UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
(Mark
One)
For
the fiscal year ended December 31, 2023
For
the transition period from ____ to _____
Commission
file number: 000-19871
MICROBOT
MEDICAL INC.
(Exact
name of registrant as specified in its charter)
288
Grove Street, Suite
388
Braintree,
MA02184
(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. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 $38,134,642.
Common
stock outstanding as of March 25, 2024: 14,398,964shares
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 13 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
Page
PART I
Item 1. Business 1
Item 1A. Risk Factors 13
Item 1B. Unresolved Staff Comments 28
Item 1C Cybersecurity 28
Item 2. Description of Property 28
Item 3. Legal Proceedings 28
Item 4. Mine Safety Disclosures 28
PART II
Item 6. [Reserved] 29
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 33
Item 8. Financial Statements and Supplementary Data 33
Item 9A. Controls and Procedures 34
Item 9B. Other Information 34
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 34
PART III
Item 10. Directors, Executive Officers and Corporate Governance 35
Item 11. Executive Compensation 39
Item 14. Principal Accountant Fees and Services 45
PART IV
Item 15. Exhibits and Financial Statement Schedules 46
i
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 subsidiary. Unless the context otherwise requires,
the historical business, financial statements and operations of Microbot include Microbot Medical Ltd., an Israeli corporation (“Microbot
Israel”) which became a wholly owned subsidiary of the Company on November 28, 2016. The capitalized term “Merger” refers to the November 28, 2016
merger of C&RD Israel Ltd, a then wholly owned subsidiary of the Company, with and into Microbot Israel, with Microbot Israel surviving
as a wholly owned subsidiary of the Company.
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 13.
Risks
Relating to Microbot’s Financial Position and Need for Additional Capital
Risks
Relating to the Development and Commercialization of Microbot’s Product Candidates
ii
Risks
Relating to International Business
Risks
Relating to Microbot’s Intellectual Property
Risks
Relating to Operations in Israel
● Israel’s economy may become unstable.
General
Risks
iii
PART
I
Item
1. Description of Business.
Overview
Microbot
is a preclinical 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 robotic technologies
with the goal of redefining surgical robotics while improving surgical outcomes for patients.
Using
our LIBERTY® Endovascular Robotic Surgical System, we are developing the first ever fully disposable robot for various
endovascular interventional procedures.
Technological
Platforms
LIBERTY®
Endovascular Robotic Surgical System
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® Endovascular Robotic Surgical
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 NovaCross® platform or possibly other guidewire/microcatheter technologies.
The
LIBERTY® Endovascular Robotic Surgical System 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.
We
believe the addressable markets for the LIBERTY® Endovascular Robotic Surgical System are the Interventional Cardiology,
Interventional Radiology and Interventional Neuroradiology markets.
The unique characteristics of the LIBERTY® Endovascular
Robotic Surgical System - 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.
The LIBERTY® Endovascular Robotic Surgical System is being
designed to have the following attributes:
On
August 17, 2020, Microbot announced the successful conclusion of its feasibility animal study using the LIBERTY® Endovascular
Robotic Surgical 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
May 3, 2023, we announced that the LIBERTY® Endovascular Robotic Surgical System has surpassed its 100th catheterization
during multiple preclinical studies, with a 95% success rate of reaching pre-determined vascular targets, such as distal branches of
hepatic, gastric, splenic, mesenteric, renal and hypogastric arteries. Moreover, all of the procedures were completed without notable
signs of intraoperative injury.
On
June 29, 2023, we announced the successful completion of a two-day preclinical study held by leading key opinion leaders at a New York-based
research lab, where they performed dozens of catheterizations, including the utilization of the LIBERTY® Endovascular
Robotic Surgical System’s remote operation capabilities, to pre-determined vascular targets, with a 100% success rate of reaching
the intended target with no observable on-site complications.
