UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended: SeptemberJune 30, 20172020

OR

For the transition period from       to

Commission file number: 001-35731

InspireMD, Inc.

(Exact name of registrant as specified in its charter)

4 Menorat Hamaor St.

Tel Aviv, Israel 6744832

(Address of principal executive offices)

(Zip Code)

(888) 776-6204

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

Securities registered pursuant to Section 12(b) of the Act:

The number of shares of the registrant’s common stock, $0.0001 par value, outstanding as of November 7, 2017: 7,465,889August 4, 2020: 33,357,661

TABLE OF CONTENTS

INSPIREMD, INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SeptemberAS OF AND FOR THE QUARTER ENDED JUNE 30, 2017

INSPIREMD, INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 20172020

TABLE OF CONTENTS

The amounts are stated in U.S. dollars in thousands

PART I

Item 1. Financial Statements

INSPIREMD, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(U.S. dollars in thousands)

INSPIREMD, INC.

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands other than share and per share data)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - DESCRIPTION OF BUSINESS

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. In October 2014, the Company launched a limited market release of its carotid embolic prevention system (CGuard™ EPS), which combines MicroNet and a self-expandable nitinol stent in a single device to treat carotid artery disease. In January 2015, a new version of CGuard, with a rapid exchange delivery system, received CE mark approval in Europe and in September 2015, the Company announced the full market launch of CGuard EPS in Europe.

The Company’s coronary products combining MicroNet and a bare-metal stent (MGuard Prime™ EPS) are marketed for use in patients with acute coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions (bypass surgery). The Company markets its products through distributors in international markets, mainly in Europe and Latin America.

The Company has an accumulated deficit as of September 30, 2017, as well as a history of net losses and negative operating cash flows in recent years. The Company expects to continue incurring losses and negative cash flows from operations until its products (primarily CGuard™ EPS) reach commercial profitability. As a result of these expected losses and negative cash flows from operations, along with the Company’s current cash position, the Company has sufficient resources to fund operations only for a period of up to 4 months from the date of issuing these interim consolidated financial statements. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern. These financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

Management’s plans include the continued commercialization of the Company’s products and raising capital through the sale of additional equity securities, debt or capital inflows from strategic partnerships. There are no assurances however, that the Company will be successful in obtaining the level of financing needed for its operations. If the Company is unsuccessful in commercializing its products and raising capital, it may need to reduce activities, curtail or cease operations.

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 management, the financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial position and results of operations of the Company. 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, 2016,2019, as found in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 16, 2017.March 10, 2020. The results ofoperations for the ninethree and threesix months ended SeptemberJune 30, 20172020 are not necessarily indicative of results that could be expected for the entire fiscal year.

INSPIREMD, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 3 – RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS- EQUITY:

INSPIREMD, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

In May 2014, the FASB issued Accounting Standards Codification (“ASC”) 606, Revenue from contracts with customers. The objective of the new revenue standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services, based on a five step model that includes the identification of the contract with the customer and the performance obligations in the contract, determination of the transaction price, allocation of the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies a performance obligation. The revenue standard is effective for annual periods beginning on or after December 15, 2017.

On July 22, 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory,” which requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out and the retail inventory method are not impacted by the new guidance. The new guidance was adopted by the Company during the first quarter of 2017.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The accounting standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

NOTE 4 - LONG-TERM LOAN:

During the three months ended March 31, 2017, the Company paid the remaining interest and principal balances under the Company’s Loan and Security Agreement, dated as of October 23, 2013, in consideration of $2,684,000. All liens and other security interests granted by the Company and its subsidiaries in connection with the Loan and Security Agreement were terminated upon such payment.

NOTE 5 - EQUITY:

INSPIREMD, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The Company received gross proceeds of approximately $6.8 million from the offering, before deducting placement agent fees payable by the Company equal to 8.0% of the gross proceeds of the offering and a solicitation fee equal to 3.0% of the proceeds from the exercise of the Series C Warrants and offering expenses payable by the Company.

The holders of Series C Convertible Preferred Stock may elect to convert at any time. The Series C Convertible Preferred Stock has certain anti-dilution provisions which provisions require the lowering of the applicable conversion price, as then in effect, to the purchase price of equity or equity-linked securities issued in subsequent offerings.

The Series B warrants are exercisable immediately and have a term of exercise of five years from the date of issuance and have an exercise price of $2.00 per share of common stock.

The Series C warrants were exercisable immediately and had a term of exercise of six months from the date of issuance and had an exercise price of $1.60 per share of common stock. As of September 30, 2017 all Series C warrants were expired and none were exercised prior to their expiration.

For accounting purposes, the Company analyzed the classification of the Series C Convertible Preferred Stock, including whether the embedded conversion options should be bifurcated. As the Series C Convertible Preferred Stock is not redeemable, and the host contract was determined to be akin to equity, the entire instrument was classified as equity.

The Company has also concluded that the warrants accompanying Series C Convertible Preferred Stock are classified as equity, since the warrants bear a fixed conversion ratio and all other criteria for equity classification have been met.

