MICROBOT MEDICAL INC. (NASDAQ:MBOT) Files An 8-K Other Events

MICROBOT MEDICAL INC. (NASDAQ:MBOT) Files An 8-K Other Events

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Other Events


DESCRIPTION OF BUSINESS

The Company

Our Company was incorporated on August2, 1988 in the State of
Delaware under the name Cellular Transplants, Inc. The original
Certificate of Incorporation was restated on February14, 1992 to
change the name of the Company to Cytotheraputics, Inc. On May24,
2000, the Certificate of Incorporation as restated was further
amended to change the name of the Company to StemCells, Inc. As
of the Merger, on November28, 2016, the Company changed its name
from StemCells, Inc. to Microbot Medical Inc. to the terms of the
Merger, at the effective time of the Merger, each outstanding
share of Microbot Israel capital stock was converted into the
right to receive approximately 2.90 shares of our common stock,
par value $0.01 per share (the Common Stock), after giving effect
to a one for nine reverse stock split, for an aggregate of
26,644,979 shares of Common Stock issued to former Microbot


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Israel shareholders. In addition, all outstanding options to
purchase the ordinary shares of Microbot Israel were assumed by
the Company and converted into options to purchase shares of the
Common Stock. On November29, 2016, the stock of the Company began
trading on 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. Following the Merger, the Company is now a
pre-clinical medical device company specializing in the research,
design and development of next generation micro-robotics assisted
medical technologies targeting the minimally invasive surgery
space. The Company is primarily focused on leveraging its
micro-robotic technologies with the goal of 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 Pressure Hydrocephalus, or NPH; and
TipCAT, a self-propelling, semi-disposable endoscope that is
being developed initially for use in colonoscopy procedures.
Microbots product candidates are being designed to bring greater
functionality to conventional medical devices and to reduce the
known risks associated with such devices. Microbot is currently
aiming to complete pre-clinical or clinical data collection for
both product candidates within the next 24 months and is
targeting approval or clearance for SCS by late 2018.

Microbot currently holds an intellectual property portfolio that
comprises nine patent families, which include eight patents
granted in the United States, eleven patents granted outside the
United States, and 17 patent applications pending worldwide, with
other patent applications under development, as well as an
exclusive license to key components of its technology.

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 increased intracranial pressure. It is
estimated that one in every 500 babies are born with
hydrocephalus, and over 1,000,000 people in the United States
currently live with hydrocephalus.

Symptoms of hydrocephalus vary with age, disease progression and
individual tolerance to the condition, but they can include
convulsion, tunnel vision, mental disability or dementia-like
symptoms and even death. Normal Pressure Hypocephalus (NPH) is a
type of hydrocephalus that usually occurs in older adults. NPH is
generally treated as distinct from other types of hydrocephalus
because it develops slowly over time. In NPH, the drainage of CSF
is blocked gradually and the excess fluid builds up slowly. This
slow accumulation means that the fluid pressure may not be as
high as in other types of hydrocephalus. It is estimated that
more than 700,000 Americans have NPH, but less than 20% receive
an appropriate diagnosis.

Hydrocephalus is most often treated by the surgical insertion of
a shunt system. The shunt system diverts the flow of CSF from the
brains ventricles (or the lumbar subarachnoid space) to another
part of the body where the fluid can be more readily absorbed.
Hydrocephalus shunt designs have changed little since their
introduction in the 1950s. A shunt system typically consists of
three parts: the distal tubing or shunt (a flexible and sturdy
plastic tube), the ventricular catheter (the proximal catheter),
and a valve. The end of the shunt system with the proximal
catheter is placed in the ventricles (within the CSF) and the
distal catheter is placed in the site of the body where the CSF
can be drained. A valve is located along the shunt to maintain
and regulate the rate of CSF flow. Current systems can be created
from separate components or bought as complete units.


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The treatment of hydrocephalus with existing shunt systems often
includes complications as well. For example, approximately 50% of
shunts used in the pediatric population fail within two years of
placement and repeated neurosurgical operations are often
required. Ventricular catheter blockage, or occlusions, is by far
the most frequent event that results in shunt failure. Shunt
occlusion occurs when there is a partial or complete blockage of
the shunt that causes it to function intermittently or not at
all. Such a shunt blockage can be caused by the accumulation of
blood cells, tissue, or bacteria in any part of the shunt system.
In the event of shunt occlusion, CSF begins to accumulate in the
brain or lumbar region again and the symptoms of untreated
hydrocephalus can reappear until a shunt replacement surgery is
performed.

Although several companies are active in the field of
hydrocephalus treatment and the manufacturing of shunt systems
and shunt components, Microbot believes that the majority of
those companies are focusing on the development of valves. The
development of a smart shunt a shunt that could provide for
weaning form shunt dependency or increase personalized control
through advanced control algorithms, that could provide data to
the physician on patient conditions and shunt function with
sensor based controls, or correct the high failure rate of
existing shunt systems is for the most part at an academic and
conceptual level only. Reports of smart shunt technologies are
typically focused on a subset of components with remaining
factors left unspecified, such as hardware, control algorithms or
power management. Microbot does not believe that a smart shunt
has been developed to date. Because of the limited innovation in
this area, Microbot believes an opportunity exists to provide
patients suffering from hydrocephalus or NPH with a more
effective instrument for treating their condition.

Endoscopic Equipment

Endoscopes are medical devices used to look inside a body cavity
or organ with minimally invasive surgery. The North American
flexible endoscopes market was valued at $1.27billion in 2013,
and is expected to reach $1.91billion 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 and treatment 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
patients gastrointestinal, or GI, tract. However, according to
data from the American Cancer Society, it is estimated that over
49,000 Americans will die from colorectal cancer and 95,000 new
cases of colon cancer will be diagnosed in 2016. It is the third
leading cause of cancer deaths in spite of being highly
preventable with early identification and removal of colorectal
adenomas, or polyps. Colonoscopy with removal of colorectal
polyps has been shown to be the most effective 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 Task Force, and
U.S. Multi-Society Task Force on Colorectal Cancer, have
undergone screening, with more than 45% of colon cancers being
diagnosed at a time when 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 sometimes damage 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 for the prevention of colorectal cancer.
Microbot believes that it has the potential to develop a robotic
endoscope product that addresses this issue of patient


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discomfort, which it believes will improve patients willingness
to get this important screening test with the additional benefit
of providing a new tool to health care practitioners for use in
the identification and treatment of colorectal polyps.

Microbots 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 and NPH. It is designed to work as an
alternative to any ventricular catheter options currently on the
market and to connect to all existing shunt system valves
currently on the market; therefore, the successful
commercialization of the SCS is not dependent on any single shunt
system. Initially, Microbot expects the SCS device to be an
aftermarket purchase that would be deployed to modify existing
products by the end user. Microbot believes that the use of its
SCS device will reduce, and potentially eliminate, shunt
occlusions, and by doing so Microbot believes its SCS has the
potential to become the gold-standard ventricular shunt in the
treatment of Hydrocephalus and NPH.

The SCS device embeds an internal robotic cleaning mechanism in
the lumen, or inside space, of the ventricular catheter which
prevents cell accumulation and tissue ingrowth into the catheter.
The SCS device consists of a silicone tube with a perforated
titanium tip, which connects to a standard shunt valve at its
distal end. The internal cleaning mechanism is embedded in the
lumen of the titanium tip. Once activated, the cleaning mechanism
keeps tissue from entering the catheter perforations while
maintaining the CSF flow in the ventricular catheter.

The internal cleaning mechanism of the SCS device is activated by
means of an induced magnetic field, which is currently designed
to be externally generated by the patient through a user-friendly
headset that transmits the magnetic field at a pre-determined
frequency and operating sequence protocol. The magnetic field
that is created by the headset is then captured by a flexible
coil and circuit board that is placed just under the patients
scalp in the location where the valve is located. The circuit
board assembly converts the magnetic field into the power
necessary to activate the cleaning mechanism within the proximal
part of the ventricular catheter.

Microbot has completed the development of an SCS prototype and is
currently completing the safety testing, general proof of concept
testing and performance testing for the device, which Microbot
began in mid-2013. Microbot had a pre-submission meeting with
the FDA in early 2014, and has been working closely with
Washington University in St. Louis to develop the protocol for
and to execute the necessary animal study. Microbot expects the
animal study to start in the first quarter of 2017. Upon the
completion of animal studies, Microbot may conduct clinical
trials if they are requested by the FDA or if Microbot decides
that the data from such trials would improve the marketability of
the product candidate. Microbot believes that the first
generation of its SCS device should receive regulatory approval
or clearance from FDA by late 2018. The proposed indication for
use of the SCS device would be for the treatment of hydrocephalus
as a component of a shunt system when draining or shunting of CSF
is indicated.

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
countrys market, although it has no current plans to do
so.


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TipCAT

The TipCAT is a
semi-disposable, flexible, self-propelled endoscope. A mechanism
comprising a series of interconnected balloons at the devices tip
provides 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, steering capability
and a standard working channel for treatments. The TipCAT thus
offers functionality and visualization features equivalent to
modern 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., the working 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 creates an inchworm-like forward
motion. Therefore, unlike standard endoscopes, the TipCAT does
not need to be mechanically forced into the patients lumen using
external pressure; rather, it will gently advance itself through
the organs anatomy. As a result, the TipCAT is designed to be
able to reach every part of the lumen under examination
regardless of the topography, be less operator dependent, and
greatly reduce the likelihood of damage to lumen
structure.

Furthermore,
Microbot believes that use of the TipCAT will improve ADR by
straightening the intestinal topography, smoothing colon
topography and improving tissue visualization. In addition, by
incorporating the TipCAT in therapeutic procedures, Microbot
believes that the inflated balloons will provide the additional
benefits of assisting the physician in centralizing endoscope
optics and allowing for the colonoscope to be secured in each
treatment position throughout 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 cross
contamination between patients and the need for post-use
reprocessing. Reducing dependence on reprocessing procedures is
important from a regulatory perspective 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, the prototype device was tested in a live
animal experiment and successfully self-propelled through
segments of the animals colon, with no post-procedural damage.
All tests were conducted at AMIT (Alfred Mann Institute of
Technology at the Technion), prior to the licensing of TipCAT by
Microbot. Microbot is currently reviewing the design and general
proof of concept of the TipCAT and working closely with experts
in the field to define the optimal design. Microbot expects
animal studies for this device to begin in 2017. Upon the
completion of animal studies, Microbot may conduct clinical
trials if they are requested by the FDA or if Microbot decides
that the data from such trials would improve the marketability of
the product candidate. Regulatory approval or clearance for
marketing the TipCAT colonoscope in the United States is targeted
to occur soon after the applicable animal or clinical trials are
completed, depending on when the applicable premarket submission
is finalized and filed with FDA, and Microbots ability to raise
money and conduct the necessary trials for approval.


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Microbot also
plans to further develop the TipCAT for application for other
diagnostic and therapeutic endoscopic procedures outside of
colonoscopy, such as Chronic Total Occlusion, or CTO,
urethroscopy and catheterization.

Microbot may
conduct clinical trials for the TipCAT in other countries where
such trials are necessary for Microbot to sell its TipCAT device
in such countrys market, although it has no current plans to do
so.

Strategy

Microbots 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 that it can achieve
this objective by working with hospitals to demonstrate the key
benefits of its products. Microbots strategy includes the
following key elements:

Continue to
refine existing
product candidates
and develop
additional micro-robotic
solutions. As Microbot prepares to bring its
initial product candidates through pre-clinical and clinical
trials, if necessary, and eventually to market, it continues
to focus on improving its product candidates to respond to
clinical data and patient and physician feedback. Microbot
also expects to continue to innovate in the micro-robotics
field by continuing to find ways of using its technology to
solve unmet needs, with the overarching goal of providing a
safer, more effective and more efficient surgical environment
for patients and physicians.

Establish and
leverage relationships
with key
institutions and
leading clinicians.
Microbot intends to develop relationships with a relatively
small number of hospitals and clinics through its clinical
stage. Microbots objective will be to maintain clinical focus
with such hospitals and clinics so as to establish the SCS
and TipCAT as the standard of care in such institutions for
their respective procedures. Microbot also expects to
identify key clinicians in the hydrocephalus and colonoscopy
specialties with the expectation that such clinical focus
will accelerate the adoption of its candidate products.

Invest in
research and
development. Microbots most significant
expense has historically been research and development, and
Microbot expects that this will continue in the foreseeable
future, including expenses it expects to incur to improve on
its prototype products in order to respond to clinical data,
to develop additional applications using its technologies and
to develop future product candidates.

Explore partnerships
for the
introduction of
Microbots products.
Microbot intends to focus its marketing and sales efforts
initially on pursuing collaborations with global medical
device companies that have established sales and distribution
networks. Microbot will seek to enter collaborations and
partnerships with strategic players that offer synergies with
Microbots product candidates and expertise.

Seek additional
IP and
technologies to
complement and
strengthen Microbots
current IP
portfolio. Microbot intends to continue
exploring new technologies, IP and know-how to add to its
current portfolio and to allow Microbot to enter new spaces
and strengthen its overall product portfolio.


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SCS
Opportunities

The SCS is
designed to prevent shunt occlusions in hydrocephalus and NPH
patients who have undergone or are undergoing the surgical
insertion of a shunt system. For purposes of its marketing
strategy, Microbot has split the market for shunt systems into
two sub-markets:

Primary shunt placement; and

Shunt replacement.

Microbots SCS
device is universal (meaning that it is designed to be attachable
to any valve on the market); therefore, Microbots initial
go-to-market strategy is the development of strategic
partnerships with leading global medical device companies with
ready sales and distribution channels. Outside of a strategic
partnership, it is most likely that Microbots SCS product will be
initially used in shunt replacement surgeries to replace occluded
ventricular catheters. Accordingly, Microbot intends to establish
key hospital and clinic relationships that will allow it to
diffuse the technology among experts and other stakeholders.
Microbot is also planning to apply for the SCS device to be
covered under the current reimbursement codes in the United
States for use in hydrocephalus and NPH shunt procedures.

TipCAT
Opportunities

Microbot expects
that its initial go-to-market strategy for the TipCAT will be to
establish key hospital and clinic relationships in the field of
colonoscopy that will allow Microbot to introduce and then
diffuse the technology among colonoscopy experts and other
stakeholders. Generally, Microbot expects the hospitals and
clinics selected for the TipCAT clinical trials to also start
using the product commercially, which will help to promote and
support market uptake of the TipCAT product. Because Microbot
expects the use of the TipCAT to increase the number of
colonoscopy procedures that can be performed at any such
facility, Microbot will seek to promote the technology among the
doctors and experts involved in the distribution and buying
groups within such selected partner hospitals.

Competition

SCS
Competitive Landscape

Several academic
research groups, such as at the New Jersey Institute of
Technology, are currently researching sensing and
obstruction-resistant catheter designs, and the Smart Sensors and
Integrated Microsystems (SSIM) Program at Wayne State University
has publicized that it is engaging in smart shunt development
activity.However, based on its knowledge of the patented
technologies, Microbot believes that these technologies are still
early in the research and development cycle. The SCS also faces
non-direct competition from Aqueduct Neurosciences, Inc., which
is developinga non-shunt, electro-mechanical technology 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 a component of existing shunt systems and is expected to
be an aftermarket purchase that would be used to modify existing
products by the end user. However, there can be no assurance that
Microbots 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 the colonoscopy space are Pentax, Fuji and
Olympus,


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which dominate the
U.S. market for reusable colonoscopes.However, Microbot believes
that the most relevant competitors to TipCAT are smaller
companies such as GI View and SMART Medical Systems, which
produce disposable, self-propelled colonoscopes.

GI View produces a
colonoscope with 360 omni-directional visualization and offers
self-propelled intubation created using balloons and low pressure
COgas. 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 physician through a
standard colonoscopes tool channel and uses its balloon
technology to anchor the bowel, which enables the colonoscope to
be maneuvered beyond 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 diameters of the organ at any moment, allows for
the straightening of an organs 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 Microbots competitors currently
have significantly greater resources than Microbot does; have
established relationships with healthcare professionals,
customers and third-party payors; and have long-term contracts
with group purchasing organizations in the United States. In
addition, many of Microbots competitors have established
distributor networks, greater resources for product development,
sales and marketing, additional lines of products and the ability
to offer financial incentives such as rebates, bundled products
or discounts on other product lines that Microbot cannot
provide.

Microbots 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 TRDF, as further discussed
below, and Microbot plans to develop other micro-robotic
solutions through internal research and development to strengthen
its intellectual property position, and continue exploring
strategic collaborations and accretive acquisition opportunities.
Microbot currently holds an intellectual property portfolio that
includes 9 patent families, which include 8 patents granted in
the US, 11 patents granted outside the US, and 17 patent
applications pending worldwide, with other patent applications
under development.


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Microbot relies on intellectual property
licensed or developed, including patents, trade secrets,
technical innovations, laws of unfair competition and various
licensing agreements to provide its future growth and to build
its competitive position. As Microbot continues to expand its
intellectual property portfolio, it is critical for Microbot to
continue to invest in filing patent applications to protect its
technology, inventions, and improvements.

