal to
8.33% of Dr. Morag’s salary to be allocated for severance pay, 6.5%
of Dr. Morag’s salary to be allocated for pension savings and 7.5%
to be allocated to an educational fund. The Company may have
additional payment obligations for disability insurance as
specified in the Morag Agreement.
Either
the
Company or Dr. Morag may terminate the Morag Agreement at its
discretion at any time by providing the other party with six months
prior written notice of termination (the “Advance Notice
Period”).
The
Company may terminate the Morag Agreement “For Cause” (as defined
in the Morag Agreement) at any time by written notice without the
Advance Notice Period.
The
Morag Agreement contains customary non-competition and non-solicit
provisions pursuant to which Dr. Morag agrees not to compete and
solicit with the Company. Dr. Morag also agreed to customary terms
regarding confidentiality and ownership of intellectual
property.
Indemnification
Agreements
The
Company generally enters into indemnification agreements with each
of its directors and executive officers. Pursuant to the
indemnification agreements, the Company has agreed to indemnify and
hold harmless these current and former directors and officers to
the fullest extent permitted by the Delaware General Corporation
Law. The agreements generally cover expenses that a director or
officer incurs or amounts that a director or officer becomes
obligated to pay because of any proceeding to which he is made or
threatened to be made a party or participant by reason of his
service as a current or former director, officer, employee or agent
of the Company, provided that he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Company. The agreements also provide for the
advancement of expenses to the directors and officers subject to
specified conditions. There are certain exceptions to the Company’s
obligation to indemnify the directors and officers, and, with
certain exceptions, with respect to proceedings that he
initiates.
Limits
on Liability and Indemnification
We
provide directors and officers insurance for our current directors
and officers.
Our
certificate of incorporation eliminate the personal liability of
our directors to the fullest extent permitted by law. The
certificate of incorporation further provide that the Company will
indemnify its officers and directors to the fullest extent
permitted by law. We believe that this indemnification covers at
least negligence on the part of the indemnified parties. Insofar as
indemnification for liabilities under the Securities Act may be
permitted to our directors, officers, and controlling persons under
the foregoing provisions or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore unenforceable.
Director
Compensation
The
Company adopted in January 2021 an amended compensation package for
the non-management members of its Board, pursuant to which each
such Board member would receive for his or her services $35,000 per
annum. Furthermore, each member of the Audit Committee of the Board
receives an additional $10,000 per annum ($20,000 if Chairman),
each member of the Compensation Committee of the Board receives an
additional $7,500 per annum ($15,000 if Chairman) and each member
of the Corporate Governance and Nominating Committee of the Board
receives an additional $5,000 per annum ($10,000 if Chairman).
Board members are also entitled to receive equity awards. Upon
joining the Board, a member would receive an initial grant of
$190,000 of stock options (calculated as the product of the
exercise price on the date of grant multiplied by the number of
shares underlying the stock option award required to equal
$190,000), with an additional grant of stock options each year
thereafter, to purchase such number of shares of the Company’s
common stock equal to $95,000, computed on a similar
basis.
The
following table summarizes cash and equity-based compensation
information for our outside directors, for the year ended December
31, 2021:
| Name | Fees earned or paid in cash | Stock Awards | Option Awards (1) | Non-Equity Incentive Plan Compensation | Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||
| Yoseph Bornstein | $ | 52,500 | – | $ | 12,767 | – | – | – | $ | 65,267 | ||||||||||||||||||
| Scott Burell | $ | 60,000 | – | $ | 12,767 | – | – | – | $ | 72,767 | ||||||||||||||||||
| Martin Madden | $ | 60,000 | – | $ | 12,767 | – | – | – | $ | 72,767 | ||||||||||||||||||
| Prattipati Laxminarain | $ | 45,000 | – | $ | 14,233 | – | – | – | $ | 59,233 | ||||||||||||||||||
| Aileen Stockburger | $ | 42,500 | – | $ | 18,788 | – | – | – | $ | 61,288 | ||||||||||||||||||
| Tal Wenderow | $ | 40,000 | – | $ | 19,412 | – | – | – | $ | 59,412 | ||||||||||||||||||
| (1) |
Amounts shown do not reflect cash compensation actually received by the director. Instead, the amounts shown are the non-cash aggregate grant date fair values of stock option awards made during the period presented as determined pursuant to U.S. GAAP. The assumptions used to calculate the fair value of stock option awards are described in Note 9 to the Consolidated Financial Statements of the Company included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2021. |
Mr.
Gadot received compensation for his services to the Company as set
forth under the summary compensation table above.
Item
12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters.
