InspireMD, Inc. 10-K

Item 9A. Controls and Procedures. Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures We conducted an evaluation of the effectiveness of our “disclosure controls and procedures”, as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of December 31, 2020, the end of the period covered by this Annual Report on Form 10-K. The disclosure controls and procedures evaluation was done under the supervision and with the participation of management, including our chief executive officer and chief financial officer. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2020. Management’s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external reporting purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate over time. Management, including our chief executive officer and our chief financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework 2013 . Based on its assessment and those criteria, management has concluded that we maintained effective internal control over financial reporting as of December 31, 2020. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance. Executive Officers and Directors The following table sets forth information regarding our executive officers and the members of our board of directors. Name Age Position Marvin Slosman 57 President, Chief Executive Officer and Director Craig Shore 59 Chief Financial Officer, Chief Administrative Officer, Secretary and Treasurer Michael Berman (1)(2) 63 Director Campbell Rogers, M.D. 59 Director Paul Stuka (1)(2)(3) 66 Chairman of the Board of Directors Thomas J. Kester (1)(3) 74 Director Gary Roubin, M.D. 72 Director (1) Member of our audit committee (2) Member of our nominating and corporate governance committee (3) Member of our compensation committee - 64 - Our directors hold office until the earlier of their death, resignation or removal by stockholders or until their successors have been qualified. Our directors are divided into three classes. Paul Stuka and Gary Roubin are our Class 1 directors, with their terms of office to expire at our 2021 annual meeting of stockholders. Michael Berman and Campbell Rogers, M.D. are our Class 2 directors, with their terms of office to expire at our 2022 annual meeting of stockholders. Marvin Slosman and Thomas J. Kester are our Class 3 directors, with their terms of office to expire at our 2023 annual meeting of stockholders. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified. Our officers hold office until the earlier of their death, resignation or removal by our board of directors or until their successors have been selected. They serve at the pleasure of our board of directors. Marvin Slosman has served as our president, chief executive officer and director since January 1, 2020. Mr. Slosman has served as chief operating officer for MEDCURA Inc. from May 2019 to December 2019. From September 2017 to September 2019, Mr. Slosman served as a Business Consultant, overseeing international commercial strategy and market development, at Integra Life Sciences, a leading innovator in orthopedic extremity surgery, neurosurgery, and reconstructive and general surgery. From 2010 to 2014 Mr. Slosman served as President of Itamar Medical, Inc., a medical technology company focused on cardiovascular and sleep diagnostics. Mr. Slosman also served as chief executive officer of Ovalum Vascular Ltd. from 2008 to 2010. Mr. Slosman’s qualifications to serve on the board of directors of the Company include his significant experience in senior management positions of leading medical device companies. Craig Shore has served as our chief financial officer, secretary and treasurer since March 31, 2011 and as our chief administrative officer since May 3, 2013. In addition, from November 10, 2010 through March 31, 2011, Mr. Shore served as InspireMD Ltd.’s vice president of business development. Mr. Shore has over 30 years of experience in financial management in the United States, Europe and Israel for companies such as Pfizer Pharmaceuticals, Bristol Myers Squibb and General Electric. His experience includes raising capital both in the private and public markets. Mr. Shore graduated with honors and received a B.Sc. in Finance from Pennsylvania State University and an M.B.A. from George Washington University. Michael Berman has served as our director since February 7, 2013. Mr. Berman is a medical device entrepreneur who works with high-potential development and early-stage commercial companies. From 2005 to 2012, when the company was sold to Boston Scientific, Mr. Berman was a co-founder and the chairman of BridgePoint Medical, Inc., which developed technology to treat coronary and peripheral vascular chronic total occlusions. Mr. Berman was also a member of the board of Lutonix, Inc. from 2007 until 2011, when the company was sold to C.R. Bard, Inc. From 2011 to 2019, Mr. Berman served as a co-founder and director of Rebiotix Inc., a company developing an innovative treatment for C Diff colitis. Rebiotix was sold to Ferring Pharmaceuticals in 2018. From 2014 till 2018 Mr. Berman served as a director Mazor Robotics, a company pioneering Spinal Robotic Surgery. Mr. Berman has served (i) since 2011 as an advisor to, and since 2012 as a director of, Cardiosonic, Inc., a company developing a system for hypertension reduction via renal denervation, (ii) since 2005 as a director of PharmaCentra, LLC, which creates customizable marketing programs that help pharmaceutical companies communicate with physicians and patients, (iii) since 2018 as a Director of STMedical, a medical device company that has developed a temporary stent for the treatment of chronic sinusitis, (iv) since 2019 as a director of CardiacSense Inc, a medical device company that has developed a smart watch vital sign monitor, (v) since 2017 as a Director of Owlytics Healthcare, (vi) since 2013 as a Director of ClearCut Inc., a medical device company that has developed an MRI system for tumor margin assessment, (vii) since 2013 as a director of PulmOne Ltd., a medical device company developing an innovative Pulmonary Function Testing system, (viii) since 2014 as a director of SoniVie, a medical device company, (ix) since 2014 as a venture partner at RiverVest Ventures and (x) since 2017 as a Director of Truleaf Medical. Mr. Berman brings to the board his extensive executive and entrepreneurial experiences in the field of medical devices and vascular intervention, which should assist in strengthening and advancing our strategic focus. - 65 - Campbell Rogers, M.D. has served as a director since September 3, 2013. Dr. Rogers is the executive vice president and chief medical officer of HeartFlow, Inc., a cardiovascular diagnostics company, since March 2012. Prior to joining HeartFlow, Inc., he was the chief scientific officer and global head of research and development at Cordis Corporation (currently part of Cardinal Health, Inc.), Johnson & Johnson, where he was responsible for leading investments and research in cardiovascular devices. Prior to that, he was associate professor of medicine at Harvard Medical School and the Harvard-M.I.T. Division of Health Sciences and Technology and director of the cardiac catheterization and experimental cardiovascular interventional laboratories at Brigham and Women’s Hospital. He served as principal investigator for numerous interventional cardiology device, diagnostic, and pharmacology trials, is the author of numerous journal articles, chapters, and books in the area of coronary artery and other cardiovascular diseases and was the recipient of research grant awards from the National Institute of Health and the American Heart Association. He received his A.B. from Harvard College and his M.D. from Harvard Medical School. Dr. Rogers’ qualifications to serve on the board include his significant experience in cardiovascular devices, as well as his familiarity with the operations of medical device companies. Paul Stuka has served as a director since August 8, 2011 and has served as our chairman since June 2, 2017. Mr. Stuka has served as the managing member of Osiris Partners, LLC, an investment fund, since 2000. Prior to forming Osiris Partners, LLC, Mr. Stuka, with 40 years of experience in the investment industry, was a managing director of Longwood Partners, managing small cap institutional accounts. In 1995, Mr. Stuka joined State Street Research and Management as manager of its Market Neutral and Mid Cap Growth Funds. From 1986 to 1994, Mr. Stuka served as the general partner of Stuka Associates, where he managed a U.S.-based investment partnership. Mr. Stuka began his career in 1980 as an analyst at Fidelity Management and Research. As an analyst, Mr. Stuka followed a wide array of industries including healthcare, energy, transportation, and lodging and gaming. Early in his career he became the assistant portfolio manager for three Fidelity Funds, including the Select Healthcare Fund which was recognized as the top performing fund in the United States for the five-year period ending December 31, 1985. Mr. Stuka has been serving as a director of Caliber Imaging & Diagnostics, Inc. (formerly Lucid, Inc.) since June 2013. Mr. Stuka’s qualifications to serve on the board include his significant strategic and business insight from his years of experience investing in the healthcare industry. Thomas J. Kester has served as a director since September 6, 2016. Mr. Kester has been serving as the chief financial officer of Kester Search Group, Inc., a private executive search firm specializing in sales force placement for medical, dental and diagnostic device companies, since October 2014. From 2004 to 2010, Mr. Kester served as a director of Orthofix International, NV (NASDAQ: OFIX), a global medical device company. Mr. Kester’s experience includes 28 years at KPMG LLP, including 18 years as an audit partner, advising public and private companies in connection with annual audit and financings. Mr. Kester’s qualifications to serve on the board include his significant strategic and business insight from his years of experience auditing global companies and serving on the boards of several public and not-for-profit organizations. Mr. Kester received his B.S. in mechanical engineering from Cornell University and an M.B.A. from Harvard University. Gary Roubin, M.D. has served as a director since October 13, 2020. Dr. Roubin cofounded Essential Medical Inc., which has had success in bringing a large bore vascular closure device to world markets and was recently acquired by Teleflex Inc. From 2002 to 2003, Dr. Roubin served as Chief Medical Officer of the Medicines Company during the release of its Angiomax product. From 2003 to 2012, Dr. Roubin served as Department Chairman and Chief of Service of the Lenox Hill Hospital Cardiac and Vascular program in New York. From 1989 to 1997, he served as Chief of Interventional Cardiology at the University of Alabama at Birmingham, to which he joined in 1989 as Professor of Medicine and Radiology and Director of the Cardiac Catheterization Laboratories and Interventional Cardiology Section at the University Hospital. In 2001, Dr. Roubin played a pivotal role in the success of Mednova Inc., which was acquired by Abbott Vascular, resulting in the introduction and marketing in the U.S. of the top selling carotid embolic protection system (NAV6) and stent system (XACT). In 1987, he developed and placed the world’s first balloon expandable coronary stent. In 1984, Dr. Roubin joined Andreas Gruentzig at Emory University to continue his post-doctoral research. He is also acknowledged for the development of coronary stenting and the first FDA-approved coronary stent. Dr. Roubin received his M.D. from the University of Queensland medical school and his Ph.D. from Sydney University. Mr. Slosman and Mr. Shore are parties to certain agreements related to their service as executive officers and directors described under “Executive Compensation – Agreements with Executive Officers.” Family Relationships We have no family relationships amongst our directors and executive officers. - 66 - Board Committees Our board of directors has established an audit committee, a nominating and corporate governance committee and a compensation committee, each of which has the composition and responsibilities described below. Audit Committee . Our audit committee is currently comprised of Messrs. Berman, Stuka and Kester, each of whom our board has determined to be financially literate and qualify as an independent director under Section 803(B)(2) of the NYSE American rules. Mr. Kester is the chairman of our audit committee and qualifies as a financial expert, as defined in Item 407(d)(5)(ii) of Regulation S-K. The audit committee’s duties are to recommend to our board of directors the engagement of independent auditors to audit our financial statements and to review our accounting and auditing principles. The audit committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls. The audit committee operates under a formal charter adopted by the board of directors that governs its duties and conduct. Copies of the charter can be obtained free of charge from the Company’s web site, www.inspiremd.com, by contacting the Company. Nominating and Corporate Governance Committee .  Our nominating and corporate governance committee is currently comprised of Messrs. Berman and Stuka, each of whom qualify as an independent director under Section 803(A) of the NYSE American rules. Mr. Berman is the chairman of our nominating and corporate governance committee. The nominating and corporate governance committee identifies and recommends to our board of directors individuals qualified to be director nominees. In addition, the nominating and corporate governance committee recommends to our board of directors the members and chairman of each board committee who will periodically review and assess our code of business conduct and ethics and our corporate governance guidelines. The nominating and corporate governance committee also makes recommendations for changes to our code of business conduct and ethics and our corporate governance guidelines to our board of directors, reviews any other matters related to our corporate governance and oversees the evaluation of our board of directors and our management. The nominating and corporate governance committee operates under a formal charter adopted by the board of directors that governs its duties and conduct. Copies of the charter can be obtained free of charge from the Company’s web site, www.inspiremd.com, by contacting the Company. Compensation Committee .  Our compensation committee is currently comprised of Messrs. Stuka and Kester, each of whom qualify as an independent director under Sections 803(A) and 805(c)(1) of the NYSE American rules. Mr. Stuka is the chairman of our compensation committee. The compensation committee reviews and approves our salary and benefits policies, including compensation of executive officers and directors. The compensation committee also administers our stock option plans and recommends and approves grants of stock options under such plans. The compensation committee operates under a formal charter adopted by the board of directors that governs its duties and conduct. Copies of the charter can be obtained free of charge from the Company’s web site, www.inspiremd.com, by contacting the Company. Code of Ethics We have adopted a code of ethics and business conduct that applies to our officers, directors and employees, including our principal executive officer, principal financial officer and principal accounting officer, which is posted on our website at www.inspiremd.com . We intend to disclose future amendments to certain provisions of the code of ethics, or waivers of such provisions granted to executive officers and directors, on this website within four business days following the date of such amendment or waiver. Item 11. Executive Compensation. Summary Compensation Table The table below sets forth the compensation earned by our named executive officers for the twelve-month period ended December 31, 2020 and 2019. Name and Principal Position Year Salary ($) Bonus ($) Restricted Stock Awards ($) (1) Option Awards ($) (1) All Other Compensation ($) Total ($) Marvin Slosman 2020 366,666 (2) 150,000 (3) 658,981 196,162 (7) 10,309 (4) 1,382,118 President and Chief Executive Officer Craig Shore 2020 265,004 (2)(5) 138,692 (3)(5) 264,745 78,955 121,626 (6) 869,022 Chief Financial Officer, Secretary and Treasurer 2019 269,758 (5) 60,000 (5) 57,000 - 114,395 (6) 501,153 - 67 - (1) For awards of stock, the aggregate grant date fair value is computed in accordance with FASB ASC Topic 718. Fair value is based on the Black-Scholes option pricing model using the fair value of the underlying shares at the measurement date. (2) On April 21, 2020, Mr. Slosman and Mr. Shore each signed waivers in connection with the COVID-19 pandemic and certain cost-reduction measures, whereby Mr. Slosman’s monthly base salary was reduced from $33,333 to $16,666 and Mr. Shore’s monthly base salary was reduced from NIS 80,125 to NIS 40,063. On June 10, 2020, following the closing of our underwritten public offering in June 2020, each of Mr. Slosman’s and Mr. Shore’s monthly base salaries were reinstated to $33,333 and NIS 