Microbot relies on a combination of
patents, trade secret, copyright and other intellectual property
rights and measures to aggressively protect its intellectual
property. It also relies on other forms of intellectual property,
including trade secrets and know-how, to maintain its
competitive position. Microbot requires its employees and
consultants to execute confidentiality agreements in connection
with their employment or consulting relationships with Microbot.
Microbot also requires its employees and consultants who work on
its product candidates to agree to disclose and assign to
Microbot all inventions conceived during the term of their
service, while using Microbot property, or which relates to
Microbots business.

Patent applications in the
United States and in foreign countries are maintained in secrecy
for a period of time after filing, which results in a delay
between the actual discoveries and the filing of related patent
applications and the time when discoveries are published in
scientific and patent literature. Patents issued and patent
applications filed relating to medical devices are numerous, and
there can be no assurance that current and potential competitors
and other third parties have not filed or in the future will not
file applications for, or have not received or in the future will
not receive, patents or obtain additional proprietary rights
relating to product candidates, products, devices or processes
used or proposed to be used by Microbot. Microbot believes that
the technologies it employs in its products and systems do not
infringe the valid claims of any third party patents. There can
be no assurance, however, that third parties will not seek to
assert that Microbot devices and systems infringe their patents
or seek to expand their patent claims to cover aspects of
Microbots products and systems.

The medical device industry in
general has been characterized by substantial litigation
regarding patents and other intellectual property rights. Any
such claims, regardless of their merit, could be time-consuming
and expensive to respond to and could divert Microbots technical
and management personnel. Microbot may be involved in litigation
to defend against claims of infringement by other patent holders,
to enforce patents issued to Microbot, or to protect Microbots
trade secrets. If any relevant claims of third-party patents are
upheld as valid and enforceable in any litigation or
administrative proceeding, Microbot could be prevented from
practicing the subject matter claimed in such patents, or would
be required to obtain licenses from the patent owners of each
such patent, or to redesign Microbots products, devices or
processes to avoid infringement. There can be no assurance that
such licenses would be available or, if available, would be
available on terms acceptable to Microbot or Microbot would be
successful in any attempt to redesign products or processes to
avoid infringement. Accordingly, an adverse determination in a
judicial or administrative proceeding or failure to obtain
necessary licenses could prevent Microbot from manufacturing and
selling its products.

Issued U.S. patents which
cover Microbots product candidates will expire between 2026 and
2031, excluding any patent term extensions that might be
available following the grant of marketing authorization. Issued
patents outside of the United States directed to Microbots
product candidates will expire between 2026 and
2032.

License Agreement
with the Technion

In June 2012, Microbot entered
into a license agreement with Technion Research and Development
Foundation Ltd., or TRDF, the technology transfer subsidiary of
the Technion Institute of Technology, to which it obtained an
exclusive, worldwide, royalty-bearing,
sub-licensable


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license to certain patents and
inventions relating to the SCS and TipCAT technology platforms
and invented by Professor Moshe Shoham, a director of the
Company, and in certain circumstances other TRDF-related persons.
to the terms of the license agreement, in order to maintain the
license with respect to each platform, Microbot must use
commercially reasonable efforts to develop products covered by
the license, including meeting certain agreed upon development
milestones. The milestones for SCS include commencing initial
studies in humans by December 2018 and commencing a full clinical
trial, if necessary, by December 2019. The milestones for TipCAT
include commencing initial studies in humans 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 to
extend 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 and
outstanding shares at such time on a fully diluted basis. Such
shares were initially subject to antidilution protections but are
no longer subject to adjustment. In addition, as partial
consideration for the licenses granted, Microbot agreed to pay
TRDF royalties of between 1.5% and 3.0% of net sales of products
covered by the licenses, subject to certain reductions, and
certain percentages of amounts received by Microbot in the event
of sublicensing.

In the case of termination of
the license by Microbot without cause or by TRDF for cause, TRDF
has the right to receive a non-exclusive license from
Microbot with respect to improvements to the licensed
technologies made by Microbot. In such cases, TRDF would pay a
royalty of 10% of the income received by TRDF in connection its
sublicensing of such patent right and related intellectual
property. If the license from TRDF were to be terminated with
respect with either of the technology platforms underlying the
SCS or the TipCAT, Microbot would no longer be able to continue
its development of the related product candidate. However,
Microbot believes that its current intellectual property
portfolio, and its ongoing efforts to expand into other
micro-robotic surgical technologies, will give it the flexibility
to shift its resources towards developing and commercializing
related products.

Research and
Development

Microbots research and
development programs are generally pursued by engineers and
scientists employed by Microbot in its offices in Israel on a
full-time basis or as consultants, or through partnerships with
industry leaders in manufacturing and design and researchers in
academia. Microbot is also working with subcontractors in
developing specific components of its
technologies.

The primary objectives of
Microbots research and development efforts are to continue to
introduce incremental enhancements to the capabilities of its
candidate products and to advance the development of proposed
products.

Microbot has received funds
from the Office of the Chief Scientist in Israel, or OCS, for
research and development activities. Microbot received a grant
from the OCS in 2012, which grant reimbursed Microbot for 50% of
its research and development expenses, up to $764,466. This first
grant from the OCS ended in 2014. After the expiration of the
first grant, Microbot received approval for an additional grant
from the OCS which reimbursed Microbot for 50% of its research
and development expenses for the period from May1, 2014 through
September30, 2015, up to $924,166. After the expiration of the
second grant, Microbot received an approval for a third grant
from the Chief Scientist of Israel which reimbursed Microbot for
50% of its research and development expenses for the period from
May1, 2016 through April30, 2017, up to $1,026,050. Microbot
expects to continue to access government funding in the
future.


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For the fiscal year ended
December31, 2015, Microbot incurred research and development
expenses of $822,759 compared to research and development
expenses of $836,698 for the fiscal year ended December31,
2014.

Microbot has already made
plans to develop a second version of its SCS device that will
have an embedded controller and battery. This alternative design
will allow the cleaning mechanism to be automatically activated,
without the need for the patients involvement in the activation
process.

Manufacturing

Microbot does not have any
manufacturing facilities or manufacturing personnel. Microbot
currently relies, and expects to continue to rely, on third
parties for the manufacturing of its product candidates for
preclinical and clinical testing, as well as for commercial
manufacturing if its product candidates receive marketing
approval.

Commercialization

Microbot has not yet
established a sales, marketing or product distribution
infrastructure for its product candidates, which are still in
development stages. Microbot plans to access the U.S. markets for
hydrocephalus, NPH, and colonoscopy with its initial device
offerings through strategic partnerships but may develop its own
focused, specialized sales force or distribution channels once it
has several commercialized products in its portfolio. Microbot
has not yet developed a commercial strategy outside of the United
States.

Government
Regulation

General

Microbots medical technology
products and operations are subject to extensive regulation in
the United States and other countries. Most notably, if Microbot
seeks to sell its products in the United States, its products
will be subject to the Federal Food, Drug, and Cosmetic Act
(FDCA) as implemented and enforced by the U.S. Food and Drug
Administration (FDA). The FDA regulates the development, bench
and clinical testing, manufacturing, labeling, storage,
record-keeping, promotion, marketing, sales, distribution and
post-market support and reporting of medical devices in the
United States to ensure that medical products distributed
domestically are safe and effective for their intended uses.
Regulatory policy affecting its products can change at any
time.

Advertising and promotion of
medical devices in the United States, in addition to being
regulated by the FDA, are also regulated by the Federal Trade
Commission and by state regulatory and enforcement authorities.
Recently, promotional activities for FDA-regulated products of
other companies have been the subject of enforcement action
brought under healthcare reimbursement laws and consumer
protection statutes. In addition, under the federal Lanham Act
and similar state laws, competitors and others can initiate
litigation relating to advertising
claims.

Foreign countries where
Microbot wishes to sell its products may require similar or more
onerous approvals to manufacture or market its products.
Government agencies in those countries also enforce laws and
regulations that govern the development, testing, manufacturing,
labeling, advertising, marketing and distribution, and market
surveillance of medical device products. These regulatory
requirements can change rapidly with relatively short
notice.


12

Other regulations Microbot
encounters in the United States and in other jurisdictions are
the regulations that are common to all businesses, such as
employment legislation, implied warranty laws, and environmental,
health and safety standards, to the extent applicable. In the
future, Microbot will also encounter industry-specific government
regulations that would govern its products, if and when they are
developed for commercial use.

U.S.
Regulation

The FDA governs the following
activities that Microbot performs, will perform, upon the
clearance or approval of its product candidates, or that are
performed on its behalf, to ensure that medical products
distributed domestically or exported internationally are safe and
effective for their intended uses:

product design, and development;

product safety, testing, labeling and storage;

record keeping procedures; and

product marketing.

There are numerous FDA
regulatory requirements governing the approval or clearance and
subsequent commercial marketing of Microbots products. These
include:

the timely submission of product listing and establishment
registration information, along with associated establishment
user fees;

continued compliance with the Quality System Regulation, or
QSR, which require specification developers and
manufacturers, including third-party manufacturers, to follow
stringent design, testing, control, documentation and other
quality assurance procedures during all aspects of the
manufacturing process;

labeling regulations and FDA prohibitions against the
promotion of products for uncleared, unapproved or off-label
use or indication;

clearance or approval of product modifications that could
significantly affect the safety or effectiveness of the
device or that would constitute a major change in intended
use;

Medical Device Reporting regulations (MDR), which require
that manufacturers keep detailed records of investigations or
complaints against their devices and to report to the FDA if
their device may have caused or contributed to a death or
serious injury or malfunctioned in a way that would likely
cause or contribute to a death or serious injury if it were
to recur;

adequate use of the Corrective and Preventive Actions process
to identify and correct or prevent significant systemic
failures of products or processes or in trends which suggest
same;

post-approval restrictions or conditions, including
post-approval study commitments;

post-market surveillance regulations, which apply when
necessary to protect the public health or to provide
additional safety and effectiveness data for the device; and

notices of correction or removal and recall regulations.


13

Unless an exemption applies,
before Microbot can commercially distribute medical devices in
the UnitedStates, Microbot must obtain, depending on the
classification of the device, either prior 510(k) clearance,
510(k) de-novo clearance or premarket approval (PMA), from the
FDA. The FDA classifies medical devices into one of three classes
based on the degree of risk associated with each medical device
and the extent of regulatory controls needed to ensure the
devices safety and effectiveness:

ClassI devices, which are low risk and subject to only
general controls (e.g., registration and listing, medical
device labeling compliance, MDRs, Quality System Regulations,
and prohibitions against adulteration and misbranding) and,
in some cases, to the 510(k) premarket clearance
requirements;

ClassII devices, which are moderate risk and generally
require 510(k) or 510(k) de-novo premarket clearance before
they may be commercially marketed in the United States as
well as general controls and potentially special controls
like performance standards or specific labeling requirements;
and

ClassIII devices, which are devices deemed by the FDA to pose
the greatest risk, such as life-sustaining, life-supporting
or implantable devices, or devices deemed not substantially
equivalent to a predicate device. ClassIII devices generally
require the submission and approval of a PMA supported by
clinical trial data.

Microbot expect the medical
products in its pipeline currently to be classified as ClassII.
ClassII devices are those for which general controls alone are
insufficient to provide reasonable assurance of safety and
effectiveness and there is sufficient information to establish
special controls. Special controls can include performance
standards, post-market surveillance, patient histories and FDA
guidance documents. Premarket review and clearance by the FDA for
these devices is generally accomplished through the 510(k) or
510(k)de-novopremarket notification process. As part of the
510(k) or 510(k) de-novo notification process, FDA may require
the following:

Development of comprehensive product description and
indications for use.

Completion of extensive preclinical tests and preclinical
animal studies, performed in accordance with the FDAs Good
Laboratory Practice (GLP) regulations.

Comprehensive review of predicate devices and development of
data supporting the new products substantial equivalence to
one or more predicate devices.

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 Clinical
Practices (GCPs), including the requirement that all research
subjects provide informed consent for their participation in the
clinical study. A written protocol with predefined end points, an
appropriate sample size and pre-determined patient
inclusion and exclusion criteria, is required before initiating
and conducting a clinical trial. All clinical investigations of
devices to determine safety and effectiveness must be conducted
in accordance with the FDAs Investigational device Exemption, or
IDE, regulations that among other things, govern investigational
device labeling, prohibit promotion of the investigational
device, and specify recordkeeping, reporting and monitoring
responsibilities of study sponsors and study investigators. If
the device presents a significant risk, as defined by the FDA,
the agency requires the device sponsor to submit an IDE
application, which must become effective prior to commencing
human clinical trials. The


14

IDE will automatically become
effective 30 days after receipt by the FDA, unless the FDA denies
the application or notifies the company that the investigation is
on hold and may not begin. If the FDA determines that there are
deficiencies or other concerns with an IDE that requires
modification, the FDA may permit a clinical trial to proceed
under a conditional approval. In addition, the study must be
approved by, and conducted under the oversight of, an
Institutional Review Board (IRB) for each clinical site. If the
device presents a non-significant risk to the patient, a sponsor
may begin the clinical trial after obtaining approval for the
trial by one or more IRBs without separate approval from the FDA,
but it must still follow abbreviated IDE requirements, such as
monitoring the investigation, ensuring that the investigators
obtain informed consent, and labeling and record-keeping
requirements.

Assuming successful completion of all required testing, a
detailed 510(k) premarket notification or 510(k) de-novo is
submitted to the FDA requesting clearance to market the
product. The notification includes all relevant data from
pertinent preclinical and clinical trials, together with
detailed information relating to the products manufacturing
controls and proposed labeling, and other relevant
documentation.

A 510(k) clearance letter from the FDA will authorize
commercial marketing of the device for one or more specific
indications for use.

After 510(k) clearance, Microbot will be required to comply
with a number of post-clearance requirements, including, but
not limited to, Medical Device Reporting and complaint
handling, and, if applicable, reporting of corrective
actions. Also, quality control and manufacturing procedures
must continue to conform to QSRs. The FDA periodically
inspects manufacturing facilities to assess compliance with
QSRs, which impose extensive procedural, substantive, and
record keeping requirements on medical device manufacturers.
In addition, changes to the manufacturing process are
strictly regulated, and, depending on the change, validation
activities may need to be performed. Accordingly,
manufacturers must continue to expend time, money and effort
in the area of production and quality control to maintain
compliance with QSRs and other types of regulatory controls

After a device receives 510(k)
clearance from FDA, any modification that could significantly
affect its safety or effectiveness, or that would constitute a
major change in its intended use or technological
characteristics, requires a new 510(k) clearance or could require
a PMA. The FDA requires each manufacturer to make the
determination of whether a modification requires a new 510(k)
notification or PMA in the first instance, but the FDA can review
any such decision. If the FDA disagrees with a manufacturers
decision not to seek a new 510(k) clearance or PMA for a
particular change, the FDA may retroactively require the
manufacturer to seek 510(k) clearance or PMA. The FDA can also
require the manufacturer to cease U.S. marketing and/or recall
the modified device until additional 510(k) clearance or PMA
approval is obtained.

The FDA and the Federal Trade
Commission, or FTC, will also regulate the advertising claims of
Microbots products to ensure that the claims Microbot makes are
consistent with its regulatory clearances, that there is
scientific data to substantiate the claims and that product
advertising is neither false nor
misleading.

To obtain 510(k) clearance,
Microbot must submit a notification to the FDA demonstrating that
its proposed device is substantially equivalent to a predicate
device (i.e., a device that was in commercial distribution before
May28, 1976, a device that has been reclassified from ClassIII to
ClassI or ClassII, or a 510(k)-cleared device). The FDAs 510(k)
clearance process generally takes from three to 12 months from
the date the application is submitted but also can take
significantly longer. If the FDA determines that the device or
its intended use is not substantially equivalent to a predicate
device, the device is automatically placed into ClassIII,
requiring the submission of a
PMA.


15

There is no guarantee that the
FDA will grant Microbot 510(k) clearance for its pipeline medical
device products, and failure to obtain the necessary clearances
for its products would adversely affect Microbots ability to grow
its business. Delays in receipt or failure to receive the
necessary clearances, or the failure to comply with existing or
future regulatory requirements, could reduce its business
prospects.

Devices that cannot be cleared
through the 510(k) process due to lack of a predicate device but
would be considered low or moderate risk may be eligible for the
510(k) de-novo process. In 1997, the Food and Drug Administration
Modernization Act, or FDAMA added the de novo classification
pathway now codified in section 513(f)(2) of the FDC Act. This
law established an alternate pathway to classify new devices into
ClassI or II that had automatically been placed in ClassIII after
receiving a Not Substantially Equivalent, or NSE, determination
in response to a 510(k) submission. Through this regulatory
process, a sponsor who receives an NSE determination may, within
30 days of receipt, request FDA to make a risk-based
classification of the device through what is called a de novo
request. In 2012, section 513(f)(2) of the FDC Act was amended by
section 607 of the Food and Drug Administration Safety and
Innovation Act (FDASIA), in order to provide a second option for
de novo classification. Under this second pathway, a sponsor who
determines that there is no legally marketed device upon which to
base a determination of substantial equivalence can submit a de
novo request to FDA without first submitting a
510(k).

In the event that Microbot
receives a Not Substantially Equivalent determination for either
of its device candidates in response to a 510(k) submission, the
Microbot device may still be eligible for the 510(k) de-novo
classification process.

