InspireMD, Inc. 10-Q

Item 1. Financial Statements INSPIREMD, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE QUARTER ENDED MARCH 31, 2024 TABLE OF CONTENTS Page CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets F-2 - F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Changes in Equity F-5 Consolidated Statements of Cash Flows F-7 Notes to the Consolidated Financial Statements F-8 - F-14 F- 1 INSPIREMD, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (U.S. dollars in thousands) March 31 2024 December 31 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 9,389 $ 9,640 Marketable securities 24,561 29,383 Accounts receivable: Trade, net 1,187 1,804 Other 483 648 Prepaid expenses 531 578 Inventory 2,360 2,106 TOTAL CURRENT ASSETS 38,511 44,159 NON-CURRENT ASSETS: Property, plant and equipment, net 1,186 1,060 Operating lease right of use assets 1,366 1,473 Fund in respect of employee rights upon retirement 965 951 TOTAL NON-CURRENT ASSETS 3,517 3,484 TOTAL ASSETS $ 42,028 $ 47,643 F- 2 INSPIREMD, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (U.S. dollars in thousands other than share and per share data) March 31 2024 December 31 2023 LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable and accruals: Trade 659 939 Other 4,218 5,081 TOTAL CURRENT LIABILITIES 4,877 6,020 LONG-TERM LIABILITIES- Operating lease liabilities 914 1,038 Liability for employees rights upon retirement 1,150 1,084 TOTAL LONG-TERM LIABILITIES 2,064 2,122 COMMITMENTS AND CONTINGENT LIABILITIES - - TOTAL LIABILITIES 6,941 8,142 EQUITY: Common stock, par value $ 0.0001 per share; 150,000,000 shares authorized at March 31, 2024 and December 31, 2023; 23,412,385 and 21,841,215 shares issued and outstanding at March 31, 2024 and December 2023, respectively 2 2 Preferred C shares, par value $ 0.0001 per share; 1,172,000 shares authorized at March 31, 2024 and December 31, 2023; 1,718 shares issued and outstanding at March 31, 2024 and December 31 2023, respectively - * - * Additional paid-in capital 263,618 261,000 Accumulated deficit ( 228,533 ) ( 221,501 ) Total equity 35,087 39,501 Total liabilities and equity $ 42,028 $ 47,643 * Represents an amount less than $1 thousand The accompanying notes are an integral part of the consolidated financial statements. F- 3 INSPIREMD, INC. (Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (U.S. dollars in thousands, except per share data) 2024 2023 3 Months Ended March 31, 2024 2023 REVENUES $ 1,511 $ 1,239 COST OF REVENUES 1,219 866 GROSS PROFIT 292 373 OPERATING EXPENSES: Research and development 2,625 1,843 Selling and marketing 1,237 788 General and administrative 3,844 2,123 Total operating expenses 7,706 4,754 LOSS FROM OPERATIONS ( 7,414 ) ( 4,381 ) FINANCIAL INCOME, net 382 125 NET LOSS $ ( 7,032 ) $ ( 4,256 ) NET LOSS PER SHARE - basic and diluted ( 0.21 ) ( 0.53 ) WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES USED IN COMPUTING NET LOSS PER SHARE - basic and diluted 34,242,976 8,093,340 The accompanying notes are an integral part of the consolidated financial statements. F- 4 INSPIREMD, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (U.S. dollars in thousands, except share data) 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 AT January 1, 2023 8,330,918 1 1,718 - * 218,977 ( 201,585 ) 17,393 Net loss - - ( 4,256 ) ( 4,256 ) Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of 4,270 shares ( 4,270 ) - - 289 289 BALANCE AT March 31, 2023 8,326,648 1 1,718 - * 219,266 ( 205,841 ) 13,426 * Represents an amount less than $1 thousand The accompanying notes are an integral part of the consolidated financial statements. F- 5 INSPIREMD, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (U.S. dollars in thousands, except share data) Common stock Series C Convertible Preferred Stock Additional paid-in Accumulated Total Shares Amount Shares Amount capital deficit equity BALANCE AT January 1, 2024 21,841,215 2 1,718 - * 261,000 ( 221,501 ) 39,501 Balance 21,841,215 2 1,718 - * 261,000 ( 221,501 ) 39,501 Net loss - - ( 7,032 ) ( 7,032 ) Share-based compensation related to stock, restricted stock, restricted stock units and stock options award, net of forfeitures of 75,090 shares 1,571,170 - - 2,618 2,618 Share-based compensation related to stock, restricted stock, restricted stock units and stock options award, net of forfeitures 1,571,170 - - 2,618 2,618 BALANCE AT March 31, 2024 23,412,385 2 1,718 - * 263,618 ( 228,533 ) 35,087 Balance 23,412,385 2 1,718 - * 263,618 ( 228,533 ) 35,087 * Represents an amount less than $1 thousand The accompanying notes are an integral part of the consolidated financial statements. F- 6 INSPIREMD, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (U.S. dollars in thousands) 2024 2023 Three months ended March 31 