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, 2022, 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, 2022. 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, 2022. 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, 2022. 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, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. - 61 - 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 59 President, Chief Executive Officer and Director Craig Shore 61 Chief Financial Officer, Chief Administrative Officer, Secretary and Treasurer Andrea Tommasoli 51 Chief Operating Officer Shane Gleason 49 General Manager of North America and VP of Global Marketing Michael Berman (1)(2) 65 Director Paul Stuka (1)(2)(3) 68 Chairman of the Board of Directors Thomas J. Kester (1)(3) 76 Director Gary Roubin, M.D. 74 Director Kathryn Arnold (3) 50 Director (1) Member of our audit committee (2) Member of our nominating and corporate governance committee (3) Member of our compensation committee 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 expiring at our 2024 annual meeting of stockholders. Michael Berman is our Class 2 director, with his term of office expiring at our 2025 annual meeting of stockholders. Marvin Slosman, Thomas J. Kester and Kathryn Arnold are our Class 3 directors, with their terms of expiring 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. - 62 - 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 vast 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. Andrea Tommasoli has served as our Chief Operating Officer since March 19, 2023. Prior to Mr. Tommasoli’s appointment as Chief Operating Officer, he served as our Senior Vice President of Global Sales and Marketing since November 2020 bringing over two decades of life sciences industry experience to the Company. Prior to joining the Company, Mr. Tommasoli held commercial leadership positions at Integra LifeSciences, a medical device manufacturing company that manufactures products for skin regeneration, neurosurgery, reconstructive and general surgery, from 2011 to 2020, serving as the Senior Director of Indirect Markets from January 2017 to October 2020, as Director of Sales for Specialty Surgical Solutions Europe from June 2014 to December 2016 and as Director of Sales for Neurosurgery EMEA from July 2011 to June 2014. Prior to joining Integra, Mr. Tommasoli was a Managing Partner at Alticare, an independent company focusing on start-ups and growth companies in the medtech business from 2009 to 2011 and was the Director of St. Jude Medical Neuromodulation division in France from 2007 to 2009. Mr. Tommasoli has vast experience in commercializing innovative medical technology solutions that improve and advance standard of care. Mr. Tommasoli received his B.A. in nuclear engineering from Bologna University, Italy and his M.B.A. from HEC Paris, France. Shane Gleason has served as our general manager of North America and vice president of global marketing since March 1, 2023. Prior to joining us, Mr. Gleason served as served as vice president of sales, vascular interventions at Surmodics from 2021. Before that, from 2019 to 2021, he served as senior director, US marketing at Edwards Life Sciences (NYSE: EW), a developer of artificial heart valve and hemodynamic monitoring technologies, and, before that, from 2017 to 2019 as, chief commercial officer at Nuvaira, Inc., a privately held developer of COPD therapies that preserve patient lung health. Earlier in his career, Mr. Gleason held sales and marketing leadership roles at Cordis, a Cardinal Health company (NYSE: CAH) from 2015 to 2016, Trivascular Technologies (part of Endologix) from 2012 to 2015, and Abbott Vascular (NYSE: ABT) from 2007 to 2010, where he launched the second FDA approved carotid stent system. Mr. Gleason received a Bachelor of Science, Engineering Science and Mechanics from Virginia Polytechnic Institute and State University and a Master of Business Administration from the University of Maryland Smith School of Business. Michael Berman has served as our director since February 7, 2013. Mr. Berman is a medical device entrepreneur who has worked with high-potential development and early-stage commercial companies since 2014. From 2005 to 2012, 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 and which was sold to Boston Scientific. 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 2018, 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 of Mazor Robotics, a company pioneering Spinal Robotic Surgery. Mazor was sold to Medtronic in 2018. 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 2019 as a director of QArt, a medical device company, (ix) since 2014 as a venture partner at RiverVest Ventures. (x) since 2017 as a Director of Truleaf Medical and (xi) since 2022 as a Director of Kedma Solar Ltd. 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. - 63 - 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 35 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. From 2013 to 2022 Mr. Stuka served as a director of Caliber Imaging & Diagnostics, Inc. (formerly Lucid, Inc.). 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, LLC 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. From 2004 till 2019 Mr. Kester served as a director of Conestee Foundation Inc, a not for profit organization that developed a 400 acre Nature Preserve in the center of Greenville County, SC . Mr. Kester has served (i) since 2003 as a director of Upstate forever, a not for profit in Greenville, SC focused on protecting special places in the 10 county upstate region of South Carolina and promoting sustainable development, (ii) since 2021 as a director of South Carolina Environmental Law Project, a not for profit law firm representing clients on environmental issues. Mr. Kester’s experience includes 28 years from 1974 until 2002 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. in 2010, 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. Dr. Roubin is qualified to serve on the board given that he is an internationally renowned interventional cardiologist recognized for his pioneering work in carotid stenting and embolic and protection devices. He is also acknowledged for the development of coronary stenting and the first FDA-approved coronary stent. Kathryn Arnold has served as our director since May 10, 2021. Ms. Arnold is the Founder and CEO of SPRIG Consulting, a strategic marketing consulting firm with over a decade of success in the medical space. Prior to founding SPRIG, Ms. Arnold held sales and marketing management roles with Guidant Corporation (acquired by Abbott Laboratories and Boston Scientific) and Kensey Nash Corporation (acquired by Spectranetics Corporation / Royal Philips). Additionally, Ms. Arnold is an adjunct faculty member at the Kellogg School of Management at Northwestern University where she teaches a course specific to medical product commercialization and financing. Ms. Arnold received a bachelor of arts in environmental science from the University of Vermont and a master’s degree from the Kellogg School of Management at Northwestern University. - 64 - Board Diversity Matrix The table below provides certain information regarding the diversity of our board of directors as of the date set forth below. Board Diversity Matrix (As of March 28, 2023) Total Number of Directors 6 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 1 5 # # Part II: Demographic Background African American or Black # # # # Alaskan Native or Native American # # # # Asian # # # # Hispanic or Latinx # # # # Native Hawaiian or Pacific Islander # # # # White 1 5 # # Two or More Races or Ethnicities # # # # LGBTQ+ 0 Did Not Disclose Demographic Background # Family Relationships We have no family relationships amongst our directors and executive officers. 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 as defined in the Nasdaq Listing Rules and Rule 10A-3 promulgated under the Exchange Act. 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 as defined in the Nasdaq Listing Rules and Rule 10A-3 promulgated under the Exchange Act. 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. - 65 - Compensation Committee .  Our compensation committee is currently comprised of Messrs. Stuka and Kester and Ms. Arnold, each of whom qualify as an independent director under as defined in the Nasdaq Listing Rules and Rule 10A-3 promulgated under the Exchange Act. 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, 2022 and 2021. Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) (1) Option Awards ($) (1) All Other Compensation ($) Total ($) Marvin Slosman 2022 432,500 (3) 233,550 (4) - - 30,759 (5) 696,809 President and Chief Executive Officer 2021 410,000 (2) 169,125 (4) 603,856 428,803 24,360 (5) 1,636,144 Craig Shore 2022 319,524 (6) 164,698 (4)(6) - - 141,013 (7) 625,234 Chief Financial Officer, Secretary and Treasurer 2021 319,569 (6) 164,257 (4)(6) 300,669 130,499 141,867 (7) 1,056,861 Andrea Tommasoli (8) 2022 226,837 (9)(10) 71,193 (4)(10)(11) - - 61,239 (12) 359,269 Chief Operating Officer 2021 242,515 46,572 (4)(10)(11) 244,192 72,872 62,337 (12) 668,488 (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) Effective as of July 1, 2021, Mr. Slosman’s annual base salary was increased to $420,000. (3) Effective as of July 1, 2022, Mr. Slosman’s annual base salary was increased to $445,000. (4) Cash bonus awards for the 2021 calendar year were approved by the compensation committee in January 2022. Cash bonus awards for the 2022 calendar year were approved by the compensation committee in January 2023. (5) Mr. Slosman’s other compensation for the twelve months ended December 31, 2022 and 2021 consisted of benefits related to health insurance. (6) Effective as of January 1, 2022, Mr. Shore’s annualized base salary was increased to NIS 1,073,280. 