The Company received written communicationelected the modified retrospective transition method and included the following tables previously disclosed.

Future contractual obligations under the abovementioned operating lease agreements (not including the extension option) as of December 31, 2018 are as follows:

In July 2019, a former distributor filed a suit seeking damages from a distributor to provide unspecified compensationthe Company’s subsidiary for pre-paid goods subject to the voluntary field action.action (from April 2014) amounting to €1,830,000 (which is approximately $2.0 million), or alternatively €1,024,000 (which is approximately $1.1 million). After considering the views of its legal counsel as well as other factors, the Company’s management believes that there is a reasonably possible likelihood of a loss from any related future proceedings that would range from a minimal amount up to 1,075,000 Euros.

On April 26, 2016, the Company received a suit seeking damages from the Company amounting to $2.2 million in cash and unspecified compensation in equity in connection with certain finders’ fees. The Company’s management, after considering the views of its legal counsel as well as other factors, is of the opinion that a loss to the Company is neither probable nor in an amount or range of loss that is estimable.€1,830,000.

In July 2016, a service provider filed a suit seeking damages from the Company’s subsidiary amounting to $1,967,822. The Company’s management, after consideringsubsidiary and the viewsplaintiff have entered into a confidential settlement agreement in the amount of its legal counsel$600,000, and on April 24, 2019, the parties filed a stipulation of dismissal, dismissing all claims in this action. On April 25, 2019, the court denied as well as other factors, ismoot all pending motions. The related increase in provision of $354,000 was recorded to “Research and development expense” within the opinion that a loss toConsolidated Statements of Operations for the Company is neither probable nor in an amount or range of loss that is estimable.

INSPIREMD, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)six months ended June 30, 2019.

NOTE 1110 - 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:

By product:

By principal customers:

All tangible long lived assets are located in Israel.

Item 2. 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 condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.

Unless the context requires otherwise, references in this Form 10-Q to the “Company,” “InspireMD,” “we,” “our” and “us” refer to InspireMD, Inc., a Delaware corporation, and its subsidiaries.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment and regulation. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will probablymay not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. For a discussion of these and other risks that relate to our business and investing in our common stock, you should carefully review the risks and uncertainties described in this Quarterly Report on Form 10-Q, and in our Annual Report on Form 10-K for the twelve month period ended December 31, 2016, and those described from time to time in our future reports filed with the Securities and Exchange Commission. The forward-looking statements contained in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. We do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.

Overview

We are a medical device company focusing on the development and commercialization of our proprietary MicroNet™ stent platform technology for the treatment of complex vascular and coronary disease. A stent is an expandable “scaffold-like” device, usually constructed of a metallic material, that is inserted into an artery to expand the inside passage and improve blood flow. Our MicroNet, a micron mesh sleeve, is wrapped over a stent to provide embolic protection in stenting procedures.

Our CGuard™ carotid embolic prevention system (“CGuard EPS”) combines MicroNet and a self-expandable nitinol stent in a single device for use in carotid artery applications. Our CGuard EPS received CE mark approval in the European Union in March 2013, and we launched its release on a limited basis in October 2014. In January 2015, a new version of CGuard, with a rapid exchange delivery system, received CE mark approval in Europe and in September 2015, we announced the full market launch of CGuard EPS in Europe. Subsequently, we launched CGuard EPS in Argentina, ColombiaRussia and Russia.certain countries in Latin America and Asia, including India. We consider the addressable market for our CGuard EPS consists of individuals with diagnosed, symptomatic high-grade carotid artery stenosis (HGCS, ≥70% occlusion) for whom an intervention is preferable to medical (drug) therapy. This group includes not only carotid artery stenting patients but also individuals undergoing carotid endarterectomy, as the two approaches compete for the same patient population. Assuming full penetration of the intervention caseload by CGuard EPS, we estimate that the addressable market for CGuard EPS was approximately $1.0 billion in 2017. (source: Health Research International 2017 Results of Update Report on Global Carotid Stenting Procedures and Markets by Major Geography and Addressable Markets).

In April 2017, we had a pre-investigational device exemption (“IDE”) submission meeting with the U.S. Food and Drug Administration (“FDA”) regarding CGuard EPS where we presented materials that we believed would support a formal IDE submission seeking approval to conduct a human clinical trial in the United States which included our draft synopsis for the clinical trial design. The FDA agreed to our pre-clinical test plan and clinical trial design. We are currently in the process of obtaining an IDE approval for CGuard EPS, and we intend to ultimately seek FDA approval for commercial sales in the United States. On July 26, 2019, we submitted our IDE application, which, if approved, would allow us to commence a human clinical trial of CGuard EPS in the United States. Following FDA’s approval of the IDE application and once sufficient funds are available, we intend to commence such clinical trial.