80,125, respectively, effective as of June 1, 2020. (3) Cash bonus awards for the 2020 calendar year were approved by the compensation committee in January 2021. (4) Mr. Slosman’s other compensation for 2020 consisted of benefits related to health insurance. (5) Compensation amounts received in non-U.S. currency have been converted into U.S. dollars using the average exchange rate for the applicable period, except for bonus amounts which have been converted into U.S. dollars using 3.215 NIS per dollar which was the exchange rate as of December 31, 2020. The average exchange rate for the twelve month period ended December 31, 2020 and 2019 were 3.437 NIS per dollar and 3.564 NIS per dollar, respectively. (6) Mr. Shore’s other compensation consisted solely of benefits in the twelve months ended December 31, 2020 and 2019. In each of the periods reported, Mr. Shore’s benefits included our contributions to his severance, pension, vocational studies and disability funds, an annual recreation payment, a company car or car allowance and cell phone, and a daily food allowance. (7) 182,381 shares of common stock issuable upon the exercise of Restricted Stock Units outside our 2013 Long-Term Incentive Plan. Agreements with Executive Officers Marvin Slosman On December 9, 2019, we entered into an Employment Agreement with Marvin Slosman, which was subsequently amended on December 31, 2019 (as amended, the “Slosman Employment Agreement”), pursuant to which Mr. Slosman was appointed as our new chief executive officer and president. Mr. Slosman’s term of employment commenced on January 1, 2020, which will remain in effect for three years (the “Initial Employment Term”), unless earlier terminated, and to be automatically renewed for successive one-year terms after the Initial Employment Term. Mr. Slosman was also appointed as a Class 3 director, effective January 1, 2020, with a term expiring on the 2020 annual meeting of our stockholders. As consideration for his services as chief executive officer, Mr. Slosman will be entitled to receive (i) an annual base salary of $400,000, less applicable payroll deductions and tax (“Base Salary”), which will be reviewed by the Board on an annual basis for increase; (ii) reimbursement of up to $50,000 for any reasonable and customary, documented out-of-pocket relocation expenses actually incurred by Mr. Slosman in 2019 or 2020 calendar years, in connection with his relocation to Europe; (iii) annual performance bonuses in an amount up to 50% percent of the Base Salary, as may be in effect from time to time, for each calendar year during his employment with us based on the extent to which performance criteria/financial results for the applicable year have been met; and (iv) equity awards as of the date of the Slosman Employment Agreement that represent, in the aggregate, 5% of the Company’s issued and outstanding common stock determined on a fully diluted basis as of the date of grant (the “Equity Awards”), with 75% of the Equity Awards being granted as restricted stock units and with the remaining 25% of the Equity Awards being granted as stock options, all of which Equity Awards shall be outside of the 2013 Long-Term Incentive Plan and subject to terms and conditions of the award agreements entered by Mr. Slosman. In addition, on or before December 31, 2020, Mr. Slosman shall become eligible to receive an additional grant of equity awards under the 2013 Long-Term Incentive Plan and the applicable award agreements up to 5% (including the Equity Awards) of the Company’s actual outstanding shares of Common Stock on the date of grant, provided that the actual amount of the grant shall be based on the achievement of certain performance/financial criteria as established by the Board after consultation with Mr. Slosman, in its reasonable discretion. For the purposes of the equity award calculation, “fully diluted basis” is defined as the sum of the total shares of common stock then outstanding, the shares of common stock issuable upon the conversion of our then outstanding shares of Series B Convertible Preferred Stock and Series C Convertible Preferred Stock and the shares of common stock issuable upon the exercise of our then outstanding pre-funded warrant. On January 2, 2020, pursuant to the Slosman Employment Agreement, we granted Mr. Slosman restricted stock units for 182,381 shares and a stock option to purchase 60,794 shares of common stock at $1.10 per share. - 68 - In the event Mr. Slosman voluntarily resigns without good reason, we may, in our sole discretion, shorten the notice period and determine the date of termination without any obligation to pay Mr. Slosman any additional compensation other than the accrued obligations and without triggering a termination of Mr. Slosman’s employment without cause. In the event the Slosman Employment Agreement expires, or we terminate Mr. Slosman’s employment for cause or Mr. Slosman voluntarily resigns without good reason, we shall have no further liability or obligation to Mr. Slosman under the Slosman Employment Agreement. Notwithstanding the foregoing, in the event that this the Slosman Employment Agreement expires as a result of our decision not to renew the Slosman Employment Agreement, we shall, subject to the execution and timely return by Mr. Slosman of a release of claims, pay Mr. Slosman cash payments totaling $100,000 in the aggregate, payable in equal installments on our regular pay dates that occur during the period commencing on 60th day following his employment termination date and ending on the last day of the Restricted Period (as defined below); provided, however, that if, at any time within the period commencing on the date that is 3 months prior to the expiration of the Initial Employment Term or the then current renewal term, as applicable, and ending on the date that is 3 months following the expiration of the Slosman Employment Agreement, we and a third party execute a definitive, written, and binding agreement (a “Sale Agreement”) to enter into certain transactions described therein that, if consummated, would constitute a change in control in us, then Mr. Slosman’s termination shall be deemed a termination by us without cause or for good reason, as of the date such Sale Agreement is executed, provided further that any amounts payable to Mr. Slosman pursuant to such termination shall be reduced by any amounts previously paid to him upon expiration of the Slosman Employment Agreement, termination by us for cause or voluntary resignation by Mr. Slosman without good reason. If Mr. Slosman’s employment is terminated (i) by us without cause or (ii) by Mr. Slosman for good reason, then we must pay Mr. Slosman, (a) a severance pay in an amount equal to twelve months of his then-current base salary, (b) his entire performance bonus for any calendar year for which Mr. Slosman has already worked the entire year but the bonus has yet to be paid, (c) a pro-rated performance bonus in an amount equal to the target annual performance bonus to which Mr. Slosman may have been entitled for the year in which the termination occurs that he would have received had his employment not been terminated during such year. In addition, 50% of all unvested stock options, shares of restricted stock, restricted stock units, stock appreciation rights, or similar stock-based rights granted to Mr. Slosman shall vest and, if applicable, be immediately exercisable and any risk of forfeiture included in such restricted or other stock grants previously made to Mr. Slosman shall immediately lapse, and Mr. Slosman may exercise any outstanding stock options or stock appreciation rights until the earlier of (x) the last date on which such stock options or stock appreciation rights could have been exercised pursuant to the terms of the applicable award agreement, irrespective of Mr. Slosman’s termination of employment; and (y) the date that is two years following his employment termination date. Craig Shore We have been a party to an employment agreement with Craig Shore since November 28, 2010. On May 5, 2014, we entered into an amended and restated employment agreement with Mr. Shore, which was amended on January 5, 2015, July 25, 2016, and on March 25, 2019. The employment agreement, as amended, has an initial term that ends on December 31, 2020, and will automatically renew for additional one-year periods on January 1st thereafter unless either party gives the other party written notice of its election not to extend such employment at least six months prior to the next January 1st renewal date. If a change in control occurs when less than two full years remain in the initial term or during any renewal term, the employment agreement will automatically be extended for two years from the change in control date and will terminate on the second anniversary of the change in control date. - 69 - Under the terms of the employment agreement, as amended by the third amendment to the amended and restated employment agreement, dated March 25, 2019, Mr. Shore is entitled to an annual base salary of at least $250,000. Such amount may be reduced only as part of an overall cost reduction program that affects all of our senior executives and does not disproportionately affect Mr. Shore, so long as such reduction does not reduce the base salary to a rate that is less than 90% of the amount set forth above (or 90% of the amount to which it has been increased). The base salary will be reviewed annually by our chief executive officer for increase (but not decrease, except as permitted as part of an overall cost reduction program) as part of our annual compensation review. Mr. Shore is also eligible to receive an annual bonus in an amount equal to 60% of his then-annual salary upon the achievement of reasonable target objectives and performance goals, to be determined by the board of directors in consultation with Mr. Shore. Mr. Shore is eligible to receive the percentage of his annual bonus corresponding to the percentage of his achievement of such target objectives and performance goals. The annual bonus will be reviewed annually by our chief executive officer for increase in the amount of the percentage of his then-base salary (but not decrease), as well as the criteria and the goals, as part of our annual compensation review. In addition, Mr. Shore is eligible to receive such additional bonus or incentive compensation as the board may establish from time to time in its sole discretion. Mr. Shore will also be considered for grants of equity awards each year as part of the board’s annual compensation review, which will be made at the sole discretion of the board of directors. Each grant will, with respect to any awards that are options, have an exercise price equal to the fair market value of our common stock as of the date of grant, and will be subject to a three-year vesting period subject to Mr. Shore’s continued service with us, with one-third of each additional grant vesting equally on the first, second, and third anniversary of the date of grant for such awards. If during the term of the employment agreement, Mr. Shore’s employment is terminated upon his death or disability, by us without cause (as such term is defined in Mr. Shore’s employment agreement), or upon his resignation for “good reason” (as such term is defined in Mr. Shore’s employment agreement), Mr. Shore will be entitled to receive, in addition to any amounts he is entitled to receive under the manager’s insurance policy: (i) any unpaid base salary and accrued unpaid vacation or earned incentive compensation and the pro rata amount of any bonus plan incentive compensation for the fiscal year of such termination (based on the number of business days he was actually employed by us during the fiscal year of such termination and based on the percentage of the goals that he actually achieved under the bonus plan) that he would have received had his employment not been terminated; (ii) a one-time lump sum severance payment equal to 100% of his base salary, provided that he executes a release relating to employment matters and the circumstances surrounding his termination in favor of us, our subsidiaries and our officers, directors and related parties and agents, in a form reasonably acceptable to us at the time of such termination; (iii) vesting of all unvested stock options, stock appreciation rights or similar stock-based rights granted to him and immediate lapse of any risk of forfeiture included in restricted or other stock grants previously made to Mr. Shore; (iv) an extension of the exercise period of all vested stock options granted to Mr. Shore until the earlier of (a) two years from the date of termination or (b) the latest date that each stock option would otherwise expire by its original terms; (v) to the fullest extent permitted by our then-current benefit plans, continuation of health, dental, vision and life insurance coverage for the lesser of 12 months after termination or until Mr. Shore obtains coverage from a new employer; and (vi) reimbursement of up to $30,000 for executive outplacement services, subject to certain restrictions. The severance payment described in (ii) of the foregoing sentence upon Mr. Shore’s death or disability will be reduced by any payments received by Mr. Shore pursuant to any of our employee welfare benefit plans providing for payments in the event of death or disability. If, during or after the term of his employment agreement, Mr. Shore’s employment is terminated by us for cause or by Mr. Shore voluntarily, Mr. Shore will only be entitled to unpaid amounts owed to him (e.g., base salary, accrued vacation and earned incentive compensation through the date of such termination) and whatever rights, if any, are available to him pursuant to our stock-based compensation plan or any award documents related to any stock-based compensation. Mr. Shore may terminate his employment for good reason by delivering a notice of termination to us 30 days in advance of the date of termination; provided, however, that Mr. Shore agreed to not terminate his employment for good reason until he has given us at least 30 days’ notice from which to cure the circumstances set forth in the notice of termination constituting good reason, and if such circumstances are not cured by the 30th day, Mr. Shore’s employment shall terminate on such date. Pursuant to terms contained in Mr. Shore’s stock option and restricted stock award agreements, in the event of a change of control of our company, the stock options and restricted stock granted to Mr. Shore that were unvested will vest immediately upon such change of control, in the case of stock options, if such stock options are not assumed or substituted by the surviving company. - 70 - If we terminate Mr. Shore’s employment without cause, Mr. Shore will be entitled, under Israeli law, to severance payments equal to his last month’s salary multiplied by the number of years Mr. Shore has been employed with us. In order to finance this obligation, we make monthly contributions equal to 8.33% of Mr. Shore’s salary to a severance payment fund. The total amount accumulated in Mr. Shore’s severance payment fund as of December 31, 2020 was $206,000, as adjusted for conversion from New Israeli Shekels to U.S. Dollars. However, if Mr. Shore’s employment is terminated without cause, on account of a disability or upon his death, as of December 31, 2020, Mr. Shore would have been entitled to receive $270,000 in severance under Israeli law, thereby requiring us to pay Mr. Shore $64,000, in addition to releasing the $206,000 in Mr. Shore’s severance payment fund. On the other hand, pursuant to his employment agreement, Mr. Shore is entitled to the total amount contributed to and accumulated in his severance payment fund in the event of the termination of his employment as a result of his voluntary resignation. In addition, Mr. Shore would be entitled to receive his full severance payment under Israeli law, including the total amount contributed to and accumulated in his severance payment fund, if he retires from our company at or after age 67. We are entitled to terminate Mr. Shore’s employment immediately at any time for “cause” (as such term is defined in the agreement and the Israeli Severance Payment Act 1963), upon which, after meeting certain requirements under the applicable law and recent Israeli Labor court requirements, we believe we will have no further obligation to compensate Mr. Shore. Also, upon termination of Mr. Shore’s employment for any reason, we will compensate him for all unused or previously uncompensated vacation days accrued. The employment agreement also contains certain standard noncompetition, non-solicitation, confidentiality, and assignment of inventions requirements for Mr. Shore. Mr. Shore is also entitled to participate in or receive benefits under our social insurance and benefits plans, including but not limited to our manager’s insurance policy and education fund, which are customary benefits provided to executive employees in Israel. A management insurance policy is a combination of severance savings (in accordance with Israeli law), defined contribution tax-qualified pension savings and disability pension payments. An education fund is a savings fund of pre-tax contributions to be