UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: March 31, September 30, 20222023
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-35731
InspireMD, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 26-2123838 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
Large accelerated filer ☐ | Accelerated filer ☐ | |
Non-accelerated filer ☒ | Smaller reporting company ☒ | |
Emerging growth company ☐ |
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 ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |||
Common Stock, par value $0.0001 per share | NSPR | Nasdaq Capital Market |
The number of shares of the registrant’s common stock, $0.0001 par value, outstanding as of November 4, 2022:May 14, 2023:
TABLE OF CONTENTS
2 |
Item 1. Financial Statements
INSPIREMD, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE QUARTER ENDED SEPTEMBER 30, 2022MARCH 31, 2023
TABLE OF CONTENTS
Page | |
CONSOLIDATED FINANCIAL STATEMENTS: | |
Consolidated Balance Sheets | F-2 - F-3 |
Consolidated Statements of Operations | F-4 |
Consolidated Statements of Changes in Equity | F-5 |
Consolidated Statements of Cash Flows | |
Notes to the Consolidated Financial Statements |
F-1 |
INSPIREMD, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(U.S. dollars in thousands)
September 30, | December 31, | March 31 | December 31 | |||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||
ASSETS | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash and cash equivalents | $ | 3,934 | $ | 12,004 | $ | 4,228 | $ | 4,632 | ||||||||
Short-term bank deposits | 17,111 | 22,036 | 8,657 | 13,171 | ||||||||||||
Accounts receivable: | ||||||||||||||||
Trade, net | 1,166 | 1,224 | 1,417 | 1,034 | ||||||||||||
Other | 207 | 165 | 310 | 213 | ||||||||||||
Prepaid expenses | 860 | 522 | 394 | 655 | ||||||||||||
Inventory | 1,414 | 1,143 | 1,697 | 1,621 | ||||||||||||
TOTAL CURRENT ASSETS | 24,692 | 37,094 | 16,703 | 21,326 | ||||||||||||
NON-CURRENT ASSETS: | ||||||||||||||||
Property, plant and equipment, net | 876 | 632 | 887 | 917 | ||||||||||||
Operating lease right of use assets | 1,635 | 1,081 | 1,472 | 1,554 | ||||||||||||
Fund in respect of employee rights upon retirement | 858 | 905 | 859 | 856 | ||||||||||||
TOTAL NON-CURRENT ASSETS | 3,369 | 2,618 | 3,218 | 3,327 | ||||||||||||
TOTAL ASSETS | 28,061 | $ | 39,712 | $ | 19,921 | $ | 24,653 |
F-2 |
INSPIREMD, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(U.S. dollars in thousands other than share and per share data)
September 30, | December 31, | March 31 | December 31 | |||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Accounts payable and accruals: | ||||||||||||||||
Trade | 404 | 893 | 607 | 659 | ||||||||||||
Other | 3,557 | 3,454 | 3,776 | 4,411 | ||||||||||||
TOTAL CURRENT LIABILITIES | 3,961 | 4,347 | 4,383 | 5,070 | ||||||||||||
LONG-TERM LIABILITIES- | ||||||||||||||||
Operating lease liabilities | 1,261 | 781 | 1,081 | 1,195 | ||||||||||||
Liability for employees’ rights upon retirement | 969 | 1,052 | ||||||||||||||
Liability for employees rights upon retirement | 1,031 | 995 | ||||||||||||||
- | ||||||||||||||||
TOTAL LONG-TERM LIABILITIES | 2,230 | 1,833 | 2,112 | 2,190 | ||||||||||||
COMMITMENTS AND CONTINGENT LIABILITIES | - | - | - | |||||||||||||
TOTAL LIABILITIES | 6,191 | 6,180 | 6,495 | 7,260 | ||||||||||||
EQUITY: | ||||||||||||||||
Common stock, par value $ | per share; shares authorized at September 30, 2022 and December 31, 2021; and shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively1 | 1 | ||||||||||||||
Preferred C shares, par value $ shares authorized at September 30, 2022 and December 31, 2021; shares issued and outstanding at September 30, 2022 and December 31, 2021 | per share;-* | -* | ||||||||||||||
Common stock, par value $ | per share; shares authorized at March 31, 2023 and December 31, 2022; and shares issued and outstanding at March 31, 2023 and December 2022, respectively1 | 1 | ||||||||||||||
Preferred C shares, par value $ shares authorized at March 31, 2023 and December 31, 2022; shares issued and outstanding at March 31, 2023 and December 31 2022, respectively | per share;-* | -* | ||||||||||||||
Additional paid-in capital | 218,609 | 216,625 | 219,266 | 218,977 | ||||||||||||
Accumulated deficit | (196,740 | ) | (183,094 | ) | (205,841 | ) | (201,585 | ) | ||||||||
Total equity | 21,870 | 33,532 | 13,426 | 17,393 | ||||||||||||
Total liabilities and equity | $ | 28,061 | $ | 39,712 | $ | 19,921 | $ | 24,653 |
* | Represents an amount less than $1 thousand |
The accompanying notes are an integral part of the consolidated financial statements.
F-3 |
INSPIREMD, INC.
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except per share data)
2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
Three months ended | Nine months ended | 3 Months Ended March 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2023 | 2022 | |||||||||||||||||||
REVENUES | $ | 1,431 | $ | 1,071 | $ | 4,145 | $ | 3,115 | $ | 1,239 | $ | 1,183 | ||||||||||||
COST OF REVENUES | 1,065 | 979 | 3,226 | 2,655 | 866 | 1,061 | ||||||||||||||||||
GROSS PROFIT | 366 | 92 | 919 | 460 | 373 | 122 | ||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Research and development | 2,061 | 1,495 | 5,797 | 3,624 | 1,843 | 1,680 | ||||||||||||||||||
Selling and marketing | 845 | 802 | 2,577 | 2,146 | 788 | 746 | ||||||||||||||||||
General and administrative | 2,070 | 1,826 | 6,322 | 5,475 | 2,123 | 2,182 | ||||||||||||||||||
Total operating expenses | 4,976 | 4,123 | 14,696 | 11,245 | 4,754 | 4,608 | ||||||||||||||||||
LOSS FROM OPERATIONS | (4,610 | ) | (4,031 | ) | (13,777 | ) | (10,785 | ) | (4,381 | ) | (4,486 | ) | ||||||||||||
FINANCIAL INCOME (EXPENSES), net: | 81 | (40 | ) | 131 | (36 | ) | ||||||||||||||||||
LOSS BEFORE TAX EXPENSES | $ | (4,529 | ) | $ | (4,071 | ) | $ | (13,646 | ) | $ | (10,821 | ) | ||||||||||||
FINANCIAL INCOME, net | 125 | 5 | ||||||||||||||||||||||
NET LOSS | $ | (4,529 | ) | $ | (4,071 | ) | $ | (13,646 | ) | $ | (10,821 | ) | $ | (4,256 | ) | $ | (4,481 | ) | ||||||
NET LOSS PER SHARE - basic and diluted | $ | (0.58 | ) | $ | (0.53 | ) | $ | (1.75 | ) | $ | (1.50 | ) | (0.53 | ) | (0.57 | ) | ||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN COMPUTING NET LOSS PER SHARE - basic and diluted | 7,838,506 | 7,739,463 | 7,816,974 | 7,194,379 | ||||||||||||||||||||
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES USED IN COMPUTING NET LOSS PER SHARE - basic and diluted | 8,093,340 | 7,804,245 |
The accompanying notes are an integral part of the consolidated financial statements.