The
following table shows the number of shares of our common stock
beneficially owned, as of March 29, 2022, by (i) each of our
directors and director nominees, (ii) each of our named executive
officers, (iii) all of our current directors and executive officers
as a group, and (iv) all those known by us to be to a beneficial
owner of more than 5% of the Company’s common stock. In general,
“beneficial ownership” refers to shares that an individual or
entity has the power to vote or dispose of, and any rights to
acquire common stock that are currently exercisable or will become
exercisable within 60 days of March 29, 2022. We calculated
percentage ownership in accordance with the rules of the SEC. The
percentage of common stock beneficially owned is based on 7,108,133
shares outstanding as of March 29, 2022. In addition, shares
issuable pursuant to options or other convertible securities that
may be acquired within 60 days of March 29, 2022 are deemed to be
issued and outstanding and have been treated as outstanding in
calculating and determining the beneficial ownership and percentage
ownership of those persons possessing those securities, but not for
any other persons.
This
table is based on information supplied by each director, officer
and principal stockholder of the Company. Except as indicated in
footnotes to this table, the Company believes that the stockholders
named in this table have sole voting and investment power with
respect to all shares of Common Stock shown to be beneficially
owned by them, based on information provided by such stockholders.
Unless otherwise indicated, the address for each director,
executive officer and 5% or greater stockholders of the Company
listed is: c/o Microbot Medical Inc., 25 Recreation Park Drive,
Unit 108, Hingham, MA 02043.
| Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Common Stock Beneficially Owned | ||||||
| Chasing Value Asset Management Inc.(1) |
610,657 | 8.59 | % | |||||
| Harel Gadot(2) |
614,606 | 8.10 | % | |||||
| Yoseph Bornstein(3) |
255,169 | 3.58 | % | |||||
| Scott Burell(4) |
13,141 | * | ||||||
| Martin Madden(4) |
13,141 | * | ||||||
| David Ben Naim(4) |
5,000 | * | ||||||
| Prattipati Laxminarain(4) |
13,141 | * | ||||||
| Aileen Stockburger(4) |
6,963 | * | ||||||
| Simon Sharon(4) |
23,107 | * | ||||||
| Eyal Morag(4) |
15,625 | * | ||||||
| Tal Wenderow(4) |
6,455 | * | ||||||
| All current directors and executive officers as a group (10 persons)(5) |
966,348 | 12.56 | % | |||||
| (1) |
Based on a Schedule 13G filed by the reporting person on January 20, 2021, the reporting person has sole voting power over 207,000 shares and sole dispositive power over 610,657 shares. Sheldon D. Liber is the Chief Executive Officer of the reporting person. The address of the principal business office of the reporting person is 2444 Wilshire Boulevard, Suite 300, Santa Monica, California 90403. |
| (2) |
Includes (i) 136,847 shares of our common stock owned by MEDX Ventures Group LLC, (ii) 77,846 shares of our common stock issuable upon the exercise of options granted to MEDX Ventures Group LLC, and (iii) 399,913 shares of our common stock issuable upon the exercise of options granted to Mr. Gadot. Mr. Gadot is the Chief Executive Officer, Company Group Chairman and majority equity owner of MEDX Venture Group, LLC and thus may be deemed to share voting and investment power over the shares and options beneficially owned by this entity. |
| (3) |
Represents (i) 242,028 shares of our common stock owned by LSA – Life Science Accelerator Ltd. and (ii) 13,141 shares of our common stock issuable to Mr. Bornstein upon exercise of options. Based on representations and other information made or provided to the Company by Mr. Bornstein, Mr. Bornstein is the CEO and Director of LSA – Life Science Accelerator Ltd. and of Shizim Ltd., and Mr. Bornstein is the majority equity owner of Shizim Ltd. Shizim Ltd. is the majority equity owner of LSA – Life Science Accelerator Ltd. Accordingly, Mr. Bornstein may be deemed to share voting and investment power over the shares beneficially owned by these entities and has an address of 16 Irus Street, Rosh-Ha’Ayin Israel 4858022. |
| (4) |
Represents options to acquire shares of our common stock. |
| (5) |
Includes shares of our common stock issuable upon the exercise of options as set forth in footnotes (2), (3) and (4). |
Item
13. Certain Relationships and Related
Transactions, and Director Independence.
Related
parties can include any of our directors or executive officers,
certain of our stockholders and their immediate family members.
Each year, we prepare and require our directors and executive
officers to complete Director and Officer Questionnaires
identifying any transactions with us in which the officer or
director or their family members have an interest. This helps us
identify potential conflicts of interest. A conflict of interest
occurs when an individual’s private interest interferes, or appears
to interfere, in any way with the interests of the company as a
whole. Our code of ethics requires all directors, officers and
employees who may have a potential or apparent conflict of interest
to immediately notify our general counsel, who serves as our
compliance officer. In addition, the Corporate Governance Committee
is responsible for considering and reporting to the Board any
questions of possible conflicts of interest of Board members. Our
code of ethics further requires pre-clearance before any employee,
officer or director engages in any personal or business activity
that may raise concerns about conflict, potential conflict or
apparent conflict of interest. Copies of our code of ethics and the
Corporate Governance Committee charter are posted on the corporate
governance section of our website at
www.microbotmedical.com.
There
have been no related party transactions or any other transactions
or relationships required to be disclosed pursuant to Item 404 of
Regulation S-K.