During the 9 month period ended September 30, 2017, 326,609 shares of Series C Convertible Preferred Stock were converted into 1,306,436 shares of common stock.

Pursuant to the terms of the public offering of Series B Convertible Preferred Stock and accompanying warrants closed in July 2016, that provided the holders of the Series B Convertible Preferred Stock with certain anti-dilution provisions, which provisions require the lowering of the applicable conversion price, as then in effect, to the purchase price of equity or equity-linked securities issued in subsequent offerings, upon closing of the March 2017 offering, the conversion price of the Series B Convertible Preferred Stock was adjusted to $1.60 per share of common stock, and each share of Series B Convertible Preferred Stock became convertible into 20.625253,587 shares of common stock. The Company received $81,510 from the placement agent for the exercise of the unit purchase option. As of June 30, 2020, there are no unit purchase options issued in July 2016.

* Including the shares of common stock the holders of Series B Convertible Preferred Stock are entitled to receive as cumulative dividends at the rate per share of 15% per annum of the stated value for five years, payable in cash or common stock, at our discretion. the Company’s discretion, but excluding effect of future conversion price adjustment, if any.

As a result of such adjustment,June 30, 2020, the Company was requiredhas outstanding warrants to issue to the holders of the Series B Convertible Preferred Stockpurchase an aggregate of 9,063,314 additional26,705,502 shares of common stock upon conversionas follows:

As of June 30, 2020, the Series B Convertible Preferred Stock and the paymentCompany had 155,000,000 authorized shares of the dividends thereunder incapital stock, par value $0.0001 per share, of which 150,000,000 are shares of common stock based on 311,521and 5,000,000 are shares of Series B Convertible Preferred Stock outstanding as“blank check” preferred stock.

In connection with an Employment Agreement with a new chief executive officer and president, the Company granted 182,381 restricted stock units and stock options to purchase 60,794 shares of March 8, 2017.common stock at $1.10 per share. The restricted stock units and options are subject to a three-year vesting period, with one-third of such awards vesting each year.

The issuancefair value of additional commonthe restricted stock at a price lower than $1.60 will entitle holders of Series B Convertible Preferred Stock and holders of Series C Convertible Preferred Stock to receive additional shares upon conversion and with respect to the Series B Convertible Preferred Stock additional shares or cash due to their dividend entitlement as described above.units was approximately $0.2 million.

During the 9 month period ended September 30, 2017, 130,529 shares of Series B Convertible Preferred Stock were converted into 4,711,281 shares of common stock.

INSPIREMD, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 6-4- NET LOSS PER SHARE:

Basic and diluted net loss per share is computed by dividing the net loss for the period attributable to common stock (after adding the beneficial conversion feature included in the series C preferred shares) by the weighted average number of shares of common stock outstanding during the period, including 2,928,358 and 3,732,960 weighted average shares of common stock issuable to holders of Series B Convertible Preferred Stock for the nine and three month periods ended September 30, 2017, respectively (since they are convertible based on passage of time).period. The calculation of diluted net loss per share excludes potential share issuances of common stock upon the exercise of share options, warrants, and restricted stocks and placement agent unit as the effect is anti-dilutive.

The total number of shares of common stock related to outstanding options, warrants, restricted stock, restricted stock units and Series C Convertible Preferred Stock and placement agent units excluded from the calculations of diluted loss per share were 10,234,35827,001,849 for the ninesix and three month periodsperiod ended SeptemberJune 30, 2017.2020.

The total number of shares of common stock related to outstanding options, warrants, and restricted stock, Series C Preferred Stock excluded from the calculations of diluted loss per share were 2,449,774992,609 for the ninesix and three month periodsperiod ended SeptemberJune 30, 2016.2019.

NOTE 75 - FAIR VALUE MEASURMENTMEASUREMENT:

Fair value of financial instruments

The carrying amounts of financial instruments included in working capital approximate their fair value either because these amounts are presented at fair value or due to the relatively short-term maturities of such instruments.

As of SeptemberJune 30, 20172020, and December 31, 2016,2019, allowance for doubtful accounts was $72,000 and $336,000, respectively, with the decrease resulting primarily from bad debt write offs.$0.

NOTE 86 - INVENTORY:

INSPIREMD, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 97 - ACCOUNTS PAYABLE AND ACCRUALS - OTHER:

NOTE 108 - COMMITMENTS AND CONTINGENT LIABILITIES:

Litigation:

The Company received written communicationIn 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.€1,830,000.

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.

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 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.

INSPIREMD, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 119 - 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.

NOTE 10 – SUBSEQUENT EVENTS

As consideration for the final release provided to us, we will pay to the prior underwriter $400,000 in cash and reduce, to $0.495, the exercise price per share of warrants to purchase 274,029 shares of our common stock that had been issued by us to the prior underwriter in various offerings that took place between March 2018 and September 2019. That reduced exercise price represents the exercise price for the Series F Warrants that we issued in our June 2020 public offering. The warrants that will be repriced had existing exercise prices per share ranging from $187.50 to $2.25 and a weighted average exercise price per share of $7.32. All other terms of those warrants will remain unchanged.

The related increase in provision of $400,000 was recorded to “General and Administrative expense” within the Consolidated Statements of Operations for the three months ended June 30, 2020.