used after a specified period of time for advanced educational training and other permitted purposes, as set forth in the by-laws of the education fund. We will make periodic contributions to these insurance and social benefits plans based on certain percentages of Mr. Shore’s base salary, including (i) 7.5% to the education fund and (ii) 15.83% to the manager’s insurance policy, of which 8.33% will be allocated to severance pay, 5.5% to pension fund payments and up to 2.5% to disability pension payments. Upon the termination of Mr. Shore’s employment for any reason other than for cause, Mr. Shore will be entitled to receive the total amount contributed to and accumulated in his manager insurance policy fund. On August 14, 2020, we entered into the fourth amendment to that certain Amended and Restated Employment Agreement dated as of May 5, 2014, as amended on January 5, 2015, July 25, 2016, and on March 25, 2019, in order to, among other things, (i) amend the term of Mr. Shore’s employment, so that the initial term of Mr. Shore employment will end on July 31, 2022, which will automatically be renewed for additional one-year periods on August 1, 2022 and on each August 1 thereafter; (ii) increase Mr. Shore’s monthly base salary to NIS 86,000; and (iii) amend certain terms related to termination of Mr. Shore’s employment without Cause (as defined therein) Change of Control Agreements We do not currently have any plans providing for the payment of retirement benefits to our officers or directors, other than as described under “Agreements with Executive Officers” above. We do not currently have any change-of-control or severance agreements with any of our executive officers or directors, other than as described under “Agreements with Executive Officers” above. In the event of the termination of employment of the named executive officers, any and all unexercised stock options shall expire and no longer be exercisable after a specified time following the date of the termination, other than as described under “Agreements with Executive Officers” above. - 71 - Outstanding Equity Awards at December 31, 2020 The following table shows information concerning unexercised options and unvested shares of restricted stock outstanding as of December 31, 2020 for each of our named executive officers. Option Awards Stock Awards Name Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable Option exercise price ($) Option expiration date Number of shares of stock that have not vested (#) Market value of shares of stock that have not vested ($) Marvin Slosman (1) - 60,794 (2) 1.10 1/2/2030 182,381 (3) 62,010 - 391,762 (4) 0.39 8/31/2030 1,175,287 (5) 399,598 Craig Shore 11 - 8,312.50 07/25/2026 4,000 (6) 1,360 - 226,278 (4) 0.39 8/31/2030 678,834 (7) 230,804 (1) Mr. Slosman was appointed as chief executive officer effective as of January 1, 2020 (2) These options vest annually, with one-third vesting on each of January 2, 2021, January 2, 2022 and January 2, 2023. (3) These RSU’s vest annually, with one-third vesting on each of January 2, 2021, January 2, 2022 and January 2, 2023. (4) These options vest annually, with one-third vesting on each of August 31, 2021, August 31, 2022 and August 31, 2023. (5) These RSU’s vest annually, with one-third vesting on each of August 31, 2021, August 31, 2022 and August 31, 2023. (6) These restricted shares vest annually, with one-half vesting on each of February 4, 2021 and February 4, 2022. (7) These Restricted Stock vest annually, with one-third vesting on each of August 31, 2021, August 31, 2022 and August 31, 2023. Option Exercises and Stock Vested There were no stock options exercised by our named executive officers during the twelve months ended December 31, 2020. 2011 UMBRELLA Option Plan On March 28, 2011, our board of directors and stockholders adopted and approved the InspireMD, Inc. 2011 UMBRELLA Option Plan, which was subsequently amended on October 31, 2011 and December 21, 2012. Under the InspireMD, Inc. 2011 UMBRELLA Option Plan, we have reserved 11 shares of our common stock as awards to the employees, consultants, and service providers to InspireMD, Inc. and its subsidiaries and affiliates worldwide. The InspireMD, Inc. 2011 UMBRELLA Option Plan currently consists of three components, the primary plan document that governs all awards granted under the InspireMD, Inc. 2011 UMBRELLA Option Plan, and two appendices: (i) Appendix A, designated for the purpose of grants of stock options and restricted stock awards to Israeli employees, consultants, officers and other service providers and other non-U.S. employees, consultants, and service providers, and (ii) Appendix B, which is the 2011 U.S. Equity Incentive Plan, designated for the purpose of grants of stock options and restricted stock awards to U.S. employees, consultants, and service providers who are subject to the U.S. income tax. On December 21, 2012, the stockholders approved the awarding of “incentive stock options” pursuant to the U.S. portion of the plan. - 72 - The purpose of the InspireMD, Inc. 2011 UMBRELLA Option Plan is to provide an incentive to attract and retain employees, officers, consultants, directors, and service providers whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in our development and financial success. The InspireMD, Inc. 2011 UMBRELLA Option Plan is administered by our compensation committee. Unless terminated earlier by the board of directors, the InspireMD, Inc. 2011 UMBRELLA Option Plan will expire on March 27, 2021. We have no shares of common stock available for future issuance under our 2011 UMBRELLA Option Plan. 2013 Long-Term Incentive Plan On December 16, 2013, our stockholders approved the InspireMD, Inc. 2013 Long-Term Incentive Plan, which was adopted by our board of directors on October 25, 2013. The purpose of the InspireMD, Inc. 2013 Long-Term Incentive Plan is to provide an incentive to attract and retain employees, officers, consultants, directors, and service providers whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in our development and financial success. The InspireMD, Inc. 2013 Long-Term Incentive Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other awards, which may be granted singly, in combination, or in tandem. The InspireMD, Inc. 2013 Long-Term Incentive Plan is administered by our compensation committee. The InspireMD, Inc. 2013 Long-Term Incentive Plan is intended to serve as an “umbrella” plan for us and our subsidiaries worldwide. Therefore, if so required, appendices may be added to the InspireMD, Inc. 2013 Long-Term Incentive Plan in order to accommodate local regulations that do not correspond to the scope of the InspireMD, Inc. 2013 Long-Term Incentive Plan. Attached as Appendix A to the InspireMD, Inc. 2013 Long-Term Incentive Plan is the InspireMD, Inc. 2013 Employee Stock Incentive Plan, for the purpose of making grants of stock options, restricted stock, and other stock incentive awards pursuant to Sections 102 and 3(i) of the Israeli Income Tax Ordinance (New Version), 1961 to Israeli employees and officers and any other service providers or control holders of us who are subject to Israeli Income Tax. When the InspireMD, Inc. 2013 Long-Term Incentive Plan was adopted, a total of 11 shares of common stock were reserved for awards under the InspireMD, Inc. 2013 Long-Term Incentive Plan. On September 9, 2015, our stockholders approved an amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to increase the number of shares of common stock available for issuance pursuant to awards under the InspireMD, Inc. 2013 Long-Term Incentive Plan by 11 shares of common stock, to a total of 22 shares of common stock. On May 24, 2016, our stockholders approved the second amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to increase the number of shares of common stock available for issuance pursuant to awards under the InspireMD, Inc. 2013 Long-Term Incentive Plan by 229 shares of common stock, to a total of 251 shares of common stock. On September 28, 2016, our stockholders approved the third amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to increase the number of shares of common stock available for issuance pursuant to awards under the InspireMD, Inc. 2013 Long-Term Incentive Plan by 144 shares of common stock, to a total of 395 shares of common stock. On October 24, 2018, our stockholders approved the fourth amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to (i) increase the number of shares of common stock available for issuance pursuant to awards under such InspireMD, Inc. 2013 Long-Term Incentive Plan by 178,000 shares, to a total of 178,395 shares of common stock, and (ii) remove the cap on the number of shares of common stock with respect to which stock options or stock appreciation rights may be granted to certain executive officers of the Company during any calendar year. On March 21, 2019, our stockholders approved the fifth amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to increase the total number of shares of common stock issuable under the InspireMD, Inc. 2013 Long-Term Incentive Plan by 500,000 shares to a total of 678,395 shares of common stock - 73 - On August 31, 2020, our stockholders approved the sixth amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to increase the total number of shares of common stock issuable under the InspireMD, Inc. 2013 Long-Term Incentive Plan by 6,500,000 shares to a total of 7,178,395 shares of common stock. As of December 31, 2020, we had 2,306,956 shares of common stock available for future issuance under our 2013 Long-Term Incentive Plan. As of March 8, 2021, we had 2,234,642 shares of common stock available for future issuance under our 2013 Long-Term Incentive Plan. Director Compensation The following table shows information concerning our directors during the twelve months ended December 31, 2020. Name Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) All Other Compensation ($) Total ($) Paul Stuka 47,250 93,191 27,792 - 168,233 Michael Berman 29,750 61,633 18,381 - 109,764 Campbell Rogers, M.D. 21,875 61,633 18,381 - 101,889 Thomas Kester 35,875 61,633 18,381 - 115,889 Gary Roubin, M.D. 5,503 78,854 23,516 - 107,873 For the 2020 calendar year, our board approved the following compensation for our independent directors: (i) a $40,000 stipend, payable quarterly to the chairman of the board; (ii) a $25,000 stipend, payable quarterly to the other directors; (iii) annual committee chair compensation of $12,000 for the chairman of the audit committee, $8,000 for the chairman of the compensation committee and $5,000 for the chairmen of the nominating and corporate governance committee and the research and development committee; and (iv) annual committee membership compensation of $4,000 for members of the audit committee and the compensation committee and $2,000 for members of the nominating and corporate governance committee and the research and development committee for members of the nominating and corporate governance committee and the research and development committee. Notwithstanding the foregoing, effective April 1, 2020, the Board approved a 50% decrease in the annual cash compensation for non-employee directors from an aggregate amount of $154,000 to $77,000, and on July 1, 2020, the Board reinstated the original annual cash compensation for non-employee directors. Directors’ and Officers’ Liability Insurance We currently have directors’ and officers’ liability insurance insuring our directors and officers against liability for acts or omissions in their capacities as directors or officers, subject to certain exclusions. Such insurance also insures us against losses which we may incur in indemnifying our officers and directors. In addition, we have entered into indemnification agreements with key officers and directors and such persons shall also have indemnification rights under applicable laws, and our certificate of incorporation and bylaws. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table sets forth information with respect to the beneficial ownership of our common stock as of March 8, 2021 by: ● each person known by us to beneficially own more than 5.0% of our common stock; ● each of our directors; ● each of the named executive officers; and ● all of our directors and executive officers as a group. - 74 - The percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission (the “SEC”) governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. Except as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned and each person’s address is c/o InspireMD, Inc., 4 Menorat Hamaor St., Tel Aviv, Israel 6744832. As of March 8, 2021, we had 117,832,226 shares outstanding Name of Beneficial Owner Number of Shares Beneficially Owned (1) Percentage Beneficially Owned (1) 5% Owners Armistice Capital, LLC 9,677,415 (2) 8.2 % FiveT Capital AG 7,258,050 (3) 6.2 % Officers and Directors Marvin Slosman 252,638 (4) * Craig Shore 1,499,251 (5) 1.27 % Michael Berman 120,976 (6) * Campbell Rogers, M.D. 160,650 (7) * Paul Stuka 243,634 (8) * Thomas Kester 392,081 (9) * Gary Roubin, M.D. 1,046,291 (10) * All directors and executive officers as a group (7 persons) 3,715,521 3.14 % * Represents ownership of less than one percent. (1) Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assumes the exercise of all options, warrants and other securities convertible into common stock beneficially owned by such person or entity currently exercisable or exercisable within 60 days of March 8, 2021. Shares issuable pursuant to the exercise of stock options and warrants exercisable within 60 days are deemed outstanding and held by the holder of such options or warrants for computing the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person. (2) Consists of (i) 6,451,610 shares of common stock purchased in connection with the February 2021 Offering, and (ii) warrants to purchase 3,225,805 shares of common stock, at an exercise price of $0.682 per share, purchased in the February 2021 Offering. We are not aware whether this stockholder has sold any of the foregoing securities it purchased in the February 2021 Offering. (3) Consists of (i) 4,838,700 shares of common stock purchased in the February 2021 Offering, and (ii) warrants to purchase 2,419,350 shares of common stock, at an exercise price of $0.682 per share, purchased in the February 2021 Offering. We are not aware whether this stockholder has sold any of the foregoing securities it purchased in the February 2021 Offering. - 75 - (4) Consists of (i) 95,870 shares of common stock, (ii) 60,794 Restricted Stock Units granted outside the plan that are currently exercisable or exercisable within 60 days of March 8, 2021, (iii) options to purchase 20,264 shares of common stock that are currently exercisable or exercisable within 60 days of March 8, 2021, and (iv) 75,710 warrants to purchase shares of common stock that are currently exercisable. (5) Consists of (i) 4,021 shares of common stock, (ii) options to purchase 11 shares of common stock that are currently exercisable or exercisable within 60 days of March 8, 2021, (iii) 680,828 shares of restricted stock granted under the Israeli Appendix of the InspireMD, Inc. 2013 Long-Term Incentive Plan and (iv) 814,391 shares of restricted stock granted to employees under the Israeli Appendix of the InspireMD, Inc. 2013 Long-Term Incentive Plan held in trust, and with respect to which Mr. Shore was granted a proxy with the right to vote such shares at his discretion. (6) Consists of (i) 80,642 shares of common stock, (ii) 40,320 warrants to purchase shares of common stock that are currently exercisable, and (iii) options to purchase 14 shares of common stock that are currently exercisable or exercisable within 60 days of March 8, 2021. Excludes 160,633 shares of common stock and restricted stock granted under the Israeli Appendix of InspireMD, Inc. 2013 Long-Term Incentive Plan held in trust, with respect to which the trustee has a proxy with the right to vote such shares at his discretion. (7) Consists of (i) 1,736 shares of common stock, (ii) 158,899 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term Incentive Plan, (iii) options to purchase 14 shares of common stock that are currently exercisable or exercisable within 60 days of March 8, 2021, and (iv) one warrant to purchase a share of common stock that is currently exercisable or exercisable within 60 days of March 8, 2021. (8) Paul Stuka is the principal and managing member of Osiris Investment Partners, L.P., and, as such, has beneficial ownership of (A) (i) 264 shares of common stock, (ii) warrants to purchase 6 shares of common stock that are currently exercisable or exercisable within 60 days of March 8, 2021 in addition to (B) personally holding (i) options to purchase 15 shares of common stock that are currently exercisable or exercisable within 60 days of March 8, 2021, (ii) 240,250 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term Incentive Plan, (iii) warrants to purchase 7 shares of common stock that are currently exercisable or exercisable within 60 days of March 8, 2021, and (iv) 3,092 shares of common stock. (9) Consists of (i) 172,694 shares of common stock, (ii) 158,899 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term Incentive Plan, (iii) 