Director Independence
NASDAQ’s
listing standards and the Company’s Corporate Governance Guidelines
require that the Company’s Board of Directors consist of a majority
of independent directors, as determined under the applicable NASDAQ
listing rules.
The
independent members of our Board are Messrs. Bornstein, Burell,
Madden, Laxminarain and Wenderow, and Ms. Stockburger.
Item
14. Principal Accountant Fees and
Services.
Audit and Tax Fees
The
Board, upon the recommendation of the Audit Committee, has selected
the independent accounting firm of Brightman Almagor Zohar &
Co., a Member of Deloitte Touche Tohmatsu Limited, to audit the
accounts of the Company for the year ending December 31,
2021.
The
Audit Committee considered the tax compliance services provided by
Brightman Almagor Zohar & Co. and Deloitte Israel & Co.,
concluded that provision of such services is compatible with
maintaining the independence of the independent accountants, and
approved the provision by Brightman Almagor Zohar & Co. of tax
compliance services with respect to the year ending December 31,
2021.
The
Audit Committee received the following information concerning the
fees of the independent accountants for the years ended December
31, 2021 and 2020, has considered whether the provision of these
services is compatible with independence of the independent
accountants, and concluded that it is:
|
For the Years Ended December 31, |
||||||||
| 2021 | 2020 | |||||||
| Audit Fees (1) | $ | 85,000 | $ | 70,000 | ||||
| Tax Fees | 10,250 | 9,500 | ||||||
| All Other Fees (2) | 12,500 | 5,000 | ||||||
| (1) |
Audit fees represents fees for the audit of our annual consolidated financial statements and reviews of the interim consolidated financial statements, and review of audit-related SEC filings. |
| (2) |
Includes fees related to issuing a comfort letter and Auditor consents. |
Audit
and tax fees include administrative overhead charges and
reimbursement for out-of-pocket expenses.
Pre-Approval Policies and Procedures
The
Audit Committee has adopted policies and procedures for
pre-approving all services (audit and non-audit) performed by our
independent auditors. In accordance with such policies and
procedures, the Audit Committee is required to pre-approve all
audit and non-audit services to be performed by the independent
auditors in order to assure that the provision of such services is
in accordance with the rules and regulations of the SEC and does
not impair the auditors’ independence. Under the policy,
pre-approval is generally provided up to one year and any
pre-approval is detailed as to the particular service or category
of services and is subject to a specific budget. In addition, the
Audit Committee may pre-approve additional services on a
case-by-case basis.
PART IV
Item
15. Exhibits and Financial Statement
Schedules
(a)
The following documents are filed as part of this Annual Report on
Form 10-K:
(1)
Financial Statements:
The
financial statements are filed as part of this Annual Report on
Form 10-K commencing on page F-1 and are hereby incorporated by
reference.
(2)
Financial Statement Schedules:
The
financial statement schedules are omitted as they are either not
applicable or the information required is presented in the
financial statements and notes thereto.
(3)
Exhibits:
The
documents set forth below are filed herewith or incorporated by
reference to the location indicated.
|
Exhibit Number |
Description of Document |
|
| 2.1 |
Agreement and Plan of Merger and Reorganization, dated as of August 15, 2016, by and among StemCells, Inc., C&RD Israel Ltd. and Microbot Medical Ltd. (incorporated by reference to the Company’s Current Report on Form 8-K filed on August 15, 2016). |
|
| 3.1 |
Restated Certificate of Incorporation of the Company (incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and filed on March 15, 2007). |
|
| 3.2 |
Certificate of Amendment to the Restated Certificate of Incorporation of the Company (incorporated by reference to the Company’s Current Report on Form 8-K filed on November 29, 2016). |
|
| 3.3 |
Certificate of Amendment to the Restated Certificate of Incorporation (incorporated by reference to the Company’s Current Report on Form 8-K filed on September 4, 2018). |
|
| 3.4 |
Amended and Restated By-Laws of the Company (incorporated by reference to the Company’s Current Report on Form 8-K filed on May 3, 2016). |
|
| 3.5 |
Certificate of Elimination (incorporated by reference to the Company’s Current Report on Form 8-K filed on December 12, 2018). |
|
| 3.6 |
Certificate of Amendment to the Restated Certificate of Incorporation (incorporated by reference to the Company’s Current Report on Form 8-K filed on September 11, 2019). |
|
| 3.7 |
Amendment to Section 5 of the Amended and Restated By-Laws of the Company (incorporated by reference to the Company’s Current Report on Form 8-K filed on May 3, 2021). |
|
| 4.1 |
Form of Series A Warrant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on December 16, 2016). |
|
| 4.2 |
Form of Series B Warrant (incorporated by reference to the Company’s Current Report on Form 8-K filed on December 16, 2016). |
|
| 4.3 |
Form of Wainwright Warrant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 16, 2019) |
|
| 4.4 |
Form of Wainwright Warrant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 17, 2019). |
|
| 4.5 |
Form of Warrant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 25, 2019). |
|
| 4.6 |
Form of Warrant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on December 27, 2019). |
|
| 4.7 |
Form of Wainwright Warrants (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 25, 2019). |
|
| 4.8 |
Form of Warrant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on December 30, 2019). |
|
| 4.9 |
Form of Warrant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on December 31, 2019). |
|
| 4.10 |
Description of the Company’s Securities (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019). |
|
| 10.1 |