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 3.519 NIS per dollar which was the exchange rate as of December 31, 2022. The average exchange rate for the twelve month period ended December 31, 2022 and 2021 were 3.359 NIS per dollar and 3.229 NIS per dollar, respectively. - 66 - (7) Mr. Shore’s other compensation consisted solely of benefits in the twelve months ended December 31, 2022 and 2021. 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, cell phone and a daily food allowance. (8) Mr. Tommasoli was appointed Chief Operating Officer in March 2023. Amounts presented are during Mr. Tommasoli’s tenure as Senior Vice President of Global Sales and Marketing. (9) Effective as of January 1, 2022, Mr. Tommasoli’ s annualized base salary was increased to Euro 215,256. (10) 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 1.073 Euro per dollar which was the exchange rate as of December 31, 2022. The average exchange rate for the twelve-month period ended December 31, 2022 and 2021 were 1.054 Euro per dollar and 1.183 Euro per dollar, respectively. (11) Amount consists of a cash bonus of $14,546 and sales commissions of $56,647 with respect to 2022 and a cash bonus of $21,599 and sales commissions of $24,973 with respect to 2021. (12) Mr. Tommasoli’s other compensation consisted solely of benefits in the twelve months ended December 31, 2022 and 2021. In each of the periods reported, Mr. Tommasoli’ s benefits included our contributions to car allowance, retirement benefits, health insurance, provident fund and other insurances typical in France (excluding social security charges for illness, family allowance and retirement). Agreements with Named 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, November 8, 2021 and January 5, 2023 (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, was to remain in effect for three years (the “Initial Employment Term”), unless earlier terminated, and was to be automatically renewed for successive one-year terms after the Initial Employment Term. We subsequently amended Mr. Shore’s employment agreement to remove that certain definitive term of his employment such that his employment agreement shall expire if and when terminated by either party pursuant to the terms thereof. 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, which as of July 1, 2022 was increased to $445,000, 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 60% 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. In January 2022, the Compensation Committee approved a reimbursement of up to $50,000 for any reasonable and customary, documented out-of-pocket relocation expenses actually incurred by Mr. Slosman in the 2022 calendar years, in connection with his relocation to Europe, as well as $62,500 in expenses on an annual basis for expenses relating to commuting expenses, health coverage and corporate and visa status costs. - 67 - 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 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 terminates, we shall, subject to the execution and timely return by Mr. Slosman of a release of claims, pay Mr. Slosman cash payments totalling $100,000 in the aggregate, payable in equal instalments 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 termination of his 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, March 25, 2019, August 14, 2020, November 4, 2021, January 17, 2022 and January 15, 2023 (as amended, the “Shore Employment Agreement”). The Shore Employment Agreement had an initial term that originally was to end on December 31, 2020, and was to automatically renew for additional one-year periods on January 1st thereafter unless either party gave 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. We subsequently amended the Shore Employment Agreement to remove that certain definitive term of his employment such that his employment agreement shall expire if and when terminated by either party pursuant to the terms thereof. Under the terms of the Shore Employment Agreement, Mr. Shore is entitled to an annual base salary, which as of January 1, 2023 was increased to no less than NIS 93,912 per month (NIS 1,126,944 on an annualized basis). 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. - 68 - If Mr. Shore’s employment is terminated upon his death or disability, by us without cause (as such term is defined in the Shore Employment Agreement), or upon his resignation for “good reason” (as such term is defined in the Shore 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 the Shore Employment Agreement 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. 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, 2022 was $254,000, 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, 2022, Mr. Shore would have been entitled to receive $308,000 in severance under Israeli law, thereby requiring us to pay Mr. Shore $54,000, in addition to releasing the $254,000 in Mr. Shore’s severance payment fund. On the other hand, pursuant to the Shore 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. - 69 - 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. Andrea Tommasoli We have been a party to an employment agreement with Mr. Andrea Tommasoli since November 2, 2020 (the “Tommasoli Agreement”). Mr. Tommasoli served as the Company’s Senior Vice President of Global Sales and Marketing since November 2020 until his promotion to Chief Operating Officer, effective as of March 19, 2023. Following his promotion Mr. Tommasoli receives an annual base salary of 240,000 Euros (approximately $260,000) and is entitled to a yearly gross bonus of 35% of his base salary, which will be based on the Board’s assessment of Mr. Tommasoli’s individual performance and the overall performance of the Company. Mr. Tommasoli’s remuneration is subject to deduction of the employee’s share of social contributions, and CSG and CRDS. The Tommasoli Agreement was entered into for an indefinite period, and it may be terminated at any time by either the Company or Mr. Tommasoli with a six months’ notice period; however, no notice period applies in case of serious or gross misconduct. The Tommasoli Agreement further provides for standard benefits, such as reimbursement of business expenses, professional vehicle expenses and participation in the Company’s employee benefit plans and programs. The Tommasoli Agreement also contains certain standard confidentiality requirements. Change of Control Agreements Pursuant to our forms of our restricted stock award agreement, stock option agreement, or restricted stock unit award agreement pursuant to our, in the event of a change of control, any unvested awards shall become immediately vested. We do not currently have any plans providing for the payment of retirement benefits to our named executive officers or directors, other than as described above and under “Agreements with Executive Officers” above. We do not currently have any change-of-control or severance agreements with any of our named 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. - 70 - Outstanding Equity Awards at December 31, 2022 The following table shows information concerning unexercised options and unvested shares of restricted stock outstanding as of December 31, 2022 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 2,702 1,351 (1) 16.50 1/2/2030 4,053 (2) 3,486 17,412 8,706 (3) 5.85 8/31/2030 26,117 (4) 22,461 13,333 26,667 (5) 6.90 4/19/2031 16,285 32,570 (6) 4.12 10/13/2031 97,711 (7) 84,032 Craig Shore 1 - 124,687.50 07/25/2026 10,057 5,029 (3) 5.85 8/31/2030 15,085 (8) 12,973 2,222 4,445 (5) 6.90 4/19/2031 8,109 16,217 (9) 4.09 11/10/2031 48,652 (10) 41,841 Andrea Tommasoli 4,023 2,012 (11) 5.25 11/2/2030 6,034 (12) 5,190 6,585 13,171 (6) 4.12 10/13/2031 39,513 (13) 33,981 (1) These options vest annually, with one vesting remaining on January 2, 2023. (2) These restricted stock units (RSUs) vest annually, with one vesting remaining on January 2, 2023.In case of the holders termination of services for any reason other than by the Company for cause, the Company shall convert the vested RSUs into the number of whole shares of Common Stock equal to the number of vested RSUs and shall deliver them to the holder. (3) These options vest annually, with one vesting remaining on August 31, 2023. (4) These RSUs vest annually, with one vesting remaining on August 31, 2023. (5) These options vest annually, with one-half vesting on each of April 19, 2023, and April 19, 2024. (6) These options vest annually, with one-half vesting on each of October 13, 2023, and October 13, 2024. (7) These RSUs vest annually, with one-half vesting on each of October 13, 2023, and October 13, 2024. (8) These shares of restricted stock vest annually, with one vesting remaining on August 31, 2023. (9) These options vest annually, with one-half vesting on each of November 10, 2023, and November 10, 2024. (10) These shares of restricted stock vest annually, with one-half vesting on each of November 10, 2023, and November 10, 2024. (11) These options vest annually, with one vesting remaining on November 2, 2023. (12) These shares of restricted stock vest annually, with one vesting remaining November 2, 2023. (13) These shares of restricted stock vest annually, with one-half vesting on each of October 3, 2023, and October 3, 2024. Option Exercises and Stock Vested There were no stock options exercised by our named executive officers during the twelve months ended December 31, 2022. - 71 - 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 13 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 is administered by our compensation committee. The InspireMD, Inc. 2011 UMBRELLA Option Plan has expired 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 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. - 72 - As of December 31, 2022, we had 73,175 shares of common stock available for future issuance under our 2013 Long-Term Incentive Plan. As of March 28, 2023, we had 74,195 shares of common stock available for future issuance under our 2013 Long-Term Incentive Plan. 2021 Equity Incentive Plan On September 30, 2021, at our 2021 annual meeting of stockholders, our stockholders approved our 2021 Equity Incentive Plan. The purpose of the InspireMD, Inc. 2021 Equity 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. 