Microbot Medical Inc.
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K (Mark One) [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 2017 [ ]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 or Other Jurisdiction ofIncorporation or Organization) (I.R.S. EmployerIdentification No.) 25 Recreation Park Drive, Unit 108Hingham, 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 className of each exchange on which registeredCommon Stock, Par value $0.01NASDAQ 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 [X] 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 [X] 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 1934during 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 filingrequirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data file required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months/(or for such shorter period thatthe registrant was required to submit and post such files). Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and willnot be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] (Do not check if smaller reporting company)Smaller reporting company [X] 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 orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] 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 thecommon 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 $40,850,000 Common stock outstanding as of March 30, 2018: 42,120,427 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 financialperformance. 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. Thesestatements 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 12 of this report, which may cause our or our industry’s actual results, levels of activity or performance to bematerially 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.Business1Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments26Item 2.Properties26Item 3.Legal Proceedings27Item 4.Mine Safety Disclosures27 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities27Item 6.Selected Financial Data28Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations28Item 7A.Quantitative and Qualitative Disclosures about Market Risk32Item 8.Financial Statements and Supplementary Data33Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure33Item 9A.Controls and Procedures33Item 9B.Other Information33 PART III Item 10.Directors, Executive Officers and Corporate Governance33Item 11.Executive Compensation37Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters41Item 13.Certain Relationships and Related Transactions, and Director Independence42Item 14.Principal Accountant Fees and Services43 PART IV Item 15.Exhibits and Financial Statement Schedules44 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 andindirectly wholly-owned subsidiaries and, unless the context otherwise requires, the historical business, financial statements and operations of Microbot areof Microbot Medical Ltd., an Israeli corporation (“Microbot Israel”) which became a wholly-owned subsidiary of the Company on November 28, 2016.“StemCells” or “StemCells, Inc.” refers to the Company prior to its merger transaction with Microbot Israel. i PART I Item 1. Description of Business. The Company We are a pre-clinical medical device company specializing in the research, design and development of next generation micro-robotics assisted medicaltechnologies targeting the minimally invasive surgery space. The Company is primarily focused on leveraging its micro-robotic technologies with the goalof improving surgical outcomes for patients. Microbot is currently developing its first two product candidates: the Self Cleaning Shunt, or SCS, for the treatment of hydrocephalus and Normal PressureHydrocephalus, or NPH; and TipCAT, a self-propelling, semi-disposable endoscope that is being developed initially for use in colonoscopy procedures.Microbot’s product candidates are being designed to bring greater functionality to conventional medical devices and to reduce the known risks associatedwith such devices. Microbot is currently aiming to complete pre-clinical studies required for regulatory submission for both product candidates within thenext 12 months. Microbot currently holds an intellectual property portfolio that comprises nine patent families, which include nine patents granted in the United States,twelve patents granted outside the United States, and fifteen patent applications pending worldwide. We have an exclusive license to key components of ourexisting technology. On January 4, 2018, we entered into an agreement to acquire a novel patent-protected technology from CardioSert Ltd., a privately-held medical devicecompany based in Israel. The acquisition is expected to close within 90 days of the agreement, at which time, with the addition of CardioSert’s issued U.S.patent and three patent applications pending worldwide, Microbot would have a patent portfolio of 25 issued/allowed patents and 15 patent applicationspending worldwide. Our Company was incorporated on August 2, 1988 in the State of Delaware under the name Cellular Transplants, Inc. The original Certificate ofIncorporation was restated on February 14, 1992 to change the name of the Company to CytoTherapeutics, Inc. On May 24, 2000, the Certificate ofIncorporation as restated was further amended to change the name of the Company to StemCells, Inc. On November 28, 2016, C&RD Israel Ltd. (“MergerSub”), a wholly-owned subsidiary of the Company, completed its merger with and into Microbot Medical Ltd. (“Microbot Israel”), with Microbot Israelsurviving as a wholly-owned subsidiary of the Company (the “Merger”). On November 28, 2016, in connection with the Merger, the Company changed itsname from “StemCells, Inc.” to Microbot Medical Inc., and each outstanding share of Microbot Israel capital stock was converted into the right to receiveshares of our common stock. In addition, all outstanding options to purchase the ordinary shares of Microbot Israel were assumed by the Company andconverted into options to purchase shares of the Common Stock of Microbot Medical Inc. On November 29, 2016, the stock of the Company began tradingon the Nasdaq Capital Market under the symbol “MBOT”. Prior to the Merger, the Company was 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 thestem cell business were sold on November 29, 2016. Industry Overview Shunt Systems Hydrocephalus is a medical condition in which there is an abnormal accumulation of cerebrospinal fluid, or CSF, in the brain that can cause increasedintracranial 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 livewith 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. Normal Pressure Hypocephalus (“NPH”) is a type of hydrocephalus that usually occurs in olderadults. NPH is generally treated as distinct from other types of hydrocephalus because it develops slowly over time. In NPH, the drainage of CSF is blockedgradually 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 thelumbar subarachnoid space) to another part of the body where the fluid can be more readily absorbed. Hydrocephalus shunt designs have changed little sincetheir introduction in the 1950s. A shunt system typically consists of three parts: the distal tubing or shunt (a flexible and sturdy plastic tube), the ventricularcatheter (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 distalcatheter 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 as well. For example, approximately 50% of shunts used in thepediatric population fail within two years of placement and repeated neurosurgical operations are often required. Ventricular catheter blockage, orocclusions, 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 thatcauses 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 theshunt system. In the event of shunt occlusion, CSF begins to accumulate in the brain or lumbar region again and the symptoms of untreated hydrocephaluscan reappear until a shunt replacement surgery is performed. 1 Although several companies are active in the field of hydrocephalus treatment and the manufacturing of shunt systems and shunt components, Microbotbelieves that the majority of those companies are focusing on the development of valves. The development of a “smart shunt” – a shunt that could providedata 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 themost part at an academic and conceptual level only. Reports of smart shunt technologies are typically focused on a subset of components with remainingfactors left unspecified, such as hardware, control algorithms or power management. Microbot does not believe that a smart shunt that can prevent functionalfailures has been developed to date. Because of the limited innovation in this area, Microbot believes an opportunity exists to provide patients suffering fromhydrocephalus or NPH with a more effective instrument for treating their condition. Endoscopic Equipment Endoscopes are medical devices used to look inside a body cavity or organ with minimally invasive surgery. The North American flexible endoscopes marketwas valued at $1.27 billion in 2013, and is expected to reach $1.91 billion by 2018, at a CAGR of 8.5% during the period 2013 to 2018. Colonoscopy is a procedure that allows a physician to examine the colon using an endoscope. It is a commonly performed procedure for the diagnosis andtreatment of a range of conditions, including for the screening and surveillance of colorectal neoplasia, or colorectal cancer. Annually, between 15 and 20million endoscopy procedures are conducted in the United States with reusable endoscope devices to screen various sections of a patient’s gastrointestinal, orGI, tract. However, according to data from the American Cancer Society, it is estimated that over 50,000 Americans will die from colorectal cancer andapproximately 95,500 new cases of colon cancer will be diagnosed in 2017. It is the third leading cause of cancer deaths in spite of being highly preventablewith early identification and removal of colorectal adenomas, or polyps. Colonoscopy with removal of colorectal polyps has been shown to be the mosteffective way of preventing colorectal cancer. And colonoscopy is generally considered the gold standard for the detection and treatment of adenomas.However, using current colonoscopic technology, approximately 30% of polyps are missed. In addition, the technique remains underutilized – less than 50%of eligible Americans, based on guidelines established by organizations including the American Cancer Society, United States Preventive Services TaskForce, and U.S. Multi-Society Task Force on Colorectal Cancer, have undergone screening, with more than 45% of colon cancers being diagnosed at a timewhen the cancer has become incurable. This reluctance can be linked to patients’ general discomfort associated with the colonoscopy screening procedure,due to the use of mechanical force to insert the endoscope into the colon. The procedure is widely perceived to be uncomfortable, and it also can sometimesdamage or perforate the bowel wall. Colonoscopy techniques that improve the Adenoma Detection Rate, or ADR, and reduce patient discomfort could optimize the potential of colonoscopy forthe prevention of colorectal cancer. Microbot believes that it has the potential to develop a robotic endoscope product that addresses this issue of patientdiscomfort, which it believes will improve patients’ willingness to get this important screening test – with the additional benefit of providing a new tool tohealth care practitioners for use in the identification and treatment of colorectal polyps. Microbot’s Product Pipeline Self-Cleaning Shunt (SCS) The Self-Cleaning Shunt, or SCS, device is designed to act as the ventricular catheter portion of a CSF shunt system that is used to relieve hydrocephalus andNPH. 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 valvescurrently on the market; therefore, the successful commercialization of the SCS is not dependent on any single shunt system. Initially, Microbot expects theSCS 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 SCSdevice 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 accumulationand 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 itsdistal end. The internal cleaning mechanism is embedded in the lumen of the titanium tip. Once activated, the cleaning mechanism keeps tissue from enteringthe 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 externallygenerated by the patient through a user-friendly headset that transmits the magnetic field at a pre-determined frequency and operating sequence protocol. Themagnetic 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 locationwhere the valve is located. The circuit board assembly converts the magnetic field into the power necessary to activate the cleaning mechanism within theproximal part of the ventricular catheter. 2 Microbot has completed the development of an SCS prototype and is currently completing the safety testing, general proof of concept testing andperformance testing for the device, which Microbot began in mid-2013. Microbot had a pre-submission meeting with the FDA in mid-2014. On January 27,2017, Microbot entered into a research agreement with The Washington University in St. Louis to develop the protocol for and to execute the necessaryanimal study to determine the effectiveness of the Microbot’s SCS prototype. The initial research was completed in 2017, and a comprehensive study isexpected to be completed in 2018. Upon the completion of animal studies, Microbot may conduct clinical trials if they are requested by the FDA or ifMicrobot decides that the data from such trials would improve the marketability of the product candidate. Microbot believes that the study results of its firstgeneration SCS device should be submitted to the FDA by late 2018. The proposed indication for use of the SCS device would be for the treatment ofhydrocephalus as a component of a shunt system when draining or shunting of CSF is indicated. Additionally, Carolyn Harris, PhD at Wayne State University (WSU) in Detroit, runs an in vitro study of our SCS device. The main objective of this study is totest and finalize the design of Microbot’s SCS, using Dr. Harris’ bio-reactor system that mimics human brain tissue three-dimensionally. Microbot may also conduct clinical trials for the SCS in other countries where such trials are necessary for Microbot to sell its SCS device in such country’smarket, although it has no current plans to do so. TipCAT The TipCAT is a semi-disposable, flexible, self-propelled endoscope. A mechanism comprising a series of interconnected balloons at the device’s tipprovides the TipCAT with its forward locomotion capability. The device has the capability to self-propel within natural tubular lumens such as the colon,blood vessels, and the urinary tract. The TipCAT is designed to be fully-equipped with a contemporary endoscope, including a high-quality camera, steeringcapability while maintaining a standard working channel for treatments. The TipCAT thus offers functionality and visualization features equivalent tomodern endoscopes, along with unique advantages associated with its physiologically adapted self-propelling mechanism, flexibility, and design. The TipCAT consists of two parts: ●A disposable self-propulsion module, which is a series of interconnected, sequentially inflatable balloons constructed on an inner tube (i.e., theworking channel); and ●A re-usable module isolated from contact with the tissue/body fluids, containing a camera, LED lighting and a steering system. In the self-propulsion module, the air to inflate the balloons is supplied from a single channel. The sequential inflating and deflating of the balloons createsan inchworm-like forward motion. Therefore, unlike standard endoscopes, the TipCAT does not need to be mechanically forced into the patient’s lumenusing 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 ofthe lumen under examination regardless of the topography, be less operator dependent, and greatly reduce the likelihood of damage to lumen structure. Furthermore, Microbot believes that use of the TipCAT will improve ADR by straightening the intestinal topography, smoothing colon topography andimproving tissue visualization. In addition, by incorporating the TipCAT in therapeutic procedures, Microbot believes that the inflated balloons will providethe additional benefits of assisting the physician in centralizing endoscope optics and allowing for the colonoscope to be secured in each treatment positionthroughout the procedure, resulting in more efficient and effective procedures. The TipCAT is also designed such that only disposable parts are in direct contact with the lumen tissue, which should eliminate the risk of crosscontamination between patients and the need for post-use reprocessing. Reducing dependence on reprocessing procedures is important from a regulatoryperspective because safety issues related to the reprocessing of reusable medical devices are a growing concern for regulatory authorities. 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, theprototype device was tested in a live animal experiment and successfully self-propelled through segments of the animal’s colon, with no post-proceduraldamage. All tests were conducted at AMIT (Alfred Mann Institute of Technology at the Technion), prior to the licensing of TipCAT by Microbot. Microbot iscurrently reviewing the design and general proof of concept of the TipCAT and working with experts in the field to define the optimal design, which isexpected to be followed by animal studies during 2017 and 2018. Upon completion, Microbot may conduct clinical trials if they are requested by the FDA orif Microbot decides that the data from such trials would improve the marketability of the product candidate. Regulatory approval or clearance for marketingthe TipCAT colonoscope in the United States is targeted to occur soon after the applicable animal and/or clinical trials are completed, depending on whenthe applicable premarket submission is finalized and filed with FDA, and Microbot’s ability to raise money and conduct the necessary trials for approval. Microbot also plans to further develop the TipCAT for application for other diagnostic and therapeutic endoscopic procedures outside of colonoscopy, suchas Chronic Total Occlusion, or CTO, urethroscopy and catheterization. 3 Microbot may conduct clinical trials for the TipCAT in other countries where such trials are necessary for Microbot to sell its TipCAT device in suchcountry’s market, although it has no current plans to do so. Strategy Microbot’s goal is to generate sales of its products, once they have received regulatory approval, by establishing SCS and TipCAT devices 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 thatit can achieve this objective by working with hospitals to demonstrate the key benefits of its products. Microbot’s strategy includes the following keyelements: ●Continue to refine existing product candidates and develop additional micro-robotic solutions. As Microbot prepares to bring its initialproduct candidates through pre-clinical and clinical trials, if necessary, and eventually to market, it continues to focus on improving its productcandidates to respond to clinical data and patient and physician feedback. Microbot also expects to continue to innovate in the micro-roboticsfield by continuing to find ways of using its technology to solve unmet needs, with the overarching goal of providing a safer, more effective andmore efficient surgical environment for patients and physicians. ●Establish and leverage relationships with key institutions and leading clinicians. Microbot intends to develop relationships with a relativelysmall number of hospitals and clinics through its clinical stage. Microbot’s objective will be to maintain clinical focus with such hospitals andclinics so as to establish the SCS and TipCAT as the standard of care in such institutions for their respective procedures. Microbot also expectsto identify key clinicians in the hydrocephalus and colonoscopy specialties with the expectation that such clinical focus will accelerate theadoption of its candidate products. ●Continuously invest in research and development. Microbot’s most significant expense has historically been research and development, andMicrobot expects that this will continue in the foreseeable future, including expenses it expects to incur to improve on its prototype products inorder 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 onpursuing collaborations with global medical device companies that have established sales and distribution networks. Microbot will seek toenter 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 exploringnew technologies, IP and know-how to add to its current portfolio and to allow Microbot to enter new spaces and strengthen its overall productportfolio. 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 shuntsystem. 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-marketstrategy is the development of strategic partnerships with leading global medical device companies with ready sales and distribution channels. Outside of astrategic partnership, it is most likely that Microbot’s SCS product will be initially used in shunt replacement surgeries to replace occluded ventricularcatheters. Accordingly, Microbot intends to establish key hospital and clinic relationships that will allow it to diffuse the technology among experts andother 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 inhydrocephalus and NPH shunt procedures. TipCAT Opportunities Microbot expects that its initial go-to-market strategy for the TipCAT will be to establish key hospital and clinic relationships in the field of colonoscopythat will allow Microbot to introduce and then diffuse the technology among colonoscopy experts and other stakeholders. Generally, Microbot expects thehospitals and clinics selected for the TipCAT clinical trials to also start using the product commercially, which will help to promote and support marketuptake of the TipCAT product. Because Microbot expects the use of the TipCAT to increase the number of colonoscopy procedures that can be performed atany such facility, Microbot will seek to promote the technology among the doctors and experts involved in the distribution and buying groups within suchselected partner hospitals. 4 Competition SCS Competitive Landscape Several academic research groups, such as at the New Jersey Institute of Technology, are currently researching sensing and obstruction-resistant catheterdesigns, and the Smart Sensors and Integrated Microsystems (SSIM) Program at Wayne State University has publicized that it is engaging in smart shuntdevelopment activity. However, based on its knowledge of the patented technologies, Microbot believes that these technologies are still early in the researchand development cycle. The SCS also faces non-direct competition from Aqueduct Neurosciences, Inc., which is developing a non-shunt, electro-mechanicaltechnology platform to control the draining of cerebrospinal fluid. 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 acomponent 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 The market for endoscopy products is highly competitive with several players operating both at a global and regional level. The leading players in thecolonoscopy space are Pentax, Fuji and Olympus, which dominate the U.S. market for reusable colonoscopes. However, Microbot believes that the mostrelevant competitors to TipCAT are smaller companies such as GI View and SMART Medical Systems, which produce disposable, self-propelledcolonoscopes. GI View produces a colonoscope with 360° omni-directional visualization and offers self-propelled intubation created using balloons and low pressure CO2gas. In addition, the GI View product is single use and disposable. SMART Medical Systems’ product, which, according to publicly available information is being commercialized by Pentax, is introduced by a physicianthrough a standard colonoscope’s tool channel and uses its balloon technology to anchor the bowel, which enables the colonoscope to be maneuveredbeyond challenging lumen sections. Microbot believes the TipCAT can successfully compete against its relevant competitors in that it offers all of the following attributes: ●the ability to have varied dimensions during insertion and any subsequent point of a procedure, so as to accommodate the particular diametersof the organ at any moment, allows for the straightening of an organ’s topography and improved visualization; ●disposability, which protects against cross-contamination; ●a working channel for therapeutic interventions (and additional visualization capabilities); ●lower cost; and ●a self-propelling mechanism, allowing for passage through challenging anatomical structures while eliminating tissue trauma. Some of Microbot’s competitors currently have significantly greater resources than Microbot does; have established relationships with healthcareprofessionals, customers and third-party payors; and have long-term contracts with group purchasing organizations in the United States. In addition, many ofMicrobot’s competitors have established distributor networks, greater resources for product development, sales and marketing, additional lines of productsand the ability to offer financial incentives such as rebates, bundled products or discounts on other product lines that Microbot cannot provide. Microbot’s products could also be rendered obsolete or uneconomical by technological advances developed in the future by existing or new competitors. Intellectual Property General Microbot is currently developing its first two product candidates, the SCS and TipCAT based on technological platforms licensed from The TechnionResearch and Development Foundation Ltd., or TRDF, as further discussed below, and Microbot plans to develop other micro-robotic solutions throughinternal research and development, to strengthen its intellectual property position, and continue exploring strategic collaborations and accretive acquisitionopportunities. Microbot currently holds an intellectual property portfolio that includes 9 patent families, which include 9 patents granted in the US, 12patents granted outside the US, and 15 patent applications pending worldwide. In addition, if and when we acquire a novel patent-protected technology fromCardioSert Ltd., a privately-held medical device company based in Israel, with the addition of CardioSerts’ issued U.S. patent and three patent applicationspending worldwide, Microbot would have a patent portfolio of 25 issued/allowed patents and 15 patent applications pending worldwide. 5 Microbot relies or intends to rely on intellectual property licensed or developed, including patents, trade secrets, trademarks, technical innovations, laws ofunfair competition and various licensing agreements, to provide its future growth, to build its competitive position and to protect its intellectual property. AsMicrobot continues to expand its intellectual property portfolio, it is critical for Microbot to continue to invest in filing patent applications to protect itstechnology, inventions, and improvements. Microbot requires its employees and consultants to execute confidentiality agreements in connection with their employment or consulting relationships withMicrobot. Microbot also requires its employees and consultants who work on its product candidates to agree to disclose and assign to Microbot allinventions 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 betweenthe actual discoveries and the filing of related patent applications and the time when discoveries are published in scientific and patent literature. Patentsissued and patent applications filed relating to medical devices are numerous, and there can be no assurance that current and potential competitors and otherthird 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 additionalproprietary rights relating to product candidates, products, devices or processes used or proposed to be used by Microbot. Microbot believes that thetechnologies 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 thirdparties 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’sproducts and systems. The medical device industry in general has been characterized by substantial litigation regarding patents and other intellectual property rights. Any suchclaims, 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 protectMicrobot’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 ofeach such patent, or to redesign Microbot’s products, devices or processes to avoid infringement. There can be no assurance that such licenses would beavailable or, if available, would be available on terms acceptable to Microbot or Microbot would be successful in any attempt to redesign products orprocesses to avoid infringement. Accordingly, an adverse determination in a judicial or administrative proceeding or failure to obtain necessary licensescould prevent Microbot from manufacturing and selling its products. Issued U.S. patents which cover Microbot’s product candidates will expire between 2026 and 2032, excluding any patent term extensions that might beavailable following the grant of marketing authorization. Issued patents outside of the United States directed to Microbot’s product candidates will expirebetween 2026 and 2032. 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 towhich it obtained an exclusive, worldwide, royalty-bearing, sub-licensable license to certain patents and inventions relating to the SCS and TipCATtechnology platforms invented by Professor Moshe Shoham, a director of and advisor to the Company, and in certain circumstances other TRDF-relatedpersons. Pursuant to the terms of the license agreement, in order to maintain the license with respect to each platform, Microbot must use commerciallyreasonable efforts to develop products covered by the license, including meeting certain agreed upon development milestones. The milestones for SCSinclude commencing initial studies in humans by December 2018 and commencing a full clinical trial, if necessary, by December 2019. The milestones forTipCAT include commencing initial studies in humans, if needed, by December 2018 and commencing a full clinical trial, if necessary, by December 2020.Failure to meet any development milestone will give TRDF the right to terminate the license with respect to the technology underlying the missed milestone.Although Microbot expects to meet the milestone requirements, TRDF has demonstrated flexibility with respect to amending the terms of the license toextend the milestone dates. 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 andoutstanding 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 productscovered 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 fromMicrobot with respect to improvements to the licensed technologies made by Microbot. In such cases, TRDF would pay a royalty of 10% of the incomereceived by TRDF in connection its sublicensing of such patent right and related intellectual property. If the license from TRDF were to be terminated withrespect with either of the technology platforms underlying the SCS or the TipCAT, Microbot would no longer be able to continue its development of therelated 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. 