Form of Indemnification Agreement, between the Company and each of its Directors and Officers (incorporated by reference to the Company’s Current Report on Form 8-K filed on November 29, 2016). |
|
| 10.2* |
Employment Agreement with Harel Gadot (incorporated by reference to the Company’s Current Report on Form 8-K filed on November 29, 2016). |
|
| 10.3* |
Services Agreement with DBN Finance Services Ltd. (incorporated by reference to the Company’s Current Report on Form 8-K filed on November 29, 2016). |
|
| 10.4 |
License Agreement, dated June 20, 2012, by and between Technion Research and Development Foundation, and Microbot Medical Ltd. (incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and filed on March 21, 2017). |
|
| 10.5* |
Form of Stock Option Agreement under the Microbot Medical Inc. 2017 Equity Incentive Plan (incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2017, filed on November 14, 2017). |
|
| 10.6 |
Agreement, dated January 4, 2018, by and between CardioSert Ltd. and Microbot Medical Ltd. (incorporated by reference to the Company’s Current Report on Form 8-K filed on January 8, 2018). |
|
| 10.7* |
Employment Agreement with Dr. Eyal Morag (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed on April 14, 2020). |
|
| 10.8* |
Microbot Medical Inc. 2017 Equity Incentive Plan (incorporated by reference to Exhibit A of the Company’s Definitive Proxy Statement on Schedule 14A filed on August 11, 2017). |
| 10.9* |
Microbot Medical Inc. 2020 Omnibus Performance Award Plan (incorporated by reference to Exhibit A of the Company’s definitive Proxy Statement on Schedule 14A filed on July 31, 2020) |
|
| 10.10* |
Form of Restricted Stock Unit Award Agreement under the Microbot Medical Inc. 2020 Omnibus Performance Award Plan (incorporated by reference to Exhibit 4.2 of the registration Statement on Form S-8 of the Company filed on November 25, 2020) |
|
| 10.11* |
Form of NQO Award Agreement under the Microbot Medical Ltd. 2020 Omnibus Performance Award Plan (incorporated by reference to Exhibit 4.3 of the registration Statement on Form S-8 of the Company filed on November 25, 2020) |
|
| 10.12* |
Form of Restricted Stock Award Agreement under the Microbot Medical Ltd. 2020 Omnibus Performance Award Plan (incorporated by reference to Exhibit 4.4 of the registration Statement on Form S-8 of the Company filed on November 25, 2020) |
|
| 10.13* |
Form of SAR Award Agreement under the Microbot Medical Ltd. 2020 Omnibus Performance Award Plan (incorporated by reference to Exhibit 4.5 of the registration Statement on Form S-8 of the Company filed on November 25, 2020) |
|
| 10.14* |
Form of ISO Award Agreement under the Microbot Medical Ltd. 2020 Omnibus Performance Award Plan (incorporated by reference to Exhibit 4.6 of the registration Statement on Form S-8 of the Company filed on November 25, 2020) |
|
| 10.15* |
Employment Agreement, as of March 31, 2018, with Simon Sharon (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on April 7, 2021) |
|
| 10.16* |
First Amendment to Employment Agreement, dated as of April 19, 2021, with Simon Sharon (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on April 22, 2021) |
|
| 10.17 |
At the Market Offering Agreement, dated June 10, 2021, by and between Microbot Medical Inc. and H.C. Wainwright & Co., LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on June 10, 2021) |
|
| 10.18** |
Strategic Collaboration Agreement for Technology Co-Development with Stryker Corporation, acting through its Neurovascular Division (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on December 27, 2021) |
|
| 21.1 |
Subsidiaries of the Company (incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and filed on March 21, 2017). |
|
| 23.1 |
Consent of Independent Registered Public Accounting Firm |
|
| 31.1 |
Certification Pursuant to Securities Exchange Act Rule 13(a)-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Harel Gadot, Chief Executive Officer) |
|
| 31.2 |
Certification Pursuant to Securities Exchange Act Rule 13(a)-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (David Ben Naim, Chief Financial Officer) |
|
| 32.1 |
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Harel Gadot, Chief Executive Officer) |
|
| 32.2 |
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (David Ben Naim, Chief Financial Officer) |
|
| 101.INS |
Inline XBRL Instance – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
| 101.SCH |
Inline XBRL Taxonomy Extension Schema. |
|
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation. |
|
| 101.DEF |
Inline XBRL Taxonomy Extension Definition. |
|
| 101.LAB |
Inline XBRL Taxonomy Extension Labels. |
|
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation. |
|
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * | Indicates Management contract or compensatory plan or arrangement |
| ** | Certain identified information has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. |
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
| MICROBOT MEDICAL INC. |
|
|
/s/ Harel Gadot |
|
| Harel Gadot |
|
| President, Chief Executive Officer and Chairman |
|
| Dated: March 31, 2022 |
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
| Signature | Title | Date | ||
|
/s/ Harel Gadot |
Chairman, President and Chief Executive Officer |
March 31, 2022 |
||
| Harel Gadot |
(Principal Executive Officer) |
|||
|
/s/ David Ben Naim |
Chief Financial Officer |
March 31, 2022 |
||
| David Ben Naim |
(Principal Financial and Accounting Officer) |
|||
|
/s/ Yoseph Bornstein |
Director |
March 31, 2022 |
||
| Yoseph Bornstein |
||||
|
/s/ Prattipati Laxminarain |
Director |
March 31, 2022 |
||
| Prattipati Laxminarain |
||||
|
/s/ Scott Burell |
Director |
March 31, 2022 |
||
| Scott Burell |
||||
|
/s/ Martin Madden |
Director |
March 31, 2022 |
||
| Martin Madden |
||||
|
/s/ Aileen Stockburger |
Director |
March 31, 2022 |
||
| Aileen Stockburger |
||||
|
/s/ Tal Wenderow |
Director |
March 31, 2022 |
||
| Tal Wenderow |
MICROBOT
MEDICAL INC.