F-4 |
INSPIREMD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(U.S. dollars in thousands, except share data)
Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | equity | ||||||||||||||||||||||||||||
Common stock | Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Additional paid-in | Accumulated | Total | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | equity | ||||||||||||||||||||||||||||
BALANCE AT January 1, 2021 | 3,284,322 | -* | 17,303 | -* | 2,343 | -* | $ | 180,339 | $ | (168,176 | ) | $ | 12,163 | |||||||||||||||||||||||
Net loss | (10,821 | ) | (10,821 | ) | ||||||||||||||||||||||||||||||||
Issuance of common stock, including at the market offering net of $2,024 issuance costs | 3,133,775 | 1 | - | - | - | - | 25,241 | - | 25,242 | |||||||||||||||||||||||||||
Exercise of Warrants F | 1,093,536 | -* | - | - | - | - | 8,120 | - | 8,120 | |||||||||||||||||||||||||||
Exercise of Warrants G | 131,876 | -* | - | - | - | - | 1,349 | - | 1,349 | |||||||||||||||||||||||||||
Conversion of Series B Convertible Preferred Stock to common stock | 207,528 | -* | (17,303 | ) | -* | - | - | -* | - | -* | ||||||||||||||||||||||||||
Conversion of Series C Convertible Preferred Stock to common stock | 831 | -* | - | - | (625 | ) | -* | -* | - | -* | ||||||||||||||||||||||||||
Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of | shares3,166 | -* | - | - | - | - | 1,010 | - | 1,010 | |||||||||||||||||||||||||||
Round up of shares due to reverse stock split effectuated on April 26, 2021 | 45,277 | -* | - | - | - | - | - | - | -* | |||||||||||||||||||||||||||
BALANCE AT September 30, 2021 | 7,900,311 | 1 | - | -* | 1,718 | -* | $ | 216,059 | $ | (178,997 | ) | $ | 37,063 |
Common stock | Series C Convertible Preferred Stock | Additional paid-in | Accumulated | Total | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | capital | deficit | equity | ||||||||||||||||||||||
BALANCE AT January 1, 2022 | 8,296,256 | 1 | 1,718 | -* | 216,625 | (183,094 | ) | 33,532 | ||||||||||||||||||||
Net loss | (4,481 | ) | (4,481 | ) | ||||||||||||||||||||||||
Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of | shares21,620 | - | 653 | 653 | ||||||||||||||||||||||||
BALANCE AT March 31, 2022 | 8,317,876 | 1 | 1,718 | -* | 217,278 | (187,575 | ) | 29,704 |
* | Represents an amount less than $1 thousand |
The accompanying notes are an integral part of the consolidated financial statements.
F-5 |
INSPIREMD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(U.S. dollars in thousands, except share data)
Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | equity | ||||||||||||||||||||||||||||
Common stock | Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Additional paid-in | Accumulated | Total | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | equity | ||||||||||||||||||||||||||||
BALANCE AT July 1, 2021 | 7,914,339 | 1 | - | - | 1,718 | -* | $ | 215,755 | $ | (174,926 | ) | $ | 40,830 | |||||||||||||||||||||||
Net loss | (4,071 | ) | (4,071 | ) | ||||||||||||||||||||||||||||||||
Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of | shares(11,917 | ) | -* | - | - | - | - | 304 | - | 304 | ||||||||||||||||||||||||||
Round up of shares due to reverse stock split effectuated on April 26, 2021 | (2,111 | ) | -* | - | - | - | - | - | - | -* | ||||||||||||||||||||||||||
BALANCE AT September 30, 2021 | 7,900,311 | 1 | - | - | 1,718 | -* | $ | 216,059 | $ | (178,997 | ) | $ | 37,063 |
Common stock | Series C Convertible Preferred Stock | Additional paid-in | Accumulated | Total | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | capital | deficit | equity | ||||||||||||||||||||||
BALANCE AT January 1, 2023 | 8,330,918 | 1 | 1,718 | -* | 218,977 | (201,585 | ) | 17,393 | ||||||||||||||||||||
Balance | 8,330,918 | 1 | 1,718 | -* | 218,977 | (201,585 | ) | 17,393 | ||||||||||||||||||||
Net loss | (4,256 | ) | (4,256 | ) | ||||||||||||||||||||||||
Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of | shares(4,270 | ) | - | 289 | 289 | |||||||||||||||||||||||
Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures | (4,270 | ) | - | 289 | 289 | |||||||||||||||||||||||
BALANCE AT March 31, 2023 | 8,326,648 | 1 | 1,718 | -* | 219,266 | (205,841 | ) | 13,426 | ||||||||||||||||||||
Balance | 8,326,648 | 1 | 1,718 | -* | 219,266 | (205,841 | ) | 13,426 |
* | Represents an amount less than $1 thousand |
The accompanying notes are an integral part of the consolidated financial statements.
F-6 |
INSPIREMD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYCASH FLOWS
(Unaudited)
(U.S. dollars in thousands, except share data)thousands)
Shares | Amount | Shares | Amount | capital | deficit | equity | ||||||||||||||||||||||
Common stock | Series C Convertible Preferred Stock | Additional paid-in | Accumulated | Total | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | capital | deficit | equity | ||||||||||||||||||||||
BALANCE AT January 1, 2022 | 8,296,256 | 1 | - | 1,718 | -* | 216,625 | (183,094 | ) | 33,532 | |||||||||||||||||||
Net loss | - | - | (13,646 | ) | (13,646 | ) | ||||||||||||||||||||||
Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of | shares39,350 | - | 1,984 | 1,984 | ||||||||||||||||||||||||
BALANCE AT September 30, 2022 | 8,335,606 | 1 | - | 1,718 | -* | 218,609 | (196,740 | ) | 21,870 |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (4,256 | ) | $ | (4,481 | ) | ||
Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 55 | 41 | ||||||
Change in liability for employees rights upon retirement | 36 | 46 | ||||||
Other financial expenses | 22 | 7 | ||||||
Change in right of use asset and leasing liability | (34 | ) | (25 | ) | ||||
Share-based compensation expenses | 289 | 653 | ||||||
Loss on amounts funded in respect of employee rights upon retirement, net | 23 | 18 | ||||||
Decrease (increase) in interest receivable on short term deposits | 14 | (17 | ) | |||||
Changes in operating asset and liability items: | ||||||||
Decrease in prepaid expenses | 261 | 231 | ||||||
Decrease (Increase) in trade receivables | (383 | ) | 111 | |||||
Decrease (Increase) in other receivables | (97 | ) | 74 | |||||
Increase in inventory | (76 | ) | (143 | ) | ||||
Increase (Decrease) in trade payables | (52 | ) | 7 | |||||
Decrease in other payables | (633 | ) | (656 | ) | ||||
Net cash used in operating activities | (4,831 | ) | (4,134 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property, plant and equipment | (25 | ) | (37 | ) | ||||
Investment in short-term bank deposits | (2,500 | ) | (6,000 | ) | ||||
Withdrawal from short-term bank deposits | 7,000 | 6,000 | ||||||
Amounts funded in respect of employee rights upon retirement | (26 | ) | (28 | ) | ||||
Net cash provided by (used in) investing activities | 4,449 | (65 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net cash provided by (used in) financing activities | - | - | ||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (22 | ) | (7 | ) | ||||
DECREASE IN CASH AND CASH EQUIVALENTS | (404 | ) | (4,206 | ) | ||||
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD | 4,632 | 12,004 | ||||||
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF THE PERIOD | $ | 4,228 | $ | 7,798 |
The accompanying notes are an integral part of the consolidated financial statements.
F-7 |
INSPIREMD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(U.S. dollars in thousands, except share data)
Shares | Amount | Shares | Amount | capital | deficit | equity | ||||||||||||||||||||||
Common stock | Series C Convertible Preferred Stock | Additional paid-in | Accumulated | Total | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | capital | deficit | equity | ||||||||||||||||||||||
BALANCE AT July 1, 2022 | 8,323,200 | 1 | - | 1,718 | -* | 217,952 | (192,211 | ) | 25,742 | |||||||||||||||||||
Net loss | - | - | (4,529 | ) | (4,529 | ) | ||||||||||||||||||||||
Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures of | shares12,406 | - | 657 | 657 | ||||||||||||||||||||||||
Share-based compensation related to restricted stock, restricted stock units and stock options award, net of forfeitures | 657 | 657 | ||||||||||||||||||||||||||
BALANCE AT September 30, 2022 | 8,335,606 | 1 | - | 1,718 | -* | 218,609 | (196,740 | ) | 21,870 |
The accompanying notes are an integral part of the consolidated financial statements.
