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Share Capital

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

NOTE 6 - SHARE CAPITAL

Each share of the Series A Convertible Preferred Stock, par value $0.01 per share, issued by the Company in December 2016 and in May 2017 (the “Series A Convertible Preferred Stock”), was convertible, at the option of the holder, into 67 shares of common stock (1,000 shares of common stock before the Reverse Split), and conferred upon the holder dividend rights on an as converted basis. On December 12, 2018, the Company filed a Certificate of Elimination with respect to its Series A Convertible Preferred Stock and as of March 31, 2019, the Company did not have any Series A Convertible Preferred Stock issued or outstanding.

See Note 5 – “Commitment s and Contingencies-Agreement with CardioSert Ltd.,” with respect to the issuance of 6,738 shares of the Company’s common stock

Share Capital Developments

The authorized capital stock consists of 221,000,000 shares of capital stock, which consists of 220,000,000 shares of common par value $0.01 (the “Preferred Stock”). As of March 31, 2019, the Company had 4,307,666 shares of common stock issued and outstanding.

On December 27, 2016, the Company exchanged 655,962 shares (9,735,925 shares before the Reverse Split) or rights to acquire shares of its common stock, for 9,736 shares of a newly designated class of Series A Convertible Preferred Stock.

On January 5, 2017, the Company entered into a definitive securities purchase agreement with an institutional investor (the “Purchaser”) for the purchase and sale of an aggregate of 47,163 shares (700,000 shares before the Reverse Split) of common stock in a registered direct offering for $74.00 per share ($5.00 per share before the Reverse Split) or gross proceeds of $3,500. The Company paid the placement agent a fee of $210 plus reimbursement of out-of-pocket expenses, as well as other offering-related expenses.

On June 5, 2017, the Company entered into a Securities Purchase Agreement with certain institutional investors (the “Investors”) providing for the issuance and sale by the Company to the Investors of an aggregate of 252,652 shares (3,750,000 shares before the Reverse Split) of common stock, at a purchase price per share of $40.50 ($2.70 before the Reverse Split). The gross proceeds to the Company was $10,125 before deducting placement agent fees and offering expenses of $922. See Note 4 – “Commitments and Contingencies-Litigation” with respect to certain rescission rights awarded to two affiliated Investors.

On January 14, 2019, the Company entered into a Securities Purchase Agreement with an accredited institutional investor providing for the issuance and sale by the Company to the purchaser of an aggregate of (i) 330,000 shares of the Company’s common stock, at a purchase price per share of $6.50 and (ii) 125,323 pre-funded warrants each to purchase one share of common stock, at a purchase price per Pre-Funded Warrant of $6.49. The gross proceeds to the Company were approximately $3.0 million. The closing of the offering took place on January 15, 2019. The pre-funded warrants were exercised in full in January 2019.

On January 15, 2019, the Company entered into a Securities Purchase Agreement with certain accredited institutional investors providing for the issuance and sale by the Company to the purchasers of an aggregate of 590,000 shares of the Company’s common stock, at a purchase price per share of $10.00. The gross proceeds to the Company were approximately $5.9 million. The closing of the offering took place on January 17, 2019.

On January 23, 2019 the Company entered into a Securities Purchase Agreement with accredited institutional investors providing for the issuance and sale by the Company to the purchasers of an aggregate of 250,000 shares of the Company’s common stock, at a purchase price per share of $9.875. The gross proceeds to the Company were approximately $2.47 million. The closing of the offering took place on January 25, 2019.

Employee Stock Option Grant

In September 2014, Microbot Israel’s board of directors approved a grant of 26,906 stock options (403,592 stock options before the Reverse Split) (77,846 stock options as retroactively adjusted to reflect the Merger) to its CEO, through MEDX Venture Group LLC. Each option was exercisable into an ordinary share, at an exercise price of $12.00 ($0.80 before the Reverse Split) ($4.20 as retroactively adjusted to reflect the Merger). The stock options were fully vested at the date of grant.

On May 2, 2016, Microbot Israel’s board of directors approved a grant of 33,333 stock options (500,000 stock options before the Reverse Split) (96,482 as retroactively adjusted to reflect the Merger) to certain of its employees and directors. Each stock option was exercisable into an ordinary share, NIS 0.001 par value, of Microbot Israel, at an exercise price equal to the ordinary share’s par value. The stock options were fully vested at the date of grant. As the exercise price of the stock options is nominal, Microbot Israel estimated the fair value of the options as equal to the Company’s share price of $20.25 ($1.35 before the Reverse Split) ($7.05 as retroactively adjusted to reflect the Merger) at the date of grant.