In
October 2023, we announced the successful initial outcomes from our pivotal preclinical study with the LIBERTY® Endovascular Robotic
Surgical System. The pivotal study was conducted by three leading interventional radiologists that utilized the LIBERTY® Endovascular
Robotic Surgical System to reach a total of 48 animal targets. A total of 6 LIBERTY® Endovascular Robotic Surgical Systems
were used in the study. All 6 LIBERTY® Endovascular Robotic Surgical Systems performed flawlessly, with 100% usability
and technical success. No acute adverse events or complications were visually observed intra-operative. In December 2023, we announced
that the final histopathology and lab report supplements our previous findings, and that the results of the study will support our IDE
submission to the FDA to commence human clinical study. On January 29, 2024, the Company submitted an Investigational Device Exemption
(IDE) application with the U.S. Food and Drug Administration, in order to commence its pivotal clinical trial in humans, and as of the
filing date of this Annual Report on Form 10-K, we are continuing our interaction with the FDA regarding our IDE submission process.
See “–Government Regulation–U.S. Regulation–Description of the IDE process” below.
On
October 24, 2023, we announced that we received confirmation for the commencement of the process to support our future CE Mark approval,
and to ultimately allow us to market the LIBERTY® Endovascular Robotic Surgical System in Europe as well as other regions who accept
the CE Mark. According to the confirmation, we will commence audits for ISO 13485 certification to ensure compliance with the Quality
Management System (QMS) requirements of the EU Medical Devices Regulation (MDR 2017/745), during the first half of 2024. We had previously
taken the first step to advance our European program by engaging with a leading Notified Body, who recently confirmed dates for conducting
the required audits.
NovaCross®
On
October 6, 2022, we purchased substantially all of the assets, including intellectual property, devices, components and product related
materials of Nitiloop Ltd., an Israeli limited liability company. The assets include intellectual property and technology in the field
of intraluminal revascularization devices with anchoring mechanism and integrated microcatheter, and the products or potential products
incorporating the technology owned by Nitiloop and designated by Nitiloop as “NovaCross”, “NovaCross Xtreme”
and “NovaCross BTK” and any enhancements, modifications and improvements. This technology is also expected to be incorporated
in our One & Done® feature.
Other
Technologies and Platforms
During
the second and third quarters of 2023, as a result of our core-business focus program and our cost reduction plan, described below, we
ceased research and development activities relating to the technology we acquired from CardioSert, and with respect to our SCS and TipCat
platforms. As a result, we terminated the Company’s agreement with CardioSert for that technology, ceased maintaining the intellectual
property with respect to that technology, and are returning the acquired intellectual property to CardioSert, and returned intellectual
property relating to the SCS (ViRob) and TipCat to Technion Research and Development Foundation.
Recent
Developments
Settlement
of Lawsuit
As
of January 26, 2024 (the “Effective Date”), we entered into a Settlement Agreement and Release (the “Settlement Agreement”)
with Empery Asset Master Ltd., Empery Tax Efficient, LP, Empery Tax Efficient III, LP and Hudson Bay Master Fund Ltd. (collectively,
“Plaintiffs”), which resolved and settled the below referenced litigation between the Company and Plaintiffs. The Company
previously announced that it was a 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 “Lawsuit”), pursuant to which the Plaintiffs alleged, among other things,
that the Company breached multiple representations and warranties contained in the Securities Purchase Agreement (the “SPA”)
related to the Company’s June 8, 2017 equity financing (the “Financing”), of which the Plaintiffs participated, and
fraudulently induced Plaintiffs into signing the SPA. The complaint sought rescission of the SPA and return of the Plaintiffs’
$6.75 million purchase price with respect to the Financing.
Pursuant
to the Settlement Agreement, the Company paid Plaintiffs an aggregate of $2,154,000 (the “Total Settlement Amount”), consisting
of a cash payment covered by the Company’s insurance carrier of $1,100,000 and 1,005,965 shares of restricted Company common stock
(the “Shares”), which Shares represent the whole number of restricted shares of Company common stock calculated pursuant
to the following formula: $1,054,000/[closing price of Company common stock on the Effective Date * 0.825]. Additionally, the Plaintiffs
and the Company each agreed to fully release the other from all claims arising out of the Financing, the SPA and/or the allegations and
claims asserted in the Lawsuit, subject to customary carve-outs.