6 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-timebasis or as consultants, or through partnerships with industry leaders in manufacturing and design and researchers in academia. Microbot is also working withsubcontractors 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 itscandidate products and to advance the development of proposed products. Microbot has received funds from the Israeli Innovation Authority (formerly known as the Office of the Chief Scientist in Israel), for research anddevelopment activities. Microbot received a grant from the Israeli Innovation Authority in 2012, which grant reimbursed Microbot for 50% of its researchand development expenses, up to $764,466. This first grant from the Israeli Innovation Authority ended in 2014. After the expiration of the first grant,Microbot received approval for an additional grant from the Israeli Innovation Authority which reimbursed Microbot for 50% of its research anddevelopment expenses for the period from May 1, 2014 through September 30, 2015, up to $924,166. After the expiration of the second grant, Microbotreceived an approval for a third grant from the Israeli Innovation Authority which reimbursed Microbot for 50% of its research and development expenses forthe period from May 1, 2016 through April 30, 2017, up to $1,026,050. In November 2017, Microbot was awarded an additional non-dilutive grant of up to 2,610,000 Israeli New Shekels (approximately $735,000) from the IsraelInnovation Authority. The grant provides additional sources to be utilized by Microbot for the continued development of the Self-Cleaning Shunt for thetreatment of hydrocephalus and Normal Pressure Hydrocephalus. The grant funds may be used for or applied towards a number of research and developmentexpenses, such as employees’ salaries, research and development expenses (including materials, as well as professional and consulting fees. The recoveriesare recognized in the corresponding period when such expenses are incurred. With respect to such grant, Microbot is committed to pay royalties, as, if andwhen it successfully commercializes the SCS and generates revenue from sales of the SCS, at a rate of between 3% to 3.5% on sales proceeds up to the totalamount of grants received, linked to the dollar, plus interest at an annual rate of USD LIBOR. Under the terms of the grant and applicable law, Microbot isrestricted from transferring any technologies, know-how, manufacturing or manufacturing rights developed using the grant outside of Israel without the priorapproval of the Israel Innovation Authority. Microbot has no obligation to repay the grant, if the SCS project fails, is unsuccessful or aborted before any salesare 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, 2017, Microbot incurred research and development expenses of approximately $1,100,000 compared to research anddevelopment expenses of $901,000 for the fiscal year ended December 31, 2016. Microbot has already made plans to develop a second version of its SCS device that will have an embedded controller and battery. This alternative designwill allow the cleaning mechanism to be automatically activated, without the need for the patient’s involvement in the activation process. On January 27, 2017, Microbot entered into a research agreement with The Washington University in St. Louis to develop the protocol for and to execute thenecessary animal study to determine the effectiveness of the Microbot’s SCS prototype. The initial research was completed in 2017, and a comprehensivestudy is expected to be completed in 2018. Upon the completion of animal studies, Microbot may conduct clinical trials if they are requested by the FDA orif Microbot decides that the data from such trials would improve the marketability of the product candidate. Manufacturing Microbot does not have any manufacturing facilities or manufacturing personnel. Microbot currently relies, and expects to continue to rely, on third partiesfor the manufacturing of its product candidates for preclinical and clinical testing, as well as for commercial manufacturing if its product candidates receivemarketing 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 for hydrocephalus, NPH, and colonoscopy with its initial device offerings through strategic partnerships but maydevelop its own focused, specialized sales force or distribution channels once it has several commercialized products in its portfolio. Microbot has not yetdeveloped 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, ifMicrobot 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 andenforced 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 thatmedical products distributed domestically are safe and effective for their intended uses. Regulatory policy affecting its products can change at any time. 7 Advertising and promotion of medical devices in the United States, in addition to being regulated by the FDA, are also regulated by the Federal TradeCommission and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products of other companies have beenthe subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes. In addition, under the federal Lanham Actand 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 shortnotice. Other regulations Microbot encounters in the United States and in other jurisdictions are the regulations that are common to all businesses, such asemployment legislation, implied warranty laws, and environmental, health and safety standards, to the extent applicable. In the future, Microbot will alsoencounter 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 areperformed 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. Theseinclude: ●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-partymanufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of themanufacturing 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 amajor change in intended use; ●Medical Device Reporting regulations (MDR), which require that manufacturers keep detailed records of investigations or complaints against theirdevices 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 wouldlikely 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 orprocesses 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 datafor the device; and ●notices of correction or removal and recall regulations. 8 Unless an exemption applies, before Microbot can commercially distribute medical devices in the United States, Microbot must obtain, depending on theclassification of the device, either prior 510(k) clearance, 510(k) de-novo clearance or premarket approval (PMA), from the FDA. The FDA classifies medicaldevices 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 thedevice’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 clearancerequirements; ●Class II devices, which are moderate risk and generally require 510(k) or 510(k) de-novo premarket clearance before they may be commerciallymarketed in the United States as well as general controls and potentially special controls like performance standards or specific labelingrequirements; 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, ordevices deemed not substantially equivalent to a predicate device. Class III devices generally require the submission and approval of a PMAsupported by clinical trial data. Microbot expect the medical products in its pipeline currently to be classified as Class II. Class II devices are those for which general controls alone areinsufficient to provide reasonable assurance of safety and effectiveness and there is sufficient information to establish special controls. Special controls caninclude performance standards, post-market surveillance, patient histories and FDA guidance documents. Premarket review and clearance by the FDA forthese 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-novonotification 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 predicatedevices; 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). Clinical trials involve use of the medical device on human subjects under the supervision of qualified investigators in accordance with current Good ClinicalPractices (GCPs), including the requirement that all research subjects provide informed consent for their participation in the clinical study. A written protocolwith predefined end points, an appropriate sample size and pre-determined patient inclusion and exclusion criteria, is required before initiating andconducting a clinical trial. All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’sInvestigational device Exemption, or IDE, regulations that among other things, govern investigational device labeling, prohibit promotion of theinvestigational device, and specify recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device presentsa “significant risk,” as defined by the FDA, the agency requires the device sponsor to submit an IDE application, which must become effective prior tocommencing human clinical trials. The IDE will automatically become effective 30 days after receipt by the FDA, unless the FDA denies the application ornotifies 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 thatrequires modification, the FDA may permit a clinical trial to proceed under a conditional approval. In addition, the study must be approved by, andconducted under the oversight of, an Institutional Review Board (IRB) for each clinical site. If the device presents a non-significant risk to the patient, asponsor 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 followabbreviated 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 FDArequesting clearance to market the product. The notification includes all relevant data from pertinent preclinical and clinical trials, togetherwith 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 manufacturingprocedures must continue to conform to QSRs. The FDA periodically inspects manufacturing facilities to assess compliance with QSRs, whichimpose extensive procedural, substantive, and record keeping requirements on medical device manufacturers. In addition, changes to themanufacturing 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 QSRsand other types of regulatory controls. After a device receives 510(k) clearance from FDA, any modification that could significantly affect its safety or effectiveness, or that would constitute a majorchange in its intended use or technological characteristics, requires a new 510(k) clearance or could require a PMA. The FDA requires each manufacturer tomake 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 themanufacturer 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 untiladditional 510(k) clearance or PMA approval is obtained. 9 The FDA and the Federal Trade Commission, or FTC, will also regulate the advertising claims of Microbot’s products to ensure that the claims Microbotmakes are consistent with its regulatory clearances, that there is scientific data to substantiate the claims and that product advertising is neither false normisleading. To obtain 510(k) clearance, Microbot must submit a notification to the FDA demonstrating that its proposed device is substantially equivalent to a predicatedevice (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 a510(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 cantake significantly longer. If the FDA determines that the device or its intended use is not substantially equivalent to a predicate device, the device isautomatically 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 necessaryclearances for its products would adversely affect Microbot’s ability to grow its business. Delays in receipt or failure to receive the necessary clearances, orthe 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 forthe 510(k) de-novo process. In 1997, the Food and Drug Administration Modernization Act, or FDAMA added the de novo classification pathway nowcodified 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 beenplaced 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 iscalled 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 andInnovation Act (FDASIA), in order to provide a second option for de novo classification. Under this second pathway, a sponsor who determines that there isno legally marketed device upon which to base a determination of substantial equivalence can submit a de novo request to FDA without first submitting a510(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, theMicrobot 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 moretime consuming and demanding than the 510(k) notification process. A PMA must be supported by extensive data, including but not limited to data obtainedfrom preclinical and/or clinical studies and data relating to manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectivenessof 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 takesignificantly 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 Microbotdoes, that the FDA would grant a PMA approval of Microbot’s products, either of which would adversely affect Microbot’s business. Foreign Regulation In addition to regulations in the United States, Microbot will be subject to a variety of foreign regulations governing clinical trials, marketing authorizationand commercial sales and distribution of its products in foreign countries. The approval process varies from country to country, and the time may be longer orshorter than that required for FDA approval or clearance. The requirements governing the conduct of clinical trials, product licensing, pricing andreimbursement 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 notMicrobot obtains FDA approval or clearance for its products, Microbot will be required to make new regulatory submissions to the comparable regulatoryauthorities of foreign countries before Microbot can commence clinical trials or marketing of the product in such countries. The time required to obtaincertification 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 28 member states and has a coordinated system for theauthorization 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 theEuropean Union. The directives include, among others, the Medical Device Directive, or MDD, that establishes certain requirements with which medicaldevices must comply before they can be commercialized in the European Economic Area, or EEA (which comprises the member states of the E.U. plusNorway, Liechtenstein and Iceland). Under the MDD, medical devices are classified into four Classes, I, IIa, IIb, and III, with Class I being the lowest risk andClass III being the highest risk. However, the E.U. authorities, including the European Commission, do not have direct regulatory over medical devicemanufacturers under the MDD. Rather, the MDD directs E.U. Member States to implement laws and regulations consistent with the provisions set forth in thedirective. 10 Under the MDD, to demonstrate compliance of a medical device with the essential requirements, manufacturers must undergo a conformity assessmentprocedure, which varies according to the type of medical device and its classification. An accredited body known as a “Notified Body”, which is an entitydesignated by an E.U. Member State (or competent authority) to perform conformity assessments, will typically audit and examine the manufacturer’s qualitysystem for the production, quality, design and final inspection of the medical devices and review a Technical File containing technical documents regardingthe device, including but limited to, detailed device description, manufacturing information, preclinical and clinical tests, risk analysis, compliance withessential requirements, etc., before issuing a certification demonstrating compliance with the essential requirements. Medical devices that comply with theessential requirements are entitled to bear the Conformité Européene, or CE Mark. Medical devices properly bearing the CE Mark may be commerciallydistributed throughout the EEA. Under the MDD, notified bodies are also charged with performing periodic inspections to verify that a manufacturer’squality system, particularly the production and quality controls, is adequately executed and maintained. In addition, the MDD requires all medical device manufacturers to inform the competent authorities of their respective Member States of the address(es) ofany business facilities and descriptions of any certified medical device products. The MDD also requires manufacturers to file vigilance reports in the event adevice malfunction, deterioration in performance, or inadequate instructions or labeling results in, or could lead to, death or serious harm to a patient. In September 2012, the European Commission published proposals for the revision of the EU regulatory framework for medical devices. The proposal wouldreplace the MDD with a new regulation, the Medical Devices Regulation, or MDR. Unlike the MDD that must be implemented into national laws, theMedical Devices Regulation would be directly applicable in all EEA member states and so is intended to eliminate current national differences in regulationof medical devices. E.U. lawmakers published a revised draft of the proposed MDR in June 2016, which continues to be discussed within the Council of theEuropean Union and the European Parliament. Final formal adoption is expected both by the European Council and the European Parliament during the second quarter of 2017. If finally adopted, the MDRis expected to become applicable three years thereafter. The adoption of the MDR may, however, be materially delayed due to disagreements about specificportions of the regulation, as well as the implementation process. In its current form it would, among other things, impose additional reporting requirementson manufacturers of high risk medical devices, impose an obligation on manufacturers to appoint a “qualified person” responsible for regulatory compliance,and provide for more strict clinical evidence requirements. These new rules and procedures will likely result in increased regulatory oversight of all medicaldevices marketed in the E.U., and this may, in turn, increase the costs, time and requirements that need to be met in order to place a medical devices on theEEA market.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 orany 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 aprecondition for production and distribution in Israel. Special exemptions may apply under limited circumstances and for purposes such as the provision ofessential 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, informationshould 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, EuropeanCommunity (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. 11 If the application includes a certificate issued by a competent authority of one of the following “recognized” countries: Australia, Canada, EuropeanCommunity (CE) Member States (MSs), Japan, or the United States, the registration process is generally expedited, but could still take 6-9 months forapproval. If such certificate is not available, the registration process will take significantly longer and a license is rarely issued. Furthermore, the MOH willdetermine 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 thedevice’s safety and effectiveness. Additional requirements may apply during the registration period, including follow-up reviews, to improve the quality andsafety 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 AMARwithin 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 anexpedited 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, exceptfor 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 thedevice 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 toorder 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 itspipeline 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 one full-time employee, are based in Microbot’s U.S. office located inHingham, Massachusetts. Additionally, Microbot currently has 6 full-time employees and 1 part time employee based in its office located in Caesarea, Israel.These employees oversee day-to-day operations of the Company supporting management and leading engineering, manufacturing, intellectual property andadministration functions of the Company. As required, Microbot also engages consultants to provide services to the Company, including regulatory, legaland corporate services. Microbot has no unionized employees. Microbot currently plans to hire an additional 4-6 full-time employees within the next 12 months subject to the availability of funds, whose principalresponsibilities will be the support of its operational, research and development, regulatory and clinical development activities. Item 1A. Risk Factors This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Our business, operating results, financialperformance, and share price may be materially adversely affected by a number of factors, including but not limited to the following risk factors, any one ofwhich could cause actual results to vary materially from anticipated results or from those expressed in any forward-looking statements made by us in thisAnnual 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 adifference 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 notundertake 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 lossesfor 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 continuesits preclinical and clinical development programs for its existing product candidates, SCS and TipCAT; its research and development of any other futureproduct candidates; and all other work necessary to obtain regulatory clearances or approvals for its product candidates in the United States and othermarkets. 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, TipCAT or other future product candidates are approved or cleared for commercialdistribution, engaging in appropriate sales and marketing activities that, together with anticipated general and administrative expenses, will likely result inMicrobot incurring further significant losses for the foreseeable future. 12 Microbot is a development-stage medical device company and currently generates no revenue from product sales, and may never be able to commercializeSCS, TipCAT or other future product candidates, including the potential acquisition of technology from CardioSert Ltd. Microbot does not currently havethe required approvals or clearances to market or test in humans SCS, 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 productpipeline, of which Microbot can give no assurance. Even if Microbot or any of its future development partners succeed in commercializing any of its productcandidates, 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 itwill achieve profitability, if ever. Failure to become and remain profitable would depress the value of the Company and could impair its ability to raisecapital, which may force the Company to curtail or discontinue its research and development programs and/or day-to-day operations. Furthermore, there canbe no assurance that profitability, if achieved, can be sustained on an ongoing basis. Microbot’s business depends on the success of the SCS and the TipCAT, both of which are still in pre-clinical development. If Microbot is unable to obtainregulatory approval for or to successfully commercialize these products, its business will be materially harmed. To date, the primary focus of Microbot’s product development has been on SCS, for the treatment of hydrocephalus and normal pressure hydrocephalus, orNPH, and TipCAT, a self-propelling, semi-disposable endoscope being developed initially for use in colonoscopy procedures. Successful continueddevelopment and ultimate regulatory approval or clearance of both SCS and TipCAT are critical to the future success of Microbot’s business. Microbot hasinvested, and will continue to invest, a significant portion of its time and financial resources in the development, pre-clinical and clinical testing of andobtaining regulatory authorization for SCS and TipCAT. Microbot will need to raise sufficient funds to successfully complete its development of theseproducts. The future regulatory and commercial success of SCS and TipCAT is subject to a number of risks, including the following: ●Microbot may not have sufficient financial and other resources to complete the necessary clinical trials for SCS and TipCAT; ●If clinical trials are required for FDA clearance or approval of SCS or TipCAT, Microbot may not be able to obtain adequate evidence from suchclinical trials of safety and effectiveness in order to receive the applicable clearance or approval from the FDA; and ●Microbot does not know the degree to which SCS or TipCAT will be accepted and adopted by physicians, patients and payors, even if approved orcleared by FDA for commercial marketing. If Microbot is unable to successfully navigate these risks and achieve commercial success for its products, its business will be significantly harmed andMicrobot may never become profitable. These risks would also apply to the CardioSert technology if and when we close that transaction. 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 andprospects of Microbot must be considered in the light of the potential problems, delays, uncertainties and complications that may be encountered inconnection with a newly established business. The risks include, but are not limited to, the possibility that Microbot will not be able to develop functionaland scalable products, or that although functional and scalable, its products will not be economical to market; that its competitors hold proprietary rights thatmay preclude Microbot from marketing such products; that its competitors market a superior or equivalent product; that Microbot is not able to upgrade andenhance its technologies and products to accommodate new features and expanded service offerings; or the failure to receive necessary regulatory clearancesor approvals for its products. To successfully introduce and market its products at a profit, Microbot must establish brand name recognition and competitiveadvantages 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 itstechnologies, developing and securing its technologies, raising capital, developing regulatory and reimbursement strategies for its product candidates andpreparing for pre-clinical and clinical trials of the SCS and TipCAT. Microbot has not yet demonstrated its ability to successfully complete development ofany product candidate, obtain marketing clearance or approval, manufacture a commercial-scale product or arrange for a third party to do so on its behalf, orconduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions made about Microbot’s futuresuccess or viability may not be as accurate as they could be if Microbot had a longer operating history. 13 Microbot will need substantial additional funding. If Microbot is unable to raise capital when needed, it could be forced to delay, reduce or eliminate itsproduct 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, itwill generate any revenue, but does not expect to generate significant revenue unless and until it obtains regulatory clearance or approval of andcommercializes one of its current or future product candidates. It is anticipated that the Company will continue to incur losses for the foreseeable future, andthat losses will increase as it continues the development of, and seeks regulatory review of, its product candidates, and begins to commercialize any approvedor 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 inlarge animals and potentially clinical trials for its product candidates, and especially if it initiates additional research programs for future product candidates,including the CardioSert technology. In addition, if the Company obtains marketing clearance or approval for any of its product candidates, it expects toincur significant commercialization expenses related to product manufacturing, marketing and sales. Furthermore, Microbot expects to incur additional costsassociated with operating as a public company in the United States. Accordingly, the Company will need to obtain substantial additional funding inconnection with its continuing operations. If the Company is unable to raise capital when needed or on attractive terms, it could be forced to delay, reduce oreliminate its research and development programs or any future commercialization efforts. Microbot believes that the net cash of the Company will be sufficient to fund the Company for at least 12 months and fund operations necessary to continuedevelopment activities of the SCS and TipCAT. The Company may need to raise additional funds through equity offerings or otherwise in order to meet expected future liquidity needs, including theintroduction of the SCS device into the hydrocephalus and NPH market, and introducing the TipCAT as a next-generation colonoscope. The Company’sfuture 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 costs, design, duration and any potential delays of the clinical trials that could be conducted at the FDA’s request using Microbot’s productcandidates; ●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, including the need to implement additional financial and reporting systems and otherinternal systems and infrastructure for the Company’s business. Raising additional capital may cause dilution to the Company’s investors, restrict its operations or require it to relinquish rights to its technologies orproduct 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 equityofferings, 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 stockholderswill be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holder of the Company’scommon stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting the Company’s ability to take specificactions, such as incurring additional debt, making capital expenditures, declaring dividends or other distributions, selling or licensing intellectual propertyrights, 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. Ifthe 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 wouldotherwise prefer to develop and market itself. 14 Risks Relating to the Development and Commercialization of Microbot’s Product Candidates Microbot’s business depends heavily on the success of its lead product candidates, the SCS and the TipCAT. If Microbot is unable to commercialize theSCS or the TipCAT or experiences significant delays in doing so, Microbot’s business will be materially harmed. On January 27, 2017 Microbot entered into a research agreement with The Washington University to develop the protocol for and to execute the necessaryanimal study to determine the effectiveness of the Microbot’s SCS prototype. The initial research was completed in 2017, with a comprehensive studyexpected to be completed in 2018. Upon the completion of animal studies, Microbot may conduct clinical trials if they are requested by the FDA or ifMicrobot decides that the data from such trials would improve the marketability of the product candidate. Additionally, Microbot is currently reviewing thedesign and general proof of concept of the TipCAT and working with experts in the field to define the optimal design, which is expected to be followed byanimal studies during 2017 and 2018. Upon completion, Microbot may conduct clinical trials if they are requested by the FDA or if Microbot decides thatthe data from such trials would improve the marketability of the product candidate. After all necessary clinical and performance data supporting the safetyand effectiveness of each product candidate are collected, Microbot must still obtain FDA clearance or approval to market the device and those regulatoryprocesses can take several months to several years to be completed. Therefore, Microbot’s ability to generate product revenues will not occur for at least thenext few years, if at all, and will depend heavily on the successful commercialization of SCS and TipCAT in their respective intended markets. The success ofeach of these product candidates will depend on a number of factors, including the following: ●the Company’s ability to obtain additional capital; ●successful completion of animal studies and, if necessary, human clinical trials and the collection of sufficient data to demonstrate that the device issafe and effective for its intended use; ●receipt of marketing approvals or clearances from FDA and other applicable regulatory authorities; ●establishing commercial manufacturing arrangements with one or more third parties; ●obtaining and maintaining patent and trade secret protections; ●protecting Microbot’s rights in its intellectual property portfolio; ●establishing sales, marketing and distribution capabilities; ●generating commercial sales of SCS and TipCAT, as applicable, if and when approved, whether alone or in collaboration with other entities; ●acceptance of SCS and TipCAT, as applicable, if and when commercially launched, by the medical community, patients and third-party payors; ●effectively competing with existing shunt and endoscope products on the market and any new competing products that may enter the market; and ●maintaining quality and an acceptable safety profile of SCS and TipCAT, as applicable, 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 successfullycommercialize SCS and/or TipCAT, which would materially harm its business. Microbot’s product candidates are subject to an uncertain and potentially lengthy domestic regulatory review process. If Microbot does not obtain andmaintain the necessary regulatory authorizations from the Food and Drug Administration, Microbot will not be able to sell its product candidates in theUnited States. Microbot’s product candidates and operations are subject to extensive regulation in the United States by the FDA under the agency’s medical deviceauthorities. 