InspireMD, Inc. 10-Q

Item 1. Financial Statements INSPIREMD, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE QUARTER ENDED SEPTEMBER 30, 2023 TABLE OF CONTENTS Page CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: Condensed Consolidated Balance Sheets F-2 - F-3 Condensed Consolidated Statements of Operations F-4 Condensed Consolidated Statements of Changes in Equity F-5 - F-8 Condensed Consolidated Statements of Cash Flows F-9 Notes to the Condensed Consolidated Financial Statements F-10 - F-20 F- 1 INSPIREMD, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (U.S. dollars in thousands) September 30, December 31, 2023 2022 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 13,839 $ 4,632 Short-term bank deposits - 13,171 Marketable securities 29,159 - Accounts receivable: Trade, net 1,045 1,034 Other 363 213 Prepaid expenses 476 655 Inventory 1,846 1,621 TOTAL CURRENT ASSETS 46,728 21,326 NON-CURRENT ASSETS: Property, plant and equipment, net 907 917 Operating lease right of use assets 1,538 1,554 Fund in respect of employee rights upon retirement 847 856 TOTAL NON-CURRENT ASSETS 3,292 3,327 TOTAL ASSETS $ 50,020 $ 24,653 F- 2 INSPIREMD, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (U.S. dollars in thousands other than share and per share data) September 30, December 31, 2023 2022 LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable and accruals: Trade 600 659 Other 4,090 4,411 TOTAL CURRENT LIABILITIES 4,690 5,070 LONG-TERM LIABILITIES- Operating lease liabilities 1,062 1,195 Liability for employees’ rights upon retirement 1,011 995 TOTAL LONG-TERM LIABILITIES 2,073 2,190 COMMITMENTS AND CONTINGENT LIABILITIES - - TOTAL LIABILITIES 6,763 7,260 EQUITY: Common stock, par value $ 0.0001 per share; 150,000,000 shares authorized at September 30, 2023 and December 31, 2022; 21,400,163 and 8,330,918 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively 2 1 Preferred C shares, par value $ 0.0001 per share; 1,172,000 shares authorized at September 30, 2023 and December 31, 2022; 1,718 shares issued and outstanding at September 30, 2023 and December 31 2022, respectively - * - * Additional paid-in capital 259,351 218,977 Accumulated deficit ( 216,096 ) ( 201,585 ) Total equity 43,257 17,393 Total liabilities and equity $ 50,020 $ 24,653 * Represents an amount less than $1 thousand The accompanying notes are an integral part of the consolidated financial statements. F- 3 INSPIREMD, INC. (Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (U.S. dollars in thousands, except per share data) 2023 2022 2023 2022 Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 REVENUES $ 1,556 1,431 $ 4,444 $ 4,145 COST OF REVENUES 1,118 1,065 3,142 3,226 GROSS PROFIT 438 366 1,302 919 OPERATING EXPENSES: Research and development 2,110 2,061 5,946 5,797 Selling and marketing 876 845 2,556 2,577 General and administrative 3,091 2,070 8,135 6,322 Total operating expenses 6,077 4,976 16,637 14,696 LOSS FROM OPERATIONS ( 5,639 ) ( 4,610 ) ( 15,335 ) ( 13,777 ) FINANCIAL INCOME, net: 461 81 824 131 NET LOSS $ ( 5,178 ) ( 4,529 ) $ ( 14,511 ) $ ( 13,646 ) NET LOSS PER SHARE - basic and diluted $ ( 0.15 ) ( 0.58 ) $ ( 0.69 ) $ ( 1.75 ) WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN COMPUTING NET LOSS PER SHARE - basic and diluted 33,984,953 7,838,506 21,148,538 7,816,974 The accompanying notes are an integral part of the consolidated financial statements. F- 4 INSPIREMD, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (U.S. dollars in thousands, except share data) Common stock Series C Convertible Preferred Stock Additional paid-in Accumulated Total Shares Amount Shares Amount capital deficit equity BALANCE AT January 1, 2022 8,296,256 1 1,718 - * 216,625 ( 183,094 ) 33,532 Net loss ( 13,646 ) ( 13,646 ) Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of 6,144 shares 39,350 - - 1,984 1,984 BALANCE AT September 30, 2022 8,335,606 1 1,718 - * 218,609 ( 196,740 ) 21,870 * Represents an amount less than $1 thousand The accompanying notes are an integral part of the consolidated financial statements. F- 5 INSPIREMD, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (U.S. dollars in thousands, except share data) Common stock Series C Convertible Preferred Stock Additional paid-in Accumulated Total Shares Amount Shares Amount capital deficit equity BALANCE AT July 1, 2022 8,323,200 1 1,718 - * 217,952 ( 192,211 ) 25,742 Net loss ( 4,529 ) ( 4,529 ) Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of 1,581 shares 12,406 - - 657 657 BALANCE AT September 30, 2022 8,335,606 1 1,718 - * 218,609 ( 