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, 2023, 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, 2023. - 66 - 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, 2023. 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, 2023. 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, 2023, 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. PART III Item 10. Directors, Executive Officers and Corporate Governance. 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. Other Information The remaining information required by this Item 10 will be included in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders and is incorporated herein by reference. Item 11. Executive Compensation. The information required by this Item 11 will be included in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item 12 will be included in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders and is incorporated herein by reference. - 67 - Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item 13 will be included in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services. The information required by this Item 13 will be included in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders and is incorporated herein by reference. 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, 2023 and 2022 ● Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022 ● Consolidated Statements of Changes in Equity for the Years Ended December 31, 2023 and 2022 ● Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 ● Notes to Consolidated Financial Statements 2. Financial Statement Schedules None 3. Exhibits See Index to Exhibits Item 16. Form 10-K Summary Not applicable. - 68 - 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 - 69 - 10.1+ 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) 10.2+ 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) 10.3+ Amended and Restated Employment Agreement, dated May 5, 2014, by and between InspireMD, Inc. and Craig Shore (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 7, 2014) 10.4+ 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) 10.5+ 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) 10.6+ 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) 10.7+ 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) 10.8+ 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) 10.9+ 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) 10.10+ 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) 10.11+ 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) 10.12+ 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) 10.13+ 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) - 70 - 10.14+ 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) 10.15+ 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) 10.16+ 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) 10.17+ 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) 10.18+ Second Amendment to Amended and Restated Employment Agreement, dated July 25, 2016, by and between InspireMD, Inc. and Craig Shore agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 29, 2016) 10.19+ 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) 10.20+ Director Offer Letter, between InspireMD, Inc. and Thomas J. Kester, dated September 6, 2016 10.21+ 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) 10.22+ 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) 10.23+ 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) 10.24 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) 10.25 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)). 10.26 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)). 10.27+ 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). 10.28+ 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). - 71 - 10.29+ 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) 10.30+ 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) 10.31 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)). 10.32 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)) 10.33 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)) 10.34 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)) 10.35+ 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) 10.36+ 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) 10.37+ 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). 10.38+ 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). 10.39+ 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) 10.40+ 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). 10.41+ 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) 10.42+ 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) 10.43+ 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) - 72 - 10.44+ 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) 10.45+ 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) 10.46+ 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) 10.47+ 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) 10.48+ 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) 10.49+ 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) 10.50+ 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) 10.51 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). 