On September 12, 2017, the Company adopted the 2017 Equity Incentive Plan (the “Plan”), which Plan authorizes, among other things, the grant of options to purchase shares of common stock to directors, officers and employees of the Company and to other individuals.

On September 14, 2017, the board of directors approved a grant of stock options to purchase an aggregate of up to 120,848 shares (1,812,712 shares before the Reverse Split) of common stock to Mr. Harel Gadot, the Company’s Chairman of the Board, President and CEO, at an exercise price per share of $15.75 ($1.05 before the Reverse Split). The stock options vest over a period of 3-5 years as outlined in the option agreements. As a result, the Company recognized compensation expenses for the three months ended March 31 2019 and 2018 in total amount of $120 and $219 respectively included in general and administrative expenses.

On September 14, 2017, the board of directors approved a grant of stock options to purchase an aggregate of up to 72,508 shares (1,087,627 shares before the Reverse Split) of common stock to Mr. Hezi Himelfarb, the Company’s General Manager, COO and a member of the Board, at an exercise price per share of $19.35 ($1.29 before the Reverse Split). The grant was subject to the Israeli Tax Authority’s approval of the plan which occurred on October 14, 2017. In accordance with the option agreement, the options vest for period of 3 years starting from the grand date. As a result, the Company recognized compensation expenses for the three months ended March 31 2019 and 2018 in total amount of $108 and $108 respectively included in general and administrative expenses.

On December 6, 2017, the board of directors approved a grant of 12,698 stock options (190,475 stock options before the Reverse Split) to purchase an aggregate of up to 12,698 shares of common stock to certain of its directors, at an exercise price per share of $15.75 ($1.05 before the Reverse Split). The stock options vest over a period of 3 years as outlined in the option agreements. As a result, the Company recognized compensation expenses for the three months ended March 31 2019 and 2018 in total amount of $13 and $15 respectively included in general and administrative expenses.

On December 28, 2017, the board of directors approved a grant of 66,036 stock options (990,543 stock options before the Reverse Split) to purchase an aggregate of up to 66,036 shares of common stock to certain of its employees, at an exercise price per share of $15.3 ($1.02 before the Reverse Split). The stock options vest over a period of 3 years as outlined in the option agreements. As a result, the Company recognized compensation expenses for the three months ended March 31 2019 and 2018 in total amount of $39 and $71 respectively included in general and administrative expenses and research and development expenses.

On November 2017, certain employees and consultant exercised 31,453 options (471,794 options before the Reverse Split) to 31,453 ordinary shares at exercise price of 0.001 NIS.

In February 2018, an employee exercised options to purchase 2,487 shares (37,300 shares before the Reverse Split) of common stock at an exercise price of $0.001 per share.

On August 13, 2018, the board of directors approved a grant of stock options to purchase an aggregate of up to 10,000 shares (150,000 shares before the Reverse Split) of common stock to Mr. Simon Sharon, the company’s CTO, at an exercise price per share of $9 ($0.6 before the Reverse Split). The grant was subject to the Israeli Tax Authority’s approval of the plan which occurred on October 14, 2017. In accordance with the option agreement, the options vest for period of 3 years starting from the grand date. As a result, the Company recognized compensation expenses for the three months ended March 31 2019 and 2018 in total amount of $11 and $0 respectively included in research and development expenses.

On January 21, 2019, the board of directors approved a grant of 11,630 stock options to purchase an aggregate of up to 11,630 shares of common stock to certain of its directors, at an exercise price per share of $8.60. The stock options vest over a period of 3 years as outlined in the option agreements. As a result, the Company recognized compensation expenses in the amount of $24 included in general and administrative expenses for the three months ended March 31, 2019.

A summary of the Company’s option activity related to options to employees and directors, and related information is as follows:

		For the three months ended March 31, 2019
		Number of stock options				Weighted average exercise price				Aggregate intrinsic value

Outstanding at beginning of period			398,308			$	11.50			$	108
Granted			11,630				8.6				-
Exercised			-				-				-
Cancelled			-				-				-
Outstanding at end of period			409,938			$	11.38			$	761
Vested at end of period			265,989			$	8.95			$	761

		For the year ended December 31, 2018
		Number of stock options				Weighted average exercise price				Aggregate intrinsic value
Outstanding at beginning of period			414,965			$	11.70			$	1,859
Granted			10,000				9				-
Exercised			(2,487	)			-				-
Cancelled			(24,170	)			-				-
Outstanding at end of period			398,308			$	11.50			$	108
Vested at end of period			245,010			$	8.45			$	108

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the common stock and the exercise price, multiplied by the number of in-the-money stock options on those dates that would have been received by the stock option holders had all stock option holders exercised their stock options on those dates.) as of March 31, 2019 and December 31, 2018 respectively.