196,740 ) 21,870 * Represents an amount less than $1 thousand The accompanying notes are an integral part of the consolidated financial statements. F- 6 INSPIREMD, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (U.S. dollars in thousands, except share data) Common stock Series C Convertible Preferred Stock Additional paid-in Accumulated Total Shares Amount Shares Amount capital deficit equity BALANCE AT January 1, 2023 8,330,918 1 1,718 - * 218,977 ( 201,585 ) 17,393 Net loss ( 14,511 ) ( 14,511 ) Issuance of common shares, pre-funded warrants and warrants, net of $ 4,635 issuance costs 10,266,270 1 - 37,533 37,534 Share-based compensation related to stock, restricted stock, restricted stock units and stock options award, net of forfeitures of 14,019 shares 2,802,975 - * 2,841 2,841 BALANCE AT September 30, 2023 21,400,163 2 1,718 - * 259,351 ( 216,096 ) 43,257 * Represents an amount less than $1 thousand The accompanying notes are an integral part of the consolidated financial statements. F- 7 INSPIREMD, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (U.S. dollars in thousands, except share data) Common stock Series C Convertible Preferred Stock Additional paid-in Accumulated Total Shares Amount Shares Amount capital deficit equity BALANCE AT July 1, 2023 21,192,204 2 1,718 - * 257,729 ( 210,918 ) 46,813 Balance 21,192,204 2 1,718 - * 257,729 ( 210,918 ) 46,813 Net loss ( 5,178 ) ( 5,178 ) Share-based compensation related to stock, restricted stock, restricted stock units and stock options award, net of forfeitures of 9,749 shares 207,959 - * - 1,622 1,622 Share-based compensation related to stock, restricted stock, restricted stock units and stock options award, net of forfeitures 207,959 - * - 1,622 1,622 BALANCE AT September 30, 2023 21,400,163 2 1,718 - * 259,351 ( 216,096 ) 43,257 Balance 21,400,163 2 1,718 - * 259,351 ( 216,096 ) 43,257 * Represents an amount less than $1 thousand The accompanying notes are an integral part of the consolidated financial statements. F- 8 INSPIREMD, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (U.S. dollars in thousands) 2023 2022 Nine months ended September 30 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ( 14,511 ) $ ( 13,646 ) Adjustments required to reconcile net loss to net cash used in operating activities: Depreciation 171 134 Gain from sale of property, plant and equipment ( 4 ) - Loss on amounts funded in respect of employee rights upon retirement 70 114 Changes in fair value of marketable securities ( 321 ) Change in liability for employees’ rights upon retirement 16 ( 83 ) Other financial expenses 72 138 Change in operating right of use asset and leasing liability ( 39 ) ( 78 ) Share-based compensation expenses 2,841 1,984 Decrease (increase) in interest receivable on short term deposits 171 ( 75 ) Changes in operating asset and liability items: Decrease (increase) in prepaid expenses 179 ( 198 ) Decrease (increase) in trade receivables ( 11 ) 58 Increase in other receivables ( 150 ) ( 42 ) Increase in inventory ( 225 ) ( 271 ) Decrease in trade payables ( 59 ) ( 489 ) Increase (decrease) in other payables ( 399 ) 107 Net cash used in operating activities ( 12,199 ) ( 12,347 ) CASH FLOWS FROM INVESTING ACTIVITIES: Investment in short-term bank deposits ( 5,500 ) ( 17,000 ) Purchase of property, plant and equipment ( 166 ) ( 378 ) Proceeds from sale of property, plant and equipment 9 - Investments in marketable securities ( 28,838 ) - Withdrawal from short-term bank deposits 18,500 22,000 Amounts funded in respect of employee rights upon retirement ( 61 ) ( 67 ) Net cash provided by (used in) investing activities ( 16,056 ) 4,555 CASH FLOWS FROM FINANCING ACTIVITIES: Issuance costs of At The Market offering - ( 140 ) Proceeds from issuance of shares and warrants net of $ 4,635 issuance costs, 37,534 - Net cash provided by (used in) financing activities 37,534 ( 140 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 72 ) ( 138 ) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,207 ( 8,070 ) BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 4,632 12,004 BALANCE OF CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 13,839 $ 3,934 SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: Acquisition of right-of-use assets by means of lease liabilities 419 835 Non-cash lease incentive 45 Decrease in right-of-use assets and lease liabilities due to shortening lease term 131 The accompanying notes are an integral part of the consolidated financial statements. F- 9 INSPIREMD, INC. NOTES TO THE CONDENSED 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. As of the date of issuance of these consolidated financial statements, the Company has the ability to fund its planned operations for at least the next 12 months. However, the Company expects to continue incurring losses and negative cash flows from operations until its product, CGuard™ EPS, reaches commercial profitability. Therefore, in order to fund the Company’s operations until such time that the Company can generate substantial revenues, the Company may need to raise additional funds. b. 