10.52+ Third Amendment to Employment Agreement, dated January 5, 2023, by and between InspireMD, Inc. and Marvin Slosman (incorporated by reference to Exhibit 10.64 to the Annual Report on Form 10-K filed on March 30, 2023) 10.53+ Seventh Amendment to Employment Agreement, dated January 18, 2023, by and between InspireMD, Inc. and Craig Shore (incorporated by reference to Exhibit 10.65 to the Annual Report on Form 10-K filed on March 30, 2023) 10.54+^ Employment Agreement, dated November 2, 2020, by and between the Company and Andrea Tommasoli (incorporated by reference to Exhibit 10.66 to the Annual Report on Form 10-K filed on March 30, 2023) 10.55 Form of Securities Purchase Agreement dated as of May 12, 2023 between the Company and purchaser identified therein (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated May 15, 2023) 10.56 Form of Pre-Funded Warrant dated May 15, 2023 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K dated May 15, 2023) 10.57 Form of Series H Warrant dated May 15, 2023 (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K dated May 15, 2023) 10.58 Form of Series I Warrant dated May 15, 2023 (incorporated by reference to Exhibit 10.4 of the Current Report on Form 8-K dated May 15, 2023) - 73 - 10.59 Form of Series J Warrant dated May 15, 2023 (incorporated by reference to Exhibit 10.5 of the Current Report on Form 8-K dated May 15, 2023) 10.60 Form of Series K Warrant dated May 15, 2023 (incorporated by reference to Exhibit 10.6 of the Current Report on Form 8-K dated May 15, 2023) 10.61 Form of Registration Rights Agreement dated as of May 12, 2023 between the Company and purchaser identified therein (incorporated by reference to Exhibit 10.7 of the Current Report on Form 8-K dated May 15, 2023) 10.62+* Fourth Amendment to Employment Agreement, dated August 14, 2020, by and between InspireMD, Inc. and Craig Shore 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 97.1* InspireMD, Inc. Executive Officer Clawback Policy 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. - 74 - 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 5, 2024 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 5, 2024 Marvin Slosman (principal executive officer) /s/ Craig Shore Chief Financial Officer, Chief Administrative Officer, Secretary and Treasurer March 5, 2024 Craig Shore (principal financial and accounting officer) /s/ Paul Stuka Chairman of the Board of Directors March 5, 2024 Paul Stuka /s/ Michael Berman Director March 5, 2024 Michael Berman /s/ Thomas J. Kester Director March 5, 2024 Thomas J. Kester /s/ Gary Roubin Director March 5, 2024 Gary Roubin /s/ Kathryn Arnold Director March 5, 2024 Kathryn Arnold - 75 - INSPIREMD, INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2023 TABLE OF CONTENTS Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB name: Kesselman & Kesselman C.P.A.s and PCAOB ID: 1309 ) F-2 CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets F-3 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-27 F- 1 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, 2023 and 2022, 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, 2023 and 2022, 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. 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 5, 2024 We have served as the Company’s auditor since 2010 F- 2 INSPIREMD, INC. CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands) 2023 2022 December 31, 2023 2022 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 9,640 $ 4,632 Short-term bank deposits - 13,171 Marketable securities 29,383 - Accounts receivable: Trade, net 1,804 1,034 Other 648 213 Prepaid expenses 578 655 Inventory 2,106 1,621 TOTAL CURRENT ASSETS 44,159 21,326 NON-CURRENT ASSETS: Property, plant and equipment, net 1,060 917 Operating lease right of use assets 1,473 1,554 Fund in respect of employee rights upon retirement 951 856 TOTAL NON-CURRENT ASSETS 3,484 3,327 TOTAL ASSETS $ 47,643 $ 24,653 F- 3 December 31, 2023 2022 LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable and accruals: Trade 939 659 Other 5,081 4,411 TOTAL CURRENT LIABILITIES 6,020 5,070 LONG-TERM LIABILITIES: Operating lease liabilities 1,038 1,195 Liability for employee rights upon retirement 1,084 995 TOTAL LONG-TERM LIABILITIES 2,122 2,190 COMMITMENTS AND CONTINGENT LIABILITIES (Note 8) TOTAL LIABILITIES 8,142 7,260 EQUITY: Common stock, par value $ 0.0001 per share; 150,000,000 shares authorized at December 31, 2023 and 2022; 21,841,215 and 8,330,918 shares issued and outstanding at December 31, 2023 and 2022, respectively 2 1 Preferred C shares, par value $ 0.0001 per share; 1,172,000 shares authorized at December 31, 2023 and 2022; 1,718 shares issued and outstanding at December 31, 2023 and 2022; - * - * Additional paid-in capital 261,000 218,977 Accumulated deficit ( 221,501 ) ( 201,585 ) Total equity 39,501 17,393 Total liabilities and equity $ 47,643 $ 24,653 * 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) 2023 2022 Year Ended December 31, 2023 2022 REVENUES $ 6,205 $ 5,171 COST OF REVENUES 4,398 4,054 GROSS PROFIT 1,807 1,117 OPERATING EXPENSES: Research and development 7,981 7,810 Selling and marketing 3,865 3,664 General and administrative 11,104 8,356 Total operating expenses 22,950 19,830 LOSS FROM OPERATIONS ( 21,143 ) ( 18,713 ) FINANCIAL INCOME , net: 1,292 250 LOSS BEFORE TAX EXPENSES ( 19,851 ) ( 18,463 ) TAX EXPENSES 65 28 NET LOSS $ ( 19,916 ) $ ( 18,491 ) NET LOSS PER SHARE - basic and diluted ( 0.82 ) ( 2.35 ) WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES USED IN COMPUTING NET LOSS PER SHARE - basic and diluted 24,268,181 7,871,814 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 