Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying
consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The discussion that follows includes a comparison of our results of operations and liquidity and capital resources
for fiscal years 2025 and 2024. For a comparison of our results of operations and financial condition for fiscal years 2024 and 2023,
see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2024
Annual Report on Form 10-K, filed with the SEC on March 12, 2025.
Overview
We
are a medical device company specializing in the development and commercialization of products for the treatment of carotid artery disease
and other vascular conditions. Our portfolio includes two commercial products based on our proprietary CGuard carotid stent technology,
designed to provide market-leading embolic protection during and after stenting procedures. A stent is an expandable scaffold-like metallic
device placed in an artery to widen the lumen and restore blood flow.
Our
first product, the CGuard Carotid Embolic Prevention System (“CGuard EPS”), integrates a self-expanding nitinol stent with
a MicroNet mesh sleeve as a single device for carotid artery revascularization. In January 2024, we received CE Mark recertification
for CGuard EPS under the EU Medical Device Regulation (“MDR”). Our CGuard EPS previously held CE Mark approval under the
former Medical Device Directive (“MDD”). CGuard EPS is marketed in over 30 countries outside the United States through a
network of distributors.
Our
second product, the CGuard Prime Carotid Stent System (“CGuard Prime”), uses the same stent and MicroNet mesh with a differentiated
deployment mechanism. CGuard Prime received premarket approval (“PMA”) by the U.S. Food and Drug Administration (“FDA”)
on June 23, 2025, and is marketed exclusively in the United States through our direct salesforce. It also received MDR CE Mark approval
on June 12, 2025.
For
more information regarding our business and operations, see “Item 1 – Business” above.
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Recent
Developments
Private
Placements
May
2023 Private Placement Offering
On
May 12, 2023, we entered into a securities purchase agreement pursuant to which we issued and sold in a private placement (the “May
2023 Private Placement Offering”) (i) an aggregate of 10,266,270 shares of common stock (the “May 2023 Shares”), (ii)
pre-funded warrants to purchase up to 15,561,894 shares of common stock (the “May 2023 Pre-Funded Warrants”), and (iii) warrants
to purchase up to an aggregate of 51,656,328 shares of common stock (the “May 2023 Warrants”), consisting of Series H warrants,
Series I warrants, Series J warrants and Series K warrants.
The
May 2023 Shares and associated warrants were sold at an offering price of $1.6327 per share and associated warrants, and the May 2023
Pre-Funded Warrants were sold at an offering price of $1.6326 per May Pre-Funded Warrant and associated warrants. Aggregate gross proceeds
totaled approximately $42.2 million, and after deducting placement agent fees and other issuance costs of approximately $4.6 million,
net proceeds to the Company were approximately $37.6 million.
Terms
of the May 2023 Pre-Funded Warrants
The
May 2023 Pre-Funded Warrants were immediately exercisable at an exercise price of $0.0001 per share and did not expire until exercised
in full. As of the date of this Annual Report on Form 10-K, the May 2023 Pre-Funded Warrants have been exercised in full. Under their
terms, holders were not able to exercise a Pre- May 2023 Funded Warrant if the exercise would result in the holder beneficially owning
more than 4.99% or 9.99% of our outstanding shares of common stock (as elected by the holder), subject to customary permitted increases
with advance notice.
Terms
of the May 2023 Warrants (Series H, I, J and K)
The
May 2023 Warrants were immediately exercisable at an exercise price of $1.3827 per share and are exercisable until the earlier of (i)
five years after issuance and (ii) the applicable milestone-triggered expiration date, as follows:
● Series
H Warrants: expire 20 trading days following our public release of one-year primary and secondary
endpoint results from the C-GUARDIANS pivotal trial.
● Series
I Warrants: expire 20 trading days following the announcement of PMA by the FDA for CGuard
Prime 135 cm carotid stent system.
● Series
J Warrants: expire 20 trading days following our announcement of FDA approval for the SwitchGuard
system and CGuard Prime 80 cm carotid stent system.
● Series
K Warrants: expire 20 trading days following the end of the fourth fiscal quarter after the
fiscal quarter in which the first U.S. commercial sale of the CGuard carotid stent system
occurs.
The
May 2023 Warrants may be exercised on a cashless basis if there is no effective registration statement for the underlying shares of common
stock issuable upon the exercise thereof. A registration statement on Form S-3 (File No. 333-272149) registering the shares underlying
the May 2023 Warrants was declared effective on June 2, 2023.