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 7,032 ) $ ( 4,256 ) Adjustments required to reconcile net loss to net cash used in operating activities: Depreciation 69 55 Change in fair value of markable securities, net of interest received ( 218 ) - Change in liability for employees rights upon retirement 66 36 Other financial expenses 4 22 Change in operating right of use asset and operating leasing liability ( 25 ) ( 34 ) Share-based compensation expenses 2,618 289 Loss on amounts funded in respect of employee rights upon retirement, net 14 23 Decrease in interest receivable on short term deposits - 14 Changes in operating asset and liability items: Decrease in prepaid expenses 47 261 Decrease (Increase) in trade receivables 617 ( 383 ) Decrease (Increase) in other receivables 165 ( 97 ) Increase in inventory ( 254 ) ( 76 ) Decrease in trade payables ( 280 ) ( 52 ) Decrease in other payables ( 855 ) ( 633 ) Net cash used in operating activities ( 5,064 ) ( 4,831 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment ( 195 ) ( 25 ) Investment in short-term bank deposits - ( 2,500 ) Withdrawal from short-term bank deposits - 7,000 Investments in marketable securities ( 1,960 ) - Proceeds from matured marketable securities 7,000 - Amounts funded in respect of employee rights upon retirement ( 28 ) ( 26 ) Net cash provided by (used in) investing activities 4,817 4,449 CASH FLOWS FROM FINANCING ACTIVITIES: Net cash provided by (used in) financing activities - - EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 4 ) ( 22 ) DECREASE IN CASH AND CASH EQUIVALENTS ( 251 ) ( 404 ) BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 9,640 4,632 BALANCE OF CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 9,389 $ 4,228 The accompanying notes are an integral part of the consolidated financial statements. F- 7 INSPIREMD, INC. UNAUDITED 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 markets its product 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. Risks Related to the Company’s 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 its production facility, are located in Israel. Currently, such activities in Israel remain largely unaffected. During the three months ended March 31, 2024, 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. NOTE 2 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. In the opinion of the Company, the financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of its financial position as of March 31, 2024 and its results of operations, changes in equity and cash flows for the three months ended March 31, 2024 and 2023. These consolidated financial statements and notes thereto are unaudited and should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2023, as found in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 5, 2024. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of results that could be expected for the entire fiscal year. F- 8 NOTE 3 - RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS Recently adopted accounting pronouncements In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This ASU is effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company adopted the provisions of this update as of January 1, 2024 with no material impact on its consolidated financial statements. 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 Accounting Standards Codification (“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. NOTE 4 – FAIR VALUE MEASUREMENTS Fair value is based on the price that would be received from the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described as follows: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. F- 9 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 March 31, 2024 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Cash equivalents- Money market funds $ 3,745 $ 3,745 $ - $ - Marketable securities- U.S government bonds $ 24,561 $ - $ 24,561 $ - 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 March 31, 2024 is $ 23,878 thousand. Fair value of financial instruments The carrying amounts of financial instruments included in working capital approximate their fair value due to the relatively short-term maturities of such instruments. As of March 31, 2024, and December 31, 2023, allowance for expected credit loss was immaterial. F- 10 NOTE 5 - MARKETABLE SECURITIES The following table sets forth the Company’s marketable securities for the indicated period: SCHEDULE OF MARKETABLE SECURITIES March 31, 2023 December 31, 2023 ($ in thousands) U.S government bonds $ 24,561 $ 29,383 Marketable securities $ 24,561 $ 29,383 The following table summarizes the fair value of the Company’s marketable securities classified by maturity as of March 31, 2024, and December 31, 2023: SCHEDULE OF FAIR VALUE OF