2021 Equity 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. 2021 Equity Incentive Plan is administered by our compensation committee. As of December 31, 2022, we had 739,826 shares of common stock available for future issuance under our 2021 Equity Incentive Plan. As of March 28, 2023, we had 700,039 shares of common stock available for future issuance under our 2021 Equity Incentive Plan. Director Compensation The following table provides certain information concerning the compensation for services rendered in all capacities by each non-employee director serving on our board during the year ended December 31, 2022, other than Mr. Slosman, our Chief Executive Officer, who did not receive additional compensation for his services as director and whose compensation is set forth in the Summary Compensation Table found elsewhere in this Item 11. Name Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) All Other Compensation ($) Total ($) Paul Stuka 62,000 - - - 62,000 Michael Berman 41,000 - - - 41,000 Campbell Rogers, M.D.(1) 21,333 - - - 21,333 Thomas Kester 46,000 - - - 46,000 Gary Roubin, M.D. 35,000 - - - 35,000 Kathryn Arnold 36,000 - - - 36,000 (1) Dr. Rogers’ term as a director ended on August 31, 2022 For the 2022 calendar year, our board approved the following compensation for our independent directors: (i) a $48,000 stipend, payable quarterly to the chairman of the board; (ii) a $30,000 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. - 73 - Beginning on January 1, 2023, directors may elect to receive all or a portion of their cash retainer amount in shares of our common stock under the 2021 Equity Incentive Plan. If a director makes that election, a stock award under the 2021 Plan will be paid quarterly on the first day of each quarter (“Grant Dates”) and will become fully vested on the Grant Dates. The stock award will be determined by dividing (x) the product of the cash retainer amount and percentage of the cash retainer amount elected to be taken in shares by (y) the “Fair Market Value” (as defined in the 2021 Equity Incentive Plan of a share on the Grant Dates. If a director’s service on the board terminates for any reasons prior to a Grant Date, he/she will receive a pro rata portion of shares or cash based on the number of days served on the board during the relevant quarter. 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 28, 2023 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. The percentages of common stock beneficially owned are reported on the basis of regulations of the 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 28, 2023, we had 8,326,648 shares outstanding. Name of Beneficial Owner Number of Shares Beneficially Owned (1) Percentage Beneficially Owned (1) 5% Owners Officers and Directors Marvin Slosman 189,106 (2) 2.22 % Craig Shore 362,749 (3) 4.25 % Michael Berman 12,329 (4) * Paul Stuka 122,280 (5) 1.47 % Thomas Kester 47,647 (6) * Gary Roubin, M.D. 195,864 (7) 2.34 % Kathryn Arnold 32,042 (8) * Shane Gleason - * Andrea Tommasoli 87,982 (9) 1.06 % All directors and executive officers as a group (9 persons) 1,049,997 11.94 % * 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 30, 2023. 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. - 74 - (2) Consists of (i) 6,392 shares of common stock, (ii) 12,159 Restricted Stock Units granted outside the plan that are currently exercisable or exercisable within 60 days of March 30, 2023, (iii) 52,235 Restricted Stock Units granted under the 2013 Equity Incentive Plan, (iv) 48,856 Restricted Stock Units granted under the 2021 Equity Incentive Plan, (v) options to purchase 64,417 shares of common stock that are currently exercisable or exercisable within 60 days of March 30, 2023, and (vi) 5,048 warrants to purchase shares of common stock that are currently exercisable. (3) Consists of (i) 54,902 shares of common stock, (ii) options to purchase 22,612 shares of common stock that are currently exercisable or exercisable within 60 days of March 30, 2023, (iii) 15,085 shares of restricted stock granted under the Israeli Appendix of the InspireMD, Inc. 2013 Long-Term Incentive Plan, (iv) 48,652 shares of restricted stock granted under the 2021 Equity Incentive Plan, and (v) 224,219 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. (4) Consists of (i) 5,378 shares of common stock, (ii) warrants to purchase 2,688 shares of common stock that are currently exercisable or exercisable within 60 days of March 30, 2023, and (iii) options to purchase 4,263 shares of common stock that are currently exercisable or exercisable within 60 days of March 30, 2023. Excludes 10,710 shares of restricted stock granted under the Israeli Appendix of InspireMD, Inc. 2013 Long-Term Incentive Plan and 17,248 shares of restricted stock granted under the 2021 Equity Incentive Plan held in trust, with respect to which the trustee has a proxy with the right to vote such shares at his discretion. (5) Paul Stuka is the principal and managing member of Osiris Investment Partners, L.P., and, as such, has beneficial ownership of (A) 73,534 shares of common stock (B) personally holding (i) options to purchase 6,443 shares of common stock that are currently exercisable or exercisable within 60 days of March 30, 2023, (ii) 5,310 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term Incentive Plan, (iii) 17,386 shares of restricted stock granted under the 2021 Equity Incentive Plan, and (iv) 19,607 shares of common stock. (6) Consists of (i) 19,077 shares of common stock, (ii) 8,780 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term Incentive Plan, (iii) 11,499 shares of restricted stock granted under the 2021 Equity Incentive Plan, (iv) 4,032 warrants to purchase shares of common stock that are currently exercisable, and (v) options to purchase 4,260 shares of common stock that are currently exercisable or exercisable within 60 days of March 28, 2023. (7) Consists of (i) 147,385 shares of common stock, (ii) 5,310 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term Incentive Plan, (ii) 11,499 shares of restricted stock granted under the 2021 Equity Incentive Plan, and (iii) 22,880 warrants to purchase shares of common stock that are currently exercisable and (iv) options to purchase 8,790 shares of common stock that are currently exercisable or exercisable within 60 days of March 28, 2023. (8) Consists of (i) 9,261 shares of common stock, (ii) 7,024 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term Incentive Plan, (iii) 11,499 shares of restricted stock granted under the 2021 Equity Incentive Plan, and (iv) options to purchase 4,258 shares of common stock that are currently exercisable or exercisable within 60 days of March 28, 2023. (9) Consists of (i) 31,825 shares of common stock, (ii) 6,034 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term Incentive Plan, (iii) 39,513 shares of restricted stock granted under the 2021 Equity Incentive Plan, and (iv) options to purchase 10,609 shares of common stock that are currently exercisable or exercisable within 60 days of March 28, 2023. - 75 - Equity Compensation Plan Information The following table provides certain information as of December 31, 2022, 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 451,293 4.43 813,001 Equity compensation plans not approved by security holders 10,088 (1) 9.77 - Total 461,381 4.55 813,001 (1) Comprised of awards made to individuals outside the InspireMD, Inc. 2011 UMBRELLA Option Plan, 2013 Long Term Incentive Plan and 2021 Equity Incentive Plan, as described below: ● On January, 2020, we issued to Mr. Marvin Slosman, our Chief Executive Officer, President and Director, 12,159 shares of restricted stock and 4,053 shares of 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 6,035 shares of our common stock, as inducement awards outside the Company’s 2013 Long-Term Incentive Plan. - 76 - 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. Roubin, Messrs. Stuka, Berman and Kester, and Ms. Arnold satisfy the requirement for independence set out in Nasdaq Listing Rules and Rule 10A-3 promulgated under the Exchange Act. 