DESCRIPTION OF BUSINESS | NOTE 1 - DESCRIPTION OF BUSINESS a. General InspireMD, Inc., a Delaware corporation (the “Company”), together with its subsidiaries, is a medical device Company focusing on the development and commercialization of its proprietary MicroNet™ stent platform technology for the treatment of complex vascular and coronary disease. MicroNet, a micron mesh sleeve, is wrapped over a stent to provide embolic protection in stenting procedures. The Company’s carotid product (CGuard™ EPS) combines MicroNet and a self-expandable nitinol stent in a single device to treat carotid artery disease. The Company’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 September 30, 2022, 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 product, 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 until the end of September 2023 . 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. See also note 1b regarding the new European Medical Device Regulation. 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. c. Failure to satisfy regulatory requirements of the new European Medical Device Regulation by November 12, 2022 could prevent the Company from marketing CGuard EPS in 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, the Company 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 its 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. The Company has obtained ISO 13485 quality system certification and CGuard EPS that the Company currently distributes into the European Union, displays the required CE mark. In order to maintain certification, the Company is 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 the Company’s’ 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 the Company is 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 the Company does not expect to satisfy MDR requirements by November 12, 2022. While the Company continues to seek to expedite the review process, if the CE mark lapses, the Company will not be able to promote and sell CGuard EPS into countries requiring the CE mark until the Company receives recertification. No assurance can be provided as to the length of time it will take to obtain recertification, If the Company is 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. d. COVID-19 Pandemic 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. The Company experienced a significant COVID-19 related impact on the Company’s financial condition and results of operations, primarily during the year ended December 31, 2020, which the Company 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 the Company anticipates that the continuation of the pandemic and related restrictions and safety measures will likely result in continued fluctuations in sales of the Company’s products, potentially enrollments in the Company’s studies as well as potential disruptions to the Company’s supply chain for the upcoming periods. e. 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 10.5% of total sales in Russia, Ukraine and Belarus in 2021 while during the nine and three months ended September 30, 2022 the Company’s 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 the Company’s operations, sales, and future growth prospects in that region. 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 us to collect on outstanding accounts receivable from customers in this region. The Company’s global operations expose us to risks that could adversely affect the Company’s business, financial condition, results of operations, cash flows or the market price of the Company’s 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 the Company’s 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 the Company’s 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 the Company believes that the executive orders currently do not preclude the Company from conducting business with the Company’s 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 the Company from engaging with them. If the Company is unable to conduct business with new or existing customers or vendors or pursue business opportunities in Russia, Ukraine or Belarus, the Company’s business, including revenue, profitability and cash flows, and operations could be adversely affected. The Company cannot provide assurance that current sanctions or potential future changes in sanctions will not have a material impact on the Company’s operations in Russia, Ukraine and Belarus or on the Company’s financial results. |