Devices that cannot be cleared
through the 510(k) or 510(k) de-novo classification process
require the submission of a PMA. The PMA process is much more
time consuming and demanding than the 510(k) notification
process. A PMA must be supported by extensive data, including but
not limited to data obtained from preclinical and/or clinical
studies and data relating to manufacturing and labeling, to
demonstrate to the FDAs satisfaction the safety and effectiveness
of the device. After a PMA application is submitted, the FDAs
in-depth review of the information generally takes between one
and three years and may take significantly longer. If the FDA
does not grant 510(k) clearance to its products, there is no
guarantee that Microbot will submit a PMA or that if Microbot
does, that the FDA would grant a PMA approval of Microbots
products, either of which would adversely affect Microbots
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
authorization and commercial sales and distribution of its
products in foreign countries. The approval process varies from
country to country, and the time may be longer or shorter than
that required for FDA approval or clearance. The requirements
governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary greatly from country to
country.

International sales of medical
devices are subject to foreign governmental regulations which
vary substantially from country to country. Whether or not
Microbot obtains FDA approval or clearance for its products,
Microbot will be required to make new regulatory submissions to
the comparable regulatory authorities of foreign countries before
Microbot can commence clinical trials or marketing of the product
in such countries. The time required to obtain certification or
approval by a foreign country may be longer or shorter than that
required for FDA clearance or approval, and the requirements may
differ. Below are


16

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 28member states and has a coordinated system
for the authorization of medical
devices.

The E.U. has adopted
legislation, in the form of directives to be implemented in each
member state, concerning the regulation of medical devices within
the European Union. The directives include, among others, the
Medical Device Directive, or MDD, that establishes certain
requirements with which medical devices must comply before they
can be commercialized in the European Economic Area, or EEA
(which comprises the member states of the E.U. plus Norway,
Liechtenstein and Iceland). Under the MDD, medical devices are
classified into four Classes, I, IIa, IIb, and III, with ClassI
being the lowest risk and ClassIII being the highest risk.
However, the E.U. authorities, including the European Commission,
do not have direct regulatory over medical device manufacturers
under the MDD. Rather, the MDD directs E.U. Member States to
implement laws and regulations consistent with the provisions set
forth in the directive.

Under the MDD, to demonstrate
compliance of a medical device with the essential requirements,
manufacturers must undergo a conformity assessment procedure,
which varies according to the type of medical device and its
classification. An accredited body known as a Notified Body,
which is an entity designated by an E.U. Member State (or
competent authority) to perform conformity assessments, will
typically audit and examine the manufacturers quality system for
the production, quality, design and final inspection of the
medical devices and review a Technical File containing technical
documents regarding the device, including but limited to,
detailed device description, manufacturing information,
preclinical and clinical tests, risk analysis, compliance with
essential requirements, etc., before issuing a certification
demonstrating compliance with the essential requirements. Medical
devices that comply with the essential requirements are entitled
to bear the Conformit Europene, or CE Mark. Medical devices
properly bearing the CE Mark may be commercially distributed
throughout the EEA. Under the MDD, notified bodies are also
charged with performing periodic inspections to verify that a
manufacturers quality 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)
of any business facilities and descriptions of any certified
medical device products. The MDD also requires manufacturers to
file vigilance reports in the event a device 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 would
replace the MDD with a new regulation, the Medical Devices
Regulation, or MDR. Unlike the MDD that must be implemented into
national laws, the Medical Devices Regulation would be directly
applicable in all EEA member states and so is intended to
eliminate current national differences in regulation of 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 the European Union.

If finally adopted, the MDR is
expected to enter into force in late 2016 and become applicable
three years thereafter. The adoption of the MDR may, however, be
materially delayed due to disagreements about specific portions
of the regulation, as well as the implementation process. In its
current form it would, among other things, impose additional
reporting requirements on manufacturers of high risk medical
devices, impose an obligation on manufacturers to appoint a
qualified person


17

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 medical devices 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 the EEA 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 or any
of its pipeline products and failure to obtain the CE Mark would
adversely affect its ability to grow its
business.

Israel.
Israels Medical Devices Law generally requires the registration
of all medical products with the Ministry of Health, or MOH,
Registrar as a precondition for production and distribution in
Israel. Special exemptions may apply under limited circumstances
and for purposes such as the provision of essential medical
treatment, research and development of the medical device, and
personal use, among others.

Registration of medical
devices requires the submission of an application to the Ministry
of Health Medical Institutions and Devices Licensing Department,
or AMAR. An application for the registration of a medical device
includes the following:

Name and address of the manufacturer, and of the importer as
applicable;

Description of the intended use of the medical device and of
its medical indications;

Technical details of the medical device and of its
components, and in the event that the device or the
components are not new, information should be provided on the
date or renovation;

Certificate attesting to the safety of the device, issued by
a competent authority of one of the following countries:
Australia, Canada, European Community (EC), Member States
(MSs), Israel, Japan, or the United States;

Information on any risk which may be associated with the use
of the device (including precautionary measures to be taken);

Instructions for use of the device in Hebrew; the MOH may
allow the instructions to be in English for certain devices;

Details of the standards to which the device complies;

Description of the technical and maintenance services,
including periodic checks and inspections; and

Declaration, as appropriate: of the local
manufacturer/importer, and of the foreign manufacturer.

If the application includes a
certificate issued by a competent authority of one of the
following recognized countries: Australia, Canada, European
Community (CE) Member States (MSs), Japan, or the United States,
the registration process is generally expedited, but could still
take 6-9 months for approval. If such certificate is not
available, the registration process will take significantly
longer and a license is rarely issued. Furthermore, the MOH will
determine what type of testing is needed. In general, in the case
of Israeli manufactured devices that are not registered or
authorized in any recognized country, the application requires
presentation of a risk analysis, a clinical evaluation, a summary
of the clinical trials, and expert opinions regarding the devices
safety and effectiveness. Additional requirements may apply
during the registration period, including follow-up reviews, to
improve the quality and safety of the
devices.


18

According to regulations
issued by Israels Minister of Health in June 2013, a decision on
a request to register a medical device must be delivered by AMAR
within 120 days from the date of the request, although this
rarely occurs. The current rules for the registration of medical
devices do not provide for an expedited approval
process.

Once granted by the MOH, a
license (marketing authorization) for a medical device is valid
for five years from the date of registration of the device,
except for implants with a life-supporting function, for which
the validity is for only two years from the date of registration.
Furthermore, the holder of the license, the Israeli Registration
Holder, or IRH, must do the following to maintain its
license:

Reside and maintain a place of business in Israel and serve
as the regulatory representative.

Respond to questions from AMAR concerning the registered
products.

Report adverse events to AMAR.

Renew the registration on time to keep the market approval
active.

Comply with post-marketing requirements, including reporting
of adverse and unexpected events occurring in Israel or in
other countries where the device is in use.

Getting a device listed on
Israels four major Sick Funds (health insurance entities) is also
necessary in order for Israeli hospitals and health care
providers to order such
products.

Microbot intends to apply for
a license from the MOH for each of its medical devices. There is
no guarantee that Microbot will be granted licenses for its
pipeline products and failure to obtain such licenses would
adversely affect its ability to grow its
business.

Employees

Microbots Chief Executive
Officer, President and Chairman, Harel Gadot, is based in
Microbots U.S. office located in Hingham, Massachusetts.
Additionally, Microbot currently has five full-time employees and
one part time employee based in its office located in Yokneam,
Israel. These employees oversee day-to-day operations of the
Company supporting management and leading engineering,
manufacturing, intellectual property and administration functions
of the Company. As required, Microbot also engages consultants to
provide services to the Company, including regulatory, legal and
corporate services. Microbot has no unionized
employees.

Microbot currently plans to
hire an additional 6-8 full-time employees within the next 12
months subject to the availability of funds, whose principal
responsibilities will be the support of its operational, research
and development, and clinical development
activities.

Facilities

Microbots principal executive
office is located at 175 Derby St., 27/1, Hingham, MA 02043.
Microbot also has facilities in premises of approximately 1,840
square feet at 5 Hamada Street, 2ndFloor, Yokneam, Israel. Microbot
plans to relocate to a larger facility in Israel within the next
12-18 months, which will provide the space and infrastructure
necessary to accommodate its development work based on its
current operating plan. Microbot does not own any real
property.


19

Legal
Matters

From time to time, we may
become involved in various lawsuits and legal proceedings, which
arise in the ordinary course of business. However, litigation is
subject to inherent uncertainties, and an adverse result in these
or other matters may arise from time to time that may harm
business.

We are not currently a party
in any legal proceeding or governmental regulatory proceeding nor
are we currently aware of any pending or potential legal
proceeding or governmental regulatory proceeding proposed to be
initiated against us that would have a material adverse effect on
us or our business.


RISK
FACTORS

The risks set forth below
are not the only ones facing our Company. Additional risks and
uncertainties may exist that could also adversely affect our
business, financial condition, prospects and/or operations. If
any of the following or other risks actually materialize, our
business, financial condition, prospects and/or operations could
suffer. In such event, the value of our securities could
decline.

Risks Relating to
Microbots Financial Position and Need for Additional
Capital

Microbot has had
no revenue and has incurred significant operating losses since
inception and is expected to continue to incur significant
operating losses following the Merger for the foreseeable future.
The Company may never become profitable or, if achieved, be able
to sustain
profitability.

Microbot has incurred
significant operating losses since its inception and expects to
incur significant losses for the foreseeable future as Microbot
continues its preclinical and clinical development programs for
its existing product candidates, SCS and TipCAT; its research and
development of any other future product candidates; and all other
work necessary to obtain regulatory clearances or approvals for
its product candidates in the United States and other markets. In
the future, Microbot intends to continue conducting
micro-robotics research and development; performing necessary
animal and clinical testing; working towards medical device
regulatory compliance; and, if SCS, TipCAT or other future
product candidates are approved or cleared for commercial
distribution, engaging in appropriate sales and marketing
activities that, together with anticipated general and
administrative expenses, will likely result in Microbot incurring
further significant losses for the foreseeable
future.

Microbot is a
development-stage medical device company and currently generates
no revenue from product sales, and may never be able to
commercialize SCS, TipCAT or other future product candidates.
Microbot does not currently have the 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 the Company can successfully develop, commercialize and
sell products derived from its product pipeline, of which
Microbot can give no assurance. Even if Microbot or any of its
future development partners succeed in commercializing any of
Microbots product candidates, Microbot may never generate
revenues significant enough to achieve
profitability.


20

Because of the numerous risks
and uncertainties associated with its product development
pipeline and strategy, Microbot cannot accurately predict when it
will achieve profitability, if ever. Failure to become and remain
profitable would depress the value of the Company and could
impair its ability to raise capital, which may force the Company
to curtail or discontinue its research and development programs
and/or day-to-day operations. Furthermore, there can be no
assurance that profitability, if achieved, can be sustained on an
ongoing basis.

Microbots 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 obtain regulatory approval for or to
successfully commercialize these products, its business will be
materially
harmed.

To date, the primary focus of
Microbots product development has been on SCS, for the treatment
of hydrocephalus and normal pressure hydrocephalus, or NPH, and
TipCAT, a self-propelling, semi-disposable endoscope being
developed initially for use in colonoscopy procedures. Successful
continued development and ultimate regulatory approval or
clearance of both SCS and TipCAT are critical to the future
success of Microbots business. Microbot has invested, and will
continue to invest, a significant portion of its time and
financial resources in the development, pre-clinical and clinical
testing of and obtaining regulatory authorization for SCS and
TipCAT. Microbot will need to raise sufficient funds to
successfully complete its development of these products. 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 such clinical 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 or cleared 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 and
Microbot may never become
profitable.

Microbot has a
limited operating history, which may make it difficult to
evaluate the prospects for the Companys future
viability.

Microbot has a limited
operating history upon which an evaluation of its business plan
or performance and prospects can be made. The business and
prospects of Microbot must be considered in the light of the
potential problems, delays, uncertainties and complications that
may be encountered in connection with a newly established
business. The risks include, but are not limited to, the
possibility that Microbot will not be able to develop functional
and scalable products, or that although functional and scalable,
its products will not be economical to market; that its
competitors hold proprietary rights that may preclude Microbot
from marketing such products; that its competitors market a
superior or equivalent product; that Microbot is not able to
upgrade and enhance its technologies and products to accommodate
new features and expanded service offerings; or the failure to
receive necessary regulatory clearances or approvals for its
products. To successfully introduce and market its products at a
profit, Microbot must establish brand name recognition and
competitive advantages for its products. There are no assurances
that Microbot can successfully address these challenges. If it is
unsuccessful, Microbot and its business, financial condition and
operating results could be materially and adversely
affected.


21

Microbots operations to date
have been limited to organizing the company, entering into
licensing arrangements to initially obtain rights to its
technologies, developing and securing its technologies, raising
capital, developing regulatory and reimbursement strategies for
its product candidates and preparing for pre-clinical and clinical
trials of the SCS and TipCAT. Microbot has not yet demonstrated
its ability to successfully complete development of any product
candidate, obtain marketing clearance or approval, manufacture a
commercial-scale product or arrange for a third party to do so on
its behalf, or conduct sales and marketing activities necessary
for successful product commercialization. Consequently, any
predictions made about Microbots future success or viability may
not be as accurate as they could be if Microbot had a longer
operating
history.

Microbots
independent registered public accounting firm has noted that the
continuation of Microbot as a business will be dependent on its
ability to receive additional
financing.

Based on Microbots limited
operating history and the risks it faces, including uncertainties
regarding the development of its product, Microbots independent
registered public accounting firm has included an explanatory
paragraph in its report on Microbots financial statements as of
and for the years ended December31, 2015 and December31, 2014
elaborating on the business conditions Microbot faces. As
Microbot expects to continue to incur significant operating costs
and losses in connection with the development of its product and
financing its business development operations, as of the date of
the financial statements, the continuation of Microbots
activities and its obligations are dependent upon the receipt of
financing from its shareholders or new
investors.

Microbot will need
substantial additional funding. If Microbot is unable to raise
capital when needed, it could be forced to delay, reduce or
eliminate its product development programs or commercialization
efforts.

To date, Microbot Israel has
funded its operations primarily through private placement
offerings of debt and equity securities, grants and loans. From
November10, 2010 through September30, 2016, Microbot Israel
received: (i)approximately $3.0million from the issuance of
Microbot Israels series A preferred stock and the exercise of
warrants to purchase Microbot Israels series A preferred stock,
(ii)approximately $0.9million for research and development
activities as a grant from the Office of the Chief Scientist in
Israel, and (iii)approximately $1.57million from shareholders of
Microbot Israel to convertible loan agreements and exercise of
warrants.

Microbot does not know when,
or if, the Company will generate any revenue, but does not expect
the Company to generate significant revenue unless and until it
obtains regulatory clearance or approval of and commercializes
one of its current or future product candidates. It is
anticipated that the Company will continue to incur losses for
the foreseeable future, and that losses will increase as the
Company continues the development of, and seeks regulatory review
of, its product candidates, and begins to commercialize any
approved or cleared products following a successful regulatory
review.

Microbot expects the research
and development expenses of the Company to increase substantially
in future periods as it conducts pre-clinical studies in large
animals and potentially clinical trials for its product
candidates, and especially if it initiates additional research
programs for future product candidates. In addition, if the
Company obtains marketing clearance or approval for any of its
product candidates, it expects to incur significant
commercialization expenses related to product manufacturing,
marketing and sales. Furthermore, Microbot expects to incur
additional costs associated with operating as a public company in
the United States. Accordingly, the Company will need to obtain
substantial additional funding in connection 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 or
eliminate its research and development programs or any future
commercialization
efforts.


22

Microbot believes that the net
cash of the Company that is available following completion of the
Merger will be sufficient to fund the Company for at least 18
months and fund operations necessary to continue development
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 the
introduction of the SCS device into the hydrocephalus and NPH
market, and introducing the TipCAT as a next-generation
colonoscope. The Companys future capital requirements, generally,
will depend on many factors,
including:

the timing and outcomes of the product candidates regulatory
reviews, subsequent approvals or clearances, or other
regulatory actions;

the costs, design, duration and any potential delays of the
clinical trials that could be conducted at the FDAs request
using Microbots product candidates;

the costs of acquiring, licensing or investing in businesses,
product candidates and technologies;

the costs to maintain, expand and defend the scope of
Microbots intellectual property portfolio;

the costs to secure or establish sales, marketing and
commercial manufacturing capabilities or arrangements with
third parties regarding same;

the Companys 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 other internal systems and
infrastructure for the Companys business.

Raising additional
capital may cause dilution to the Companys investors, restrict
its operations or require it to relinquish rights to its
technologies or product
candidates.