INSPIREMD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in thousands)
2022 | 2021 | |||||||
Nine months ended September 30 | ||||||||
2022 | 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (13,646 | ) | $ | (10,821 | ) | ||
Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 134 | 121 | ||||||
Loss from sale of property, plant and equipment | - | 1 | ||||||
Loss on amounts funded in respect of employee rights upon retirement | 114 | - | ||||||
Change in liability for employees’ rights upon retirement | (83 | ) | 82 | |||||
Other financial expense | 138 | 13 | ||||||
Change in operating right of use asset and operating leasing liability | (78 | ) | (58 | ) | ||||
Share-based compensation expenses | 1,984 | 1,010 | ||||||
Increase in interest receivable on short term deposits | (75 | ) | (12 | ) | ||||
Changes in operating asset and liability items: | ||||||||
Increase in prepaid expenses | (198 | ) | (439 | ) | ||||
Decrease (increase) in trade receivables | 58 | (495 | ) | |||||
Decrease (increase) in other receivables | (42 | ) | 5 | |||||
Decrease (increase) in inventory | (271 | ) | 280 | |||||
Increase (decrease) in trade payables | (489 | ) | 320 | |||||
Increase (decrease) in other payables | 107 | (316 | ) | |||||
Net cash used in operating activities | (12,347 | ) | (10,309 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property, plant and equipment | (378 | ) | (237 | ) | ||||
Proceeds from withdrawal of (invest in) short-term deposits | 5,000 | (24,000 | ) | |||||
Amounts funded in respect of employee rights upon retirement | (67 | ) | (61 | ) | ||||
Net cash provided by (used in) investing activities | 4,555 | (24,298 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Issuance costs of At The Market offering | (140 | ) | - | |||||
Proceeds from issuance of shares and warrants and exercise of Pre-Funded Warrants and unit purchase option, net of $2,024 issuance costs | - | 35,034 | ||||||
Net cash provided by (used in) financing activities | (140 | ) | 35,034 | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (138 | ) | (13 | ) | ||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (8,070 | ) | 414 | |||||
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD | 12,004 | 12,645 | ||||||
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF THE PERIOD | $ | 3,934 | $ | 13,059 | ||||
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Acquisition of right-of-use assets by means of lease liabilities | 835 | 91 |
The accompanying notes are an integral part of the consolidated financial statements.
INSPIREMD, INC.
UNAUDITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
a. | General | |
InspireMD, Inc., a Delaware corporation (the “Company”), together with its subsidiaries, is a medical device | ||
The Company’s carotid product (CGuard™ EPS) combines MicroNet and a self-expandable nitinol stent in a single device to treat carotid artery disease. | ||
The Company’s MGuard™ Prime™ embolic protection system (“MGuard Prime EPS”) was marketed for use in patients with acute coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions, or bypass surgery. MGuard Prime EPS combines MicroNet with a bare-metal cobalt-chromium based stent. MGuard Prime EPS received CE mark approval in the European Union in October 2010 for improving luminal diameter and providing embolic protection. Over the past years, there has been a shift in industry preferences away from bare-metal stents, such as MGuard Prime EPS in ST-Elevation Myocardial Infarction (“STEMI”) patients. As a result of declining sales of the MGuard Prime EPS, which the Company believes is largely driven by the predominant industry preferences favoring drug-eluting, or drug-coated, stents, during the second quarter of 2022, the Company ceased sales of the Company’s MGuard Prime EPS following a phase out period. | ||
The Company markets its products through distributors in international markets, mainly in Europe. | ||
b. | Liquidity | |
The Company has an accumulated deficit as of
Management’s plans include the continued commercialization of the Company’s product 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.
On May 12, 2023, the Company entered into a securities purchase agreement for the issuance and sale of Company securities in a private placement. Aggregate gross proceeds to the Company in respect of the private placement is expected to be approximately $42.2 million, before deducting fees payable to the placement agent and other offering expenses payable by the Company and before exercising any warrants. The offering is expected to close on or about May 15, 2023, subject to the satisfaction of customary closing conditions. |
c. | Failure to satisfy regulatory requirements of the new European Medical Device Regulation
For the European Union nations, medical devices must obtain a CE mark before they may be placed on the market. In order to obtain and maintain the CE mark, the Company must The The European Union replaced the MDD with the new In the
| |
Risks Related to the Geopolitical and Military Tensions Between Russia and Ukraine in Europe | |||
In February 2022, Russia launched a military invasion into Ukraine. The Company derived approximately As a result of the crisis in Ukraine, the United States and the EU have implemented sanctions against certain Russian individuals and entities and have made it more difficult for
The U.S. government has imposed sanctions through several executive orders restricting U.S. companies from conducting business with specified Russian |
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements for the year ended December 31, 2021.statements. In the opinion of the Company, the financial statements reflect all adjustments, consideredwhich include only normal recurring adjustments, necessary for a fair statement of theits financial position as of March 31, 2023 and its results of operations, changes in equity and cash flows for the interim periods reported herein have been included (consisting only of normal recurring adjustments).three months ended March 31, 2023 and 2022. 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, 2021,2022, as found in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 7, 2022.30, 2023. The results of operations for the three and nine months ended September 30, 2022March 31, 2023 are not necessarily indicative of results that could be expected for the entire fiscal year.
NOTE 3 - RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS
Newly issued accounting pronouncements | ||
Financial Instruments - Credit Losses | ||
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments. This guidance replaces the current incurred loss impairment methodology. Under the new guidance, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects its current estimate of credit losses expected to be incurred over the life of the financial instrument based on historical experience, current conditions and reasonable and supportable forecasts. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”). The purpose of this amendment is to create a two-tier rollout of major updates, staggering the effective dates between larger public companies and all other entities. This granted certain classes of companies, including Smaller Reporting Companies (“SRCs”), additional time to implement major FASB standards, including ASU 2016-13. Larger public companies had an effective date for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All other entities are permitted to defer adoption of ASU 2016-13, and its related amendments, until the earlier of fiscal periods beginning after December 15, 2022. Under the current SEC definitions, the Company met the definition of an SRC and adopted the deferral period for ASU 2016-13. The guidance requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company adopted the provisions of this update as of January 1, 2023 with no material impact on its consolidated financial statements. |
F-11 |
NOTE 34 - EQUITY:
a. | As of |
As of September 30, 2022,March 31, 2023, the Company has outstanding warrants to purchase an aggregate of 1,793,815 1,793,504shares of common stock as follows:
SCHEDULE OF ISSUANCE OF WARRANTS TO PURCHASE COMMON STOCK
Number of underlying Common stock | Exercise price | Number of underlying Common stock | Weighted average exercise price | |||||||||||||
Series E Warrants | 198,159 | $ | 27.000 | 198,159 | $ | 27.000 | ||||||||||
Series F Warrants | 433,878 | $ | 7.425 | 433,878 | $ | 7.425 | ||||||||||
Series G Warrants | 1,092,344 | $ | 10.230 | 1,092,344 | $ | 10.230 | ||||||||||
Underwriter Warrants | 18,277 | $ | 7.425 | 17,966 | $ | 7.425 | ||||||||||
Other warrants | 51,157 | 225 and above | 51,157 | 225 and above | ||||||||||||
Total Warrants | 1,793,815 | $ | 1,793,504 | $ |
As of September 30, 2022,March 31, 2023, the Company had 155,000,000 authorized shares of capital stock, par value $ per share, of which are shares of common stock and are shares of “blank check” preferred stock.
b. During the ninethree months ended September 30, 2022,March 31, 2023, the Company granted to employees and consultants’a consultant options to purchase a total of shares of the Company’s common stock. The options have an exercise price ranging fromof $ - $ per share, which was the fair market value of the Company’s common stock on the date of the grant. .
In calculating the fair value of the above options, the Company used the following assumptions: dividend yield of % and expected term of - years; expected volatility ranging from %- %; and risk-free interest rate ranging from %- %.
The fair value of the above options, using the Black-Scholes option-pricing model, was approximately $ .
F-12 |
c. During the nine months ended September 30, 2022, the Company granted restricted shares of the Company’s common stock to employees. The shares are subject to a -year vesting period, with one-third of such awards vesting each year.
The fair value of the above restricted shares was approximately $.
NOTE 45 – RELATED PARTIES TRANSACTIONS
During the nine and three months ended September 30,March 31, 2022, a consulting Companycompany whose founder and CEO is aour board member of the Company’s board of directors, provided certain marketing services in the amount of $9,276 6,276and $500, respectively..
Basic and diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share excludes potential share issuances of common stock upon the exercise of share options, warrants, and unvested restricted stockstocks and unvested restricted stock units as the effect is anti-dilutive.
The total number of shares of common stock related to outstanding options, warrants, unvested restricted stock, unvested restricted stock units and Series C Preferred Stock excluded from the calculations of diluted loss per share were for the nine and three month periods ended September 30, 2022.
The total number of shares of common stock related to outstanding options, warrants, restricted stock, restricted stock units, and Series C Preferred Stock excluded from the calculations of diluted loss per share were . This amount includes 342,766 forof unvested restricted stock included in the ninenumber of issued and three month periods ended September 30, 2021.
NOTE 6 – LEASE AGREEMENTSoutstanding shares as of March 31, 2023.
Supplemental informationThe total number of shares of common stock related to leases areoutstanding options, warrants, restricted stock, restricted stock units, Series C Preferred Stock excluded from the calculations of diluted loss per share were . This amount includes of unvested restricted stock included in the number of issued and outstanding shares as follows:
SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES
September 30 | December 31 | |||||||
2022 | 2021 | |||||||
($ in thousands) | ($ in thousands) | |||||||
Operating lease right-of-use assets | 1,635 | 1,081 | ||||||
Current operating lease liabilities | (416 | ) | (420 | ) | ||||
Non-current operating lease liabilities | (1,261 | ) | (781 | ) |
Other information:of March 31, 2022.