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 wewas fully 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.2015. Subsequently, we launched CGuard EPS in Argentina, ColombiaRussia and Russia.certain countries in Latin America and Asia, including India. We expect to launch CGuard EPS in Brazil, in the near future after receiving regulatory approval in July 2020, and we are seeking strategic partners for potential launch of CGuard EPS in Japan and China.

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, including our draft synopsis for a clinical trial design, which we believed supported a formal IDE submission for the approval of a human clinical trial in the United States. The FDA agreed to our pre-clinical test plan and clinical trial design.  On July 26, 2019, we submitted an IDE application for CGuard EPS. In connection with such application, on August 23, 2019, we received a request for additional information from the FDA in support of our application. In May 2020, we re-submitted the IDE application, as IDE approval by the FDA would be a critical step toward the commencement of a human clinical trial using CGuard EPS in the United States. On June 25, 2020, the FDA granted us conditional approval of this IDE. The conditional approval is contingent upon us addressing concerns raised by the agency, within 45 days of receipt of the approval letter, regarding the stent-embolic protection device (EPD) compatibility performance testing .

Additionally, we intend to continue to invest in current and future potential product and manufacturing enhancements for CGuard EPS that are expected to reduce cost of goods and/or provide the best-in-class performing delivery system. In furtherance of our strategy that focuses on establishing CGuard EPS as a viable alternative to vascular surgery, we are exploring adding a procedural protection device to our portfolio. We cannot give any assurance that we will receive sufficient (or any) proceeds from future financings or the timing of such financings, if ever, for potential product enhancements and manufacturing enhancements. 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 may allow us to reduce our cost of goods and increase penetration in our existing geographies and better position us for entry into new markets.

We consider the addressable market for our CGuard EPS to be 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).

Our MGuard™ Prime™ Embolic Protection Systemembolic 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,however, 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.

Recent Developments

Public Offerings

On June 5, 2020, we closed an underwritten public offering of (i) 7,635,800 units (“Units”), with each Unit being comprised of one share of the Company’s common stock, par value $0.0001 per share, and one Series F warrant (a “Series F Warrant”) to purchase one share of common stock, and (ii) 14,586,400 pre-funded units (the “Pre-Funded Units”), with each Pre-Funded Unit being comprised of one pre-funded warrant (a “Pre-Funded Warrant”) to purchase one share of common stock and one Series F Warrant. In connection with this public offering, the underwriter exercised the option practically in full, for 3,333,300 shares of common stock and 3,333,300 Series F Warrants. The offering price to the public was $0.45 per Unit and $0.449 per Pre-Funded Unit. The net proceeds to the Company from the offering and the exercise of the underwriter’s over-allotment option were approximately $10.7 million, after deducting underwriting discounts and commissions and payment of other estimated expenses associated with the offering, but excluding the proceeds, if any, from the exercise of Series F Warrants and the Pre-Funded Warrants sold in the offering.

Registration Clearance for CGuard™ MicroNet^® in Brazil

On July 23, 2020, we announced that we obtained registration from the Brazilian registration authority, Agéncia Nacional de Vigiláncia Sanitária (ANVISA), for our CGuard MicroNet covered stent, clearing it for sale and distribution in Brazil.

New Trial Results for CGuard EPS

On June 10, 2020, we reported the publication of the results of our PARADIGM trial in the EuroIntervention journal. In that trial, 101 unselected consecutive real-life patients were treated with our CGuard MicroNET covered stent for carotid stenosis and were monitored for postprocedural neurologic events for a period of 12 months. The results displayed sustained protection against any such neurologic events. At 30 days, only one adverse event occurred (a minor transient stroke with no other strokes, myocardial infarctions, or deaths). Furthermore, those study results showed that no strokes occurred between 30 days and twelve months.

On June 25, 2020, we reported the results from an investigator-initiated SIBERIA randomized clinical trial of our CGuard EPS, which evaluated 30-day silent brain infarcts associated with the use of the Acculink™ conventional open-cell nitinol stent vs. our CGuard Micronet-covered stent. Those results displayed that CGuard had a statistically significant (greater than three-fold) reduction in the procedure-generated mean cerebral lesion volume relative to Acculink. At 30 days, there were zero new cerebral lessons in the CGuard arm, compared to six in the Acculink arm, also statistically significant.

COVID-19 Developments

In an effort to contain and mitigate the spread of COVID-19, which the World Health Organization, or WHO, declared to be a pandemic on March 12, 2020, many countries have imposed unprecedented restrictions on travel, quarantines and other public health safety measures. As of the beginning of the second quarter of 2020, we began to experience a significant COVID-19 related impact on our financial condition and results of operations, which we primarily attribute to the postponement of CGuard EPS procedures (non-emergency procedures), as hospitals shifted resources to patients affected by COVID-19. To our knowledge, most European countries in which we operate are slowly reinstating elective procedures, but we do not know when the hospitals will resume to normal pre-pandemic levels with such procedures. We anticipate that the continuation of the pandemic and related restrictions and safety measures would likely result in a continued decline in sales of our products for the upcoming periods. For more discussion on our risks related to COVID-19, please see risk factors included under “Item 1A. Risk Factors” herein.