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 (“EU”) 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 the Company’s 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 distribute 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 (MDR 2017/745) (“MDR”) regulations. 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 EU. 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 the Company is in the final stages of technical documentation review by the Notified Body auditor to meet the MDR requirements 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 the Company to continue marketing CGuard EPS in the EU until August 15, 2023, subject to certain procedural requirements. Subsequently, on March 20, 2023 Regulation (EU) 2023/607 was published allowing the Company to continue marketing CGuard EPS in EU countries under the MDD directive until December 31, 2027. As a result of the foregoing, the Company may 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 c. Risks Related to Our Operations in Israel including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them. In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in thousands of deaths and injuries, and Hamas additionally kidnapped many Israeli civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and commenced a military campaign against Hamas and other terrorist organizations in parallel to their continued rocket and terror attacks. The Company cannot currently predict the intensity or duration of Israel’s war against Hamas, nor can predict how this war will ultimately affect the Company’s business and operations or Israel’s economy in general. 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 12.1 % of total sales in Russia and Belarus in 2022 while during the nine and three months ended September 30, 2023, the Company’s sales to Russia and Belarus were 13.1 % and 19.6 % ,respectively, compared to 11.9 % and 21.5 % in the nine and three months ended September 30, 2022, respectively. 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 the Company to collect on outstanding accounts receivable from customers in this region. 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 NOTE 2 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements for the year ended December 31, 2022. In the opinion of the Company, all adjustments considered necessary for a fair statement of the results of the interim periods reported herein have been included (consisting only of normal recurring adjustments). These consolidated financial statements and notes thereto are unaudited and should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2022, as found in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 30, 2023. The results of operations for the three and nine months ended September 30, 2023, are not necessarily indicative of results that could be expected for the entire fiscal year. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. As of September 30, 2023, cash and cash equivalents consisted of cash, short-term deposits (up to three months from the date of deposit) and money market funds. As of December 31, 2022, this balance consisted solely of cash. Marketable securities Marketable securities consist of debt securities. The Company elected the fair value option to measure and recognize its investments in debt securities in accordance with ASC 825, Financial Instruments as the Company manages its portfolio and evaluates the performance on a fair value basis. Changes in fair value, realized gains and losses on sales of marketable securities, are reflected in the statements of operation as finance expense (income), net. NOTE 3 - NEW ACCOUNTING PRONOUNCEMENT Recently adopted accounting pronouncement 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 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 met the definition of an SRC and adopted 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 adopted the provisions of this update as of January 1, 2023 with no material impact on its consolidated financial statements. Recently