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 January 1, 2022 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 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- 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 January 1, 2023 8,330,918 1 1,718 - * 218,977 ( 201,585 ) 17,393 Net loss ( 19,916 ) ( 19,916 ) Exercise of pre-funded warrants 307,260 - * - - - - 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 29,695 shares 2,936,767 - * - - 4,490 4,490 Share-based compensation related to stock, restricted stock, restricted stock units and stock options award, net of forfeitures 2,936,767 - * - - 4,490 4,490 BALANCE as of December 31, 2023 21,841,215 2 1,718 - * 261,000 ( 221,501 ) 39,501 * Represents an amount less than $1 F- 7 INSPIREMD, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in thousands) 2023 2022 Year ended December 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 19,916 ) $ ( 18,491 ) Adjustments required to reconcile net loss to net cash used in operating activities: Depreciation and amortization 232 188 Gain from sale of property, plant and equipment ( 6 ) - Change in fair value of markable securities, net of interest received ( 739 ) - Change in liability for employees rights upon retirement 89 ( 57 ) Other financial expense 58 131 Change in operating right of use asset and operating leasing liability 62 ( 60 ) Share-based compensation expenses 4,490 2,352 Decrease (increase) in interest receivable on short term deposits 171 ( 135 ) Loss (gain) on amounts funded in respect of employee rights upon retirement, net ( 16 ) 135 Changes in operating asset and liability items: Decrease in prepaid expenses 77 7 Decrease (increase) in trade receivables ( 770 ) 190 Increase in other receivables ( 435 ) ( 48 ) Increase in inventory ( 485 ) ( 478 ) Increase (decrease) in trade payables 280 ( 234 ) Increase in other payables 532 958 Net cash used in operating activities ( 16,376 ) ( 15,542 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment ( 381 ) ( 473 ) Proceeds from sale of property, plant and equipment 12 - Investment in short-term bank deposits ( 5,500 ) ( 19,000 ) Investments in marketable securities ( 34,644 ) - Proceeds from matured marketable securities 6,000 - Amounts funded in respect of employee rights upon retirement ( 79 ) ( 86 ) Withdrawal from short-term bank deposits 18,500 28,000 Net cash provided by (used in) investing activities ( 16,092 ) 8,441 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 ( 58 ) ( 131 ) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,008 ( 7,372 ) BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,632 12,004 BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR 9,640 $ 4,632 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- 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 ceased sales of the Company’s MGuard Prime EPS in the beginning of 2022. The Company market 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. Status of European Medical Device Regulation for 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. 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. 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. In January 2024, the Company received CE mark recertification for the CGuard™ EPS under the EU’s Medical Device Regulation regulatory framework and can market Cguard permanently in EU countries as long as the Company is able to maintain its regulatory approvals. 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, Israel was attacked by a terrorist organization and entered a state of war. As of the date of these consolidated financial statements, the war in Israel is ongoing and continues to evolve. The Company operations including the production facility are located in Israel. Currently, such activities in Israel remain largely unaffected. During the year ended December 31, 2023, the impact of this war on the Company’s results of operations and financial condition was immaterial, but such impact may increase, which could be material, as a result of the continuation, escalation or expansion of such war. d. Risks Related to the Geopolitical and Military Tensions Between Russia and Ukraine in Europe The Company derived approximately 13.5 % and 12.1 % in the years ended December 31, 2023 and 2022, respectively, of total sales in Russia and Belarus. 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 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- 9 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES a. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates using assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of 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 purchased with original maturities of three months or less from the purchase date to be cash equivalents. As of December 31, 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. e. 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. Marketable securities are classified under current assets in the consolidated balance sheet as they represent the investment of funds available for the Company’s current operations. F- 10 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): f. 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. g. 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 and other receivables. 