Until such time, if ever, as
the Company can generate substantial product revenues, it expects
to finance its cash needs through a combination of equity
offerings, licensing, collaboration or similar arrangements,
grants and debt financings. The Company does not have any
committed external source of funds other than a commitment by
Alpha Capital Anstalt to invest an amount so that, with the funds
from the Companys asset sale on November29, 2016, we receive an
aggregate of $4.0 million under certain circumstances, which
commitment has not been consummated as of the date of this
Form8-K. To the extent that the Company raises additional capital
through the sale of equity or convertible debt securities, the
ownership interest of its stockholders will be diluted, and the
terms of these securities may include liquidation or other
preferences that adversely affect the rights of holder of the
Companys common stock. Debt financing, if available, may involve
agreements that include covenants limiting or restricting the
Companys ability to take specific actions, such as incurring
additional debt, making capital expenditures, declaring dividends
or other distributions, selling or licensing intellectual
property rights, and other operating restrictions that could
adversely affect the Companys ability to conduct its
business.

If the Company raises
additional funds through licensing, collaboration or similar
arrangements, it may have to relinquish valuable rights to its
technologies, future revenue streams, research and development
programs or product candidates or to grant licenses on terms that
may not be favorable to the Company. If the Company is unable to
raise additional funds through equity or debt financings or other
arrangements when needed, it may be required to delay, limit,
reduce or terminate its product development or future
commercialization efforts or grant rights to develop and market
product candidates that it would otherwise prefer to develop and
market
itself.


23

Risks Relating to the
Development and Commercialization of Microbots Product
Candidates

Microbots business
depends heavily on the success of its lead product candidates,
the SCS and the TipCAT. If Microbot is unable to commercialize
the SCS or the TipCAT or experiences significant delays in doing
so, Microbots business will be materially
harmed.

Microbot expects the animal
studies for SCS to start in the first quarter of 2017. Upon the
completion of animal studies, Microbot may conduct clinical
trials if they are requested by the FDA or if Microbot decides
that the data from such trials would improve the marketability of
the product candidate. The TipCAT is expected to enter animal
studies in 2017. Upon the completion of animal studies, Microbot
may conduct clinical trials if they are requested by the FDA or
if Microbot decides that the data from such trials would improve
the marketability of the product candidate. After all necessary
clinical and performance data supporting the safety and
effectiveness of each product candidate are collected, Microbot
must still obtain FDA clearance or approval to market the device
and those regulatory processes can take several months to several
years to be completed. Therefore, Microbots ability to generate
product revenues will not occur for at least the next few years,
if at all, and will depend heavily on the successful
commercialization of SCS and TipCAT in their respective intended
markets. The success of each of these product candidates will
depend on a number of factors, including the
following:

the Companys 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 is safe 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 Microbots 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,
Microbot could experience significant delays or an inability to
successfully commercialize SCS and/or TipCAT, which would
materially harm its
business.


24

Microbots product
candidates are subject to an uncertain and potentially lengthy
domestic regulatory review process. If Microbot does not obtain
and maintain the necessary regulatory authorizations from the
Food and Drug Administration, Microbot will not be able to sell
its product candidates in the United
States.

Microbots product candidates
and operations are subject to extensive regulation in the United
States by the FDA under the agencys medical device authorities.
The FDA regulates the development, bench and clinical testing,
manufacturing, labeling, storage, record-keeping, promotion,
marketing sales, distribution and post-market support and
reporting of medical devices in the United States to ensure that
medical products distributed domestically are safe and effective
for their intended uses. Microbot expects its product candidates
to be classified as ClassII. In order to market ClassII products
for use in the United States, Microbot must first obtain
clearance from the FDA to Section510(k) of the Federal Food,
Drug, and Cosmetic Act. Clearance under Section510(k) requires a
demonstration that a new device is substantially equivalent to
another device with 510(k) clearance or grandfathered status or
to a device that was reclassified from ClassIII to ClassII or
ClassI.

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 Microbots determination that a 510(k) notification is the
appropriate regulatory pathway for its products, or that FDA will
grant Microbot 510(k) clearance for its pipeline medical device
products even if that pathway is accepted. Failure to obtain the
necessary clearances for its products would adversely affect
Microbots ability to grow its business. Delays in receipt or
failure to receive the necessary clearances, or the failure to
comply with existing or future regulatory requirements, could
reduce our 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 (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 of Microbots 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
Microbots 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 devices safety or effectiveness, or that would cause
them to be marketed for additional 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 in the 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 appropriate 510(k) clearance or PMA approval is
obtained.

The FDA may not act favorably
or quickly in its review of Microbots 510(k), de novo 510(k), or
PMA submissions, as applicable, or Microbot may encounter
significant difficulties and costs in its efforts to obtain FDA
clearance or approval, any of which could delay or preclude its
sale of its product candidates 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 Microbots proposed product candidates can
change at any time. The changes and their potential impact on
Microbots business cannot be accurately predicted. For example,
in 2011, the FDA announced a Plan of Action to modernize and
improve the FDAs premarket review of medical devices, and has
implemented, and continues to implement, reforms intended to
streamline the premarket review process. In addition, as part of
the Food and
Drug


25

Administration Safety and
Innovation Act of 2012, Congress enacted several reforms through
the Medical Device Regulatory Improvements and additional
miscellaneous provisions which will further affect both pre- and
post-approval medical device regulation. Changes in the FDA
510(k) process could make clearance more difficult to obtain,
increase delay, add uncertainty and have other significant
adverse effects on Microbots 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 initial
clearance, which is typically a much more complex, lengthy and
burdensome application than a 510(k) submission. To support a
PMA, the FDA would likely require that Microbot conduct one or
more clinical studies to demonstrate that the device is safe and
effective. In some cases such studies may be requested for 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 the FDA may not grant any necessary clearances or
approvals. In addition, the FDA may place significant limitations
upon the intended use of its product candidates as a condition to
a 510(k) clearance or PMA approval. Product applications can also
be denied or withdrawn due to failure to comply with regulatory
requirements or the occurrence of unforeseen problems following
clearance or approval. Any delays or failure to obtain FDA
clearance or approval of new products Microbot develops, any
limitations imposed by the FDA on new product use or the costs of
obtaining FDA clearance or approvals could have a material
adverse effect on Microbots 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 Microbots business, financial
condition and results of operations. There can be no assurance
that clinical trials will meet desired endpoints, produce
meaningful or useful data and be free of unexpected adverse
effects, and such uncertainty could preclude or delay market
clearance or authorizations resulting in significant financial
costs and reduced
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
either product
candidate.

Microbot anticipates that each
of its existing product candidates, SCS and TipCAT, will be
classified by the FDA as ClassII and thus be eligible for
marketing to a cleared 510(k) notification. However, there is no
guarantee that the FDA will agree with the Companys determination
or that the FDA would accept the predicate devices that Microbot
intends to submit in its 510(k) notifications in order to
establish that its new device product is substantially equivalent
to one or more predicate devices. The FDA also may request
additional data in response to a 510(k) notification, or require
Microbot to 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 include clinical data
that must be derived from human clinical studies that are
designed appropriately to address the potential questions from
the FDA regarding a proposed products 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, a
company must, among other things, apply for and obtain
Institutional Review Board, or IRB, approval of the proposed
investigation. In addition, if the clinical study involves a
significant risk (as defined by the FDA) to human health, the
sponsor of the investigation must also submit and obtain FDA
approval of an Investigational Device Exemption, or IDE,
application. Microbot may not be able to obtain FDA and/or IRB
approval to undertake clinical trials in the United States for
any new devices Microbot intends to market in the United States
in the future. Any type of clinical study in humans requires the
investment of substantial expense, professional resources and
time. Moreover, the timing of the commencement, continuation and
completion of any future
clinical


26

trial may be subject to
significant delays attributable to various causes, including
scheduling conflicts with participating clinicians and clinical
institutions, difficulties in identifying and enrolling patients
who meet trial eligibility criteria, failure of patients to
complete the clinical trial, delay in or failure to obtain IRB
approval to conduct a clinical trial at a prospective site, and
shortages of supply in the investigational
device.

The addition of one or more
mandatory clinical trials to the development timeline for one or
both Microbot product candidates would significantly increase the
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
on Microbots
prospects.

The regulatory approval
process for new products and new indications for existing
products requires extensive data and procedures, including the
development of regulatory and quality standards and, potentially,
certain clinical studies. Unfavorable or inconsistent data from
current or future clinical trials or other studies conducted by
Microbot or third parties, or perceptions regarding such data,
could adversely affect Microbots ability to obtain necessary
device clearance or approval and the markets view of Microbots
future prospects. Failure to successfully complete these studies
in a timely and cost-effective manner could have a material
adverse effect on Microbots 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 be completed in a timely or cost-effective manner
or result in a commercially viable product. Clinical trials or
studies may experience significant setbacks even if earlier
preclinical or animal studies have shown promising results.
Furthermore, preliminary results from clinical trials may be
contradicted by subsequent clinical analysis. Results from
clinical trials may also not be supported by actual long-term
studies or clinical experience. If preliminary clinical results
are later contradicted, or if initial results cannot be supported
by actual long-term studies or clinical experience, Microbots
business could be adversely affected. Clinical trials also may be
suspended or terminated by us, the FDA or other regulatory
authorities at any time if it is believed that the trial
participants face unacceptable health
risks.

Microbot has no
prior experience in conducting clinical trials and will depend
upon the ability of third parties, including contract research
organizations, collaborative academic groups, future clinical
trial sites and investigators, to conduct or to assist the
Company in conducting clinical trials for its product candidates,
if such trials become
necessary.

As a development-stage,
pre-clinical
company, Microbot has no prior experience in designing,
initiating, conducting and monitoring human clinical trials, if
data from such trials become necessary in order to obtain
regulatory clearance or approval of our product candidates.
Should the FDA or another regulatory agency in a foreign market
request clinical data to support the safety and effectiveness of
Microbots product candidates, Microbot will depend upon its
ability and/or the ability of future collaborators, contract
research organizations, clinical trial sites and investigators to
successfully design, initiate, conduct and monitor such clinical
trials.

Failure by Microbot or by any
of these future collaborating parties to timely and effectively
initiate, conduct and monitor a future clinical trial could
significantly delay or materially impair Microbots ability to
complete those clinical trials and/or obtain regulatory clearance
or approval of its product candidates and, consequently, could
delay or materially impair its ability to generate revenues from
the commercialization of those
products.


27

If the commercial
opportunity for SCS and TipCAT is smaller than Microbot
anticipates, Microbots future revenue from SCS and TipCAT will be
adversely affected and Microbots business will
suffer.

If the size of the commercial
opportunities in any of Microbots target markets is smaller than
Microbot anticipates, Microbot may not be able to achieve
profitability and growth. Microbot is developing SCS as a device
for the treatment of hydrocephalus and NPH and is developing
TipCAT as an endoscopic tool, with colonoscopy as the most
immediate application of the TipCAT technology. Microbot expects
its future revenues to be primarily derived from the sales of the
SCS 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 Microbots 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 specialize in the
procedures targeted by each device, a limited number of whom may
be able to influence device selection and purchasing decisions.
If Microbots technologies are not broadly accepted and perceived
as having significant advantages over existing medical devices,
then Microbot will not meet its business objectives. Such
perceptions are likely to be based on a determination by medical
facilities and physicians that Microbots product candidates are
safe and effective, are cost-effective in comparison to existing
devices, and represent acceptable methods of treatment. Microbot
cannot assure that it will be able to establish the relationships
and arrangements with medical facilities and physicians necessary
to support the market uptake of its product candidates. In
addition, its competitors may develop new technologies for the
same markets Microbot is targeting that are more attractive to
medical facilities and physicians. If doctors and other medical
professionals do not consider Microbot product candidates to be
suitable for application in the procedures we are targeting and
an improvement over the use of existing or competing products,
Microbots business goals will not be
realized.

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
attractive
prices.

To date, Microbot has focused
primarily on research and development of the first generation
versions of the SCS and the TipCAT. Consequently, Microbot has no
experience in manufacturing its product candidates, and intends
to manufacture its product candidates through third-party
manufacturers. Microbot can offer no assurance that either it or
its manufacturing partners will develop efficient, automated,
low-cost manufacturing capabilities and processes to meet the
quality, price, engineering, design and production standards or
production volumes required to successfully mass produce its
commercial products. Even if its manufacturing partners are
successful in developing such manufacturing capability and
quality processes, including the assurance of GMP-compliant device
manufacturing, there can be no assurance that Microbot can timely
meet its product commercialization schedule or the production and
delivery requirements of potential customers. A failure to
develop such manufacturing processes and capabilities could have
a material adverse effect on Microbots business and financial
results.

The proposed price of
Microbots product candidates, once approved for sale, will be
dependent on material and other manufacturing costs. Microbot
cannot offer any assurances that its manufacturing partner will
be able manufacture its product candidates at a competitive price
or that achieving cost reductions will not cause a reduction in
the performance, reliability and longevity of its product
candidates.


28

Microbot has
relied on, and intends to continue to rely on, third-party
manufacturers to produce its product
candidates.

Microbot currently relies, and
expects to rely for the foreseeable future, on third-party
manufacturers to produce and supply its product candidates, and
it expects to rely on third parties to manufacture the
commercialized products as well, should they receive the
necessary regulatory clearance or approval. Reliance on
third-party manufacturers entails risks to which Microbot would
not be subject if Microbot manufactured its product candidates or
future commercial products itself,
including:

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 or government enforcement action that has a
negative effect on Microbots product candidates and
distribution strategy;

the possible breach of manufacturing agreements by third
parties because of various factors beyond Microbots control;
and

the possible termination or non-renewal of manufacturing
agreements by third parties for various reasons beyond
Microbots control, at a time that is costly or inconvenient
to Microbot.

If Microbot is not able to
maintain its key manufacturing relationships, Microbot may fail
to find replacement manufacturers or develop its own
manufacturing capabilities, which could delay or impair Microbots
ability to obtain regulatory clearance or approval for its
product candidates and could substantially increase its costs or
deplete profit margins, if any. If Microbot does find replacement
manufacturers, Microbot may not be able to enter into agreements
with them on terms and conditions favorable to it and there could
be a substantial delay before new facilities could be qualified
and registered with the FDA and other foreign regulatory
authorities.

If Microbots
product candidates are not considered to be a safe and effective
alternative to existing technologies, Microbot will not be
commercially
successful.

The SCS and TipCAT rely on new
technologies, and Microbots success will depend on acceptance of
these technologies by the medical community as safe, clinically
effective, cost effective and a preferred device as compared to
products of its competitors. Microbot does not have long-term
data regarding efficacy, safety and clinical outcomes associated
with the use of SCS or TipCAT. Any data that is generated in the
future may not be positive or may not support the product
candidates regulatory dossiers, which would negatively affect
market acceptance and the rate at which its product candidates
are adopted. Equally important will be physicians perceptions of
the safety of Microbots product candidates because Microbots
technologies are relatively new. If, over the long term,
Microbots product candidates do not meet surgeons expectations as
to safety, efficacy and ease of use, they may not become widely
adopted.

Market acceptance of Microbots
product candidates will also be affected by other factors,
including Microbots ability to convince key opinion leaders to
provide recommendations regarding its product candidates;
convince distributors that its technologies are attractive
alternatives to existing and competing technologies; supply and
service sufficient quantities of products directly or through
marketing alliances; and price products competitively in light of
the current macroeconomic environment, which is becoming
increasingly price
sensitive.


29

Microbot may be
subject to penalties and may be precluded from marketing its
product candidates if Microbot fails to comply with extensive
governmental
regulations.

Microbot believes that its
medical device product candidates will be categorized as ClassII
devices, which typically require a 510(k) or 510(k) de-novo
premarket submission to the FDA. However, the FDA has not made
any determination about whether Microbots medical product
candidates are ClassII medical devices and may disagree with that
classification. If the FDA determines that Microbots product
candidates should be reclassified as ClassIII medical devices,
Microbot could be precluded from marketing the devices for
clinical use within the United States for months, years or
longer, depending on the specifics of the change in
classification. Reclassification of any of Microbots product
candidates as ClassIII medical devices could significantly
increase Microbots regulatory costs, including the timing and
expense associated with required clinical trials and other
costs.

The FDA and non-U.S.
regulatory authorities require that Microbot product candidates
be manufactured according to rigorous standards. These regulatory
requirements significantly increase Microbots production costs,
which may prevent Microbot from offering products within the
price range and in quantities necessary to meet market demands.
If Microbot or one of its third-party manufacturers changes an
approved manufacturing process, the FDA may need to review the
process before it may be used. Failure to comply with applicable
pre-market and post-market regulatory requirements could subject
Microbot to enforcement actions, including warning letters,
fines, injunctions and civil penalties, recall or seizure of its
products, operating restrictions, partial suspension or total
shutdown of its production, and criminal
prosecution.

If Microbot is not
able to both obtain and maintain adequate levels of third-party
reimbursement for procedures involving its product candidates
after they are approved for marketing and launched commercially,
it would have a material adverse effect on Microbots
business.

Healthcare providers and
related facilities are generally reimbursed for their services
through payment systems managed by various governmental agencies
worldwide, private insurance companies, and managed care
organizations. The manner and level of reimbursement in any given
case may depend on the site of care, the procedure(s) performed,
the final patient diagnosis, the device(s) utilized, available
budget, or a combination of these factors, and coverage and
payment levels are determined at each payors discretion. The
coverage policies and reimbursement levels of these third-party
payors may impact the decisions of healthcare providers and
facilities regarding which medical products they purchase and the
prices they are willing to pay for those products. Microbot
cannot assure you that its sales will not be impeded and its
business harmed if third-party payors fail to provide
reimbursement for Microbot products that healthcare providers
view as
adequate.