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 safeand effective for their intended uses. Microbot expects its product candidates to be classified as Class II. In order to market Class II products for use in theUnited States, Microbot must first obtain clearance from the FDA pursuant to Section 510(k) of the Federal Food, Drug, and Cosmetic Act. Clearance underSection 510(k) requires a demonstration that a new device is substantially equivalent to another device with 510(k) clearance or grandfathered status or to adevice that was reclassified from Class III to Class II or Class I. 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 ClassIII, requiring the submission of a premarket approval application (PMA). There is no guarantee that the FDA will agree with Microbot’s determination that a510(k) notification is the appropriate regulatory pathway for its products, or that FDA will grant Microbot 510(k) clearance for its pipeline medical deviceproducts even if that pathway is accepted. Failure to obtain the necessary clearances for its products would adversely affect Microbot’s ability to grow itsbusiness. Delays in receipt or failure to receive the necessary clearances, or the failure to comply with existing or future regulatory requirements, could reduceour business prospects. 15 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 (in other words,they do not rise to the level of requiring the approval of a PMA) may be eligible for the 510(k) de novo classification process. If FDA determines that either ofMicrobot’s product candidates is not eligible for a traditional 510(k), the Microbot device may still be eligible for the 510(k) de novo process. Even if one or both of Microbot’s product candidates receives 510(k) clearance from FDA, under either the traditional pathway or the de novo 510(k)pathway, any subsequent modification that could significantly affect the device’s safety or effectiveness, or that would cause them to be marketed foradditional indications for use, may require a new 510(k) clearance or a PMA for the modified products before Microbot will be permitted to market them inthe United States. The FDA can require a manufacturer to cease U.S. marketing and/or recall the modified device until it is satisfied that the appropriate510(k) clearance or PMA approval is obtained. The FDA may not act favorably or quickly in its review of Microbot’s 510(k), de novo 510(k), or PMA submissions, as applicable, or Microbot mayencounter significant difficulties and costs in its efforts to obtain FDA clearance or approval, any of which could delay or preclude its sale of its productcandidates in the United States. Furthermore, the FDA may request additional data or require Microbot to conduct further testing, or compile more data,including clinical data and clinical studies, in support of its 510(k) submission or potentially a de novo 510(k). Moreover, the regulatory policies affecting Microbot’s proposed product candidates can change at any time. The changes and their potential impact onMicrobot’s business cannot be accurately predicted. For example, in 2011, the FDA announced a Plan of Action to modernize and improve the FDA’spremarket review of medical devices, and has implemented, and continues to implement, reforms intended to streamline the premarket review process. Inaddition, as part of the Food and Drug Administration Safety and Innovation Act of 2012, Congress enacted several reforms through the Medical DeviceRegulatory Improvements and additional miscellaneous provisions which will further affect both pre- and post-approval medical device regulation. Changesin the FDA 510(k) process could make clearance more difficult to obtain, increase delay, add uncertainty and have other significant adverse effects onMicrobot’s ability to obtain and maintain clearance for its product candidates. The FDA may also, instead of accepting any kind of 510(k) submission, classify a product as high-risk and require Microbot to submit a PMA for the initialclearance, which is typically a much more complex, lengthy and burdensome application than a 510(k) submission. To support a PMA, the FDA would likelyrequire that Microbot conduct one or more clinical studies to demonstrate that the device is safe and effective. In some cases such studies may be requestedfor a 510(k) or de novo 510(k) as well. Microbot may not be able to meet the requirements to obtain 510(k) clearance or PMA approval, in which case theFDA may not grant any necessary clearances or approvals. In addition, the FDA may place significant limitations upon the intended use of its productcandidates as a condition to a 510(k) clearance or PMA approval. Product applications can also be denied or withdrawn due to failure to comply withregulatory requirements or the occurrence of unforeseen problems following clearance or approval. Any delays or failure to obtain FDA clearance or approvalof new products Microbot develops, any limitations imposed by the FDA on new product use or the costs of obtaining FDA clearance or approvals couldhave a material adverse effect on Microbot’s business, financial condition and results of operations. Failure to comply with the regulations or obtain the approvals described above could have a material adverse effect on Microbot’s business, financialcondition and results of operations. There can be no assurance that clinical trials will meet desired endpoints, produce meaningful or useful data and be freeof unexpected adverse effects, and such uncertainty could preclude or delay market clearance or authorizations resulting in significant financial costs andreduced revenue. 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 eitherproduct candidate. Microbot anticipates that each of its existing product candidates, SCS and TipCAT, will be classified by the FDA as Class II and thus be eligible formarketing pursuant to a cleared 510(k) notification. However, there is no guarantee that the FDA will agree with the Company’s determination or that theFDA would accept the predicate devices that Microbot intends to submit in its 510(k) notifications in order to establish that its new device product issubstantially equivalent to one or more predicate devices. The FDA also may request additional data in response to a 510(k) notification, or require Microbotto conduct further testing or compile more data in support of its 510(k) submission or de novo 510(k), as appropriate. Such additional data could includeclinical data that must be derived from human clinical studies that are designed appropriately to address the potential questions from the FDA regarding aproposed product’s safety or effectiveness. In order to conduct a clinical investigation involving human subjects for the purpose of demonstrating the safety and effectiveness of a medical device, acompany must, among other things, apply for and obtain Institutional Review Board, or IRB, approval of the proposed investigation. In addition, if theclinical study involves a “significant risk” (as defined by the FDA) to human health, the sponsor of the investigation must also submit and obtain FDAapproval of an Investigational Device Exemption, or IDE, application. Microbot may not be able to obtain FDA and/or IRB approval to undertake clinicaltrials in the United States for any new devices Microbot intends to market in the United States in the future. Any type of clinical study in humans requires theinvestment of substantial expense, professional resources and time. Moreover, the timing of the commencement, continuation and completion of any futureclinical trial may be subject to significant delays attributable to various causes, including scheduling conflicts with participating clinicians and clinicalinstitutions, difficulties in identifying and enrolling patients who meet trial eligibility criteria, failure of patients to complete the clinical trial, delay in orfailure to obtain IRB approval to conduct a clinical trial at a prospective site, and shortages of supply in the investigational device.16 The addition of one or more mandatory clinical trials to the development timeline for one or both Microbot product candidates would significantly increasethe costs associated with developing and commercializing the product and delay the timing of U.S. regulatory authorization. Unsuccessful animal studies, clinical trials or procedures relating to product candidates under development could have a material adverse effect onMicrobot’s prospects. The regulatory approval process for new products and new indications for existing products requires extensive data and procedures, including thedevelopment of regulatory and quality standards and, potentially, certain clinical studies. Unfavorable or inconsistent data from current or future clinicaltrials or other studies conducted by Microbot or third parties, including the studies now being performed by The Washington University or perceptionsregarding such data, could adversely affect Microbot’s ability to obtain necessary device clearance or approval and the market’s view of Microbot’s futureprospects. Failure to successfully complete these studies in a timely and cost-effective manner could have a material adverse effect on Microbot’s prospects.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 becompleted in a timely or cost-effective manner or result in a commercially viable product. Clinical trials or studies may experience significant setbacks evenif earlier preclinical or animal studies have shown promising results. Furthermore, preliminary results from clinical trials may be contradicted by subsequentclinical analysis. Results from clinical trials may also not be supported by actual long-term studies or clinical experience. If preliminary clinical results arelater 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 faceunacceptable health risks. 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 productcandidates, 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, ifdata from such trials become necessary in order to obtain regulatory clearance or approval of our product candidates. Should the FDA or another regulatoryagency in a foreign market request clinical data to support the safety and effectiveness of Microbot’s product candidates, Microbot will depend upon itsability and/or the ability of future collaborators, contract research organizations, clinical trial sites and investigators to successfully design, initiate, conductand 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 couldsignificantly delay or materially impair Microbot’s ability to complete those clinical trials and/or obtain regulatory clearance or approval of its productcandidates and, consequently, could delay or materially impair its ability to generate revenues from the commercialization of those products. If the commercial opportunity for SCS and TipCAT is smaller than Microbot anticipates, Microbot’s future revenue from SCS and TipCAT will beadversely 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 profitabilityand growth. Microbot is developing SCS as a device for the treatment of hydrocephalus and NPH and is developing TipCAT as an endoscopic tool, withcolonoscopy as the most immediate application of the TipCAT technology. Microbot expects its future revenues to be primarily derived from the sales of theSCS and TipCAT, neither of which has undergone an FDA pre-market review process necessary to commercialize the product candidate in the United States.It is difficult to predict the penetration, future growth rate or size of the market for Microbot’s product candidates. The commercial success of the SCS and TipCAT will require broad acceptance of the devices by the doctors and other medical professionals who specializein the procedures targeted by each device, a limited number of whom may be able to influence device selection and purchasing decisions. If Microbot’stechnologies are not broadly accepted and perceived as having significant advantages over existing medical devices, then it will not meet its businessobjectives. Such perceptions are likely to be based on a determination by medical facilities and physicians that Microbot’s product candidates are safe andeffective, are cost-effective in comparison to existing devices, and represent acceptable methods of treatment. Microbot cannot assure that it will be able toestablish the relationships and arrangements with medical facilities and physicians necessary to support the market uptake of its product candidates. Inaddition, its competitors may develop new technologies for the same markets Microbot is targeting that are more attractive to medical facilities andphysicians. If doctors and other medical professionals do not consider Microbot product candidates to be suitable for application in the procedures we aretargeting and an improvement over the use of existing or competing products, Microbot’s business goals will not be realized. 17 Customers will be unlikely to buy the SCS or the TipCAT unless Microbot can demonstrate that they can be produced for sale to consumers at attractiveprices. To date, Microbot has focused primarily on research and development of the first generation versions of the SCS and the TipCAT. Consequently, Microbothas no experience in manufacturing its product candidates, and intends to manufacture its product candidates through third-party manufacturers. Microbotcan offer no assurance that either it or its manufacturing partners will develop efficient, automated, low-cost manufacturing capabilities and processes to meetthe quality, price, engineering, design and production standards or production volumes required to successfully mass produce its commercial products. Evenif its manufacturing partners are successful in developing such manufacturing capability and quality processes, including the assurance of GMP-compliantdevice manufacturing, there can be no assurance that Microbot can timely meet its product commercialization schedule or the production and deliveryrequirements of potential customers. A failure to develop such manufacturing processes and capabilities could have a material adverse effect on Microbot’sbusiness 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 cannotoffer any assurances that its manufacturing partner will be able manufacture its product candidates at a competitive price or that achieving cost reductionswill not cause a reduction in the performance, reliability and longevity of its product candidates. 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 itexpects 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 futurecommercial products itself, including: ●limitations on supply availability resulting from capacity, internal operational problems or scheduling constraints of third parties; ●potential regulatory non-compliance or other violations by the third-party manufacturer that could result in quality assurance issues orgovernment enforcement action that has a negative effect on Microbot’s product candidates and distribution strategy; ●the possible breach of manufacturing agreements by third parties because of various factors beyond Microbot’s control; and ●the possible termination or non-renewal of manufacturing agreements by third parties for various reasons beyond Microbot’s control, at a timethat 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 ownmanufacturing capabilities, which could delay or impair Microbot’s ability to obtain regulatory clearance or approval for its product candidates and couldsubstantially increase its costs or deplete profit margins, if any. If Microbot does find replacement manufacturers, Microbot may not be able to enter intoagreements with them on terms and conditions favorable to it and there could be a substantial delay before new facilities could be qualified and registeredwith the FDA and other foreign regulatory authorities. If Microbot’s product candidates are not considered to be a safe and effective alternative to existing technologies, Microbot will not be commerciallysuccessful. The SCS 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 regardingefficacy, safety and clinical outcomes associated with the use of SCS or TipCAT. Any data that is generated in the future may not be positive or may notsupport the product candidates’ regulatory dossiers, which would negatively affect market acceptance and the rate at which its product candidates areadopted. Equally important will be physicians’ perceptions of the safety of Microbot’s product candidates because Microbot’s technologies are relativelynew. 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 becomewidely adopted. Market acceptance of Microbot’s product candidates will also be affected by other factors, including Microbot’s ability to convince key opinion leaders toprovide recommendations regarding its product candidates; convince distributors that its technologies are attractive alternatives to existing and competingtechnologies; supply and service sufficient quantities of products directly or through marketing alliances; and price products competitively in light of thecurrent macroeconomic environment, which is becoming increasingly price sensitive. 18 Microbot may be subject to penalties and may be precluded from marketing its product candidates if Microbot fails to comply with extensivegovernmental 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-novopremarket submission to the FDA. However, the FDA has not made any determination about whether Microbot’s medical product candidates are Class IImedical devices and may disagree with that classification. If the FDA determines that Microbot’s product candidates should be reclassified as Class IIImedical devices, Microbot could be precluded from marketing the devices for clinical use within the United States for months, years or longer, depending onthe specifics of the change in classification. Reclassification of any of Microbot’s product candidates as Class III medical devices could significantly increaseMicrobot’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 regulatoryrequirements significantly increase Microbot’s production costs, which may prevent Microbot from offering products within the price range and in quantitiesnecessary to meet market demands. If Microbot or one of its third-party manufacturers changes an approved manufacturing process, the FDA may need toreview the process before it may be used. Failure to comply with applicable pre-market and post-market regulatory requirements could subject Microbot toenforcement actions, including warning letters, fines, injunctions and civil penalties, recall or seizure of its products, operating restrictions, partial suspensionor 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 theyare 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 agenciesworldwide, private insurance companies, and managed care organizations. The manner and level of reimbursement in any given case may depend on the siteof care, the procedure(s) performed, the final patient diagnosis, the device(s) utilized, available budget, or a combination of these factors, and coverage andpayment levels are determined at each payor’s discretion. The coverage policies and reimbursement levels of these third-party payors may impact thedecisions 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 Microbotproducts 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 billvarious third-party payors, such as the Centers for Medicare & Medicaid Services, or CMS, which administers the Medicare program through MedicareAdministrative Contractors, and other government health care programs and private insurance plans, for the healthcare products and services provided totheir patients. The process involved in applying for coverage and incremental reimbursement from CMS is lengthy and expensive. Moreover, many privatepayors look to CMS in setting their reimbursement policies and amounts. If CMS or other agencies limit coverage for procedures utilizing Microbot’sproducts or decrease or limit reimbursement payments for doctors and hospitals utilizing Microbot’s products, this may affect coverage and reimbursementdeterminations 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 absorbthe 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 whichmedical institutions would consider insurers’ payment levels adequate to cover the cost of its products. Failure by hospitals and surgeons to receive anamount that they consider to be adequate reimbursement for procedures in which Microbot products are used could deter them from purchasing Microbotproducts 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 areapproved. 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 ofpayment bundling initiatives, and other such methods that shift medical cost risk to providers) that may potentially impact coverage and/or payment levelsfor 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 may not provide sufficient data to make Microbot’s product candidates the standard of care. Microbot’s business plan relies on the broad adoption by surgeons of the SCS for primary shunt placement procedures to prevent shunt occlusions. AlthoughMicrobot believes the occurrence of shunt occlusion complications is well known among physicians practicing in the relevant medical fields, SCS may beadopted for replacement shunt surgeries only. Neurosurgeons may adopt SCS for primary shunt placement procedures only upon additional clinical studieswith 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 convincethe medical community of its safety and efficacy. Clinical studies may not show an advantage in SCS based procedures in a timely manner, or at all, andoutcome studies have not been designed at this time, and may be too large and too costly for Microbot to conduct. Both situations could prevent broadadoption of the SCS and materially impact Microbot’s business. 19 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 materialdeficiencies 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 bebased on an FDA finding that there is a reasonable probability that the device would cause serious injury or death, although in most cases this mandatoryrecall authority is not used because manufacturers typically initiate a voluntary recall when a device violation is discovered. In addition, foreigngovernmental 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 byMicrobot or one of its distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies andissues. Recalls of any Microbot products would divert managerial and financial resources and have an adverse effect on Microbot’s financial condition andresults of operations, and any future recall announcements could harm Microbot’s reputation with customers and negatively affect its sales. In addition, theFDA could take enforcement action, including any of the following sanctions for failing to timely report a recall to the FDA: ●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; ●detention or seizure of Microbot products; ●operating restrictions or partial suspension or total shutdown of production; ●refusing or delaying requests for 510(k) clearance or premarket approval of new products or modified products; ●withdrawing 510(k) clearances or other types of regulatory authorizations -that have already been granted; ●refusing to grant export approval for Microbot products; or ●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 Reportingregulations, 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 orcontributed 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 todeath or serious injury. In addition, all manufacturers placing medical devices in European Union markets are legally bound to report any serious orpotentially 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 DeviceReporting (MDR) regulations. Any adverse event involving a Microbot product could result in future voluntary corrective actions, such as product actions orcustomer notifications, or agency actions, such as inspection, mandatory recall or other enforcement action. Any corrective action, whether voluntary orinvoluntary, 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 otherwiseprotect 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 isexpensive and may not be available on acceptable terms, if at all. A successful product liability claim or product recall could inhibit or prevent the successfulcommercialization of Microbot’s products, cause a significant financial burden on Microbot, or both, which in any case could have a material adverse effecton 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 productcandidates. 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 inresponse to changing technologies, customer demands and competitive pressures. As such, Microbot expects to continue dedicating significant resources inresearch and development. The product candidates and services being developed by Microbot may not be technologically successful. In addition, the lengthof Microbot’s product candidates and service development cycle may be greater than Microbot originally expected. We cannot assure you that we will complete the acquisitions of CardioSert we have under contract on a timely basis or at all. The proposed acquisition of certain technologies of CardioSert Ltd. may not be completed, or may not be completed in the time frame, on the terms or in themanner currently anticipated, as a result of a number of factors, including the failure of the parties to satisfy one or more of the conditions to closing. Therecan be no assurance that the conditions to closing of these acquisitions will be satisfied or waived or that other events will not intervene to delay or result inthe failure to close these acquisitions. There can be no assurance that we will be able to complete this acquisition or to find suitable alternative acquisitionson a timely basis. 20 Our business strategy in part relies on identifying, acquiring and developing complementary technologies and products, which entails risks which couldnegatively affect our business, operations and financial condition. We may pursue other acquisitions of businesses and technologies. Acquisitions entail numerous risks, including: ●difficulties in the integration of acquired operations, services and products; ●failure to achieve expected synergies; ●diversion of management’s attention from other business concerns; ●assumption of unknown material liabilities of acquired companies; ●amortization of acquired intangible assets, which could reduce future reported earnings; ●potential loss of clients or key employees of acquired companies; and ●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 asacquisitions, mergers and combinations within our industry. The purchase price for possible acquisitions could be paid in cash, through the issuance ofcommon 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 thetiming, likelihood or business effect of any possible transaction. For example, we could begin negotiations that we subsequently decide to suspend orterminate for a variety of reasons. However, opportunities may arise from time to time that we will evaluate. Any transactions that we consummate wouldinvolve risks and uncertainties to us. These risks could cause the failure of any anticipated benefits of an acquisition to be realized, which could have amaterial adverse effect on our business, financial condition, results of operations and prospects. If Microbot fails to retain certain of its key personnel and attract and retain additional qualified personnel, Microbot might not be able to pursue itsgrowth strategy effectively. Microbot is dependent on its senior management, in particular Harel Gadot, Microbot’s Chairman, President and Chief Executive Officer. Although Microbotbelieves that its relationship with members of its senior management is positive, there can be no assurance that the services of any of these individuals willcontinue 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 forthe succession of senior management, when necessary. Competition for qualified personnel in the medical device industry is intense and finding andretaining qualified personnel with experience in the industry is very difficult. Microbot believes that there are only a limited number of individuals with therequisite skills to serve in key positions at Microbot, particularly in Israel, and it competes for key personnel with other medical equipment and technologycompanies, 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 tocommercialize 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 suchcountries. In Europe, these regulations, including the requirements for approvals, clearance or grant of Conformité Européenne, or CE, Certificates of Conformity andthe time required for regulatory review, vary from country to country. Failure to obtain regulatory approval, clearance or CE Certificates of Conformity (orequivalent) 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. Thetime required to obtain approval or CE Certificate of Conformity in other countries might differ from that required to obtain FDA clearance. The regulatoryapproval or CE marking process in other countries may include all of the risks detailed above regarding FDA clearance in the United States. Regulatoryapproval or the CE marking of a product candidate in one country does not ensure regulatory approval in another, but a failure or delay in obtainingregulatory approval or a CE Certificate of Conformity in one country may negatively impact the regulatory process in others. Failure to obtain regulatoryapproval or a CE Certificate of Conformity in other countries or any delay or setback in obtaining such approval could have the same adverse effectsdescribed above regarding FDA clearance in the United States. 