issued accounting pronouncement, not yet adopted In August 2020, the FASB issued ASU 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This ASU is effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of ASU 2020-06 on the Company’s consolidated financial statements. F- 12 NOTE 4 – FAIR VALUE MEASUREMENTS Fair value is based on the price that would be received from the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described as follows: 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. The Company’s financial assets subject to fair value measurements on a recurring basis and the level of inputs used in such measurements were as follows: SCHEDULE OF FINANCIAL ASSETS SUBJECT TO FAIR VALUE MEASUREMENTS Total Level 1 Level 2 Level 3 As of September 30, 2023 Total Level 1 Level 2 Level 3 Assets: Cash equivalents- Money market funds $ 7,268 $ 7,268 $ - $ - Cash equivalents $ 7,268 $ 7,268 $ - $ - Marketable securities- U.S government bonds $ 29,159 $ - $ 29,159 $ - Marketable securities $ 29,159 $ - $ 29,159 $ - The Company’s debt securities are classified within Level 2 because it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value. The cost of marketable securities as of September 30, 2023 is $ 28,838 thousands. F- 13 NOTE 5 - MARKETABLE SECURITIES The following table sets forth the Company’s marketable securities for the indicated period: SCHEDULE OF MARKETABLE SECURITIES September 30, December 31, 2023 2022 ($ in thousands) U.S government bonds $ 29,159 $ - Marketable securities $ 29,159 $ - The following table summarizes the fair value of the Company’s marketable securities classified by maturity as of September 30, 2023, and December 31, 2022: SCHEDULE OF FAIR VALUE OF MARKETABLE SECURITIES CLASSIFIED BY MATURITY September 30, December 31, 2023 2022 ($ in thousands) Amounts maturing within one year $ 23,417 $ - Amounts maturing after one year through two years 5,742 - $ 29,159 $ - The table below sets forth a summary of the changes in the fair value of the Company’s marketable securities for the nine months period ended September 30, 2023: SCHEDULE OF CHANGES IN FAIR VALUE OF MARKETABLE SECURITIES Nine months ended September 30, 2023 ($ in thousands) Balance at beginning of the period $ - Additions 28,838 Sale or maturity - Changes in fair value during the period 321 Balance at end of the period - Balance at end of the period 29,159 NOTE 6 - EQUITY : a. Private Placement On May 12, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) pursuant to which the Company agreed to sell and issue in a private placement (the “Private Placement Offering) an aggregate of 10,266,270 shares (the “Private Placement Shares”) of the Company’s common stock, pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 15,561,894 shares of common stock and warrants to purchase up to an aggregate of 51,656,328 shares of common stock, consisting of Series H warrants to purchase up to 12,914,086 shares of common stock (the “Series H Warrants”), Series I warrants to purchase up to 12,914,078 shares of common stock (the “Series I Warrants”), Series J warrants to purchase up to 12,914,086 shares of Common Stock (the “Series J Warrants”) and Series K warrants to purchase up to 12,914,078 shares of common stock (the “Series K Warrants” and together with the Series H Warrants, Series I Warrants and Series J Warrants, the “Warrants”), at an offering price of $ 1.6327 per Private Placement Share and associated Warrants and an offering price of $ 1.6326 per Pre-Funded Warrant and associated Warrants. The Private Placement Offering closed on May 16, 2023. F- 14 Aggregate gross proceeds to the Company in respect of the Private Placement Offering were $ 42.2 million, before deducting fees payable to the placement agent and other offering expenses payable by the Company which amounted to approximately $ 4.6 million. If the Warrants are exercised in cash in full this would result in an additional $ 71.4 million of gross proceeds. The Pre-Funded Warrants are immediately exercisable at an exercise price of $ 0.0001 per share and will not expire until exercised in full. The Warrants are immediately exercisable upon issuance at an exercise price of $ 1.3827 per share. The Warrants have a term of the earlier of (i) five years from the date of issuance and (ii) (A) in the case of the Series H Warrants, 20 trading days following the Company’s public release of primary and secondary end points related to one year follow up study results from the Company’s C-Guardians pivotal trial, (B) in the case of the Series I Warrants, 20 trading days following