InspireMD Inc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -DESCRIPTION OF BUSINESS

NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES

a. Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates using assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

As applicable to these consolidated financial statements, the most significant estimates and assumptions relate to the determination of the lease terms in operating leases.

b. Functional currency

The currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is the U.S. dollar (“$” or “dollar”). Accordingly, the functional currency of the Company and its subsidiaries is the U.S. dollar.

The dollar figures are determined as follows: transactions and balances originally denominated in dollars are presented in their original amounts. Balances in foreign currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. The resulting translation gains or losses are recorded as financial income or expense, as appropriate. For transactions reflected in the statements of operations in foreign currencies, the exchange rates at transaction dates are used. Depreciation and changes in inventories and other changes deriving from non-monetary items are based on historical exchange rates.

c. Principles of consolidation

The consolidated financial statements include the accounts of the Company and of its subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.

d. Cash and cash equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. As of December 31, 2024 and 2023, cash and cash equivalents consisted of cash, short-term deposits (up to three months from the date of deposit) and money market funds.

e. Marketable securities

Marketable securities consist of debt securities. The Company elected the fair value option to measure and recognize its investments in debt securities in accordance with ASC 825, Financial Instruments as the Company manages its portfolio and evaluates the performance on a fair value basis. Changes in fair value, realized gains and losses on sales of marketable securities, are reflected in the consolidated statements of operation as finance expense (income), net.

Marketable securities are classified under current assets in the consolidated balance sheets as they represent the investment of funds available for the Company’s current operations.

f. Concentration of credit risk and allowance for doubtful accounts

Financial instruments that may potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, marketable securities and long-term deposits, which are deposited in major financially sound institutions in the U.S. Israel and Germany, and trade accounts receivable and other receivables. The Company’s trade accounts receivable is derived from revenues earned from customers from various countries. The Company performs ongoing credit evaluations of its customers’ financial condition and, requires no collateral from its customers. The Company also has a credit insurance policy for some of its customers. The Company maintains the allowance for estimated losses resulting from the inability of the Company’s customers to make required payments. The allowance represents the current estimate of lifetime expected credit losses over the remaining duration of existing accounts receivable considering current market conditions and supportable forecasts when appropriate. The estimate is a result of the Company’s ongoing evaluation of collectability, customer creditworthiness, historical levels of credit losses, and future expectations. The allowance for expected credit losses was immaterial during the periods presented.

g. Inventory

Inventories are stated at the lower of cost (cost is determined on a “first-in, first-out” basis) or net realizable value. The Company’s inventories generally have a limited shelf life and are subject to impairment as they approach their expiration dates. The Company regularly evaluates the carrying value of its inventory and when, based on such evaluation, factors indicate that impairment has occurred, the Company impairs the inventories’ carrying value. There were no impairments or inventory allowances during the years ended December 31, 2024 and 2023.

h. Leases

Operating leases are included in operating lease right-of-use (“ROU”) assets. Short-term balances regarding lease liabilities are included in accounts payable and accruals - Other and long-term balances regarding lease liabilities are included in operating lease liabilities. ROU assets represent Company’s right to use an underlying asset for the lease term and lease liabilities represent obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses the incremental borrowing rate based on the information available at the lease commencement date as the rate implicit in the lease is not readily determinable. The determination of the incremental borrowing rate requires management judgment based on information available at lease commencement. The lease terms may include periods covered by options to extend the lease when it is reasonably certain that the Company will exercise such options, and periods covered by options to terminate the lease when it is reasonably certain that the Company will not exercise such options. Operating lease cost is recognized on a straight-line basis over the lease term. Lease agreements that include lease and non-lease components are accounted for as a single lease component. The Company elected the short-term lease recognition exemption for leases with a lease term of 12 months or less.

i. Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets: over three years for computers and other electronic equipment, and seven to fifteen years for office furniture and equipment and machinery and equipment (mainly seven years). Leasehold improvements are amortized on a straight-line basis over the term of the lease, which is shorter than the estimated life of the improvements.