In the United States, Microbot
expects that its product candidates, once approved, will be
purchased primarily by medical institutions, which then bill
various third-party payors, such as the Centers for Medicare
Medicaid Services, or CMS, which administers the Medicare program
through Medicare Administrative Contractors, and other government
health care programs and private insurance plans, for the
healthcare products and services provided to their patients. The
process involved in applying for coverage and incremental
reimbursement from CMS is lengthy and expensive. Moreover, many
private payors look to CMS in setting their reimbursement
policies and amounts. If CMS or other agencies limit coverage for
procedures utilizing Microbots products or decrease or limit
reimbursement payments for doctors and hospitals utilizing
Microbots products, this may affect coverage and reimbursement
determinations by many private
payors.

If a procedure involving a
medical device is not reimbursed separately by a government or
private insurer, then a medical institution would have to absorb
the
cost


30

of Microbots products as part
of the cost of the procedure in which the products are used. At
this time, Microbot does not know the extent to which medical
institutions would consider insurers payment levels adequate to
cover the cost of its products. Failure by hospitals and surgeons
to receive an amount that they consider to be adequate
reimbursement for procedures in which Microbot products are used
could deter them from purchasing Microbot products and limit
sales growth for those
products.

Microbot has no control over
payor decision-making with respect to coverage and payment levels
for its medical device product candidates, once they are
approved. Additionally, Microbot expects many payors to continue
to explore cost-containment strategies (e.g., comparative and
cost-effectiveness analyses, so-called pay-for-performance
programs implemented by various public government health care
programs and private third-party payors, and expansion of payment
bundling initiatives, and other such methods that shift medical
cost risk to providers) that may potentially impact coverage
and/or payment levels for Microbots current product candidates or
products Microbot develops in the
future.

As Microbots 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
Microbots product candidates the standard of
care.

Microbots business plan relies
on the broad adoption by surgeons of the SCS for primary shunt
placement procedures to prevent shunt occlusions. Although
Microbot believes the occurrence of shunt occlusion complications
is well known among physicians practicing in the relevant medical
fields, SCS may be adopted for replacement shunt surgeries only.
Neurosurgeons may adopt SCS for primary shunt placement
procedures only upon additional clinical studies with longer
follow up periods, if at all. It may also be necessary to provide
outcome studies on the preventative capabilities of the SCS in
order to convince the medical community of its safety and
efficacy. Clinical studies may not show an advantage in SCS based
procedures in a timely manner, or at all, and outcome studies
have not been designed at this time, and may be too large and too
costly for Microbot to conduct. Both situations could prevent
broad adoption of the SCS and materially impact Microbots
business.

Microbot products
may in the future be subject to mandatory product recalls that
could harm its reputation, business and financial
results.

The FDA and similar foreign
governmental authorities have the authority to require the recall
of commercialized products in the event of material deficiencies
or defects in design or manufacture that could pose a risk of
injury to patients. In the case of the FDA, the authority to
require a recall must be based on an FDA finding that there is a
reasonable probability that the device would cause serious injury
or death, although in most cases this mandatory recall authority
is not used because manufacturers typically initiate a voluntary
recall when a device violation is discovered. In addition,
foreign governmental bodies have the authority to require the
recall of Microbot products in the event of material deficiencies
or defects in design or manufacture. Manufacturers may, under
their own initiative, recall a product if any material deficiency
in a device is found. A government-mandated or voluntary recall
by Microbot or one of its distributors could occur as a result of
component failures, manufacturing errors, design or labeling
defects or other deficiencies and issues. Recalls of any Microbot
products would divert managerial and financial resources and have
an adverse effect on Microbots financial condition and results of
operations, and any future recall announcements could harm
Microbots reputation with customers and negatively affect its
sales. In addition, the FDA could take enforcement action,
including any of the following sanctions for failing to timely
report a recall to the
FDA:

untitled letters, warning letters, fines, injunctions,
consent decrees and civil penalties;


31

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 Microbots
future commercialized products cause or contribute to a death or
a serious injury, Microbot will be subject to Medical Device
Reporting regulations, which can result in voluntary corrective
actions or agency enforcement
actions.

Under FDA regulations,
Microbot will be required to report to the FDA any incident in
which a marketed medical device product may have caused or
contributed to a death or serious injury or in which a medical
device malfunctioned and, if the malfunction were to recur, would
likely cause or contribute to death or serious injury. In
addition, all manufacturers placing medical devices in European
Union markets are legally bound to report any serious or
potentially serious incidents involving devices they produce or
sell to the relevant authority in whose jurisdiction the incident
occurred.

Microbot anticipates that in
the future it is likely that we may experience events that would
require reporting to the FDA to the Medical Device Reporting
(MDR) regulations. Any adverse event involving a Microbot product
could result in future voluntary corrective actions, such as
product actions or customer notifications, or agency actions,
such as inspection, mandatory recall or other enforcement action.
Any corrective action, whether voluntary or involuntary, as well
as defending Microbot in a lawsuit, will require the dedication
of our time and capital, distract management from operating our
business, and may harm our reputation and financial
results.

Microbot could be
exposed to significant liability claims if Microbot is unable to
obtain insurance at acceptable costs and adequate levels or
otherwise protect itself against potential product liability
claims.

The testing, manufacture,
marketing and sale of medical devices entail the inherent risk of
liability claims or product recalls. Product liability insurance
is expensive and may not be available on acceptable terms, if at
all. A successful product liability claim or product recall could
inhibit or prevent the successful commercialization of Microbots
products, cause a significant financial burden on Microbot, or
both, which in any case could have a material adverse effect on
Microbots business and financial
condition.

The results of
Microbots research and development efforts are uncertain and
there can be no assurance of the commercial success of Microbots
product
candidates.

Microbot believe that its
success will depend in part on its ability to expand its product
offerings and continue to improve its existing product candidates
in response to changing technologies, customer demands and
competitive pressures. As such, Microbot expects to continue
dedicating
significant


32

resources in research and
development. The product candidates and services being developed
by Microbot may not be technologically successful. In addition,
the length of Microbots product candidates and service
development cycle may be greater than Microbot originally
expected.

If Microbot fail
to retain certain of its key personnel and attract and retain
additional qualified personnel, Microbot might not be able to
pursue its growth strategy
effectively.

Microbot is dependent on its
senior management, in particular Harel Gadot, Microbots Chairman,
President and Chief Executive Officer. Although Microbot believes
that its relationship with members of its senior management is
positive, there can be no assurance that the services of any of
these individuals will continue to be available to Microbot in
the future. Microbots future success will depend in part on its
ability to retain its management and scientific teams, to
identify, hire and retain additional qualified personnel with
expertise in research and development and sales and marketing,
and to effectively provide for the succession of senior
management, when necessary. Competition for qualified personnel
in the medical device industry is intense and finding and
retaining qualified personnel with experience in the industry is
very difficult. Microbot believes that there are only a limited
number of individuals with the requisite skills to serve in key
positions at Microbot, particularly in Israel, and it competes
for key personnel with other medical equipment and technology
companies, as well as research
institutions.

Microbot does not carry, and
does not intend to carry, any key man life insurance policies on
any of its existing executive
officers.

Risks Relating to
International
Business

If Microbot fails
to obtain regulatory clearances in other countries for its
product candidates under development, Microbot will not be able
to commercialize these product candidates in those
countries.

In order for Microbot to
market its product candidates in countries other than the United
States, Microbot must comply with the safety and quality
regulations in such
countries.

In Europe, these regulations,
including the requirements for approvals, clearance or grant of
Conformit Europenne, or CE, Certificates of Conformity and the
time required for regulatory review, vary from country to
country. Failure to obtain regulatory approval, clearance or CE
Certificates of Conformity (or equivalent) in any foreign country
in which Microbot plans to market its product candidates may harm
its ability to generate revenue and harm its business. Approval
and CE marking procedures vary among countries and can involve
additional product testing and additional administrative review
periods. The time required to obtain approval or CE Certificate
of Conformity in other countries might differ from that required
to obtain FDA clearance. The regulatory approval or CE marking
process in other countries may include all of the risks detailed
above regarding FDA clearance in the United States. Regulatory
approval or the CE marking of a product candidate in one country
does not ensure regulatory approval in another, but a failure or
delay in obtaining regulatory approval or a CE Certificate of
Conformity in one country may negatively impact the regulatory
process in others. Failure to obtain regulatory approval or a CE
Certificate of Conformity in other countries or any delay or
setback in obtaining such approval could have the same adverse
effects described above regarding FDA clearance in the United
States.

Microbot cannot be certain
that it will be successful in complying with the requirements of
the CE Certificate of Conformity and receiving a CE Mark for its
product candidates or in continuing to meet the requirements of
the Medical Devices Directive in the European Economic Area
(EEA).


33

Israels Medical Devices Law
generally requires the registration of all medical products with
the Ministry of Health, or MOH, Registrar through the submission
of an application to the Ministry of Health Medical Institutions
and Devices Licensing Department, or AMAR. If the application
includes a certificate issued by a competent authority of a
recognized country, which includes Australia, Canada, the
European Community Member States, Japan or the United States, the
registration process is expedited, but is generally still
expected to take 6 to 9 months for approval. If certification
from a recognized country is not available, the registration
process takes significantly longer and a license is rarely issued
under such circumstances, as the MOH may require the presentation
of significant additional clinical data. Once granted, a license
(marketing authorization) for a medical device is valid for five
years from the date of registration of the device, except for
implants with a life-supporting function, for which the validity
is for only two years from the date of registration. Furthermore,
the holder of the license must meet several additional
requirements to maintain the license. Microbot cannot be certain
that it will be successful in applying for a license from the MOH
for its product
candidates.

Microbot
operations in international markets involve inherent risks that
Microbot may not be able to
control.

Microbots business plan
includes the marketing and sale of its proposed product
candidates internationally, and specifically in Europe and
Israel. Accordingly, Microbots results could be materially and
adversely affected by a variety of factors relating to
international business operations that it may or may not be able
to control,
including:

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 Microbots ability to import or export its
product candidates from or to various countries;

adverse tax consequences;

unexpected changes in legal and regulatory requirements;

military conflict, terrorist activities, natural disasters
and medical epidemics; and

Microbots ability to recruit and retain channel partners in
foreign jurisdictions.


34

Microbots
financial results may be affected by fluctuations in exchange
rates and Microbots current currency hedging strategy may not be
sufficient to counter such
fluctuations.

Microbots financial statements
are denominated in U.S. dollars and the financial results of the
Company are expected to be denominated in U.S. dollars, while a
significant portion of Microbots 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 Microbots future revenues or
expenses as presented in the financial statements. Microbot may
in the future use financial instruments, such as forward foreign
currency contracts, in its management of foreign currency
exposure. These contracts would primarily require Microbot to
purchase and sell certain foreign currencies with or for U.S.
dollars at contracted rates. Microbot may be exposed to a credit
loss in the event of non-performance by the counterparties of
these contracts. In addition, these financial instruments may not
adequately manage Microbots foreign currency exposure. Microbots
results of operations could be adversely affected if Microbot is
unable to successfully manage currency fluctuations in the
future.

Risks Relating to
Microbots Intellectual
Property

Microbots right to
develop and commercialize its existing product candidates are
subject to the terms and condition of a license granted to
Microbot by Technion Research and Development Foundation Ltd and
termination of the license with respect to one or both of the
technology platforms underlying the product candidates would
result in Microbot ceasing its development efforts for the
applicable product
candidate(s).

Microbot entered into a
license agreement with Technion Research and Development
Foundation Ltd., or TRDF, in 2012 to which Microbot obtained an
exclusive, worldwide, royalty-bearing, sub-licensable license to
certain patents and inventions relating to the SCS and TipCAT
technology platforms. to the terms of the license agreement, in
order to maintain the license with respect to each platform,
Microbot must use commercially reasonable efforts to develop
products covered by the license, including meeting certain agreed
upon development milestones. TRDF has the option to terminate a
license granted with respect a particular technology in the event
Microbot fails to meet a development milestone associated with
such technology. Therefore, the failure to meet development
milestones may lead to a complete termination of the applicable
license agreement and result in Microbot ceasing its development
efforts for the applicable product candidate. The milestones for
SCS include commencing initial studies in humans by December 2018
and commencing a clinical trial, if necessary, by December 2019.
The milestones for TipCAT include commencing initial studies in
humans 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 to extend the milestone
dates.

Under the license agreement,
Microbot is also subject to various other obligations, including
obligations with respect to payment upon the achievement of
certain milestones and royalties on product sales. TRDF may
terminate the license agreement under certain circumstances,
including material breaches by Microbot or under certain
bankruptcy or insolvency events. In the case of termination of
the license by Microbot without cause or by TRDF for cause, TRDF
has the right to receive a non-exclusive license from Microbot
with respect to improvements to the licensed technologies made by
Microbot.

If TRDF were to terminate the
license agreement or if Microbot was to otherwise lose the
ability to exploit the licensed patents, Microbots competitive
advantage could be reduced or terminated, and Microbot will
likely not be able to find a source to replace the licensed
technology.


35

However, if there is any
future dispute between Microbot and TRDF regarding the respective
parties rights under the license agreement, Microbots ability to
develop and commercialize the SCS and TipCAT may be materially
harmed.

Microbot may not
meet its product candidates development and commercialization
objectives in a timely manner or at
all.

Microbot has established
internal goals, based upon expectations with respect to its
technologies, which Microbot has used to assess its progress
toward developing its product candidates. These goals relate to
technology and design improvements as well as to dates for
achieving specific development results. If the product candidates
exhibit technical defects or are unable to meet cost or
performance goals, Microbots commercialization schedule could be
delayed and potential purchasers of its initial commercialized
products may decline to purchase such products or may opt to
pursue alternative products, which would materially harm its
business.

Intellectual
property litigation and infringement claims could cause Microbot
to incur significant expenses or prevent Microbot from selling
certain of its product
candidates.

The medical device industry is
characterized by extensive intellectual property litigation. From
time to time, Microbot might be the subject of claims by third
parties of potential infringement or misappropriation. Regardless
of outcome, such claims are expensive to defend and divert the
time and effort of Microbots management and operating personnel
from other business issues. A successful claim or claims of
patent or other intellectual property infringement against
Microbot could result in its payment of significant monetary
damages and/or royalty payments or negatively impact its ability
to sell current or future products in the affected category and
could have a material adverse effect on its business, cash flows,
financial condition or results of
operations.

If Microbot or
TRDF are unable to protect the patents or other proprietary
rights relating to Microbots product candidates, or if Microbot
infringes on the patents or other proprietary rights of others,
Microbots competitiveness and business prospects may be
materially
damaged.

Microbots success depends on
its ability to protect its intellectual property (including its
licensed intellectual property) and its proprietary technologies.
Microbots 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 hold,
through licenses or otherwise, an intellectual property portfolio
that includes U.S. and international patents and pending patents,
and other patents under development. Microbot intend to continue
to seek legal protection, primarily through patents, including
the TRDF licensed patents, for its proprietary technology.
Seeking patent protection is a lengthy and costly process, and
there can be no assurance that patents will be issued from any
pending applications, or that any claims allowed from existing or
pending patents will be sufficiently broad or strong to protect
its proprietary technology. There is also no guarantee that any
patents Microbot holds, through licenses or otherwise, will not
be challenged, invalidated or circumvented, or that the patent
rights granted will provide competitive advantages to Microbot.
Microbots competitors have developed and may continue to develop
and obtain patents for technologies that are similar or superior
to Microbots technologies. In addition, the laws of foreign
jurisdictions in which Microbot develops, manufactures or sells
its product candidates may not protect Microbots intellectual
property rights to the same extent as do the laws of the United
States.


36

Adverse outcomes in current or
future legal disputes regarding patent and other intellectual
property rights could result in the loss of Microbots
intellectual property rights, subject Microbot to significant
liabilities to third parties, require Microbot to seek licenses
from third parties on terms that may not be reasonable or
favorable to Microbot, prevent Microbot from manufacturing,
importing or selling its product candidates, or compel Microbot
to redesign its product candidates to avoid infringing third
parties intellectual property. As a result, Microbot may be
required to incur substantial costs to prosecute, enforce or
defend its intellectual property rights if they are challenged.
Any of these circumstances could have a material adverse effect
on Microbots business, financial condition and resources or
results of
operations.

Microbot has the first right,
but not the obligation, to control the prosecution, maintenance
or enforcement of the licensed patents from TRDF. However, there
may be situations in which Microbot will not have control over
the prosecution, maintenance or enforcement of the patents that
Microbot licenses, or may not have sufficient ability to consult
and input into the patent prosecution and maintenance process
with respect to such patents. If Microbot does not control the
patent prosecution and maintenance process with respect to the
TRDF licensed patents, TRDF may elect to do so but may fail to
take the steps that are necessary or desirable in order to
obtain, maintain and enforce the licensed
patents.

Microbots ability to develop
intellectual property depends in large part on hiring, retaining
and motivating highly qualified design and engineering staff and
consultants with the knowledge and technical competence to
advance its technology and productivity goals. To protect
Microbots trade secrets and proprietary information, Microbot has
entered into confidentiality agreements with its employees, as
well as with consultants and other parties. If these agreements
prove inadequate or are breached, Microbots remedies may not be
sufficient to cover its
losses.