Operating cash flows from operating leases (cash paid in thousands) | (328 | ) | (437 | ) | ||||
Weighted Average Remaining Lease Term | 4.25 | 3 | ||||||
Weighted Average Discount Rate | 8.69 | % | 8.38 | % |
Maturities of lease liabilities are as follows:
SCHEDULE OF MATURITIES OF LEASE LIABILITIES
Amount | ||||
($ in thousands) | ||||
2022 | 107 | |||
2023 | 429 | |||
2024 | 469 | |||
2025 | 469 | |||
2026 | 509 | |||
Total lease payments | 1,983 | |||
Less imputed interest | (307 | ) | ||
Total | ||||
2022 | 1,677 | |||
Total | 1,677 |
NOTE 7 –- FINANCIAL INSTRUMENTS:
a. | 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.
b. | As of |
NOTE 8 –- INVENTORY:
SCHEDULE OF INVENTORY
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||
($ in thousands) | ($ in thousands) | |||||||||||||||
Finished goods | $ | 217 | $ | 92 | $ | 138 | $ | 179 | ||||||||
Work in process | 347 | 436 | 690 | 510 | ||||||||||||
Raw materials and supplies | 850 | 615 | 869 | 932 | ||||||||||||
Total inventory | $ | 1,414 | $ | 1,143 | $ | 1,697 | $ | 1,621 |
F-13 |
NOTE 9 - ACCOUNTS PAYABLE AND ACCRUALS - OTHER:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUALS - OTHER
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
($ in thousands) | ||||||||
Employees and employee institutions | 1,394 | 1,510 | ||||||
Accrued vacation and recreation pay | 227 | 233 | ||||||
Accrued expenses | 1,425 | 1,136 | ||||||
Current Operating lease liabilities | 416 | 420 | ||||||
Other | 95 | 155 | ||||||
Accounts payable and accruals - other | $ | 3,557 | $ | 3,454 |
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
($ in thousands) | ||||||||
Employees and employee institutions | 970 | 1,853 | ||||||
Accrued vacation and recreation pay | 240 | 197 | ||||||
Accrued expenses | 933 | 554 | ||||||
Clinical trial accrual | 1,046 | 1,258 | ||||||
Current Operating lease liabilities | 417 | 419 | ||||||
Other | 170 | 130 | ||||||
Accounts payable and accruals-other | $ | 3,776 | $ | 4,411 |
NOTE 10 - DISAGGREGATED REVENUE AND ENTITY WIDE DISCLOSURES:
Revenues are attributed to geographic areas based on the location of the customers. The following is a summary of revenues:
SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | Three months ended March 31 | ||||||||||||||||||||
($ in thousands) | 2023 | 2022 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Italy | $ | 240 | $ | 219 | $ | 713 | $ | 678 | $ | 267 | $ | 243 | ||||||||||||
Germany | 191 | 213 | 866 | 690 | 214 | 249 | ||||||||||||||||||
Poland | 74 | 125 | 217 | 318 | ||||||||||||||||||||
Russia | 250 | 118 | 381 | 261 | ||||||||||||||||||||
Other | 676 | 396 | 1,968 | 1,168 | 758 | 691 | ||||||||||||||||||
Revenues | $ | 1,431 | $ | 1,071 | $ | 4,145 | $ | 3,115 | ||||||||||||||||
$ | 1,239 | $ | 1,183 |
By product:
SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS BY PRODUCT
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | Three months ended March 31 | ||||||||||||||||||||
($ in thousands) | 2023 | 2022 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
CGuard | $ | 1,431 | $ | 1,031 | $ | 4,097 | $ | 3,018 | $ | 1,239 | $ | 1,161 | ||||||||||||
MGuard | - | 40 | 48 | 97 | - | 22 | ||||||||||||||||||
Revenue | $ | 1,431 | $ | 1,071 | $ | 4,145 | $ | 3,115 | ||||||||||||||||
$ | 1,239 | $ | 1,183 |
By principal customers:
SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS BY PRINCIPAL CUSTOMERS
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Customer A | 13 | % | 19 | % | 21 | % | 21 | % | ||||||||
Customer B | 17 | % | 11 | % | 9 | % | 8 | % | ||||||||
Customer C | 9 | % | 12 | % | 9 | % | 13 | % | ||||||||
Customer D | 5 | % | 12 | % | 5 | % | 10 | % | ||||||||
Concentration risk percentage | 5 | % | 12 | % | 5 | % | 10 | % |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Customer A | 17 | % | 21 | % | ||||
Customer B | 13 | % | 11 | % |
All tangible long lived assets are located in Israel.
F-14 |
NOTE 11 – SUBSEQUENT EVENTS
On May 12, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) pursuant to which the Company agreed to sell and issue in a private placement (the “Private Placement Offering) an aggregate of 15,561,894 shares of common stock and warrants to purchase up to an aggregate of 51,656,328 shares of common stock, consisting of Series H warrants to purchase up to 12,914,086 shares of common stock (the “Series H Warrants”), Series I warrants to purchase up to 12,914,078 shares of common stock (the “Series I Warrants”), Series J warrants to purchase up to 12,914,086 shares of Common Stock (the “Series J Warrants”) and Series K warrants to purchase up to 12,914,086 shares of common stock (the “Series K Warrants” and together with the Series H Warrants, Series I Warrants and Series J Warrants, the “Warrants”), at an offering price of $ per Private Placement Share and associated Warrants and an offering price of $ per Pre-Funded Warrant and associated Warrants. shares (the “Private Placement Shares”) of the Company’s common stock, pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to
The Pre-Funded Warrants will be immediately exercisable at an exercise price of $0.0001 per share and will not expire until exercised in full. The Warrants will be immediately exercisable upon issuance at an exercise price of $1.3827 per share, subject to adjustment as set forth therein. The Warrants have a term of the earlier of (i) five years from the date of issuance and (ii) (A) in the case of the Series H Warrants, 20 trading days following the Company’s public release of primary and secondary end points related to one year follow up study results from the Company’s C-Guardians pivotal trial, (B) in the case of the Series I Warrants, 20 trading days following the Company’s announcement of receipt of Premarket Approval from the Food and Drug Administration (“FDA”) for the CGuard Prime Carotid Stent System (135 cm), (C) in the case of the Series J Warrants, 20 trading days following the Company’s announcement of receipt of FDA approval for the SwitchGuard and CGuard Prime 80 and (D) in the case on the Series K Warrants, 20 trading days following the end of the fourth fiscal quarter after the fiscal quarter in which the first commercial sales of the CGuard Carotid Stent System in the United States begins. The Warrants may be exercised on a cashless basis if there is no effective registration statement registering the shares underlying the warrants.
In connection with the Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company is required to file a resale registration statement (the “Registration Statement”) with the SEC to register for resale the Private Placement Shares and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and Warrants, within 20 days of the signing date of the Purchase Agreement (the “Signing Date”), and to have such Registration Statement declared effective within 45 days after the Signing Date in the event the Registration Statement is not reviewed by the SEC, or 90 days of the Signing Date in the event the Registration Statement is reviewed by the SEC. The Company will be obligated to pay certain liquidated damages if the Company fails to file the Registration Statement when required, fails to cause the Registration Statement to be declared effective by the SEC when required, of if the Company fails to maintain the effectiveness of the Registration Statement.
Aggregate gross proceeds to the Company in respect of the Private Placement Offering are expected to be approximately $42.2 million, before deducting fees payable to the placement agent and other offering expenses payable by the Company which are expected to amount to approximately $4.6 million. If the Warrants are exercised in cash in full this would result in an additional $71.4 million of proceeds. The Private Placement Offering is expected to close on or about May 15, 2023, subject to satisfaction of customary closing conditions.