In
February 2024, the Plaintiffs filed a stipulation discontinuing the Lawsuit with prejudice.
We
also agreed, pursuant to a Registration Rights Agreement (the “Registration Rights Agreement”), to file a registration statement
on Form S-1 or Form S-3 covering the resale of the Shares (the “Resale Registration Statement”), within 30 calendar days
following the Effective Date, and to use reasonable best efforts to have such Resale Registration Statement declared effective by the
SEC within 60 days (or, in the event of a “full review” by the Securities and Exchange Commission, within 90 days) following
the Effective Date. We shall be required to make cash payments to the Plaintiffs in the event we fail to register the Shares and keep
the Resale Registration Statement effective pursuant to the terms of the Registration Rights Agreement, and if we fail to remove the
restrictions on the Shares pursuant to the terms of the Settlement Agreement.
Preferred
Investment Option Inducement Transaction
The Company entered into a Preferred Investment Option Exercise and Inducement
Letter on December 29, 2023 (the “Inducement Letter”) with certain selling stockholders (the “Stockholders”),
the registered holders of existing (i) Series A preferred investment options to purchase shares of the Company’s common stock at
an exercise price of $2.20 per share, issued on October 25, 2022, as amended on May 24, 2023, (ii) Series C preferred investment options
to purchase shares of the Company’s common stock at an exercise price of $2.075 per share, issued on June 6, 2023, and (iii) Series
D preferred investment options to purchase shares of the Company’s common stock at an exercise price of $3.19 per share issued on
June 26, 2023 (the “Existing Investment Options”), pursuant to which the Stockholders agreed to exercise for cash their Existing
Investment Options to purchase an aggregate of 1,685,682 shares of the Company’s common stock, at a reduced exercised price of $1.62
per share, in consideration for the Company’s agreement to issue new preferred investment options (the “Inducement Investment
Options”) to purchase up to an aggregate of 1,685,682 shares of the Company’s common stock at an exercise price of $1.50 per
share. The closings of the transactions contemplated by the Inducement Letter occurred on January 3, 2024. The Inducement Investment Options
are immediately exercisable from the date of issuance until five and one-half (5.5) years following the date of issuance. No other changes
to the Existing Investment Options were made.
Core-Business
Focus Program
On
May 15, 2023, the Board of Directors of the Company authorized, and the Company commenced, a core-business focus program while the
Company seeks to raise additional capital to continue development of the LIBERTY® Endovascular Robotic Surgical
System. This core-business focus program includes the cessation of research and development activities not related to the
LIBERTY® Endovascular Robotic Surgical System, including terminating the Company’s agreement with CardioSert
for, and returning and ceasing the maintenance of, that technology, and returning intellectual property relating to the SCS (ViRob) and TipCat to Technion
Research and Development Foundation.
Cost
Reduction Plan
In
addition to the core-business focus program described above, the Board of Directors of the Company authorized, and the Company commenced,
a cost reduction plan while the Company seeks to raise additional capital to continue development of the LIBERTY® Endovascular
Robotic Surgical System.
In May and June 2023 and in January 2024, we raised sufficient capital
that, together with the savings from the cost reduction plan, enabled us to continue our operations, including completion of the V&V
study, perform the GLP study and submit the IDE to the U.S. Food & Drug Administration. We also, as of November 1, 2023, recommenced
paying Rachel Vaknin, our CFO, and Simon Sharon, our CTO and General Manager, their regular salaries and benefits that were previously
reduced as a result of the cost reduction plan, and as of January 1, 2024, recommenced paying Harel Gadot, our CEO, and the independent
directors of our Board their regular salaries and benefits, or fees as the case may be, that were previously reduced as a result of the
cost reduction plan. We continue to seek new sources of capital to stabilize our finances and provide operating runway. In the event the
Company is not successful in raising additional capital, or if the results of the V&V study and first-in-human trials are not promising,
the Company may be forced to take more drastic actions to conserve capital or shut down operations entirely.