60,480 warrants to purchase shares of common stock that are currently exercisable and (iv) options to purchase 8 shares of common stock that are currently exercisable or exercisable within 60 days of March 8, 2021. (10) Consists of (i) 464,153 shares of common stock, (ii) 238,950 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term Incentive Plan, and (iii) 343,188 warrants to purchase shares of common stock that are currently exercisable. Equity Compensation Plan Information The following table provides certain information as of December 31, 2020, with respect to our equity compensation plans under which our equity securities are authorized for issuance: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders 1,169,665 37.69 2,306,956 Equity compensation plans not approved by security holders 205,615 (1) 50.36 - Total 1,375,280 39.59 2,306,956 - 76 - (1) Comprised of awards made to individuals outside the InspireMD, Inc. 2011 UMBRELLA Option Plan and 2013 Long Term Incentive Plan, as described below: ● Options issued to former director: In November 2011, we issued options to purchase an aggregate of 3 shares of common stock to Dr. Barer, then chairman of our board of directors who resigned from the board of directors effective as of June 2, 2017. The exercise price of these options is $3,412,500 per share and the options may be exercised at any time prior to the tenth anniversary of the grant date, pursuant to the nonqualified stock option agreement, as amended on June 2, 2017. ● On January, 2020, we issued to Mr. Marvin Slosman, our Chief Executive Officer, President and Director, 182,381 shares of restricted stock and 60,794 shares of common stock, as inducement awards outside the Company’s 2013 Long-Term Incentive Plan. ● On October 6, 2020, we issued to Mr. Patrick Jamnik, our Vice President of Business Development and Strategic Initiatives, options to purchase 54,307 shares of our common stock, as inducement awards outside the Company’s 2013 Long-Term Incentive Plan. ● On November 3, 2020, we issued to Mr. Andrea Tommasoli, our Senior Vice President of Global Sales and Marketing, options to purchase 90,511 shares of our common stock, as inducement awards outside the Company’s 2013 Long-Term Incentive Plan.] Item 13. Certain Relationships and Related Transactions, and Director Independence. In accordance with our audit committee charter, the audit committee is required to approve all related party transactions. In general, the audit committee will review any proposed transaction that has been identified as a related party transaction under Item 404 of Regulation S-K. A related party includes (i) a director, director nominee or executive officer of us, (ii) a security holder known to be an owner of more than 5% of our voting securities, (iii) an immediate family member of the foregoing or (iv) a corporation or other entity in which any of the foregoing persons is an executive, principal or similar control person or in which such person has a 5% or greater beneficial ownership interest. There were no related party transactions that are required to be disclosed pursuant to Regulation S-K promulgated under the Securities Act of 1933, as amended. Director Independence The board of directors has determined that Dr. Rogers and Messrs. Stuka, Berman and Kester, satisfy the requirement for independence set out in Section 803 of the NYSE American rules and that each of these directors has no material relationship with us (other than being a director and/or a stockholder). In making its independence determinations, the board of directors sought to identify and analyze all of the facts and circumstances relating to any relationship between a director, his immediate family or affiliates and our company and our affiliates and did not rely on categorical standards other than those contained in the NYSE American rule referenced above. Item 14. Principal Accountant Fees and Services. The fees billed for professional services provided to us by Kesselman & Kesselman, Certified Public Accountants (“Kesselman”), a member of PricewaterhouseCoopers International Limited, for the years ended December 31, 2020 and 2019 are described below. - 77 - Audit Fees Kesselman billed us audit fees in the aggregate amount of $160,000 and $160,000 for the years ended December 31, 2020 and 2019, respectively. These fees relate to the audit of our annual financial statements and the review of our interim quarterly financial statements. Audit-Related Fees Kesselman billed us audit-related fees in the aggregate amount of $53,900 and $60,000 for the year ended December 31, 2020 and 2019, respectively. The fees for the year ended December 31, 2020 mostly related to registration statement on Form S-1 filed with the SEC in June 2020 and to our prospectus supplements filed with the Securities and Exchange Commission in July 2020. The fees for the year ended December 31, 2019 mostly related to our prospectus supplements filed with the Securities and Exchange Commission in April 2019 and to our registration statement on Form S-1 filed with the Securities and Exchange Commission in August and September of 2019. Tax Fees Kesselman billed us tax fees in the aggregate amount of $39,209 and $38,675 for the year ended December 31, 2020 and 2019, respectively. These fees relate to professional services rendered for tax compliance, tax advice and tax planning. All Other Fees Kesselman did not bill us for any other fees for the year ended December 31, 2020 and 2019. Our audit committee pre-approves all auditing services, internal control-related services and permitted non-audit services (including the fees and terms thereof) to be performed for us by our independent auditor, except for de minimis non-audit services that are approved by the audit committee prior to the completion of the audit. The audit committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals is presented to the full audit committee at its next scheduled meeting. The Audit Committee pre-approved all of the fees set forth above. PART IV Item 15. Exhibits and Financial Statement Schedules. Documents filed as part of report: 1. Financial Statements The following financial statements are included herein: ● Report of Kesselman & Kesselman, Independent Registered Public Accounting Firm ● Consolidated Balance Sheets as of December 31, 2020 and 2019 ● Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019 ● Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020 and 2019 ● Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019 ● Notes to Consolidated Financial Statements 2. Financial Statement Schedules None 3. Exhibits See Index to Exhibits - 78 - Item 16. Form 10-K Summary Not applicable. Index to Exhibits [Subject to additional analysis/review] Exhibit No. Description 3.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2015) 3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011) 3.3 Certificate of Designation, Preferences and Rights of Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on October 25, 2013) 3.4 Certificate of Amendment to Amended and Restated Certificate of Incorporation of InspireMD, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on May 25, 2016) 3.5 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.5 to the Quarterly Report on Form 10-Q filed on August 9, 2016) 3.6 Certificate of Amendment to Amended and Restated Certificate of Incorporation of InspireMD, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on September 29, 2016) 3.7 Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on March 15, 2017) 3.8 Certificate of Amendment to Certificate of Designation of Preferences, Rights and Limitation of Series C Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on November 29, 2017) 3.9 Certificate of Designation of Preferences, Rights and Limitation of Series D Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on December 4, 2017) 3.10 Certificate of Amendment to Certificate of Designation of Preferences, Rights and Limitation of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on December 12, 2017) 3.11 Certificate of Amendment to Certificate of Designation of Preferences, Rights and Limitation of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on December 22, 2017) 3.12 Certificate of Amendment to Amended and Restated Certificate of Incorporation of InspireMD, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on February 7, 2018) 3.13 Certificate of Amendment to Certificate of Designation of Preferences, Rights and Limitation of Series D Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on March 1, 2018) 3.14 Certificate of Amendment to Certificate of Designation of Preferences, Rights and Limitation of Series D Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 3, 2018) 3.15 Certificate of Amendment to Certificate of Designation of Preferences, Rights and Limitation of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on July 5, 2018) - 79 - 3.16 Certificate of Amendment to Amended and Restated Certificate of Incorporation of InspireMD, Inc., dated March 27, 2019 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on March 28, 2019) 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 5, 2013) 4.2 Rights Agreement dated as of October 22, 2013 between InspireMD, Inc. and Action Stock transfer Corporation, as Rights Agent, including exhibits thereto (incorporated by reference to an exhibit to the Registration Statement on Form 8-A filed with Securities and Exchange Commission on October 25, 2013) 4.3 Form of Series B Warrant Agent Agreement and Form of Series B Warrant (incorporated by reference to Exhibit 4.3 to Amendment No.3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 6, 2017) 4.4 Description of Securities (incorporated by reference to Exhibit 4.4 to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2020) 10.1+ Amended and Restated 2011 Umbrella Option Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on November 4, 2011) 10.2+ Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011) 10.3+ Employment Agreement, by and between InspireMD Ltd. and Craig Shore, dated as of November 28, 2010 (incorporated by reference to Exhibit 10.21 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011) 10.4+ Form of Indemnity Agreement between InspireMD, Inc. and each of the directors and executive officers thereof (incorporated by reference to Exhibit 10.22 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011) 10.5 Agreement by and between InspireMD Ltd. and MeKo Laser Material Processing, dated as of April 15, 2010 (incorporated by reference to Exhibit 10.26 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011) 10.6 Agreement by and between InspireMD Ltd. and Natec Medical Ltd, dated as of September 23, 2009 (incorporated by reference to Exhibit 10.27 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011) 10.7+ InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on December 20, 2013) 10.8+ Amended and Restated Employment Agreement, dated May 5, 2014, by and between InspireMD, Inc. and Craig Shore (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 7, 2014) 10.9+ First Amendment to the InspireMD, Inc. Amended and Restated 2011 UMBRELLA Option Plan (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 7, 2014) 10.10+ Form of Incentive Stock Option Award Agreement under the InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 5, 2014) 10.11+ Form of Nonqualified Stock Option Award Agreement under the InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.3 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 5, 2014) - 80 - 10.12+ Form of Restricted Stock Award Agreement under the InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.4 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 5, 2014) 10.13+ Form of Restricted Stock Unit Award Agreement under the InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.5 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 5, 2014) 10.13+ Form of Section 3(i) Stock Option Award Agreement under the InspireMD, Inc. 2013 Long-Term Incentive Plan (Israeli) (incorporated by reference to Exhibit 99.6 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 5, 2014) 10.14+ Form of Section 102 Capital Gain Stock Option Award Agreement under the InspireMD, Inc. 2013 Long-Term Incentive Plan (Israeli) (incorporated by reference to Exhibit 99.7 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 5, 2014) 10.15+ Form of Section 102 Capital Gain Restricted Stock Award Agreement under the InspireMD, Inc. 2013 Long-Term Incentive Plan (Israeli) (incorporated by reference to Exhibit 99.8 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 5, 2014) 10.16+ Form of Stock Option Award Agreement under the InspireMD, Inc. 2013 Long-Term Incentive Plan (European) (incorporated by reference to Exhibit 99.9 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 5, 2014) 10.17+ Form of Restricted Stock Award Agreement under the InspireMD, Inc. 2013 Long-Term Incentive Plan (European) (incorporated by reference to Exhibit 99.10 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 5, 2014) 10.18+ Form of Stock Option Award Agreement outside the InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.11 to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 5, 2014) 10.19+ Employment Agreement, dated July 14, 2014, by and between InspireMD, Inc. and James J. Barry, Ph.D. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on July 18, 2014) 10.20+ Amendment to Employment Agreement, dated January 5, 2015, by and between InspireMD, Inc. and James J. Barry, PhD (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on January 6, 2015) 10.21+ First Amendment to Amended and Restated Employment Agreement, dated January 5, 2015, by and between InspireMD, Inc. and Craig Shore (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on January 6, 2015) 10.22+ Amendment Number Two to Employment Agreement, dated February 22, 2015, by and between InspireMD, Inc. and James J. Barry, PhD (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on February 25, 2015) 10.23+ First Amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 9, 2015) 10.24+ Third Amendment to Employment Agreement, dated March 28, 2016, by and between InspireMD, Inc. and James J. Barry, PhD (incorporated by reference to Exhibit 10.66 to the Annual Report on Form 10-K filed on March 28, 2016) 10.25 Form of $25,812.50 Underwritten Warrant (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on March 16, 2016) - 81 - 10.26 Form of $32,265.63 Underwriter Warrant (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on March 16, 2016) 10.27 Form of $25,812.50 Private Placement Warrant (incorporated by reference to Exhibit 10.5 to Current Report on Form 8-K filed with the Securities and Exchange Commission on March 16, 2016) 10.28 Form of $32,265.63 Placement Agent Warrant (incorporated by reference to Exhibit 10.7 to Current Report on Form 8-K filed with the Securities and Exchange Commission on March 16, 2016) 10.29+ Second Amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 25, 2016) 10.30+ Fourth Amendment to Employment Agreement, dated June 6, 2016, by and between InspireMD, Inc. and James Barry, Ph.D. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 7, 2016) 10.31 Warrant Agreement, dated June 13, 2016, by and between InspireMD, Inc. and Hercules Capital, Inc. (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on June 14, 2016) 10.32 Placement Agent Unit Purchase Option, dated June 7, 2016, issued to Dawson James Securities, Inc. (incorporated by reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q filed on August 9, 2016) 10.33 Warrant Agent Agreement and Form of Warrant, dated as of July 7, 2016, between InspireMD, Inc. and Action Stock Transfer Corporation, as Warrant Agent (incorporated by reference to an exhibit to the Registration Statement on Form 8-A filed with Securities and Exchange Commission on July 26, 2016) 10.34+ Second Amendment to Amended and Restated Employment Agreement, dated July 25, 2016, by and between InspireMD, Inc. and Craig Shore agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 29, 2016) 10.35+ Third Amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 29, 2016) 10.36+ Director Offer Letter, between InspireMD, Inc. and Thomas J. Kester, dated September 6, 2016 10.37+ Fifth Amendment to Employment Agreement, dated September 5, 2017, by and between InspireMD, Inc. and James Barry, Ph.D. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 7, 2017) 10.38 Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 29, 2017) 10.39 Amendment to Securities Purchase Agreement, dated February 21, 2018 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 21, 2018) 10.40 Waiver Agreement, dated February 26, 2018 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 26, 2018) 10.41 Form of Underwriter Warrant, dated March 1, 2018 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 1, 2018) 10.42 Waiver Agreement, dated March 28, 2018 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 29, 2018) 10.43 Form of Underwriter Warrant, dated April 2, 2018 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 3, 2018) 10.44 Letter Agreement, dated June 28, 2018, by and between InspireMD, Inc. and Sabby Healthcare Master Fund, Ltd. (incorporated by reference to Exhibit 10.67 to the Registration Statement on Form S-1, Amendment No. 2, filed with the SEC on June 26, 2018 (File No. 333-225680)) - 82 - 10.45 Form of Series D Warrant (incorporated by reference to Exhibit A to Exhibit 4.3 to the Company’s Registration Statement on Form S-1, Amendment No. 2, filed with the SEC on June 26, 2018 (File No. 333-225680)) 10.46 Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-1, Amendment No. 2, filed with the SEC on June 26, 2018 (File No. 333-225680)) 10.47 Form of Underwriter Warrant (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-1, Amendment No. 2, filed with the SEC on June 26, 2018 (File No. 333-225680)) 10.48+ Fourth Amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on October 26, 2018) 10.49+ Amended and Restated Employment Agreement, dated February 4, 2019, by and between InspireMD, Inc. and James J. Barry, Ph.D. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 6, 2019) 10.50+ Fifth Amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 21, 2019) 10.51+ Third Amendment to Amended and Restated Employment Agreement, dated March 25, 2019, by and between InspireMD, Inc. and Craig Shore (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 28, 2019) 10.52 Form of Underwriter Warrant, dated April 8, 2019 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 8, 2019) 10.53 Form of Series E Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on September 13, 2019 (File No. 333-233432)). 10.54 Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on September 13, 2019 (File No. 333-233432)). 10.55 Form of Underwriter Warrant (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on September 13, 2019 (File No. 333-233432)). 10.56+ General Release and Severance Agreement, dated December 9, 2019, by and between the Company and James J. Barry, Ph.D. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 10, 2019) 10.57+ Employment Agreement, dated December 9, 2019, by and between the Company and Marvin Slosman (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on December 10, 2019). 10.58+ First Amendment to General Release and Severance Agreement, dated December 31, 2019, by and between the Company and James J. Barry, Ph.D. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on January 6, 2020). 10.59+ First Amendment to Employment Agreement, dated December 31, 2019, by and between the Company and Marvin Slosman (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on January 6, 2020). 10.60+ Nonqualified Stock Option Agreement, by and between the Company and Marvin Slosman (incorporated by reference to Exhibit 10.60 to the Annual Report on Form 10-K filed on March 10, 2020) 10.61+ Restricted Stock Unit Award agreement, by and between the Company and Marvin Slosman (incorporated by reference to Exhibit 10.61 to the Annual Report on Form 10-K filed on March 10, 2020) - 83 - 10.62 Form of Series F Warrant (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on June 1, 2020 (File No. 333-238247)). 10.63 Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on June 1, 2020 (File No. 333-238247)) 10.64 Form of Underwriter Warrant (incorporated by reference to Exhibit 1.1 to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on June 1, 2020 (File No. 333-238247)) 10.65 Sales Agreement, dated July 28, 2020 (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 28, 2020) 10.66 Form of Series G Warrant (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on February 3, 2021 (File No. 333-238247)) 10.67 Form of Underwriter Warrant (incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on February 3, 2021 (File No. 333-238247)) 21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011) 23.1* Consent of Kesselman & Kesselman, Certified Public Accountants 31.1* Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 31.2* Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 32.1* Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101* The following materials from the Company’s Annual Report on Form 10-K for the twelve months ended December 31, 2019, formatted in XBRL (eXtensible Business Reporting Language), (i) Consolidated Balance Sheets, (ii)Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statement of Stockholders’ Equity (Capital Deficiency) and (vi) Notes to Consolidated Financial Statements * Filed herewith. + Management contract or compensatory plan or arrangement. - 84 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INSPIREMD, INC. Date: March 8, 2021 By: /s/ Marvin Slosman Marvin Slosman President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Marvin Slosman President, Chief Executive Officer and Director March 8, 2021 Marvin Slosman (principal executive officer) /s/ Craig Shore Chief Financial Officer, Chief Administrative Officer, Secretary and Treasurer March 8, 2021 Craig Shore (principal financial and accounting officer) /s/ Paul Stuka Chairman of the Board of Directors March 8, 2021 Paul Stuka /s/ Michael Berman Director March 8, 2021 Michael Berman /s/ Thomas J. Kester Director March 8, 2021 Thomas J. Kester /s/ Campbell Rogers, M.D. Director March 8, 2021 Campbell Rogers, M.D. /s/ Gary Roubin Director March 8, 2021 Gary Roubin INSPIREMD, INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2020 F- 1 INSPIREMD, INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2020 TABLE OF CONTENTS Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-3 CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets F-4 Consolidated Statements of Operations F-5 Consolidated Statements of Changes in Equity F-6 - F-7 Consolidated Statements of Cash Flows F-8 Notes to the Consolidated Financial Statements F-9 - F-29 F- 2 Report of Independent Registered Public Accounting Firm To the board of directors and shareholders of InspireMD Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of InspireMD Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, changes in equity and cash flows for the years then ended , including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 2(g) to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. We determined there are no critical audit matters. /s/ Kesselman&Kesselman Certified Public Accountants (Isr.) A member of PricewaterhouseCoopers International Limited Tel-Aviv, Israel March 8, 2021 We have served as the Company’s auditor since 2010. F- 3 INSPIREMD, INC. CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands) December 31, 2020 2019 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 12,645 $ 5,514 Accounts receivable: Trade, net 476 823 Other 146 150 Prepaid expenses 334 87 Inventory 1,415 1,236 Receivable for sale of Shares 323 - TOTAL CURRENT ASSETS 15,339 7,810 NON-CURRENT ASSETS: Property, plant and equipment, net 448 547 Operating lease right of use assets 1,265 937 Fund in respect of employee rights upon retirement 725 586 TOTAL NON-CURRENT ASSETS 2,438 2,070 TOTAL ASSETS $ 17,777 $ 9,880 December 31, 2020 2019 LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable and accruals: Trade 236 646 Other 3,469 2,469 TOTAL CURRENT LIABILITIES 3,705 3,115 LONG-TERM LIABILITIES: Operating lease liabilities 999 653 Liability for employee rights upon retirement 910 729 TOTAL LONG-TERM LIABILITIES 1,909 1,382 COMMITMENTS AND CONTINGENT LIABILITIES (Note 6) TOTAL LIABILITIES 5,614 4,497 EQUITY: Common stock, par value $0.0001 per share; 150,000,000 shares authorized at December 31, 2020 and 2019; 49,264,830 and 3,916,134 shares issued and outstanding at December 31, 2020 and 2019, respectively 5 - Preferred B shares, par value $0.0001 per share; 500,000 shares authorized at December 31, 2020 and 2019; 17,303 shares issued and outstanding at December 31, 2020 and 2019, respectively - - Preferred C shares, par value $0.0001 per share; 1,172,000 shares authorized at December 31, 2020 and 2019; 2,343 and 34,370 shares issued and outstanding at December 31, 2020 and 2019, respectively - - Additional paid-in capital 180,334 163,015 Accumulated deficit (168,176 ) (157,632 ) Total equity 12,163 5,383 Total liabilities and equity $ 17,777 $ 9,880 The accompanying notes are an integral part of the consolidated financial statements. F- 4 INSPIREMD, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (U.S. dollars in thousands, except per share data) Year Ended December 31, 2020 2019 REVENUES (2020 - net of settlement payment of $580, see note 6) $ 2,485 $ 3,721 COST OF REVENUES 2,402 2,965 GROSS PROFIT 83 756 OPERATING EXPENSES: Research and development 2,233 2,954 Selling and marketing 2,103 2,396 General and administrative 6,127 5,222 Total operating expenses 10,463 10,572 LOSS FROM OPERATIONS (10,380 ) (9,816 ) FINANCIAL EXPENSES (160 ) (200 ) LOSS BEFORE TAX EXPENSES (10,540 ) (10,016 ) TAX EXPENSES 4 24 NET LOSS $ (10,544 ) $ (10,040 ) NET LOSS PER SHARE - basic and diluted (0.46 ) (4.80 ) WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES USED IN COMPUTING NET LOSS PER SHARE - basic and diluted 22,686,590 2,089,964 The accompanying notes are an integral part of the consolidated financial statements. F- 5 INSPIREMD, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (U.S. dollars in thousands, except share data) Common stock Series B Convertible Preferred Stock Series C Convertible Preferred Stock Additional paid-in Accumulated Total Shares Amount Shares Amount Shares Amount capital deficit equity BALANCE as of December 31, 2018 768,615 * 17,303 * 61,423 * $ 156,355 $ (147,592 ) $ 8,763 Net loss (10,040 ) (10,040 ) Issuance of common shares, warrants, pre-funded warrants and exercise of pre-funded warrants, net of $1,177 issuance costs 3,039,161 * 6,335 6,335 Conversion of Series C Convertible Preferred Stock to common shares 38,614 * (27,053 ) * * - Share-based compensation related to restricted stock , restricted stock units and stock options award, net of forfeitures of 838 shares 69,744 * 325 325 BALANCE as of December 31, 2019 3,916,134 * 17,303 * 34,370 * $ 163,015 $ (157,632 ) $ 5,383 * Represents an amount less than $1 F- 6 INSPIREMD, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (U.S. dollars in thousands, except share data) Common stock Series B Convertible Preferred Stock Series C Convertible Preferred Stock Additional paid-in Accumulated Total Shares Amount Shares Amount Shares Amount capital deficit equity BALANCE as of December 31, 2019 3,916,134 * 17,303 * 34,370 * $ 163,015 $ (157,632 ) $ 5,383 Net loss (10,544 ) (10,544 ) Exercise of pre-funded warrants 14,856,400 2 16 18 Settlement of restricted stock units in shares of common stock 165,000 * * Issuance of common shares, including at the market offering net of $1,110 issuance costs 24,108,771 3 15,197 15,200 Exercise of Warrants F 2,866,600 * 1,418 1,418 Exercise of Unit Purchase Option 253,587 * 82 82 Conversion of Series C Convertible Preferred Stock to common shares 372,173 * (32,027 ) * * Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of 55,755 shares 2,726,165 * 606 606 BALANCE as of December 31, 2020 49,264,830 5 17,303 * 2,343 * $ 180,334 $ (168,176 ) $ 12,163 * Represents an amount less than $1 F- 7 INSPIREMD, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in thousands) Year ended December 31, 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (10,544 ) $ (10,040 ) Adjustments required to reconcile net loss to net cash used in operating activities: Depreciation and amortization 151 158 Loss from sale of property, plant and equipment 14 - Change in liability for employees rights upon retirement 181 124 Non cash financial expense (income) (4 ) 8 Net change in operating lease assets and liabilities 56 78 Share-based compensation expenses 606 325 Gains on amounts funded in respect of employee rights upon retirement, net (18 ) (35 ) Changes in operating asset and liability items: Increase in prepaid expenses (247 ) (6 ) Decrease (increase) in trade receivables 347 (107 ) Decrease (increase) in other receivables 4 (46 ) Increase in inventory (179 ) (102 ) Decrease in trade payables (410 ) (283 ) Increase in other payables 962 116 Net cash used in operating activities (9,081 ) (9,810 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (88 ) (284 ) Proceeds from sale of property, plant and equipment 22 - Amounts withdrawn in respect of employee rights upon retirement, net (121 ) (103 ) Net cash used in investing activities (187 ) (387 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of shares and warrants and exercise of Pre-Funded Warrants and unit purchase option, net of $1,110 and $1,177 issuance costs, respectively 16,395 6,335 Net cash provided by financing activities 16,395 6,335 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 4 (8 ) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,131 (3,870 ) BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,514 9,384 BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR $ 12,645 $ 5,514 SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: Acquisition of right-of-use assets by means of lease liabilities 619 67 Receivable for Shares 323 - The accompanying notes are an integral part of the consolidated financial statements. F- 8 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF BUSINESS a. General InspireMD, Inc., a Delaware corporation (the “Company”), together with its subsidiaries, is a medical device company focusing on the development and commercialization of its proprietary MicroNet™ stent platform technology for the treatment of complex vascular and coronary disease. MicroNet, a micron mesh sleeve, is wrapped over a stent to provide embolic protection in stenting procedures. The Company’s carotid product (CGuard™ EPS) combines MicroNet and a self-expandable nitinol stent in a single device to treat carotid artery disease. The Company’s coronary product combining MicroNet and a bare-metal stent (MGuard Prime™ EPS) is marketed for use in patients with acute coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions (bypass surgery). The Company markets its products through distributors in international markets, mainly in Europe. As of the date of issuance of the consolidated financial statements, the Company has the ability to fund its planned operations for at least the next 12 months. However, the Company expects to continue incurring losses and negative cash flows from operations until its products (primarily CGuard™ EPS) reach commercial profitability. Therefore, in order to fund the Company’s operations until such time that the Company can generate substantial revenues, the Company may need to raise additional funds. b. COVID-19 Pandemic During the year ended December 31, 2020, in an effort to contain and mitigate the spread of COVID-19, many countries have imposed unprecedented restrictions on travel, quarantines and other public health safety measures. As of the beginning of the second quarter of 2020, we began to experience a significant COVID-19 related impact on our financial condition and results of operations, which we primarily attribute to the postponement of CGuard EPS procedures (non-emergency procedures), as hospitals shifted resources to patients affected by COVID-19. To the best of our knowledge, most European countries in which we operate are reinstating elective procedures, but we do not know when the hospitals will resume to normal pre-pandemic levels with such procedures in light of recent increases in COVID-19 cases in the territories we sell into. We anticipate that the continuation of the pandemic and related restrictions and safety measures would likely result in a continued fluctuations in sales of our products for the upcoming periods. F- 9 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES a. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates using assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these consolidated financial statements, the most significant estimates and assumptions relate to inventory valuations, assessing the likelihood of exercise of options to extend the lease term and legal contingencies. b. Functional currency The currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is the U.S. dollar (“$” or “dollar”). Accordingly, the functional currency of the Company and its subsidiaries is the U.S. dollar. The dollar figures are determined as follows: transactions and balances originally denominated in dollars are presented in their original amounts. Balances in foreign currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. The resulting translation gains or losses are recorded as financial income or expense, as appropriate. For transactions reflected in the statements of operations in foreign currencies, the exchange rates at transaction dates are used. Depreciation and changes in inventories and other changes deriving from non-monetary items are based on historical exchange rates. c. Principles of consolidation The consolidated financial statements include the accounts of the Company and of its subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation. d. Cash and cash equivalents The Company considers all highly liquid investments, which include short-term bank deposits (up to three months from date of deposit), that are not restricted as to withdrawal or use, to be cash equivalents. F- 10 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): e. Concentration of credit risk and allowance for doubtful accounts Financial instruments that may potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, which are deposited in major financially sound institutions in the U.S, Israel and Germany, and trade accounts receivable. The Company’s trade accounts receivable is derived from revenues earned from customers from various countries. The Company performs ongoing credit evaluations of its customers’ financial condition and, requires no collateral from its customers. The Company also has a credit insurance policy for some of its customers. The Company maintains an allowance for doubtful accounts receivable based upon the expected ability to collect the accounts receivable. The Company reviews its allowance for doubtful accounts quarterly by assessing individual accounts receivable and all other balances based on historical collection experience and an economic risk assessment. If the Company determines that a specific customer is unable to meet its financial obligations to the Company, the Company provides an allowance for credit losses to reduce the receivable to the amount management reasonably believes will be collected, which is netted against “Accounts receivable - Trade”. f. Inventory Inventories are stated at the lower of cost (cost is determined on a “first-in, first-out” basis) or net realizable value. The Company’s inventories generally have a limited shelf life and are subject to impairment as they approach their expiration dates. The Company regularly evaluates the carrying value of its inventory and when, based on such evaluation, factors indicate that impairment has occurred, the Company impairs the inventories’ carrying value. The fair value of the Company’s financial instruments approximates their carrying values.” g. Leases In February 2016, the FASB established ASC Topic 842, Leases (Topic 842), by issuing ASU No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. We adopted the new standard on January 1, 2019 using the modified retrospective transition method and we did not restate comparative periods. The new standard provides a number of optional practical expedients in transition. We have elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs for leases entered into prior to adoption of Topic 842. Additionally, the Company did not separate lease and non-lease components for all of our leases. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. Instead, we will continue to recognize the lease payments for those leases in profit or loss on a straight-line basis over the lease term. The new standard had a material effect on the Company’s financial statements. The most significant effects of adoption relate to (1) the recognition of new operating lease ROU assets and operating lease liabilities on its balance sheet for real estate operating leases; and (2) providing significant new disclosures about its leasing activities. Upon adoption, we recognized additional operating lease liabilities, of approximately $1.2 million based on the present value of the remaining lease payments under current leasing standards for existing operating leases. The Company also recognized corresponding ROU assets of approximately $1.2 million. Lease terms may include options to extend or terminate the lease when the Company is reasonably certain that the extension option will be exercised or termination option will not be exercised. For Operating Lease expense is recognized on a straight-line basis over the lease term. Our leases may include variable payments based on measures that include changes in price index which are expensed as incurred and presented as operating expense on the condensed consolidated statements of operations in the same line item as expense arising from fixed lease payments. The new standard also provides practical expedients for an entity’s ongoing accounting. See Note 5. h. Property, plant and equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets: over three years for computers and other electronic equipment, and seven to fifteen years for office furniture and equipment and machinery and equipment (mainly seven years). Leasehold improvements are amortized on a straight-line basis over the term of the lease, which is shorter than the estimated life of the improvements. i. Impairment in value of long-lived assets The Company tests long-lived intangible and tangible assets for impairment whenever events or circumstances present an indication of impairment. If the sum of expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the carrying amount of such assets, an impairment would be recognized, and the assets would be written down to their estimated fair values, based on expected future discounted cash flows. F- 11 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): j. Revenue recognition A contract with a customer exists only when: 1) the parties to the contract have approved it and are committed to perform their respective obligations, 2) the Company can identify each party’s rights regarding the distinct goods or services to be transferred (“Performance Obligations”), 3) the Company can determine the transaction price for the goods or services to be transferred, 4) the contract has commercial substance and 5) it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. Revenues are recorded in the amount of consideration to which the Company expects to be entitled in exchange for Performance Obligations upon transfer of control to the customer, excluding sales taxes. Revenue from sales of goods, including sales to distributors, is recognized when the customer obtains control of the product, once the Company has a present right to payment and the customer has legal title, and risk and rewards of ownership are obtained by the customer. This occurs when products are shipped. The Company recognizes the incremental costs of obtaining contracts as an expense since the amortization period of the assets that the Company otherwise would have recognized is one year or less. The costs are recorded under selling and marketing expenses. Disaggregated revenue is disclosed in Note 10. The Company recognizes revenue net of value added tax (VAT). k. Research and development costs Research and development costs are charged to the statement of operations as incurred. l. Share-based compensation The Company has equity incentive plans under which the Company grants equity awards, including stock options, restricted stock and restricted stock units (“RSUs”). Employee equity awards are classified as equity awards and accounted for using the grant-date fair value method. The Company determines compensation expense associated with Restricted Stock and RSUs based on the fair value of our common stock on the date of grant. The fair value of option awards is estimated using the Black-Scholes valuation model and expensed over the requisite service period. The Company elected to account for forfeitures as they occur. The Company elected to recognize compensation expenses for awards with only service conditions that have graded vesting schedules using the accelerated multiple option approach. m. Uncertain tax positions The Company follows a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit. If under the first step a tax provision is assessed to be more likely than not of being sustained on audit, the second step is performed, under which the tax benefit is measured as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Such liabilities are classified as long-term, unless the liability is expected to be resolved within twelve months from the balance sheet date. The Company’s policy is to include interest related to unrecognized tax benefits within “Financial expenses - net”. n. Deferred income taxes Deferred taxes are determined utilizing the “asset and liability” method based on the estimated future tax effects of differences between the financial accounting and tax bases of assets and liabilities under the applicable tax laws, and on tax rates anticipated to be in effect when the deferred taxes are expected to be paid or realized. The Company assesses realization of deferred income tax assets and, based on all available evidence, concludes whether it is more likely than not that the net deferred income tax assets will be realized. A valuation allowance is provided for the amount of deferred income tax assets not considered to be realizable. The Company may incur an additional tax liability in the event of intercompany dividend distributions by its subsidiaries. Such additional tax liability in respect of these foreign subsidiaries has not been provided for in these financial statements as it is the Company’s policy to permanently reinvest the subsidiaries’ earnings and to consider distributing dividends only in connection with a specific tax opportunity that may arise. Taxes that would apply in the event of disposal of investments in a foreign subsidiary have not been taken into account in computing the deferred taxes, as it is the Company’s intention to hold, and not to realize, these investments. F- 12 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): o. Advertising Costs related to advertising and promotion of products are charged to sales and marketing expense as incurred. Advertising expenses were approximately $163,000 and $262,000 for the years ended December 31, 2020 and 2019, respectively. p. Net loss per share Basic and diluted net loss per share is computed by dividing the net loss for the period attributable to common stock by the weighted average number of shares of common stock outstanding during the period, including 922,720 and 151,884 weighted average shares of common stock issuable to holders of Series B Convertible Preferred Stock for the years ended December 31, 2020 and 2019, respectively, (since they are convertible based on passage of time) and 72,493 weighted average shares of common stock issuable to holders of unexercised Pre-Funded Warrants for the year ended December 31, 2019. The total number of shares of common stock related to outstanding options, warrants, restricted stock, restricted stock units, Series C Convertible Preferred Stock and placement agent units excluded from the calculations of diluted loss per share were 32,493,268 and 4,707,230 for the years ended December 31, 2020 and 2019, respectively. q. Segment reporting The Company has one operating and reportable segment. r. Fair value measurement The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value. F- 13 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): s. Issued accounting pronouncements effective in future periods Financial Instruments - Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments. This guidance replaces the current incurred loss impairment methodology. Under the new guidance, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects its current estimate of credit losses expected to be incurred over the life of the financial instrument based on historical experience, current conditions and reasonable and supportable forecasts. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”). The purpose of this amendment is to create a two-tier rollout of major updates, staggering the effective dates between larger public companies and all other entities. This granted certain classes of companies, including Smaller Reporting Companies (“SRCs”), additional time to implement major FASB standards, including ASU 2016-13. Larger public companies will have an effective date for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All other entities are permitted to defer adoption of ASU 2016-13, and its related amendments, until the earlier of fiscal periods beginning after December 15, 2022. Under the current SEC definitions, the Company meets the definition of an SRC and is adopting the deferral period for ASU 2016-13. The guidance requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements but does not believe the adoption of this standard will have a material impact on its consolidated financial statements. F- 14 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 3 - PROPERTY, PLANT AND EQUIPMENT a. Composition of assets, grouped by major classifications, is as follows: December 31, 2020 2019 ($ in thousands) Cost: Computer equipment $ 289 $ 287 Office furniture and equipment 95 95 Machinery and equipment 1,427 1,414 Leasehold improvements 211 206 2,022 2,002 Less - accumulated depreciation and amortization (1,574 ) (1,455 ) Net carrying amount $ 448 $ 547 b. Depreciation and amortization expenses totaled approximately $151,000 and $158,000 for the years ended December 31, 2020 and 2019, respectively. NOTE 4 - LIABILITY FOR EMPLOYEES RIGHT UPON RETIREMENT Israeli labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. Pursuant to section 14 of the Israeli Severance Compensation Act, 1963, some of the Company’s employees are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made in their name with insurance companies. Payments in accordance with section 14 relieve the Company from any future severance payments to these employees. The severance pay liability of the Company for the rest of its Israeli employees, which reflects the undiscounted amount of the liability, is based upon the number of years of service and the latest monthly salary. The severance pay liability is partly covered by insurance policies and by regular deposits with recognized severance payment funds. The Company may only withdraw funds previously deposited for savings in connection with the payment of severance. The severance pay expenses were approximately $276,000 and $197,000 for the years ended December 31, 2020 and 2019, respectively. Defined contribution plan expenses were approximately $339,000 and $294,000 for the years ended December 31, 2020 and 2019, respectively. The Company expects contribution plan expenses in 2021 to be approximately $346,000. F- 15 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 5 – LEASE AGREEMENTS 1) The Company’s Israeli subsidiary has a lease agreement for a facility in Israel, which expires on December 31, 2020 with an option to extend the agreement for two additional years until December 31, 2022 under the terms stipulated in the agreement. The company exercised the Option Period as estimated. In addition, the Company amended the agreement mentioned above which include a new option period for two additional years until December 31, 2024 under the terms stipulated in the agreement, the Option Period was taken in consideration when calculating the operating lease right of use assets and liabilities. In addition, the Company entered into another amendment to the lease agreement for a lease of additional space in the facility, the additional space amendment was taken in consideration when calculating the operating lease right of use assets and liabilities. 2) The Company leases its motor vehicles under operating lease agreements. 