the Company’s announcement of receipt of Premarket Approval (PMA) from the Food and Drug Administration, or FDA, for the CGuard Prime Carotid Stent System (135 cm), (C) in the case of the Series J Warrants, 20 trading days following the Company’s announcement of receipt of FDA approval for the SwitchGuard transcarotid system and CGuard Prime 80 cm and (D) in the case on the Series K Warrants, 20 trading days following the end of the fourth fiscal quarter after the fiscal quarter in which the first commercial sales of the CGuard Carotid Stent System in the United States begin. The Warrants may be exercised on a cashless basis if there is no effective registration statement registering the shares underlying the warrants. As of September 30, 2023, there are 15,561,894 outstanding Pre-Funded Warrants. Pursuant to the full ratchet anti-dilution adjustment provisions in the respective certificate of designation for the Company’s Series C Preferred Stock, the conversion price of the outstanding shares of the Series C Preferred Stock was reduced to $ 1.3827 per share, effective as of the date of the securities purchase agreement entered for the Offering, and the number of shares of common stock issuable upon conversion of the Series Series C Preferred Stock increased by 5,668 additional shares of common stock upon conversion of the Series C Preferred Stock, based on 1,718 shares of Series C Preferred Stock outstanding as of May 16, 2023. As of September 30, 2023, there were 1,718 shares of Series C Preferred Stock outstanding, convertible into an aggregate of 7,952 shares of the company’s common stock. b. As of September 30, 2023, the Company has outstanding warrants to purchase an aggregate of 53,396,008 shares of common stock as follows: SCHEDULE OF ISSUANCE OF WARRANTS TO PURCHASE COMMON STOCK Number of underlying Common stock Exercise price Series E Warrants 198,159 $ 27.0000 Series F Warrants 433,878 $ 7.4250 Series G Warrants 1,092,344 $ 10.2300 Series H Warrants 12,914,086 $ 1.3827 Series I Warrants 12,914,078 $ 1.3827 Series J Warrants 12,914,086 $ 1.3827 Series K Warrants 12,914,078 $ 1.3827 Underwriter Warrants 15,299 $ 7.4250 Total Warrants 53,396,008 $ As of September 30, 2023, the Company had 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- 15 c. During the nine months ended September 30, 2023, the Company granted 2,774,600 restricted shares of the Company’s common stock to employees and directors. The shares are subject to a three-year vesting period, with one-third of such awards vesting each year. The fair value of the above restricted shares was approximately $ 5.23 million. d. During the nine months ended September 30, 2023, the Company granted 1,045,150 restricted share units of the Company’s common stock to the chief executive officer. The shares are subject to a three-year vesting period, with one-third of such awards vesting each year. The fair value of the above restricted share units was approximately $ 1,839 thousand. e. On January 6, 2023, the Company granted to a consultant options to purchase a total of 50,000 shares of the Company’s common stock. The options have an exercise price of $ 1.15 per share, which was the fair market value of the Company’s common stock on the date of the grant. 45,000 options are subject to a three-year vesting period (of which 20,000 options are vesting in the first year, 15,000 options are vesting in the second year and 10,000 options are vesting in the third year) and 5,000 options with performance conditions related to marketing activities. In calculating the fair value of the above options, the Company used the following assumptions: dividend yield of 0 % and expected term of 5.125 - 6.5 years; expected volatility ranging from 124.58 %- 125.61 %; and risk-free interest rate ranging from 3.65 %- 3.68 %. The fair value of the above options, using the Black-Scholes option-pricing model, was approximately $ 50,658 . On May 17, 2023, the Company granted to employees and directors options to purchase a total of 1,011,930 shares of the Company’s common stock. The options have an exercise prices of $ 1.76 per share, which was the fair market value of the Company’s common stock on the date of the grant. The options are subject to a three-year vesting period, with one-third of such awards vesting each year. In calculating the fair value of the above options the Company used the following assumptions: dividend yield of 0 % and expected term of 5.5 - 6.5 years; expected volatility of 116.76 %- 123.30 %; and risk-free interest rate of 3.58 %. The fair value of the