First-In-Human
Clinical Cases
On
January 29, 2024, we submitted an Investigational Device Exemption (IDE) application with the U.S. Food and Drug Administration, in
order to commence our pivotal clinical trial in humans, and as of the filing date of this Annual Report on Form 10-K, we are
continuing our interaction with the FDA regarding our IDE submission process. See “–Government Regulation–U.S.
Regulation–Description of the IDE process” below.
Israel-Hamas
War
On
October 7, 2023, the State of Israel, where the Company’s research and development and other operations are primarily based, suffered
a surprise attack by hostile forces from Gaza, which led to the declaration by Israel of the “Iron Swords” military operation.
This military operation and related activities are on-going as of the filing date of this Annual Report on Form 10-K.
The
Company has considered various ongoing risks relating to the military operation and related matters, including:
● A slowdown in the number of international flights in and out of Israel.
The
Company is closely monitoring how the military operation and related activities could adversely effect its anticipated milestones and
its Israel-based activities to support future clinical and regulatory milestones, including the Company’s ability to import materials
that are required to construct the Company’s devices and to ship them outside of Israel. As of the filing date of this Annual Report
on Form 10-K, the Company has determined that there have not been any materially adverse effects on its business or operations, but it
continues to monitor the situation, as any future escalation or change could result in a material adverse effect on the ability of the
Company’s Israeli office to support the Company’s clinical and regulatory activities. The Company does not have any specific
contingency plans in the event of any such escalation or change.
Industry
Overview
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 U.S. 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 U.S. 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 up-front capital expenditures.
Microbot believes that with the LIBERTY® Endovascular Robotic
Surgical System, coupled with its own NovaCross® products and other off-the-shelf products, it is well-positioned to deliver
a value-added endovascular robotic system, with a focus on improving the ease and access and enhancing the safety of endovascular interventions.
Strategy
Microbot’s
goal is to generate sales of its products, once they have received regulatory approval, by establishing the LIBERTY® Endovascular
Robotic Surgical System as the standard-of-care in the eyes of medical practitioners, 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 health care providers
and systems to demonstrate the key benefits of its products. Microbot’s strategy includes the following key elements:
Competition
LIBERTY®
Competitive Landscape
We believe the main competitor to the LIBERTY® Endovascular
Robotic Surgical System is the CorPath GRX vascular robotics system by Corindus Vascular Robotics, a Siemens Healthineers company. To
our knowledge, CorPath GRX system is FDA-approved and CE-marked for percutaneous coronary and vascular procedures, is CE-marked for neurovascular
interventions and is pending FDA approval for neurovascular interventions. Another competitor is Robocath (CE Marked for PCI only). 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 upfront capital expenditures. We also expect that we could be
competing with other technologies that are in different stages of development, including preclinical and without CE/FDA approvals, such
as LN Robotics and Endoways, of which additional competitive data will be required to better explore their respective positioning in the
competitive landscape.
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, some 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
LIBERTY® Endovascular Robotic Surgical System’s core technology is co-owned by Microbot and The Technion
Research and Development Foundation Ltd., or TRDF. The NovaCross® device is based on technologies acquired by
Microbot from Nitiloop Ltd. Microbot may 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 12 patents issued/allowed and 47 patent applications
pending worldwide. Microbot also holds 10 design patents issued/allowed and 5 design patents pending worldwide. It also has
registered trademarks in Israel, Europe, UK and the U.S. relating to the LIBERTY® Endovascular Robotic Surgical
System, and also has trademarks relating to its proprietary Microbot Medical wordmark and logo registered in Israel, Europe, and UK,
and pending in the U.S. and China, in addition to having registered trademarks for the “One & Done” wordmark in
Israel, Europe, the U.S., UK, and Japan. Microbot also has a registered trademark in the U.S. for the NovaCross
trademark.
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 2032 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 2032 and 2040.
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. During the second and third quarters of 2023, as a result of our core-business focus
program and our cost reduction plan, we ceased research and development activities relating to the SCS and TipCat platforms. As a result,
we returned intellectual property relating to the SCS (ViRob) and TipCat to TRDF.
The LIBERTY® Endovascular Robotic Surgical System, 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 the parties established the LIBERTY® Endovascular Robotic Surgical System 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 Israel has received grants from the Israeli Innovation Authority
(“IIA”) for participation in research and development since 2013 through December 31, 2023 totaling approximately $1.8 million.