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.regulation, including revenue growth. 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 may 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:
● | our history of recurring losses and negative cash flows from operating activities, significant future commitments and the uncertainty regarding the adequacy of our liquidity to pursue our complete business objectives, and substantial doubt regarding our ability to continue as a going concern; |
● | our need to raise additional capital to meet our business requirements in the future and such capital raising may be costly or difficult to obtain and could dilute out stockholders’ ownership interests; | |
● | an inability to secure and maintain regulatory approvals for the | |
● | negative clinical trial results or lengthy product delays in key markets; | |
● | our ability to maintain compliance with the Nasdaq Capital Market listing standards; | |
● | our ability to generate revenues from our products and obtain and maintain regulatory approvals for our products; | |
● | our ability to | |
● | our dependence on a single manufacturing facility and our ability to comply with stringent manufacturing quality standards; | |
● | ||
the risk that the data collected from our current and planned clinical trials may not be sufficient to demonstrate that our technology is an attractive alternative to other procedures and | ||
● | intense competition in our industry, with competitors having greater financial, technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do; | |
● | entry of new competitors and products and potential technological obsolescence of our products; | |
● | inability to carry out research, development and commercialization plans; |
3 |
● | loss of a key customer or supplier; | |
● | technical problems with our research and products and potential product liability claims; | |
● | product malfunctions; | |
● | price increases for supplies and components; | |
● | adverse economic conditions; | |
● | insufficient or inadequate reimbursement by governmental and other third-party payers for our products; | |
● | adverse federal, state and local government regulation in the United States, Europe, Israel and other foreign jurisdictions; | |
● | the fact that we conduct business in multiple foreign jurisdictions, exposing us to foreign currency exchange rate fluctuations, logistical and communications challenges, burdens and costs of compliance with foreign laws and political and economic volatility in certain jurisdictions; | |
● | the escalation of hostilities in Israel, which could impair our ability to manufacture our products; and | |
● |
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 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.
All information in this Quarterly Report on Form 10-Q relating to shares or price per share reflects the 1-for-15 reverse stock split effected by us on April 26, 2021.
Overview
We are a medical device company focusing on the development and commercialization of our proprietary MicroNet™ stent platform technology for the treatment of complexcarotid artery disease and other vascular and coronary disease. A stent is an expandable “scaffold-like” device, usually constructed of a metallic material, that is inserted into anthe lumen of the artery to expand the inside passagecreate patency and improverevascularization of blood flow. MicroNet, a micron mesh sleeve, is wrappedattached over a stent to provide embolic protection inboth during and after stenting procedures.
4 |
Our CGuard™ carotid embolic prevention system (“CGuard EPS”EPS™”) combines MicroNet and a unique self-expandable nitinol stent in a single device for use in carotid artery applications.revascularization. Our CGuard EPS originally received CE mark approval under Medical Device Directive 93/42/EEC (“MDD”) in the European Union (“EU”) in March 2013 and was fully launched in Europe in September 2015. Subsequently, we launched CGuard EPS in Russia and certainover 30 countries in Latin America and Asia, including India. In September 2020, we launched CGuard EPS in Brazil after receiving regulatory approval in July 2020 and on February 3, 2021, we executed a distribution agreement with Chinese partners for the purpose of expanding our presence in China.the Asian markets. Currently, we are seeking strategic partners for a potential launch of CGuard EPS in Japan and other Asian countries.
Our CE mark for CGuard EPS expiresunder the MDD expired on November 12, 2022 and we are in the final stages of technical documentation review by the Notified Body auditor to meet the Medical Device Regulation (“MDR”) (MDR 2017/745) requirements (which replaced the MDD) for recertification. In the meantime, on February 14, 2023, we received a derogation per Article 97 paragraph 1 of Regulation 2017/745 from the Agency for Medicines and Health Products (FAMHP) allowing us to continue marketing CGuard EPS in the EU until August 15, 2023 subject to certain procedural requirements. Subsequently, on March 20, 2023, Regulation (EU) 2023/607 was published allowing us to continue marketing CGuard EPS in EU countries under the MDD directive until December 31, 2027. As a result of the foregoing, we may market and sell CGuard EPS in the EU and certain other jurisdictions subject to certain procedural requirements while weour MDR CE recertification is pending. We continue to seek to expedite the review process for recertification under the new European Medical Device Regulation, we do not expect to receive recertification by November 12, 2022 (see Part II – Item 1A. Risk Factors “Failure to satisfy regulatory requirements of the new European Medical Device Regulation by November 12, 2022 will prevent us from marketing CGuard EPS in countries requiring the CE mark).MDR.
On September 8, 2020, we received approval from the U.S. Food and Drug Administration (“FDA”) of our Investigation Device Exemption (“IDE”), thereby allowing us to proceed with a pivotal study of our CGuard™ Carotid Stent System, C-Guardians, for prevention of stroke in patients in the United States. C-Guardians is a prospective, multicenter, single-arm, pivotal study to evaluate the safety and efficacy of the CGuard™ Carotid StentSten System when used to treat symptomatic and asymptomatic carotid artery stenosis in patients undergoing carotid artery stenting. The trial was designed to enroll approximately 315 subjects in a maximum of 40 study sites located in the United States and Europe. Study sites in Europe may contribute a maximum of approximately 50% of the total enrollees. The primary endpoint of the study will be the composite of incidence of death (all-cause mortality), all stroke, and myocardial infarction (DSMI) through 30-days post-index procedure, based on the clinical events committee (CEC) adjudication and ipsilateral stroke from 31-365 day follow-up, based on Clinical Events Committee (CEC) adjudication. The composite index will be compared to a performance goal based on the observed rate of the two components of the primary endpoint from previous pivotal stent trials which are considered industry standard. The performance goal will be considered met if the upper bound of the two-sided 95% confidence interval calculated from the observed primary endpoint rate is < 11.6% and the p-value is less than 0.025.
On July 23, 2021, we announced the initiation of enrollment and successful completion of the first cases of our C-Guardian trial of CGuard EPS. The first patients, who were under the care of principal investigator, Chris Metzger, M.D., system chair of clinical research at Ballard Health System in Eastern Tennessee, were successfully implanted with the CGuard EPS stent device. TheseThere are the first of 315 patients who are expected to be enrolled in the trial and receive CGuard EPS in the treatment of carotid artery stenosis in symptomatic and asymptomatic patients undergoing carotid artery stenting. We are currently continuing with the enrollment phase. In April 2022, weenrolment phase at approximately 20 trial sites and expect it to be completed our first European recruitment.approximately at the end of the second quarter of 2023.
Additionally, we intend to continue to invest in current and future potential productnew indications, products and manufacturing enhancements for CGuard EPS that are expected to reduce cost of goods and/or provide the best-in-class performing delivery system,systems, such as CGuard Prime.Prime™for transfemoral access. In furtherance of our strategy that focuses on establishing CGuard EPS as a viable alternative to vascular surgery, we are exploring addingdeveloping a new transcarotid artery revascularization (TCAR) delivery systemssystem, SwitchGuard™, for transcarotid access and accessory solutionsneuro protection. In addition, we intend to explore new indications for proceduralCGuard EPS to leverage the advantages of stent design and mesh protection, to our portfoliowell suited in labels such as SwitchGuard.acute stroke with tandem lesions.
We consider theour current addressable market for our CGuard EPS to be individuals with diagnosed, symptomatic high-grade carotid artery stenosis (HGCS, ≥70% occlusion) for whom 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 will be approximately $666 million$1.3 billion in 20222023 (source: Health Research International Personal Medical Systems, Inc. September 13, 2021 Results of Update Report on Global Carotid Stenting Procedures and Markets by Major Geography and Addressable Markets)Markets and internal estimates). According to this same report, and internal estimates, assuming full penetration of the caseload for all individuals diagnosed with high-grade carotid artery stenosis, we estimate that the total available market for CGuard EPS in 2022 will be approximately $5$9.3 billion.
Our MGuard™ Prime™ embolic protection system (“MGuard Prime EPS”) was marketed for usemission is to offer a comprehensive set of delivery solutions (TCAR and Transfemoral) in patientsorder to deliver best in class results through patient outcomes by way of stent performance with acute coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions, or bypass surgery. MGuard Prime EPS combines MicroNet with a bare-metal cobalt-chromium based stent. MGuard Prime EPS received CE mark approval in the European Union in October 2010 for improving luminal diameter and providing embolic protection. Over the past years there has been a shift in industry preferences away from bare-metal stents, such as MGuard Prime EPS in ST-Elevation Myocardial Infarction (“STEMI”) patients. As a result of declining sales of the MGuard Prime EPS, which we believe this is largely driven by the predominant industry preferences favoring drug-eluting, or drug-coated, stents, during the second quarter of 2022 we ceased sales of our MGuard Prime EPS following a phase out period.
We also intend to develop a pipeline of other products and additional applications by leveraging our MicroNet technology to improve peripheral procedures such as the treatment of the superficial femoral artery disease and vascular disease below the knee as well as neurovascular procedures, such as the treatment of acute stroke.
Presently, none of our products may be sold or marketed in the United States, but we do derive revenues from the use of our products in the currently ongoing trials.CGuard EPS.
We were organized in the State of Delaware on February 29, 2008.