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 the allowance for estimated losses resulting from the inability of the Company’s customers to make required payments. The allowance represents the current estimate of lifetime expected credit losses over the remaining duration of existing accounts receivable considering current market conditions and supportable forecasts when appropriate. The estimate is a result of the Company’s ongoing evaluation of collectability, customer creditworthiness, historical levels of credit losses, and future expectations. The allowance for expected credit losses was immaterial during the periods presented. h. 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. i. 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. j. 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. k. 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- 11 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): l. 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 13. The Company recognizes revenue net of value added tax (VAT). m. Research and development costs Research and development costs, including the costs of the Company’s US based clinical trial costs were approximately $ 3,300,000 and $ 4,468,000 for the years ended December 31, 2023 and 2022, respectively, and charged to the statement of operations as incurred. n. 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, directors and service providers. Employee and service providers equity awards are 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. The attribution for nonemployee awards is in the same manner as if the Company had paid cash for the goods or services. In addition, certain of our share-based awards to service providers are performance based, i.e., the vesting of these awards depends upon achieving certain goals. The company recognizes compensation expenses for awards with performance conditions when the company concludes that it is probable that the performance condition will be achieved. o. 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”. F- 12 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): p. 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. q. Advertising Costs related to advertising and promotion of products are charged to sales and marketing expense as incurred. Advertising expenses were approximately $ 426,000 and $ 359,000 for the years ended December 31, 2023 and 2022, respectively. r. 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 the effect of potential dilution 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 year ended December 31, 2023, we had weighted average Pre-funded Warrants to purchase 9,612,502 share of common stock, which was used in the computation of net loss per share for the year. 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, which were excluded from the calculations of diluted loss per share were 74,978,006 and 2,741,355 for the years ended December 31, 2023 and 2022, respectively. This amount includes 3,054,086 and 355,951 of unvested restricted stock included in the number of issued and outstanding shares as of December 31, 2023 and 2022, respectively. s. Segment reporting The Company has one operating and reportable segment. t. Fair value measurement The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value. F- 14 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): u. 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. v. Recently issued accounting pronouncement, not yet adopted 1) In November 2023, the FASB issued ASU 2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures”. This guidance expands public entities segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied retrospectively to all prior periods presented in an entity’s financial statements. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements related disclosures. 2) In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This guidance is intended to enhance the transparency and decision-usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S. and in foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures. 3) 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 initial adoption of ASU 2020-06 is not expected to have a material impact on the Company’s consolidated financial statements. F- 15 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 3 – FAIR VALUE MEASUREMENTS As of December 31, 2023, the carrying amounts of accounts payable, accounts receivable and other receivable approximate their fair values due to the short-term maturities of these instruments. 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 December 31, 2023 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Cash equivalents- Money market funds $ 7,094 $ 7,094 $ - $ - Cash equivalents $ 7,094 $ 7,094 $ - $ - Marketable securities- U.S government bonds $ 29,383 $ - $ 29,383 $ - Marketable securities $ 29,383 $ - $ 29,383 $ - 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 December 31, 2023 is $ 28,727,000 . NOTE 4 - MARKETABLE SECURITIES The following table sets forth the Company’s marketable securities for the indicated period: SCHEDULE OF MARKETABLE SECURITIES December 31, 2023 ($ in thousands) U.S government bonds $ 29,383 Marketable securities $ 29,383 The following table summarizes the fair value of the Company’s marketable securities classified by maturity as of December 31, 2023: SCHEDULE OF FAIR VALUE OF MARKETABLE SECURITIES CLASSIFIED BY MATURITY December 31, 2023 ($ in thousands) Amounts maturing within one year $ 24,523 Amounts maturing after one year through two years 4,860 $ 29,383 The table below sets forth a summary of the changes in the fair value of the Company’s marketable securities for the year ended December 31, 2023: SCHEDULE OF CHANGES IN FAIR VALUE OF MARKETABLE SECURITIES Year ended December 31, 2023 ($ in thousands) Balance at beginning of the period $ - Additions 34,644 Sale or maturity ( 6,000 ) Interest Received ( 38 ) Changes in fair value 777 Balance at end of the period 29,383 F- 16 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 5 - PROPERTY, PLANT AND EQUIPMENT a. Composition of assets, grouped by major classifications, is as follows: SCHEDULE OF PROPERTY PLANT AND EQUIPMENT 2023 2022 December 31, 2023 2022 ($ in thousands) Cost: Computer equipment $ 425 $ 396 Office furniture and equipment 249 231 Machinery and equipment 1,702 1,704 Leasehold improvements 724 494 Property plant and equipment, gross 3,100 2,825 Less - accumulated depreciation and amortization ( 2,040 ) ( 1,908 ) Net carrying amount $ 1,060 $ 917 b. Depreciation and amortization expenses totaled approximately $ 232,000 and $ 188,000 for the years ended December 31, 2023 and 2022, respectively. NOTE 6 - 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 $ 256,000 and $ 241,000 for the years ended December 31, 2023 and 2022, 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 $ 116,000 and $ 68,000 for the years ended December 31, 2023 and 2022, respectively. F- 17 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 – 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. 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. The 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 years ended December 31, 2023 and 2022 was $ 433,000 and $ 442,000 respectively. Supplemental information related to leases are as follows: SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES 2023 2022 December 31, 2023 2022 ($ in thousands) Operating lease right-of-use assets 1,473 1,554 Current Operating lease liabilities ( 557 ) ( 419 ) Non-current operating lease liabilities ( 1,038 ) ( 1,195 ) Other information: Operating cash flows from operating leases (cash paid in thousands) ( 429 ) ( 436 ) Weighted Average Remaining Lease Term 3 4 Weighted Average Discount Rate 9.73 % 8.69 % Maturities of lease liabilities are as follows: SCHEDULE OF MATURITIES OF LEASE LIABILITIES Amount ($ in thousands) 2024 579 2025 584 2026 653 Total lease payments 1,816 Less imputed interest ( 221 ) Total 1,595 F- 18 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 8 - 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 until December 31, 2023. The liability at December 31, 2023 is immaterial. NOTE 9 - EQUITY a. Share capital The Company’s common stock are listed on the Nasdaq Capital Market. 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. 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. F- 19 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 9 – EQUITY (continued): 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. The Company issued a total of 307,260 shares of its common stock in connection with the exercise of Pre-Funded Warrants to purchase 307,271 shares of common stock on a cashless basis. As of December 31, 2023, there are Pre-Funded Warrants to purchase an aggregate of 15,254,623 share of common stock outstanding. 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 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 December 31, 2023 and 2022, there were 1,718 shares of Series C Preferred Stock outstanding, convertible into an aggregate of 7,952 and 2,284 shares of the Company’s common stock, respectively with a total stated value of $ 10,997 . As of December 31, 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 December 31, 2023, 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- 20 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 9 – EQUITY (continued): b. Share-Based Compensation 1) On September 30, 2021, at our 2021 annual meeting of stockholders, our stockholders approved our 2021 Equity Incentive Plan. The Company’s. 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. As of December 31, 2023, we had 7,731,618 shares of common stock available for future issuance under our 2021 Equity Incentive Plan. 5) The following table summarizes information about stock options granted to employees: SCHEDULE OF STOCK OPTIONS GRANTED Year ended December 31 2023 2022 Number of options Weighted average exercise price Number of options Weighted average exercise price Outstanding - beginning of period 294,712 5.21 289,408 $ 5.29 Granted 1,097,250 1.89 7,841 2.61 Forfeited ( 12,266 ) 4.00 ( 2,537 ) 5.70 Outstanding- end of period 1,379,696 2.58 294,712 $ 5.21 Exercisable at the end of the period 215,709 5.38 123,115 5.51 6) The following table summarizes information about stock options granted to non-employees: Year ended December 31 2023 2022 Number of options Weighted average exercise price Number of options Weighted average exercise price Outstanding - beginning of period 166,669 3.37 20,002 6.90 Granted 625,000 1.71 146,667 2.89 Outstanding - end of period 791,669 2.06 166,669 3.37 Exercisable at the end of the period 84,667 3.42 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 2023 2022 Number of restricted stock Outstanding - beginning of period 355,951 527,668 Granted 2,914,340 45,494 Forfeited ( 29,695 ) ( 10,832 ) Vested ( 186,510 ) ( 206,379 ) Outstanding - end of period 3,054,086 355,951 F- 21 