j. **Impairment in value of long-lived assets **

The Company tests long-lived tangible assets for impairment whenever events or circumstances present an indication of impairment. If the sum of expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the carrying amount of such assets, an impairment would be recognized, and the assets would be written down to their estimated fair values, based on expected future discounted cash flows.

k. Revenue recognition

A contract with a customer exists only when: 1) the parties to the contract have approved it and are committed to perform their respective obligations, 2) the Company can identify each party’s rights regarding the distinct goods or services to be transferred (“Performance Obligations”), 3) the Company can determine the transaction price for the goods or services to be transferred, 4) the contract has commercial substance and 5) it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. Revenues are recorded in the amount of consideration to which the Company expects to be entitled in exchange for Performance Obligations upon transfer of control to the customer, excluding sales taxes.

Revenue from sales of goods, including sales to distributors, is recognized when the customer obtains control of the product, once the Company has a present right to payment and the customer has legal title, and risks and rewards of ownership are obtained by the customer. Generally, this occurs when products are shipped. In few cases when products are directly sold to medical centers on consignment basis, revenue is recognized when the product is consumed.

The Company recognizes the incremental costs of obtaining contracts as an expense since the amortization period of the assets that the Company otherwise would have recognized is one year or less. The costs are recorded under selling and marketing expenses. Disaggregated revenue is disclosed in Note 13.

The Company recognizes revenue net of value added tax (VAT).

l. Research and development costs

Research and development costs, including the costs of the Company’s U.S.-based clinical trial costs which were approximately $3,815 and $3,300 thousand for the years ended December 31, 2024 and 2023, respectively, are charged to the consolidated statements of operations as incurred.

m. Share-based compensation

The Company has equity incentive plans under which the Company grants equity awards, including stock options, restricted stock and restricted stock units (“RSUs”) to employees, directors and service providers. Employee and service providers equity awards are accounted for using the grant-date fair value method. The Company determines compensation expense associated with restricted stock and RSUs based on the fair value of our common stock on the date of grant. The fair value of option awards is estimated using the Black-Scholes valuation model and expensed over the requisite service period. The Company elected to account for forfeitures as they occur.

The Company elected to recognize compensation expenses for awards to employees with only service conditions that have graded vesting schedules using the accelerated multiple option approach. The attribution for nonemployee awards is in the same manner as if the Company had paid cash for the goods or services.

In addition, some of our share-based awards to service providers are performance based, i.e., the vesting of these awards depends upon achieving certain goals. The Company recognizes compensation expenses for awards with performance conditions when the company concludes that it is probable that the performance condition will be achieved.

n. Uncertain tax positions

The Company follows a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit. If under the first step a tax position is assessed to be more likely than not of being sustained on audit, the second step is performed, under which the tax benefit is measured as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Such liabilities are classified as long-term, unless the liability is expected to be resolved within twelve months from the balance sheet date. The Company’s policy is to include interest related to unrecognized tax benefits within “Financial income - net”.

o. Deferred income taxes

Deferred taxes are determined utilizing the “asset and liability” method based on the estimated future tax effects of differences between the financial accounting and tax bases of assets and liabilities under the applicable tax laws, and on tax rates anticipated to be in effect when the deferred taxes are expected to be paid or realized. The Company assesses realization of deferred income tax assets and, based on all available evidence, concludes whether it is more likely than not that the net deferred income tax assets will be realized. A valuation allowance is provided for the amount of deferred income tax assets not considered to be realizable.

The Company may incur an additional tax liability in the event of intercompany dividend distributions by its subsidiaries. Such additional tax liability in respect of these foreign subsidiaries has not been provided for in these consolidated financial statements as it is the Company’s policy to permanently reinvest the subsidiaries’ earnings and to consider distributing dividends only in connection with a specific tax opportunity that may arise.

Taxes that would apply in the event of disposal of investments in a foreign subsidiary have not been taken into account in computing the deferred taxes, as it is the Company’s intention to hold, and not to realize, these investments.

p. **Advertising **

Costs related to advertising and promotion of products are charged to sales and marketing expense as incurred. Advertising expenses were approximately $691 and $426 thousand for the years ended December 31, 2024 and 2023, respectively.

q. 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 or other contingencies associated with them.