21 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 itsproduct 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 thesubmission of an application to the Ministry of Health Medical Institutions and Devices Licensing Department, or AMAR. If the application includes acertificate issued by a competent authority of a “recognized” country, which includes Australia, Canada, the European Community Member States, Japan orthe United States, the registration process is expedited, but is generally still expected to take 6 to 9 months for approval. If certification from a recognizedcountry is not available, the registration process takes significantly longer and a license is rarely issued under such circumstances, as the MOH may requirethe presentation of significant additional clinical data. Once granted, a license (marketing authorization) for a medical device is valid for five years from thedate 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 successfulin applying for a license from the MOH for its product candidates. 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 ormay not be able to control, including: ●adverse macroeconomic conditions affecting geographies where Microbot intends to do business; ●foreign currency exchange rates; ●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 tovarious 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 tocounter 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 significantportion 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 inthe future use financial instruments, such as forward foreign currency contracts, in its management of foreign currency exposure. These contracts wouldprimarily 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 lossin the event of non-performance by the counterparties of these contracts. In addition, these financial instruments may not adequately manage Microbot’sforeign currency exposure. Microbot’s results of operations could be adversely affected if Microbot is unable to successfully manage currency fluctuations inthe future. Risks Relating to Microbot’s Intellectual Property Microbot’s right to develop and commercialize its existing product candidates are subject to the terms and condition of a license granted to Microbot byTechnion Research and Development Foundation Ltd. and termination of the license with respect to one or both of the technology platforms underlyingthe 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 Microbotobtained an exclusive, worldwide, royalty-bearing, sub-licensable license to certain patents and inventions relating to the SCS and TipCAT technologyplatforms. Pursuant to the terms of the license agreement, in order to maintain the license with respect to each platform, Microbot must use commerciallyreasonable efforts to develop products covered by the license, including meeting certain agreed upon development milestones. TRDF has the option toterminate a license granted with respect a particular technology in the event Microbot fails to meet a development milestone associated with suchtechnology. Therefore, the failure to meet development milestones may lead to a complete termination of the applicable license agreement and result inMicrobot ceasing its development efforts for the applicable product candidate. The milestones for SCS include commencing initial studies in humans byDecember 2018 and commencing a clinical trial, if necessary, by December 2019. The milestones for TipCAT include commencing initial studies in humansby December 2018 and commencing a full clinical trial, if necessary, by December 2020. Failure to meet any development milestone will give TRDF theright to terminate the license with respect to the technology underlying the missed milestone. Although Microbot expects to meet the milestonerequirements, TRDF has 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 ofcertain milestones and royalties on product sales. TRDF may terminate the license agreement under certain circumstances, including material breaches byMicrobot or under certain bankruptcy or insolvency events. In the case of termination of the license by Microbot without cause or by TRDF for cause, TRDFhas 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 competitiveadvantage could be reduced or terminated, and Microbot will likely not be able to find a source to replace the licensed technology. However, if there is any future dispute between Microbot and TRDF regarding the respective parties’ rights under the license agreement, Microbot’s ability todevelop 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 towarddeveloping 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 delayedand potential purchasers of its initial commercialized products may decline to purchase such products or may opt to pursue alternative products, which wouldmaterially harm its business. Intellectual property litigation and infringement claims could cause Microbot to incur significant expenses or prevent Microbot from selling certain of itsproduct candidates. The medical device industry is characterized by extensive intellectual property litigation. From time to time, Microbot might be the subject of claims bythird parties of potential infringement or misappropriation. Regardless of outcome, such claims are expensive to defend and divert the time and effort ofMicrobot’s management and operating personnel from other business issues. A successful claim or claims of patent or other intellectual property infringementagainst Microbot could result in its payment of significant monetary damages and/or royalty payments or negatively impact its ability to sell current or futureproducts 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 onthe 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 anypending 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 thepatent rights granted will provide competitive advantages to Microbot. Microbot’s competitors have developed and may continue to develop and obtainpatents 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. 22 Adverse outcomes in current or future legal disputes regarding patent and other intellectual property rights could result in the loss of Microbot’s intellectualproperty rights, subject Microbot to significant liabilities to third parties, require Microbot to seek licenses from third parties on terms that may not bereasonable or favorable to Microbot, prevent Microbot from manufacturing, importing or selling its product candidates, or compel Microbot to redesign itsproduct 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’sbusiness, 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, theremay be situations in which Microbot will not have control over the prosecution, maintenance or enforcement of the patents that Microbot licenses, or maynot have sufficient ability to consult and input into the patent prosecution and maintenance process with respect to such patents. If Microbot does not controlthe 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 arenecessary 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 staffand consultants with the knowledge and technical competence to advance its technology and productivity goals. To protect Microbot’s trade secrets andproprietary information, Microbot has entered into confidentiality agreements with its employees, as well as with consultants and other parties. If theseagreements 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 inMicrobot’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 maintainadequate intellectual property protection, it may not be able to prevent third parties from using its proprietary technologies or may lose access totechnologies critical to our product candidates. Also, Microbot currently pending or future patent applications may not result in issued patents, and issuedpatents 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 proprietarytechnologies 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, three of its seven directors (one of whom is also its Chief Operating Officer) and its Chief FinancialOfficer, are residents of Israel. Accordingly, political, economic and military conditions in Israel will directly or indirectly affect Microbot’s operations andresults. 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 ofhostility, varying in degree and intensity has led to security and economic problems for Israel. For a number of years there have been continuing hostilitiesbetween Israel and the Palestinians. This includes hostilities with the Islamic movement Hamas in the Gaza Strip, which have adversely affected the peaceprocess and at times resulted in armed conflicts. Such hostilities have negatively influenced Israel’s economy as well as impaired Israel’s relationships withseveral other countries. Israel also faces threats from Hezbollah militants in Lebanon, from ISIS and rebel forces in Syria, from the government of Iran andother potential threats from additional countries in the region. Moreover, some of Israel’s neighboring countries have recently undergone or are undergoingsignificant 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 andorganizations continue to participate in a boycott of Israeli firms and others doing business with Israel, with Israeli companies or with Israeli-ownedcompanies operating in other countries. Foreign government defense export policies towards Israel could also make it more difficult for us to obtain theexport authorizations necessary for Microbot’s activities. Also, over the past several years there have been calls in Europe and elsewhere to reduce trade withIsrael. There can be no assurance that restrictive laws, policies or practices directed towards Israel or Israeli businesses will not have an adverse impact onMicrobot’s business. 23 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, militaryconflicts 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 ofIsraeli banks to companies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrenceof 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 inflationrate 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, theU.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. IfMicrobot 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’sresearch 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 asignificant 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 itstechnologies and product candidates. If Microbot fails to comply with the conditions applicable to this program, it may be required to pay additionalpenalties or make refunds and may be denied future benefits. From time to time, the government of Israel has discussed reducing or eliminating the benefitsavailable 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 bearinggrants in an aggregate amount of approximately $1,183,000 through December 31, 2017. With respect to such grants Microbot is committed to pay royaltiesat 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 IndustrialResearch 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 fromtransferring any technologies, know-how, manufacturing or manufacturing rights developed using Israeli Innovation Authority grants outside of Israelwithout the prior approval of Israeli Innovation Authority. Therefore, if aspects of its technologies are deemed to have been developed with Israeli InnovationAuthority funding, the discretionary approval of an Israeli Innovation Authority committee would be required for any transfer to third parties outside of Israelof the technologies, know-how, manufacturing or manufacturing rights related to such aspects. Furthermore, the Israeli Innovation Authority may imposecertain conditions on any arrangement under which it permits Microbot to transfer technology or development outside of Israel or may not grant suchapprovals 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, thenumber of years since the funding and other factors. These restrictions and requirements for payment may impair Microbot’s ability to sell its technologyassets 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 developedwith Israeli Innovation Authority funding outside of Israel (such as through a merger or other similar transaction) may be reduced by any amounts thatMicrobot 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 becalled to active duty at any time under emergency circumstances, which could have a disruptive impact on Microbot’s workforce. 24 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 judgmentobtained 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 becollectible 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 inthe 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 otherperson 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 ofU.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 aclaim, 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. lawoften involves the testimony of expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed byIsraeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing ajudgment 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 ourcommon 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 continuedlisting 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 applicablelisting standards. On March 23, 2018, we were notified by The Nasdaq Stock Market, LLC (“Nasdaq”) that it was not in compliance with the minimum bid price requirementsset forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities tomaintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirementexists if the deficiency continues for a period of 30 consecutive business days. The notification provided that we have 180 calendar days, or until September18, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). During that time, our shares of common stock will continue to be listed and traded onThe Nasdaq Capital Market. To regain compliance, the closing bid price of our shares of common stock needed to meet or exceed $1.00 per share for at least10 consecutive business days during the 180 calendar day compliance period, No assurance can be given that we will regain compliance with Nasdaq Listing Rule 5550(a)(2) or meet applicable Nasdaq continued listing standards in thefuture. Failure to meet applicable Nasdaq continued listing standards could result in a delisting of our common stock. A delisting of our common stock fromThe Nasdaq Capital Market could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of ourcommon 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 ofconfidence 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 securitiessuch 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, ourcommon 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 ourcommon stock to decline further. Our executive officers and directors, through their ownership of common stock, can substantially influence the outcome of matters requiring shareholderapproval and may prevent you and other stockholders from influencing significant corporate decisions, which could result in conflicts of interest thatcould cause the Company’s stock price to decline. Our executive officers and directors collectively beneficially own shares of Common Stock equal to approximately 25% of our outstanding shares ofCommon Stock. As a result, such individuals will have the ability, acting together, to substantially influence the election of our directors and the outcome ofcorporate actions requiring shareholder approval, such as: (i) a merger or a sale of our Company, (ii) a sale of all or substantially all of our assets, and (iii)amendments to our articles of incorporation and bylaws. This concentration of voting power and control could have a significant effect in delaying, deferringor preventing an action that might otherwise be beneficial to our other shareholders and be disadvantageous to our shareholders with interests different fromthose individuals. These individuals also have significant control over our business, policies and affairs as officers and/or directors of our Company. Thesestockholders may exert influence in delaying or preventing a change in control of the Company, even if such change in control would benefit the otherstockholders of the Company. Lastly, the significant concentration of stock ownership may adversely affect the market value of the Company’s commonstock due to investors’ perception that conflicts of interest may exist or arise. Therefore, you should not invest in reliance on your ability to have any controlover the Company. 25 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 thefuture. 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 boardof 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 provisionsinclude a classified board of directors. In addition, because the Company is incorporated in Delaware, it is governed by the provisions of Section 203 of theDGCL, which prohibits stockholders owning in excess of 15% of outstanding voting stock from merging or combining with the Company. Although theCompany believes these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with theCompany’s board of directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions mayfrustrate or prevent any attempts by the Company’s stockholders to replace or remove then current management by making it more difficult for stockholdersto replace members of the board of directors, which is responsible for appointing members of management. 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 operatingperformance 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 ofsuch securities may ultimately convert and sell the full amount issuable on conversion. We are subject to litigation and may be subject to similar or other litigation in the future, which may divert management’s attention and have a materialadverse effect on our business, financial condition and results of operations. We are subject to litigation with investors in our June 2017 securities offering. Litigation in general can be expensive, lengthy, and disruptive to normalbusiness operations. Moreover, the results of legal proceedings are difficult to predict. Responding to lawsuits brought against us, or legal actions that wemay initiate, can often be expensive and time-consuming. Unfavorable outcomes from these claims and/or lawsuits could materially adversely affect ourbusiness, results of operations, and financial condition, and we could incur substantial monetary liability and/or be required to change our business plans orpractices. 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 has recently relocated to new facilities inpremises of approximately 6,000 square feet at 8 Hatochen Street, 3rd Floor, Caesarea, Israel. This new facility is expected to provide the space andinfrastructure necessary to accommodate its development work based on its current operating plan. Microbot does not own any real property. 26 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 issubject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. We are named as the defendant in a lawsuit, captioned Sabby Healthcare Master Fund Ltd. and Sabby Volatility Warrant Master Fund Ltd., Plaintiffs, againstMicrobot Medical Inc., Defendant, pending in the Supreme Court of the State of New York, County of New York (Index No. 654581/2017) (the “Matter”).The suit was initiated on or about June 29, 2017. The complaint alleges, among other things, that Microbot Medical Inc. breached multiple representationsand warranties contained in the Securities Purchase Agreement (the “SPA”) related to the June 8, 2017 equity financing of the Company (the “Financing”), ofwhich the Plaintiffs participated. The complaint seeks rescission of the SPA and return of the Plaintiffs’ $3,375,000 purchase price with respect to theFinancing, and damages in an amount to be determined at trial, but alleged to exceed $1 million. The parties presently are engaged in discovery. We believe that the claims are without merit and intend to defend the action vigorously. However, due to the early stage in the ligation process, managementis unable to assess the likelihood of the claim and the amount of potential damages, if any, to be awarded. Accordingly, no assurance can be given that anyadverse outcome would not be material to our consolidated financial position. Other than the foregoing, we are not currently a party in any legal proceeding or governmental regulatory proceeding nor are we currently aware of anypending or potential legal proceeding or governmental regulatory proceeding proposed to be initiated against us that would have a material adverse effect onus 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 wastraded under the symbol “STEM.” The following table sets forth for the periods indicated, the high and low closing prices of our common stock on theNASDAQ Capital Market. High Low Year Ended December 31, 2016: 1st Quarter $46.33 $27.10 2nd Quarter(1) 5.24 3.26 3rd Quarter 23.40 3.24 4th Quarter(2) 12.69 5.85 High Low Year Ended December 31, 2017: 1st Quarter $8.64 $4.41 2nd Quarter 5.43 1.42 3rd Quarter 1.50 1.00 4th Quarter 1.42 1.02 (1) The Company effected a 1-for-12 reverse stock split on May 6, 2016.(2) The Company effected a 1-for-9 reverse stock split on November 28, 2016. As of March 30, 2018, there were approximately 191 holders of record of our common stock, and the closing sales price of our common stock as reported onthe NASDAQ Capital Market was $0.6508. 27 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. Thepayment of dividends on our common stock will depend on earnings, financial condition, debt covenants in place, and other business and economic factorsaffecting 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 areturn 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 existingcompensation plans as of December 31, 2017. Number of securities tobe issued upon exercise ofoutstanding options,warrants and rights Weighted-averageexercise price ofoutstanding options,warrants and rights Number of securitiesremaining available forfuture issuance Plan Category Equity compensation plans approved by security holders2017Equity Incentive Plan 4,081,357 $1.11 5,274,406 Equity compensation plans not approved by security holders: Microbot Israel Employee Stock Option Plan(1) 975,429 $0 - Stock Options (2) 1,167,693 $0.28 - Total 6,224,479 5,274,406 (1)Such options were originally issued by Microbot Israel under its Employee Stock Option Plan, and represented the right to purchase an aggregate of500,000 of Microbot Israel’s ordinary shares. As of the effective time of the Merger, such options were retroactively adjusted to reflect the Merger andnow 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, CompanyGroup Chairman and majority equity owner, and represented the right to purchase an aggregate of 403,592 of Microbot Israel’s ordinary shares. As of theeffective time of the Merger, such options were retroactively adjusted to reflect the Merger and now represent the right to purchase shares of our commonstock. Item 6. Selected Financial Data. This item is not required for a smaller reporting company. 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 andprojections about our future results, performance, liquidity, financial condition and results of operations, prospects and opportunities and are based uponinformation currently available to us and our management and their interpretation of what is believed to be significant factors affecting our existing andproposed 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 aresult 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 thewords “may,” “should,” “would,” “will,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative ofthese 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 unduereliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or reviseany forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. 28 Overview Microbot is a pre-clinical medical device company specializing in the research, design and development of next generation micro-robotics assisted medicaltechnologies targeting the minimally invasive surgery space. Microbot is primarily focused on leveraging its micro-robotic technologies with the goal ofimproving surgical outcomes for patients. Microbot is currently developing its first two product candidates: the Self Cleaning Shunt, or SCS, for the treatment of hydrocephalus and Normal PressureHydrocephalus, or NPH; and TipCAT, a self-propelling, semi-disposable endoscope that is being developed initially for use in colonoscopy procedures.Microbot’s product candidates are being designed to bring greater functionality to conventional medical devices and to reduce the known risks associatedwith such devices. Microbot is currently aiming to complete pre-clinical studies required for regulatory submission for both product candidates within thenext 12 months. On January 4, 2018, we entered into an agreement to acquire a novel patent-protected technology from CardioSert Ltd., a privately-held medical devicecompany based in Israel. The acquisition is expected to close within 90 days of the agreement, at which time, with the addition of CardioSerts’ issued U.S.patent and three patent applications pending worldwide, Microbot would have a patent portfolio of 25 issued/allowed patents and 15 patent applicationspending worldwide. Microbot has no products approved for commercial sale and has not generated any revenues from product sales since its inception in 2010. From inception toDecember 31, 2017, Microbot has raised cash proceeds of approximately $18,000,000 to fund operations, primarily from government grants, loans, andprivate placement offerings of debt and equity securities. Microbot has never been profitable and has incurred significant operating losses in each year since inception. Net losses for the years ended December 31,2017 and 2016 were approximately $7,589,000 and $9,663,000, respectively. Substantially all of Microbot’s operating losses resulted from expensesincurred in connection with its research and development programs and from general and administrative costs associated with its operations. As of December31, 2017, Microbot had a net working capital of approximately $10,402,000, consisting primarily of cash and cash equivalents. Microbot expects tocontinue to incur significant expenses and increasing operating losses for at least the next several years as it continues the clinical development of and seeksregulatory approval for its product candidates. Accordingly, Microbot will continue to require substantial additional capital to continue its clinicaldevelopment and potential commercialization activities, however, at this time it believes that its net cash will be sufficient to fund its operations for at least12 months and fund operations necessary to continue development activities of the SCS and TipCAT. The amount and timing of Microbot’s future fundingrequirements will depend on many factors, including the timing and results of its clinical development efforts. Estimated completion dates and costs for Microbot’s clinical development and research programs can vary significantly for each current and future productcandidate and are difficult to predict. As a result, Microbot cannot estimate with any degree of certainty the costs it will incur in connection withdevelopment of its product candidates at this point in time. Microbot anticipates it will make determinations as to which programs and product candidates topursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the scientific success of early researchprograms, results of ongoing and future clinical trials, its ability to enter into collaborative agreements with respect to programs or potential productcandidates, as well as ongoing assessments as to each current or future product candidate’s commercial potential. 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 engineeringpersonnel, prototype materials and research studies, obtaining and maintaining Microbot’s patent portfolio. Microbot expenses its research and developmentcosts as incurred. General and Administrative Expenses General and administrative expenses consist primarily of the costs associated with management costs, professional fees for accounting, auditing, consultingand legal services, and allocated overhead expenses. Microbot expects that its general and administrative expenses may increase in the future as it expands its operating activities, maintains and expands itspatent portfolio and incurs additional costs associated with the Merger, the preparation of becoming a public company and maintaining compliance withexchange 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 generatedrevenues, 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. 29 Critical Accounting Policies and Significant Judgments and Estimates Microbot’s management’s discussion and analysis of its financial condition and results of operations are based on its financial statements, which have beenprepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires Microbot tomake estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities at thedate of the financial statements. On an ongoing basis, Microbot evaluates its estimates and judgments, including those related to accrued research anddevelopment expenses. Microbot bases its estimates on historical experience, known trends and events, and various other factors that are believed to bereasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are notreadily 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 financial statements, Microbot believes the followingaccounting policies are the most critical for fully understanding and evaluating its financial condition and results of operations. Fair Value of Financial Instruments The Company measures the fair value of certain of its financial instruments (such as the derivative warrant liabilities) 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 fairvalue 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 forsubstantially 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. Foreign Currency Translation Microbot’s functional currency is the U.S. dollars, and its reporting currency is the U.S. dollar. Government Grant and Input Tax Credit Recoveries Microbot from time to time has received, and may in the future continue to receive, grants from the Israeli Innovation Authority to cover eligible companyexpenditures. These are presented as other income in the statement of operations and comprehensive loss as the grant funds are used for or applied towards anumber of Microbot’s operating expenses, such as salaries and benefits, research and development and professional and consulting fees. The recoveries arerecognized in the corresponding period when such expenses are incurred. Research and Development Expenses Microbot recognizes research and development expenses as incurred, typically estimated based on an evaluation of the progress to completion of specifictasks using data such as clinical site activations, manufacturing steps completed, or information provided by vendors on their actual costs incurred. Microbotdetermines the estimates by reviewing contracts, vendor agreements and purchase orders, and through discussions with internal clinical personnel andexternal service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. These estimatesare made as of each balance sheet date based on facts and circumstances known to Microbot at that time. If the actual timing of the performance of services orthe level of effort varies from the estimate, Microbot will adjust the estimate accordingly. Nonrefundable advance payments for goods and services, includingfees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, arecapitalized as prepaid expenses and recognized as expense in the period that the related goods are consumed or services are performed. Microbot may pay fees to third-parties for manufacturing and other services that are based on contractual milestones that may result in uneven paymentflows. There may be instances in which payments made to vendors will exceed the level of services provided and result in a prepayment of the research anddevelopment expense. 