While entering the U.S. market remains our top development priority and therefore we are focusing on, as our highest priority, completing the testing required for an IDE submission seeking approval to conduct a human clinical trial in the United States using CGuard EPS, we intend to continue to evaluate potential product enhancements and manufacturing enhancements for CGuard EPS expected to reduce cost of goods and/or provide the best-in-class performing delivery system. Among other delivery system improvements, we continue to evaluate the development of a smaller delivery catheter (5 French gauge) CGuard EPS product. If we receive sufficient proceeds from future financings, we may seek to develop CGuard EPS with a smaller delivery catheter (5 French gauge), which we would submit for CE mark approval. We cannot give any assurance that we will receive sufficient (or any) proceeds from future financings or the timing of such financings, if ever. In addition, such additional financings may be costly or difficult to complete. Even if we receive sufficient proceeds from future financings, there is no assurance that we will be able to timely apply for CE mark approval following our receipt of such proceeds. We believe these improvements and a smaller delivery system may allow us to reduce cost of goods, increase penetration in our existing geographies and better position us for entry into the Asia Pacific market and for transradial catheterization, which, we believe, is gaining favor among interventionalists.

Our MGuard™ Prime™ Embolic Protection System (“MGuard Prime EPS”) is marketed for use in patients with acute coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions (bypass surgery). MGuard Prime EPS combines MicroNet with a bare-metal cobalt-chromium based stent and, together with our first generation MGuard stent combining MicroNet with a bare-metal stainless steel stent, unless otherwise indicated, we refer to both kinds of bare-metal stents as our MGuard coronary products. We market and sell MGuard Prime EPS for the treatment of coronary disease in the European Union.stent. MGuard Prime EPS received CE mark approval in the European Union in October 2010 for improving luminal diameter and providing embolic protection. However, as a result of a shift in industry preferences away from bare-metal stents in favor of drug-eluting (drug-coated) stents, in 2014 we decided to curtail further development of this product in order to focus on the development of a drug-eluting stent product, MGuard DES™. Due to limited resources, though, our efforts have been limited to testing drug-eluting stents manufactured by potential partners for compatibility with MicroNet and seeking to incorporate MicroNet onto a drug-eluting stent manufactured by a potential partner.

We The FDA has clarified that the primary mode of action for drug-eluting cardiovascular stents, which are also developing a neurovascular flow diverter (“NGuard”), whichregulated as combination products, is an endovascularthat of the device that directs blood flow away from cerebral aneurysms in ordercomponent and has assigned the FDA Center for Devices and Radiological Health (CDRH) primary responsibility for premarket review and regulation, providing some clarity about what to ultimately sealexpect regarding the aneurysms. Our flow diverter would utilize an open cell, highly flexible metal scaffoldregulatory framework related to which MicroNet would be attached. We have completed initial pre-clinical testing of this product in both simulated bench models and standard in vivo pre-clinical models. However, as we plan to focus our resources on the further expansion of our sales and marketing activities for CGuard EPS and MGuard Prime EPS and, provided that we have sufficient resources, the development of CGuard EPS with a smaller delivery catheter (5 French gauge) and its submission for CE mark approval, we do not intend to resume further development of NGuard until at least the third quarter of 2018.

MGuard DES™.

We also intend to develop a pipeline of other products and additional applications by leveraging our MicroNet technology to new applications to improve peripheral vascular and neurovascular procedures, such as the treatment of the superficial femoral artery disease, vascular disease below the knee and neurovascular stenting to open diseased vesselsseal aneurysms in the brain.

Presently, none of our products may be sold or marketed in the United States.

In 2017, we decided to shift our commercial strategy to focus on sales of our products through local distribution partners and our own internal sales initiatives to gain greater reach into all the relevant clinical specialties and to expand our geographic coverage. Pursuant to our strategy, we completed our transition away from a single distributor covering 18 European countries to a direct distribution model intended to broaden our sales efforts to key clinical specialties. All territories previously covered by our former European distributor were transferred to local distributors by June 2017. We also have been participating in international trade shows and industry conferences in an attempt to gain market exposure and brand recognition.

Recent Developments

Public Offering

On April 8, 2019, we closed an underwritten public offering of 486,957 shares of our common stock at a price to the public of $5.00 per share. We received net proceeds of approximately $2.0 million from the offering, after deducting underwriter discounts and commissions and offering expenses payable by us. As a result of such offering, the conversion price for each of our Series B Preferred Stock and Series C Preferred was reduced to $5.00 per share. In connection with this public offering, on April 12, 2019, the underwriter partially exercised its over-allotment option and purchased an additional 12,393 shares of our common stock at a price to the public of $5.00 per share. We received net proceeds of approximately $47,000 from the exercise of the over-allotment option.