above options, using the Black-Scholes option-pricing model, was approximately $ 1.56 million. On May 17, 2023, the Company granted to consultants options to purchase a total of 575,000 shares of the Company’s common stock. The options have an exercise price of $ 1.76 per share, which was the fair market value of the Company’s common stock on the date of the grant. The options are subject to a three-year vesting period, with one-third of such awards vesting each year. In calculating the fair value of the above options the Company used the following assumptions: dividend yield of 0 % and expected term of 5.5 - 6.5 years; expected volatility of 116.76 %- 123.30 %; and risk-free interest rate of 3.58 %. The fair value of the above options, using the Black-Scholes option-pricing model, was approximately $ 885 thousand. On August 28, 2023 and September 10, 2023the Company granted to employees options to purchase a total of 38,740 shares of the Company’s common stock. The options have an exercise prices of $ 3.37 -$ 3.57 per share, which was the fair market value of the Company’s common stock on the date of the grant. The options are subject to a three-year vesting period, with one-third of such awards vesting each year. In calculating the fair value of the above options the Company used the following assumptions: dividend yield of 0 % and expected term of 5.5 - 6.5 years; expected volatility of 114.25 %- 123.07 %; and risk-free interest rate of 4.34 %- 4.39 %. The fair value of the above options, using the Black-Scholes option-pricing model, was approximately $ 120,000 thousand. F- 16 f. 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 next quarter (“Issuance Dates”) and will become fully vested on the Issuance 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 Issuance Dates. If a director’s service on the board terminates for any reasons prior to an Issuance 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. On April 1, 2023, the Company issued 29,746 shares of common stock to non-employee directors who elected to receive all or a portion of their cash retainer amount for the three months ended March 31, 2023 in shares of the Company’s common stock under the 2021 Equity Incentive Plan. On July 1, 2023, the Company issued 12,648 shares of common stock to non-employee directors who elected to receive all or a portion of their cash retainer amount for the three months ended June 30, 2023 in shares of the Company’s common stock under the 2021 Equity Incentive Plan. As of September 30, 2023, there was an accrual for $ 55,000 for director’s fees for the three months ended September 30, 2023. Out of this an amount of $ 22,875 will be paid in cash and $ 32,125 will be issued in shares of the Company’s common stock under the 2021 Equity Incentive Plan and accordingly On October 1, 2023 the company issued 9,735 shares. NOTE 7 – RELATED PARTIES TRANSACTIONS 1) During the nine and three months ended September 30, 2022, a consulting company whose founder and CEO is a member of the company’s board of directors, provided certain marketing services in the amount of $ 9,276 and $ 500 , respectively. During the nine and three months ended September 30, 2023, no marketing services were provided. 2) On September 15, 2023, the board approved the company’s entry into a consultancy agreement with a member of the immediate family of the CEO for certain administrative projects in connection with the Company’s expansion to the U.S. until a full-time Company employee is retained in such capacity. Pursuant to the Consultancy Agreement, the Company will pay a fixed hourly fee of $ 50 for a maximum of 20 hours per week and customary expenses. The Company may terminate this Agreement for any reason or no reason, at any time, upon 30 days prior written notice to consultant. Consulting expenses for the nine and three-month periods ended September 30, 2023, were $ 4,000 . F- 17 NOTE 8 - NET LOSS PER SHARE : Basic and diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock, pre-funded warrants and fully vested restricted stock units outstanding during the period. The calculation of diluted net loss per share excludes potential share issuances of common stock upon the exercise of share options, warrants, and unvested restricted stocks, unvested restricted stock units and Series C preferred stock as the effect is anti-dilutive. For the purpose of calculating basic net loss per share, the additional shares of common stock that are issuable upon exercise of the Pre-funded Warrants have been included since the shares are issuable for a negligible