30 Results of Operations Comparison of Years Ended December 31, 2017 and 2016 The following table sets forth the key components of Microbot’s results of operations for the years ended December 31, 2017 and 2016 (in thousands): Years Ended December 31, Increase/ 2017 2016 (Decrease) Research and development expenses $1,100 $901 $199 General and administrative expenses 4,167 8,734 (4,567)Financing expenses 2,322 28 2,294 Research and Development Expenses. Microbot’s research and development expenses were approximately $1,100,000 for the year ended December 31, 2017,compared to approximately $901,000 for the same period in 2016. The increase in research and development expenses of approximately $199,000 in 2017was primarily due to an increase in the cost of materials. Microbot expects its research and development expenses to increase over time as Microbot advancesits development programs and begins pre-clinical and clinical trials for SCS and TipCAT. General and Administrative Expenses. General and administrative expenses were approximately $4,167,000 for the year ended December 31, 2017, comparedto approximately $8,734,000 for the same period in 2016. The substantial decrease in general and administrative expenses of approximately $4,567,000 in2017 was primarily due to share-based compensation of $676,000 and shares for services issued to consultants relating to the Merger in November 2016 ofapproximately $7,258,000 which did not repeat in 2017, offset by increases during 2017 of $1,168,000 in payroll and related expenses, $515,000 relating topublic and investor relations, $226,000 in D&O insurance premiums, $251,000 in governmental fees, and $689,000 in professional services which included$141,000 of expenses related to litigation defense, and $254,000 relating to board fees. Microbot believes its general and administrative expenses mayincrease over time as it advances its programs, increases its headcount and operating activities and incurs expenses associated with being a public company. Financing Expenses. Financing expenses were approximately $2,322,000 for the year ended December 31, 2017, compared to expenses of approximately$28,000 for the same period in 2016. The net increase in financial expenses was primarily due to revaluation and extinguishment of the convertible note andchange in fair value of derivative warrant liabilities. As a result of the extinguishment of the convertible note and issuance of the Series A preferred stock, theCompany recorded a financial loss in the amount of approximately $2,360,000 and $0 for the year ended December 31,2017 and 2016, respectively. Liquidity and Capital Resources Microbot has incurred losses since inception and negative cash flows from operating activities for the years ended December 31, 2017 and 2016. As ofDecember 31, 2017, Microbot had a net working capital of approximately $10,402,000, consisting primarily of cash and cash equivalents. Microbotanticipates that it will continue to incur net losses for the foreseeable future as it continues research and development efforts of its product candidates, hiresadditional staff, including clinical, scientific, operational, financial and management personnel, and incurs additional costs associated with being a publiccompany. Microbot has funded its operations through the issuance of capital stock, grants from the Israeli Innovation Authority, and convertible debt. As of December31, 2017, Microbot raised total cash proceeds of approximately $18,000,000, and incurred a total cumulative loss of approximately $20,624,000 frominception (November 2010) to December 31, 2017. As a result of the sale of certain of the assets of StemCells on November 29, 2016, Microbot received aggregate net cash consideration of approximately $3.1million. Additionally, in January 2017, we sold an aggregate of 700,000 shares of our common stock for net proceeds, after deducting placement agent feesand expenses, of approximately $3.25 million, and in June 2017, we sold an aggregate of 3,750,000 shares of our common stock for net proceeds, afterdeducting placement agent fees and expenses, of approximately $9.3 million. In November 2017, Microbot was awarded an additional non-dilutive grant of up to 2,610,000 Israeli New Shekels (approximately $735,000) from the IsraelInnovation Authority. The grant provides additional sources to be utilized by Microbot for the continued development of the Self-Cleaning Shunt for thetreatment of hydrocephalus and Normal Pressure Hydrocephalus. The grant funds may be used for or applied towards a number of research and developmentexpenses, such as employees’ salaries, research and development expenses (including materials, as well as professional and consulting fees. The recoveriesare recognized in the corresponding period when such expenses are incurred. With respect to such grant, Microbot is committed to pay royalties, as, if andwhen it successfully commercializes the SCS and generates revenue from sales of the SCS, at a rate of between 3% to 3.5% on sales proceeds up to the totalamount of grants received, linked to the dollar, plus interest at an annual rate of USD LIBOR. Under the terms of the grant and applicable law, Microbot isrestricted from transferring any technologies, know-how, manufacturing or manufacturing rights developed using the grant outside of Israel without the priorapproval of the Israel Innovation Authority. Microbot has no obligation to repay the grant, if the SCS project fails, is unsuccessful or aborted before any salesare generated. The financial risk is assumed completely by the IIA. 31 As a result of such funding, Microbot believes that its net cash will be sufficient to fund its operations for at least 12 months and fund operations necessary tocontinue development activities of the SCS and TipCAT. Microbot plans to continue to fund its research and development and other operating expenses, other development activities relating to additional productcandidates, and the associated losses from operations, through future issuances of debt and/or equity securities and possibly additional grants from the IsraeliInnovation Authority. The capital raises from issuances of convertible debt and equity securities could result in additional dilution to Microbot’sshareholders. In addition, to the extent Microbot determines to incur additional indebtedness, Microbot’s incurrence of additional debt could result in debtservice obligations and operating and financing covenants that would restrict its operations. Microbot can provide no assurance that financing will beavailable 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 becomesneeded, it may be required to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtailplanned 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 set forth below (in thousands): Years endedDecember 31, 2017 2016 Net cash used in operating activities $(4,856) $(786)Net cash used in investing activities (85) (25)Net cash provided by financing activities 13,019 3,083 Net increase in cash and cash equivalents $8,078 $2,272 Comparison of the Years Ended December 31, 2017 and 2016 Cash used in operating activities for the year ended December 31, 2017 was approximately $4,856,000, calculated by adjusting net loss from operations byapproximately $2,733,000 to eliminate non-cash and expense items not involving cash flows such as depreciation and accumulated interest on convertibleloans, as well as other changes in current assets and liabilities resulting in non-cash adjustments in the income statement. Cash used in operating activities forthe year ended December 31, 2016 was approximately $786,000, similarly adjusted by approximately $8,877,000. Net cash provided by financing activitiesof approximately $13,019,000 for the year ended December 31, 2017 consisted of issuance of common stock and outflow amounts related to the mergerrecapitalization, compared to approximately $3,083,000 in the year ended December 31, 2016. Off Balance Sheet Arrangements Microbot has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes infinancial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk Microbot’s cash and cash equivalents as of December 31, 2017 consisted of readily available checking and money market funds. Microbot’s primaryexposure 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 onMicrobot’s financial condition and/or results of operations. Microbot does not believe that its cash or cash equivalents have significant risk of default orilliquidity. While Microbot believes its cash and cash equivalents do not contain excessive risk, Microbot cannot provide absolute assurance that in thefuture its investments will not be subject to adverse changes in market value. In addition, Microbot maintains significant amounts of cash and cashequivalents 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 isconducted, 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 thefuture use financial instruments, such as forward foreign currency contracts, in its management of foreign currency exposure. These contracts would primarilyrequire 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. Ourresults of operations could be adversely affected if we are unable to successfully manage currency fluctuations in the future. 32 Effects of Inflation Inflation generally affects Microbot by increasing its clinical trial costs. Microbot does not believe that inflation and changing prices had a significantimpact on its results of operations for any periods presented herein. 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 From 10-K immediately followingPart 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). Asrequired by Rule 13a-15(b) under the Exchange Act, management of the Company, under the direction of our Chief Executive Officer and Chief FinancialOfficer, 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, 2017. Based on that review and evaluation, the Chief Executive Officer and Chief Financial Officer, alongwith the management of the Company, have determined that as of December 31, 2017, the disclosure controls and procedures were effective to providereasonable 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 suchinformation is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate toallow timely decisions regarding required disclosures. Management’s Annual Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining effectiveinternal control over financial reporting (as defined in Rule 13a – 15(f) of the Exchange Act). There are inherent limitations to the effectiveness of anyinternal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls canprovide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internalcontrol 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 ExchangeAct) as of December 31, 2017, and have concluded that, as of December 31, 2017, 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 Commissionthat 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 withthe 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. PART III Item 10. Directors, Executive Officers, and Corporate Governance. Board of Directors We currently have seven directors serving on our Board of Directors (our “Board”). The Board currently consists of Harel Gadot, Yoav Waizer, YosephBornstein, Yehezkel (Hezi) Himelfarb, Scott Burell, Martin Madden and Prattipati Laxminarain. Messrs. Gadot, Waizer and Madden are Class I directors whose terms expire at the Company’s 2019 annual meeting of stockholders. Messrs. Himelfarb andBurell are Class II directors whose terms expire at the Company’s 2017 annual meeting of stockholders. Messrs. Bornstein and Laxminarain are Class IIIdirectors whose terms expire at the Company’s 2018 annual meeting of stockholders. 33 The following table lists the names, ages and positions of the individuals who serve as executive officers and directors of the Company, as of March 30,2018: Name Age PositionHarel Gadot 46 President, Chief Executive Officer and Chairman of the Board of DirectorsYehezkel (Hezi) Himelfarb 60 Chief Operation Officer, General Manager and DirectorYoav Waizer 53 DirectorYoseph Bornstein 59 DirectorScott Burell 53 DirectorMartin Madden 57 DirectorPrattipati Laxminarain 60 Director Harel Gadot, became President, Chief Executive Officer and Chairman of the Company’s Board following the consummation of the merger of C&RD IsraelLtd, a wholly owned subsidiary of the Company, with and into Microbot Medical Ltd. (“Microbot Israel”), with Microbot Israel surviving as a wholly ownedsubsidiary of the Company (the “Merger”). Mr. Gadot is a co-founder of Microbot Israel and has served as Microbot Israel’s Chief Executive Officer sinceMicrobot 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 theChairman of XACT Robotics Ltd., an Israel-based private company seeking to develop a novel platform technology for robotic needle steering in minimallyinvasive interventional procedures such as biopsies and ablations, since August 2013 and MEDX Xelerator LP since July 2016. From December 2007 toApril 2010 Mr. Gadot was a Worldwide Group Marketing Director at Ethicon Inc., a Johnson and Johnson Company, where he was responsible for the globalstrategic marketing of the Company. Mr. Gadot also held management positions, as well as leading regional strategic position for Europe, Middle-East andAfrica, as well as In Israel, while at Johnson and Johnson. Mr. Gadot served as director for ConTIPI Ltd. from August 2010 until November 2013 whenConTIPI 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 theUniversity of Manchester, UK. The Company believes that Mr. Gadot is qualified to serve as Chairman of the Board and as President and Chief ExecutiveOfficer of the Company due to his extensive experience in strategic marketing and general management in the medical device industry. Yehezkel (Hezi) Himelfarb, became the Company’s Chief Operating Officer and General Manager of the Company’s Israeli operations on December 5, 2016and has been a director of the Company since September 2017. Mr. Himelfarb was the Chief Executive Officer from 2008 through November 2016 and amember of the board of directors from 2008 through August 2016 of IceCure Medical Ltd., a Tel Aviv Stock Exchange listed company that developsadvanced cryotherapy systems (cryoablation) intended for the growing physician-office market. Prior to that, from 1999 to 2008, Mr. Himelfarb was thePresident, Chief Executive Officer and a member of the board of directors of Remon Medical Technologies, Inc., a venture backed US/Israeli company thatdeveloped and commercialized smart, miniature implants which enabled physicians to assess and treat a variety of medical conditions, where he, among otherthings, led its acquisition by Boston Scientific. From 1996 to 1999, he was the Vice President and Chief Operating Officer of Medtronic-InStent (Israel),which was part of Medtronic’s vascular division. From 1982 to 1996, Mr. Himelfarb had various positions at Scitex Corporation Ltd., which was an Israeli-based company specializing in specialty equipment production. Mr. Himelfarb holds a B.Sc. in Electronic Engineering and an M.B.A. in Marketing andEngineering Management, both from Tel Aviv University. The Company believes that Mr. Himelfarb is qualified to serve as a director of the Company due tohis extensive experience managing medical device companies. Yoav Waizer, became a director of the Company following the Merger and has served as a member of the Board of Directors of Microbot Israel since May2015. Mr. Waizer is a Partner and Chief Executive Officer of Medica Venture Partners, a healthcare dedicated venture investing out of Israel in innovativecapital-starved early stage and special situation companies, since November 2005. Prior to his Tenure at Medica, Mr. Waizer served as CFO & COO at CedarFund, a venture capital fund focuses on investing in Israel-related high-tech companies in the telecom, networking, Internet-infrastructure and enterprisesoftware areas and prior to that Mr. Waizer was the CFO of Star Ventures Israel, the Israeli fund of Star Ventures, a $1 billion venture capital fund investing inall stages of development within the Telecom, Enterprise S/W, Wireless and Life Sciences sectors. Mr. Waizer is currently a director of InterCure Ltd., acompany focused on investing in medical technology companies that is traded on the Tel Aviv Stock Exchange, Yeda Research & Development Co. Ltd., thetechnology transfer arm of the Weizmann Institute of Science, and (iii) XACT Robotics Ltd,. a private Israeli company developing novel platform robotictechnology for use in minimally invasive procedures. Mr. Waizer holds Master of Business Administration in Information Systems and B.Sc. in Accountingand Statistics, both from the Tel-Aviv University. The Company believes that Mr. Waizer is qualified to serve as a member of the Company’s board due to hisextensive investment experience and extensive knowledge of the life sciences 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 theBoard of Directors since Microbot Israel was founded in November 2010. Mr. Bornstein founded Shizim Ltd., a life science holding group in October 2000and has served as its president since then. Mr. Bornstein is the Chairman of GCP Clinical Studies Ltd., a provider of clinical research services and educationalprograms 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., a service company for the medical device industry, since April 2012 and the Chairman of ASIS EnterprisesB.B.G. Ltd., a business August 2007. In October 1992, Mr. Bornstein founded Pharmateam Ltd., an Israeli company that specialized in representinginternational 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 “USISTF”) fromSeptember 2002 to February 2005 as well as a consultant for USISTF from September 2002 to February 2005. He is also the founder of ILSI-Israel LifeScience Industry Organization (who was integrated into IATI) and ITTN-Israel Tech Transfer Organization. The Company believes that Mr. Bornstein isqualified to serve as a member of the Board due to his extensive experience in, and knowledge of, the life sciences industry and international business. 34 Scott R. Burell, became a director of the Company following the Merger. From November 2006 until its sale to Invitae Corp. in November 2017, he was theChief Financial Officer, Secretary and Treasurer of CombiMatrix Corporation (NASDAQ: CBMX), a family health-focused clinical molecular diagnosticlaboratory specializing in pre-implantation genetic screening, prenatal diagnosis, miscarriage analysis, and pediatric developmental disorders. Hesuccessfully led the split-off of CombiMatrix in 2007 from its former parent, has led several successful public and private debt and equity financingtransactions as well as CombiMatrix’s reorganization in 2010. Prior to this, Mr. Burell had served as CombiMatrix’s Vice President of Finance sinceNovember 2001 and as its Controller from February 2001 to November 2001. From May 1999 to first joining CombiMatrix in February 2001, Mr. Burell wasthe Controller for Network Commerce, Inc., a publicly traded technology and information infrastructure company located in Seattle. Prior to this, Mr. Burellspent 9 years with Arthur Andersen’s Audit and Business Advisory practice in Seattle. During his tenure in public accounting, Mr. Burell worked with manyclients, 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 is also a Board member and Audit Committee Chairman of AgEagle Aerial Systems, Inc. (NYSE: UAVS), a publicly-traded agricultural dronecompany based in Kansas, and is a Board member of Collplant Holdings, Ltd. (Nasdaq: CLGN), an Israeli -based publicly traded biotechnology companyfocused on regenerative medicine. Mr. Burell obtained his Washington state CPA license in 1992 and is a certified public accountant (currently inactive). Heholds Bachelor of Science degrees in Accounting and Business Finance from Central Washington University. The Company believes Mr. Burell’squalifications to serve on the Board include his experience as an executive of a public life sciences company and knowledge of financial accounting in themedical 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 affiliatesfrom 1986 to January 2017, most recently as Vice President, Research & Development of DePuy Synthes, a Johnson & Johnson Company, from February2016 to January 2017. Prior to that, from July 2015 to February 2016, Mr. Madden was the Vice President, New Product Development of Johnson & JohnsonMedical Devices. From January 2012 to July 2015, Mr. Madden was the Vice President, Research & Development of Johnson & Johnson’s Global SurgeryGroup. Mr. Madden holds a MBA from Columbia University, a M.S. from Carnegie Mellon University in Mechanical Engineering, and a B.S. from theUniversity of Dayton in Mechanical Engineering. The Company believes that Mr. Madden is qualified to serve as a member of the Board due to his extensiveexperience 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 asWorldwide 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. Laxminarainholds an MBA from Indian Institute of Management, Calcutta, India and a Bachelor of Engineering from Osmania University, Hyderabad, India. TheCompany believes that Mr. Laxminarain is qualified as a Board member of the Company because of his extensive experience working with medical devicecompanies and knowledge of the industries in which the Company intends to compete. Executive Officers Following are the name, age and other information for our named executive officers, as of March 30, 2018. All company officers have been appointed to serveuntil their successors are elected and qualified or until their earlier resignation or removal. Information regarding Messrs. Gadot and Himelfarb is set forthabove under “–Board of Directors.” Name Age PositionHarel Gadot 46 President, Chief Executive Officer and Chairman of the Board of DirectorsDavid Ben Naim 49 Chief Financial OfficerYehezkel (Hezi) Himelfarb 60 General Manager and Chief Operating 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 managerof DBN Finance Services Ltd., a company which provides outsourcing financial services to public and private companies, since 2014, including theCompany. Through DBN Finance Services, Mr. Ben Naim has acted as the outsourced CFO for Emerald Medical Applications Corp. (OTC:MRLA), a digitalhealth startup company engaged in the development, sale and service of imaging solutions, and Tempramed Inc., a private medical device company. Prior tothat, 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 ofinsulin treatment methods. From 2008 until 2011, Mr. Ben Naim served as Chief Financial Officer of Crow Technologies 1977 Ltd. (OTC:CRWTF), acompany that designs, develops, manufactures and sells a broad range of security and alarm systems. From 2007 to 2008, Mr. Ben Naim served as ChiefFinancial Officer of Ilex Medical Ltd. (TASE:ILX), a leading company in the medical diagnostics field. From 2003 to 2007, Mr. Ben Naim was the CorporateController 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 holdsa 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. 35 Committees of the Board of Directors Presently, the Board has three standing committees — the Audit Committee, the Compensation and Stock Option Committee (the “CompensationCommittee”), 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 hasdetermined that Mr. Burell is an “audit committee financial expert,” as defined in SEC rules. The Audit Committee acts pursuant to a written charter which isavailable through our website at www.microbotmedical.com. The primary function of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities. The Audit Committee does thisprimarily by reviewing the Company’s financial reports and other financial information as well as the Company’s systems of internal controls regardingfinance, accounting, legal compliance, and ethics that management and the Board of Directors have established. The Audit Committee also assesses theCompany’s auditing, accounting and financial processes more generally. The Audit Committee recommends to the Board of Directors the appointment of afirm of independent auditors to audit the financial statements of the Company and meets with such personnel of the Company to review the scope and theresults of the annual audit, the amount of audit fees, the company’s internal accounting controls, the Company’s financial statements contained in this proxystatement, and other related matters. Compensation Committee The Compensation Committee is composed of Messrs. Waizer, Madden and Bornstein. 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 acts pursuant to a written charter. The Compensation Committee makes recommendations to the Board of Directors andmanagement concerning salaries in general, determines executive compensation and approves incentive compensation for employees and consultants. Nominating and Governance Committee The Corporate Governance Committee is composed of Messrs. Waizer, Laxminarain and Burell. Each of the members of the Corporate GovernanceCommittee is independent. The Corporate Governance Committee acts pursuant to a written charter which is available through our website atwww.microbotmedical.com. The Corporate Governance Committee oversees nominations to the Board and considers the experience, ability and character of potential nominees to serveas 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 CorporateGovernance 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, technicalexpertise or personal attributes, or a combination of these, sufficient to suggest, in the Board’s judgment, that the candidate would have the ability to helpdirect the affairs of the company and enhance the Board as a whole. The Corporate Governance Committee may identify potential candidates through anyreliable means available, including recommendations of past or current members of the Board from their knowledge of the industry and of the Company. TheCorporate Governance Committee also considers past service on the Board or on the board of directors of other publicly traded or technology focusedcompanies. The Corporate Governance Committee has not adopted a formulaic approach to evaluating potential nominees to the Board; it does not have aformal policy concerning diversity, for example. Rather, the Corporate Governance Committee weighs and considers the experience, expertise, intellect, andjudgment of potential nominees irrespective of their race, gender, age, religion, or other personal characteristics. The Corporate Governance Committee maylook for nominees that can bring new skill sets or diverse business perspectives. Potential candidates recommended by security holders will be considered asprovided in the company’s “Policy Regarding Shareholder Candidates for Nomination as a Director,” which sets forth the procedures and conditions for suchrecommendations. This policy is available through our website at www.microbotmedical.com. There were no material changes to the procedures by which securityholders may recommend nominees to the Board, since the Company last provided thedisclosure in this section. 36 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, hasresponsibility for the oversight of risk management. An important part of risk management is not only understanding the risks facing the company and whatsteps management is taking to manage those risks, but also understanding what level of risk is appropriate for the company. In support of this oversightfunction, the Board receives regular reports from our Chief Executive Officer and members of senior management on operational, financial, legal, andregulatory issues and risks. The Audit Committee additionally is charged under its charter with oversight of financial risk, including the company’s internalcontrols, and it receives regular reports from management, the company’s internal auditors and the company’s independent auditors. The chairman of theBoard and independent members of the Board work together to provide strong, independent oversight of the company’s management and affairs through itsstanding 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 isposted on our website at www.microbotmedical.com. We intend to disclose any substantive amendment or waivers to this code on our website. There were nosubstantive amendments or waivers to this code in 2016. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers, directors, and persons who own morethan 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, webelieve that, during the fiscal year ended December 31, 2017, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10%beneficial owners have been met, with the exception of Mr. Madden who failed to timely file his Form 3, Mr. Bornstein who failed to timely file 4 reportsshowing 7 transactions, and Professor Moshe Shoham who failed to timely file one report showing 15 transactions. 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 Companyfor the periods indicated. Name and Principal Position Year Salary ($) Bonus ($) StockAwards($) OptionAwards($) (2) Non-EquityIncentive PlanCompensation($) All OtherCompensation($) Total ($) Harel Gadot(1) 2017 389,000 158,000 — 156,219 — 15,000 718,219 Chief Executive 2016 275,000 — — — — — 275,000 Officer 2015 91,000 — — — — — 91,000 Hezi Himelfarb(3) Chief Operating 2017 228,653(5) 40,625 — 92,205 — (5) 361,483 Officer & General 2016 16,000 — — — — — 16,000 Manager 2015 — — — — — — — David Ben Naim(4) 2017 66,000 — — 188 — — 66,188 Chief Financial 2016 6,000 — — — — — 6,000 Officer 2015 — — — — — — — (1)Mr. Gadot’s compensation prior to the Merger on November 28, 2016 was paid pursuant to a consulting agreement with MEDX Ventures Group LLC, ofwhich Mr. Gadot is the Chief Executive Officer, Company Group Chairman and majority equity owner. All Other Compensation includes Mr. Gadot’smonthly automobile allowance and tax gross-up.(2)Amounts shown do not reflect cash compensation actually received by the named executive officer. Instead, the amounts shown are the non-cashaggregate grant date fair values of stock option awards made during the periods presented as determined pursuant to ASC Topic 718 and excludes theeffect of forfeiture assumptions. The assumptions used to calculate the fair value of stock option awards are set forth under Note 10 to the ConsolidatedFinancial Statements included herein.(3)Mr. Himelfarb commenced employment in December 2016.(4)Mr. Ben Naim commenced employment in December 2016.(5)The salary includes $13,000 for Mr. Himelfarb’s yearly automobile allowance. 