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, which were excluded from the calculations of diluted loss per share were 48,681,495 and 59,723,455 for the years ended December 31, 2024 and 2023, respectively. This amount includes 4,073,966 and 3,054,086 of unvested restricted stock included in the number of issued and outstanding shares as of December 31, 2024 and 2023, respectively.

For the years ended December 31, 2024 and 2023 the weighted average number of ordinary shares used in computing net loss per share - basic and diluted was as follows:

r. **Segment reporting **

The Company hasone operating and reportable segment. The Company has adopted the new accounting standard ASU 2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures” in 2024, see note 14.

s. Fair value measurement

The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

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.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.

t. Recently issued accounting pronouncement, not yet adopted

NOTE 3 –FAIR VALUE MEASUREMENTS**

As of December 31, 2024 and 2023, the carrying amounts of accounts payable, accounts receivable and other receivables approximate their fair values due to the short-term maturities of these instruments.

The carrying amount of the long-term deposit approximates its fair value since it is measured at its present value applying prevailing interest rates, see note 7.

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 1 and 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 December 31, 2024 and 2023 is $15,277 and 28,727 thousand, respectively.

NOTE 4 -MARKETABLE SECURITIES

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

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

The table below sets forth a summary of the changes in the fair value of the Company’s marketable securities for the years ended December 31, 2024 and 2023:

NOTE 5 -PROPERTY, PLANT AND EQUIPMENT

NOTE 6 -LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT AND OTHERS

Israeli labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances.

Pursuant to section 14 of the Israeli Severance Compensation Act, 1963, most of the Company’s employees are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made in their name with insurance companies. Payments in accordance with section 14 relieve the Company from any future severance payments to these employees. The severance pay expenses for such employees were approximately $293,000 and $256,000 for the years ended December 31, 2024 and 2023, respectively.

The severance pay liability of the Company for the rest of its Israeli employees amounting to $1,224 thousand and $1,084 thousand for the years ended December 31, 2024 and 2023, respectively, reflects the undiscounted amount of the liability and is based upon the number of years of service and the latest monthly salary. The severance pay liability is partly covered by insurance policies and by regular deposits with recognized severance payment funds. The Company may only withdraw funds previously deposited for savings in connection with the payment of severance. The severance pay expenses for such employees were approximately $124,000 and $116,000 for the years ended December 31, 2024 and 2023, respectively.

NOTE 7 –LEASE AGREEMENTS

The U.S. lease rent commences on the date that the landlord delivers the entire premises to the Company with (i) the landlord’s completion of the construction of Suite 280 and (ii) the construction of Suite 215 being substantially complete (the “Commencement Date”). The U.S. lease will be in effect until August 31, 2030, with an option for a five-year extension in accordance with the lease terms. However, the Company has determined that the lease renewal option is not reasonably certain to be exercised due to operational and strategic factors.

Under the U.S. Lease, the Company will pay the landlord a security deposit of $500 thousand. Provided the Company does not default, the security deposit will be refunded at specified intervals throughout the lease term. The present value of the deposit as of December 31, 2024, is $426 thousand, and it is classified as Long-term Deposit while the remaining is included as Operating Lease Right of Use Assets.

The Company took possession of Suite 215 as of November 1, 2024 (“Commencement Date”), and it expects to take possession of Suite 280 in May 2025 following the substantial completion of landlord improvements as outlined in the U.S. Lease.

On August 24, 2023, the Company amended the Israeli Lease, leasing additional space in the facility and shortened the lease term of another space in the building. The balances of right of use assets and lease liabilities increased due to the newly leased space and decreased due to the lease that was shortened.

On March 14, 2024, the Company amended the Israeli Lease, modifying the structure of the extension options. While the lease term currently extends through December 31, 2027, any extensions beyond this date are subject to the landlord’s approval and are not solely at the Company’s discretion.

In the fourth quarter of 2024, as part of the approval of the Company’s long term strategic production plan, the Company reassessed its long-term leasing strategy. Following this reassessment, the Company updated its assumption on the lease term for the Israeli premise and included the optional period until the end of 2027 within the lease term.