INDEX
TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To
the Board of Directors and Shareholders of Microbot Medical
Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of
Microbot Medical Inc. and its subsidiary (the “Company”) as of
December 31, 2021 and 2020 and the related consolidated statements
of comprehensive loss, shareholders’ equity and cash flows, for
each of the two years in the period ended December 31, 2021, and
the related notes (collectively referred to as the “financial
statements”).
In
our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2021 and 2020, and the results of its operations and
its cash flows for each of the two years in the period ended
December 31, 2021, in conformity with accounting principles
generally accepted in the United States of America.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are
required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding
of internal control over financial reporting but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly,
we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical
Audit Matter
The
critical audit matter communicated below is a matter arising from
the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee
and that (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Commitments and Contingencies: Litigation — Refer to Note 2P and 8
to the financial statements
Critical
Audit Matter Description
The
Company is involved in a litigation as the defendant resulting from
the 2017 financing Litigation from third parties may result in a
substantial loss. An estimated loss from a loss contingency is
accrued by a charge to expenses or shareholders’ equity if it is
probable that a liability has been incurred and the amount of the
loss can be reasonably estimated.
The
Company concluded that the loss from the case is not probable and
it cannot be reasonably estimable at this stage and no provision
was recorded as of December 31, 2021.
The
determination of litigation contingency accruals is subject to
significant management judgement in assessing the likelihood of a
loss being incurred and when determining whether a reasonable
estimate of the loss or range of loss can be made.
Given
the inherent uncertainty of the outcome of identified litigation,
auditing the valuation assertion of litigation contingency required
a high degree of auditor judgment and an increased extent of effort
when performing audit procedures to evaluate management’s
assessment on the likelihood and magnitude of the contingent loss
and whether this litigation is reasonably estimable as of December
31, 2021.
How
the Critical Audit Matter Was Addressed in the Audit
Our
audit procedures related to the potential loss contingency
liability and disclosure of the litigation included the following,
among others:
| ● |
We made inquiries with management to obtain an understanding of litigation matter and status that the Company is currently undergoing. |
|
| ● |
We obtained legal letters from the external legal counsel. |
|
| ● |
We inquired of the external and internal legal counsels to determine the status of the case and to understand the basis for management’s conclusion that the loss from the case is not probable and it cannot be reasonably estimable at this stage. |
|
| ● |
We evaluated the assumptions used by management to estimate the litigation contingency likelihood and magnitude, including corroborating these assumptions with internal and external legal counsel. |
|
| ● |
We evaluated the Company’s litigation contingencies disclosure for consistency with our evidence obtained on the litigation matter. |
/s/ Brightman Almagor Zohar & Co.
Brightman Almagor Zohar & Co.
Certified
Public Accountants
A
firm in the Deloitte Global Network
Tel Aviv, Israel
March
31, 2022
We
have served as the Company’s auditor since 2013
MICROBOT MEDICAL INC.