37 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 31,2017. Option Awards Stock Awards Name Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable OptionExercisePrice OptionExpirationDate Number ofShares orUnits ofStock ThatHave NotVested Marketvalue ofShares ofUnits ofStock ThatHave NotVested EquityIncentivePlanAwards:Number ofUnearnedShares,Units orOtherRights ThatHave NotVested EquityIncentivePlanAwards:Market orPayoutValue ofUnearnedShares,Units orOtherRights ThatHave NotVested Harel Gadot 1,167,693 - $0.28 9/01/2024 - - - - - 1,812,712 1.05 9/14/2027 - - - - Hezi Himelfarb - 1,087,627 1.29 10/15/2027 - - - - David Ben Naim - 75,000 1.02 12/28/2027 - - - - Harel Gadot Employment Agreement The Company entered into an employment agreement (the “Gadot Agreement”) with Harel Gadot on November 28, 2016, to serve as the Company’sChairman of the Board of Directors and Chief Executive Officer, on an indefinite basis subject to the termination provisions described in the Agreement.Pursuant to the terms of the Gadot Agreement, Mr. Gadot shall receive an annual base salary of $360,000. The salary will be reviewed on an annual basis bythe Compensation Committee of the Company to determine potential increases taking into account such performance metrics and criteria as established bythe Executive and the Company. Mr. Gadot shall also be entitled to receive a target annual cash bonus of up to a maximum amount of 40% of base salary. On March 9, 2017, the Companyadopted a 2017 bonus plan (the “Bonus Plan”). The Bonus Plan provides for the payment of Mr. Gadot’s bonus based on certain milestones of the Companybeing satisfied, as follows: ●The Company having closed a financing of at least $3 million in the first quarter of 2017, at which time 20% of the bonus would be payable. Suchmilestone was satisfied in January 2017. ●The Company having closed a financing of at least $10 million by the end of the third quarter of 2017, at which time 20% of the bonus would bepayable. ●The Company having entered into research agreements with Wayne State University (the “Wayne Agreement”) and The Washington University inSt. Louis (the “Washington Agreement”) by the end of the first quarter of 2017, at which time 20% of the bonus would be payable. Such milestonewas satisfied in January 2017. ●The Company having initiated studies pursuant to both the Wayne Agreement and the Washington Agreement, by the end of April 2017, at whichtime 15% of the bonus would be payable. ●The Company having completed the initial study from at least one of the Wayne Agreement and the Washington Agreement, by the end of 2017, atwhich time 15% of the bonus would be payable. ●The Company meeting its 2017 budget, as approved by the Board of Directors of the Company by March 31, 2017, at which time 10% of the bonuswould be payable. 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 topurchase shares of common stock of the Company representing 5% of the issued and outstanding shares of the Company, based on vesting and other terms tobe determined by the Compensation Committee of the Board of Directors subsequent to the Effective Time. 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 andpayable incurred up to the date of termination. 38 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) 12months’ 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 accruedvacation days; and (v) applicable premiums (inclusive of premiums for Mr. Gadot’s dependents) pursuant to the Consolidated Omnibus BudgetReconciliation 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 theCompany. Mr. Gadot also agreed to customary terms regarding confidentiality and ownership of intellectual property. Hezi Himelfarb Employment Agreement We entered into an employment agreement (the “Himelfarb Agreement”) with Mr. Himelfarb on December 5, 2016, to serve as our Chief Operating Office andGeneral Manager, on an indefinite basis subject to the termination provisions described in the Himelfarb Agreement. Pursuant to the terms of the HimelfarbAgreement, Mr. Himelfarb shall receive a base salary of 64,000 New Israeli Shekel (NIS) per month or NIS 768,000 per year, or the equivalent ofapproximately $211,624 per annum based on an exchange rate of $.28 for NIS 1.0. The salary will be reviewed on an annual basis by the Company’s Board ofDirectors to determine potential salary increases. Mr. Himelfarb shall be entitled to grants or payments subject to the adoption by the Company at its discretion of a bonus plan or policy. On March 9, 2017,the Company adopted the Bonus Plan. The Bonus Plan provides for the payment of Mr. Himelfarb’s bonus of up to 25% of his base salary based on certainmilestones of the Company being satisfied, as follows: ●The Company having closed a financing of at least $3 million in the first quarter of 2017, at which time 20% of the bonus would be payable. Suchmilestone was satisfied in January 2017. ●The Company having closed a financing of at least $10 million by the end of the third quarter of 2017, at which time 20% of the bonus would bepayable. ●The Company having entered into research agreements with Wayne State University (the “Wayne Agreement”) and The Washington University inSt. Louis (the “Washington Agreement”) by the end of the first quarter of 2017, at which time 20% of the bonus would be payable. Such milestonewas satisfied in January 2017. ●The Company having initiated studies pursuant to both the Wayne Agreement and the Washington Agreement, by the end of April 2017, at whichtime 15% of the bonus would be payable. ●The Company having completed the initial study from at least one of the Wayne Agreement and the Washington Agreement, by the end of 2017, atwhich time 15% of the bonus would be payable. ●The Company meeting its 2017 budget, as approved by the Board of Directors of the Company by March 31, 2017, at which time 10% of the bonuswould be payable. Mr. Himelfarb shall also entitled participate in the Company’s motor vehicle program and receive a motor vehicle from the Company’s vehicle pool, whichshall be leased or rented by the Company for use by Mr. Himelfarb. The Company shall pay an amount equal to 8.33% of Mr. Himelfarb’s salary, which shallbe allocated to a fund for severance pay to Mr. Himelfarb, and an additional amount equal to 6.25% of Mr. Himelfarb’s salary (6.5% as of January 1, 2017),which shall be allocated to a pension plan, in addition to disability insurance contributions and as otherwise may be required by applicable Israeli law fromtime to time. The Company shall also contribute to an educational fund an amount equal to 7.5% of each monthly payment of Mr. Himelfarb’s full salary. Mr.Himelfarb is also entitled to options to purchase 1,087,627 shares of the Company’s common stock, which represents 3% of the Company’s issued andoutstanding shares of common stock as of the closing of the Company’s merger transaction with the Subsidiary on November 28, 2016. Such options havenot yet been granted. The Himelfarb Agreement contains customary non-competition provisions pursuant to which Mr. Himelfarb agrees not to compete with the Company. Mr.Himelfarb 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 asthe principal financial and accounting officer of Microbot Israel and the Company. Mr. Ben Naim’s engagement will continue on an indefinite basis subjectto the termination provisions described in the Agreement. 39 Pursuant to the Agreement, the Company shall pay the Service Provider a fixed fee of NIS 22,000, or the equivalent of approximately $6,110 per month basedon an exchange rate of $.28 for NIS1.0, plus VAT per month, and the Company shall reimburse DBN Finance Services for reasonable and customary out ofpocket expenses incurred by it or Mr. Ben Naim connection with the performance of the duties under the Services Agreement. In addition, the Company shallmaintain 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 theCompany. 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 theother party with a 30-day notice of termination. The Company shall further be entitled to terminate the Services Agreement for “cause” without notice, inwhich 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 ServicesAgreement also contains customary non-competition and non-solicitation provisions pursuant to which DBN Finance Services and Mr. Ben Naim agree notto compete and solicit with the Company during the term of the Agreement and for a period of twelve (12) months following the termination of theAgreement. 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 DelawareGeneral Corporation Law. The agreements generally cover expenses that a director or officer incurs or amounts that a director or officer becomes obligated topay 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 bestinterests of the Company. The agreements also provide for the advancement of expenses to the directors and officers subject to specified conditions. There arecertain exceptions to the Company’s obligation to indemnify the directors and officers, and, with certain exceptions, with respect to proceedings that heinitiates. 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 furtherprovide that the Company will indemnify its officers and directors to the fullest extent permitted by law. We believe that this indemnification covers at leastnegligence 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 Commissionsuch indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable. Director Compensation The Company adopted a compensation package for the non-management members of its Board, pursuant to which each such Board member would receive forhis services $12,000 per annum, $750 per duly called Board meeting and $250 per unanimous written consent. Furthermore, each member of the AuditCommittee of the Board receives an additional $10,000 per annum, and other committee members receive an additional $5,000 per annum. Board membersare also entitled to receive equity awards. Upon joining the Board, a member would receive an initial grant of $40,000 of stock options (calculated as theproduct of the exercise price on the date of grant multiplied by the number of shares underlying the stock option award required to equal $40,000), with anadditional grant of stock options each year thereafter, to purchase such number of shares of the Company’s common stock equal to $20,000, subject to themember of the Board having served on the Board for at least twelve continuous months, and having attended at least 80% of the Board meetings over theprior year. The following table summarizes cash-based and equity compensation information for our outside directors, including annual Board and committee retainerfees and meeting attendance fees, for the year ended December 31, 2017: Name Feesearned orpaid incash StockAwards OptionAwards(1) Non-EquityIncentive PlanCompensation NonqualifiedDeferredCompensationEarnings All OtherCompensation Total Yoav Waizer $50,602 $- $828 $- $- $ 50,000 (2) $101,430 Moshe Shoham(1) 33,333 - 321 - - - $33,654 Yoseph Bornstein 52,166 - 828 - - - 52,994 Solomon Mayer 20,500 - - - - - 20,500 Scott Burell 53,062 - 828 - - - 53,890 Martin Madden 27,270 - 828 - - - 28,098 Laxminarain Prattipati - - 828 - - - 828 (1)Amounts shown do not reflect cash compensation actually received by the director. Instead, the amounts shown are the non-cash aggregate grant date fairvalues of stock option awards made during the period presented as determined pursuant to ASC Topic 718 and excludes the effect of forfeitureassumptions. The assumptions used to calculate the fair value of stock option awards are set forth under Note 10 to the Consolidated FinancialStatements included herein. (2)Represents director fee paid to Mr. Waizer for director services in 2016 to Microbot Medical Ltd. (3)Represents consulting fees paid to Professor Shoham. Professor Shoham resigned from the Board as of December 6, 2017. 40 Messrs. Gadot and Himelfarb received compensation for their respective 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 30, 2018, by (i) each of our directors, (ii) each of ournamed 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 morethan 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 30, 2018. We calculatedpercentage ownership in accordance with the rules of the SEC. The percentage of common stock beneficially owned is based on 42,120,427 sharesoutstanding as of March 30, 2018. In addition, shares issuable pursuant to options or other convertible securities that may be acquired within 60 days ofMarch 30, 2018 are deemed to be issued and outstanding and have been treated as outstanding in calculating and determining the beneficial ownership andpercentage ownership of those persons possessing those securities, but not for any other persons. This table is based on information supplied by each prospective director, officer and principal stockholder of the Company. Except as indicated in footnotesto this table, the Company believes that the stockholders named in this table have sole voting and investment power with respect to all shares of CommonStock shown to be beneficially owned by them, based on information provided by such stockholders. Unless otherwise indicated, the address for eachdirector, 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 SharesBeneficially Owned Percentage of CommonStock Beneficially Owned Directors and Executive Officers Harel Gadot(1) 4,154,795 9.52%Yoav Waizer – – Moshe Shoham(2) 2,550,231 5.29%Yoseph Bornstein(3) 4,530,409 10.76%Scott Burell – – Martin Madden – – David Ben Naim – – Yehezkel (Hezi) Himelfarb – – Prattipati Laxminarain – – All current directors and executive officers as a group (9 persons)(4) 11,235,435 25.34% Five Percent Shareholders LSA - Life Science Accelerator Ltd.(3) 4,530,409 10.76%Technion Research and Development Foundation Ltd.(5) 3,555,339 8.44%MEDX Ventures Group LLC(6) 3,820,664 8.83%Saber Holding GmbH(7) 4,307,003 10.23% (1)Includes 1,167,960 shares of the Company’s common stock issuable upon the exercise of options granted to MEDX Ventures Group and 334,131 sharesof the Company’s common stock issuable upon the exercise of options granted to Mr. Gadot. All of such shares and 1,167,960 options are held byMEDX Ventures Group LLC, which is beneficially owned by Mr. Gadot. See Note 6 below.(2)Includes 708,141 shares of the Company’s common stock issuable upon the exercise of options.(3)Based on representations and other information made or provided to the Company by Mr. Bornstein, Mr. Bornstein is the CEO and Director of LSA andof Shizim, and Mr. Bornstein is the majority equity owner of Shizim. Shizim is the majority equity owner of LSA. Accordingly, Mr. Bornstein may bedeemed to share voting and investment power over the shares beneficially owned by these entities and has an address of 16 Iris Street, Rosh-Ha’AyinIsrael 4858022.(4)Includes shares of the Company’s common stock issuable upon the exercise of options as set forth in footnotes (1) and (2).(5)The address of Technion Research and Development Foundation is Technion City, Malat Bldg., 5th Floor, Haifa, Israel 3200003. 41 (6)Includes 1,167,960 shares of the Company’s common stock issuable upon the exercise of options granted to MEDX Ventures Group. Mr. Gadot is theChief Executive Officer, Company Group Chairman and majority equity owner of MEDX Venture Group and thus may be deemed to share voting andinvestment power over the shares beneficially owned by this entity. Does not include 334,131 shares of the Company’s common stock issuable upon theexercise of options granted to Mr. Gadot directly. See Note 1 above.(7)Pursuant to a Schedule 13D/A-2 filed on June 20, 2017, Mrs. Sandra Berkson owns 100% of the equity of Saber Holding GmbH. Mr. Avram Berkson andMrs. Sandra Berkson have shared power with Saber to vote or direct the vote, and to dispose or direct the disposition, of such shares. Saber’s address isKrummbaumgasse 10/20, 1020 Wein, Austria. 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 prepareand require our directors and executive officers to complete Director and Officer Questionnaires identifying any transactions with us in which the officer ordirector or their family members have an interest. This helps us identify potential conflicts of interest. A conflict of interest occurs when an individual’sprivate 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 andemployees who may have a potential or apparent conflict of interest to immediately notify our general counsel, who serves as our compliance officer. Inaddition, the Corporate Governance Committee is responsible for considering and reporting to the Board any questions of possible conflicts of interest ofBoard members. Our code of ethics further requires pre-clearance before any employee, officer or director engages in any personal or business activity thatmay raise concerns about conflict, potential conflict or apparent conflict of interest. Copies of our code of ethics and the Corporate Governance Committeecharter are posted on the corporate governance section of our website at www.microbotmedical.com. In March 2011, Microbot Israel entered into a consulting agreement with MEDX Ventures Group LLC, of which Mr. Gadot is the Chief Executive Officer,Company Group Chairman and majority equity owner (the “Gadot Consulting Agreement”), pursuant to which Mr. Gadot served as Microbot Israel’s ChiefExecutive Officer. Under the terms of the Gadot Consulting Agreement, MEDX Ventures Group received a monthly fee of $17,000, which amount was toincrease to $25,000 per month upon the consummation of a merger or other similar transaction. Under the Gadot Consulting Agreement, MEDX VenturesGroup and Mr. Gadot was subject to customary non-competition, non-solicitation, confidentiality and intellectual property ownership provisions. Inaddition, MEDX Ventures Group was entitled to receive reimbursement for all direct expenses in connection with the performance of services under theGadot Consulting Agreement. Either Microbot or MEDX Ventures Group was entitled to terminate the Gadot Consulting Agreement upon 60 days’ writtennotice. MEDX Ventures Group LLC is a stockholder of Microbot. As a result of the Merger, the Gadot Consulting Agreement was terminated in November2016 and was replaced with an employment agreement between the Company and Mr. Gadot. In 2015, Microbot Israel issued convertible promissory notes, at an interest rate of 10%, in the aggregate principal amount of $411,500 (the “2015 Notes”) tocertain investors and Microbot Israel shareholders. The 2015 Notes matured on July 8, 2016. The principal and accrued but unpaid interest on the 2015 Notesconverted into 452,650 shares of Series A Preferred Stock of Microbot Israel and warrants to purchase 409,750 shares of Series A Preferred Stock of MicrobotIsrael. The table below sets forth the 2015 Notes with aggregate principal in excess of $120,000 that were purchased by Microbot’s directors, executiveofficers and holders of more than 5% of its capital stock. Name of 2015 Bridge Note Holder Outstanding Principal Purchased in 2015 Saber Holding GmbH $140,000 Leon Lewkowicz $140,000 In 2016, Microbot Israel issued convertible promissory notes, at an annual interest rate of 10%, in the aggregate principal amount of $750,000 (the “2016Notes”) to certain investors and Microbot Israel shareholders. The principal and accrued but unpaid interest on the 2016 Notes converted, at a 20% discount,into common stock upon the consummation of the Merger. The table below sets forth the 2016 Notes with aggregate principal in excess of $120,000 thatwere purchased by Microbot Israel’s directors, executive officers and holders of more than 5% of its capital stock. Name of 2016 Bridge Note Holder Outstanding Principal Purchased in 2016 Alpha Capital Anstalt $400,000 Saber Holding GmbH $175,000 Leon Lewkowicz $175,000 Microbot Israel entered into a license agreement with Technion Research and Development Foundation Ltd., or TRDF, in 2012 pursuant to which MicrobotIsrael obtained an exclusive, worldwide, royalty-bearing, sub-licensable license to certain patents and inventions relating to the SCS and TipCAT technologyplatforms. TRDF is a founding member of Microbot and current beneficially owns approximately 14.5% of Microbot’s ordinary shares on an as convertedbasis. See “Description of Business – Intellectual Property” for a description of this agreement. 42 On August 15, 2016, Microbot Israel and Alpha Capital Anstalt (“Alpha Capital”), an existing shareholder of Microbot Israel, entered into an agreementpursuant to which, among other things, Alpha Capital agreed to fund a proposed $4 million private placement, which obligation would be reduced dollar-for-dollar by any third party investors investing in such private placement. This agreement was superseded by the Letter Agreement referred to below. The Company entered into a letter agreement (the “Letter Agreement”) with Alpha Capital, dated November 18, 2016 but effective November 28, 2016pursuant to which Alpha Capital committed to make a cash investment into the Company, no later than December 31, 2016, in an amount equal to thedifference between $4 million and the amount of cash released to the Company, by December 31, 2016, out of escrow pursuant to the Company’s asset saletransaction with BOCO Silicon Valley, Inc., a California corporation. The Company waived Alpha Capital’s commitments under the Letter Agreement. On August 15, 2016, concurrently with the execution of the Merger Agreement, the Company issued a 5.0% secured note (the “Secured Note”) to AlphaCapital, in the principal amount of $2 million, payable upon the earlier of (i) 30 days following the consummation of the Merger and (ii) December 31, 2016.In addition, on August 15, 2016, the Company and Alpha Capital entered into a Security Agreement to secure the Company’s obligations under the SecuredNote (the “Security Agreement”). The Company’s obligations under the Secured Note were secured by a first priority security interest in all of the Company’sintellectual property and certain other general assets. As of November 28, 2016, the Company entered into a Securities Exchange Agreement (the “ExchangeAgreement”) with Alpha Capital, providing for the issuance to Alpha Capital of a convertible promissory note by the Company (the “Convertible Note”) in aprincipal amount of $2,028,767, which is equal to the principal and accrued interest under the Secured Note, in exchange for (a) the full satisfaction,termination and cancellation of the Secured Note and (b) the release and termination of the Security Agreement and the first priority security interest grantedthereunder. The Convertible Note is convertible into the Company’s common stock any time after November 28, 2017 until the maturity date of November28, 2019, based on a conversion price of $0.64, subject to adjustments as provided in the Convertible Note and the other terms and the conditions specifiedin the Convertible Note. Pursuant to the terms of the Note, the Company is obligated to pay interest on the outstanding principal amount owed under theNote at a fixed rate per annum of 6.0%, payable at maturity or earlier conversion. On December 16, 2016, the Company entered into a Securities Exchange Agreement with Alpha Capital, pursuant to which Alpha exchanged approximately9,735,925 shares or rights to acquire shares of the common stock of the Company held by it, for approximately 9,736 shares of a newly designated class ofSeries A Convertible Preferred Stock, par value $0.01 per share. The common stock and common stock underlying the rights include all of the shares ofcommon stock issued or issuable to Alpha Capital pursuant to the Merger. The closing of the exchange was effective as of December 27, 2017. 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 ofindependent directors, as determined under the applicable NASDAQ listing rules. The independent members of our Board are Messrs. Waizer, Bornstein, Burell, Madden and Laxminarain. 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 Memberof Deloitte Touche Tohmatsu Limited, to audit the accounts of the Company for the year ending December 31, 2017. The Audit Committee considered the tax compliance services provided by Brightman Almagor Zohar & Co., concluded that provision of such services iscompatible with maintaining the independence of the independent accountants, and approved the provision by Brightman Almagor Zohar & Co. of taxcompliance services with respect to the year ending December 31, 2017. The Audit Committee received the following information concerning the fees of the independent accountants for the years ended December 31, 2017 and2016, has considered whether the provision of these services is compatible with independence of the independent accountants, and concluded that it is: Year Ended 12/31/17 12/31/16 Audit Fees (1) $35,000 $35,000 Audit-Related Fees – – Tax Fees – – All Other Fees – – (1)Audit fees represents fees for the integrated audit of our annual consolidated financial statements and reviews of the interim consolidated financialstatements, and review of audit-related SEC filings; also includes fees related to issuing comfort letter(s). Also includes tax filing fees. 43 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. Inaccordance with such policies and procedures, the Audit Committee is required to pre-approve all audit and non-audit services to be performed by theindependent 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 theauditors’ independence. Under the policy, pre-approval is generally provided up to one year and any pre-approval is detailed as to the particular service orcategory 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. During2015 and through November 28, 2016, Microbot Israel did not have a standing audit committee. 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 notesthereto. (3) Exhibits: The documents set forth below are filed herewith or incorporated by reference to the location indicated. Exhibit No. Title or Description 2.1 Agreement and plan of merger and Reorganization, dated as of August 15, 2016, by and among StemCells, Inc., C&RD Israel Ltd. andMicrobot Medical Ltd.(1)3.1 Restated Certificate of Incorporation of the Registrant(2)3.2 Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant(3)3.3 Amended and Restated By-Laws of the Registrant(4)3.4 Certificate of Designations of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock(5)3.5 Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock(12)4.1 Form of Series A Warrant(6)4.2 Form of Series B Warrant(6)10.1 Letter Agreement between the Company and Alpha Capital Anstalt(3)10.2 Securities Exchange Agreement between the Company and Alpha Capital Anstalt(3)10.3 Convertible Promissory Note in favor of Alpha Capital Anstalt(3)10.4 Form of Indemnification Agreement, by and between the Company and each of its directors and officers(3)10.5* Employment Agreement with Harel Gadot(3)10.6* Services Agreement with DBN Finance Services Ltd.(3)10.7* Employment Agreement with Yehezkel Himelfarb(7)10.8 Securities Exchange Agreement with Alpha Capital Anstalt(5)10.9 Form of Securities Purchase Agreement, dated as of January 5, 2017(8)10.10 Placement Agent Agreement, dated as of January 4, 2017(8)10.11 Asset Purchase Agreement, dated as of November 11, 2016, by and among StemCells, Inc., Stem Cell Sciences Holdings Limited, StemcellsCalifornia, Inc., and Boco Silicon Valley, Inc.(15)10.12 Escrow Agreement, as of November 11, 2016, by and among BOCO Silicon Valley, Inc., StemCells, Inc., Continental Stock Transfer & TrustCompany, Kenneth B. Stratton and Alpha Capital Anstalt(15)10.13 Contract Research Agreement, dated as of January 27, 2017, with The Washington University(15)10.14 License Agreement, as of June 20, 2012, by and between Technion Research and Development Foundation, and Microbot Medical Ltd.(15)10.15* 2017 Equity Incentive Plan(13)10.16* Letter agreement, dated January 10, 2016, between the Registrant and Martin McGlynn(10)10.17* Severance Buy-Out Agreement, Compromise and Release, by and between StemCells, Inc. and Ken Stratton, dated June 6, 2016(11) 44 10.18* Severance Buy-Out Agreement, Compromise and Release, by and between StemCells, Inc. and Gregory Schiffman, dated June 6, 2016(11)10.19* Severance Buy-Out Agreement, Compromise and Release, by and between StemCells, Inc. and Ian Massey, dated June 6, 2016(11)10.20* Cooperation and Consulting Agreement, by and between StemCells, Inc. and Ken Stratton, dated June 6, 2016(11)10.21* Cooperation and Consulting Agreement, by and between StemCells, Inc. and Gregory Schiffman, dated June 6, 2016(11)10.22* Cooperation and Consulting Agreement, by and between StemCells, Inc. and Ian Massey, dated June 6, 2016(11)10.23 Trust Agreement, by and between the StemCells, Inc. and David A Bradlow, dated June 16, 2016(11)10.24 Securities Exchange Agreement, dated May 10, 2017, between the Company and Alpha Capital Anstalt(12)10.26 Asset Purchase Agreement, dated as of July 13, 2016, by and between StemCells, Inc. and Miltenyi Biotec, Inc. (1)10.27 Settlement Agreement, dated as of July 29, 2016, by and among BMR-Pacific Research Center LP and StemCells, Inc. (1)10.28 Agreement, dated January 4, 2018, by and between CardioSert Ltd. and Microbot Medical Ltd.(14)21.1 Subsidiaries of the Registrant(15)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, ChiefExecutive 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 XBRL Instance101.SCH XBRL Taxonomy Extension Schema101.CAL XBRL Taxonomy Extension Calculation101.DEF XBRL Taxonomy Extension Definition101.LAB XBRL Taxonomy Extension Labels101.Pre XBRL Taxonomy Extension Presentation (1)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on August 15, 2016.(2)Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and filed on March 15, 2007.(3)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on November 29, 2016.(4)Incorporated by reference to the Registrant’s Current report on Form 8-K filed on May 3, 2016.(5)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on December 16, 2016.(6)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on March 11, 2016.(7)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on December 8, 2016.(8)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 5, 2017.(9)Incorporated by reference to the Registrant’s definitive proxy statement filed October 31, 2013.(10)Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2016, filed on May 10, 2016.(11)Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2016, filed on August 15, 2016.(12)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on May 11, 2017.(13)Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2017, filed on November 14, 2017.(14)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 8, 2018.(15)Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and filed on March 21, 2017. * Indicates Management contract or compensatory plan or arrangement 45 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 itsbehalf by the undersigned, thereunto duly authorized. MICROBOT MEDICAL INC. /s/ Harel Gadot Harel Gadot President, Chief Executive Officer and ChairmanDated: April 2, 2018 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 registrantand in the capacities and on the dates indicated. Signature Title Date /s/ Harel Gadot Chairman, President and Chief Executive Officer April 2, 2018Harel Gadot (Principal Executive Officer) /s/ David Ben Naim Chief Financial Officer April 2, 2018David Ben Naim (Principal Financial and Accounting Officer) /s/ Hezi Himelfarb Chief Operating Officer, General Manager and Director April 2, 2018Yehezkel (Hezi) Himelfarb /s/ Yoav Waizer Director April 2, 2018Yoav Waizer /s/ Yoseph Bornstein Director April 2, 2018Yoseph Bornstein /s/ Pratipatti Laxminarain Director April 2, 2018Pratipatti Laxminarain /s/ Scott Burell Director April 2, 2018Scott Burell /s/ Martin Madden Director April 2, 2018Martin Madden 46 MICROBOT MEDICAL INC. CONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017 INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting FirmF-2 Consolidated Balance Sheets as of December 31, 2017, and 2016F-3 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2017 and 2016F-4 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2017 and 2016F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016F-6 Notes to the Consolidated Financial StatementsF-8-24 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofMICROBOT 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, 2017 and2016 and the related consolidated statements of comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period endedDecember 31, 2017, 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, 2017 and 2016, andthe results of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principlesgenerally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audit. 