Operating lease cost for the years ended December 31, 2024 and 2023 in Tel-Aviv was $423 and $433 thousand respectively.

Operating lease cost for the years ended December 31, 2024 and 2023 in Miami was $34 thousand and $0 respectively.

In addition to the fixed lease payments in Miami, the Company incurred variable expenses related to the lease, including utilities, maintenance, and other common area costs, totaling approximately $21 thousand for the year ended December 31, 2024.

Supplemental information related to leases are as follows:

Maturities of lease liabilities as of December 31, 2024 are as follows:

NOTE 8 -COMMITMENTS AND CONTINGENT LIABILITIES:

Distribution Agreement with Chinese Partner

On February 3, 2021, the Company entered into a distribution agreement (the “Distribution Agreement”) with three China-based partners, pursuant to which the Chinese partners will be responsible for conducting the necessary registration trials for commercial approval of the Company’s products in China, followed by an eight-year exclusive distribution right to sell the Company’s products in China with the term of the agreement continuing on a year-to-year basis unless terminated. Under the Distribution Agreement, the China-based partners will be subject to minimum purchase obligations. The Distribution Agreement may be terminated for cause upon failure to meet minimum purchase obligations, failure to obtain regulatory approvals or for other material breaches.

In addition, the agreement stipulates that if the Distributor fails to obtain the Regulatory Approvals by the time stipulated in the agreement due to the failure of the clinical trials, and this Agreement was terminated as a result of such failure to obtain Regulatory Approvals, InspireMD shall reimburse Distributor in an amount which is 50% of Distributor’s direct out of pocket costs to 3rd parties for conducting the clinical trials, which reimbursement will not exceed USD 1,000,000. The consolidated financial statements include a liability, based on 50% of the Distributor costs incurred until December 31, 2024. The liability at December 31, 2023 and 2024 is immaterial.

NOTE 9 -EQUITY

The Company’s shares of common stock are listed on the Nasdaq Capital Market.

Private Placement

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 10,266,270 shares (the “Private Placement Shares”) of the Company’s 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 12,914,078 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 Private Placement Offering closed on May 16, 2023.

Aggregate gross proceeds to the Company in respect of the Private Placement Offering were $42.2 million, before deducting fees payable to the placement agent and other offering expenses payable by the Company which amounted to approximately $4.6 million. If the Warrants are exercised in cash in full this would result in an additional $71.4 million of gross proceeds.

The Pre-Funded Warrants are immediately exercisable at an exercise price of $0.0001 per share and will not expire until exercised in full. The Warrants are immediately exercisable upon issuance at an exercise price of $1.3827 per share. 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 (PMA) from the Food and Drug Administration, or 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 transcarotid system and CGuard Prime 80 cm 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 begin. The Warrants may be exercised on a cashless basis if there is no effective registration statement registering the shares underlying the warrants.

In 2024 and 2023, the Company issued a total of 1,728,382 and 307,260 shares of its common stock, respectively, in connection with the exercise of Pre-Funded Warrants to purchase 1,728,390 and 307,271, respectively, shares of common stock of which 200,000 and 307,271, respectively, Pre-Funded Warrants were exercised to 199,992 and 307,260 shares of its common stock on a cashless basis.As of December 31, 2024 and 2023, there are Pre-Funded Warrants to purchase an aggregate of 26,147,323 and 15,254,623, respectively shares of common stock outstanding.

Pursuant to the full ratchet anti-dilution adjustment provisions in the respective certificate of designation for the Company’s Series C Preferred Stock, the conversion price of the outstanding shares of the Series C Preferred Stock was reduced to $1.3827 per share, effective as of the date of the securities purchase agreement entered for the Offering, and the number of shares of common stock issuable upon conversion of the Series C Preferred Stock increased by 5,668 additional shares of common stock upon conversion of the Series C Preferred Stock, based on 1,718 shares of Series C Preferred Stock outstanding as of May 16, 2023.

As of December 31, 2024 and 2023, 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.

