InspireMD Inc

NOTE 1 -DESCRIPTION OF BUSINESS

NOTE 2 -BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements for the year ended December 31, 2023. In the opinion of the company, all adjustments considered necessary for a fair statement of the results of the interim periods reported herein have been included (consisting only of normal recurring adjustments). These condensed 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, 2023, as found in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 5, 2024. The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of results that could be expected for the entire fiscal year.

NOTE 3 -RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

Recently adopted accounting pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This ASU is effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company adopted the provisions of this update as of January 1, 2024 with no material impact on its condensed consolidated financial statements.

Recently issued accounting pronouncement, not yet adopted

NOTE 4 –FAIR VALUE MEASUREMENTS

Fair value is based on the price that would be received from the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

The Company’s financial assets subject to fair value measurements on a recurring basis and the level of inputs used in such measurements were as follows:

The Company’s debt securities are classified within Level 2 because it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value.

The cost of marketable securities as of June 30, 2024, is $18,137 thousand.

The cost of marketable securities as of December 31, 2023 is $28,727 thousand.

NOTE 5 -MARKETABLE SECURITIES

The following table sets forth the Company’s marketable securities for the indicated periods:

The following table summarizes the fair value of the Company’s marketable securities classified by maturity as of June 30, 2024, and December 31, 2023:

The table below sets forth a summary of the changes in the fair value of the Company’s marketable securities for the six months period ended June 30, 2024:

NOTE 6 -EQUITY:

Exercise of Series H Warrant

The Series H Warrants have a term of the earlier of (i)five years from the date of issuance and (ii) 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.

Following the announcement on May 28, 2024 of the one year follow up study results from the Company’s C-GUARDIANS pivotal trial, the Series H warrants for the purchase of 12,914,086 shares of common stock were exercised in full into 292,996 shares of common stock and pre-funded warrants exercisable into 12,621,090 shares of common stock. The net proceeds to the Company from the exercise of the Series H warrants were $16.9 million after deduction of placement agent fees of $1 million. The Series H warrants, each exercisable at $1.3827 per share of common stock and $1.3826 per pre-funded warrant, were issued as part of the private placement financing that the Company consummated on May 15, 2023.

As of June 30, 2024, there are 26,347,323 outstanding pre-funded warrants.

As of June 30, 2024, there were 1,718 shares of Series C Preferred Stock outstanding, convertible into an aggregate of 7,952 shares of the company’s common stock with a total stated value of $10,997.

As of June 30, 2024, the Company has outstanding warrants to purchase an aggregate of 40,479,588 shares of common stock as follows:

As of June 30, 2024, the Company had 155,000,000 authorized shares of capital stock, par value $0.0001 per share, of which 150,000,000 are shares of common stock and 5,000,000 are shares of “blank check” preferred stock.

During the six months ended June 30, 2024, the Company granted 1,634,403 restricted shares of the Company’s common stock to employees and directors. The shares to employees are subject to a three-year vesting period, with one-third of such awards vesting each year. The shares to directors are subject to a one-year vesting period.

The fair value of the above restricted shares was approximately $5.07 million.

During the six months ended June 30, 2024, the Company granted 563,499 restricted share units of the Company’s common stock to the chief executive officer. The shares are subject to a three-year vesting period, with one-third of such awards vesting each year.

The fair value of the above restricted share units was approximately $1.77 million.

During the six months ended June 30, 2024, the Company granted to employees and directors options to purchase a total of 715,614 shares of the Company’s common stock. The options have exercise prices ranging from $2.71-$3.14 per share, which was the fair market value of the Company’s common stock on the respective dates of the grant. The options to employees are subject to a three-year vesting period, with one-third of such awards vesting each year. The options to directors are subject to a one-year vesting period.

In calculating the fair value of the above options, the Company used the following assumptions: dividend yield of 0% and expected term of 5.5-6.5 years; expected volatility ranging from 96.40%-119.38%; and risk-free interest rate ranging from 3.93%-4.10%.

The fair value of the above options, using the Black-Scholes option-pricing model, was approximately $1.85 million.

On April 1, 2024, the Company granted to consultants options to purchase a total of 125,000 shares of the Company’s common stock. The options have an exercise price of $2.37 per share, which was the fair market value of the Company’s common stock on the date of the grant.25,000 options are subject to a two-year vesting period (of which 12,500 options are vesting in the first year and 12,500 options are vesting in the second year) and 100,000 options with performance conditions related to clinical activities.

In calculating the fair value of the above options, the Company used the following assumptions: dividend yield of 0% and expected term of 5.125-6 years; expected volatility ranging from 96.01%-100.76%; and risk-free interest rate ranging from 4.33%-4.34%.

The fair value of the above options, using the Black-Scholes option-pricing model, was $233,169.

NOTE 7 –RELATED PARTIES TRANSACTIONS

During the six and three months ended June 30, 2024, a member of the immediate family of the CEO provided certain administrative services in connection with the Company’s expansion to the U.S. in the amount of $30,000 and $15,000, respectively.

NOTE 8 -NET LOSS PER SHARE:

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, pre-funded warrants and fully vested restricted stock units outstanding during the period. The calculation of diluted net loss per share excludes the effect of potential dilution of share options, warrants, and unvested restricted stocks, unvested restricted stock units and Series C preferred stock as the effect is anti-dilutive.

For the purpose of calculating basic net loss per share, the additional shares of common stock that are issuable upon exercise of the pre-funded warrants have been included since the shares are issuable for a negligible consideration, as determined by the Company according to ASC 260-10-45-13, and have no vesting nor any other contingencies associated with them. For the six and three-month periods ended June 30, 2024, we had weighted average pre-funded warrants of 15,385,212 and 15,515,802, respectively, which were used in the computations of net loss per share for the six and three-month periods.

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 48,550,189 and 59,624,929 for the six and three-month periods ended June 30, 2024 and 2023, respectively. This amount includes 3,744,828 and 2,905,615 of unvested restricted stock included in the number of issued and outstanding shares as of June 30, 2024 and 2023, respectively.

NOTE 9 -FINANCIAL INSTRUMENTS:

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

NOTE 10-INVENTORY:

NOTE 11 -ACCOUNTS PAYABLE AND ACCRUALS - OTHER:

NOTE 12 -DISAGGREGATED REVENUE AND ENTITY WIDE DISCLOSURES:

Revenues are attributed to geographic areas based on the location of the customers. The following is a summary of revenues:

By principal customers:

All substantially tangible long lived assets are located in Israel.