Recent Developments
Private Placement
On May 12, 2023, we entered into a securities purchase agreement (the “Purchase Agreement”) pursuant to which we agreed to sell and issue in a private placement (the “Private Placement Offering) an aggregate of 10,266,270 shares (the “Private Placement Shares”) of our common stock, pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 15,561,894 shares of common stock and warrants to purchase up to an aggregate of 51,656,328 shares of common stock, consisting of Series H warrants to purchase up to 12,914,086 shares of common stock (the “Series H Warrants”), Series I warrants to purchase up to 12,914,078 shares of common stock (the “Series I Warrants”), Series J warrants to purchase up to 12,914,086 shares of Common Stock (the “Series J Warrants”) and Series K warrants to purchase up to 12,914,086 shares of common stock (the “Series K Warrants” and together with the Series H Warrants, Series I Warrants and Series J Warrants, the “Warrants”), at an offering price of $1.6327 per Private Placement Share and associated Warrants and an offering price of $1.6326 per Pre-Funded Warrant and associated Warrants.
The Pre-Funded Warrants will be immediately exercisable at an exercise price of $0.0001 per share and will not expire until exercised in full. The Warrants will be immediately exercisable upon issuance at an exercise price of $1.3827 per share, subject to adjustment as set forth therein. The Warrants have a term of the earlier of (i) five years from the date of issuance and (ii) (A) in the case of the Series H Warrants, 20 trading days following the Company’s public release of primary and secondary end points related to one year follow up study results from the Company’s C-Guardians pivotal trial, (B) in the case of the Series I Warrants, 20 trading days following the Company’s announcement of receipt of Premarket Approval from the Food and Drug Administration (“FDA”) for the CGuard Prime Carotid Stent System (135 cm), (C) in the case of the Series J Warrants, 20 trading days following the Company’s announcement of receipt of FDA approval for the SwitchGuard and CGuard Prime 80 and (D) in the case on the Series K Warrants, 20 trading days following the end of the fourth fiscal quarter after the fiscal quarter in which the first commercial sales of the CGuard Carotid Stent System in the United States begins. The Warrants may be exercised on a cashless basis if there is no effective registration statement registering the shares underlying the warrants.
In connection with the Purchase Agreement, we entered into a registration rights agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, we are required to file a resale registration statement (the “Registration Statement”) with the SEC to register for resale the Private Placement Shares and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and Warrants, within 20 days of the signing date of the Purchase Agreement (the “Signing Date”), and to have such Registration Statement declared effective within 45 days after the Signing Date in the event the Registration Statement is not reviewed by the SEC, or 90 days of the Signing Date in the event the Registration Statement is reviewed by the SEC. We will be obligated to pay certain liquidated damages if we fail to file the Registration Statement when required, fails to cause the Registration Statement to be declared effective by the SEC when required, of if we fail to maintain the effectiveness of the Registration Statement.
Aggregate gross proceeds to us in respect of the Private Placement Offering are expected to be approximately $42.2 million, before deducting fees payable to the placement agent and other offering expenses. If the Warrants are exercised in cash in full this would result in an additional $71.4 million of proceeds.
We agreed to pay LifeSci Capital LLC, a placement fee equal to 5.6% of the aggregate gross proceeds from the closing of the Private Placement Offering and a non-accountable expense allowance of $25,000. In addition, we have agreed to pay Piper Sandler & Co. a financial advisory fee of $1.5 million and AGP/Alliance Global Partners a financial advisory fee of $250,000.
The Private Placement Offering is expected to close on or about May 15, 2023, subject to satisfaction of customary closing conditions.
Recent Developments
The COVID-19 global pandemic has led governments and authorities around the globe to take various precautionary measures in order to limit the spread of COVID-19, including government-imposed quarantines, lockdowns, and other public health safety measures. We experienced a significant COVID-19 related impact on our financial condition and results of operations, primarily during the year ended December 31, 2020, which we primarily attribute to the postponement of CGuard EPS procedures (non-emergency procedures), as hospitals have shifted resources to patients affected by COVID-19. New COVID-19 variants, and potentially increasing infection rates make the current COVID-related environment highly volatile and uncertain and we anticipate that the continuation of the pandemic and related restrictions and safety measures will likely result in continued fluctuations in sales of our products and potentially enrollments in our studies as well as potential disruptions to our supply chain for the upcoming periods.
In February 2022, Russia launched a military invasion into Ukraine. We derived approximately 10.5% of total sales in Russia, Ukraine and Belarus in 2021 while during the nine and three months ended September 30, 2022 our sales to Russia, Ukraine and Belarus were 12.1% and 22.2% respectively. The escalation of geopolitical instability in Russia and Ukraine as well as currency fluctuations in the Russian Ruble could negatively impact our operations, sales, and future growth prospects in that region. As a result of the crisis in Ukraine both the United States and the EU have implemented sanctions against certain Russian individuals and entities and have made it more difficult for us to collect on outstanding accounts receivable from customers in this region. Our global operations expose us to risks that could adversely affect our business, financial condition, results of operations, cash flows or the market price of our securities, including the potential for increased tensions between the United States and Russia resulting from the current situation involving Russia and Ukraine, tariffs, economic sanctions and import-export restrictions imposed by either nation, and retaliatory actions by the other nation, as well as the potential negative impact on our business and sales in Russia, Ukraine and Belarus. Current geopolitical instability in Russia and Ukraine and related sanctions by the U.S. government against certain companies and individuals may hinder our ability to conduct business with potential or existing customers and vendors in these countries. The U.S. government has imposed sanctions through several executive orders restricting U.S. companies from conducting business with specified Russian and Ukrainian individuals and companies. While we believe that the executive orders currently do not preclude us from conducting business with our current customers or vendors in Russia, Ukraine and Belarus, the sanctions imposed by the U.S. government may be expanded in the future to restrict us from engaging with them. If we are unable to conduct business with new or existing customers or vendors or pursue business opportunities in Russia, Ukraine or Belarus, our business, including revenue, profitability and cash flows, and operations could be adversely affected. We cannot provide assurance that current sanctions or potential future changes in sanctions will not have a material impact on our operations in Russia, Ukraine and Belarus or on our financial results.
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, 2021.2022. There have not been any material changes to such critical accounting policies since December 31, 2021.2022.
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 September 30, 2022,March 31, 2023, compared to the three months ended September 30, 2021March 31, 2022
Revenues. For the three months ended September 30, 2022,March 31, 2023, revenue increased by $360,000,$56,000, or 33.6%4.7%, to $1,431,000,$1,239,000, from $1,071,000$1,183,000 during the three months ended September 30, 2021.March 31, 2022. This increase was predominantly driven by a 38.8%6.7% increase in sales of CGuard EPS from $1,031,000$1,161,000 during the three months ended September 30, 2021,March 31, 2022, to $1,431,000$1,239,000 during the three months ended September 30, 2022. ThisMarch 31, 2023. During the second half of the quarter, our CE mark was reinstated under the MDD directive allowing us to resume sales increase was dueand shipments to growththe EU countries and we spent the remainder of the quarter shipping product in existing markets and sales inorder to reduce the United States related to stents used in our C-Guardians FDA study as enrollment accelerated.
With respect to geographical regions,backlog of orders that accumulated over the past few months. We believe the quarter over quarter increase in revenue was primarily attributable to a $270,000 increase in Europe, a $79,000 increase in Latin America, and a $4,000 decrease in other geographies. This growth was mainly due to growth in existing markets. In addition, there was a $14,000 increase in revenue from North America due to sales inis not representative of the United States related to stents used in our C-Guardians FDA study.
Our CE markreal market demand for CGuard EPS, expires on November 12, 2022 and while wedue to our inability to ship product for the first half of the quarter. We continue to seek to expedite the review process for recertification under the new European Medical Device Regulation, we do not expect to receive recertification by November 12, 2022. If our CE mark lapses, then we will not be able to promote and sell CGuard EPS into countries requiring the CE mark. If the duration of the lapsed CE mark continues for a prolonged period, then we expect our revenues to decrease significantly until such time that we obtain recertification.
Gross Profit. For the three months ended September 30, 2022, gross profit (revenue less cost of revenues) increased by $274,000, or 297.8%, to $366,000, from $92,000 during the three months ended September 30, 2021. This increase in gross profit resulted from a $95,000 increase in revenues (as mentioned above), less the associated related material and labor costs, a decrease in write-offs of $64,000, due to components supply issues in 2021, a $64,000 decrease in new employee training costs, and a decrease of $51,000 in miscellaneous expenses during the three months ended September 30, 2021. Gross margin (gross profits as a percentage of revenue) increased to 25.6% during the three months ended September 30, 2022 from 8.6% during the three months ended September 30, 2021, driven by the factors mentioned above.