Exercise of Series H Warrant

The Series H Warrants had a term of the earlier of (i)five years from the date of issuance and (ii) (A) 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 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 approximately $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 Offering.

ATM Offering

On May 31, 2024, the Company entered into an at-the-market (“ATM”) facility with Piper Sandler & Co. (“Piper”) pursuant to an Equity Distribution Agreement (the “Distribution Agreement”). In accordance with the Distribution Agreement, the Company is entitled, at its sole discretion, to offer and sell through or to Piper Sandler, acting as a sales agent, shares of its common stock having an aggregate offering price of up to $17.0 million throughout the period during which the ATM facility remains in effect. The Company has agreed to pay Piper a commission of 3.0% of the gross proceeds from the sale of shares of common stock under the ATM facility. For the year ended December 31, 2024, the net proceeds to the Company from the issuance of 647,277 shares of common stock were $1,598 thousand after deduction of issuance fees of approximately $81 thousand.

As of December 31, 2024, the Company has outstanding warrants to purchase an aggregate of 40,268,464 shares of common stock as follows:

NOTE 9 – EQUITY (continued):

2. On September 30, 2024, the compensation committee of the Company’s board of directors approved the InspireMD, Inc. 2024 Inducement Plan (the “2024 Inducement Plan”) to be used exclusively for grants of equity-based awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company.

As of December 31, 2024, the Company had 1,957,763 shares of common stock available for future issuance under the 2024 Inducement Plan.

The weighted average of the remaining contractual life of total vested and exercisable options as of December 31, 2024 was 7.73 years.

The aggregate intrinsic value of the total exercisable options as of December 31, 2024 was approximately $494,250.

The weighted average fair value of options granted to employees was $2.54 and $1.65 for the years ended December 31, 2024 and 2023, respectively. The weighted average fair value of options granted was estimated using the Black-Scholes option-pricing model.

The weighted average fair value of options granted to consultants was $1.87 and $1.50 for the years ended December 31, 2024 and 2023, respectively. The weighted average fair value of options granted was estimated using the Black-Scholes option-pricing model.

The weighted average fair value of restricted stock granted was $2.94 and $1.95 for the years ended December 31, 2024 and 2023, respectively.

The weighted average fair value of RSU granted was $3.14 and $1.76 for the years ended December 31, 2024 and 2023, respectively.

The vesting period for outstanding stock options, restricted stock, and RSUs is typically three years, with one-third of the awards vesting annually. The options and restricted stock to directors are subject to aone-year vesting period. Additionally, some of our share-based awards to service providers are performance-based, vesting upon the achievement of specified performance criteria related to clinical or marketing activities.

The Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. Accordingly, as to ordinary course options granted, the expected term was determined using the simplified method, which takes into consideration the option’s contractual life and the vesting periods (for non-employees, the expected term is equal to the option’s contractual life).

The annual risk-free rates are based on the yield rates of zero coupon non-index linked U.S. Federal Reserve treasury bonds as both the exercise price and the share price are in dollar terms. The Company’s expected volatility is derived from its historical data.

NOTE 10 –RELATED PARTIES TRANSACTIONS

Consulting expenses for the years ended December 31, 2024 and 2023, were $75,522 and $11,440, respectively.

During 2023, certain non-employee directors elected to receive all or a portion of their cash retainer amount in shares of the Company’s common stock under the 2021 Equity Incentive Plan. For a director that made that election, a stock award under the 2021 Equity Incentive Plan was paid quarterly on the first day of each next quarter (“Issuance Dates”) and became fully vested on the Issuance Dates. The stock award was determined by dividing (x) the product of the cash retainer amount and percentage of the cash retainer amount elected to be taken in shares by (y) the “Fair Market Value” (as defined in the 2021 Equity Incentive Plan) of a share on the Issuance Dates.

For the year ended 2024, no expenses were recorded in shares of the company.

During the year ended December 31, 2023 the Company issued 52,129 shares of common stock to non-employee directors who elected to receive all or a portion of their cash retainer amount for the nine months ended September 30, 2023 in shares of the Company’s common stock under the 2021 Equity Incentive Plan.