In response to significant market volatility and uncertainties relating to COVID-19, the fees and salaries of our board of directors (the “Board”), management and most of its employees were reduced in order to alleviate corporate operating expenses.

Effective April 1, 2020, the Board approved a 50% decrease in the annual cash compensation for non-employee directors from an aggregate amount of $154,000 to $77,000.

On April 21, 2020, Marvin Slosman, our President, Chief Executive Officer and Director, signed a waiver reducing his monthly base salary from $33,333 to $16,666 for the period beginning April 1, 2020 and ending on such date as Mr. Slosman was to determine, and Craig Shore, our Chief Financial Officer, Chief Administrative Officer, Secretary and Treasurer, signed a waiver reducing his monthly base salary from NIS 80,125 to NIS 40,063 for the period beginning April 1, 2020 and ending on such date as Mr. Shore was to determine.

Effective April 1, 2020, we reduced the annual salaries of most of our employees by 20% to 30% until further notice.

Based on a determination made by each of Mr. Slosman and Mr. Shore on June 10, 2020, following the closing of our underwritten public offering in June 2020, as described above, each of Mr. Slosman’s and Mr. Shore’s monthly base salaries were reinstated to $33,333 and NIS 80,125, respectively, effective as of June 1, 2020. Each of the salaries for the remaining officers, directors and employees was similarly reinstated by no later than June 30, 2020.

As a result of the reduction of those fees and salaries during the second quarter of 2020, our operating expenses were reduced by approximately $235,000 in the second quarter of 2020.

Release from Former Underwriter

The terms of our engagement of the underwriter for our September 2019 financing contained a purported 12 month right of first refusal in favor of such underwriter with respect to future financings. Due to, among other things, difficulties in the relationship with that prior underwriter and our need to raise additional funds to finance our ongoing operations, we engaged A.G.P. in May 2020 as underwriter for our June 2020 public offering, and again in July 2020 for an At-the-market offering (ATM). 

On July 28, 2020, we entered into a settlement agreement and release with that prior underwriter, under which it provided us a final, unconditional release from any further obligations arising out of or related to the engagement agreements, underwriting agreements and placement agency agreements which we had been party to with it and with respect to any services which it had provided to us. We, in turn, provided the prior underwriter a final, unconditional release from any further obligations arising out of or related to the prior agreements and services.

As consideration for the final release provided to us, we will pay to the prior underwriter $400,000 in cash and reduce, to $0.495, the exercise price per share of warrants to purchase 274,029 shares of our common stock that had been issued by us to the prior underwriter in various offerings that took place between March 2018 and September 2019. That reduced exercise price represents the exercise price for the Series F Warrants that we issued in our June 2020 public offering. The warrants that will be repriced had existing exercise prices per share ranging from $187.50 to $2.25 and a weighted average exercise price per share of $7.32. All other terms of those warrants will remain unchanged.

NYSE American Deficiency

On August 7, 2019, we received a notification from the NYSE American that we do not meet the continued listing standards of the NYSE American as set forth in Part 10 of the NYSE American Company Guide (the “Company Guide”). Specifically, we are not in compliance with Section 1003(a)(iii) of the Company Guide because we reported stockholders’ equity of less than $6 million as of June 30, 2019, and net losses in our five most recent fiscal years ended December 31, 2018. As a result, we became subject to the procedures and requirements of Section 1009 of the Company Guide.

On October 11, 2019, the NYSE American accepted our plan to regain compliance with Section 1003(a)(iii) of the Company Guide by August 7, 2020. We are subject to periodic review during the period covered by the compliance plan. Failure to make progress consistent with the plan or to regain compliance with the continued listing standards by the end of the plan period could result in our common stock being delisted from the NYSE American. As a result of our receipt of approximately $10.7 million of net proceeds from our capital raise in our June 2020 public offering, in addition to $1.5 million of additional funds from subsequent exercises of warrants and pre-funded warrants sold in that offering, we believe that we have sufficient stockholders’ equity to regain compliance with Section 1003(a)(iii) of the Company Guide by August 7, 2020. Nevertheless, we will be subject to ongoing review for compliance with NYSE American requirements, and there can be no assurance that we will continue to remain in compliance with this standard.

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, 2016.2019. There have not been any material changes to such critical accounting policies since December 31, 2016.2019.