NYSE American Notification

On January 7, 2019, we received notification from the NYSE American that we are not in compliance with the NYSE American continued listing standards because our shares of common stock have been selling for a low price per share for a substantial period of time. Pursuant to Section 1003(f)(v) of the NYSE American Company Guide (the “Company Guide”), the NYSE American staff determined that our continued listing is predicated on us effecting a reverse stock split of our common stock or otherwise demonstrating sustained price improvement within a reasonable period of time, which the staff determined to be until July 7, 2019. In addition, the NYSE American advised us that its policy is to immediately suspend trading in shares of, and commence delisting procedures with respect to, a listed company if the market price of its shares falls below $0.06 per share at any time during the trading day.

Effective as of 5:00 p.m. Eastern Time on March 29, 2019, we amended our amended and restated certificate of incorporation in order to effectuate a 1-for-50 reverse stock split of our outstanding shares of common stock.

On July 8, 2019, we received notice from NYSE American that we have resolved the continued listing deficiency with respect to low selling price pursuant to Section 1003(f)(v) of the Company Guide. We are subject to NYSE Regulation’s normal continued listing monitoring. However, in accordance with Section 1009(h) of the Company Guide, if we are again determined to be below any of the continued listing standards within 12 months of July 8, 2019, NYSE American will examine the relationship between the two incidents of noncompliance and re-evaluate our method of financial recovery from the first incident. NYSE Regulation will then take the appropriate action, which depending on the circumstances, may include truncating the compliance procedures described in Section 1009 of the Company Guide or immediately initiating delisting proceedings. If in the future we fall below the continued listing criterion of a minimum average share price of $0.20 over a 30-day trading period, our common stock will be subject to immediate review by NYSE American. There can be no assurance that the market price of our common stock will remain above the levels viewed as abnormally low for a substantial period of time.

Critical Accounting Policies

A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies are more fully described in both (i) “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) Note 2 of the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2016.2018. There have not been any material changes to such critical accounting policies since December 31, 2016.2018 other than a change to the accounting policy of Leases following the adoption of ASU No. 2016-02. See Note 3(a) to our unaudited consolidated financial statements included in Item 1, “Unaudited Financial Statements,” of this Quarterly Report on Form 10-Q.

The currency of the primary economic environment in which our operations are conducted is the U.S. dollar (“$” or “dollar”).

Contingencies

We and our subsidiaries are involved in legal proceedings that arise from time to time in the ordinary course of business. We record accruals for these types of contingencies to the extent that we conclude the occurrence of such contingencies is probable and that the related liabilities are estimable. When accruing these costs, we recognize an accrual in the amount within a range of loss that is the best estimate within the range. When no amount within the range is a better estimate than any other amount, we accrue for the minimum amount within the range. Legal costs are expensed as incurred.

Results of Operations

Three months ended SeptemberJune 30, 20172019 compared to the three months ended SeptemberJune 30, 20162018

Revenues. For the three months ended SeptemberJune 30, 2017,2019, revenue increased by $249,000,351,000, or 53.1%35.0%, to $718,000$1,354,000, from $469,000$1,003,000 during the three months ended SeptemberJune 30, 2016.2018. This increase was predominantly driven by an 89.9%a 34.0% increase in sales volume of CGuard EPS from $277,000$833,000 during the three months ended June 30, 2018, to $1,116,000 during the three months ended June 30, 2019, and a 39.9% increase in sales volume of MGuard Prime EPS from $170,000 during the three months ended June 30, 2018, to $238,000 during the three months ended June 30, 2019. Both increases were primarily due to the shipments during the three months ended June 30, 2019 of approximately $592,000 of backlog that accumulated in the three months ended September 30, 2016,March 31, 2019 that we were unable to $526,000previously ship. These increases, however, were partially offset by sales decreases in certain of our markets during the three months ended SeptemberJune 30, 2017 as we continued focus on expanding existing markets such as Italy, expansion into new geographies such as Russia, as well as the transition from our prior exclusive distribution partner for most of Europe to local distributors. The transition to local distributors reflects an effort to broaden our sales efforts from only interventional neuroradiologists to include vascular surgeons, interventional cardiologists and interventional radiologists, as well. Revenue from sales of MGuard EPS remained flat at $192,000 in the three months ended September 30, 2017, compared to the same period in 2016.2019.

With respect to regions, the increase in revenue was primarily attributable to ana $222,000 increase of $233,000 in revenue from sales made in Europe (driven by a $180,000 increase in sales volume of CGuard EPS from our distributorsfor reasons discussed in Europe and anthe paragraph above), as well as a $65,000 increase of $21,000 in revenue from sales made in Asia (driven by a $90,000 increase in sales volume of CGuard EPS for reasons discussed in Latin America.the paragraph above, offset by a $25,000 decrease in sales of MGuard Prime EPS).