Research and Development Expenses. For the three months ended September 30, 2022, research and development expenses increased by $566,000, or 37.9%, to $2,061,000, from $1,495,000 during the three months ended September 30, 2021. This increase resulted primarily from an increase of $455,000 in expenses related to the acceleration of enrollment in the C-Guardians FDA study as the number of patients enrolling increased, an increase in share-based compensation-related expenses to employees and consultants of $78,000 and an increase of $33,000 in miscellaneous expenses.
Selling and Marketing Expenses. For the three months ended September 30, 2022, selling and marketing expenses increased by $43,000, or 5.4%, to $845,000, from $802,000 during the three months ended September 30, 2021. This increase resulted primarily from an increase in share-based compensation expenses of $61,000 due to the expense recognition of grants made during the fourth quarter of 2021 offset, in part, by a decrease of $18,000 in miscellaneous expenses
General and Administrative Expenses. For the three months ended September 30, 2022, general and administrative expenses increased by $244,000, or 13.4%, to $2,070,000, from $1,826,000 during the three months ended September 30, 2021. This increase resulted primarily from an increase in share-based compensation-related expenses of $211,000, mainly due to the expense recognition of grants made during the fourth quarter of 2021 and an increase of $33,000 in miscellaneous expenses.
Financial Income (Expenses). For the three months ended September 30, 2022, financial income increased by $121,000, to $81,000 of financial income, from $40,000 of financial expenses during the three months ended September 30, 2021. The increase in financial income primarily resulted from a $67,000 increase in interest income from short-term bank deposits and an increase of $52,000 in financial income related to changes in exchange rates.
Tax Expenses. For the three months ended September 30, 2022, there was no change in our tax expenses as compared to the three months ended September 30, 2021.
Net Loss. Our net loss increased by $458,000, or 11.3%, to $4,529,000, for the three months ended September 30, 2022, from $4,071,000 during the three months ended September 30, 2021. The increase in net loss resulted primarily from an increase of $853,000 in operating expenses partially offset by an increase of $274,000 in gross profit and an increase of $121,000 in financial income.
Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021
Revenues. For the nine months ended September 30, 2022, revenue increased by $1,030,000, or 33.1%, to $4,145,000, from $3,115,000 during the nine months ended September 30, 2021. This increase was predominantly driven by a 35.7% increase in sales of CGuard EPS from $3,018,000 during the nine months ended September 30, 2021, to $4,097,000 during the nine months ended September 30, 2021. This sales increase was mainly due to growth in existing and new markets and sales in the United States related to stents used in our C-Guardians FDA study as enrollment accelerated.MDR.
With respect to geographical regions, the increase in revenue was primarily attributable to a $559,000$177,000 increase in Europe, for reasons mentioned in the paragraph above, and a $224,000$13,000 increase from the Middle East. This increase was offset by a $87,000 decrease in Latin America a $84,000 increase in Asia and a $29,000 increase in other geographies. This growth was mainly due to growth in existing and new markets. In addition, there was a $133,000 increase$52,000 decrease in revenue from North Americaother regions such as Australia and Asia due to sales in the United States relatedtiming of shipments to stents used in our C-Guardians FDA study which occurred in the nine months ended September 30, 2022, but not in the corresponding period in 2021.
Our CE mark for CGuard EPS expires on November 12, 2022 and while we continue to seek to expedite the review process for recertification under the new European Medical Device Regulation, we do not expect to receive recertification by November 12, 2022. If our CE mark lapses, then we will not be able to promote and sell CGuard EPS into countries requiring the CE mark. If the duration of the lapsed CE mark continues for a prolonged period, then we expect our revenues to decrease significantly until such time that we obtain recertification.distributers.
Gross Profit. For the ninethree months ended September 30, 2022,March 31, 2023, gross profit (revenue less cost of revenues) increased by 99.8%$251,000, or 205.6%, or $459,000, to $919,000, compared to a $460,000 for$373,000, from $122,000 during the same period in 2021.three months ended March 31, 2022. This increase in gross profit resulted from a $318,000decrease in write-offs of $184,000 and a $71,000 increase in revenues (as mentioned above), less the associated related material and labor costs and a decrease of $141,000 in miscellaneous expenses.labor. Gross margin (gross profits as a percentage of revenue) increased to 22.2%30.1% during the ninethree months ended September 30, 2022March 31, 2023 from 14.8%10.3% during the ninethree months ended September 30, 2021,March 31, 2022, driven by the reasonsfactors mentioned above.
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Research and Development Expenses. For the ninethree months ended September 30, 2022,March 31, 2023, research and development expenses increased by 60.0%$163,000, or 9.7%, or $2,173,000, to $5,797,000,$1,843,000, from $3,624,000$1,680,000 during the ninethree months ended September 30, 2021.March 31, 2022. This increase resulted primarily from an increase of $2,102,000$170,000 in expenses related to the enrollment inthe C-Guardians FDA study which commenced in the second half of 2021CGuard Prime regulatory and approval process and an increase of $71,000$88,000 in miscellaneous expenses.expenses offset, in part, by a decrease of $95,000 in expenses related to the C-Guardians FDA study.
Selling and Marketing Expenses. For the ninethree months ended September 30, 2022,March 31, 2023, selling and marketing expenses increased by 20.1%$42,000, or 5.6%, or $431,000, to $2,577,000,$788,000, from $2,146,000$746,000 during the ninethree months ended September 30, 2021.March 31, 2022. This increase resulted primarily from an increase in tradeshows and travel expenses of $210,000 in light of resumed marketing activities following the lifting of restrictions related to COVID-19, an increase in share-based compensation expenses of $175,000 due to the expense recognition$49,000 offset, in part, by a decrease of grants made during the fourth quarter of 2021 and an increase$7,000 in salary expenses of $59,000.miscellaneous expenses.
General and Administrative Expenses. For the ninethree months ended September 30, 2022,March 31, 2023, general and administrative expenses increaseddecreased by 15.5%$59,000, or 2.7%, or $847,000, to $6,322,000,$2,123,000, from $5,475,000$2,182,000 during the ninethree months ended September 30, 2021.March 31, 2022. This increasedecrease resulted primarily from an increasea decrease in share-based compensation-related expenses of $575,000, mainly due to the expense recognition of$310,000 as no new grants were made duringfrom the fourth quarter of 2021 through March 31, 2023 offset, in part, by an increase in patent relatedregulatory expenses of $148,000, an increase in travel expenses of $116,000 in light of resumed activities following governments lifting restrictions$171,000 related to COVID-19, an increase in directors’ and officers’ liability insurance expenses of $107,000, due to increased premiums caused by recent trends in the overall insurance industryMDR registration process and an increase of $98,000$80,000 in miscellaneous expenses offset, in part, by a decrease in shareholder related expenses of $197,000 mainly due to a special shareholders meeting (which occurred in 2021, but not in 2022) and also due to higher costs of our annual stockholder meeting in 2021 compared to our annual stockholder meeting in 2022.expenses.
Financial Income. For the ninethree months ended September 30, 2022,March 31, 2023, financial income increased by $167,000,$120,000, to $131,000 of financial income,$125,000, from $36,000 of financial expense$5,000 during the ninethree months ended September 30, 2021.March 31, 2022. The increase in financial income primarily resulted from a $141,000$88,000 increase in interest income from short-term bank deposits and an increase of $33,000 in financial income related to changes in exchange rates..
Tax Expenses. For the ninethree months ended September 30, 2022,March 31, 2023, there was no material change in our tax expenses as compared to the ninethree months ended September 30, 2021.March 31, 2022.
Net Loss. Our net loss increaseddecreased by $2,825,000,$225,000, or 26.1%5.0%, to $13,646,000,$4,256,000, for the ninethree months ended September 30, 2022,March 31, 2023, from $10,821,000$4,481,000 during the ninethree months ended September 30, 2021.March 31, 2022. The increasedecrease in net loss resulted primarily from an increase of $3,451,000$251,000 in operating expenses,gross profit and an increase of $120,000 in financial income partially offset by an increase of $459,000$146,000 in gross profit.operating expenses.
Liquidity and Capital Resources
We had an accumulated deficit as of September 30, 2022,March 31, 2023 of $197$206 million, as well as a net loss of $13,646,000$4,256,000 and negative operating cash flows for the nine months ended September 30, 2022.flows. We expect to continue incurring losses and negative cash flows from operations until our product, CGuard EPS, reachreaches commercial profitability. As a result of these expected losses and negative cash flows from operations, along with our current cash position, we believe we only have sufficient resources to fund operations throughuntil the end of September 2023. Therefore, there is substantial doubt about our ability to continue as a going concern.