MARKETABLE SECURITIES CLASSIFIED BY MATURITY March 31, 2024 December 31, 2023 ($ in thousands) Amounts maturing within one year $ 23,573 $ 24,523 Amounts maturing after one year through two years 988 4,860 $ 24,561 $ 29,383 The table below sets forth a summary of the changes in the fair value of the Company’s marketable securities for the three month period ended March 31, 2024: SCHEDULE OF CHANGES IN FAIR VALUE OF MARKETABLE SECURITIES Three months ended March 31, 2024 ($ in thousands) Balance at beginning of the period $ 29,383 Additions 1,960 Maturity ( 7,000 ) Interest Received ( 75 ) Changes in fair value during the period 293 Balance at end of the period 24,561 NOTE 6 - EQUITY : a. As of March 31, 2024, there were 1,718 shares of Series C preferred stock outstanding, convertible into an aggregate of 7,952 shares of the Company’s common stock, with a total stated value of $ 10,997 . b. As of March 31, 2024, there are 15,254,623 outstanding pre-funded warrants. F- 11 c. As of March 31, 2024, 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 March 31, 2024, the Company had 155,000,000 authorized shares of capital stock, par value $ 0.0001 per share, of which 150,000,000 are shares of common stock and 5,000,000 are shares of “blank check” preferred stock. d. During the three months ended March 31, 2024, the Company granted 1,634,403 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. The fair value of the above restricted shares was approximately $ 5.07 million. During the three months ended March 31, 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. The fair value of the above restricted share units was approximately $ 1.77 million During the three months ended March 31, 2024, the Company granted to employees and directors options to purchase a total of 715,614 shares of the Company’s common stock. The options have an exercise prices ranging from $ 2.71 -$ 3.14 per share, which was the fair market value of the Company’s common stock on the respective dates 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. In calculating the fair value of the above options, the Company used the following assumptions: dividend yield of 0 % and expected term of 5.5 - 6.5 years; expected volatility ranging from 96.40 %- 119.38 %; and risk-free interest rate ranging from 3.93 %- 4.10 %. The fair value of the above options, using the Black-Scholes option-pricing model, was approximately $ 1.85 million. F- 12 NOTE 7 – RELATED PARTIES TRANSACTIONS During the three months ended March 31, 2024, a member of the immediate family of the CEO provided certain administrative services in connection with the Company’s expansion to the U.S. in the amount of $ 15 thousand. NOTE 8 - NET LOSS PER SHARE : Basic and diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock, pre-funded warrants and fully vested restricted stock units outstanding during the period. The calculation of diluted net loss per share excludes 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 three month period ended March 31, 2024, the Company had weighted average pre-funded warrants to purchase 15,254,623 share of common stock, which was used in the computation of net loss per share for the quarter. 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 62,556,668 and 2,773,675 for the three month period ended March 31, 2024 and 2023. This amount includes 4,611,500 and 342,766 of unvested restricted stock included in the number of issued and outstanding shares as of March 31, 2024 and 2023. NOTE 9 - INVENTORY : SCHEDULE OF INVENTORIES March 31, 2024 December 31, 2023 ($ in thousands) Finished goods $ 73 $ 210 Work in process 917 562 Raw materials and supplies 1,370 1,334 Total inventory $ 2,360 $ 2,106 NOTE 10 - ACCOUNTS PAYABLE AND ACCRUALS - OTHER : SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUALS - OTHER March 31, 2024 December 31, 2023 ($ in thousands) Employees and employee institutions 1,207 2,188 Accrued vacation and recreation pay 348 287 Accrued expenses 1,101 1,115 Clinical trial accrual 826 744 Current Operating lease liabilities 549 557 Other 187 190 Accounts Payable and Accruals - Other $ 4,218 $ 5,081 F- 13 NOTE 11 - DISAGGREGATED REVENUE AND ENTITY WIDE DISCLOSURES : Revenues are attributed to geographic areas based on the location of the customers. The following is a summary of revenues: SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS Three months ended March 31 2024 2023 ($ in thousands) Italy $ 295 $ 267 Germany 242 214 Poland 152 119 Other 822 639 $ 1,511 $ 1,239 By principal customers: SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS BY PRINCIPAL CUSTOMERS Three months ended March 31 2024 2023 Customer A 16 % 17 % Customer B 12 % 13 % Customer C 10 % 10 % All tangible long lived assets are located in Israel. F- 14