Milestone-Based
Exercises Under the May 2023 Warrants
74
Following
the achievement of the applicable milestones during 2024 and 2025, the May 2023 Warrants were exercised as follows:
Series
H Warrant Exercise
After
we announced positive one-year results from the C-GUARDIANS pivotal trial, all Series H Warrants were exercised in full into 292,996
shares of common stock and 12,621,090 pre-funded warrants. Gross proceeds totaled approximately $17.9 million, and after deducting placement
agent fees and issuance costs of approximately $1.0 million, net proceeds were approximately $16.9 million.
Series
I Warrant Exercise
Following
our June 24, 2025 announcement that the FDA granted PMA approval for CGuard Prime in the United States, all Series I Warrants were exercised
in full into 2,352,393 shares of common stock and 10,561,685 pre-funded warrants. Gross proceeds totaled approximately $17.9 million,
and net proceeds were approximately $16.9 million after issuance costs of approximately $1.0 million.
August
2025 Private Placement Offering
On
July 30, 2025, we entered into a securities purchase agreement with investors pursuant to which we issued and sold in a private placement
(the “August 2025 Private Placement Offering”) an aggregate of 6,791,380 shares (the “August 2025 Shares”) of
common stock and pre-funded warrants (the “August 2025 Pre-Funded Warrants”) to purchase up to 9,764,804 shares of common
stock, at an offering price of $2.42 per August 2025 Share and $2.4199 per August 2025 Pre-Funded Warrant. The August 2025 Pre-Funded
Warrants are immediately exercisable at an exercise price of $0.0001 per share and will not expire until exercised in full.
Aggregate
gross proceeds totaled approximately $40.1 million, after deducting placement agent fees and other issuance costs of approximately $3.1
million, net proceeds to the Company were approximately $37 million.
PMA
approval of the CGuard Prime Carotid Stent System and Commercial Launch in the United States
On
June 23, 2025, the FDA granted PMA approval of CGuard Prime in the United States.
Following
such approval, in July 2025, we announced the official commercial launch of CGuard Prime in the United States. In October 2024, we established
our global headquarters in Miami, Florida to support the U.S. launch and commercialization of CGuard Prime.
CE
Mark Approval for CGuard Prime Under European MDR
On
June 12, 2025, we received CE Mark approval under the EU’s MDR for CGuard Prime.
Critical
Accounting Policies
We
prepared our consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
U.S. GAAP represents a comprehensive set of accounting and disclosure rules and requirements, and applying these rules and requirements
requires management judgments and estimates including, in certain circumstances, choices between acceptable U.S. GAAP alternatives. The
following is a discussion of our most critical accounting policies, judgments and uncertainties that are inherent in our application
of U.S. GAAP.
Use
of estimates
As
applicable to these consolidated financial statements, the most significant estimates and assumptions relate to the determination of
the lease terms in operating leases.
75
Leases
Operating
leases are included in operating lease right-of-use (“ROU”) assets, Accounts payable and accruals - Other, and 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, we use 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
we will exercise such options, and periods covered by options to terminate the lease when it is reasonably certain that we 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.
Results
of Operations
Year
ended December 31, 2025 compared to the year ended December 31, 2024
Revenues .
For the year ended December 31, 2025, revenue was $8,979,000, an increase of $1,970,000, or 28.1%, compared to $7,009,000 during the
year ended December 31, 2024. The increase was driven by the commercial launch of the CGuard Prime product through direct sales in the
U.S. following FDA approval in June 2025, and continued growth in sales of the CGuard EPS product through distributors in international
markets.
With
respect to regions, the increase in revenue was primarily attributable to $1,385,000 increase in North America due to the commercial
launch of CGuard Prime in the U.S. in the second half of 2025, and a $585,000 increase in international markets from continued penetration
of our CGuard EPS product.
Gross
Profit . For the year ended December 31, 2025, gross profit (revenue less cost of revenues) was $2,649,000 compared to gross profit
of $1,506,000 for 2024. The increase resulted mainly from the increase in revenue year-on-year.