The stock options outstanding as of March 31, 2019 and December 31, 2018, separated by exercise prices, are as follows:

Exercise price $		Stock options outstanding as of March 31, 2019				Stock options outstanding as of December 31, 2018				Weighted average remaining contractual life – years as of March 31, 2019				Weighted average remaining contractual life – years as of December 31, 2018				Stock options exercisable as of March 31, 2019				Stock options exercisable as of December 31, 2018

4.20			77,846				77,846				6.75				7.00				77,846				77,846
15.75			133,546				133,546				8.50				8.75				61,387				53,752
8.6			11,630				-				9.75				-				2,905				-
9.00			10,000				10,000				9.50				9.75				2,500				-
19.35			72,508				72,508				8.50				8.75				34,442				29,003
15.30			41,866				41,866				8.75				9.00				24,367				21,867
(*)			62,542				62,542				7.50				7.75				62,542				62,542
			409,938				398,308				6.75				7.00				265,989				245,010

(*) Less than $0.01.

Compensation expense recorded by the Company in respect of its stock-based employee compensation awards in accordance with ASC 718-10 for the three months ended March 31, 2019 and 2018 was $ 315 and $412, respectively.

The fair value of the stock options is estimated at the date of grant using Black-Scholes options pricing model with the following weighted-average assumptions:

		Three months ended March 31, 2019				Year ended December 31, 2018

Expected volatility			144.4	%			99.4	%
Risk-free interest			1.64	%			2.39	%
Dividend yield			0	%			0	%
Expected life of up to (years)			6.37				5.24

Shares issued to service provider

On May 24, 2018 the Company issued an aggregate of 6,738 nonrefundable shares (100,000 nonrefundable shares before the Reverse Split) of common stock to CardioSert as part of certain patent acquisition. The Company recorded expenses of approximately $74 with respect to the issuance of these shares included in research and development expenses.

Warrants

The remaining outstanding warrants and terms as of March 31, 2019 and December 31, 2018 are as follows:

Issuance date		Outstanding as of December 31, 2018				Outstanding as of March 31, 2019				Exercise Price				Exercisable as of March 31, 2019				Exercisable Through

Series A (2013)			181				181			$	2,754				181				April 2023
Series A (2015)			676				676			$	1,377				676				April 2020
Series B (2016) (a)			2,741				2,741			$	40.5				2,741				March 2022

These warrants contain a full ratchet anti-dilution price protection so that, in most situations upon the issuance of any common stock or securities convertible into common stock at a price below the then-existing exercise price of the outstanding warrants, the warrant exercise price will be reset to the lower common stock sales price.

Prior to January 1, 2019, warrants with non-standard anti-dilution provisions (referred to as down round protection) were classified as liabilities and re-measured each reporting period. On January 1, 2019, the Company adopted the provisions of ASU 2017-11, which indicates that a down round feature no longer precludes equity classification when assessing whether an investment is indexed to an entity’s own stock. The Company used a full retrospective approach to adoption, and restated its financial statements as of the earliest period presented. (See note 2)

Repurchase of Shares

The Company had intended to enter into a definitive agreement with up to three Israeli shareholders, some of whom are directors of the Company, that were former shareholders of Microbot Israel, pursuant to which the Company would repurchase, at a discount on the fair value of the share at the date of repurchase, up to $500 of common stock held by them, in the aggregate, if and to the extent such shareholders are unable to sell enough of their shares to cover certain of their Israeli tax liabilities resulting from the Merger. Such repurchase(s), if any, would occur only after the two-year anniversary of the Merger. The transaction would have been subject to negotiating final terms and entering into definitive agreements with such shareholders.

The Company evaluated whether an embedded derivative that requires bifurcation exists within such shares that may be subject to repurchase. The Company concluded the fair value of such derivative instrument would be nominal and, in any case, would represent an asset to the Company as (a) the settlement requires acquiring the shares at a discount on the fair market value of the share at the time of re purchase and in no circumstances the acquisition price will be higher than approximately one dollar per share (representing 25% discount on the fair market value of the share at the merger closing date) and (b) it is assumed that the selling shareholders would use such right as last resort as such repurchase at a discount on the fair market value of such shares results in a loss to be incurred by the selling shareholders.

In accordance with ASC 480-10-S99-3A (formerly EITF D-98), the Company classified the maximum amount it may be required to pay in the event the repurchase right is exercised ($500) as temporary equity.

As of December 31, 2018, the Company determined that no obligation remained to enter into any such definitive agreement as the two-year anniversary of the Merger was in November 2018 and therefore there was no liability for the Company to repurchase any shares from the three Israeli shareholders.