Gross Profit (Loss). For the three months ended SeptemberJune 30, 2017,2019, gross profit (revenue less cost of revenues) increased by 410.0%59.6%, or $123,000,$165,000, to $153,000,$442,000, compared to $30,000a gross profit of $277,000 during the same period in 2016. The2018. This increase in gross profit resulted primarily from ana $180,000 increase of $249,000 in revenues (as mentioned above), a decreaseless the related material and labor costs and receipt of $25,000$135,000 compensation from our former third-party sterilizer for the delays related to the product sterilization interruption during the three months ended March 31, 2019. These increases in gross profit were partially offset by $69,000 of expenses related to upgrades made to our production facilities, $40,000 of expenses pertaining to annual and new employee training of the underutilizationproduction workers and an increase of our manufacturing resources and a decrease of $14,000$41,000 in miscellaneous expenses, partially offset by an increase in material and labor costs of $165,000, which resulted from our increase in sales.expenses. Gross margin (gross profits as a percentage of revenue) increased to 21.3% in32.6% during the three months ended SeptemberJune 30, 20172019, from 6.4% in27.6% during the three months ended SeptemberJune 30, 2016.2018, driven mainly by the compensation received from our former third-party sterilizer and cost reductions in raw materials, offset by expenses pertaining to upgrades made to our production facility, training of production workers and miscellaneous expenses.

Research and Development Expenses. For the three months ended SeptemberJune 30, 2017,2019, research and development expenses remained relatively flat comparedincreased by 276.1%, or $635,000, to $865,000, from $230,000 during the same period in 2016 due tothree months ended June 30, 2018. This increase resulted primarily from an increase of $40,000$426,000 in a salaryclinical expenses associated with CGuard EPS, mainly related accrual. Thisto IDE approval process, an increase of $183,000 in researchcompensation and quality assurance expenses primarily due to expenses incurred to support various development expenses was partially offset by a decreaseprojects and an increase of $41,000$26,000 in miscellaneous expenses.

Selling and Marketing Expenses. For the three months ended SeptemberJune 30, 2017,2019, selling and marketing expenses increased by 117.2%6.9%, or $362,000,$40,000, to $671,000,$620,000, from $309,000$580,000 during the three months ended SeptemberJune 30, 2016.2018. This increase in selling and marketing expenses resulted primarily from an increase of $195,000$35,000 in salarypromotional expenses, an increase of $100,000 in travel expensesprimarily related to operating our social media infrastructure and an increase of $67,000$5,000 in miscellaneous expenses. The increase in selling and marketing expenses was driven primarily to support the CGuard EPS sales and marketing related activities as we transitioned away from our prior exclusive distribution partner for most of Europe to using local distributors, as well as expansion of existing markets and into new geographies.

General and Administrative Expenses. For the three months ended SeptemberJune 30, 2017,2019, general and administrative expenses increased by 7.5%21.3%, or $89,000,$200,000, to $1,279,000$1,140,000, from $1,190,000$940,000 during the three months ended SeptemberJune 30, 2016. The2018. This increase in general and administrative expenses resulted primarily from an increase of $88,000$212,000 in salarycompensation expenses, primarilymainly due to a salary related accrual reversal of approximately $143,000 during the three months ended June 30, 2018, which did not occur during the three months ended in June 30, 2019, and an increase of $67,000approximately $71,000 of share-based compensation-related expenses in expenses relatedthe three months ended June 30, 2019, due to our 2017 regulatory audit which included the recertificationvesting of our CE Mark as well as an increasegrants made in the first quarter of $35,000 in miscellaneous expenses.2019. These increaseincreases in general and administrative expenses were partially offset by a decrease of $101,000approximately $12,000 in share based compensation expenses due to the timing of vesting of certain equity grants to our chief executive officer and the reversal of certain equity grants to two former directors.miscellaneous expenses.

Financial Expenses (Income). For the three months ended SeptemberJune 30, 2017,2019, financial income decreased by 102.7% or $869,000, to $23,000 of financial expenses, decreased by 99.6% or $236,000, to $1,000, from $237,000$846,000 of financial income earned during the three months ended SeptemberJune 30, 2016.2018. The decrease in financial expensesincome primarily resulted from the $871,000 of financial income related to the revaluation of the embedded derivative of the Series C Preferred Stock recorded during the three months ended June 30, 2018, which did not occur during the three months ended in June 30, 2019, and a decrease of $2,000 in interestmiscellaneous expenses due toduring the repayment of the remaining balance of our outstanding indebtedness of $1.2 million on March 21, 2017.three months ended June 30, 2019.