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 ofthe Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, norwere we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding ofinternal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control overfinancial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Brightman Almagor Zohar & Co. Certified Public Accountants Member of Deloitte Touche Tohmatsu Limited Tel Aviv, IsraelApril 2, 2018 We have served as the Company’s auditor since 2014. F-2 MICROBOT MEDICAL INC.Consolidated Balance SheetsU.S. dollars in thousands(Except share data) As of December 31, Note 2017 2016 ASSETS Current assets: Cash and cash equivalents $10,787 $2,709 Restricted cash 27 - Other current assets 3 116 606 10,930 3,315 Fixed assets, net 4 90 53 Total assets $11,020 $3,368 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Trade payables $78 $512 Accrued liabilities 5 450 271 Total current liabilities 528 783 Long-term liabilities: Convertible notes 6 - 76 Derivative warrant liability 7 28 313 28 389 Total liabilities 556 1,172 Commitments and contingencies 8 Temporary equity: 9 Common stock of $0.01 par value; issued and outstanding: 10,702,838 shares asof December 31, 2017 and 2016 500 500 Shareholders’ equity: Preferred stock of $0.01 par value; Authorized: 1,000,000 shares as of December31, 2017 and 2016; issued and outstanding: 4,001 and 9,736 shares as ofDecember 31, 2017 and 2016, respectively 9 (*) (*) Common stock of $0.01 par value; Authorized: 220,000,000 as of December 31,2017 and 2016; issued and outstanding: 29,880,289 and 15,848,136 shares as ofDecember 31, 2017, and December 31, 2016, respectively 406 266 Additional paid-in capital 30,182 14,465 Accumulated deficit (20,624) (13,035) 9,964 1,696 $11,020 $3,368 (*)Less than 1 The accompanying notes are an integral part of these consolidated financial statements. F-3 MICROBOT MEDICAL INC.Consolidated Statements of Comprehensive LossU.S. dollars in thousands(Except share data) Years ended December 31, Note 2017 2016 Research and development expenses, net 11 $1,100 $901 General and administrative expenses 12 4,167 8,734 Operating loss (5,267) (9,635) Financing expenses, net 13 2,322 28 Net loss $(7,589) $(9,663) Net loss per share, basic and diluted 10 $0.18 $0.40 Weighted-average number of common shares outstanding, basic and diluted 32,682,401 14,293,737 The accompanying notes are an integral part of these consolidated financial statements. F-4 MICROBOT MEDICAL INC.Consolidated Statements of Shareholder’s EquityU.S. dollars in thousands(Except share data) Preferred A Shares –Microbot MedicalLtd.(Pre - merger) * Preferred AShares – MicrobotMedical Inc.(Post - merger) * Common Stock Additionalpaid-in Accumulated Totalshareholders’ Temporary Number Amount Number Amount Number Amount capital deficit equity equity Balance, December31, 2015 8,708,132 $87 - - 13,182,660 $132 $3,089 $(3,372) $(64) $- Conversion ofconvertible notes andexercise of warrantsissued upon conversion 4,746,237 48 - - - - 1,803 - 1,851 - Effect of reverserecapitalization (13,454,369) (135) - - 15,301,675 153 454 - 472 - Common Stockclassified as temporaryequity - - - - - - (500) - (500) 500 Beneficial ConversionFeature recorded onconvertible debtacquired in reverserecapitalization - - - - - - 2,029 - 2,029 - Transaction costsincurred in reverserecapitalization - - - - 7,802,639 78 6,817 - 6,895 - Cancellation ofordinary shares andissuance of preferredshares - - 9,736 (*) (9,736,000) (97) 97 - - Share basedcompensation - - - - - - 676 - 676 - Net loss - - - - - - - (9,663) (9,663) - Balances, December31, 2016 - - 9,736 (*) **26,550,974 266 14,465 (13,035) 1,696 500 Issuance of commonstock - - - - 4,450,000 45 12,657 - 12,702 - Share-basedcompensation - - - - 120,000 1 478 - 479 - Exercise of options - - - - 471,794 4 (4) - - - Cashless exercise ofwarrants - - - - 359 (*) - - (*) - Extinguishment ofconvertible notes andissuance of preferred Ashares - - 3,255 (*) - - 2,676 - 2,676 - Conversion of preferredA shares to commonstock - - (8,990) (*) 8,990,000 90 (90) - - - Net loss - - - - - - - (7,589) (7,589) - Balances, December31, 2017 - - 4,001 $(*) **40,583,127 $406 $30,182 $(20,624) $9,964 $500 (*) Less than 1 * Share data for periods prior to the reverse recapitalization represents the legal equity structure of Microbot Ltd. with the number of shares adjusted toretroactively reflect the one-to-nine Reverse Stock Split effected on November 28, 2016 as well as the reverse recapitalization consummated on November28, 2016.** Includes 10,702,838 common stock classified as temporary equity. The accompanying notes are an integral part of these consolidated financial statements. F-5 MICROBOT MEDICAL INC.Consolidated Statements of Cash FlowsU.S. dollars in thousands(Except share data) Years ended December 31, 2017 2016 OPERATING ACTIVITIES Net loss $(7,589) $(9,663) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 21 10 Interest and amortization of discount on convertible notes 237 333 Share-based transaction costs incurred in reverse recapitalization - 7,258 Financing loss on debt extinguishment 2,364 - Changes in fair value of derivative warrant liability (285) (262)Share-based compensation expense 479 676 Changes in assets and liabilities: Other receivables (14) 538 Other payables and accrued liabilities (69) 324 Net cash used in operating activities (4,856) (786) INVESTMENT ACTIVITIES Increase in restricted cash (27) - Purchase of property and equipment (58) (25) Net cash used in investing activities (85) (25) FINANCING ACTIVITIES Acquisition of a subsidiary in connection with reverse recapitalization - 269 Transaction costs incurred in reverse recapitalization - (347)Inflows in connection with current assets and liabilities acquired in reverse recapitalization, net 317 2,002 Exercise of warrants issued upon conversion of notes - 409 Issuance of common stock, net of issuance costs 12,702 - Issuance of convertible notes - 750 Net cash provided by financing activities 13,019 3,083 Increase in cash and cash equivalents 8,078 2,272 Cash and cash equivalents at the beginning of the year 2,709 437 Cash and cash equivalents at the end of the year $10,787 $2,709 Supplemental disclosure of cash flow information:Non-cash financing transactions: Cashless exercise of warrants $(*) $- Conversion of preferred A shares into common shares $90 $- Extinguishment of convertible notes in exchange for preferred A shares $2,083 $- (*) Less than 1 The accompanying notes are an integral part of these consolidated financial statements. F-6 MICROBOT MEDICAL INC.Consolidated Statements of Cash Flows (continued)U.S. dollars in thousands(Except share data) As of November 28, 2016 Assets acquired (liabilities assumed): Current assets excluding cash and cash equivalents $(3,618)Current liabilities 811 Derivative warrant liability 575 Convertible note 2,029 Reverse recapitalization effect on equity 472 Cash acquired in connection with reverse recapitalization $269 The accompanying notes are an integral part of these consolidated financial statements. F-7 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except 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 generationmicro-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 improving surgical outcomes for patients. It was incorporated on August 2, 1988 in the State of Delaware under the name Cellular Transplants, Inc. The original Certificate of Incorporation wasrestated on February 14, 1992 to change the name of the Company to Cyto Therapeutics, Inc. On May 24, 2000, the Certificate of Incorporation as restatedwas 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 MicrobotMedical Ltd., a private medical device company organized under the laws of the State of Israel (“Microbot Israel”), and C&RD Israel Ltd. (“Merger Sub”), anIsraeli corporation and wholly-owned subsidiary of the Company, whereby Merger Sub merged with and into Microbot Israel and Microbot Israel survivingas a wholly-owned subsidiary of the Company (the “Merger”). Pursuant to the terms of the Merger, at the effective time of the Merger, each outstandingordinary share of Microbot Israel capital stock was converted into the right to receive approximately 2.9 shares of the Company’s common stock, par value$0.01 per share, after giving effect to a one for nine reverse stock split (the “Reverse Stock Split”), for an aggregate of 26,550,974 shares of Company’scommon Stock issued to the former Microbot Israel shareholders. In addition, all outstanding options to purchase the ordinary shares of Microbot Israel wereassumed by the Company and converted into options to purchase an aggregate of 2,614,916 shares of the Company’s common stock. Additionally, theCompany issued an aggregate of 7,802,639 restricted shares of its common stock or rights to receive the Company’s common stock, to certain advisers. Onthe same day and in connection with the Merger, the Company changed its name from StemCells, Inc. to Microbot Medical Inc. On November 29, 2016, theCompany’s common stock began trading on the Nasdaq Capital Market under the symbol “MBOT”. As a result of the Merger, Microbot Israel became a wholly owned subsidiary of the Company. The transaction between the Company and Microbot Israel wasaccounted for as a reverse recapitalization. As the shareholders of Microbot Israel received the largest ownership interest in the Company, Microbot Israel wasdetermined to be the “accounting acquirer” in the reverse recapitalization. As a result, the historical financial statements of the Company were replaced withthe historical financial statements of Microbot Israel. Unless indicated otherwise, pre-acquisition share, options and warrants data included in these financialstatements is retroactively adjusted to reflect the Reverse Stock Split and the Merger. Prior to the Merger, the Company was a biopharmaceutical company that conducts research, development, and commercialization of stem cell therapeuticsand related technologies. Substantially the sale of all material assets relating to the stem cell business were completed on November 29, 2016. The Company and its subsidiaries are collectively referred to as the “Company”. “StemCells” or “StemCells, Inc.” refers to the Company prior to the Merger. B. Risk Factors To date, the Company has not generated revenues from its operations. As of the date of issuance of these financial statements, the Company has cash and cashequivalent balance of approximately $9.5 million, which management believes is sufficient to fund its operations for more than 12 months from the date ofissuance of these financial statements and sufficient to fund its operations necessary to continue development activities of its current proposed products. Dueto continuing research and development activities, the Company expects to continue to incur net losses into the foreseeable future. The Company plans tocontinue to fund its current operations as well as other development activities relating to additional product candidates, through future issuances of eitherdebt and/or equity securities and possibly additional grants from the Israeli Innovation Authority. The Company’s ability to raise additional capital in theequity 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 issubject to a number of development and business risks and uncertainties, as well as the uncertainty that the Company would be able to raise such additionalcapital at a price or on terms that are favorable to the Company. C. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions pertaining to transactionsand matters whose ultimate effect on the financial statements cannot precisely be determined at the time of financial statements preparation. Although theseestimates are based on management’s best judgment, actual results may differ from these estimates. F-8 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) 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 theCompany 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 havebeen 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 ofoperations as financial income or expenses, as appropriate. C. 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. D. 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 theshort-term maturity of these instruments. The Company measures the fair value of certain of its financial instruments (such as the derivative warrant liabilities) on a recurring basis. The method ofdetermining the fair value of derivative warrant liabilities is discussed in Note 7. 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 fairvalue 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 andliabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observablemarket 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. E. Fixed Assets Fixed assets are presented at costs less accumulated depreciation. Depreciation is calculated based on the straight-line method over the estimated useful livesof the assets, as the following annual rates: % Research equipment and software 25-33 Furniture and office equipment 7 F-9 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) F. 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 sheet. G. Basic and Diluted Net Loss Per Share Basic net loss per share is computed by dividing net loss, as adjusted to include the weighted average number of common shares outstanding during the year.Common shares and preferred shares contingently issuable for little or no cash are included in basic net loss per share on an as issued basis. Diluted net loss per share is computed by dividing net loss, as adjusted to include preferred shares dividend participation rights of preferred sharesoutstanding during the year as well as of preferred shares that would have been outstanding if all potentially dilutive preferred shares had been issued, by theweighted average number of common shares outstanding during the year, plus the number of common shares that would have been outstanding if allpotentially dilutive common shares had been issued, using the treasury stock method, in accordance with ASC 260-10 “Earnings per Share”. All outstanding stock options and warrants have been excluded from the calculation of the diluted loss per share for the years ended December 31, 2017 andDecember 31, 2016, since all such securities have an anti-dilutive effect. The weighted average number of shares outstanding has been retroactively restated for the equivalent number of shares received by the accounting acquireras a result of the reverse recapitalization as if these shares had been outstanding as of the beginning of the earliest period presented. H. 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 developmentprojects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction from the research anddevelopment expenses. I. Convertible Notes Proceeds from the sale of debt securities with a conversion feature are allocated to equity based on the intrinsic value of such conversion feature inaccordance with ASC 470-20 “Debt with Conversion and Other Options”, with a corresponding discount on the debt instrument recorded in liabilities whichis amortized in finance expense over the term of the notes. Convertible notes with characteristics of both liabilities and equity are classified as either debt or equity based on the characteristics of its monetary value,with convertible notes classified as debt being measured at fair value, in accordance with ASC 480-10, “Accounting for Certain Financial instruments withCharacteristics of both Liabilities and Equity”. J. Share-Based Compensation The Company applies ASC 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation expenses for all share-basedpayment awards made to employees and directors including stock options under the Company’s stock plans based on estimated fair values. ASC 718-10 requires companies to estimate the fair value of stock options using an option-pricing model. The value of the portion of the award that isultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s statement of operations. The Company accounts for stock-based compensation awards to non-employees in accordance with FASB ASC 505-50, “Equity-Based Payments to Non-Employees” (“FASB ASC 505-50”). Under FASB ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awardsgranted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. F-10 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) The Company estimates the fair value of stock options granted as share-based payment awards using a Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are expected volatility and the expected option term (the time from the grantdate until the options are exercised or expire). Expected volatility is estimated based on volatility of similar companies in the technology sector for equityawards granted prior to the Merger and on the Company’s trading share price for equity awards granted subsequent to the Merger. The Company hashistorically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. The expected stock option term is calculated for stock options granted to employees and directors using the“simplified” method. Grants to non-employees are based on the contractual term. Changes in the determination of each of the inputs can affect the fair valueof the stock options granted and the results of operations of the Company. K. Reclassification Certain prior year amounts have been reclassified to conform to the current year presentation. L. Transaction Costs Transaction costs incurred in the Merger were charged directly to equity to the extent of cash and net other current assets acquired. Transaction costs inexcess of cash acquired were charged to general and administrative expenses. M. Income Taxes The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differencesbetween the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred taxassets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assetswill not be realized. As of December 31, 2017 and 2016, the Company had a full valuation allowance against deferred tax assets. N. Recent Accounting Standards In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers” to provide a single comprehensive model for entities to use inaccounting for revenue arising from contracts with customers. The ASU supersedes most current revenue recognition guidance, including industry-specificguidance. The FASB subsequently issued ASU 2015-14, ASU 2016-08 and ASU 2016-12, which clarified the guidance, provided scope improvements andamended the effective date of ASU 2014-09. As a result, ASU 2014-09 becomes effective for the Company in the first quarter of 2018, with early adoptionpermitted. The Company has not yet generated revenues to date, and does not yet know the impact the standard may have on its consolidated financialstatements. In February 2016, the FASB issued ASU 2016-02 “Leases” to increase transparency and comparability among organizations by recognizing lease assets andlease liabilities on the balance sheet and disclosing key information about leasing arrangements. For operating leases, the ASU requires a lessee to recognizea right-of-use asset and a lease liability, initially measured at the present value of the lease payments, on its balance sheet. The ASU retains the currentaccounting for lessors and does not make significant changes to the recognition, measurement, and presentation of expenses and cash flows by a lessee. ThisASU is effective for the Company in the first quarter of 2019, with early adoption permitted. The Company continues to evaluate the effect of the adoption ofthis ASU and expects the adoption will result in an increase in the assets and liabilities on the consolidated balance sheets for operating leases (refer to Note8) and will likely have an insignificant impact on the consolidated statements of comprehensive loss. In June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit Losses” to improve information on credit losses for financial assets and netinvestment in leases that are not accounted for at fair value through net income. The ASU replaces the current incurred loss impairment methodology with amethodology that reflects expected credit losses. This ASU is effective for the Company in the first quarter of 2020, with early adoption permitted. TheCompany is currently evaluating the effect the adoption of this ASU will have on its consolidated financial statements. In November 2016, the FASB issued ASU 2016-18 “Restricted Cash” to provide guidance on the presentation of restricted cash in the statement of cashflows. Currently, the statement of cash flows explained the change in cash and cash equivalents for the period. The ASU requires that the statement of cashflows explain the change in cash, cash equivalents and restricted cash for the period. The ASU is effective for the Company in the first quarter of 2018, withearly adoption permitted. The Company does not expect the adoption to have a material effect on the statements of cash flows as the Company’s restrictedcash is not expected to be material. F-11 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, “Compensation-StockCompensation (Topic 718): Scope of Modification Accounting,” which clarifies when a change to terms or conditions of a share-based payment award mustbe accounted for as a modification. The new guidance requires modification accounting if the vesting condition, fair value or the award classification is notthe same both before and after a change to the terms and conditions of the award. The new guidance is effective for the Company on a prospective basisbeginning on January 1, 2018 and early adoption is permitted. The Company does not expect to change terms or conditions of share-based payment awards,and therefore, does not expect the adoption of this standard to have a material impact on its consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, which includes Part I “Accounting for Certain Financial Instruments with Down Round Features” and Part II“Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain MandatorilyRedeemable Non-Controlling Interests with a Scope Exception”. The ASU makes limited changes to the Board’s guidance on classifying certain financialinstruments as either liabilities or equity. The ASU’s objective is to improve (1) the accounting for instruments with “down-round” provisions and (2) thereadability of the guidance in ASC 480 on distinguishing liabilities from equity by replacing the indefinite deferral of certain pending content with scopeexceptions. The ASU is effective for the Company in the first quarter of 2019, with early adoption permitted. The Company has derivative warranty liabilitiesas discussed in Note 7 which upon adoption of the new standard are expected to be classified as equity. NOTE 3 - OTHER CURRENT ASSETS As of December 31, 2017 2016 Deposit in escrow account (*) $- $400 Government institutions 35 15 Prepaid expenses and others 81 191 $116 $606 (*)Purchase Agreement with BOCO. On November 11, 2016, the Company, together with two of its wholly-owned subsidiaries, Stem CellSciences Holdings Limited and StemCells California, Inc. (collectively, with the Company, the “Sellers”), entered into an Asset PurchaseAgreement (the “Asset Purchase Agreement”) with BOCO Silicon Valley, Inc., a California corporation and wholly-owned subsidiary ofBright Oceans Corporation (“BOCO US”). Pursuant to the terms and subject to the conditions set forth in the Asset Purchase Agreement, the Sellers sold to BOCO US certain stem andprogenitor cell lines that have been researched, studied or manufactured by the Company since 2007 (the “Cell Lines”) and certain othertangible and intangible assets, including intellectual property and books and records, related to the foregoing (together with the Cell Lines,the “Assets”) in exchange for $4 million in cash (the “Asset Consideration”). Of the Asset Consideration, $300 was provided to the Company prior to November 11, 2016 in exchange for the Sellers’ agreement not tosolicit or reach any agreement with any third party pertaining to the sale of the Assets, and $400 will remain in a twelve-month escrow forthe benefit of BOCO US to satisfy certain indemnification obligations of the Sellers which may arise and which, subject to any validindemnification claims of BOCO US, will be released to the Company at the end of such 12-month period. In addition, sixteen formeremployees of the Company received, in the aggregate, $495 in accordance with their June 2016 agreements with the Company under whicheach accepted a more than 50% reduction in his or her severance award otherwise payable. The Asset Purchase Agreement contains certain covenants prohibiting the Sellers from, during the four-year period immediately followingthe completion of the Asset Sale, (a) engaging in or having certain financial interests in a business that is engaged in the research,development or commercialization of the Cell Lines, or (b) soliciting for employment employees of BOCO US. On November 29, 2016, the Sellers completed the sale of the Assets. As of December 31, 2017, the Company received $320 from the escrow account and paid $80 to certain consultant relating to BOCOtransaction. The opening balance sheet as of the Merger date included a receivable balance with respect to sale of the Assets of $3.5 which wascollected in full as of December 31 2017. F-12 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) NOTE 4 - FIXED ASSETS, NET As of December 31, 2017 2016 Cost: Research equipment and software $76 $54 Furniture and office equipment 92 56 168 110 Accumulated Depreciation: Research equipment and software 42 29 Furniture and office equipment 36 28 78 57 $90 $53 NOTE 5 - ACCRUED LIABILITIES As of December 31, 2017 2016 Employees $64 $102 Government institution 56 24 Other current liabilities 330 145 $450 $271 NOTE 6 - CONVERTIBLE LOAN FROM SHAREHOLDERS Microbot Israel Convertible Loan Agreements On October 8, 2015, Microbot Israel entered into a convertible loan agreement with several investors who were also existing shareholders. According to theloan agreement, Microbot Israel received an amount of $419. The loan bore interest of 10% and was converted to both equity shares and preferred shareswarrants of Microbot Israel on the nine-month anniversary of the loan. The Company concluded the conversion feature is not a Beneficial ConversionFeature pursuant to the provisions of ASC 470-20, “Debt with Conversion and Other Options”. Accordingly, the proceeds were recorded in liabilities in theirentirety at the date of issuance. On July 7, 2016, the outstanding principal and accrued interest were converted into 1,315,023 Series A preferred shares, of Microbot Israel (the “Series APreferred Shares”) and 1,188,275 warrants to purchase the Series A Preferred Shares, at an exercise price of $1.00 per share. The preferred shares warrants wereexercised in full in September 2016 for total gross proceeds to Microbot Israel of $410. On May 11, 2016, Microbot Israel entered into a convertible loan agreement with several investors who were also existing shareholders. The loan boreinterest at a fixed rate of 10% per annum beginning on the issuance date. At maturity, all of the outstanding principal and accrued interest was converted into Microbot Israel’s ordinary shares subject to the conversion or defaultevents specified in the loan agreement, based on a conversion price that represents a 20% discount on Microbot Israel’s valuation upon such default events. On November 28, 2016, upon the consummation of the Merger, the loan was converted into an aggregate of 2,242,939 shares of Company’s common stock. The Company concluded the value of the loan is predominantly based on a fixed monetary amount known at the date of issuance as represented by the 20%discount on the Company’s valuation. Accordingly, the loan was classified as debt and was measured at its fair value, pursuant to the provisions of ASC 480-10, “Accounting for Certain Financial instruments with Characteristics of both Liabilities and Equity”. F-13 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) The fair value of the loan was measured based on observable inputs as the fixed monetary value of the variable number of shares to be issued uponconversion (level 2 measurement). Secured Note to Alpha Capital Anstalt On August 15, 2016, concurrent with the execution of the Agreement and Plan of Merger (see Note 1A), StemCells Inc. issued a 6.0% secured note (the“Note”) to Alpha Capital Anstalt (“Alpha Capital”), in the principal amount of $2,000, for value received, payable upon the earlier of (i) 30 days followingthe consummation of the Merger and (ii) December 31, 2016. Proceeds from the Note were used for the payment of costs and expenses in connection with theMerger and operational expenses leading to such Closing. The Note bears interest at 6% per annum, payable monthly in arrears on the first of the month, beginning on January 1, 2017 until the principal amount ispaid in full. In addition, the Note is secured by a first priority security interest in all of the Company’s intellectual property and certain other general assetspursuant to a Security Agreement Securities Exchange Agreement with Alpha Capital As of the effective time of the Merger, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”) with Alpha Capital,providing for the issuance to Alpha Capital of a convertible promissory note by the Company (the “Convertible Note”) in a principal amount of $2,029,which is equal to the principal and accrued interest under the Note, in exchange for (a) the full satisfaction, termination and cancellation of the Note and (b)the release and termination of the Security Agreement and the first priority security interest granted thereunder. The Convertible Note was convertible into the Company’s Common Stock any time after November 28, 2017 and until the maturity date of November 28,2019, based on a conversion price of $0.64, subject to adjustments as provided in the Exchange Agreement. Pursuant to the terms of the Convertible Note, the Company was obligated to pay interest on the outstanding principal amount owed under the ConvertibleNote at a fixed rate per annum of 6.0%, payable at maturity or earlier upon conversion. The Exchange Agreement contains customary representations andwarranties and usual and customary affirmative and negative covenants. The Convertible Note also contained certain customary events of default. As the Exchange Agreement represented the consummation of the original intent of the Company and Alpha Capital, as of the date of execution of theMerger Agreement (August 2016), to enter into a $2 million convertible note sale transaction, upon the consummation of the Merger, the Companyaccounted for the convertible note in accordance with such economic substance, as if it had been issued for a cash consideration equal to the principal andaccrued interest on the Note, as of the effective date of the Merger, in the amount of $2,029 (the “Assumed Consideration”), which is equal to the