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 9 – 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 2023 2022 Number of RSUs Outstanding - beginning of period 237,078 237,078 Granted 1,045,150 - Outstanding - end of period 1,282,228 237,078 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, 2023 Exercise price Options outstanding Weighted average remaining contractual life (years) Options exercisable $ 1.15 - 2.97 1,786,211 9.28 73,946 $ 3.30 - 4.12 227,932 8.53 95,075 $ 4.95 - 10.05 153,169 7.00 127,303 $ 16.50 4,053 6.01 4,053 2,171,365 9.03 300,376 The weighted average of the remaining contractual life of total vested and exercisable options as of December 31, 2023 was 7.54 years. The aggregate intrinsic value of the total exercisable options as of December 31, 2023 was approximately $ 10,983 . The weighted average fair value of options granted to employees was $ 1.65 and $ 2.33 for the years ended December 31, 2023 and 2022, respectively. The weighted average fair value of options granted was estimated using the Black-Scholes option-pricing model. The weighted average fair value of options granted to consultants was $ 1.50 and $ 2.57 for the years ended December 31, 2023 and 2022, respectively. The weighted average fair value of options granted was estimated using the Black-Scholes option-pricing model. The weighted average fair value of restricted stock granted was $ 1.95 and $ 2.42 for the years ended December 31, 2023 and 2022, respectively. The weighted average fair value of RSU granted was $ 1.76 for the year ended December 31, 2023. The vesting period for outstanding stock options, restricted stock, and RSUs is typically three years, with one-third of the awards vesting annually. Additionally, some of our share-based awards to service providers are performance-based, vesting upon the achievement of specified performance criteria related to clinical or marketing activities. F- 22 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 9 – EQUITY (continued): 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, 2023 and 2022: SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED TO EMPLOYEES Year ended December 31 2023 2022 Expected life 5.125 - 6.5 years 5.125 - 6.5 years Risk-free interest rates 3.58 %- 4.73 % 1.79 %- 2.88 % Volatility 109.62 %- 125.61 % 127.43 %- 130.93 % Dividend yield - - 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, 2023, 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 $ 7.18 million. This cost is expected to be recognized over a weighted-average period of approximately 0.97 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 2023 2022 ($ in thousands) Cost of revenues $ 93 $ 72 Research and development 649 582 Sales and marketing 416 318 General and administrative 3,332 1,380 $ 4,490 $ 2,352 F- 23 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 10 – RELATED PARTIES TRANSACTIONS 1) During the twelve months ended December 31, 2023 and 2022, a consulting company whose founder and CEO is our board member provided certain marketing services in the amount of $ 788 and $ 9,645 , respectively. 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 year ended December 31, 2023, were $ 11,440 . 3) Election to Receive Shares of Common Stock in lieu of Cash Compensation For the year 2023, certain non-employee directors elected 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. For a director that made that election, a stock award under the 2021 Equity Incentive Plan was paid quarterly on the first day of each next quarter (“Issuance Dates”) and became fully vested on the Issuance Dates. The stock award was 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. During the years ended December 31, 2023 the Company issued 52,129 shares of common stock to non-employee directors who elected to receive all or a portion of their cash retainer amount for the nine months ended September 30, 2023 in shares of the Company’s common stock under the 2021 Equity Incentive Plan. As of December 31, 2023, there was an accrual for $ 55,000 for director’s fees for the three months ended December 31, 2023. Out of this an amount of $ 22,875 was paid in cash and $ 32,125 was issued in shares of the Company’s common stock under the 2021 Equity Incentive Plan. On January 1, 2024 the Company issued 11,854 shares of common stock. NOTE 11 - 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 2023 is 21 %. the applicable state income tax rate in 2023 is 3.42%. Taxation in Israel InspiredMD, Ltd is taxed under Israeli tax laws. Accordingly, the applicable corporate tax rate in 2023 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 %. F- 24 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 11 - TAXES ON INCOME: (continued): b. Tax benefits under the Law for the Encouragement of Capital Investments, 1959 (the “Law”): On December 29, 2016, the Investment Law was amended (“73 Amendment”), which includes, inter alia, two new tax incentive opportunities. These are the Preferred Technological Enterprise (“PTE”) and Special Preferred Technological Enterprise (“SPTE”). In order to benefit from either of these options, a Company must meet certain qualifications and receive formal approval from the Israel Innovation Authority (“IIA”) which allows the Company to use the reduced corporate tax rate of 12 % on its “Preferred Technological Income” (earned from enterprises located in Development outside of Zone A) in the case of a “preferred technology enterprise”, or 6 % on its “preferred technology income” (earned from enterprises located in Development Zone A or outside it) in the case of a “special preferred technology enterprise”. Additionally, any “technology income”, as this term is defined by the Law, not classified as “preferred technology income” is subject to the corporate tax rate. Furthermore, according to the provisions regarding “preferred technology enterprise” and “special preferred technology enterprise” in the Law and the regulations thereunder, and to the extent the income is attributable to manufacturing, this income is classified as “preferred income” and is taxed at 7.5 % or 16 % according to the development zone. To the extent the income is from an intangible asset used for marketing, it is subject to the normal corporate tax rate. Additionally, when income of a company originating from “preferred technology income” is distributed as dividend to a foreign-resident corporation, tax withholding from the dividend is 4 %, provided that 90 % or more of that company’s shares are directly held by one or more foreign corporations, and the profits resulted after they acquired the shares. c. Carry forward tax losses As of December 31, 2023, the Company had a net carry forward tax loss of approximately $ 54 million, of which approximately $ 35 million (arising before January 1, 2018), expires until 2038 , and approximately $ 19 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, 2023, 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 2023 2022 ($ in thousands) Loss before taxes on income: InspireMD, Inc. $ ( 5,772 ) $ ( 4,773 ) Subsidiaries ( 14,079 ) ( 13,690 ) $ ( 19,851 ) $ ( 18,463 ) F- 25 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 11 - 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, 2023 and 2022 were as follows: SCHEDULE OF CHANGES IN VALUATION ALLOWANCE Year ended December 31 2023 2022 ($ in thousands) Balance at the beginning of the year $ 40,071 $ 39,212 Changes during the year: Losses during the year (including foreign exchange rate effect) 2,580 859 Balance at the end of the year $ 42,651 $ 40,071 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, 2023 and 2022 were as follows: SCHEDULE OF RECONCILIATION OF UNCERTAIN TAX POSITIONS Year ended December 31, 2023 2022 ($ in thousands) Balance at beginning of period $ 106 $ 89 Increase in uncertain tax positions because of tax positions taken during the year 62 17 Balance at end of period $ 168 $ 106 A summary of open tax years by major jurisdiction is presented below: SCHEDULE OF OPEN TAX YEARS BY MAJOR JURISDICTION Jurisdiction Years U.S. 2020 - 2023 Israel 2019 - 2023 Germany 2020 - 2023 g. Deferred income tax: SCHEDULE OF DEFERRED INCOME TAX 2023 2022 December 31, 2023 2022 ($ in thousands) Provision for vacation and recreation pay 68 45 R&D expenses 1,691 1,452 Operating lease right of use assets ( 339 ) ( 357 ) Operating lease liabilities 367 371 Share-based compensation 3,492 3,021 Carry forward tax losses 37,342 35,507 Accrued severance pay, net 30 32 Deferred tax assets noncurrent 42,651 40,071 Less-valuation allowance ( 42,651 ) ( 40,071 ) Deferred tax assets - - F- 26 INSPIREMD, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 12 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION : Balance sheets: Inventory: SCHEDULE OF INVENTORIES 2023 2022 December 31, 2023 2022 ($ in thousands) Finished goods $ 210 $ 179 Work in process 562 510 Raw materials and supplies 1,334 932 Total inventory $ 2,106 $ 1,621 SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUALS - OTHER a. Accounts payable and accruals-other: 2023 2022 December 31, 2023 2022 ($ in thousands) Employees and employee institutions $ 2,188 $ 1,853 Accrued vacation and recreation pay 287 197 Accrued expenses 1,115 554 Clinical trial accrual 744 1,258 Current Operating lease liabilities 557 419 Other 190 130 Accounts Payable and Accruals - Other $ 5,081 $ 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 Year ended December 31, 2023 2022 ($ in thousands) Italy $ 1,195 $ 970 Germany 896 866 Russia 738 381 Other 3,376 2,954 $ 6,205 $ 5,171 By product: SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS BY PRODUCT Year ended December 31, 2023 2022 ($ in thousands) CGuard™ EPS $ 6,205 $ 5,123 MGuard Prime™ EPS - 48 $ 6,205 $ 5,171 By principal customers: SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS BY PRINCIPAL CUSTOMERS Year ended December 31, 2023 2022 Customer A 14 % 17 % Customer B 12 % 7 % All tangible long lived assets are located in Israel. NOTE 14 - SUBSEQUENT EVENTS : On January 23, 2024, the Company granted 1,528,316 restricted shares of the Company’s common stock to employees and directors. The shares to employees are subject to a three-year vesting period, with one-third of such awards vesting each year. The shares to directors are subject to a one-year vesting period. On January 23, 2024, the Company granted 563,499 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. On January 23, 2024, the Company granted to employees and directors options to purchase a total of 669,464 shares of the Company’s common stock. The options have an exercise prices of $3.14 per share, which was the fair market value of the Company’s common stock on the date of the grant. The options to employees are subject to a three-year vesting period, with one-third of such awards vesting each year. The options to directors are subject to a one-year vesting period. F- 27