3) Operating lease cost for the year ended December 31, 2020 was comprised of the following: Twelve months ended December 31 Twelve months ended December 31 2020 2019 ($ in thousands) ($ in thousands) Operating lease expense 370 358 Short-term lease expense - 8 370 366 Supplemental information related to leases are as follows: December 31 December 31 2020 2019 ($ in thousands) ($ in thousands) Operating lease right-of-use assets 1,265 937 Current Operating lease liabilities (400 ) (362 ) Non-current operating lease liabilities (999 ) (653 ) Other information: Operating cash flows from operating leases (cash paid in thousands) (387 ) (366 ) Weighted Average Remaining Lease Term 1.73 1.33 Weighted Average Discount Rate 8.38 % 9.07 % Maturities of lease liabilities are as follows: Amount ($ in thousands) 2021 421 2022 389 2023 400 2024 419 Total lease payments 1,629 Less imputed interest (230 ) Total 1,399 F- 16 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 6 - COMMITMENTS AND CONTINGENT LIABILITIES : Litigation: In July 2016, a service provider filed a suit seeking damages from the Company’s subsidiary amounting to $1,967,822. The Company’s subsidiary and the plaintiff have entered into a confidential settlement agreement in the amount of $600,000, and on April 24, 2019, the parties filed a stipulation of dismissal, dismissing all claims in this action. On April 25, 2019, the court denied as moot all pending motions. The related increase in provision of $354,000 was recorded to “Research and development expense” within the Consolidated Statements of Operations for the year months ended December 31, 2019. In July 2019, a former distributor filed a suit seeking damages from the Company’s subsidiary for pre-paid goods subject to the voluntary field action (from April 2014) amounting to €1,830,000 (which is approximately $2.0 million), or alternatively €1,024,000 (which is approximately $1.1 million). In January 2021, we executed a Mediation Agreement with the former distributor, pursuant to which the former distributor agreed to release the Company from all claims stated in the Complaint in exchange for a payment of $580,000. Accordingly, the amount of $580,000 was recorded as a debit to revenue. On July 28, 2020, we entered into a settlement agreement and release with the prior underwriter, under which it provided us a final, unconditional release from any further obligations arising out of or related to the engagement agreements, underwriting agreements and placement agency agreements which we had been party to with it and with respect to any services which it had provided to us. We, in turn, provided the prior underwriter a final, unconditional release from any further obligations arising out of or related to the prior agreements and services. As consideration for the final release provided to us, we paid to the prior underwriter $400,000 in cash and reduced, to $0.495, the exercise price per share of warrants to purchase 274,029 shares of our common stock that had been issued by us to the prior underwriter in various offerings that took place between March 2018 and September 2019. That reduced exercise price represents the exercise price for the Series F Warrants that we issued in our June 2020 public offering. The warrants that were repriced had existing exercise prices per share ranging from $187.50 to $2.25 and a weighted average exercise price per share of $7.32. All other terms of those warrants will remain unchanged. The related increase in expenses of $400,000 was recorded to “General and Administrative expense” within the Consolidated Statements of Operations. In July 2020, a former senior employee of InspireMD GmbH filed a statement of claim at the Munich Labor Court, seeking confirmation of the court that the notice of termination is not effective. On November 10, 2020, we entered into a settlement agreement. As consideration for the final release, we paid the former senior employee 25,000 Eur (approximately $30,000) which was recorded to “Selling and marketing expense” within the Consolidated Statements of Operations. NOTE 7 - EQUITY a. Share capital The Company’s common stock are listed on the NYSE American. On March 27, 2019, the Company filed with the Secretary of State of Delaware a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a one-for-fifty reverse stock split of its common stock, par value $0.0001 per share, effective as of March 29, 2019, which decreased the number of issued and outstanding shares of common stock and restricted stock as of December 31, 2018 from 38.4 million shares to 769 thousand shares. All related share and per share data have been retroactively applied to the financial statements and their related notes for all periods presented. F- 17 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 – EQUITY (continued): Public Offering s On April 8, 2019, the Company closed an underwritten public offering of 486,957 shares of the Company’s common stock at the offering price to the public of $5.00 per share. The Company received net proceeds of approximately $2 million from the offering, after deducting underwriter discounts and commissions and other fees and expenses payable by the Company. In connection with this public offering, on April 12, 2019, the underwriter partially exercised its over-allotment option and purchased an additional 12,393 shares of our common stock at a price to the public of $5.00 per share. The Company received net proceeds of approximately $47,000 from the exercise of the over-allotment option. In connection with the offering, the Company issued to the underwriter warrants to purchase up to 34,955 shares of common stock, or 7% of the shares sold in the offering, including the shares issued pursuant to the over-allotment option (the “April 2019 Underwriter Warrants”). The April 2019 Underwriter Warrants are exercisable at any time and from time to time, in whole or in part, following the date of issuance and ending on April 4, 2024, at an exercise price of $6.25 per share (125% of the offering price to the public per share). Upon execution of the underwriting agreement, the respective conversion price of the outstanding shares of Series B Convertible Preferred Stock and Series C Convertible Preferred Stock was reduced to $5.00 pursuant to the anti-dilution adjustment provisions of the Series B Convertible Preferred Stock and of the Series C Convertible Preferred Stock, and the number of shares of common stock issuable upon conversion of the Series B Convertible Preferred Stock and the Series C Convertible Preferred Stock had increased as follows: ● an aggregate of 133,233 additional shares of common stock issuable upon conversion of the Series B Convertible Preferred Stock, including the payment of the cumulative dividends accrued thereunder in common stock, based on 17,303 shares of Series B Convertible Preferred Stock outstanding as of April 4, 2019. ● an aggregate of 50,708 additional shares of common stock issuable upon conversion of the Series C Convertible Preferred Stock, based on 59,423 shares of Series C Convertible Preferred Stock outstanding as of April 4, 2019. On September 19, 2019, the Company entered into an underwriting agreement relating to an underwritten public offering (the “September 2019 Offering”) of (i) 539,000 common units (“2019 Common Units”), with each 2019 Common Unit being comprised of one share of the Company’s common stock and one Series E warrant (collectively, the “Series E Warrants”) to purchase one share of common stock and (ii) 2,238,777 pre-funded units (“2019 Pre-Funded Units”), with each 2019 Pre-Funded Unit being comprised of one pre-funded warrant (collectively, the “2019 Pre-Funded Warrants”) to purchase one share of common stock and one Series E Warrant, which closed on September 24, 2019. The offering price to the public was $1.80 per 2019 Common Unit and $1.79 per 2019 Pre-Funded Unit. In connection with this public offering, on September 24, 2019, the underwriter partially exercised its over-allotment option and purchased an additional Series E Warrants to purchase 194,444 shares of common stock at a purchase price of $0.01 per Series E Warrant. The Series E Warrants included in the 2019 Common Units and the 2019 Pre-Funded Units are immediately exercisable at a price of $1.80 per share of common stock, subject to adjustment in certain circumstances, and expire five years from the date of issuance. Each 2019 Pre-Funded Warrant contained in a 2019 Pre-Funded Unit is exercisable for one share of our common stock at an exercise price of $0.01 per share. The 2019 Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the 2019 Pre-Funded Warrants are exercised in full. In connection with the offering, the Company issued to the underwriter warrants to purchase up to 194,444 shares of common stock, or 7% of the shares sold in the offering, including the number of shares of common stock issuable upon exercise of the 2019 Pre-Funded Warrants sold in the offering (the “September 2019 Underwriter Warrants”). The September 2019 Underwriter Warrants are exercisable at any time and from time to time, in whole or in part, following the date of issuance and ending on September 19, 2024, at an exercise price of $2.25 per share (125% of the offering price to the public per 2019 Common Unit). Pursuant to the full ratchet anti-dilution adjustment provisions in the respective certificate of designation for the Company’s Series B Convertible Preferred Stock and Series C Preferred Stock, the conversion price of the outstanding shares of the Series B Convertible Preferred Stock and the Series C Preferred Stock was reduced to $1.80 per share, effective as of the date of the underwriting agreement entered for the September 2019 Offering, and the number of shares of common stock issuable upon conversion of the Series B Preferred Stock and the Series C Preferred Stock had increased as follows: ● an aggregate of 355,288 additional shares of common stock upon conversion of the Series B Preferred Stock and as payment of the dividends thereunder in common stock, based on 17,303 shares of Series B Preferred Stock outstanding as of September 19, 2019. ● an aggregate of 84,253 additional shares of common stock upon conversion of the Series C Preferred Stock, based on 37,025 shares of Series C Preferred Stock outstanding as of September 19, 2019. F- 18 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 – EQUITY (continued): The Company received gross proceeds of $5.0 million from the offering, before deducting underwriter discounts and commissions and other fees and expenses payable by the Company. On June 5, 2020, the Company closed an underwritten public offering of (i) 7,635,800 units (“Units”), with each Unit being comprised of one share of the Company’s common stock, par value $0.0001 per share, and one Series F warrant (a “Series F Warrant”) to purchase one share of common stock, and (ii) 14,586,400 pre-funded units (the “Pre-Funded Units”), with each Pre-Funded Unit being comprised of one pre-funded warrant (a “Pre-Funded Warrant”) to purchase one share of common stock and one Series F Warrant. In connection with this public offering, the underwriter exercised its over-allotment option in full and purchased an additional 3,333,300 shares of common stock and 3,333,300 Series F Warrants. The offering price to the public was $0.45 per Unit and $0.449 per Pre-Funded Unit. The net proceeds to the Company from the offering and the exercise of the underwriter’s over-allotment option were approximately $10.7 million, after deducting underwriting discounts and commissions and payment of other estimated expenses associated with the offering, but excluding the proceeds, if any, from the exercise of Series F Warrants and the Pre-Funded Warrants sold in the offering. The pre-funded warrants exercisable at a price of $0.001 per share of common stock. The Series F Warrants included in the Common Units and the Pre-Funded Units are immediately exercisable at a price of $0.495 per share of common stock, subject to adjustment in certain circumstances, and expire June 2, 2025. The shares of common stock, or Pre-Funded Warrants in the case of the Pre-Funded Units, and the Series F Warrants were offered together, but the securities contained in the Common Units and the Pre-Funded Units were issued separately. During the year ended December 31, 2020, 2,866,600 Series F Warrants were converted into 2,866,600 shares of common stock. The net proceeds to the Company from exercise of the Series F Warrants were approximately $1.4 million. Pursuant to the full ratchet anti-dilution adjustment provisions in the respective certificate of designation for the Company’s Series B Convertible Preferred Stock and Series C Preferred Stock, the conversion price of the outstanding shares of the Series B Convertible Preferred Stock and the Series C Preferred Stock was reduced to $0.45 per share, effective as of the date of the underwriting agreement entered for the June 2020 Offering, and the number of shares of common stock issuable upon conversion of the Series B Preferred Stock and the Series C Preferred Stock had increased as follows: ● An aggregate of 1,665,414 additional shares of common stock upon conversion of the Series B Preferred Stock and as payment of the dividends thereunder in common stock, based on 17,303 shares of Series B Preferred Stock outstanding as of June 2, 2020. ● An aggregate of 283,285 additional shares of common stock upon conversion of the Series C Preferred Stock, based on 26,558 shares of Series C Preferred Stock outstanding as of June 2, 2020. for the purpose of calculating basic net loss per share, the additional shares of common stock that are issuable upon exercise of the Pre-funded Warrants have been included since the shares are issuable for a negligible consideration, as determined by the Company according to ASC 260-10-45-13, and have no vesting or other contingencies associated with them. The Company has also concluded that the series F warrants are classified as equity, since the warrants meet all criteria for equity classification. During the year ended December 31, 2020, the Company issued a total of 14,586,400 shares of common stock in connection with the exercise of all outstanding Pre-Funded Warrants issued in June 2020. In addition, the Company issued a total of 270,000 shares of its common stock in connection with the exercise of 270,000 Pre-Funded Warrants issued in September 2019. As of December 31, 2020, there are no outstanding Pre-Funded Warrants. During the year ended December 31, 2019, the Company issued a total of 2,000,811 shares of its common stock in connection with the exercise of an aggregate of 2,000,811 Pre-Funded Warrants and 2019 Pre-Funded Warrants. The Company received aggregate cash proceeds equal to approximately $35,705 in connection with such exercises. F- 19 ATM Offering During the year ended December 31, 2020, the Company sold 12,917,448 shares of its common stock pursuant to its at-the-market (ATM) issuance sales agreement with A.G.P./Alliance Global Partners. These sales resulted in net proceeds to the Company of approximately $4,447 thousand. Pursuant to the full ratchet anti-dilution adjustment provisions in the respective certificate of designation for the Company’s Series B Convertible Preferred Stock and Series C Preferred Stock, the conversion price of the outstanding shares of the Series B Convertible Preferred Stock and the Series C Preferred Stock was reduced to $0.321 per share, triggered by the ATM Facility, effective as of December 14, 2020 , and the number of shares of common stock issuable upon conversion of the Series B Preferred Stock and the Series C Preferred Stock had increased as follows: ● an aggregate of 892,371 additional shares of common stock upon conversion of the Series B Preferred Stock and as payment of the dividends thereunder in common stock, based on 17,303 shares of Series B Preferred Stock outstanding as of December 14, 2020. ● an aggregate of 13,392 additional shares of common stock upon conversion of the Series C Preferred Stock, based on 2,343 shares of Series C Preferred Stock outstanding as of December 14, 2020. As of December 31, 2020, the Number of Preferred shares the amount each class is convertible into is below: Number of Preferred Stock Number of underlying Common stock Series B Convertible Preferred Stock* 17,303 3,112,923 ** Series C Convertible Preferred Stock 2,343 46,714 *** Total 3,159,637 * See “Note 11 - Subsequent events” regarding conversion of all remaining Series B Convertible Preferred Stock into common stock. ** On July 7, 2016, we issued 442,424 shares of Series B Preferred Stock in a public offering. Our Series B Preferred Stock has a stated value of $33.00 which currently converted into 3,112,923 reflecting a conversion price equal to $ 0.321. The holders of Series B Preferred Stock are entitled to receive as cumulative dividends at the rate per share of 15% per annum of the stated value for five years, payable in cash or common stock, at the Company’s discretion, but excluding effect of future conversion price adjustment, if any. *** On March 14, 2017, we issued 1,069,822 shares of Series C Preferred Stock in a public offering. Our Series C Preferred Stock has a stated value of $6.40 which currently converted into 46,714 reflecting a conversion price equal to $ 0.321. As of December 31, 2020, the Company has outstanding warrants to purchase an aggregate of 26,705,502 shares of common stock as follows: Number of underlying Common stock Weighted average exercise price Series A Warrants 1,107 $ 8,750.00 Series B Warrants 2,448 $ 3,500.00 Series D Warrants 766,698 $ 15.00 Series E Warrants 2,972,221 $ 1.80 Series F Warrants 22,688,900 $ 0.50 Underwriter Warrants 274,029 $ 0.50 Other warrants 99 $ 21,993.00 Total Warrants 26,705,502 $ 1.82 As of December 31, 2020, the Company has 155,000,000 authorized shares of capital stock, par value $0.0001 per share, of which 150,000,000 are shares of common stock and 5,000,000 are shares of “blank check” preferred stock. In the event of our liquidation, dissolution, or winding up, holders of Series B Convertible Preferred Stock and Series C Convertible Preferred Stock are entitled to receive the amount of cash, securities or other property to which such holder would be entitled to receive with respect to such shares of Preferred Stock if such shares had been converted to common stock immediately prior to such event. F- 20 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 – EQUITY (continued): b. Share-Based Compensation 1) Pursuant to the current Section 102 of the Israeli Tax Ordinance, which came into effect on January 1, 2003, options may be granted through a trustee (i.e., Approved 102 Options) or not through a trustee (i.e., Unapproved 102 Options). As a result of an election made by the Company under Section 102 of the Income Tax Ordinance, the Company will not be allowed to claim as an expense for tax purposes in Israel the amounts credited to the employee as capital gains to the grantees, although it will generally be entitled to do so in respect of the salary income component (if any) of such awards when the related tax is paid by the employee. 