Gross
margin represents our gross profit as a percentage of our revenue. Gross margin was 29.5% for the year ended December 31, 2025, an increase
of 8.0 percentage points compared to 21.5% for the year ended December 31, 2024. This increase in gross margin resulted primarily from
a more favorable revenue mix driven by direct U.S. sales, which carry higher margins due to a higher average selling price per unit compared
with international distributor sales.
Research
and Development Expenses . For the year ended December 31, 2025, research and development expenses were $15,003,000, an increase of
$1,369,000, or 10.0%, compared to $13,634,000 during the year ended December 31, 2024. This increase resulted primarily due to higher
staff levels in connection with our expansion in the U.S., and higher development and clinical expenses for the SwitchGuard NPS and CGuard
Prime 80 cm carotid stent system, respectively. These increases were partially offset by a decrease in expenses for the C-GUARDIANS clinical
study and related product preparation activity prior to the FDA approval of CGuard Prime in June 2025.
Selling
and Marketing Expenses . For the year ended December 31, 2025, selling and marketing expenses were $16,553,000, an increase of $10,484,000,
or 172.7%, compared to $6,069,000 during the year ended December 31, 2024. This increase resulted primarily from higher commercial staffing
levels in connection with the commercial launch of CGuard Prime in the U.S.
General
and Administrative Expenses . For the year ended December 31, 2025, general and administrative expenses were $20,707,000, an increase
of $5,401,000, or 35.3%, compared to $15,306,000 during the year ended December 31, 2024. The increase was primarily driven by new hires,
professional services expenses, and occupancy-related costs related to the Company’s expansion of U.S. operations to support the
commercial launch of CGuard Prime.
Financial
Income, net . For the year ended December 31, 2025, financial income was $891,000, a decrease of $666,000, compared to $1,557,000
during the year ended December 31, 2024. The decrease in financial income primarily resulted from a $403,000 increase in financial expenses
related to changes in exchange rates and a $264,000 decrease in income from investment in marketable securities and money market funds
due to lower interest rates.
76
Tax
Expenses . For the year ended December 31, 2025, tax expenses increased by $4,000 compared to the year ended December 31, 2024. Our
expenses for income taxes reflect primarily the tax liability due to potential tax exposure.
Net
Loss . Our net loss for the year ended December 31, 2025 was $48,786,000, an increase of $16,781,000, or 52.4%, compared to $32,005,000
during the year ended December 31, 2024. The increase in net loss resulted primarily from an increase of $17,254,000 in operating expenses.
Liquidity
and Capital Resources
We
had an accumulated deficit as of December 31, 2025, of $302.3 million, as well as a net loss of $48.8 million and negative operating
cash flows for fiscal year 2025. We expect to continue incurring losses and negative cash flows from operations until we expand our commercial
revenue to a scale that funds our commercial resources, development activities and support functions. As a result of these expected losses
and negative cash flows from operations, along with our current cash position, we believe we do not have sufficient resources to fund
operations for at least the next 12 months. Therefore, there is substantial doubt about our ability to continue as a going concern.
Our
plans include continued commercialization of our products and raising capital through sale of additional equity securities, debt or capital
inflows from strategic partnerships and exercise of warrants. There are no assurances, however, that we will be successful in obtaining
the level of financing needed for our operations. If we are unsuccessful in commercializing our products or raising capital, we may need
to reduce activities, curtail or cease operations.
In
May 2023, we closed the May 2023 Private Placement Offering that resulted in aggregate gross proceeds of approximately $42.2 million,
before deducting fees payable to the placement agent and other offering expenses payable by us. If the May 2023 Warrants are exercised
in cash in full this would result in an additional $71.4 million of gross proceeds (of which approximately $33.8 million has been received
as of the date of this Annual Report on Form 10-K). There can be no assurance that we will achieve any of the remaining milestones set
forth in the May 2023 Warrants or that the outstanding May 2023 Warrants will be exercised in cash in full.
Following
the announcement of the one year follow up study results from the Company’s C-GUARDIANS trial, Series H Warrants to purchase 12,914,086
shares of common stock were exercised in full into 292,996 shares of common stock and pre-funded warrants to purchase 12,621,090 shares
of common stock. The net proceeds from the exercise of the Series H Warrants were $16.9 million after deducting placement agent fees.