Tax Expenses (Income). For the three months ended SeptemberJune 30, 2017,2019, there was no material change in our tax expenses (income)as compared to the same period in 2016.three months ended June 30, 2018.

Net Loss. Our net loss increased by $91,000,$1,579,000, or 4.6%251.8%, to $2,086,000$2,206,000, for the three months ended SeptemberJune 30, 2017,2019, from $1,995,000$627,000 during the same period in 2016.three months ended June 30, 2018. The increase in net loss resulted primarily from an increase of $450,000$875,000 in operating expenses, partially offset by a decrease of $236,000 in financial expenses and an increase of $123,000$869,000 in financial expenses. These increases in net loss were partially offset by an increase of $165,000 in gross profit.

NineSix months ended SeptemberJune 30, 20172019 compared to the ninesix months ended SeptemberJune 30, 20162018

Revenues. For the ninesix months ended SeptemberJune 30, 2017,2019, revenue increaseddecreased by $355,000,$241,000, or 22.6%12.0%, to $1,927,000,$1,769,000, from $1,572,000$2,010,000 during the ninesix months ended SeptemberJune 30, 2016.2018. This increasedecrease was predominantly driven by a 38.1% increase10.3% decrease in sales volume of CGuard EPS from $952,000 in$1,664,000 during the ninesix months ended SeptemberJune 30, 2016,2018, to $1,315,000 in$1,492,000 during the ninesix months ended SeptemberJune 30, 2017, as we expanded into new geographies such as Russia, continued focus on expanding existing markets such as Italy, as well as the transition from our prior exclusive distribution partner for most of Europe to local distributors. The transition to local distributors reflects an effort to broaden our sales efforts from only interventional neuroradiologists to include vascular surgeons, interventional cardiologists2019, and interventional radiologists, as well. This increasea 19.9% decrease in sales of CGuard EPS was partially offset by a 1.3% decrease in salesvolume of MGuard Prime EPS from $620,000$346,000 during the six months ended June 30, 2018, to $277,000 during the six months ended June 30, 2019. Both decreases were primarily due to shipment delays in the ninethree months ended September 30, 2016,March 31, 2019 associated with us changing sterilization companies and sales decreases in certain of our markets.The transition to $612,000our new sterilization is now complete and we do not currently anticipate any future disruptions in the nine months ended September 30, 2017, largely driven by doctors increasingly using drug-eluting stents rather than bare metal stents such as MGuard Prime EPS in STEMI patients.fulfilling new orders.

With respect to regions, the increasedecrease in revenue was primarily attributable to an increase of $333,000a $284,000 decrease in revenue from sales made in Europe (driven by a $257,000 decline in the sales volume of CGuard EPS from our distributors in Europe an increase of $132,000 in revenue from sales of MGuard Prime EPS from our distributors in Latin America and an increase of $30,000 in revenue from sales of CGuard EPS from our distributors in Latin America, partially offset by a decrease of $96,000 in revenue from sales of MGuard Prime EPS from our distributors in Europe and a decrease of $44,000 in revenue from sales of MGuard Prime EPS from our distributorsfor reasons discussed in the Middle East.paragraph above).

Gross Profit. For the ninesix months ended SeptemberJune 30, 2017,2019, gross profit (revenue less cost of revenues) increaseddecreased by 136.7%35.3%, or $216,000,$201,000, to $374,000,$369,000, compared to $158,000 duringa $570,000 for the same period in 2016. The increase2018. This decrease in gross profit resulted primarily from an increase of $355,000a $69,000 decrease in revenues (as mentioned above), a decrease of $76,000less the related material and labor costs, $69,000 of expenses related to upgrades made to our production facilities, $38,000 of expenses pertaining to annual and new employee training of the underutilization of our manufacturing resources and a decrease in write-offs of inventory of MGuard Prime EPS of $66,000. These increases in gross profit were partially offset by an increase in material and labor costs of $244,000, which resulted from our increase in salesproduction workers, and an increase of $37,000$25,000 in miscellaneous expenses. Gross margin (gross profits as a percentage of revenue) increaseddecreased to 19.4% in20.9% during the ninesix months ended SeptemberJune 30, 20172019 from 10.1% in28.4% during the ninesix months ended SeptemberJune 30, 2016.2018, driven mainly by the increased expenses incurred in connection with the upgrades made to our production facilities, employee trainings and miscellaneous expenses during the six months ended June 30, 2019.