Dependence on
patent and other proprietary rights and failing to protect such
rights or to be successful in litigation related to such rights
may result in Microbots payment of significant monetary damages
or impact offerings in its product
portfolios.

Microbots long-term success
largely depends on its ability to market technologically
competitive product candidates. If Microbot fails to obtain or
maintain adequate intellectual property protection, it may not be
able to prevent third parties from using its proprietary
technologies or may lose access to technologies critical to our
product candidates. Also, Microbot currently pending or future
patent applications may not result in issued patents, and issued
patents are subject to claims concerning priority, scope and
other
issues.

Furthermore, Microbot has not
filed applications for all of our patents internationally and it
may not be able to prevent third parties from using its
proprietary technologies or may lose access to technologies
critical to its product candidates in other
countries.

Risks Relating to
Operations in
Israel

Microbot has
facilities located in Israel, and therefore, political conditions
in Israel may affect Microbots operations and
results.

Microbot has facilities
located in Israel In addition, half of its directors are
residents of Israel. Accordingly, political, economic and
military conditions in Israel will directly or indirectly affect
Microbots operations and results. Since the establishment of the
State of Israel, a number of armed conflicts have taken place
between Israel and its Arab neighbors. An ongoing state of
hostility, varying in degree and intensity has led to security
and economic problems for Israel. For a number of years there
have been continuing hostilities between Israel and the
Palestinians. This includes hostilities with the Islamic movement
Hamas in the Gaza Strip, which have adversely affected the peace
process and at
times


37

resulted in armed conflicts.
Such hostilities have negatively influenced Israels economy as
well as impaired Israels relationships with several other
countries. Israel also faces threats from Hezbollah militants in
Lebanon, from ISIS and rebel forces in Syria, from the government
of Iran and other potential threats from additional countries in
the region. Moreover, some of Israels neighboring countries have
recently undergone or are undergoing significant political
changes. These political, economic and military conditions in
Israel could have a material adverse effect on Microbots
business, financial condition, results of operations and future
growth.

Political
relations could limit Microbots ability to sell or buy
internationally.

Microbot could be adversely
affected by the interruption or reduction of trade between Israel
and its trading partners. Some countries, companies and
organizations continue to participate in a boycott of Israeli
firms and others doing business with Israel, with Israeli
companies or with Israeli-owned companies operating in other
countries. Foreign government defense export policies towards
Israel could also make it more difficult for us to obtain the
export authorizations necessary for Microbots activities. Also,
over the past several years there have been calls in Europe and
elsewhere to reduce trade with Israel. There can be no assurance
that restrictive laws, policies or practices directed towards
Israel or Israeli businesses will not have an adverse impact on
Microbots
business.

Israels economy
may become
unstable.

From time to time, Israels
economy may experience inflation or deflation, low foreign
exchange reserves, fluctuations in world commodity prices,
military conflicts and civil unrest. For these and other reasons,
the government of Israel has intervened in the economy employing
fiscal and monetary policies, import duties, foreign currency
restrictions, controls of wages, prices and foreign currency
exchange rates and regulations regarding the lending limits of
Israeli banks to companies considered to be in an affiliated
group. The Israeli government has periodically changed its
policies in these areas. Reoccurrence of previous destabilizing
factors could make it more difficult for Microbot to operate its
business and could adversely affect its
business.

Exchange rate
fluctuations between the U.S. dollar and the NIS currencies may
negatively affect Microbots operating
costs.

A significant portion of
Microbots expenses is paid in New Israeli Shekels, or NIS, but
its financial statements are denominated in U.S. dollars. As a
result, Microbot is exposed to the risks that the NIS may
appreciate relative to the U.S. dollar, or the NIS instead
devalues relative to the U.S. dollar, and the inflation rate in
Israel may exceed such rate of devaluation of the NIS, or that
the timing of such devaluation may lag behind inflation in
Israel. In any such event, the U.S. dollar cost of Microbots
operations in Israel would increase and Microbots 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.

Microbots primary expenses
paid in NIS that are not linked to the U.S. dollar are employee
expenses in Israel and lease payments on its Israeli facility. If
Microbot is unsuccessful in hedging against its position in NIS,
a change in the value of the NIS compared to the U.S. dollar
could increase Microbots research and development expenses, labor
costs and general and administrative expenses, and as a result,
have a negative impact on Microbots
profits.


38

Funding and other
benefits provided by Israeli government programs may be
terminated or reduced in the future and the terms of such funding
may have a significant impact on future corporate
decisions.

Microbot participates in
programs under the auspices of the Israeli Office of the Chief
Scientist, or OCS, for which it receives funding for the
development of its technologies and product candidates. If
Microbot fails to comply with the conditions applicable to this
program, it may be required to pay additional penalties or make
refunds and may be denied future benefits. From time to time, the
government of Israel has discussed reducing or eliminating the
benefits available under this program, and therefore these
benefits may not be available in the future at their current
levels or at
all.

Microbots research and
development efforts from inception until now have been financed
in part through such OCS royalty bearing grants in an aggregate
amount of US$893,673 through September30, 2016. With respect to
such grants Microbot is committed to pay royalties at a rate of
between 3% to 3.5% on sales proceeds up to the total amount of
grants received, linked to the dollar, plus interest at an annual
rate of USD LIBOR. In addition, as a recipient of OCS grants,
Microbot must comply with the requirements of the Israeli
Encouragement of Industrial Research and Development Law, 1984,
or the RD Law, and related regulations. Under the terms of the
grants and the RD Law, Microbot is restricted from transferring
any technologies, know-how, manufacturing or manufacturing rights
developed using OCS grants outside of Israel without the prior
approval of OCS. Therefore, if aspects of its technologies are
deemed to have been developed with OCS funding, the discretionary
approval of an OCS committee would be required for any transfer
to third parties outside of Israel of the technologies, know-how,
manufacturing or manufacturing rights related to such aspects.
Furthermore, the OCS may impose certain conditions on any
arrangement under which it permits Microbot to transfer
technology or development outside of Israel or may not grant such
approvals at
all.

If approved, the transfer of
OCS-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
OCS funding received by Microbot, the number of years since the
funding and other factors. These restrictions and requirements
for payment may impair Microbots ability to sell its technology
assets outside of Israel or to outsource or transfer development
or manufacturing activities with respect to any product or
technology outside of Israel. Furthermore, the amount of
consideration available to Microbots shareholders in a
transaction involving the transfer of technology or know-how developed with OCS
funding outside of Israel (such as through a merger or other
similar transaction) may be reduced by any amounts that Microbot
is required to pay to the
OCS.

Some of Microbots
employees and officers are obligated to perform military reserve
duty in
Israel.

Generally, Israeli adult male
citizens and permanent residents are obligated to perform annual
military reserve duty up to a specified age. They also may be
called to active duty at any time under emergency circumstances,
which could have a disruptive impact on Microbots
workforce.

It may be
difficult to enforce a non-Israeli judgment against Microbot or
its officers and
directors.

The operating subsidiary of
the Company is incorporated in Israel. Some of Microbots
executive officers and directors are not residents of the United
States, and a substantial portion of Microbots assets and the
assets of its executive officers and directors are located
outside the United States. Therefore, a judgment obtained against
Microbot, or any of these persons, including a judgment based on
the civil liability provisions of the U.S. federal securities
laws, may not be collectible in the United States and may not
necessarily be enforced by an Israeli court. It also may be
difficult to affect service of process on these persons in the
United States or to assert U.S. securities law claims in original
actions instituted in Israel. Additionally, it may be difficult
for an investor, or any other person or entity, to initiate an
action with respect to U.S. securities laws in Israel. Israeli
courts may refuse to hear a claim based on an
alleged


39

violation of U.S. securities
laws reasoning that Israel is not the most appropriate forum in
which to bring such a claim. In addition, even if an Israeli
court agrees to hear a claim, it may determine that Israeli law
and not U.S. law is applicable to the claim. If U.S. law is found
to be applicable, the content of applicable U.S. law often
involves the testimony of expert witnesses, which can be a time
consuming and costly process. Certain matters of procedure will
also be governed by Israeli law. There is little binding case law
in Israel that addresses the matters described above. As a result
of the difficulty associated with enforcing a judgment against
Microbot in Israel, it may be impossible to collect any damages
awarded by either a U.S. or foreign
court.

Risks Relating to
Microbots Securities and Governance
Matters

Our executive
officers and directors, through their ownership of common stock,
can substantially influence the outcome of matters requiring
shareholder approval and may prevent you and other stockholders
from influencing significant corporate decisions, which could
result in conflicts of interest that could cause the Companys
stock price to
decline.

Our executive officers and
directors collectively beneficially own shares of Common Stock
equal to approximately 41% of our outstanding shares of Common
Stock. As a result, such individuals will have the ability,
acting together, to substantially influence the election of our
directors and the outcome of corporate 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, deferring or preventing an action
that might otherwise be beneficial to our other shareholders and
be disadvantageous to our shareholders with interests different
from those individuals. These individuals also have significant
control over our business, policies and affairs as officers
and/or directors of our Company. These stockholders may exert
influence in delaying or preventing a change in control of the
Company, even if such change in control would benefit the other
stockholders of the Company. Lastly, the significant
concentration of stock ownership may adversely affect the market
value of the Companys common stock 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 control
over the
Company.

We do not expect
to pay cash dividends on our common
stock.

We anticipate that we will
retain our earnings, if any, for future growth and therefore do
not anticipate paying cash dividends on our Common Stock in the
future. Investors seeking cash dividends should not invest in our
Common Stock for that
purpose.

Anti-takeover
provisions in the Companys charter and bylaws under Delaware law
may prevent or frustrate attempts by stockholders to change the
board of directors or current management and could make a
third-party acquisition of the Company
difficult.

Provisions in the Companys
certificate of incorporation and bylaws may delay or prevent an
acquisition or a change in management. These provisions include a
classified board of directors. In addition, because the Company
is incorporated in Delaware, it is governed by the provisions of
Section203 of the DGCL, which prohibits stockholders owning in
excess of 15% of the outstanding Company voting stock from
merging or combining with the Company. Although the Company
believes these provisions collectively will provide for an
opportunity to receive higher bids by requiring potential
acquirors to negotiate with the Companys board of directors, they
would apply even if the offer may be considered beneficial by
some stockholders. In addition, these provisions may frustrate or
prevent any attempts by the Companys stockholders to replace or
remove then current management by making it more difficult for
stockholders to replace members of the board of directors, which
is responsible for appointing members of
management.


40

The market price
for our Common Stock may be
volatile.

The market price for our
Common Stock may be volatile and subject to wide fluctuations in
response to factors including the
following:

actual or anticipated fluctuations in our quarterly or annual
operating results;

changes in financial or operational estimates or projections;

conditions in markets generally;

changes in the economic performance or market valuations of
companies similar to ours;

announcements by us or our competitors of new products,
acquisitions, strategic partnerships, joint ventures or
capital commitments;

our intellectual property position; and

general economic or political conditions in the United
States, Israel or elsewhere.

In addition, the securities
market has from time to time experienced significant price and
volume fluctuations that are not related to the operating
performance of particular companies. These market fluctuations
may also materially and adversely affect the market price of
shares of our Common
Stock.

The issuance of
shares upon exercise of outstanding warrants could cause
immediate and substantial dilution to existing
stockholders.

The issuance of shares upon
exercise of warrants could result in substantial dilution to the
interests of other stockholders since the holders of such
warrants may ultimately convert and sell the full amount issuable
on
conversion.

Risks Relating to the
Merger

The total number
of shares issued by us as consideration to the former
securityholders of Microbot Israel, and the resulting dilution
that our current stockholders experienced because of it, was
significant.

The former stockholders of
Microbot Israel received as consideration for the Merger, in the
aggregate, 26,644,979 shares of our common stock. The shares now
held by the former stockholders of Microbot Israel represent a
majority of the company, resulting in significant dilution to our
pre-Merger stockholders. As of the closing of the Merger, the
former stockholders of Microbot represent 75% of our total
outstanding shares of Common Stock on a fully-diluted, as
converted
basis.


41

Because our
determination to purchase Microbot Israel was based in part on
certain financial and other projections about future results, and
projections are subject to inherent risks and uncertainties, the
Merger consideration may be greater than the fair market value of
Microbot
Israel.

Microbot Israel provided
financial and other projections to us in connection with the
determination to purchase Microbot Israel and the consideration
to be paid for Microbot Israel, and we relied in part on Microbot
Israels projections for purposes of valuing Microbot Israel and
agreeing on the purchase price. The valuation was not necessarily
indicative of the actual value of Microbot Israel. Accordingly,
if actual financial results in the future are lower than the
projections we relied upon, the consideration may be greater than
the fair market value of Microbot Israel, as
acquired.

We can give no assurance that
the financial and other projections we relied upon are accurate
and will be met in the future because the projections reflect
numerous estimates and assumptions with respect to industry
performance, general business, economic, regulatory, market and
financial conditions and other matters, all of which are
difficult to predict and many of which are beyond Microbot
Israels and our control. As a result, actual results may differ
materially from these projections. It is expected that there will
be differences between actual and projected results because the
projections covered multiple years and such information by its
nature becomes less reliable with each successive
year.

If the benefits of
the acquisition of Microbot Israel do not meet the expectations
of the marketplace, or financial or industry analysts, the market
price of our common stock may
decline.

The market price of our common
stock may decline as a result of the Merger if the Microbot
Israel subsidiary does not perform as expected or we do not
otherwise achieve the perceived benefits of the Merger as rapidly
as, or to the extent anticipated by the marketplace or financial
or industry analysts. Accordingly, investors may experience a
loss as a result of a decreasing stock price and we may not be
able to raise future capital, if necessary, in the equity
markets.

Any weakness in
internal control over financial reporting or disclosure controls
and procedures could result in a loss of investor confidence in
our financial reports and lead to a stock price
decline.

We are required to evaluate
our internal control over financial reporting under Section404 of
the Sarbanes-Oxley Act of 2002 and report the results in our
annual report on Form 10-K. We are also required to maintain
effective disclosure controls and procedures. After the
acquisition of Microbot Israel, our internal controls and our
disclosure controls and procedures will need to expand to
encompass activities related to those assets. If material
weakness arise as a result and they are not remedied, we will be
unable to assert that our internal controls are effective. Any
failure to have effective internal control over financial
reporting or disclosure controls and procedures covering the
combined business post-Merger could cause investors to lose
confidence in the accuracy and completeness of our financial
reports, limit our ability to raise financing or lead to
regulatory sanctions, any of which could result in a material
adverse effect on our business or decline in the market price of
our common
stock.


42

IN ADDITION TO THE
ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN
OR FULLY APPRECIATED BY MANAGEMENT. IN REVIEWING THIS CURRENT
REPORT ON FORM 8-K, POTENTIAL INVESTORS SHOULD KEEP IN MIND THAT
THERE MAY BE OTHER POSSIBLE RISKS THAT COULD BE
IMPORTANT.


MANAGEMENTS DISCUSSION
AND ANALYSIS
OF


FINANCIAL CONDITION
AND RESULTS OF
OPERATIONS

The following Managements
Discussion and Analysis of Financial Condition and Results of
Operations (
MDA) covers information pertaining to the
Company up to September 30, 2016 and should be read in
conjunction with the audited financial statements and related
notes of the Company as of and for the year ended December 31,
2015 and 2014, as well as the unaudited financial statements and
related notes of the Company for the three and nine month periods
ended September 30, 2016. Except as otherwise noted, the
financial information contained in this MDA and in the financial
statements has been prepared in accordance with accounting
principles generally accepted in the United States of America.
All amounts are expressed in U.S. dollars unless otherwise
noted.

Forward Looking
Statements

Certain information contained
in this MDA includes forward-looking statements. Statements which
are not historical reflect our current expectations and
projections about our future results, performance, liquidity,
financial condition and results of operations, prospects and
opportunities and are based upon information currently available
to us and our management and their interpretation of what is
believed to be significant factors affecting our existing and
proposed business, including many assumptions regarding future
events. Actual results, performance, liquidity, financial
condition and results of operations, prospects and opportunities
could differ materially and perhaps substantially from those
expressed in, or implied by, these forward-looking statements as
a result of various risks, uncertainties and other factors,
including those risks described in detail in the section of this
Current Report on Form 8-K entitled Risk Factors as well as
elsewhere in this Current
Report.

Forward-looking statements,
which involve assumptions and describe our future plans,
strategies, and expectations, are generally identifiable by use
of the words may, should, would, will, could, scheduled, expect,
anticipate, estimate, believe, intend, seek, or project or the
negative of these words or other variations on these words or
comparable
terminology.

In light of these risks and
uncertainties, and especially given the nature of our existing
and proposed business, there can be no assurance that the
forward-looking statements contained in this section and
elsewhere in this Current Report on Form 8-K will in fact occur.
Potential investors should not place undue reliance on any
forward-looking statements. Except as expressly required by the
federal securities laws, there is no undertaking to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events, changed circumstances
or any other
reason.

Overview

Microbot is a pre-clinical medical device
company specializing in the research, design and development of
next generation micro-robotics assisted medical technologies
targeting the minimally invasive surgery space. Microbot is
primarily focused on leveraging its micro-robotic technologies
with the goal of improving surgical outcomes for
patients.