Consolidated Balance
Sheets
U.S.
dollars in thousands
(Except
share and per share data)
| As of December 31, | ||||||||||||
| Notes | 2021 | 2020 | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents |
$ | 13,493 | $ | 19,650 | ||||||||
| Marketable securities |
1,999 | 4,998 | ||||||||||
| Restricted cash |
87 | 84 | ||||||||||
| Prepaid expenses and other assets | 300 | 521 | ||||||||||
| Total current assets |
15,879 | 25,253 | ||||||||||
| Property and equipment, net | 244 | 251 | ||||||||||
| Operating right-of-use assets |
3 | 644 | 775 | |||||||||
| Total assets |
$ | 16,767 | $ | 26,279 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payables |
$ | 279 | $ | 275 | ||||||||
| Lease liabilities |
3 | 278 | 187 | |||||||||
| Accrued liabilities | 7 | 1,427 | 883 | |||||||||
| Total current liabilities |
1,984 | 1,345 | ||||||||||
| Non current liabilities: | ||||||||||||
| Long-term lease liabilities | 3 | 402 | 626 | |||||||||
| Total liabilities |
2,386 | 1,971 | ||||||||||
| Commitments and contingencies | 4 | |||||||||||
| Stockholders’ equity: | ||||||||||||
| Common stock; $ par value; shares authorized as of December 31, 2021 and 2020; shares issued and outstanding as of December 31, 2021 and 2020 |
5 | 72 | 72 | |||||||||
| Additional paid-in capital |
69,902 | 68,516 | ||||||||||
| Accumulated deficit | (55,593 | ) | (44,280 | ) | ||||||||
| Total stockholders’ equity |
14,381 | 24,308 | ||||||||||
| Total liabilities and stockholders’ equity |
$ | 16,767 | $ | 26,279 | ||||||||
The
accompanying notes are an integral part of these consolidated
financial statements.
MICROBOT MEDICAL INC.
Consolidated Statements of
Comprehensive Loss
U.S.
dollars in thousands
(Except
share and per share data)
|
For the Years Ended December 31, |
||||||||
| 2021 | 2020 | |||||||
| Research and development | $ | (6,153 | ) | $ | (3,396 | ) | ||
| General and administrative | (5,204 | ) | (5,693 | ) | ||||
| Operating loss |
(11,357 | ) | (9,089 | ) | ||||
| Financing income (expenses), net | 44 | (80 | ) | |||||
| Net loss | $ | (11,313 | ) | $ | (9,169 | ) | ||
| Basic and diluted net loss per share |
$ | (1.59 | ) | $ | (1.29 | ) | ||
| Basic and diluted weighted average common shares outstanding |
7,108,133 | 7,117,747 | ||||||
The
accompanying notes are an integral part of these consolidated
financial statements.
MICROBOT MEDICAL INC.
Consolidated Statements of
Shareholder’s Equity
U.S.
dollars in thousands
(Except
share and per share data)
|
Common Stock |
Additional |
Treasury |
Accumulated |
Total |
||||||||||||||||||||
| Shares | Amount | Amount | Amount | Amount | Amount | |||||||||||||||||||
| Balances, December 31, 2020 | 7,108,133 | $ | 72 | $ | 68,516 | $ | $ | (44,280 | ) | $ | 24,308 | |||||||||||||
| Share-based compensation | – | – | 1,386 | – | – | 1,386 | ||||||||||||||||||
| Net loss | – | – | – | – | (11,313 | ) | (11,313 | ) | ||||||||||||||||
| Balances, December 31, 2021 | 7,108,133 | $ | 72 | $ | 69,902 | $ | $ | (55,593 | ) | $ | 14,381 | |||||||||||||
| Balances, December 31, 2019 | 7,185,628 | $ | 72 | $ | 69,954 | $ | (3,375 | ) | $ | (35,111 | ) | $ | 31,540 | |||||||||||
| Exercise of options | 5,838 | 1 | (1 | ) | – | – | – | |||||||||||||||||
| Cancellation of treasury Common Stock |
(83,333 | ) | (1 | ) | (3,374 | ) | 3,375 | – | – | |||||||||||||||
| Share-based compensation | – | – | 1,937 | – | – | 1,937 | ||||||||||||||||||
| Net loss | – | – | – | – | (9,169 | ) | (9,169 | ) | ||||||||||||||||
| Balances, December 31, 2020 | 7,108,133 | $ | 72 | $ | 68,516 | $ | $ | (44,280 | ) | $ | 24,308 | |||||||||||||
The
accompanying notes are an integral part of these consolidated
financial statements.
MICROBOT MEDICAL INC.
Consolidated Statements of
Cash Flows
U.S.