Research and Development Expenses. For the ninesix months ended SeptemberJune 30, 2017,2019, research and development expenses increased by 10.0%312.9%, or $95,000,$1,508,000, to $1,041,000,$1,990,000, from $946,000$482,000 during the ninesix months ended SeptemberJune 30, 2016.2018. This increase in research and development expenses resulted primarily from an increase of $191,000$842,000 in salary expenses primarily due to the resignation and timing of the replacement of our former vice president of research and development who resigned on March 10, 2016, lowering our expenses in the nine months ended September 30, 2016 as well as a salary related accrual in 2017. In addition to the increase in salary expenses, the increase in research and development expenses for the nine months ended September 30, 2017, compared to the same period in 2016 resulted from an increase of $104,000 in development and clinical expenses associated with CGuard EPS, mainly related to IDE application process, a settlement payment of $354,000 made to a former service provider pursuant to a settlement agreement (see Part II, Item 1. “Legal Proceedings” below), an increase of $291,000 in compensation and quality assurance expenses primarily due to our pre-IDE meeting with the FDA. Thisexpenses incurred to support various development projects and an increase however, was partially offset by a decrease of $166,000 in share-based compensation expenses due to the recognition of all remaining unrecognized costs following the option cancellation agreement with our chief executive officer in 2016 while he was our chief operating officer, resulting in higher share-based compensation expenses in 2016, as well as a decrease of $34,000$21,000 in miscellaneous expenses.

Selling and Marketing Expenses. For the ninesix months ended SeptemberJune 30, 2017,2019, selling and marketing expenses increased by 70.4%17.0%, or $758,000,$182,000, to $1,835,000,$1,254,000, from $1,077,000$1,072,000 during the ninesix months ended SeptemberJune 30, 2016.2018. This increase in selling and marketing expenses resulted primarily from an increase of $264,000$137,000 in salarypromotional expenses, an increase of $182,000 in travel expenses, an increase of $113,000 in consulting fees, an increase of $99,000 in share-based compensation expenses due to a former employee’s forfeiture of the former employee’s share-based compensation in 2016, reducing our 2016 share-based compensation expenses, for which, no such reduction occurred during 2017, an increase of $95,000 in expendituresprimarily related to operating our participation in trade shows and promotional activitiessocial media infrastructure and an increase of $5,000$45,000 in miscellaneous expenses. The increase in selling and marketing expenses was primarily to support the new sales and marketing CGuard EPS related activities due to the transition from our prior exclusive distribution partner for most of Europe to local distributors.

General and Administrative Expenses. For the ninesix months ended SeptemberJune 30, 2017,2019, general and administrative expenses increaseddecreased by 16.0%0.2%, or $592,000,$4,000, to $4,281,000,$2,438,000, from $3,689,000$2,442,000 during the ninesix months ended SeptemberJune 30, 2016. The increase2018. This decrease resulted primarily from a decrease of $429,000 in legal expenses, primarily due to reduced legal work required for a litigation with a former service provider (which settled in April 2019) during the six months ended June 30, 2019, compared to the amount of legal work required for the same litigation during the six month ended June 30, 2018. This decrease in general and administrative expenses resulted primarily fromwas partially offset by an increase of $292,000$282,000 in compensation expenses, mainly due to a salary related accrual reversal of approximately $230,000 during the three months ended June 30, 2018, which did not occur during the six months ended in June 30, 2019, an increase of $121,000approximately $109,000 of share-based compensation-related expenses in rent and related expense, primarilythe six months ended June 30, 2019, due to a city tax refund we received in 2016, which reduced our 2016 rent and related expenses, while no such refund was received in 2017, as well as a termination fee for our Boston officethe grants made in the nine months ended September 30, 2017, which increased our rent and related expenses, an increasefirst quarter of $52,000 in legal expenses2019 and an increase of $127,000$143,000 in miscellaneous expenses.

Financial Expenses (Income). For the ninesix months ended SeptemberJune 30, 2017,2019, financial expenses decreasedincreased by 75.7%124.4%, or $483,000,$510,000, to $155,000,$100,000, from $638,000$410,000 of financial income during the ninesix months ended SeptemberJune 30, 2016.2018. The decreaseincrease in financial expenses primarily resulted from the $438,000 of financial income related to the revaluation of the embedded derivative of the Series C Preferred Stock recorded during the six months ended June 30, 2018, which did not occur during the six months ended in June 30, 2019, and an increase of $81,000 in financial expenses related to changes in exchange rates. These increases in financial expenses were partially offset by a decrease of $9,000 in interestmiscellaneous expenses due toduring the repayment of the remaining balance of our outstanding indebtedness of $1.2 million on March 21, 2017.six months ended June 30, 2019.

Tax Expenses (Income). For the ninesix months ended SeptemberJune 30, 2017,2019, there was no material change in our tax expenses (income)as compared to the same period in 2016.six months ended June 30, 2018.