Our plans include continued commercialization of our products and raising capital through sale of additional equity securities, debt or capital inflows from strategic partnerships. There are no assurances, however, that we will be successful in obtaining the level of financing needed for our operations. If we are unsuccessful in commercializing our products or raising capital, we may need to reduce activities, curtail or cease operationsoperations.
On June 3, 2022,May 12, 2023, we entered into a Sales Agreement with A.G.P./Alliance Global Partners, as sales agent (“A.G.P.”), pursuant to which we may offer and sell from time to time, at our option, through or to A.G.P., up to an aggregate of approximately $8,313,000 of shares of our common stock. Thesecurities purchase agreement for the issuance and sale of shares byour securities in a private placement. Aggregate gross proceeds to us underin respect of the program willprivate placement is expected to be made pursuantapproximately $42.2 million, before deducting fees payable to our effective “shelf” registration statementthe placement agent and other offering expenses payable us and before exercising any warrants. The offering is expected to close on Form S-3 (Registration Statement No. File No. 333-265409) filed withor about May 15, 2023, subject to the SEC on June 3, 2022, and declared effective on June 14, 2022. No shares have been sold under the program.satisfaction of customary closing conditions.
NineThree months ended September 30, 2022March 31, 2023 compared to the ninethree months ended September 30, 2021March 31, 2022
General. At September 30, 2022,March 31, 2023, we had cash and cash equivalents of $3,934,000$4,228,000 and short-term bank deposits of $8,657,000 as compared to $12,004,000$4,632,000 and short-term bank deposits of $13,171,000 as of December 31, 2021.2022. 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, capital expenditures and general working capital.
For the ninethree months ended September 30, 2022,March 31, 2023, net cash used in our operating activities increased by $2,038,000,$697,000, or 19.8%16.9%, to $12,347,000,$4,831,000, from $10,309,000$4,134,000 during the same period in 2021.2022. The primary reason for the increase in cash used in our operating activities was an increase of $2,785,000$449,000 in compensation costs paid during the three months ended March 31, 2023 from $2,679,000 in the three months ended March 31, 2022 to $3,128,000 during the same period in 2023 and a decrease of $366,000 in payments received from customers, to $925,000 during the three months ended March 31, 2023 from $1,291,000 during the same period in 2022 ,offset in part by a decrease of $118,000 in payments for third party related expenses and for professional services and an increase of $827,000 in compensation costs paid during the three months ended September 30, 2022 from $5,868,000 in the three months ended September 30, 2021 to $6,695,000 during the same period in 2022, offset by an increase of $1,574,000 in payments received from customers, to $4,135,000 during the three months ended September 30, 2022 from $2,561,000 during the same period in 2021.
Cash provided byin our investing activities increased by $28,853,000 or 118.75%, to $4,555,000was $4,449,000 during the ninethree months ended September 30, 2022,March 31, 2023, compared to cash used of $24,298,000$65,000 during the ninethree months ended September 30, 2021.March 31, 2022. The primary reasons for the increase in cash provided by our investing activities is a withdrawal of $5,000,000short-term deposits, net of investments of $4,500,000 of short-term deposits.deposits, offset by a decrease of $12,000 in payments made for purchase of property, plant and equipment to $25,000 during the three months ended March 31, 2023.
Cash used by financing activities for the nine months ended September 30, 2022There was $140,000, theno cash used by financing activities during the nine months ended September 30, 2022 were due to issuance costs associated with a shelf registration statement on Form S-3 filed with the SEC on June 3, 2022. Cash provided by financing activities for the ninethree months ended September 30, 2021 was $35,034,000,March 31, 2023 and for the principal sources of which were our February 2021 public offering of common stock and warrants, exercise of Series F and Series G warrants, proceeds from an at-the-market offering as well as proceeds from the issuance of shares to Chinese distributor that resulted in approximately $35,034,000 of aggregate net proceeds.three months ended March 31, 2022.
As of September 30, 2022,March 31, 2023, our current assets exceeded our current liabilities by a multiple of 6.2,3.8. Current assets decreased by $12,402,000$4,623,000 during the period and current liabilities decreased by $386,000$687,000 during the period. As a result, our working capital decreased by $12,016,000$3,936,000 to $20,731,000$12,320,000 as of September 30, 2022.March 31, 2023.
Off Balance Sheet Arrangements
We have no off-balance sheet transactions, arrangements, obligations (including contingent obligations) or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Factors That May Affect Future Operations
We believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including the cyclical nature of the ordering patterns of our distributors, timing of regulatory approvals, the implementation of various phases of our clinical trials and manufacturing efficiencies due to the learning curve of utilizing new materials and equipment, the impact of the COVID-19 pandemic and the ongoing conflict in the Ukraine.equipment. Our operating results could also be impacted by a weakening of the Euro and strengthening of the NIS, both against the U.S. dollar. Lastly, other economic conditions we cannot foresee may affect customer demand, such as individual country reimbursement policies pertaining to our products.
Contractual Obligations and Commitments
Except as set forth below, duringDuring the three months ended September 30, 2022,March 31, 2023, there were no material changes to our contractual obligations and commitments.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures
Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures
As of September 30, 2022,March 31, 2023, we conducted an evaluation, under the supervision and participation of management including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level as of September 30, 2022.March 31, 2023.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2022,March 31, 2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. There are currently no pending material legal proceedings, and we are currently not aware of any legal proceedings or claims against us or our property that we believe will have any significant effect on our business, financial position or operating results.
Item 1A. Risk Factors
Except for the Risk Factors included in our previous filings made with the SEC and as set forth below, there have been no material changes to our risk factors from those disclosed in “Part I. Item 1A. Risk Factors” in the Form 10-K filed with the SEC on March 7, 2022.30, 2023.
Failure to satisfy regulatory requirements of the new European Medical Device Regulation by November 12, 2022 will prevent us from marketing CGuard EPS in countries requiring the CE mark.
For the European Union nations, medical devices must obtain a CE mark before they may be placed on the market. In order to obtain and maintain the CE mark, we must comply with EU law on medical devices, which, until May 26, 2021 was governed by the Medical Device Directive 93/42/EEC (“MDD”), by presenting comprehensive technical files for our products demonstrating safety and efficacy of the product to be placed on the market and passing initial and annual quality management system audit as per ISO 13485 standard by a European Notified Body. We have obtained ISO 13485 quality system certification and CGuard EPS that we currently distribute into the European Union, displays the required CE mark. In order to maintain certification, we are required to pass an annual surveillance audit conducted by Notified Body auditors. The European Union replaced the MDD with the new European Medical Device Regulation, or MDR (MDR 2017/745). The MDR entered into force after a transitional period of three years and a one year extension of that transition period due to the COVID-19 pandemic on May 26, 2021 and which changes several aspects of the regulatory framework in the European Union. Manufacturers had the duration of the transition period to update their technical documentation and processes to meet the new requirements in order to obtain a CE Mark. After May 26, 2021, medical devices can generally still be placed on the market under the provision of the MDD until May 26, 2024; provided the CE Mark was issued prior to this date and the manufacturer continues to comply with this directive. By May 26, 2024, all medical devices entering the EU will need to have a CE Mark under the MDR, even if they have been on the market previously under the MDD. In our particular case, CGuard EPS can continue to be marketed under the MDD until November 12, 2022. Specifically, the EU MDR requires changes in the clinical evidence required for medical devices, post-market clinical follow-up evidence, annual reporting of safety information for Class III products, Unique Device Identification (“UDI”) for all products, submission of core data elements to a European UDI database prior to placement of a device on the market, and multiple other labeling changes. Currently we are under technical documentation review by the Notified Body auditor to meet the MDR requirements for recertification having completed the quality management system Notified Body audit in October 2021. The Notified Body is currently experiencing chronic delays in processing MDR audits and reviews and we do not expect to satisfy MDR requirements by November 12, 2022. While we continue to seek to expedite the review process, if our CE mark lapses, we will not be able to promote and sell CGuard EPS into countries requiring the CE mark until we receive recertification. No assurance can be provided as to the length of time it will take to obtain recertification, If we are unable to promote and sell CGuard EPS into countries requiring the CE mark for a prolonged period, this is expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
EXHIBIT INDEX
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
INSPIREMD, INC. | ||
Date: | By: | /s/ Marvin Slosman |
Name: | Marvin Slosman, | |
Title: | President and Chief Executive Officer (Principal Executive Officer) | |
Date: | By: | /s/ Craig Shore |
Name: | Craig Shore | |
Title: | Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer) |