43

Microbot is currently
developing its first two product candidates: the Self Cleaning
Shunt, or SCS, for the treatment of hydrocephalus and Normal
Pressure Hydrocephalus, or NPH; and TipCAT, a self-propelling,
semi-disposable endoscope that is being developed initially for
use in colonoscopy procedures. Microbots product candidates are
being designed to bring greater functionality to conventional
medical devices and to reduce the known risks associated with
such devices. Microbot is currently aiming to complete
pre-clinical or clinical data collection for both product
candidates within the next 24 months and is targeting approval or
clearance for SCS by late
2018.

Microbot has no products
approved for commercial sale and has not generated any revenues
from product sales since its inception in 2010. From inception to
September30, 2016, Microbot has raised net cash proceeds of
approximately $5,377,631 to fund operations, primarily from
government grants, loans, and private 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 nine months ended
September30, 2016 and 2015 were approximately $1,963,340 and
$521,664, respectively, and net losses for the year ended
December31, 2015 were approximately $920,840. Substantially all
of Microbots operating losses resulted from expenses incurred in
connection with its research and development programs and from
general and administrative costs associated with its operations.
As of September30, 2016, Microbot had a net working capital of
approximately $201,763, consisting primarily of cash and cash
equivalents. Microbot expects to continue to incur significant
expenses and increasing operating losses for at least the next
several years as it continues the clinical development of, and
seeks regulatory approval for its product candidates.
Accordingly, Microbot will continue to require substantial
additional capital to continue its clinical development and
potential commercialization activities. The amount and timing of
Microbots future funding requirements will depend on many
factors, including the timing and results of its clinical
development
efforts.

Estimated completion dates and
costs for Microbots clinical development and research programs
can vary significantly for each current and future product
candidate and are difficult to predict. As a result, Microbot
cannot estimate with any degree of certainty the costs it will
incur in connection with development of its product candidates at
this point in time. Microbot anticipates it will make
determinations as to which programs and product candidates to
pursue and how much funding to direct to each program and product
candidate on an ongoing basis in response to the scientific
success of early research programs, results of ongoing and future
clinical trials, its ability to enter into collaborative
agreements with respect to programs or potential product
candidates, as well as ongoing assessments as to each current or
future product candidates commercial
potential.

Recent
Developments

On November28, 2016, Merger
Sub, a wholly-owned subsidiary of the Company, completed its
merger with and into Microbot Israel, with Microbot Israel
surviving as a wholly-owned subsidiary of the Company. On
November28, 2016, in connection with the Merger, the Company
changed its name from StemCells, Inc. to Microbot Medical
Inc.

Following the closing of the
Merger, former StemCells stockholders owned approximately 5% of
the Company, with the remaining approximately 95% of the Company
ownership comprised approximately 75% of Microbot Israel
shareholders and approximately 20% by certain advisors (which
includes an existing Microbot Israel
shareholder).


44

In connection with the Merger,
Microbot Israel is deemed to be the accounting acquirer because
the shareholders of Microbot Israel effectively control the
Company following the Merger. The Merger was treated as a reverse
acquisition.

On November29, 2016, we sold
certain stem and progenitor lines that have been researched,
studied or manufactured by StemCells since 2007, and certain
other tangible and intangible assets, including intellectual
property and books and records related to the foregoing, in
exchange for $4 million. Of the consideration, $300,000 was paid
prior to November11, 2016, $400,000 is being held in escrow to
satisfy any indemnification claims of buyer, and $495,000 was
paid to certain StemCells employees, leaving an aggregate of
approximately $2.8 million released to the Company at
closing.

As of December27, 2017, the
Company issued 9,736 shares of a newly-designated Series A
Convertible Preferred Stock, in exchange for the cancellation of
an aggregate of 9,735,925 shares or rights to acquire shares of
Common Stock. Upon the exchange, all such shares of Common Stock
were
cancelled.

Financial Operations
Overview

Research and
Development
Expenses

Research and development
expenses consist primarily of salaries and related expenses and
overhead for Microbots research, development and engineering
personnel, prototype materials and research studies, obtaining
and maintaining Microbots patent portfolio. Microbot expenses its
research and development costs as
incurred.

General and
Administrative
Expenses

General and administrative
expenses consist primarily of the costs associated with
management costs , professional fees for accounting, auditing,
consulting and 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 its
patent portfolio and incurs additional costs associated with the
Merger, the preparation of becoming a public company and
maintaining compliance with exchange listing and SEC
requirements. Microbot expects these potential increases will
likely include management costs, legal fees, accounting fees,
directors and officers liability insurance premiums and expenses
associated with investor
relations.

Income
Taxes

Microbot has incurred net
losses and has not recorded any income tax benefits for the
losses. It is still in its development stage and has not yet
generated revenues, therefore, it is more likely than not that
sufficient taxable income will not be available for the tax
losses to be utilized in the
future.

Critical Accounting
Policies and Significant Judgments and
Estimates

Microbots managements
discussion and analysis of its financial condition and results of
operations are based on its financial statements, which have been
prepared in accordance with U.S. generally accepted accounting
principles, or GAAP. The preparation of these financial
statements requires Microbot to make estimates and judgments that
affect the reported amounts of assets, liabilities, and expenses
and the disclosure of contingent assets and liabilities at the
date of the financial statements. On an ongoing basis, Microbot
evaluates its estimates and judgments, including those related to
accrued research and development expenses. Microbot bases its
estimates on historical experience, known trends and events, and
various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ materially from these estimates under different
assumptions or
conditions.

While Microbots significant
accounting policies are described in more detail in the notes to
its financial statements, Microbot believes the following
accounting policies are the most critical for fully understanding
and evaluating its financial condition and results of
operations.


45

Foreign Currency
Translation

Microbots 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 Office of the Chief Scientist to cover eligible
company expenditures. These are presented as other income in the
statement of operations and comprehensive loss as the grant funds
are used for or applied towards a number of Microbots operating
expenses, such as salaries and benefits, research and development
and professional and consulting fees. The recoveries are
recognized 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 specific tasks
using data such as clinical site activations, manufacturing steps
completed, or information provided by vendors on their actual
costs incurred. Microbot determines the estimates by reviewing
contracts, vendor agreements and purchase orders, and through
discussions with internal clinical personnel and external 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 estimates are 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 or the level of
effort varies from the estimate, Microbot will adjust the
estimate accordingly. Nonrefundable advance payments for goods
and services, including fees for process development or
manufacturing and distribution of clinical supplies that will be
used in future research and development activities, are
capitalized 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 payment
flows. 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 and development
expense.

Results of
Operations

Comparison of Nine
Months Ended September30, 2016 and
2015

The following table sets forth
the key components of Microbots results of operations for the
nine months ended September30, 2016 and 2015 (in
thousands):


NineMonths Ended
September30,

Increase/ (Decrease)


Research and Development Expenses


General and Administrative Expenses

1,120 1,075


Financing Expenses

(1 )

Research and
Development Expenses. Microbots research and
development expenses were approximately $603,000 for the nine
months ended September30, 2016, compared to approximately
$478,000 for the same period in 2015. The increase in research
and development expenses
of


46

approximately $125,000 in 2016
was primarily due to decrease in cash received from the CSO
participation. Microbot expects its research and development
expenses to increase over time as Microbot advances its
development programs and begins pre-clinical and clinical trials
for SCS and
TipCAT.

General and
Administrative Expenses. General and
administrative expenses were approximately $1,120,000 for the
nine months ended September30, 2016, compared to approximately
$45,000 for the same period in 2015. The increase in general and
administrative expenses of approximately $1,075,000 in 2016 was
primarily due to Share based compensation as of $675,000 and
legal and professional services paid mainly due to the merger
activities. Microbot believes its general and administrative
expenses may increase 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 $241,000
for the nine months ended September30, 2016, compared to income
of approximately $1,000 for the same period in 2015. The increase
in financial expenses was primarily due to revaluation and
interest of Microbots convertible loans and currency exchange
differences.

Comparison of the
Years Ended December31, 2015 and
2014

The following table sets forth
the key components of Microbots results of operations for the
years ended December31, 2015, 2014 (in
thousands):


Changein Versus2014


Research and Development Expenses

(1.67 )%


General and Administrative Expenses

(63 )%


Financing Expenses

(95 )%

Research and
Development Expenses.Research and development
expenses, net for the fiscal year ended December31, 2015 was
$822,759, compared to $836,698 for the fiscal year ended
December31, 2014, a decrease of approximately $14,000 or 1.67%.
This decrease was primarily attributable to a decrease in
expenses relating to the submission of new and maintenance of
existing patents and professional services. A portion of
Microbots research and development expenses are paid for through
grants received from time to time from the Office of Chief
Scientist of the State of Israel. For the fiscal year ended
December31, 2015, Microbot received grants totaling $201,388,
compared to grants totaling $429,633 for the fiscal year ended
December31,
2014.

Research and development
expenses by major programs or categories were as follows (in
thousands):


Changein Versus2014


Wages and related expenses

(3.1 )%


Professional services

(32.0 )%


Patents

(68.1 )%


Other

(17.9 )%
$ 1,025 $ 1,267 (19.1 )%


Less grants received from Chief Scientist

(201 ) (429 ) (53.1 )%


Total


47

General and
Administrative Expenses. General and
administrative expenses for the fiscal year ended December31,
2015 was $92,018, compared to $251,000 for the fiscal year ended
December31, 2014, a decrease of approximately $158,982, or 63%.
This decrease was primarily attributable to a decrease in
share-based
compensation.

Financing
Expenses. Financing expenses, net for the fiscal year
ended December31, 2015 was approximately $6,000, compared to
approximately $119,000 for the fiscal year ended December31,
2014. Interest expense consists primarily of bank fees and
interest, and currency exchange differences. The decrease in
interest expense in 2015 over 2014 was due to primarily to
currency exchange differences, as well as to a lesser extent on
accumulated interest on outstanding convertible
loans.

Liquidity and Capital
Resources

Microbot has incurred losses
since inception and negative cash flows from operating activities
for the nine months ended September30, 2016 and 2015 and for the
years ended December31, 2015 and 2014. As of September30, 2016,
Microbot had a net working capital of approximately $201,763,
consisting primarily of cash and cash equivalents. Microbot
anticipates that it will continue to incur net losses for the
foreseeable future as it continues research and development
efforts of its product candidates, hires additional staff,
including clinical, scientific, operational, financial and
management personnel, and incurs additional costs associated with
being a public
company.

Microbot has funded its
operations through the issuance of capital stock, grants from the
Israeli Office of the Chief Scientist, and convertible debt. As
of September30, 2016, Microbot had raised total net cash of
$5,377,631, which was comprised of $3,121,958 upon the issuance
of capital shares, a $200,000 strategic investment loan from
Johnson Johnson (non-equity and non-dilutive), approximately
$1,162,000 upon the sale of convertible promissory notes in 2015
and 2016, and three grants from the Israeli Office of the Chief
Scientist totaling $893,673. As of September30, 2016, Microbot
had a shareholders deficit of $745,555 and has incurred a total
cumulative loss of $5,149,552 from inception (November 2010) to
September30, 2016 (which reflects a net cumulative loss of
$4,255,879, after a deduction of the Chief Scientist grants which
totaled
$893,673).

As a result of the sale of
certain of the assets of StemCells, on November29, 2016, Microbot
raised approximately $2.8million in cash, after taking into
account the payment of $495,000 to certain StemCells employees
but excluding $400,000 held in escrow to satisfy any
indemnification claims of the buyer of the assets. Additionally,
a stockholder of Microbot has committed to invest an amount so
that, with the funds from the asset sale, Microbot receives an
aggregate of $4million under certain circumstances, which
commitment has not been consummated as of the date of this
Form8-K. As a result of such cash and cash commitments, Microbot
believes that its net cash will be sufficient to fund the Company
for at least 18 months and fund operations necessary to continue
development activities of the SCS and
TipCAT.

Microbots independent
registered public accounting firm included an explanatory
paragraph in its report on Microbots financial statements as of
and for the year ended December31, 2015, describing the
continuation of Microbots activities and its ability to fulfill
its obligations as dependent upon its ability to receive
financing from its shareholders or new
investors.

Microbot plans to continue to
fund its research and development and other operating expenses,
other development activities relating to additional product
candidates, and the associated losses from operations, through
future issuances of debt and/or equity securities and possibly
additional grants from the Israeli Office of the Chief Scientist.
The capital raises from issuances of convertible debt and equity
securities could result in additional dilution to Microbots
shareholders. In addition, to the extent Microbot determines to
incur additional indebtedness, Microbots incurrence of additional
debt could result in debt service obligations and operating and
financing covenants that would restrict its operations. Microbot
can provide no assurance that financing will be available in the
amounts it needs or on terms acceptable to it, if at all. If
Microbot is not able to secure adequate additional working
capital when it becomes needed, Microbot may be required to make
reductions in spending, extend payment terms with suppliers,
liquidate assets where possible and/or suspend or curtail planned
research programs. Any of these actions could materially harm
Microbots
business.


48

Cash
Flows

The following table provides a
summary of the net cash flow activity for each of the periods set
forth below (in
thousands):


NineMonth Ended
September30,

YearEnded December31,


Net cash used in operating activities

$ (767 ) $ (493 ) $ (765 )


Net cash provided by financing activities


Net increase (decrease) in cash and cash equivalents

(495 ) (354 )

Comparison of the
Nine Months Ended September30, 2016 and
2015

Cash used in operating
activities for the nine months ended September30, 2016 was
approximately $767,000, calculated by adjusting net loss from
operations by approximately $1,196,000 to eliminate non-cash and
expense items not involving cash flows such as depreciation and
accumulated interest on convertible loans, as well as other
changes in assets and liabilities resulting in non-cash
adjustments in the income statement. Cash used in operating
activities for the nine months ended September30, 2015 was
approximately $493,000, similarly adjusted by approximately
$28,000. Net cash provided by financing activities of $904,000
for the nine months ended September30, 2016 consisted of proceeds
from the sale of convertible promissory notes to existing
shareholders of Microbot, compared to $nil in the nine months
ended September30,
2015.

Comparison of the
Years Ended December31, 2015 and
2014

Cash used in operating
activities for the year ended December31, 2015 was approximately
$764,000, calculated by adjusting net loss from operations by
approximately $156,000 to eliminate non-cash and expense items
not involving cash flows such as depreciation and accumulated
interest on convertible loans, as well as other changes in assets
and liabilities resulting in non-cash adjustments in the income
statement. Cash used in operating activities for the year ended
December31, 2014 was approximately $1,063,000, similarly adjusted
by approximately $144,000. Net cash provided by financing
activities of $412,494 for the year ended December31, 2015
consisted of proceeds from the sale of convertible promissory
notes to existing shareholders of Microbot. Net cash provided by
financing activities of approximately $1,503,000 for the year
ended December31, 2014 consisted of net proceeds from the
exercise of outstanding warrants for shares of the Series A
Preferred Stock of
Microbot.

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 in
financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital
resources.

Quantitative and
Qualitative Disclosures about the Market Risk of
Microbot

Interest Rate
Risk

Microbots cash and cash
equivalents as of September30, 2016 consisted of readily
available checking and money market funds. Microbots primary
exposure to market risk is interest income sensitivity, which is
affected by changes in the general level of U.S. interest rates.
However, because of the short-term nature of the instruments in
Microbots portfolio, a sudden change in market interest rates
would not be expected to have a material impact on Microbots
financial condition and/or results of operations. Microbot does
not believe that its cash or cash equivalents have significant
risk of default or illiquidity. While Microbot believes its cash
and cash equivalents do not contain excessive risk, Microbot
cannot provide absolute assurance that in the future its
investments will not be subject to adverse changes in market
value. In addition, Microbot maintains significant amounts of
cash and cash equivalents at one or more financial institutions
that are in excess of federally insured
limits.


49

Effects of
Inflation

Inflation generally affects
Microbot by increasing its clinical trial costs. Microbot does
not believe that inflation and changing prices had a significant
impact on its results of operations for any periods presented
herein.


DESCRIPTION OF
SECURITIES

General

Our authorized capital stock
consists of 221,000,000 shares of capital stock, which consists
of 220,000,000 shares of common stock, par value $0.01 (the
Common Stock), and 1,000,000 of undesignated preferred stock, par
value $0.01 (the Preferred Stock). As of January3, 2017, we had
approximately 26,551,000 shares of Common Stock issued and
outstanding, and 9,736 shares of Series A Convertible Preferred
Stock issued and
outstanding.

Common
Stock

Holders of Common Stock are
entitled to one vote per share on matters on which our
stockholders vote. There are no cumulative voting rights. Holders
of Common Stock are entitled to receive dividends, if declared by
our board of directors, out of funds that we may legally use to
pay dividends. If we liquidate or dissolve, holders of Common
Stock are entitled to share ratably in our assets once our debts
and any liquidation preference owed to any then-outstanding
preferred stockholders are paid. Our certificate of incorporation
does not provide the Common Stock with any redemption, conversion
or preemptive
rights.