consideration, as determined by the Company according to ASC 260-10-45-13, and have no vesting or other contingencies associated with them. For the nine and three-month periods ended September 30, 2023, we had weighted average Pre-funded Warrants of 7,866,452 and 15,561,894 , respectively, which were used in the computations of net loss per share for the nine and three-month periods. The total number of shares of common stock related to outstanding options, warrants, unvested restricted stock, unvested restricted stock units and Series C Preferred Stock excluded from the calculations of diluted loss per share were 75,315,352 for the nine and three-month periods ended September 30, 2023. This amount includes 3,073,821 of unvested restricted stock included in the number of issued and outstanding shares as of September 30, 2023. The total number of shares of common stock related to outstanding options, warrants, unvested restricted stock, unvested restricted stock units and Series C Preferred Stock excluded from the calculations of diluted loss per share were 2,932,284 for the nine and three month periods ended September 30, 2022. This amount includes 497,767 of unvested restricted stock included in the number of issued and outstanding shares as of September 30, 2022. NOTE 9 – LEASE AGREEMENTS 1) The Company’s Israeli subsidiary has a lease agreement for a facility in Israel, which expires on December 31, 2026. On August 24, 2023, the Company amended the lease agreement mentioned above, leasing additional space in the facility and shortened the lease term of another space in the building. he balances of right of use assets and lease liabilities increased due to the newly leased space and decreased due to the lease that was shortened. 2) Operating lease cost for the nine and three-month periods ended September 30, 2023 were $ 337,000 and $ 112,000 respectively Supplemental information related to leases are as follows: SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES September 30 December 31 2023 2022 ($ in thousands) ($ in thousands) Operating lease right-of-use assets 1,538 1,554 Current operating lease liabilities ( 497 ) ( 419 ) Non-current operating lease liabilities ( 1,062 ) ( 1,195 ) Weighted Average Remaining Lease Term 3.25 4 Weighted Average Discount Rate 9.73 % 8.69 % F- 18 Other information: Nine months ended September 30, Twelve months ended December 31, 2023 2022 Operating cash flows from operating leases (cash paid in thousands) ( 307 ) ( 436 ) Maturities of lease liabilities are as follows: SCHEDULE OF MATURITIES OF LEASE LIABILITIES Amount ($ in thousands) 2023 113 2024 536 2025 541 2026 606 Total lease payments 1,796 Less imputed interest ( 237 ) Total 1,559 NOTE 10 - FINANCIAL INSTRUMENTS : a. Fair value of financial instruments The carrying amounts of financial instruments approximate their fair value either because these amounts are presented at fair value or due to the relatively short-term maturities of such instruments. b. As of September 30, 2023, and December 31, 2022, allowance for expected credit loss was immaterial. NOTE 11- INVENTORY : SCHEDULE OF INVENTORIES September 30, December 31, 2023 2022 ($ in thousands) Finished goods $ 191 $ 179 Work in process 634 510 Raw materials and supplies 1,021 932 Total inventory $ 1,846 $ 1,621 F- 19 NOTE 12 - ACCOUNTS PAYABLE AND ACCRUALS - OTHER : SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUALS - OTHER September 30, December 31, 2023 2022 ($ in thousands) Employees and employee institutions 1,571 1,853 Accrued vacation and recreation pay 273 197 Accrued expenses 926 554 Clinical trial accrual 708 1,258 Current Operating lease liabilities 497 419 Other 115 130 Accounts Payable and Accruals - Other 4,090 4,411 NOTE 13 - 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 Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 ($ in thousands) Italy $ 328 $ 240 $ 932 $ 713 Russia 250 250 483 381 Germany 209 191 699 866 Other 769 750 2,330 2,185 $ 1,556 $ 1,431 $ 4,444 $ 4,145 By product: SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS BY PRODUCT Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 ($ in thousands) CGuard $ 1,556 $ 1,431 $ 4,444 $ 4,097 MGuard - - - 48 $ 1,556 $ 1,431 $ 4,444 $ 4,145 By principal customers: SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS BY PRINCIPAL CUSTOMERS Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 Customer A 16 % 17 % 11 % 9 % Customer B 13 % 13 % 16 % 21 % Customer C 13 % 7 % 10 % 8 % Customer D 8 % 9 % 11 % 9 % All tangible long lived assets are located in Israel. F- 20