Net Loss. Our net loss increased by $746,000,$2,397,000, or 12.0%79.5%, to $6,939,000$5,413,000, for the ninesix months ended SeptemberJune 30, 2017,2019, from $6,193,000$3,016,000 during the same period in 2016.six months ended June 30, 2018. The increase in net loss resulted primarily from an increase of $1,445,000$1,686,000 in operating expenses, partially offset by a decreasean increase of $483,000$510,000 in financial expenses and an increasea decrease of $216,000$201,000 in gross profit.

Liquidity and Capital Resources

We had an accumulated deficit as of SeptemberJune 30, 2017,2019, of $139$153 million, as well as a net loss of $6,939,000$5,413,000 and negative operating cash flows.flows for the six months ended June 30, 2019. We expect to continue incurring losses and negative cash flows from operations until our products (primarily CGuard EPS) reach commercial profitability. As a result of these expected losses and negative cash flows from operations, along with our current cash position, we only have sufficient resources to fund operations for a perioduntil the end of up to four months from the datefourth quarter of filing of this Quarterly Report on Form 10-Q.2019. Therefore, there is substantial doubt about our ability to continue as a going concern.

Our plans include the continued commercialization of our products and raising capital through the sale of additional equity securities, debt or capital inflows from strategic partnerships. 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 andor raising capital, we may need to reduce activities, curtail or cease operations.

On March 14, 2017,1, 2018, we announced the closing of a “best efforts”closed an underwritten public offering of Series C Convertible Preferred Stock, Series B warrants to purchase20,000 shares of our common stock and Series C warrantsat a price to purchase sharesthe public of common stock.$150.00 per share. We received gross proceeds of approximately $6.8$3.0 million from the offering, before deducting placement agent feesunderwriter discounts and commissions and offering expenses.expenses payable by us. Upon closing of the offering, we used $450,000 of the proceeds from the offering to redeem 450 shares of Series D Preferred Stock. As a result of such offering, the conversion price for each of our Series C Preferred Stock and our Series D Preferred Stock was reduced to $150.00 per share.

On April 2, 2018, we closed an underwritten public offering of 57,143 shares of our common stock at a price to the public of $87.50 per share. We received gross proceeds of approximately $5.0 million from the offering, before deducting underwriter discounts and commissions and offering expenses payable by us. Upon closing of the offering, we used $300,000 of the proceeds from the offering to redeem 46,875 shares of our Series C Preferred Stock held by the Series D Investor. As a result of such offering, the conversion price for each of our Series B Preferred Stock, our Series C Preferred Stock and our Series D Preferred Stock was reduced to $87.50 per share.

On July 3, 2018, we closed an underwritten public offering of (i) 10,851,417 Common Units, with each Common Unit being comprised of one fiftieth share of our common stock, and one Series D Warrant to purchase one fiftieth share of common stock, (ii) 22,481,916 Pre-Funded Units (“Pre-Funded Units”), with each Pre-Funded Unit being comprised of one Pre-Funded Warrant to purchase one fiftieth share of common stock and one Series D Warrant, and (iii) additional Series D Warrants to purchase 100,000 shares of common stock pursuant to the underwriter’s option. We received net proceeds from the offering and the exercise of the underwriter’s option to purchase additional Series D Warrants to purchase 100,000 shares of common stock of approximately $8.7 million, excluding the proceeds, if any, from the exercise of the Series D Warrants and the Pre-Funded Warrants sold in the offering, and after deducting underwriting discounts and commissions and payment of other estimated expenses associated with the offering that are payable by us. We used $2,264,269 of the net proceeds of the offering to redeem 306,917 shares of Series C Preferred Stock and 300 shares of Series D Preferred Stock held by the Series D Investor. As a result of such offering, the conversion price of the outstanding shares of the Series B Preferred Stock and the Series C Preferred Stock was reduced to $15.00 per share, effective as of June 29, 2018.

Our outstanding shares of Series B Preferred Stock and Series BC Preferred Stock contain anti-dilution provisions that may result in the reduction of the conversion price thereof in the future. This feature may result in an indeterminate number of shares of common stock being issued upon conversion of the Series B Convertible Preferred Stock or the Series C Convertible Preferred Stock. In addition, The Series B Convertible Preferred Stock provides for the payment of dividends in cash or in shares of our common stock, and we may not be able to pay such dividends in cash, which will require us to have shares of common stock available to pay the dividend. Sales of additional shares of common stock issuable upon conversion of the Series B Convertible Preferred Stock or Series C Convertible Preferred stockStock as a result of anti-dilution adjustments or on the Series B Preferred Stock as dividends on the Series B Preferred Stock will dilute the interests of other security holders and may depress the price of our common stock. Accordingly, we may find it more difficult to raise additional equity capital while any of our Series B Convertible Preferred Stock or Series C Convertible Preferred Stock is outstanding. As of June 30, 2019, 17,303 shares of Series B Preferred Stock and 38,806 shares of Series C Preferred Stock were outstanding.