The Series H warrants, each exercisable at $1.3827 per common share and $1.3826 per pre-funded warrant, were issued as part of the May
2023 Private Placement Offering.
Following
the announcement of the PMA approval of the CGuard Prime carotid stent system in the United States, Series I warrants to purchase 12,914,078
shares of common stock were exercised in full into 2,352,393 shares of common stock and pre-funded warrants to purchase 10,561,685 shares
of common stock during June and July 2025. The net proceeds from the exercise of the Series I Warrants were $16.9 million after deducting
placement agent fees. The Series I warrants, each exercisable at $1.3827 per common share and $1.3826 per pre-funded warrant, were issued
as part of the May 2023 Private Placement Offering.
In
May 2024, we entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Piper Sandler & Co., as
sales agent (“Piper Sandler”). Pursuant to the Distribution Agreement, we may offer and sell from time to time, at our option,
through or to Piper Sandler shares of our common stock having an aggregate offering price of up to $75 million (the “ATM Facility”).
We will pay Piper Sandler a commission at a fixed rate of 3.0% of the aggregate gross proceeds
from each sale of the shares under the Distribution Agreement. As of the date hereof, we sold 1,366,190 shares pursuant to the
Distribution Agreement for aggregate gross proceeds of approximately $3,473,314.
In
July 2025, we closed August 2025 that resulted in aggregate gross proceeds of approximately $40.1 million, before deducting fees payable
to the placement agent and other offering expenses payable by us.
77
Year
ended December 31, 2025 compared to the year ended December 31, 2024
General .
As of December 31, 2025, we had cash and cash equivalents of $8,939,000 and marketable securities of $45,272,000, as compared to $18,916,000
of cash and cash equivalents and $15,721,000 marketable securities as of December 31, 2024. We have historically met our cash needs through
a combination of issuing new shares, borrowing activities and product sales. Our cash requirements are generally for manufacturing costs,
research and development activities, sales and marketing efforts, finance and administrative expenses, capital expenditures and general
working capital.
For
the year ended December 31, 2025, net cash used in our operating activities increased by $13,235,000 to $35,103,000, from $21,868,000
during the same period in 2024. The primary reason for the increase in cash used in our operating activities was an increase of $13,163,000
in compensation costs paid during the year ended December 31, 2025 (from $12,013,000 in the year ended December 31, 2024 to $25,176,000
in the year ended December 31, 2025) and an increase of $1,509,000 in payments for third party related expenses and for professional
services, offset, in part, by an increase of $1,374,000 in payments received from customers to $8,590,000 during the year ended December
31, 2025, from $7,216,000 during the same period in 2024.
Cash
used in our investing activities was $30,560,000 during the year ended December 31, 2025, compared to cash provided by our investing
activities of $12,641,000 during the year ended December 31, 2024. The primary reason for the increase in cash used in our investing
activities is investments of $43,748,000, net of withdrawal in marketable securities.
Cash
provided by financing activities for the year ended December 31, 2025, was $55,569,000. The source of the cash provided by financing
activities during the year ended December 31, 2025, were the proceeds from the August 2025 Private Placement Offering as well as proceeds
from issuance of shares received from our ATM Facility that resulted in approximately of $38,714,000 aggregate net proceeds and proceeds
from the exercise of Series I Warrants of $16,855,000. Cash provided by financing activities for the year December 31, 2024, was $18,452,000.
The principal source of the cash provided by financing activities during the year ended December 31, 2024, was the proceeds from exercise
of warrants of $16,854,000 net of issuance costs and funds received from our ATM Facility that resulted in approximately $1,598,000 of
aggregate net proceeds.
Contractual
Obligations
Operating
lease payments represent our commitment for future rent made under non-cancelable lease for our offices in the U.S. and Israel. The total
future payments for our operating lease obligation on December 31, 2025, were approximately $3,966,000. For additional details regarding
our lease, see Note 7 to our consolidated financial statements included in this Annual Report on Form 10-K.
Off
Balance Sheet Arrangements
We
have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated
entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Factors
That May Affect Future Operations
We
believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including
the cyclical nature of the ordering patterns of our distributors, timing of regulatory approvals, the implementation of various phases
of our clinical trials and manufacturing efficiencies due to the learning curve of utilizing new materials and equipment. Our operating
results could also be impacted by a weakening of the Euro and strengthening of the NIS, both against the U.S. dollar. Lastly, other economic
conditions we cannot foresee may affect customer demand, such as individual country reimbursement policies pertaining to our products.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk.
Not
applicable.
78