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, 20172020 compared to the three months ended SeptemberJune 30, 20162019

Revenues. For the three months ended SeptemberJune 30, 2017,2020, revenue increaseddecreased by $249,000,$1,041,000, or 53.1%76.9%, to $718,000$313,000, from $469,000$1,354,000 during the three months ended SeptemberJune 30, 2016.2019. This increasedecrease was predominantly driven by an 89.9% increasea 75.7% decrease in sales volume of CGuard EPS from $277,000$1,116,000 during the three months ended June 30, 2019, to $271,000 during the three months ended June 30, 2020. This decrease was mainly due to the fact that procedures with CGuard EPS, which are generally scheduled or non-emergency procedures, were mostly postponed as hospitals shifted resources to patients affected by COVID-19. The decrease was also due to the large shipments of CGuard EPS that we made during the three months ended June 30, 2019 of backlog that accumulated in the three months ended September 30, 2016,March 31, 2019 that we were unable to $526,000 inpreviously ship due to our former third-party sterilizer equipment failures. Those large shipments did not reoccur 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 reflects2020. In addition, there was an effort to broaden our82.4% decrease in sales efforts from only interventional neuroradiologists to include vascular surgeons, interventional cardiologists and interventional radiologists, as well. Revenue from salesvolume of MGuard Prime EPS, remained flat at $192,000 infrom $238,000 during the three months ended SeptemberJune 30, 2017, compared2019, to $42,000 during the same period in 2016.three months ended June 30, 2020, mainly due to similar reasons as mentioned above.

With respect to geographical regions, the increasedecrease in revenue was primarily attributable toto: a $781,000 decrease in revenue from sales made in Europe (driven by a $668,000 decrease of CGuard EPS sales and $113,000 decrease of MGuard Prime EPS sales for the reasons discussed in the paragraph above); a decrease of $118,000 in revenue from sales made in Latin America (driven by an increase$87,000 decrease of $233,000MGuard Prime EPS sales and $31,000 decrease of CGuard EPS sales for the reasons discussed in the paragraph above); a decrease of $105,000 in revenue from sales made in Asia and Middle East (primarily driven by a $109,000 decrease of CGuard EPS sales for the reasons discussed in the paragraph above); and a decrease of $37,000 in revenue from sales of CGuard EPS from our distributorsmade in EuropeAustralia and an increase of $21,000 in revenue from sales of CGuard EPS in Latin America.South Africa.

Gross Profit (Loss). For the three months ended SeptemberJune 30, 2017,2020, gross profit (revenue less cost of revenues) increaseddecreased by 410.0%, or $123,000,$562,000, to $153,000,a gross loss of $120,000, compared to $30,000a gross profit of $442,000 during the same period in 2016. The increase2019. This decrease in gross profit resulted primarily from a $448,000 decrease in revenues (as described above), less the related material and labor costs, and a decrease following a receipt of $135,000 compensation received in the three months ended June 30, 2019 from our former third-party sterilizer for the delays related to the product sterilization interruption during the three months ended March 31, 2019, which did not reoccur in the three months ended June 30, 2020. In addition, we had an increase of $249,000$48,000 in revenues (as mentioned above),miscellaneous expenses during the three months ended June 30, 2020. These decreases were partially offset by a decrease of $25,000$69,000 of expenses related to upgrades made to our production facilities during the underutilization of our manufacturing resources and a decrease of $14,000 in miscellaneous expenses, partially offset by an increase in material and labor costs of $165,000,three months ended June 30, 2019, which resulted from our increase in sales.did not reoccur during the three months ended June 30, 2020. Gross margin (gross profits as a percentage of revenue) increaseddecreased to 21.3% in(38.3)% during the three months ended SeptemberJune 30, 20172020 from 6.4% in32.6% during the three months ended SeptemberJune 30, 2016.2019, driven by the reasons mentioned above.

Research and Development Expenses. For the three months ended SeptemberJune 30, 2017,2020, research and development expenses remained relatively flat compareddecreased by 48.7%, or $421,000, to $444,000, from $865,000 during the same period in 2016 due to an increase of $40,000 in a salary related accrual.three months ended June 30, 2019. This increase in research and development expenses was partially offset bydecrease resulted primarily from a decrease of $41,000$382,000 in clinical expenses associated with the IDE approval process work for CGuard EPS, which was nearly complete during the three months ended June 30, 2020, and a decrease of $39,000 in miscellaneous expenses.

Selling and Marketing Expenses. For the three months ended SeptemberJune 30, 2017,2020, selling and marketing expenses increaseddecreased by 117.2%39.2%, or $362,000,$243,000, to $671,000,$377,000, from $309,000$620,000 during the three months ended SeptemberJune 30, 2016.2019. This increase in selling and marketing expensesdecrease resulted primarily from an increasefrom: a decrease of $195,000$89,000 in promotional expenses, primarily related to building our social media infrastructure in 2019; a decrease of $72,000 in compensation expenses, primarily related to temporary salary expenses, an increasereductions in the second quarter of $100,0002020, due to the immediate negative impact of COVID-19 on cash flow during the three months ended June 30, 2020 (which salary reductions were only reversed following the consummation of our June 2020 offering); a decrease in travel expenses of $70,000 in light of restrictions imposed by governments worldwide in order to mitigate the spread of COVID-19; and an increasea decrease of $67,000$12,000 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, 2017,2020, general and administrative expenses increased by 7.5%32.0%, or $89,000,$365,000, to $1,279,000$1,505,000, from $1,190,000$1,140,000 during the three months ended SeptemberJune 30, 2016. The2019. This increase in general and administrative expenses resulted primarily from an increase of $88,000 in salary expenses, primarily$400,000 due to a salary related accrual, anexpenses for the settlement agreement with the underwriter of our prior offerings accrued for the three months ended June 30, 2020, and increase of $67,000 in$73,000 of expenses related to our 2017 regulatory auditlisting in the NYSE which includedwas predominantly driven by the recertification of our CE Mark as well asJune 2020 offering and an increase of $35,000$36,000 in miscellaneous expenses. These increase in general and administrative expensesincreases were partially offset by a decrease of $101,000$144,000 in share based compensation expenses dueprimarily related to temporary salary reductions that were implemented in response to the timingimmediate negative impact that COVID-19 had on our cash flow during the three months ended June 30, 2020 and which were only restored following the consummation of vesting of certain equity grants to our chief executive officer and the reversal of certain equity grants to two former directors.June 2020 offering.