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 or her immediate family or affiliates and our company and our affiliates and did not rely on categorical standards other than those contained in the rules 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, 2022 and 2021 are described below. Fee category 2022 2021 Audit Fees (1) $ 188,000 $ 176,000 Audit – related fees 25,900 $ 49,900 Tax fees 40,282 $ 38,675 All other fees - $ - Total fees $ 254,182 $ 264,575 Audit Fees Kesselman billed us audit fees in the aggregate amount of $188,000 and $176,000 for the years ended December 31, 2022 and 2021, 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 $25,900 and $49,900 for the year ended December 31, 2022 and 2021, respectively. The fees for the year ended December 31, 2022 mostly related to registration statement on Form S-3 filed with the SEC in June 2022. The fees for the year ended December 31, 2021 mostly related to registration statement on Form S-1 filed with the SEC in February 2021 and to registration statement on Form S-3 filed with the SEC in April 2021. Tax Fees Kesselman billed us tax fees in the aggregate amount of $40,282 and $38,675 for the year ended December 31, 2022 and 2021, respectively. These fees relate to professional services rendered for tax compliance, tax advice and tax planning. - 77 - All Other Fees Kesselman did not bill us for any other fees for the year ended December 31, 2022 and 2021. 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, 2022 and 2021 ● Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021 ● Consolidated Statements of Changes in Equity for the Years Ended December 31, 2022 and 2021 ● Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 ● Notes to Consolidated Financial Statements 2. Financial Statement Schedules None 3. Exhibits See Index to Exhibits Item 16. Form 10-K Summary Not applicable. - 78 - Index to Exhibits 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 June 29, 2021). 3.3 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) 3.4 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 September 29, 2016) 3.5 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) 3.6 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) 3.7 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) 3.8 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) 3.9 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) 3.10 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) 3.11 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) 3.12 Certificate of Amendment to Amended and Restated Certificate of Incorporation of InspireMD, Inc., dated April 14, 2021 (incorporated by reference to Exhibit 3.1 to Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 10, 2021) 3.13 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) 3.15 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) 4.1* Description of Securities 10.2+ 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) 10.3 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) 10.4 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) 10.5+ 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) 10.6+ 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) - 79 - 10.7+ 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) 10.8+ 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) 10.9+ 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) 10.10+ 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) 10.11+ 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) 10.12+ 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) 10.13+ 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) 10.14+ 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) 10.15+ 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) 10.16+ 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) 10.17+ 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) 10.18+ 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) 10.19+ 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) 10.20+ 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) 10.21+ 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) - 80 - 10.22+ 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) 10.23+ Director Offer Letter, between InspireMD, Inc. and Thomas J. Kester, dated September 6, 2016 10.29 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) 10.31 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)) 10.32 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)) 10.33+ 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) 10.34+ 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) 10.35+ 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) 10.36 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) 10.37 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)). 10.38 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)). 10.39+ 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). 10.40+ 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). 10.41+ 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) 10.42+ 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) - 81 - 10.43 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)). 10.44 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)) 10.45 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)) 10.46 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)) 10.47+ Sixth 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 August 31, 2020) 10.48+ Seventh Amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on August 9, 2021) 10.49+ First Amendment to Employment Agreement, dated November 8, 2021, by and between InspireMD, Inc. and Marvin Slosman (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on November 8, 2021). 10.50+ Fifth Amendment to Employment Agreement, dated November 4, 2021, by and between InspireMD, Inc. and Craig Shore (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on November 8, 2021). 10.51+ Sixth Amendment to Employment Agreement, dated January 17, 2022, by and between InspireMD, Inc. and Craig Shore (incorporated by reference to Exhibit 10.51 to the Annual Report on Form 10-K filed on March 7, 2022) 10.52+ 2021 Equity Compensation Plan (incorporated by reference to Annex A to the registrant’s Proxy Statement on Schedule 14A filed with the Commission on August 12, 2021). 10.53+ Form of Nonqualified Stock Option Agreement for U.S. employees under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.53 to the Annual Report on Form 10-K filed on March 7, 2022) 10.54+ Form of Nonqualified Stock Option Agreement for European employees under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.54 to the Annual Report on Form 10-K filed on March 7, 2022) 10.55+ Form of Nonqualified Stock Option Agreement for consultants under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.55 to the Annual Report on Form 10-K filed on March 7, 2022) 10.56+ Form of Nonqualified Stock Option Agreement for Israeli employees under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.56 to the Annual Report on Form 10-K filed on March 7, 2022) 10.57+ Form of Nonqualified Stock Option Agreement for U.S. directors under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.57 to the Annual Report on Form 10-K filed on March 7, 2022) 10.58+ Form of Restricted Stock Award Agreement for U.S. employees under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.58 to the Annual Report on Form 10-K filed on March 7, 2022) - 82 - 10.59+ Form of Restricted Stock Award Agreement for U.S. directors under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.59 to the Annual Report on Form 10-K filed on March 7, 2022) 10.60+ Form of Restricted Stock Award Agreement for Israeli employees under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.60 to the Annual Report on Form 10-K filed on March 7, 2022) 10.61+ Form of Restricted Stock Award Agreement for European employees under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.61 to the Annual Report on Form 10-K filed on March 7, 2022) 10.62+ Form of Restricted Stock Unit Award Agreement under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.62 to the Annual Report on Form 10-K filed on March 7, 2022) 10.63 Sales Agreement by and between InspireMD, Inc. and A.G.P./Alliance Global Partners, dated June 3, 2022 (incorporated by reference to Exhibit 1.2 of the Registration Statement on Form S-3 as filed on June 3, 2022). 10.64+* Third Amendment to Employment Agreement, dated January 5, 2023, by and between InspireMD, Inc. and Marvin Slosman 10.65+* Seventh Amendment to Employment Agreement, dated January 18, 2023, by and between InspireMD, Inc. and Craig Shore 10.66+*^ Employment Agreement, dated November 2, 2020, by and between the Company and Andrea Tommasoli 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.INS* Inline XBRL Instance Document (the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document) 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. + Management contract or compensatory plan or arrangement. ^ Portions of this exhibit (indicated by asterisks) have been omitted under rules of the U.S. Securities and Exchange Commission permitting the confidential treatment of select information. - 83 - 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 30, 2023 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 30, 2023 Marvin Slosman (principal executive officer) /s/ Craig Shore Chief Financial Officer, Chief Administrative Officer, Secretary and Treasurer March 30, 2023 Craig Shore (principal financial and accounting officer) /s/ Paul Stuka Chairman of the Board of Directors March 30, 2023 Paul Stuka /s/ Michael Berman Director March 30, 2023 Michael Berman /s/ Thomas J. Kester Director March 30, 2023 Thomas J. Kester /s/ Gary Roubin Director March 30, 2023 Gary Roubin /s/ Kathryn Arnold Director March 30, 2023 Kathryn Arnold - 84 - INSPIREMD, INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022 F- 1 INSPIREMD, INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022 TABLE OF CONTENTS Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB name: Kesselman & Kesselman C.P.A.s and PCAOB ID: 1309 ) 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-30 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, 2022 and 2021, 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, 2022 and 2021, 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. Substantial Doubt About the Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1b to the consolidated financial statements, the Company has suffered recurring losses from operations and cash outflows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1b. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 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 30, 2023 We have served as the Company’s auditor since 2010. F- 3 INSPIREMD, INC. CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands) 2022 2021 December 31, 2022 2021 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 4,632 $ 12,004 Short-term bank deposits 13,171 22,036 Accounts receivable: Trade, net 1,034 1,224 Other 213 165 Prepaid expenses 655 522 Inventory 1,621 1,143 TOTAL CURRENT ASSETS 21,326 37,094 NON-CURRENT ASSETS: Property, plant and equipment, net 917 632 Operating lease right of use assets 1,554 1,081 Fund in respect of employee rights upon retirement 856 905 TOTAL NON-CURRENT ASSETS 3,327 2,618 TOTAL ASSETS $ 24,653 $ 39,712 LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable and accruals: Trade 659 893 Other 4,411 3,454 TOTAL CURRENT LIABILITIES 5,070 4,347 LONG-TERM LIABILITIES: Operating lease liabilities 1,195 781 Liability for employee rights upon retirement 995 1,052 TOTAL LONG-TERM LIABILITIES 2,190 1,833 COMMITMENTS AND CONTINGENT LIABILITIES (Note 6) - - TOTAL LIABILITIES 7,260 6,180 EQUITY: Common stock, par value $ 0.0001 per share; 150,000,000 shares authorized at December 31, 2022 and 2021; 8,330,918 and 8,296,256 shares issued and outstanding at December 31, 2022 and 2021, respectively 1 1 Preferred C shares, par value $ 0.0001 per share; 1,172,000 shares authorized at December 31, 2022 and 2021; 1,718 shares issued and outstanding at December 31, 2022 and 2021; - * - * Additional paid-in capital 218,977 216,625 Accumulated deficit ( 201,585 ) ( 183,094 ) Total equity 17,393 33,532 Total liabilities and equity $ 24,653 $ 39,712 * Represents an amount less than $1 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) 2022 2021 Year Ended December 31, 2022 2021 REVENUES $ 5,171 $ 4,495 COST OF REVENUES 4,054 3,741 GROSS PROFIT 1,117 754 OPERATING EXPENSES: Research and development 7,810 5,158 Selling and marketing 3,664 2,907 General and administrative 8,356 7,405 Total operating expenses 19,830 15,470 LOSS FROM OPERATIONS ( 18,713 ) ( 14,716 ) FINANCIAL INCOME (EXPENSES), net: 250 ( 157 ) LOSS BEFORE TAX EXPENSES ( 18,463 ) ( 14,873 ) TAX EXPENSES 28 45 NET LOSS $ ( 18,491 ) $ ( 14,918 ) NET LOSS PER SHARE - basic and diluted ( 2.35 ) ( 2.03 ) WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES USED IN COMPUTING NET LOSS PER SHARE - basic and diluted 7,871,814 7,346,022 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) Shares Amount Shares Amount Shares Amount capital deficit equity 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 January 1, 2021 3,284,322 - * 17,303 - * 2,343 - * $ 180,339 $ ( 168,176 ) $ 12,163 Net loss ( 14,918 ) ( 14,918 ) Issuance of common shares, including at the market offering net of $ 2,024 issuance costs 3,133,775 1 25,241 25,242 Exercise of Warrants F 1,093,536 - * 8,120 8,120 Exercise of Warrants G 131,876 - * 1,349 1,349 Conversion of Series B Convertible Preferred Stock to common shares 207,528 - * ( 17,303 ) - * - * Conversion of Series C Convertible Preferred Stock to common shares 831 - * ( 625 ) - * - * Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of 20,822 shares 399,120 1,576 1,576 Round up of shares due to reverse stock split effectuated on April 26, 2021 45,268 - * - - - - - - - * BALANCE as of December 31, 2021 8,296,256 1 - - 1,718 - * 216,625 ( 183,094 ) 33,532 * Represents an amount less than $1 F- 6 INSPIREMD, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (U.S. dollars in thousands, except share data) Shares Amount Shares Amount capital deficit equity Common stock Series C Convertible Preferred Stock Additional paid-in Accumulated Total Shares Amount Shares Amount capital deficit equity BALANCE as of December 31, 2021 8,296,256 1 1,718 - * 216,625 ( 183,094 ) 33,532 Net loss ( 18,491 ) ( 18,491 ) Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of 10,832 shares 34,662 - - - 2,352 2,352 Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of shares 34,662 - - - 2,352 2,352 BALANCE as of December 31, 2022 8,330,918 1 1,718 - * 218,977 ( 201,585 ) 17,393 * Represents an amount less than $1 F- 7 INSPIREMD, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in thousands) 2022 2021 Year ended December 31, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 18,491 ) $ ( 14,918 ) Adjustments required to reconcile net loss to net cash used in operating activities: Depreciation and amortization 188 161 Gain from sale of property, plant and equipment - ( 1 ) Change in liability for employees rights upon retirement ( 57 ) 142 Other financial expense 131 8 Change in operating right of use asset and operating leasing liability ( 60 ) ( 14 ) Increase in interest receivable on short term deposits ( 135 ) ( 36 ) Share-based compensation expenses 2,352 1,576 Loss (gain) on amounts funded in respect of employee rights upon retirement, net 135 ( 67 ) Changes in operating asset and liability items: Decrease (Increase) in prepaid expenses 7 ( 188 ) Decrease (increase) in trade receivables 190 ( 748 ) Increase in other receivables ( 48 ) ( 19 ) Decrease (increase) in inventory ( 478 ) 272 Increase (decrease) in trade payables ( 234 ) 657 Increase (decrease) in other payables 958 ( 35 ) Net cash used in operating activities ( 15,542 ) ( 13,210 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment ( 473 ) ( 344 ) Investment in short-term bank deposits ( 19,000 ) ( 24,000 ) Withdrawal from short-term bank deposits 28,000 2,000 Amounts funded in respect of employee rights upon retirement ( 86 ) ( 113 ) Net cash provided by (used in) investing activities 8,441 ( 22,457 ) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance costs of At The Market offering ( 140 ) - Proceeds from issuance of shares and warrants and exercise of Pre-Funded Warrants and unit purchase option, net of $ 2,024 issuance costs - 35,034 Net cash provided by (used in) financing activities ( 140 ) 35,034 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 131 ) ( 8 ) DECREASE IN CASH AND CASH EQUIVALENTS ( 7,372 ) ( 641 ) BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 12,004 12,645 BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,632 $ 12,004 SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: Acquisition of right-of-use assets by means of lease liabilities 835 91 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 MGuard™ Prime™ embolic protection system (“MGuard Prime EPS”) was marketed for use in patients with acute coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions, or bypass surgery. MGuard Prime EPS combines MicroNet with a bare-metal cobalt-chromium based stent. MGuard Prime EPS received CE mark approval in the European Union in October 2010 for improving luminal diameter and providing embolic protection. Over the past years, there has been a shift in industry preferences away from bare-metal stents, such as MGuard Prime EPS in ST-Elevation Myocardial Infarction (“STEMI”) patients. As a result of declining sales of the MGuard Prime EPS, which the Company believes is largely driven by the predominant industry preferences favoring drug-eluting, or drug-coated, stents, during the second quarter of 2022, the Company ceased sales of the Company’s MGuard Prime EPS following a phase out period. The Company markets its products through distributors in international markets, mainly in Europe. b. Liquidity The Company has an accumulated deficit as of December 31, 2022, as well as a history of net losses and negative operating cash flows in recent years. The Company expects to continue incurring losses and negative cash flows from operations until its product, CGuard™ EPS, reaches commercial profitability. As a result of these expected losses and negative cash flows from operations, along with the Company’s current cash position, the Company has sufficient resources to fund operations until the end of September 2023. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern. These financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. Management’s plans include the continued commercialization of the Company’s product and raising capital through the sale of additional equity securities, debt or capital inflows from strategic partnerships. There are no assurances however, that the Company will be successful in obtaining the level of financing needed for its operations. If the Company is unsuccessful in commercializing its products and raising capital, it may need to reduce activities, curtail or cease operations. F- 9 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 1 - DESCRIPTION OF BUSINESS (continued): c. Failure to satisfy regulatory requirements of the new European Medical Device Regulation could prevent the Company from marketing CGuard EPS in countries requiring the CE Mark. For the European Union nations, medical devices must obtain a CE mark before they may be placed on the market. In order to obtain and maintain the CE mark, the Company must comply with EU law on medical devices, which, until May 26, 2021 was governed by the Medical Device Directive 93/42/EEC (“MDD”), by presenting comprehensive technical files for its products demonstrating safety and efficacy of the product to be placed on the market and passing initial and annual quality management system audit as per ISO 13485 standard by a European Notified Body. The Company has obtained ISO 13485 quality system certification and CGuard EPS that the Company currently distributes into the European Union, displays the required CE mark. In order to maintain certification, the Company is required to pass an annual surveillance audit conducted by Notified Body auditors. The European Union replaced the MDD with the new European Medical Device Regulation, or MDR (MDR 2017/745). The MDR entered into force after a transitional period of three years and a one year extension of that transition period due to the COVID-19 pandemic on May 26, 2021 and which changes several aspects of the regulatory framework in the European Union. Manufacturers had the duration of the transition period to update their technical documentation and processes to meet the new requirements in order to obtain a CE Mark. In the Company’s specific case, the Company’s’ CE mark for CGuard EPS under the MDD expired on November 12, 2022 and it is in the final stages of technical documentation review by the Notified Body auditor to meet the Medical Device Regulation (“MDR”) (MDR 2017/745) requirements (which replaced the MDD) for recertification. In the meantime, on February 14, 2023, the Company received a derogation per Article 97 paragraph 1 of Regulation 2017/745 from the Agency for Medicines and Health Products (FAMHP) allowing it to continue marketing CGuard EPS in the European Union until August 15, 2023 subject to certain procedural requirements. Subsequently, on March 20, 2023, Regulation (EU) 2023/607 was published allowing us to continue marketing CGuard EPS in EU countries under the MDD directive until December 31, 2027. This allows the Company to market and sell CGuard EPS in the EU and certain other jurisdictions subject to certain procedural requirements while the Company’s MDR CE recertification is pending. F- 10 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 1 - DESCRIPTION OF BUSINESS (continued): d. Risks Related to the Geopolitical and Military Tensions Between Russia and Ukraine in Europe In February 2022, Russia launched a military invasion into Ukraine. The Company derived approximately 9.9% of total sales in Russia and Belarus in 2021 while during 2022 the Company’s sales to Russia and Belarus were 12.1%. The escalation of geopolitical instability in Russia and Ukraine as well as currency fluctuations in the Russian Ruble could negatively impact the Company’s operations, sales, and future growth prospects in that region. As a result of the crisis in Ukraine, the United States and the EU have implemented sanctions against certain Russian individuals and entities and have made it more difficult for us to collect on outstanding accounts receivable from customers in this region. The Company’s global operations expose the Company to risks that could adversely affect the Company’s business, financial condition, results of operations, cash flows or the market price of the Company’s securities, including the potential for increased tensions between the United States and Russia resulting from the current situation involving Russia and Ukraine, tariffs, economic sanctions and import-export restrictions imposed by either nation, and retaliatory actions by the other nation, as well as the potential negative impact on the Company’s business and sales in Russia, and Belarus. Current geopolitical instability in Russia and Ukraine and related sanctions by the U.S. government against certain companies and individuals may hinder the Company’s ability to conduct business with potential or existing customers and vendors in these countries. The U.S. government has imposed sanctions through several executive orders restricting U.S. companies from conducting business with specified Russian individuals and companies. While the Company believes that the executive orders currently do not preclude the Company from conducting business with the Company’s current customers or vendors in Russia, and Belarus, the sanctions imposed by the U.S. government may be expanded in the future to restrict the Company from engaging with them. If the Company is unable to conduct business with new or existing customers or vendors or pursue business opportunities in Russia, or Belarus, the Company’s business, including revenue, profitability and cash flows, and operations could be adversely affected. The Company cannot provide assurance that current sanctions or potential future changes in sanctions will not have a material impact on the Company’s operations in Russia, and Belarus or on the Company’s financial results. F- 11 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 revenues 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 and assessing the likelihood of exercise of options to extend the lease term. 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- 12 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): e. Short-term bank deposits Bank deposits with original maturities of more than three months but less than one year are presented as part of short-term bank deposits. Deposits are presented at their cost which approximates market values including accrued interest. Interest on deposits is recorded as financial income. f. 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 and short-term bank deposits, 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”. g. 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. h. Leases Operating leases are included in operating lease right-of-use (“ROU”) assets. Short-term balances regarding lease liabilities are included in accounts payable and accruals - Other and long-term balances regarding lease liabilities are included in operating lease liabilities. ROU assets represent Company’s right to use an underlying asset for the lease term and lease liabilities represent obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses the incremental borrowing rate based on the information available at the lease commencement date as the rate implicit in the lease is not readily determinable. The determination of the incremental borrowing rate requires management judgment based on information available at lease commencement. The lease terms may include periods covered by options to extend the lease when it is reasonably certain that the Company will exercise such options, and periods covered by options to terminate the lease when it is reasonably certain that the Company will not exercise such options. Operating lease cost is recognized on a straight-line basis over the lease term. Lease agreements that include lease and non-lease components are accounted for as a single lease component. The Company elected the short-term lease recognition exemption for leases with a lease term of 12 months or less. i. 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. j. Impairment in value of long-lived assets The Company tests long-lived 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- 13 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): k. 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. Generally, this occurs when products are shipped. In few cases when products are directly sold to medical centers on consignment basis, revenue is recognized when the product is consumed. 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 11. The Company recognizes revenue net of value added tax (VAT). l. Research and development costs Research and development costs, including the costs of the Company’s US based clinical trial costs of approximately $ 4,468,000 and $ 2,037,000 for the years ended December 31, 2022 and 2021, respectively, and are charged to the statement of operations as incurred. m. 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”) to employees and service providers. 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 to employees with only service conditions that have graded vesting schedules using the accelerated multiple option approach. n. 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 position 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”. o. 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- 14 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): p. Advertising Costs related to advertising and promotion of products are charged to sales and marketing expense as incurred. Advertising expenses were approximately $ 359,000 and $ 290,000 for the years ended December 31, 2022 and 2021, respectively. q. 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 0 and 11,696 weighted average shares of common stock issuable to holders of Series B Convertible Preferred Stock for the years ended December 31, 2022 and 2021, respectively. The total number of shares of common stock related to outstanding options, warrants, restricted stock, RSUs and Series C Convertible Preferred Stock excluded from the calculations of diluted loss per share were 2,741,355 and 2,840,179 for the years ended December 31, 2022 and 2021, respectively. r. Segment reporting The Company has one operating and reportable segment. s. 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. The Company has no financial instruments measured carried at fair value in each reporting period. The fair value of the Company’s financial instruments approximates their carrying values. F- 15 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): t. 