2) During the year ended December 31, 2020, the Company granted stock options to the CEO, employees and directors to purchase a total of 1,379,856 shares of the Company’s common stock. The options have exercise prices ranging from $0.33-$1.10 per share, respectively, which were the fair market value of the company’s common stock on the date of each respective grant. As of December 31, 2020, the fair value of the above options, using the Black-Scholes pricing models, was approximately $509,000. The options are subject to a three-year vesting period with one-third of such awards vesting each year. 3) During the years ended December 31, 2020 and 2019, the Company granted to the then CEO, employees and directors 2,781,920 and 70,582 restricted stock, respectively. The fair value of these restricted stock was approximately $1,051,604 and $668,000, respectively. The restricted stock are subject to a three-year vesting period, with one-third of such awards vesting each year. 4) During the years ended December 31, 2020 and 2019, the Company granted CEO and former CEO 1,357,668 and 165,000 Restricted Stock Units, respectively. The fair value of these restricted stock units was approximately $658,981 and $141,900, respectively. The restricted stock units granted during the years ended December 31, 2020 are subject to a three-year vesting period, with one-third of such awards vesting each year. The restricted stock units granted during the year ended December 31, 2019 were fully vested upon grant. 5) The following table summarizes information about stock options granted to employees: Year ended December 31 2020 2019 Number of options Weighted average exercise price Number of options Weighted average exercise price Outstanding - beginning of period 160 $ 189,161.99 164 $ 184,656 Granted 1,379,856 0.41 - - Forfeited (4,751 ) 343.51 (4 ) 4,423 Outstanding -end of period 1,375,265 $ 21.24 160 $ 189,162 Exercisable at the end of the period 115 $ 249,006 160 $ 189,162 F- 21 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 – EQUITY (continued): 6) The following table summarizes information about stock options granted to non-employees: Year ended December 31 2020 2019 Number of options Weighted average exercise price Number of options Weighted average exercise price Outstanding - beginning of period 16 $ 1,711,975 20 $ 1,693,174 Granted - - - - Forfeited (1 ) 2,156,208 (4 ) 1,617,338 Exercised - - - - Outstanding - end of period 15 1,682,385 16 1,711,975 Exercisable at the end of the period 15 1,682,385 16 1,711,975 7) The following table summarizes information about restricted stock granted to employees: Year ended December 31 2020 2019 Number of restricted stock Outstanding - beginning of period 69,631 19 Reverse Split Adjustments - (127 ) Granted 2,781,920 70,582 Forfeited (55,755 ) (838 ) Vested (9,915 ) (5 ) Outstanding - end of period 2,785,881 69,631 8) The following table summarizes information about Restricted Stock Unit granted to employees: Year ended December 31 2020 2019 Number of restricted stock Outstanding - beginning of period 165,000 - Granted 1,357,668 165,000 Forfeited - - Vested (165,000 ) - Outstanding - end of period 1,357,668 165,000 9) The following table provides additional information about all options outstanding and exercisable: Outstanding as of December 31, 2020 Exercise price Options outstanding Weighted average remaining contractual life (years) Options exercisable $0.175 2 1.39 2 $0.33-0.39 1,314,356 9.69 - $1.10 60,794 9.01 - $175 and above 128 4.71 128 1,375,280 9.66 130 The weighted average of the remaining contractual life of total vested and exercisable options as of December 31, 2020 was 4.66 years. The aggregate intrinsic value of the total exercisable options as of December 31, 2020 was approximately $1. F- 22 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 – EQUITY (continued): The weighted average fair value of options granted was $0.37 for the year ended December 31, 2020. The weighted average fair value of options granted was estimated using the Black-Scholes option-pricing model. 10) The following table sets forth the assumptions that were used in determining the fair value of options granted to employees for the year December 31, 2020: Year ended December 31 2020 Expected life 5.5-6.5 years Risk-free interest rates 0.32%-0.42 % Volatility 124.53%-136.66 % Dividend yield 0 % The Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. Accordingly, as to ordinary course options granted, the expected term was determined using the simplified method, which takes into consideration the option’s contractual life and the vesting periods (for non-employees, the expected term is equal to the option’s contractual life). The annual risk-free rates are based on the yield rates of zero coupon non-index linked U.S. Federal Reserve treasury bonds as both the exercise price and the share price are in dollar terms. The Company’s expected volatility is derived from its historical data. 11) As of December 31, 2020, the total unrecognized compensation cost on employee and non-employee stock options and restricted stock, related to unvested stock-based compensation, amounted to approximately $1.7 million. This cost is expected to be recognized over a weighted-average period of approximately 0.95 years. This expected cost does not include the impact of any future stock-based compensation awards. 12) The following table summarizes the allocation of total share-based compensation expense in the consolidated statements of operations: Year ended December 31 2020 2019 ($ in thousands) Cost of revenues $ 22 $ 14 Research and development 29 10 Sales and marketing 32 29 General and administrative 523 272 $ 606 $ 325 F- 23 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 8 - TAXES ON INCOME: a. Tax laws applicable to the Company and its subsidiaries Taxation in the United States InspireMD, Inc. is taxed under U.S. tax laws. Accordingly, the applicable federal corporate tax rate in 2020 is 21%. State tax may also apply . Taxation in Israel The corporate tax rate was 23% in 2020 and will be 23% thereafter. Taxation in Germany InspireMD GmbH is taxed according to the tax laws in Germany. Accordingly, the applicable tax rates are corporate tax rate of 15.825% and trade tax rate of 17.15%. b. Tax benefits under the Law for the Encouragement of Capital Investments, 1959 (the “Law”): InspireMD Ltd. has been granted a “Beneficiary Enterprises” status under the Investment Law including Amendment No. 60 thereof, which became effective in April 2005. The tax benefits derived from any such Beneficiary Enterprise relate only to taxable profits attributable to the specific program of investment to which the status was granted. The main benefit, to which InspireMD Ltd. is entitled, conditional upon the fulfilling of certain conditions stipulated by the above law, is a two-year exemption and five to eight years of a reduced tax rate of 10% to 23% from tax on income derived from beneficiary activities in facilities in Israel. The two-year exemption starts only when the Company starts to pay taxes after using all tax offsetting losses. The tax benefit period is twelve years from the year of election, which means that after a year of election, the two-year exemption and eight years of reduced tax rate can only be used within the next twelve years. The Company elected the year 2011 as a year of election. F- 24 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 8 - TAXES ON INCOME (continued): In the event of a distribution of tax-exempt income attributable to “Beneficiary Enterprises” as a cash dividend, the Company will be required to pay tax at a rate of 10% to 23% on the amount distributed, subject to certain conditions. In addition, dividends originating from income attributable to the “Beneficiary Enterprises” will be subject to a 20% withholding tax. Should InspireMD Ltd. derive income from sources other than the “Beneficiary Enterprises” during the period of benefits, such income shall be taxable at the regular corporate tax rate. 1) Conditions for entitlement to the benefits The entitlement to the above benefits is conditional upon InspireMD Ltd. fulfilling the conditions stipulated by the law, regulations published thereunder and the instruments of approval for the specific investments in approved assets. In the event of failure to comply with these conditions, the benefits may be cancelled, and InspireMD Ltd. may be required to refund the amount of the benefits, in whole or in part, with the addition of interest and linkage. The Company opted not to apply for Preferred Enterprise status (as defined in the Amendment of the Law for the Encouragement of Capital Investments, 1959). c. Carry forward tax losses As of December 31, 2020, the Company had a net carry forward tax loss of approximately $44 million, of which approximately $35 million (arising before January 1, 2018), expires until 2037, and approximately $9 million, which does not expire, but is limited to offset 80% of the net income in the year it is utilized. Under the U.S. tax laws, for net operating losses (NOLs) arising after December 31, 2017, the Tax Cuts and Jobs Act enacted on December 22, 2017 (the “2017 Act”) limits a taxpayer’s ability to utilize NOL carryforwards to 80% of taxable income. In addition, NOLs arising after 2017 can be carried forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, 2018, will not be subject to the foregoing taxable income limitation and will continue to have a two-year carryback and twenty-year carryforward period. Further to COVID-19 CARES act of the U.S. Treasury, the business tax provision temporarily removes the current law taxable income 80% limitation to allow an NOL to fully offset income in tax years 2018, 2019 and 2020. The provision also allows an NOL from tax years beginning in 2018, 2019, or 2020 to be carried back for five years. As of December 31, 2020, InspireMD Ltd., an Israeli subsidiary, had a net carry forward tax loss of approximately $98 million. Under Israeli tax laws, the carry forward tax losses can be utilized indefinitely. d. Loss before income taxes The components of loss before income taxes are as follows: Year ended December 31 2020 2019 ($ in thousands) Loss before taxes on income: InspireMD, Inc. $ (3,897 ) $ (3,687 ) Subsidiaries (6,643 ) (6,329 ) $ (10,540 ) $ (10,016 ) F- 25 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 8 - TAXES ON INCOME (continued): e. Current taxes on income The main reconciling items between the statutory tax rate of the Company and the effective tax rate are the change in subsidiary tax rates and the change in valuation allowance in respect of tax benefits from carried forward tax losses due to uncertainty of the realization of such tax benefits and changes in tax rates following the 2017 Act. The changes in the valuation allowance for the year ended December 31, 2020 and 2019 were as follows: Year ended December 31 2020 2019 ($ in thousands) Balance at the beginning of the year $ 31,181 $ 27,640 Changes during the year: Losses during the year (including foreign exchange rate effect) 3,964 3,541 Balance at the end of the year $ 35,145 $ 31,181 f. Accounting for Uncertain Tax position Following is a reconciliation of the total amounts of the Company’s uncertain tax positions during the year ended December 31, 2020 and 2019 were as follows: Year ended December 31, 2020 2019 ($ in thousands) Balance at beginning of period $ 44 $ 28 Increase in uncertain tax positions because of tax positions taken during the year 8 16 Balance at end of period $ 52 $ 44 A summary of open tax years by major jurisdiction is presented below: Jurisdiction Years U.S. 2017-2020 Israel 2015-2020 Germany 2017-2020 United Kingdom 2014-2015 F- 26 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 8 - TAXES ON INCOME (continued): g. Deferred income tax: December 31, 2020 2019 ($ in thousands) Long-term: Allowance for bonus 2 57 Provision for vacation and recreation pay 63 35 R&D expenses 578 589 Operating lease right of use assets (291 ) (215 ) Operating lease liabilities 322 233 Share-based compensation 2,669 2,596 Carry forward tax losses 31,759 27,854 Accrued severance pay, net 43 32 35,145 31,181 Less-valuation allowance (35,145 ) (31,181 ) - - NOTE 9 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION: Balance sheets: Inventory: December 31, 2020 2019 ($ in thousands) Finished goods $ 350 $ 173 Work in process 376 81 Raw materials and supplies 689 982 $ 1,415 $ 1,236 F- 27 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 9 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (continued): a. Accounts payable and accruals-other: December 31, 2020 2019 ($ in thousands) Employees and employee institutions $ 1,236 $ 1,238 Accrued vacation and recreation pay 278 188 Accrued expenses 886 604 Accrual for settlement payment (see note 6) 580 - Current Operating lease liabilities 400 362 Other 89 77 $ 3,469 $ 2,469 NOTE 10 – DISAGGREGATED REVENUE AND ENTITY WIDE DISCLOSURES : Revenues are attributed to geographic areas based on the location of the customers. The following is a summary of revenues: Year ended December 31, 2020 2019 ($ in thousands) Germany $ 708 $ 727 Italy 596 686 Poland 219 370 Other (2020 - net of settlement payment of $580, see note 6) 962 1,938 $ 2,485 $ 3,721 By product: Year ended December 31, 2020 2019 ($ in thousands) CGuard™ EPS $ 2,764 $ 3,265 MGuard Prime™ EPS (2020 - net of settlement payment of $580, see note 6) (279 ) 456 $ 2,485 $ 3,721 By principal customers (2020 - before of settlement payment of $580 see note 6): Year ended December 31, 2020 2019 Customer A 21 % 18 % Customer B 11 % 8 % Customer C 8 % 10 % Customer D 7 % 10 % All tangible long lived assets are located in Israel. NOTE 11 - SUBSEQUENT EVENTS: Subsequent to December 31, 2020 the Company had several stock transactions as follows (U.S. dollars in thousands, except share data): Common Stock Gross amount BALANCE as of December 31, 2020 49,264,830 Issuance of shares to Chinese distributor 1,341,682 900 (a) ATM sales 12,277,844 5,659 (b) February 2021 public offering 33,387,096 20,700 (c) Series F and Series G warrants exercise 18,381,177 9,469 (d) Conversion of Series B Convertible Preferred Stock to common shares 3,112,923 - (e) a. On February 3, 2021, the Company entered into a Distribution Agreement with three China-based partners, pursuant to which the Chinese partners will be responsible for conducting the necessary registration trials for commercial approval of the Company’s products in China, followed by an eight-year exclusive distribution right to sell the Company’s products in China with the term of the agreement continuing on a year-to-year basis unless terminated. Under the Distribution Agreement, the China-based partners will be subject to minimum purchase obligations. The Distribution Agreement may be terminated for cause upon failure to meet minimum purchase obligations, failure to obtain regulatory approvals or for other material breaches. In addition, and on the same day, the Company entered into an investment transaction with one of the Chinese parties to the Distribution Agreement, , which included (i) a Securities Purchase Agreement, or the SPA, pursuant to which investor agreed to invest $900,000 in exchange for shares of the Company’s common stock at a purchase price of $0.6708 per share. F- 28 b. Subsequent to year-end, the Company sold an aggregate of 12,277,844 shares of common stock for aggregate gross proceeds of $5,659,000 under the ATM Sales Agreement. In addition, in January 2021 we received $323,000 for shares of common stock sold on December 2020 and recorded to "Receivable for sale of Shares" in current assets of the Consolidated Balance Sheet as of December 31, 2020. c. On February 3, 2021, the Company entered into an underwriting agreement with A.G.P./Alliance Global Partners, relating to an underwritten public offering (the “Offering”) of 29,032,258 units (“Units”), with each Unit being comprised of one share of the Company’s common stock, par value $0.0001 per share, and one Series G warrant to purchase one-half of one share of Common Stock. The offering price to the public was $0.62 per Unit. The Series G Warrants are immediately exercisable at a price of $0.682 per share, subject to adjustment in certain circumstances, and expire five years from the date of issuance. The Offering closed on February 8, 2021. The Company granted the Underwriter a 45-day option to purchase up to an additional 4,354,838 Units consisting of 4,354,838 shares of Common Stock and Series G Warrants to purchase 2,177,419 shares of common stock in the Offering, which the Underwriter exercised in full on February 4, 2021. The Company granted the Underwriter a compensation warrant to purchase up to 1,669,355 shares of Common Stock. The Underwriter Warrants have an exercise price of $0.682 per share and are exercisable immediately and for five years from the date of effectiveness of the registration statement in connection with the Offering. The net proceeds to the Company from the Offering, after giving effect to the exercise of the Underwriter’s over-allotment option, were approximately $18.9 million, after deducting underwriting discounts and commissions and payment of other estimated expenses associated with the Offering, but excluding the proceeds, if any, from the exercise of Series G Warrants sold in the Offering. d. Subsequent to year-end, Series F and Series G warrants to purchase shares of common stock were exercised by investors at an exercise price of $0.495 and $0.682 per share, resulting in the issuance of 18,381,177 shares of common stock for proceeds of approximately $9,469,000. e. On February 3, 2021, 17,303 shares of Series B Convertible Preferred Stock were converted into 3,112,923 shares of common stock. F- 29