Financial ExpensesExpenses. . For the three months ended SeptemberJune 30, 2017,2020, financial expenses decreasedincreased by 99.6%47.8%, or $236,000,$11,000, to $1,000,$34,000, from $237,000$23,000 during the three months ended SeptemberJune 30, 2016. The decrease in financial expenses resulted from a decrease in interest expenses due to the repayment of the remaining balance of our outstanding indebtedness of $1.2 million on March 21, 2017.2019.

Tax Expenses (Income). For the three months ended SeptemberJune 30, 2017,2020, there was no material change in our tax expenses (income)as compared to the same period in 2016.three months ended June 30, 2019.

Net Loss. Our net loss increased by $91,000,$274,000, or 4.6%12.4%, to $2,086,000$2,480,000, for the three months ended SeptemberJune 30, 2017,2020, from $1,995,000$2,206,000 during the same period in 2016.three months ended June 30, 2019. The increase in net loss resulted primarily from an increasea decrease of $450,000$562,000 in operating expenses, partiallygross profit offset by a decrease of $236,000$299,000 in financial expenses and an increase of $123,000 in gross profit.operating expenses.

NineSix months ended SeptemberJune 30, 20172020 compared to the ninesix months ended SeptemberJune 30, 20162019

Revenues. For the ninesix months ended SeptemberJune 30, 2017,2020, revenue increaseddecreased by $355,000,$422,000, or 22.6%23.9%, to $1,927,000,$1,347,000, from $1,572,000$1,769,000 during the ninesix months ended SeptemberJune 30, 2016.2019. This increasedecrease was predominantly driven by a 38.1% increase16.8% decrease in sales volume of CGuard EPS from $952,000 in$1,492,000 during the ninesix months ended SeptemberJune 30, 2016,2019, to $1,315,000 in$1,242,000 during the ninesix months ended SeptemberJune 30, 2017,2020, mainly due to the postponement of procedures with CGuard EPS, which are generally scheduled or non-emergency procedures, 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 Europehospitals shifted resources 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. This increasepatients affected by COVID-19. In addition, there was a 62.1% decrease in sales of CGuard EPS was partially offset by a 1.3% decrease in salesvolume of MGuard Prime EPS from $620,000 in$277,000 during the ninesix months ended SeptemberJune 30, 2016,2019, to $612,000 in$105,000 during the ninesix months ended SeptemberJune 30, 2017, largely driven by doctors increasingly using drug-eluting stents rather than bare metal stents such2020, mainly due to the impact of COVID-19, as MGuard Prime EPS in STEMI patients.mentioned above.

With respect to regions, the increasedecrease in revenue was primarily attributable to an increaseto: a $214,000 decrease in revenue from sales made in Europe (driven by a $109,000 decrease of $333,000CGuard EPS sales and $105,000 decrease of MGuard Prime EPS sales for reasons discussed in the paragraph above); a decrease of $119,000 in revenue from sales made in Latin America (driven by a $74,000 decrease of MGuard Prime EPS sales and $45,000 decrease of CGuard EPS sales for reasons discussed in the paragraph above); a decrease of $69,000 in revenue from sales made in Asia and Middle East (primarily driven by a $76,000 decrease of CGuard EPS sales for reasons discussed in the paragraph above); as well as a decrease of $20,000 in revenue from sales of CGuard EPS from our distributorsmade in Europe an increase of $132,000 in revenue from sales of MGuard Prime EPS from our distributors in Latin AmericaAustralia 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 distributors in the Middle East.South Africa.

Gross Profit. For the ninesix months ended SeptemberJune 30, 2017,2020, gross profit (revenue less cost of revenues) increaseddecreased by 136.7%52.6%, or $216,000,$194,000, to $374,000,$175,000, compared to $158,000 duringa $369,000 for the same period in 2016. The increase2019. This decrease in gross profit resulted primarily from an increase of $355,000a $225,000 decrease in revenues (as mentioned above), less the related material and labor costs and a $61,000 increase in write-offs driven by a non-recurring component supply issue. These decreases were partially offset by a decrease of $76,000$69,000 of expenses related to upgrades made to our production facilities during the underutilization of our manufacturing resourcessix months ended June 30, 2019, which did not reoccur during the six months ended in June 30, 2020 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 sales and an increase of $37,000$23,000 in miscellaneous expenses.expenses during the six months ended June 30, 2020. Gross margin (gross profits as a percentage of revenue) increaseddecreased to 19.4% in13.0% during the ninesix months ended SeptemberJune 30, 20172020 from 10.1% in20.9% during the ninesix months ended SeptemberJune 30, 2016.2019, driven by the reasons mentioned above.