Preferred
Stock

The Company is currently
authorized to issue up to 1,000,000 shares of Preferred Stock,
$0.01 par value per share, of which 9,736 shares have currently
been designated as Series A Convertible Preferred Stock (the
Series A Stock) and are issued and outstanding. The Board of
Directors is authorized to fix the dividend rights, dividend
rate, voting rights, conversion rights, rights and terms of
redemption and liquidation preferences of any wholly unissued
series of preferred stock and the number of shares constituting
any series and the designation thereof, of any of
them.

Each share of Series A Stock
shall be convertible, at any time and from time to time from and
after the original issue date at the option of the holder
thereof, into 1,000 shares of Common Stock, subject to customary
adjustments for stock dividends, stock splits and other
fundamental transactions, and are further subject to a beneficial
ownership limitation of 4.99% of the number of shares of Common
Stock outstanding immediately after giving effect to the issuance
of Common Stock issuable upon conversion of the Series A Stock.
The Series A Stock have no voting rights, except as may be
required by law or for limited purposes specified in the
Certificate of Designation with respect to the Series A
Stock.


50


MANAGEMENT OF THE
COMPANY

Executive Officers and
Directors

The Companys board of
directors currently consists of six (6)members, consisting of
Harel Gadot, Yoav Waizer, Moshe Shoham, Yoseph Bornstein, Solomon
Mayer, and Scott Burell. Messrs. Gadot and Waizer are ClassI
directors whose terms expire at the Companys 2019 annual meeting
of stockholders. Messrs. Mayer and Burell are ClassII directors
whose terms expire at the Companys 2017 annual meeting of
stockholders. Messrs. Bornstein and Shoham are ClassIII directors
whose terms expire at the Companys 2018 annual meeting of
stockholders.

The following table lists the
names, ages and positions of the individuals who serve as
executive officers and directors of the Company, as of January3,
2017:


Name


Age


Position(s)


Executive Officers


Harel Gadot

President, Chief Executive Officer and Chairman of the Board
of Directors


David Ben Naim

Chief Financial Officer


Yehezkel(Hezi)Himelfarb

General Manager and Chief Operating Officer


Non-EmployeeDirectors


Yoav Waizer

Director


Moshe Shoham

Director


Yoseph Bornstein

Director


Solomon Mayer

Director


Scott Burell

Director

Executive
Officers

Harel Gadot,
became President, Chief Executive Officer and Chairman of the
Companys Board of Directors following the consummation of the
Merger. Mr.Gadot is a co-founder of Microbot Israel and has
served as Microbot Israels Chief Executive Officer since Microbot
Israel was founded in November 2010. He has been the Chairman of
Microbot Israels board of directors since July 2014. He also
serves as the Chairman of XACT Robotics Ltd. since August 2013
and MEDX Xelerator LP since July 2016. From December 2007 to
April 2010 Mr.Gadot was a Worldwide Group Marketing Director at
Ethicon Inc., a Johnson and Johnson Company, where he was
responsible for the global strategic marketing of the company.
Mr.Gadot also held management positions, as well as leading
regional strategic position for Europe, Middle-East and Africa,
as well as In Israel, while at Johnson and Johnson. Mr.Gadot
served as director for ConTIPI Ltd. from August 2010 until
November 2013 when ConTIPI Ltd. was acquired by Kimberly-Clark
Corporation. Mr.Gadot holds a B.Sc.in Business from Siena
College, Loudonville NY, and an M.B.A. from the University of
Manchester,
UK.

David Ben
Naim, age 46, became the Companys Chief Financial
Officer following the consummation of the Merger. Mr.Ben Naim is
the general manager of DBN Finance Services Ltd., a company which
provides outsourcing financial services to public and private
companies, since 2014. Through DBN Finance Services, Mr.Ben Naim
has acted as the outsourced CFO for Emerald Medical Applications
Corp. (OTC:MRLA), a digital health startup company engaged in the
development, sale and service of imaging solutions, and Tempramed
Inc., a private medical device company. Prior to that, Mr.Ben
Naim served as Chief Financial Officer for several companies in
the


51

biomedical and technology
industries. From July 2012 to September 2014, Mr.Ben Naim served
as Chief Financial Officer for Insuline Medical Ltd. (TASE:
INSL), an Israel-based company focused on improving performance
of insulin treatment methods. From 2008 until 2011, Mr.Ben Naim
served as Chief Financial Officer of Crow Technologies 1977 Ltd.
(OTC:CRWTF), a company that designs, develops, manufactures and
sells a broad range of security and alarm systems. From 2007 to
2008, Mr.Ben Naim served as Chief Financial Officer of Ilex
Medical Ltd. (TASE:ILX), a leading company in the medical
diagnostics field. From 2003 to 2007, Mr.Ben Naim was the
Corporate Controller of Tadiran Telecom Ltd. He started his
career in 1998 at Deloitte Touche where he left in 2003 as an
Audit Senior Manager. Mr.Ben Naim holds a B.A. in social sciences
from Open University, Israel, a CPA license from Ramat Gan
College, Israel, and an M.B.A. from Ono Academic College,
Israel.

Yehezkel
(Hezi) Himelfarb, age 59, became the Companys
Chief Operating Officer and General Manager of the Companys
Israeli operations on December5, 2016. Mr.Himelfarb was the Chief
Executive Officer from 2008 through November 2016 and a member of
the board of directors from 2008 through August 2016 of IceCure
Medical Ltd., a Tel Aviv Stock Exchange listed company that
develops advanced cryotherapy systems (cryoablation) intended for
the growing physician-office market. Prior to that, from 1999 to
2008, Mr.Himelfarb was the President, Chief Executive Officerand
a member of the board of directors of Remon Medical Technologies,
Inc., a venture backed US/Israeli company that developed and
commercialized smart, miniature implants which enabled physicians
to assess and treat a variety of medical conditions, where he,
among other things, 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
Medtronics 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 and Engineering Management, both from
Tel Aviv
University.

Non-Employee
Directors

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 May 2015. Mr.Waizer is a Partner and Chief
Executive Officer of Medica Venture Partners, a healthcare
dedicated venture investing out of Israel in innovative
capital-starved early stage and special situation companies,
since November 2005. Prior to his Tenure at Medica, Mr.Waizer
served as CFO COO at Cedar Fund, a venture capital fund focuses
on investing in Israel-related high-tech companies in the
telecom, networking, Internet-infrastructure and enterprise
software areas and prior to that Mr.Waizer was the CFO of Star
Ventures Israel, the Israeli fund of Star Ventures, a $1billion
venture capital fund investing in all stages of development
within the Telecom, Enterprise S/W, Wireless and Life Sciences
sectors. Mr.Waizer is currently a director of InterCure Ltd., a
company focused on investing in medical technology companies that
is traded on the Tel Aviv Stock exchange. Mr.Waizer holds Master
of Business Administration in Information Systems and B.Sc. in
Accounting and Statistics, both from the Tel-Aviv
University.

Moshe
Shoham, D.Sc.,became a director of the Company
following the Merger. Dr.Shoham is a co-founder of Microbot Israel
and has served as Chairman of Microbot Israels Scientific Advisor
Board and as a Director since Microbot Israel was founded in
November 2010. Prof. Shoham has been the head of the robotics
laboratory at the Technion-Israel Institute of Technology,
Department of Mechanical Engineering since October 1990 and has
been a professor in the Department of Mechanical Engineering at
the Technion-Israel Institute of Technology since October 1989.
Prior to that, Dr.Shoham was the director of the robotic
laboratory in the Department of Mechanical Engineering at
Columbia University from September 1986 to September 1989.
Dr.Shoham has served as a foreign member of the National Academy
of Engineering in the United States since October 2014. In
addition, Dr.Shoham founded Mazor Surgical Technologies Ltd., a
publically traded medical device company in the field of surgical
robotics, and has been its Chief Technology Officer since January
2003. Dr.Shoham earned a B.Sc. in 1978, a M.Sc. in 1982 and a
D.Sc. in 1986 from the Technion-Israel Institute of
Technology.

Yoseph
Bornstein,became a director of the Company following the
Merger . Mr.Bornstein is a co-founder of Microbot Israel
and has been a member of the Board of Directors since Microbot
Israel was founded in November 2010. Mr.Bornstein founded Shizim
Ltd., a life science holding group in October 2000 and has served
as its president since then. Mr.Bornstein is the Chairman of GCP
Clinical Studies Ltd., a provider of clinical research services
and educational programs in Israel since January 2002. He is the
Chairman of Biotis Ltd., a service company for the
bio-pharmaceutical industry, since June 2000. In addition, he is
the Chairman of Dolphin Medical Ltd., a service company for the
medical device industry, since April 2012 and the Chairman of
ASIS Enterprises B.B.G. Ltd., a business August 2007. In October
1992, Mr.Bornstein founded Pharmateam Ltd., an Israeli company
that specialized in representing international pharmaceutical
companies which was sold in 2000. Mr.Bornstein is also a founder
of a number of other privately held life-science companies.
Mr.Bornstein served as the Biotechnology Committee Chairman of
the Unites States-Israel Science Technology Commission (the
USISTF) from September 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 Life Science Industry
Organization and ITTN-Israel Tech Transfer
Organization.


52

Solomon
Mayer,became a director of the Company following the
Merger. Mr.Mayer has served as a member of the Board of Directors
of Microbot Israel since June 2014, as the designated director of
Alpha Capital. Mr.Mayer has served as the President and Chief
Executive Officer of Mooney Aviation Company since June 1999. He
also serves as President of Chailife Line, an organization
devoted to help restore normalcy to family life and better enable
them to withstand the crises and challenges of serious pediatric
illness. In addition, Mr.Mayer serves as a Director of the
Laniado Hospital, International Medical Search Co. of New York,
Blastgard International, Inc. and Ironwood Gold
Corp.

Scott R.
Burell, became a director of the Company following the
Merger and has served as a member of the Board of Directors of
Microbot Israel since the closing of the Merger on November28,
2016. He is the Chief Financial Officer, Secretary and Treasurer
of CombiMatrix Corporation, a family health-focused clinical
molecular diagnostic laboratory specializing in pre-implantation
genetic screening, prenatal diagnosis, miscarriage analysis, and
pediatric developmental disorders, since November 2006. He
successfully led the split-off of CombiMatrix in 2007 from its
former parent, has led several successful public and private debt
and equity financing transactions as well as CombiMatrixs
reorganization in 2010. Prior to this, Mr.Burell had served as
CombiMatrixs Vice President of Finance since November 2001 and as
its Controller from February 2001 to November 2001. From May 1999
to first joining CombiMatrix in February 2001, Mr.Burell was the
Controller for Network Commerce, Inc., a publicly traded
technology and information infrastructure company located in
Seattle. Prior to this, Mr.Burell spent 9 years with Arthur
Andersens Audit and Business Advisory practice in Seattle. During
his tenure in public accounting, Mr.Burell worked with many
clients, both public and private, in the high-tech and healthcare
markets, and was involved in numerous public offerings,
spin-offs, mergers and acquisitions. Mr.Burell obtained his
Washington state CPA license in 1992 and is a certified public
accountant (currently inactive). He holds Bachelor of Science
degrees in Accounting and Business Finance from Central
Washington
University.

Committees of the
Board of
Directors

Audit
Committee

The Audit Committee acts to a
written charter. The primary function of the Audit Committee is
to assist the Board of Directors in fulfilling its oversight
responsibilities. The Audit Committee does this primarily by
reviewing the Companys financial reports and other financial
information as well as the Companys systems of internal controls
regarding finance, accounting, legal compliance, and ethics that
management and the Board of Directors have established. The Audit
Committee also assesses the Companys auditing, accounting and
financial processes more generally. The Audit Committee
recommends to the Board of Directors the appointment of a firm of
independent auditors to audit the financial statements of the
Company and meets with such personnel of the Company to review
the scope and the results of the annual audit, the amount of
audit fees, the companys internal accounting controls, the
Companys financial statements contained in this proxy statement,
and other related
matters.

In connection with the closing
of the Merger, the Companys Board of Directors elected Messrs.
Burell, Waizer and Bornstein to serve as members of the Audit
Committee, with Mr.Burell being elected as the Audit Committee
financial
expert.

Compensation
Committee

The Compensation Committee
acts to a written charter. The Compensation Committee makes
recommendations to the Board of Directors and management
concerning salaries in general, determines executive compensation
and approves incentive compensation for employees and
consultants.

In connection with the closing
of the Merger, the Companys Board of Directors elected Messrs.
Burell and Bornstein to serve as members of the Compensation
Committee.

Nominating and
Governance
Committee

The Nominating and Governance
Committee acts to a written charter. The Nominating and
Governance Committee oversees nominations to the Board of
Directors and considers the experience, ability
and


53

character of potential
nominees to serve as directors, as well as particular skills or
knowledge that may be desirable in light of the Companys position
at any time. The Nominating and Governance Committee also
develops and recommends to the Board of Directors a set of
corporate governance principles applicable to the
company.

In connection with the closing
of the Merger, the Companys Board of Directors elected Messrs.
Shoham and Waizer to serve as members of the Nominating and
Governance
Committee.

Director
Independence

NASDAQs listing standards and
the Companys Corporate Governance Guidelines require that the
Companys Board of Directors consist of a majority of independent
directors, as determined under the applicable NASDAQ listing
standards.


PRINCIPAL STOCKHOLDERS
OF THE
COMPANY

The following table and the
related notes present information on the beneficial ownership of
shares of the Company
by:

each director of the Company;

each executive officer of the Company; and

each stockholder known by us to beneficially own more than
five percent of the Companys common stock on an as-converted
basis.

Beneficial ownership is
determined in accordance with the rules of the SEC and includes
voting or investment power with respect to the securities. Does
not include any warrants, options or other convertible securities
of the Company, except that shares of the Companys common stock
subject to options, warrants and other convertible securities
currently exercisable or which may become exercisable within 60
days of January 3, 2017 are deemed outstanding and beneficially
owned by the person holding such options or warrants for purposes
of computing the number of shares and percentage beneficially
owned by such person, but are not deemed outstanding for purposes
of computing the percentage beneficially owned by any other
person.

This table is based on
information supplied by each prospective director, officer and
principal stockholder of the Company. Except as indicated in
footnotes to this table, the Company believes that the
stockholders named in this table have sole voting and investment
power with respect to all shares of Common Stock shown to be
beneficially owned by them, based on information provided by such
stockholders. Unless otherwise indicated, the address for each
prospective director and executive officer of the Company listed
is: c/o Microbot Medical Inc., 175 Derby Street, 27/1, Hingham,
MA
02043.


Beneficial Owner


NumberofShares
BeneficiallyOwned

Percentageof CommonStock
BeneficiallyOwned


Directors and Executive Officers


Harel Gadot(1)

3,820,664 13.78 %


Yoav Waizer


Moshe Shoham(2)

2,550,231 9.36 %


Yoseph Bornstein(3)

5,305,409 19.98 %


Solomon Mayer


Scott Burell


David Ben Naim


Yehezkel (Hezi) Himelfarb


All current directors and executive officers as a group
(8persons)(4)

41.07 %


54


BeneficialOwner


NumberofShares
BeneficiallyOwned

Percentageof CommonStock
BeneficiallyOwned


Five Percent Stockholders


LSA – Life Science Accelerator Ltd.(3)

5,305,409 19.98 %


Technion Research and Development Foundation

3,555,339 13.39 %


MEDX Ventures Group LLC(5)

3,820,664 13.78 %


Leon Lewkowicz

3,149,438 11.86 %


Saber Holding GmbH

4,307,003 16.22 %


GreenBlock Capital

1,950,660 7.35 %


Lane Ventures

1,950,660 7.35 %


(1)
Includes 1,167,960 shares of the Companys common stock
issuable upon the exercise of options granted to MEDX
Ventures Group. All of such shares and options are held by
MEDX Ventures Group LLC, which is beneficially owned by
Mr.Gadot. See Note 5 below.

(2)
Includes 708,141 shares of the Companys common stock issuable
upon the exercise of options.

(3)
Based on representations and other information made or
provided to Microbot by Mr.Bornstein, Mr.Bornstein is the CEO
and Director of LSA and of Shizim, and Mr.Bornstein is the
majority equity owner of Shizim. Shizim is the majority
equity owner of LSA. Accordingly, Mr.Bornstein may be deemed
to share voting and investment power over the shares
beneficially owned by these entities.

(4)
Includes shares of the Companys common stock issuable upon
the exercise of options as set forth in footnotes (1)and (2).

(5)
Includes 1,167,960 shares of the Companys common stock
issuable upon the exercise of options granted to MEDX
Ventures Group. Mr.Gadot is the Chief Executive Officer,
Company Group Chairman and majority equity owner of MEDX
Venture Group and thus may be deemed to share voting and
investment power over the shares beneficially owned by this
entity.


55


Item9.01
FinancialStatementsandExhibits


Exhibit

Description
23.1 Consent of Brightman Almagor Zohar Co., a Member of Deloitte
Touche Tohmatsu Limited
23.2 Consent of Brightman Almagor Zohar Co., a Member of Deloitte
Touche Tohmatsu Limited
99.1 Audited Financial Statements for the Fiscal Years ended
December31, 2015 and 2014
99.2 Condensed unaudited financial statements for the periods
ended September30, 2016 and 2015
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document


*
To be filed by amendment.


56

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