This amount includes amounts received in 2023 of approximately $304,000, which are a portion of an additional grant from the IIA in the
amount of approximately NIS 1.6 million (approximately $447,000) approved by the IIA on June 1, 2023, to further finance the development
of the manufacturing process of the LIBERTY® Endovascular Robotic Surgical System.
In
addition, as a result of the agreement with CardioSert on January 4, 2018, Microbot Israel took over the liability to repay CardioSert’s
IIA grants in the aggregate amount of approximately $530,000, which liability will remain for so long as the Company continues to own
the CardioSert assets. As a result of CardioSert’s recent exercise to have the assets returned, we expect that this will cease
to be a liability upon return.
As
a result of the agreement with Nitiloop, on October 6, 2022, Microbot Israel took over the liability to repay Nitiloop’s IIA grants
in the aggregate amount of approximately $925,000.
In
relation to the IIA grants described above, the Company is obligated to pay royalties amounting to 3%-5% of its future sales of the products
relating to such grants.
The
grants are linked to the exchange rate of the dollar to the New Israeli Shekel and bears interest of SOFR per year (SOFR is a benchmark interest rate which replaced LIBOR).
The
repayment of the grants is contingent upon the successful completion of the Company’s research and development programs and generating
sales. The Company has no obligation to repay these grants, if the project fails, is unsuccessful or aborted or if no sales are generated.
The financial risk is assumed completely by the Government of Israel. The grants are received from the Government on a project-by-project
basis.
On December 11, 2022, the Company received approval for a grant from the
Ministry of Economy, in the amount of NIS 300,000 (approximately $83,000), for participation in expenses related to the LIBERTY®
Endovascular Robotic Surgical System in the U.S. market. As of December 31, 2023, the Company received approximately $27,000 of such amount.
In relation with the Ministry of Economy grant, the Company is obligated to pay royalties amounting to 3% of future sales of the LIBERTY®
Endovascular Robotic Surgical System up to the grant amount plus interest.
Microbot
expects to continue to access government funding in the future.
For
the fiscal years ended December 31, 2022 and 2023, respectively, Microbot incurred research and development expenses of approximately
$7,736,000 and $5,724,000.
Strategic
collaboration agreement with Stryker
On
December 22, 2021, the Company 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 the Company and Stryker
aims to integrate certain of Stryker’s instruments with the Company’s LIBERTY® Endovascular Robotic Surgical System to address certain
neurovascular procedures. The parties conducted discussions in the past to define the development plan; however, due to other strategic priorities, the collaboration is not
moving forward.
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.
During
2022 Microbot initiated the transfer to production by means of designing and building molds for plastic injection of parts which is a
more cost-effective method for producing high quantities compared to conventional machined production of these parts. Some molds are
already operative while others are being designed and built. We expect completing the molds during 2024.
On
August 4, 2023, we signed a Turn-Key Manufacturing Agreement with a subcontractor that is suited to assemble and test our products under
applicable regulatory requirements and regulations. As of the filing date of this Annual Report on Form 10-K, we are working with the
subcontractor to transfer the production to the subcontractor.
Commercialization
Microbot
has not yet established a sales, marketing or product distribution infrastructure for the LIBERTY® Endovascular Robotic
Surgical System or any other product candidate, which are still in development stages. Microbot plans to access the U.S. markets with
its initial device offerings through direct sales, distributors, as well as strategic partnerships. Microbot has not yet developed a
commercial strategy outside of the United States, but it most likely would utilize distributors and strategic partnerships.
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:
● 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:
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;
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.
Description
of the IDE process. The IDE will become effective 30 days after receipt by the FDA, unless
the FDA otherwise informs the sponsor prior to the 30-day period that the IDE is approved, approved with conditions, or disapproved. If
the FDA determines that additional information is required, the FDA may permit a clinical trial to proceed under a conditional approval.
In case of disapproval, the Company can continue its existing IDE process interaction with the FDA, and supply FDA with additional information
to obtain approval or 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:
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