Research and Development Expenses. For the ninesix months ended SeptemberJune 30, 2017,2020, research and development expenses increaseddecreased by 10.0%51.4%, or $95,000,$1,023,000, to $1,041,000,$967,000, from $946,000$1,990,000 during the ninesix months ended SeptemberJune 30, 2016.2019. This increase in research and development expensesdecrease resulted primarily from an increasefrom: a decrease of $191,000$710,000 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, primarilymainly related to the IDE approval process work, which was nearly complete prior to the six months ended June 30, 2020; a decrease of $354,000 due to our pre-IDE meeting withsettlement expenses that were paid to a former service provider pursuant to a settlement agreement during the FDA. This increase however, wassix months ended June 30, 2019, which did not reoccur during the six months ended June 30, 2020 (see Part II, Item 1. “Legal Proceedings” below); and a decrease of $137,000 in quality assurance and regulatory expenses related to the development of various projects during the six months ended June 30, 2019, which did not reoccur during the six months ended June 30, 2020. These decreases were partially offset by a decreasean increase of $166,000$168,000 in share-based compensationdevelopment expenses duerelated to the recognitionCGuard EPS enhancements and an increase 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$10,000 in miscellaneous expenses.

Selling and Marketing Expenses. For the ninesix months ended SeptemberJune 30, 2017,2020, selling and marketing expenses increaseddecreased by 70.4%20.2%, or $758,000,$253,000, to $1,835,000,$1,001,000, from $1,077,000$1,254,000 during the ninesix months ended SeptemberJune 30, 2016.2019. This increase in selling and marketing expensesdecrease resulted primarily from an increasefrom: a decrease of $264,000$129,000 in salarypromotional expenses, an increase of $182,000primarily related to having already built our social media infrastructure in 2019; a decrease in travel expenses an increase of $113,000$98,000 in consulting fees, an increaselight of $99,000restrictions imposed by governments worldwide in share-based compensation expenses dueorder to mitigate the spread of COVID-19 during the six months ended June 30, 2020; and a former employee’s forfeituredecrease 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 expenditures related to our participation in trade shows and promotional activities and an increase of $5,000$26,000 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, 2017,2020, general and administrative expenses increased by 16.0%9.7%, or $592,000,$236,000, to $4,281,000,$2,674,000, from $3,689,000$2,438,000 during the ninesix months ended SeptemberJune 30, 2016. The2019. This increase in general and administrative expenses resulted primarily fromfrom: an increase of $292,000$400,000 due to a salary related accrual,expenses for the settlement agreement with the underwriter of our prior offerings accrued for the six months ended June 30, 2020; an increase of $121,000 in rent and$71,000 of expenses related expense, primarily due to a city tax refund we received in 2016,our continued listing on the NYSE, 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 office inpredominantly driven by the nine months ended September 30, 2017, which increased our rent and related expenses, an increase of $52,000 in legal expensesJune 2020 offering; and an increase of $127,000$60,000 in miscellaneous expenses. These increases were partially offset by: a decrease of $168,000 in legal expenses due to the reduced need for general legal services; and a decrease of $127,000 in compensation expenses primarily related to temporary salary reductions intended to offset the immediate negative impact of COVID-19 on cash flow during the six months ended June 30, 2020, which salary levels were restored only following the consummation of our June 2020 offering.

Financial Expenses (Income). For the ninesix months ended SeptemberJune 30, 2017,2020, financial income increased by 109.0%, or $109,000, to $9,000 of financial income, from $100,000 of financial expenses decreased by 75.7%, or $483,000, to $155,000, from $638,000 during the ninesix months ended SeptemberJune 30, 2016.2019. The decreaseincrease in financial expensesincome primarily resulted from an increase of $122,000 in financial income related to changes in exchange rates, offset, in part, by a decrease of $13,000 in interest expenses due to the repayment of the remaining balance of our outstanding indebtedness of $1.2 million on March 21, 2017.miscellaneous expenses.

Tax Expenses (Income). For the ninesix months ended SeptemberJune 30, 2017,2020, there was no material change in our tax expenses (income)as compared to the same period in 2016.six months ended June 30, 2019.

Net Loss. Our net loss increaseddecreased by $746,000,$955,000, or 12.0%17.6%, to $6,939,000$4,458,000, for the ninesix months ended SeptemberJune 30, 2017,2020, from $6,193,000$5,413,000 during the same period in 2016.six months ended June 30, 2019. The increasedecrease in net loss resulted primarily from an increasea decrease of $1,445,000$1,040,000 in operating expenses partiallyand a decrease of $109,000 in financial expenses, offset by a decrease of $483,000 in financial expenses and an increase of $216,000$194,000 in gross profit.