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 had 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 does not believe the adoption of this standard will have a material impact on its consolidated financial statements. F- 16 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: SCHEDULE OF PROPERTY PLANT AND EQUIPMENT 2022 2021 December 31, 2022 2021 ($ in thousands) Cost: Computer equipment $ 396 $ 361 Office furniture and equipment 231 157 Machinery and equipment 1,704 1,599 Leasehold improvements 494 243 Property plant and equipment, gross 2,825 2,360 Less - accumulated depreciation and amortization ( 1,908 ) ( 1,728 ) Net carrying amount $ 917 $ 632 b. Depreciation and amortization expenses totaled approximately $ 188,000 and $ 161,000 for the years ended December 31, 2022 and 2021, 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, most 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 expenses for such employees were approximately $ 241,000 and $ 199,000 for the years ended December 31, 2022 and 2021, respectively. 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 for such employees were approximately $ 68,000 and $ 103,000 for the years ended December 31, 2022 and 2021, respectively. F- 17 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 5 – LEASE AGREEMENTS 1) The Company’s Israeli subsidiary had a lease agreement for a facility in Israel, which expired on December 31, 2022 with an option to extend the agreement for two additional years until December 31, 2024. On May 25, 2022 the Company amended the agreement mentioned above and extended it until December 31, 2026 as well as leasing 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) Operating lease cost for the years ended December 31, 2022 and 2021 was $ 442,000 and $ 476,000 respectively. Supplemental information related to leases are as follows: SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES December 31 December 31 2022 2021 ($ in thousands) ($ in thousands) Operating lease right-of-use assets 1,554 1,081 Current Operating lease liabilities ( 419 ) ( 420 ) Non-current operating lease liabilities ( 1,195 ) ( 781 ) Other information: Operating cash flows from operating leases (cash paid in thousands) ( 436 ) ( 437 ) Weighted Average Remaining Lease Term 4 3 Weighted Average Discount Rate 8.69 % 8.38 % Maturities of lease liabilities are as follows: SCHEDULE OF MATURITIES OF LEASE LIABILITIES Amount ($ in thousands) 2023 432 2024 472 2025 472 2026 513 Total lease payments 1,889 Less imputed interest ( 275 ) Total 1,614 F- 18 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 6 - COMMITMENTS AND CONTINGENT LIABILITIES : Distribution Agreement with Chinese Partner On February 3, 2021, the Company entered into a distribution agreement (the “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, the agreement stipulates that if the Distributor fails to obtain the Regulatory Approvals by the time stipulated in the agreement due to the failure of the clinical trials, and this Agreement was terminated as a result of such failure to obtain Regulatory Approvals, InspireMD shall reimburse Distributor in an amount which is 50 % of Distributor’s direct out of pocket costs to 3rd parties for conducting the clinical trials, which reimbursement will not exceed USD 1,000,000 . The financial statements include a liability, based on 50 % of the Distributor costs incurred up to December 31, 2022. The liability at December 31, 2022. is immaterial. See Note 7 for details regarding an investment transaction with one of the Chinese parties to the Distribution Agreement. NOTE 7 - EQUITY a. Share capital The Company’s shares that previously traded on the NYSE American were approved for listing on the Nasdaq Capital Market (“Nasdaq”) and such shares began trading on Nasdaq on May 21, 2021 under the symbol, “NSPR.” On April 19, 2021, 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-fifteen reverse stock split of its common stock , par value $ 0.0001 per share, effective as of April 26, 2021. F- 19 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 – EQUITY (continued): Public Offering On February 8, 2021, the Company closed an underwritten public offering (the “Offering”) of 1,935,484 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 (the “Series G Warrants”) to purchase one-half of one share of common stock. In connection with this public offering, the underwriter exercised its over-allotment option in full and purchased an additional 290,322 shares of common stock and 145,161 Series G Warrants. The offering price to the public was $ 9.30 per Unit. The Series G Warrants are immediately exercisable at a price of $ 10.23 per and expire five years from the date of issuance. The Company granted the underwriter compensation warrants to purchase up to 111,290 shares of common stock. The underwriter warrants have an exercise price of $ 10.23 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 expenses associated with the Offering, but excluding the proceeds, if any, from the exercise of Series G Warrants sold in the Offering. On February 3, 2021, the Company entered into a Distribution Agreement with three China-based partners, See Note 6b. for details about the Distribution Agreement. 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 a securities purchase agreement pursuant to which investor agreed to invest $ 900,000 in exchange for 89,445 shares of the Company’s common stock at a purchase price of $ 10.062 per share. During the year ended December 31, 2021, Series F and Series G warrants to purchase shares of common stock were exercised by investors at an exercise price of $ 7.425 and $ 10.23 per share, resulting in the issuance of 1,225,412 shares of common stock for proceeds of approximately $ 9,469,000 . ATM Offering During the year ended December 31, 2021, the Company sold 818,523 shares of its common stock pursuant to its at-the-market (ATM) issuance sales agreement with a sales agent. These sales resulted aggregate net proceeds to the Company of approximately $ 5,453,000 . On July 7, 2016, the Company issued 442,424 shares of Series B Preferred Stock in a public offering. During the year ended December 31, 2021, all the remaining 17,303 shares of Series B Convertible Preferred Stock were converted into 207,528 shares of common stock. F- 20 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 – EQUITY (continued): On March 14, 2017, the Company issued 1,069,822 shares of Series C Preferred Stock in a public offering. During the year ended December 31, 2021, an amount of 625 shares of Series C Convertible Preferred Stock were converted into 831 shares of common stock. As of December 31, 2021 and 2022, there were 1,718 shares of Series C Preferred Stock outstanding with a total stated value of $10,997 which convertible into an aggregate of 2,284 shares of our common stock reflecting a conversion price equal to $ 4.815. As of December 31, 2022, the Company has outstanding warrants to purchase an aggregate of 1,793,815 shares of common stock as follows: SCHEDULE OF ISSUANCE OF WARRANTS TO PURCHASE COMMON STOCK Number of underlying common stock Weighted average exercise price Series E Warrants 198,159 $ 27.000 Series F Warrants 433,878 $ 7.425 Series G Warrants 1,092,344 $ 10.230 Underwriter Warrants 18,277 $ 7.425 Other warrants 51,157 $ 225.000 and above Total Warrants 1,793,815 $ As of December 31, 2022, 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. F- 21 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 years ended December 31, 2022 and 2021, the Company granted stock options to the CEO, employees, consultants and directors to purchase a total of 154,508 and 225,225 , respectively, shares of the Company’s common stock. The options have exercise prices ranging from $ 2.61 -$ 2.97 and $ 3.89 -$ 10.05 per share, respectively, which were the fair market value of the company’s common stock on the date of each respective grant. The fair value of the above options, using the Black-Scholes pricing models, was approximately $ 360,356 and $ 1,026,000 , respectively. Of the 154,508 options granted during the year ended December 31, 2022, 109,839 options are subject to a three -year vesting period, with one-third of such awards vesting each year and 44,669 options with performance conditions, mainly related to clinical activities. 