principalamount of the Convertible Note as determined in the Exchange Agreement. The Company concluded the conversion feature of the Convertible Note, based on the commitment date of November 28 2016 (the Exchange Agreementdate), is a Beneficial Conversion Feature pursuant to the provisions of ASC 470-20, “Debt with Conversion and Other Options”. Accordingly, $2,029 of theAssumed Consideration was recorded in equity with a corresponding discount on the Convertible Note, to be amortized over its term through maturity. See also Note 9 – Securities Exchange Agreements with Alpha Capital. The carrying value of the Convertible Note as of the periods below was calculated as follow: As of December 31, 2017 2016 Convertible note $- $2,029 Unamortized discount - (1,963)Accrued interest - 10 $- $76 F-14 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) NOTE 7 - DERIVATIVE WARRANT LIABILITIES As part of StemCell’s obligations under the Merger Agreement, in August 2016, StemCells negotiated with certain institutional holders of its 2016 Series Aand Series B Warrants, issued by prior to the Merger, to have such holders surrender their 2016 Series B Warrants in exchange for a reduced exercise price of$0.30 per share on their existing 2016 Series A Warrants and the elimination of the anti-dilution price protection in the 2016 Series A Warrants. As a result,the exercise price for all outstanding 2011 Series A Warrants and 2016 Series A and Series B Warrants was reset to $0.30 per share. Subsequent to the reset ofthe exercise price, an aggregate of 531,814 (from an outstanding aggregate of 578,081) 2011 Series A Warrants were exercised. For the exercise of thesewarrants, the Company issued 531,814 shares of its common stock prior to the Merger. The remaining outstanding warrants and terms as of December 31, 2017 and 2016 is as follows: Issuance Date Outstandingas ofDecember 31, 2016 Outstandingas ofDecember 31, 2017 ExercisePrice Exercisableas ofDecember 31, 2017 ExercisableThrough Series A (2011) 64,230 - $151.20 - December2016Series A (2013) 57,814 57,814 $194.40 57,814 October 2018Series A (2013) 2,718 2,718 $183.60 2,718 April 2023Series A (2015) 10,139 10,139 $91.80 10,139 April 2020Series A (2016)(a) 10,047 9,279 $2.70 9,279 March 2018Series B (2016)(a) 41,116 41,116 $2.70 41,116 March 2022 (a)These warrants contain a full ratchet anti-dilution price protection so that, in most situations upon the issuance of any common stock orsecurities convertible into common stock at a price below the then-existing exercise price of the outstanding warrants, the warrantexercise price will be reset to the lower common stock sales price. As such anti-dilution price protection does not meet the specificconditions for equity classification, the Company is required to classify the fair value of these warrants as a liability, with changes in fairvalue to be recorded as income (loss) due to change in fair value of warrant liability. The estimated fair value of our warrant liability atDecember 31, 2017 and December 31, 2016, was approximately $28 and $313, respectively. As quoted prices in active markets for identical or similar warrants are not available, the Company uses directly observable inputs in the valuation of itsderivative warrant liabilities (level 2 measurement). The Company uses the Black-Scholes valuation model to estimate fair value of these warrants. In using this model, the Company makes certain assumptionsabout risk-free interest rates, dividend yields, volatility, expected term of the warrants and other assumptions. Risk-free interest rates are derived from theyield on U.S. Treasury debt securities. Dividend yields are based on our historical dividend payments, which have been zero to date. Volatility is estimatedfrom the historical volatility of our common stock as traded on NASDAQ. The expected term of the warrants is based on the time to expiration of the warrantsfrom the date of measurement. In March 2017, an institutional holder executed a cashless exercise of 768 warrants and 359 shares of Common Stock were issued in connection therewith. The following table summarizes the observable inputs used in the valuation of the derivative warrant liabilities as of December 31, 2017 and December 31,2016: Series A(2011) Series A(2013) Series A(2013) Series A(2015) Series A(2016) Series B(2016) Total Balances at December 31, 2016 $- $12 $9 $22 $43 $227 $313 Exercised - - - - - - - Cancelled - - - - - - - Changes in fair value - (12) (9) (22) (43) (199) (285)Balances at December 31, 2017 $- $- $- $- $(*) $28 $28 (*) Less than 1 F-15 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) The following table summarizes the observable inputs used in the valuation of the derivative warrant liabilities as of December 31, 2017 and December 31,2016: As of December 31, 2017 As of December 31, 2016 Series A (2016) Series B (2016) Series A (2016) Series B (2016) Share price $1.02 $1.02 $6.10 $6.10 Exercise price $2.70 $2.70 $2.70 $2.70 Expected volatility 60% 119% 380% 380%Risk-free interest 1.24% 1.89% 0.85% 1.93%Dividend yield — — — — Expected life of up to (years) 0.25 4.25 1.2 5.2 Activity in such liabilities measured on a recurring basis is as follows: Derivativewarrant liabilities As of December 31, 2016 $313 Revaluation of warrants (285)Exercise warrants (*)As of December 31, 2017 $28 (*) Less than 1 Derivativewarrant liabilities As of November 30, 2016 $575 Revaluation of warrants (262)Exercise warrants (*)As of December 31, 2016 $313 (*) Less than 1 In accordance with ASC-820-10-50-2(g), the Company has performed a sensitivity analysis of the derivative warrant liabilities of the Company which areclassified as level 3 financial instruments. The Company recalculated the value of warrants by applying a +/- 5% changes to the input variables in the Black-Scholes model that vary overtime, namely, the volatility and the risk-free rate. A 5.0% decrease in volatility would decrease the value of the warrants to $27;a 5.0% increase in volatility would increase the value of the warrants to $29. A 5.0% decrease or increase in the risk-free rate would not have materiallychanged the value of the warrants; the value of the warrants is not strongly correlated with small changes in interest rates. NOTE 8 - COMMITMENTS AND CONTINGENCIES Microbot Israel obtained from the Israeli Innovation Authority (“IIA”) grants for participation in research and development for the years 2013 throughDecember 31, 2017 in the total amount of approximately $1,183 and, in return, Microbot Israel is obligated to pay royalties amounting to 3% of its futuresales 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 Libor per annum. The repayment of the grants is contingent upon the successful completion of the Company’s research and development programs and generating sales. TheCompany 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 assumedcompletely by the Government of Israel. The grants are received from the Government on a project-by-project basis. Microbot Israel signed an agreement with the Technion Research and Development Foundation (“TRDF”) in June 2012 by which TRDF transferred toMicrobot Israel a global, exclusive, royalty-bearing license. As partial consideration for the license, Microbot Israel shall pay TRDF royalties on net sales(between 1.5%-3%) and on sublicense income as detailed in the agreement. F-16 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) Lease Agreements In June 2016, the Company entered into an office lease agreement, with a term ending on February 28, 2018. According to the lease agreement, the monthlyoffice lease payment is approximately $3. In December 2016, the Company entered into a cars lease agreement, which will end on December 31, 2019. According to the lease agreement, the monthlycar lease payment is approximately $2.5. In May 2017, the Company entered into an office lease agreement effective from February 1, 2018, with a term ending on December 31, 2020. According tothe lease agreement, the monthly office lease payment is approximately $14. The Company also has future minimum payments related to maintenanceexpenses in accordance with the lease agreement. The Company has guarantees in the amount of approximately $55 with respect to this lease agreement. Compensation Liability The Company incurred compensation commitments of approximately $400 to a former executive that management estimates as remote that this amount willever be paid out and therefore is not reflected in these consolidated financial statements. Contract Research Agreement On January 27, 2017, the Company entered into a Contract Research Agreement (the “Research Agreement”) with The Washington University (“WashingtonU.”), pursuant to which the parties will collaborate to determine the effectiveness of the Company’s self-cleaning shunt. The study in WU includes several phases. The first phase (initial research) was completed. The parties are in the final stage of planning the next phase,including the related various costs. Pursuant to the Research Agreement, all rights, title and interest in the data, information and results obtained or arrived atby Washington U. in the performance of its services under the Research Agreement, as well as any patentable inventions obtained or arrived at in theperformance of such services, will be jointly owned by the Company and Washington U., and each will have full right to practice and grant licenses in jointinventions. Additionally, Washington U. granted to the Company: (a) a non-exclusive, worldwide, royalty-free, fully paid-up, perpetual and irrevocablelicense to use and practice patentable inventions (other than joint inventions and improvements to Washington U.’s animal models) obtained or arrived at byWashington U. in the provision of its services under the Research Agreement (“University Inventions”) with respect to the self-cleaning shunt; and (b) anexclusive option to obtain an exclusive worldwide license in University Inventions, on terms to be negotiated between the parties. Litigation The Company is named as the defendant in a lawsuit, captioned Sabby Healthcare Master Fund Ltd. and Sabby Volatility Warrant Master Fund Ltd.,Plaintiffs, against Microbot Medical Inc., Defendant, pending in the Supreme Court of the State of New York, County of New York. The complaint alleges,among other things, that the Company breached multiple representations and warranties contained in the Securities Purchase Agreement (the “SPA”) relatedto the June 8, 2017 equity financing of the Company (the “Financing”), of which the Plaintiffs participated. The complaint seeks rescission of the SPA andreturn of the Plaintiffs’ $3,375 purchase price with respect to the Financing, and damages in an amount to be determined at trial, but alleged to exceed $1million. The parties presently are engaged in discovery. Due to the early stage in the ligation process, management is unable to assess the likelihood of the claim and the amount of potential damages, if any, to beawarded. Management believes that the claims made against it are without merit and intends to vigorously defend itself against these claims. See Note 16 –Subsequent Events, below. NOTE 9 - 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 AConvertible Preferred Stock”), is convertible, at the option of the holder, into 1,000 shares of Common Stock, and confer upon the holder dividend rights onan as converted basis. Exercise of Warrants On March 2017, an institutional holder exercised, in a cashless transaction, 768 warrants and 359 shares of Common Stock were issued in connectiontherewith. F-17 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) 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 Stock and 1,000,000 shares ofundesignated preferred stock, par value $0.01 (the “Preferred Stock”). As of December 31, 2017, the Company had 40,583,127 shares of Common Stockissued and outstanding, and 4,001 shares of Series A Convertible Preferred Stock issued and outstanding. On November 28, 2016, the Company filed a Certificate of Amendment to its Restated Certificate of Incorporation, as amended, with the Secretary of State ofthe State of Delaware to (i) effect the Reverse Stock Split, (ii) change its name from “StemCells, Inc.” to “Microbot Medical Inc.” and (iii) increase the numberof authorized shares of the Common Stock from 200,000,000 to 220,000,000 shares (the “Certificate of Amendment”). As a result of the Reverse Stock Split, the number of issued and outstanding shares of the Common Stock immediately prior to the Reverse Stock Split werereduced into a smaller number of shares, such that every nine shares of the Common Stock held by a stockholder immediately prior to the Reverse Stock Splitwere combined and reclassified into one share of the Common Stock. Immediately following the Reverse Stock Split and the Merger, there were 36,254,240 shares of the Common Stock issued and outstanding, which includedcertain rights to receive shares of Common Stock or equivalent securities but excludes shares underlying outstanding stock options and warrants and theConvertible Note. On December 27, 2016, the Company exchanged 9,735,925 shares or rights to acquire shares of its Common Stock, for 9,736 shares of a newly designatedclass of Series A Convertible Preferred Stock. See “- Securities Exchange Agreement with Alpha Capital” below. See also Note 6 – Securities ExchangeAgreement with Alpha Capital, above. On January 5, 2017, the Company entered into a definitive securities purchase agreement with an institutional investor (the “Purchaser”) for the purchase andsale of an aggregate of 700,000 shares of Common Stock in a registered direct offering for $5.00 per share or gross proceeds of $3,500. The Company paid theplacement 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 issuanceand sale by the Company to the Investors of an aggregate of 3,750,000 shares of Common Stock, at a purchase price per share of $2.70. The gross proceeds tothe Company was $10,125,000 before deducting placement agent fees and offering expenses of $922. In 2017, the Company issued an aggregate of 8,990,000 shares of its Common Stock upon the conversion of an aggregate of 8,990 shares of its Series AConvertible Preferred Stock. Employee stock option grant: In September 2014, Microbot Israel’s board of directors approved a grant of 403,592 stock options (1,167,693 stock options as retroactively adjusted toreflect the Merger) to its CEO, through MEDX Venture Group LLC. Each option was exercisable into an ordinary share, at an exercise price of $0.8 ($0.28 asretroactively 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 500,000 stock options (1,447,223 as retroactively adjusted to reflect the Merger) tocertain 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 priceequal to the ordinary share’s par value. The stock options were fully vested at the date of grant. As a result, the Company recognized compensation expensesin the amount of $675 included in general and administrative expenses. As the exercise price of the stock options is nominal, Microbot Ltd estimated the fairvalue of the options as equal to the Company’s share price of $1.35 ($0.47 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 optionsto 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 1,812,712 shares of Common Stock to Mr.Harel Gadot, the Company’s Chairman of the Board, President and CEO, at an exercise price per share of $1.05. The stock options vest over a period of 3-5years as outlined in the option agreements. As a result, the Company recognized compensation expenses in the amount of $156 included in general andadministrative expenses for the period ended December 31, 2017. F-18 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) On September 14, 2017, the board of directors approved a grant of stock options to purchase an aggregate of up to 1,087,627 shares 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 $1.29. The grant was subject to the IsraeliTax 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 yearsstarting from the grand date. As a result, the Company recognized compensation expenses in the amount of $92 included in general and administrativeexpenses for the period ended December 31, 2017. On December 6, 2017, the board of directors approved a grant of 190,475 stock options to purchase an aggregate of up to 190,475 shares of Common Stockto certain of its directors, at an exercise price per share of $1.05. The stock options vest over a period of 3 years as outlined in the option agreements. As aresult, the Company recognized compensation expenses in the amount of $5 included in general and administrative expenses for the period ended December31, 2017. On December 28, 2017, the board of directors approved a grant of 990,543 stock options to purchase an aggregate of up to 990,543 shares of Common Stockto certain of its employees, at an exercise price per share of $1.02. The stock options vest over a period of 3 years as outlined in the option agreements. As aresult, the Company recognized compensation expenses in the amount of $1 included in general and administrative expenses for the period ended December31, 2017. In November, 2017, certain employees and consultants exercised 471,794 options to 471,794 shares of common stock at exercise price of $0.001 per share. A summary of the Company’s option activity related to options to employees and directors, and related information is as follows: For the year ended December 31, 2017 Number of stockoptions Weighted averageexercise price Aggregate intrinsicvalue Outstanding at beginning of period 2,614,916 $0.13 $15,624 Granted 4,081,357 1.1 Exercised (471,794) - Cancelled - - Outstanding at end of period 6,224,479 $0.78 $1,859 Vested and expected-to-vest at end of period 2,143,122 $0.13 $1,375 For the year ended December 31, 2016 Number of stockoptions Weighted averageexercise price Aggregate intrinsicvalue Outstanding at beginning of period 1,167,693 $0.28 Granted 1,447,223 (*) Exercised - - Cancelled - - Outstanding at end of period 2,614,916 $0.13 $15,624 Vested and expected-to-vest at end of period 2,614,916 $0.13 $15,624 (*) Less than 1 The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the Common Stock andthe 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 allstock option holders exercised their stock options on those dates.) as of December 31, 2017 and December 31, 2016 respectively, F-19 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) The stock options outstanding as of December 31, 2017 and December 31, 2016, separated by exercise prices, are as follows: Exercise price Stock options outstanding as ofDecember 31, Weighted average remainingcontractual life – years as ofDecember 31, Stock options exercisable as ofDecember 31, $ 2017 2016 2017 2016 2017 2016 0.28 1,167,693 1,167,693 8.0 8.0 1,167,693 1,167,693 1.05 2,003,187 - 9.75 - - - 1.29 1,087,627 - 9.75 - - - 1.02 990,543 - 10 - - - (*) 975,429 1,447,223 8.75 9.5 975,429 1,447,223 6,224,479 2,614,916 - - 2,143,122 2,614,916 (*) Less than 1 Compensation expense recorded by the Company in respect of its stock-based employee compensation awards in accordance with ASC 718-10 for the yearended December 31, 2017 and 2016 was $ 254 and $ 675, 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-averageassumptions: Years ended December 31, 2017 2016 Expected volatility 122.5% 77.3%Risk-free interest 1.64% 0.6%Dividend yield 0% 0%Expected life of up to (years) 6.25 5.0 Shares Issued to Service Provider In connection with the Merger, the Company issued an aggregate of 7,802,639 restricted shares of its Common Stock to certain advisors. The fair value of theaward of approximately $10,000 was estimated based on the share price of the Common Stock of $1.28 as of the date of grant. The portion of the expense inexcess of the cash and other current assets acquired in the Merger, in the amount of $7,300 was included in general and administrative expenses in theStatements of Comprehensive Loss. During 2017 the Company issued an aggregate of 120,000 nonrefundable shares of Common Stock to a consultant as part of investor relations services. TheCompany recorded expenses of approximately $225 with respect to the issuance of these shares included in general and administrative expenses. Securities Exchange Agreement with Alpha Capital On December 16, 2016, the Company entered into a Securities Exchange Agreement with Alpha Capital, pursuant to which Alpha Capital exchanged9,736,000 shares of common stock or rights to acquire shares of the common stock held by it, for 9,736 shares of a newly designated class of Series AConvertible Preferred Stock, par value $0.01 per share (the “Preferred Stock”). The common stock and common stock underlying the rights to acquirecommon stock include all of the shares of common stock issued or issuable to Alpha Capital pursuant to the Merger. The 9,735,925 shares of common stockand the rights to acquire common stock were cancelled and the Company’s issued and outstanding shares of Common Stock were reduced to 26,518,315. On May 9, 2017, the Company entered into a Securities Exchange Agreement with Alpha Capital pursuant to which the Company agreed to issue 3,254shares of the Series A Convertible Preferred Stock, in exchange for the full satisfaction, termination and cancellation of the outstanding 6% convertiblepromissory note of the Company in the principal amount of approximately $2,029 issued on November 28, 2016 and held by Alpha Capital. The Series AConvertible Preferred Stock is the same series of securities as the Company’s existing Series A Convertible Preferred Stock issued in December 2016. As aresult of the extinguishment of the convertible note and issuance of the preferred shares, the Company recorded a financial loss in the amount of $2,360. During the year 2017, the holder of the Series A Convertible Preferred Stock converted 8,990 shares of the Series A Convertible Preferred Stock for 8,990,000shares of Common Stock, pursuant to the terms of conversion of the Series A Convertible Preferred Stock. F-20 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) Repurchase of Shares The Company intends to enter into a definitive agreement with up to three Israeli shareholders, some of whom are directors of the Company, that were formershareholders 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 theirIsraeli tax liabilities resulting from the Merger. Such repurchase(s), if any, would occur only after the two-year anniversary of the Merger. The transaction issubject 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 Companyconcluded the fair value of such derivative instrument would be nominal and, in any case, would represent an asset to the Company as (a) the settlementrequires 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 behigher 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 isassumed 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 aloss 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 therepurchase right is exercised ($500) as temporary equity. NOTE 10 - BASIC AND DILUTED NET LOSS PER SHARE The basic and diluted net loss per share and weighted average number of common shares used in the calculation of basic and diluted net loss per share are asfollows (in thousands, except share and per share data): Years Ended December 31, 2017 2016 Net loss attributable to shareholders of the Company $7,589 $9,663 Net loss attributable to shareholders of preferred shares 1,582 3,954 Net loss used in the calculation of basic net loss per share $6,007 $5,709 Net loss per share $0.18 $0.40 Weighted average number of common shares 32,682,401 14,293,737 As the inclusion of common share equivalents in the calculation would be anti-dilutive for all periods presented, diluted net loss per share is the same asbasic net loss per share. The weighted average number of common shares outstanding has been retroactively restated for the equivalent number of common shares received by theaccounting acquirer as a result of the reverse recapitalization and reverse stock split as if these common shares had been outstanding as of the beginning ofthe earliest period presented. NOTE 11 - RESEARCH AND DEVELOPMENT EXPENSES, NET Years ended December 31, 2017 2016 Payroll and related expenses $634 $491 Share-based compensation 1 - Materials 266 155 Patents 66 75 Office and maintenance expenses 27 21 Rent 34 36 Professional services 174 253 Depreciation 12 7 Other 65 76 Less: Grants received from IIA (179) (213) $1,100 $901 F-21 NOTE 12 - GENERAL AND ADMINISTRATIVE EXPENSES Years ended December 31, 2017 2016 Payroll and related expenses $1,213 $45 Share-based compensation 253 676 Professional services 1,217 528 Common shares issued for services - 7,258 Travel 284 180 Marketing expenses 26 - Office and maintenance expenses 121 - Depreciation 9 - Public and Investor Relations 515 - Insurance 226 - Governmental Fees 251 Other 52 47 $4,167 $8,734 NOTE 13 - FINANCE EXPENSES, NET Years ended December 31, 2017 2016 Bank fees and interest $1 $1 Change in fair value of derivative warrant liability (285) (262)Financing loss on debt extinguishment 2,364 - Exchange rate differences 5 (44)Revaluation and interest on convertible loans 237 333 $2,322 $28 NOTE 14 - TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES A. Transactions Years endedDecember 31, 2017 2016 Payroll and related expenses $851 $- Directors fees and insurance 463 58 Subcontracted work and consulting 67 253 $1,381 $311 B. Balances As of December 31, 2017 2016 Other accounts payable $46 - $46 - F-22 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) NOTE 15 - TAXES ON INCOME The Company is subject to income taxes under the Israeli and U.S. tax laws: Corporate Tax Rates The Company is subject to Israeli corporate tax rate of 25% in the year 2016, 24% in 2017 and 23% from 2018. The Company is subject to a blended U.S. tax rate (Federal as well as state corporate tax) of 35%. On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law in the United States. The Tax Act, among other provisions, introduceschanges in the U.S corporate tax rate, business related exclusions and deductions and credits, and has internationally tax consequences for companies thatoperate international. Most of the changes introduced in the Tax Act are effective beginning on January 1, 2018. The Tax Act introduces a reduced federaltax rate of 21% from January 1, 2018 and onward. As of December 31, 2017, the Company generated net operating losses in Israel of approximately $5,267 which may be carried forward and offset againsttaxable income in the future for an indefinite period. As of December 31, 2017, the Company generated net operating losses in the U.S. of approximately $2,987. Net operating losses in the United States areavailable through 2035. Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the “change in ownership” provisionsof the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses beforeutilization. The Company is still in its development stage and has not yet generated revenues, therefore, it is more likely than not that sufficient taxable income will notbe available for the tax losses to be utilized in the future. Therefore, a valuation allowance was recorded to reduce the deferred tax assets to its recoverableamounts. As of December 31, 2017 2016 Net operating loss carry-forward $488,603 $481,052 Total deferred tax assets 117,265 120,263 Valuation allowance (117,265) (120,263)Net deferred tax assets $- $- Reconciliation of Income Taxes: The following is a reconciliation of the taxes on income assuming that all income is taxed at the ordinary statutory corporate tax rate in Israel and theeffective income tax rate: As of December 31, 2017 2016 Net loss as reported in the statements of operations $7,589 $9,663 Statutory tax rate 24% 25%Income Tax under statutory tax rate 1,821 2,416 Change in valuation allowance (1,821) (2,416)Actual income tax $- $- F-23 MICROBOT MEDICAL INC.Notes to the Consolidated Financial StatementsU.S. dollars in thousands(Except share data) NOTE 16 -SUBSEQUENT EVENTS CardioSert On January 4, 2018, Microbot Medical Ltd. entered into an agreement with CardioSert Ltd. to acquire certain patent-protected technology owned byCardioSert. With the closing of the acquisition expected in April 2018, CardioSert’s issued U.S. patent and three patent applications pending worldwide willbe added to Microbot’s patent portfolio which will then have a patent portfolio of 25 issued/allowed patents and 15 patent applications pending worldwide. Pursuant to the Agreement, Microbot Medical Ltd made an initial payment of $50 to CardioSert and has 90-days to complete the acquisition. At the end ofthe 90-day period, at Microbot’s sole option, CardioSert shall assign and transfer the Technology to Microbot Medical Ltd and Microbot Medical Ltd shallpay to CardioSert additional amounts and options as determined in the agreements. The Agreement may be terminated by Microbot at any time during the 90-day pre-closing period, and otherwise for convenience upon 90-days’ notice. TheAgreement may be terminated by CardioSert in case the first commercial sale does not occur by the third anniversary of the date of signing of the Agreementexcept in the event that Microbot has invested more than $2,000 in certain development stages, or the first commercial sale does not occur within 50 months.In each of the above termination events, or in case of breach by Microbot, CardioSert shall have the right to buy back the Technology from Microbot for$1.00, upon 60 days prior written notice, but only 1 year after such termination. Additionally, the Agreement may be terminated by either party upon breachof the other (subject to cure). CardioSert agreed to assist Microbot in the development of the Technology for a minimum of one year, for a monthly consultation fee of NIS40,000 coveringup to 60 consulting hours per month. Share Capital Developments In 2018, through March 30, 2018, the Company issued an aggregate of 1,500,000 shares of its Common Stock upon the conversion of an aggregate of 1,500shares of its Series A Convertible Preferred Stock. F-24  Exhibit 31.1CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Harel Gadot, certify that: 1.I have reviewed this annual report on Form 10-K of Microbot Medical Inc. 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: April 2, 2018 /S/ HAREL GADOT Harel Gadot President and Chief Executive Officer (principal executive officer)   Exhibit 31.2CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, David Ben Naim, certify that: 1.I have reviewed this annual report on Form 10-K of Microbot Medical Inc. 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: April 2, 2018 /S/ DAVID BEN NAIM David Ben Naim Chief Financial Officer (principal financial and accounting officer)   Exhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Microbot Medical Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2017 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Harel Gadot, President and Chief Executive Officer of the Company,certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the company. /s/ HAREL GADOT Harel Gadot President and Chief Executive Officer April 2, 2018   Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Microbot Medical Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2017 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, David Ben Naim, Chief Financial Officer of the Company, certify,pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the company. /s/ DAVID BEN NAIM David Ben Naim Chief Financial Officer April 2, 2018  

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