Liquidity and Capital Resources

We had an accumulated deficit as of SeptemberJune 30, 2017,2020, of $139approximately $162 million, as well as a net loss of $6,939,000$4,458,000 and negative operating cash flows.flows for the six months ended June 30, 2020. 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 periodthrough the third quarter of up to four months from the date of filing of this Quarterly Report on Form 10-Q.2021. 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. The COVID-19 pandemic has resulted in significant financial market volatility and uncertainty. A continuation or worsening of the levels of market disruption and volatility could have an adverse effect on our ability to access capital and on the market price of our common stock, and we may not be able to successfully raise capital through the sale of our securities. 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,June 5, 2020, we announced the closing of a “best efforts”closed an underwritten public offering of (i) 7,635,800 Units, with each Unit being comprised of one share of the Company’s common stock, par value $0.0001 per share, and one Series C Convertible Preferred Stock, Series B warrantsF Warrant to purchase one share of common stock, and (ii) 14,586,400 Pre-Funded Units, with each Pre-Funded Unit being comprised of one Pre-Funded Warrant to purchase one share of common stock and one Series F Warrant. In connection with this public offering, the underwriter exercised the option practically in full, for 3,333,300 shares of common stock and 3,333,300 Series C warrantsF Warrants. The offering price to purchase shares of common stock. We received grossthe public was $0.45 per Unit and $0.449 per Pre-Funded Unit. The net proceeds of approximately $6.8 millionto the Company from the offering beforeand the exercise of the underwriter’s over-allotment option were approximately $10.7 million, after deducting placement agent feesunderwriting discounts and commissions and payment of other estimated expenses associated with the offering, expenses.but excluding the proceeds, if any, from the exercise of Series F Warrants and the Pre-Funded Warrants sold in the offering.

Anti-Dilution Provisions

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 August 3, 2020, 17,303 shares of Series B Preferred Stock and 2,343 shares of Series C Preferred Stock were outstanding.

NineSix months ended SeptemberJune 30, 20172020 compared to the ninesix months ended SeptemberJune 30, 20162019

General. At SeptemberJune 30, 2017,2020, we had cash and cash equivalents of $4,765,000,$13,861,000, as compared to $7,516,000$5,514,000 as of December 31, 2016.2019. 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, 2017,2020, net cash used in our operating activities increased $742,000decreased by $2,545,000 to $6,356,000,$3,837,000, from $5,614,000 in$6,382,000 during the same period in 2016.2019. The primary reasonreasons for the increasedecrease in cash used in our operating activities was an increasewere a decrease of $2,411,000 in payments for third party related expenses and for professional services of $1,201,000 including(primarily due to a decrease in production related payments, a decrease in payments related to IDE application process and a settlement payment made to a former service provider pursuant to a settlement agreement in the end of term charge of $520,000 to Hercules, from $3,833,000 to $5,034,000. This increasesix months ended June 30, 2019 which did not reoccur in cash used in operating activities was partially offset bythe six months ended June 30, 2020) and an increase of $351,000$129,000 in payments received from customers, from $1,421,000 into $1,754,000 during the ninesix months ended SeptemberJune 30, 2016 to $1,772,000 in2020, from $1,625,000 during the same period in 20172019 as well as a decrease of $108,000$5,000 in salary paymentscompensation costs paid during the six months ended June 30, 2020, from $3,202,000$3,011,000 in the ninesix months ended SeptemberJune 30, 20162019 to $3,094,000 in$3,006,000 during the same period in 2017.2020.

Cash used in our investing activities was $34,000 during the six months ended June 30, 2020 compared to $224,000 during the six months ended June 30, 2019. The primary reasons for the decrease in cash used by our investing activities was $282,000were: a decrease of $165,000 in payments made for purchase of property, plant and equipment to $0 during the ninesix months ended SeptemberJune 30, 2017, resulting primarily2020, from the purchase of production equipment, compared to $81,000 of cash provided$165,000 during the same period in 2016 resulting primarily from the receipt2019; and a decrease of $25,000 in cash previously fundeddeposited to employee retirement funds.funds, to $34,000 during the six months ended June 30, 2020, from $59,000 during the same period in 2019.

Cash provided by financing activities for the ninesix months ended SeptemberJune 30, 20172020 was $3,883,000,$12,237,000, compared to $12,756,000$2,046,000 during the same period in 2016.2019. The principal sources of the cash provided by financing activities during the six months ended June 30, 2020 were our June 2020 public offering of common stock, pre-funded warrants and warrants, the subsequent exercise of the pre-funded warrants sold in the offering, as well as exercise of warrants F and Unit Purchase Options that resulted in approximately $12,237,000 of aggregate net proceeds. 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. The principal source of the cash provided by financing activities during the nine months ended September 30, 2016 was the funds received from the issuance of preferred stock and warrants in a public offering closed on July 7, 2016, as well issuance of shares and warrants in a concurrent public offering and private placement closed on March 21, 2016, for approximately $14,424,000 of net proceeds, offset by loan repayments of $1,651,000.proceeds.

As of SeptemberJune 30, 2017,2020, our current assets exceeded our current liabilities by a multiple of 2.3.4.9. Current assets decreasedincreased by $2,439,000$8,061,000 during the period and current liabilities decreasedincreased by $2,055,000$134,000 during the period. As a result, our working capital decreasedincreased by $384,000$7,927,000 to $3,432,000 at September$12,622,000 as of June 30, 2017.2020.

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.

Recent Accounting Pronouncements