During January and February 2018, the placement agent from the public offering that closed in July 2016 exercised its unit purchase option to purchase 13,508 units and received 13,508 shares of Series B Preferred Stock and Series A warrants to purchase 31 shares of common stock. The placement agent subsequently converted its Series B Preferred Stock and received an aggregate of 2,229 shares of common stock. We received an aggregate of $557,205 from the placement agent for the exercise of the unit purchase option.

On March 21, 2017,April 8, 2019, we paid downclosed an underwritten public offering of 486,957 shares of our common stock at a price to the remaining $1.2public of $5.00 per share. We received net proceeds of approximately $2.0 million balance underfrom the offering, after deducting underwriter discounts and commissions and offering expenses payable by us. As a result of such offering, the conversion price for each of our LoanSeries B Preferred Stock and Security Agreement (the “Loan Agreement”), dated as of October 23, 2013, with Hercules Technology Growth Capital, Inc. (“Hercules”). All liens and other security interests grantedSeries C Preferred was reduced to Hercules by us and our subsidiaries in$5.00 per share. In connection with this public offering, on April 12, 2019, the Loan Agreement were terminated upon such payment.underwriter partially exercised its over-allotment option and purchased an additional 12,393 shares of our common stock at a price to the public of $5.00 per share. We received net proceeds of approximately $47,000 from the exercise of the over-allotment option.

Nine

Six months ended SeptemberJune 30, 20172019 compared to the ninesix months ended SeptemberJune 30, 20162018

General. At SeptemberJune 30, 2017,2019, we had cash and cash equivalents of $4,765,000,$4,823,000, as compared to $7,516,000$9,384,000 as of December 31, 2016.2018. 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 research and development, marketing and sales activities, finance and administrative costs,cost, capital expenditures and general working capital.

For the ninesix months ended SeptemberJune 30, 2017,2019, net cash used in our operating activities increased $742,000by $2,408,000 to $6,356,000,$6,382,000, from $5,614,000 in$3,974,000 during the same period in 2016.2018. The primary reason for the increase in cash used in our operating activities was an increase of payments for third party related expenses and for professional services of $1,201,000 including the end of term charge of $520,000$1,741,000 (primarily due to Hercules, from $3,833,000production related payments, payments related to $5,034,000. This increase in cash used in operating activities was partially offset byIDE application process and a settlement payment made to a former service provider pursuant to a settlement agreement), an increase of $351,000$553,000 in salary and bonus payments from $2,458,000 in the six months ended June 30, 2018 to $3,011,000 during the same period in 2019 and a decrease of $114,000 in payments received from customers from $1,421,000 into $1,625,000 during the ninesix months ended SeptemberJune 30, 2016 to $1,772,000 in2019, from $1,739,000 during the same period in 2017 as well as a decrease of $108,000 in salary payments from $3,202,000 in the nine months ended September 30, 2016 to $3,094,000 in the same period in 2017.2018.

Cash used by our investing activities was $282,000$224,000 during the ninesix months ended SeptemberJune 30, 2017,2019 compared to $41,000 during the six months ended June 30, 2018 resulting primarily from the purchase ofpurchases related to upgrades made to our production equipment, compared to $81,000 of cash provided during the same period in 2016 resulting primarily from the receipt of cash previously funded to employee retirement funds.facilities and our information technology infrastructure.

Cash provided by financing activities for the ninesix months ended SeptemberJune 30, 20172019 was $3,883,000,$2,046,000 compared to $12,756,000$6,780,000 during the same period in 2016.2018. The principal source of the cash provided by financing activities during the ninesix months ended SeptemberJune 30, 2017,2019, was the funds received from our March 2017April 2019 public offering of preferredcommon stock and warrants that resulted in approximately $6,072,000$2,030,000 of aggregate net proceeds, offset by loan repayments of $2,179,000.proceeds. The principal source of the cash provided by financing activities during the ninesix months ended SeptemberJune 30, 20162018, was the funds received from the issuance of preferred stock and warrants in aour April 2018 public offering closed on July 7, 2016, as well issuance of sharescommon stock that resulted in approximately $4,169,000 of aggregate net proceeds and warrants in a concurrentthe funds received from our March 2018 public offering and private placement closed on March 21, 2016, forof common stock that resulted in approximately $14,424,000$2,611,000 of aggregate net proceeds, offset by loan repayments of $1,651,000.proceeds.