3) During the years ended December 31, 2022 and 2021, the Company granted to the employees and directors 45,494 and 419,943 restricted stock, respectively. The fair value of these restricted stock was approximately $ 109,886 and $ 1,781,981 , respectively. The restricted stock are subject to a three-year vesting period, with one-third of such awards vesting each year. 4) During the year ended December 31, 2021, the Company granted to the CEO 146,567 RSUs. The fair value of these restricted stock units was approximately $ 603,856 . The RSUs granted during the year ended December 31, 2021, are subject to a three -year vesting period, with one-third of such awards vesting each year. F- 22 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 – EQUITY (continued): SCHEDULE OF STOCK OPTIONS GRANTED 5) The following table summarizes information about stock options granted to employees: Year ended December 31 2022 2021 Number of options Weighted average exercise price Number of options Weighted average exercise price Outstanding - beginning of period 289,408 5.29 91,692 $ 6.20 Granted 7,841 2.61 205,223 4.90 Forfeited ( 2,537 ) 5.70 ( 7,507 ) 5.69 Outstanding- end of period 294,712 5.21 289,408 $ 5.29 Exercisable at the end of the period 123,115 5.51 28,360 6.26 6) The following table summarizes information about stock options granted to non-employees: Year ended December 31 2022 2021 Number of options Weighted average exercise price Number of options Weighted average exercise price Outstanding - beginning of period 20,002 6.90 - - Granted 146,667 2.89 20,002 6.90 Forfeited - - - - Exercised - - - - Outstanding - end of period 166,669 3.37 20,002 6.90 Exercisable at the end of the period 35,667 3.61 - - 7) The following table summarizes information about restricted stock granted to employees: SCHEDULE OF RESTRICTED STOCK GRANTED TO EMPLOYEES Year ended December 31 2022 2021 Number of restricted stock Outstanding - beginning of period 527,668 185,725 Reverse Split Adjustments - 59 Granted 45,494 419,943 Forfeited ( 10,832 ) ( 20,822 ) Vested ( 206,379 ) ( 57,237 ) Outstanding - end of period 355,951 527,668 F- 23 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 – EQUITY (continued): 8) The following table summarizes information about RSUs granted to employees: SCHEDULE OF RESTRICTED STOCK UNIT GRANTED TO EMPLOYEES Year ended December 31 2022 2021 Number of RSUs Outstanding - beginning of period 237,078 90,511 Granted - 146,567 Forfeited - - Vested - - Outstanding - end of period 237,078 237,078 9) The following table provides additional information about all options outstanding and exercisable: SCHEDULE OF ADDITIONAL INFORMATION ABOUT ALL OPTIONS OUTSTANDING AND EXERCISABLE Outstanding as of December 31, 2022 Exercise price Options outstanding Weighted average remaining contractual life (years) Options exercisable $ 2.61 - 2.97 154,508 9.25 29,000 $ 3.89 - 4.12 146,347 8.81 48,782 $ 4.95 - 10.05 156,473 8.00 78,298 $ 16.50 4,053 7.01 2,702 461,381 8.67 158,782 The weighted average of the remaining contractual life of total vested and exercisable options as of December 31, 2022 was 8.41 years. The aggregate intrinsic value of the total exercisable options as of December 31, 2022 was approximately $ 0 . The weighted average fair value of options granted was $ 2.56 for the year ended December 31, 2022. 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, 2022 and 2021: SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED TO EMPLOYEES Year ended December 31 2022 2021 Expected life 5.125 - 6.5 years 5.5 - 6.5 years Risk-free interest rates 1.79 %- 2.88 %- 0.59 %- 1.40 % Volatility 127.43 %- 130.93 % 129.11 %- 136.78 % Dividend yield - - F- 24 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 – EQUITY (continued): 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, 2022, the total unrecognized compensation cost on employee and non-employee stock options, restricted stock and RSUs, related to unvested stock-based compensation, amounted to approximately $ 1.30 million. This cost is expected to be recognized over a weighted-average period of approximately 0.85 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: SCHEDULE OF ALLOCATION OF TOTAL SHARE-BASED COMPENSATION EXPENSE Year ended December 31 2022 2021 ($ in thousands) Cost of revenues $ 72 $ 49 Research and development 582 64 Sales and marketing 318 182 General and administrative 1,380 1,281 $ 2,352 $ 1,576 F- 25 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 8 – RELATED PARTIES TRANSACTIONS On May 10, 2021, the board of directors of the Company appointed a new member. During the twelve months ended December 31, 2022 and 2021, a consulting company whose founder and CEO is our new board member provided certain marketing services in the amount of $ 9,645 and $ 33,775 , respectively. NOTE 9 - 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 2022 is 21 %. State tax may also apply. Taxation in Israel InspiredMD, Ltd is taxed under Israeli tax laws. Accordingly, the applicable corporate tax rate in 2022 is 23 %. 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 and accordingly 2022 is the last year that would have entitled the Company tax benefits under this law. F- 26 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 9 - 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, 2022, the Company had a net carry forward tax loss of approximately $ 51 million, of which approximately $ 35 million (arising before January 1, 2018), expires until 2037 , and approximately $ 16 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. As of December 31, 2022, InspireMD Ltd., an Israeli subsidiary, had a net carry forward tax loss of approximately $ 107 million. Under Israeli tax laws, the carry forward tax losses can be utilized indefinitely. The Israeli subsidiary is taxed in the New Israeli Shekel (“NIS”), which is different from its functional currency (U.S. Dollar). The change in the Israeli subsidiary NOL’s for tax purposes is partly resulted by such rate differences. d. Loss before income taxes The components of loss before income taxes are as follows: SCHEDULE OF COMPONENTS OF LOSS BEFORE INCOME TAXES Year ended December 31 2022 2021 ($ in thousands) Loss before taxes on income: InspireMD, Inc. $ ( 4,773 ) $ ( 4,452 ) Subsidiaries ( 13,690 ) ( 10,421 ) $ ( 18,463 ) $ ( 14,873 ) F- 27 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 9 - TAXES ON INCOME (continued): e. Current taxes on income The main reconciling item between the statutory tax rate of the Company and the effective tax rate is 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. The changes in the valuation allowance for the year ended December 31, 2022 and 2021 were as follows: SCHEDULE OF CHANGES IN VALUATION ALLOWANCE Year ended December 31 2022 2021 ($ in thousands) Balance at the beginning of the year $ 39,212 $ 35,145 Changes during the year: Losses during the year (including foreign exchange rate effect) 859 4,067 Balance at the end of the year $ 40,071 $ 39,212 f. Accounting for Uncertain Tax position The following is a reconciliation of the total amounts of the Company’s uncertain tax positions during the year ended December 31, 2022 and 2021 were as follows: SCHEDULE OF RECONCILIATION OF UNCERTAIN TAX POSITIONS Year ended December 31, 2022 2021 ($ in thousands) Balance at beginning of period $ 89 $ 52 Increase in uncertain tax positions because of tax positions taken during the year 17 37 Balance at end of period $ 106 $ 89 A summary of open tax years by major jurisdiction is presented below: SCHEDULE OF OPEN TAX YEARS BY MAJOR JURISDICTION Jurisdiction Years U.S. 2019 - 2022 Israel 2018 - 2022 Germany 2019 - 2022 F- 28 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 9 - TAXES ON INCOME (continued): SCHEDULE OF DEFERRED INCOME TAX g. Deferred income tax: 2022 2021 December 31, 2022 2021 ($ in thousands) Long-term: Provision for vacation and recreation pay 45 53 R&D expenses 1,452 1,000 Operating lease right of use assets ( 357 ) ( 248 ) Operating lease liabilities 371 276 Share-based compensation 3,021 2,849 Carry forward tax losses 35,507 35,248 Accrued severance pay, net 32 34 Deferred tax assets noncurrent 40,071 39,212 Less-valuation allowance ( 40,071 ) ( 39,212 ) Deferred tax assets - - NOTE 10 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION : Balance sheets: Inventory: SCHEDULE OF INVENTORIES 2022 2021 December 31, 2022 2021 ($ in thousands) Finished goods $ 179 $ 92 Work in process 510 436 Raw materials and supplies 932 615 Total inventory $ 1,621 $ 1,143 F- 29 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 10 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (continued): SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUALS - OTHER a. Accounts payable and accruals-other: 2022 2021 December 31, 2022 2021 ($ in thousands) Employees and employee institutions $ 1,853 $ 1,510 Accrued vacation and recreation pay 197 233 Accrued expenses 554 632 Clinical trial accrual 1,258 504 Current Operating lease liabilities 419 420 Other 130 155 Accounts Payable and Accruals - Other $ 4,411 $ 3,454 NOTE 11 – 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: SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS Year ended December 31, 2022 2021 ($ in thousands) Germany $ 866 $ 948 Italy 970 981 Other 3,335 2,566 $ 5,171 $ 4,495 By product: SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS BY PRODUCT Year ended December 31, 2022 2021 ($ in thousands) CGuard™ EPS $ 5,123 $ 4,309 MGuard Prime™ EPS 48 186 $ 5,171 $ 4,495 By principal customers: SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS BY PRINCIPAL CUSTOMERS Year ended December 31, 2022 2021 Customer A 17 % 20 % Customer B 10 % 13 % All tangible long lived assets are located in Israel. NOTE 12 - SUBSEQUENT EVENTS : Election to Receive Shares of Common Stock in lieu of Cash Compensation Beginning on January 1, 2023, non-employee directors may elect to receive all or a portion of their cash retainer amount in shares of the Company’s common stock under the 2021 Equity Incentive Plan. If a director makes that election, a stock award under the 2021 Equity Incentive Plan will be paid quarterly on the first day of each quarter (“Grant Dates”) and will become fully vested on the Grant Dates. The stock award will be determined by dividing (x) the product of the cash retainer amount and percentage of the cash retainer amount elected to be taken in shares by (y) the “Fair Market Value” (as defined in the 2021 Equity Incentive Plan) of a share on the Grant Dates. If a director’s service on the board terminates for any reasons prior to a Grant Date, he/she will receive a pro rata portion of shares or cash based on the number of days served on the board during the relevant quarter. F- 30