dollars in thousands
(Except
share and per share data)
| For the Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (11,313 | ) | $ | (9,169 | ) | ||
| Adjustments to reconcile net loss to net cash flows from operating activities: |
||||||||
| Depreciation and amortization |
76 | 68 | ||||||
| Unrealized gain from convertible loan |
– | (61 | ) | |||||
| Non-cash and accrued interest |
– | (9 | ) | |||||
| Share-based compensation expense |
1,386 | 1,937 | ||||||
| Changes in assets and liabilities: |
||||||||
| Prepaid expenses and other assets |
177 | 222 | ||||||
| Other payables and accrued liabilities |
320 | (240 | ) | |||||
| Net cash flows from operating activities |
(9,354 | ) | (7,252 | ) | ||||
| Investing activities: | ||||||||
| Purchase of property and equipment |
(69 | ) | (91 | ) | ||||
| Investment in convertible loan |
– | (200 | ) | |||||
| Proceeds from sale of investment |
270 | – | ||||||
| Proceeds from sales of marketable security | 2,999 | 2,521 | ||||||
| Net cash flows from investing activities |
3,200 | (2,768 | ) | |||||
| Financing activities: | ||||||||
| Repayment of shareholders investment | – | (3,375 | ) | |||||
| Net cash flows from financing activities |
– | (3,375 | ) | |||||
| Decrease in cash, cash equivalents and restricted cash |
(6,154 | ) | (13,395 | ) | ||||
| Cash, cash equivalents and restricted cash at beginning of period |
19,734 | 33,129 | ||||||
| Cash, cash equivalents and restricted cash at ending of period |
$ | 13,580 | $ | 19,734 | ||||
| Supplemental disclosure of cash flow information: |
||||||||
| Interest paid from litigation | $ | $ | 236 | |||||
| Cash received from interest |
$ | 1 | $ | 32 | ||||
| Right-of-use assets and lease liability | $ | 69 | $ | |||||
The
accompanying notes are an integral part of these consolidated
financial statements.
MICROBOT MEDICAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S.
dollars in thousands
(Except
share and per share data)
NOTE
1 – GENERAL
| A. | Description of business: |
Microbot
Medical Inc. (the “Company”) is a pre-clinical medical device
company specializing in the research, design and development of
next generation micro-robotics assisted medical technologies
targeting the minimally invasive surgery space. The Company is
primarily focused on leveraging its micro-robotic technologies with
the goal of redefining surgical robotics while improving surgical
outcomes for patients.
The
Company incorporated on August 2, 1988 in the State of Delaware
under the name Cellular Transplants, Inc. The original Certificate
of Incorporation was restated on February 14, 1992 to change the
name of the Company to Cyto Therapeutics, Inc. On May 24, 2000, the
Certificate of Incorporation as restated was further amended to
change the name of the Company to StemCells, Inc.
On
November 28, 2016, the Company consummated a transaction pursuant
to an Agreement and Plan of Merger, dated August 15, 2016, with
Microbot Medical Ltd., a private medical device company organized
under the laws of the State of Israel (“Microbot Israel”). On the
same day and in connection with the Merger, the Company changed its
name from StemCells, Inc. to Microbot Medical Inc. On November 29,
2016, the Company’s common stock began trading on the Nasdaq
Capital Market under the symbol “MBOT”.
The
Company and its subsidiaries are collectively referred to as the
“Company”.
To
date, the Company has not generated revenues from its operations.
As of December 31, 2021, the Company had unrestricted cash, cash
equivalent and marketable securities balance of approximately
$15,492
excluding encumbered cash, which management believes is sufficient
to fund its operations for more than 12 months from the date of
issuance of these financial statements and sufficient to fund its
operations necessary to continue development activities of its
current proposed products with full flexibilities to adjust its
costs to the cash needed for the next 12 months.
Due
to continuing research and development activities, the Company
expects to continue to incur additional losses for the foreseeable
future. While management of the Company believes that it has
sufficient funds for more than 12 months, the Company may seek to
raise additional funds through future issuances of either debt
and/or equity securities and possibly additional grants from the
Israeli Innovation Authority and other government institutions. The
Company’s ability to raise additional capital in the equity and
debt markets is dependent on a number of factors, including, but
not limited to, the market demand for the Company’s stock, which
itself is subject to a number of development and business risks and
uncertainties, as well as the uncertainty that the Company would be
able to raise such additional capital at a price or on terms that
are favorable to the Company. As noted above, Company’s management
and board of directors believe that the existing funds are
sufficient to fund the Company’s operations for more than 12
months, even without raising additional funds.
An
epidemic of the coronavirus disease (“COVID-19”) is ongoing
throughout the world. As the outbreak is still evolving, much of
its impact continues to change. As of this filing, it is impossible
to predict future effects and potential spread of the coronavirus
disease globally. The coronavirus disease may cause significant
delays and disruptions to our pre-clinical studies.
Additionally,
travel restrictions have been implemented with respect to certain
countries in an effort to contain the coronavirus disease, and
several countries have expanded screenings of travelers. As travel
restrictions may be implemented and adopted by countries around the
world, the Company and its contract research organizations may be
unable to visit its clinical trial sites and monitor the data from
its clinical trials on timely basis. The Company’s employees may
also face travel restrictions, which would impact its business.
Furthermore, some of the Company’s manufacturers and suppliers are
in Europe and may be impacted by port closures and other
restrictions resulting from the coronavirus outbreak, which may
disrupt the Company’s supply chain or limit its ability to obtain
sufficient materials for its products.
MICROBOT MEDICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands
(Except
share and per share data)
The
ultimate impact of the COVID-19 outbreaks or similar health
epidemics are highly uncertain and subject to changes, and the
Company cannot presently predict the scope and severity of any
potential business shutdowns or disruptions. However, if the
Company or any of the third parties with whom the Company’s
engages, including the suppliers, animal trial sites, contract
research organizations, regulators, including the FDA health care
providers and other third parties with whom the Company conducts
business, were to experience shutdowns or other business
disruptions, the Company’s ability to conduct our business and
operations could be materially and negatively impacted, which could
prevent or delay the Company from obtaining approval for its
devices.
The
preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions pertaining to
transactions and matters whose ultimate effect on the financial
statements cannot precisely be determined at the time of financial
statements preparation. Although these estimates are based on
management’s best judgment, actual results may differ from these
estimates.
NOTE
2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
The
significant accounting policies applied in the preparation of the
financial statements are as follows:
| A. | Basis of presentation: |
The
financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America (“US GAAP”).
| B. | Financial statement in U.S. dollars: |
The
functional currency of the Company is the U.S. dollar (“dollar”)
since the dollar is the currency of the primary economic
environment in which the Company has operated and expects to
continue to operate in the foreseeable future.
Transactions
and balances denominated in dollars are presented at their original
amounts. Transactions and balances denominated in foreign
currencies have been re-measured to dollars in accordance with the
provisions of ASC 830-10, “Foreign Currency
Translation”.
All
transaction gains and losses from re-measurement of monetary
balance sheet items denominated in non-dollar currencies are
reflected in the statement of operations as financial income or
expenses, as appropriate.
| C. | Principles of consolidation: |
The
consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. Inter-company balances and
transactions have been eliminated in consolidation.
| D. | Cash and cash equivalents: |
Cash
and cash equivalents consist of cash and demand deposits in banks,
and other short-term liquid investments (primarily interest-bearing
time deposits) with original maturities of less than three
months
MICROBOT MEDICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands
(Except
share and per share data)
Restricted
cash as of December 31, 2021 and 2020 included an $87 and $84, respectively, collateral account
for the Company’s leases agreements and credit line from the
bank.
| F. | Fair value of financial instruments: |
The
carrying values of cash and cash equivalents, other receivable and
other accounts payable and accrued liabilities approximate their
fair value due to the short-term maturity of these
instruments.
The
Company measures the fair value of certain of its financial
instruments (such as marketable securities) on a recurring basis.
The method of determining the fair value of marketable securities
is discussed in Note 3.
A
fair value hierarchy is used to rank the quality and reliability of
the information used to determine fair values. Financial assets and
liabilities carried at fair value will be classified and disclosed
in one of the following three categories:
Level
1 – Quoted prices (unadjusted) in active markets for identical
assets and liabilities.
Level
2 – Inputs other than Level 1 that are observable, either
directly or indirectly, such as unadjusted quoted prices for
similar assets and liabilities, unadjusted quoted prices in the
markets that are not active, or other inputs that are observable or
can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
Level
3 – Unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the
assets or liabilities.
| G. | Concentrations of credit risk |
Financial
instruments which potentially subject the Company to credit risk
consist primarily of cash and cash equivalents. The Company holds
these investments in highly rated financial institutions. These
amounts at times may exceed federally insured limits. The Company
has not experienced any credit losses in such accounts and does not
believe it is exposed to any significant credit risk on these
funds. The Company has no off-balance sheet concentrations of
credit risk, such as foreign currency exchange contracts, option
contracts, or other hedging arrangements.
| H. | Property and equipment: |
Property
and equipment are presented at costs less accumulated depreciation.
Depreciation is calculated based on the straight-line method over
the estimated useful lives of the assets, at the following annual
rates:
| % | ||||
| Research equipment and software | 25–33 | |||
| Furniture and office equipment |
7 | |||
| Leasehold improvements | Over the lease period |
|||
MICROBOT MEDICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands
(Except
share and per share data)
| I. | Liabilities due to termination of employment agreements: |
Under
Israeli employment laws, employees of Microbot Israel are included
under Article 14 of the Severance Compensation Act, 1963 (“Article
14”). According to Article 14, these employees are entitled to
monthly deposits made by Microbot Israel on their behalf with
insurance companies. Payments in accordance with Article 14 release
Microbot Israel from any future severance payments (under the
Israeli Severance Compensation Act, 1963) with respect of those
employees. The aforementioned deposits are not recorded as an asset
in the Company’s balance sheets.
| J. | Basic and diluted net loss per share: |
Basic
net loss per share is calculated by dividing net loss attributable
to common stock shareholders by the weighted average number of
shares of common stock outstanding during the year without
consideration of potentially dilutive securities. Diluted net loss
per share is calculated by giving effect to all potentially
dilutive securities outstanding for the period using the treasury
share method.
All
outstanding stock options and warrants have been excluded from the
calculation of the diluted loss per share for the years ended
December 31, 2021 and December 31, 2020, since all such securities
have an anti-dilutive effect.
| K. | Research and development expenses, net: |
Research
and development expenses are charged to the statement of operations
as incurred. Grants for funding of approved research and
development projects are recognized at the time the Company is
entitled to such grants,