As of December 31, 2023, there was an accrual for $55,000 for director’s fees. Out of this an amount of $22,875 was paid in cash and $32,125 was issued in shares of the Company’s common stock under the 2021 Equity Incentive Plan. On January 1, 2024 the Company issued 11,854 shares of common stock.

NOTE 11 -TAXES ON INCOME:

Taxation in the United States

InspireMD, Inc. is taxed under U.S. tax laws. Accordingly, the applicable federal corporate tax rate in 2024 and 2023 is 21%. The applicable state income tax rate in 2024 and 2023 is 3.42%.

Taxation in Israel

InspiredMD, Ltd is taxed under Israeli tax laws. Accordingly, the applicable corporate tax rate in 2024 and 2023 is 23%.

Taxation in Germany

InspireMD GmbH is taxed according to the tax laws in Germany. Accordingly, the applicable tax rates are corporate tax rate of 15.825% and trade tax rate of 17.15% in 2024 and 2023

On December 29, 2016, the Investment Law was amended (“73 Amendment”), which includes, inter alia, two new tax incentive opportunities. These are the Preferred Technological Enterprise (“PTE”) and Special Preferred Technological Enterprise (“SPTE”). In order to benefit from either of these options, a company must meet certain qualifications and receive formal approval from the Israel Innovation Authority (“IIA”) which allows the company to use the reduced corporate tax rate of 12% on its “Preferred Technological Income” (earned from enterprises located in Development outside of Zone A) in the case of a “preferred technology enterprise”, or 6% on its “preferred technology income” (earned from enterprises located in Development Zone A or outside it) in the case of a “special preferred technology enterprise”. Additionally, any “technology income”, as this term is defined by the Law, not classified as “preferred technology income” is subject to the corporate tax rate.

Furthermore, according to the provisions regarding “preferred technology enterprise” and “special preferred technology enterprise” in the Law and the regulations thereunder, and to the extent the income is attributable to manufacturing, this income is classified as “preferred income” and is taxed at 7.5% or 16% according to the development zone. To the extent the income is from an intangible asset used for marketing, it is subject to the normal corporate tax rate.

Additionally, when income of a company originating from “preferred technology income” is distributed as dividend to a foreign-resident corporation, tax withholding from the dividend is 4%, provided that 90% or more of that company’s shares are directly held by one or more foreign corporations, and the profits resulted after they acquired the shares.

As of December 31, 2024, the Company had a net carry forward tax loss of approximately $60 million, of which approximately $35 million (arising before January 1, 2018), expires until 2038, and approximately $25 million, which does not expire, but is limited to offset 80% of the net income in the year it is utilized.

Under the U.S. tax laws, for net operating losses (NOLs) arising after December 31, 2017, the Tax Cuts and Jobs Act enacted on December 22, 2017 (the “2017 Act”) limits a taxpayer’s ability to utilize NOL carryforwards to 80% of taxable income.

In addition, NOLs arising after 2017 can be carried forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, 2018, will not be subject to the foregoing taxable income limitation and will continue to have a two-year carryback and twenty-year carryforward period.

As of December 31, 2024 and 2023, InspireMD Ltd., an Israeli subsidiary, had a net carry forward tax loss of approximately $126 and $107 million. Under Israeli tax laws, the carry forward tax losses can be utilized indefinitely.

The Israeli subsidiary is taxed in New Israeli Shekel (“NIS”), which is different from its functional currency (U.S. Dollar). The change in the Israeli subsidiary NOL’s for tax purposes partly resulted by such rate differences.

The components of loss before income taxes are as follows:

NOTE 11 - TAXES ON INCOME(continued):

The main reconciling item between the statutory tax rate of the Company and its subsidiaries and the effective tax rate is the change in valuation allowance in respect of tax benefits from carried forward tax losses due to uncertainty of the realization of such tax benefits.

The changes in the valuation allowance for the years ended December 31, 2024 and 2023 were as follows:

The following is a reconciliation of the total amounts of the Company’s uncertain tax positions during the years ended December 31, 2024 and 2023:

A summary of open tax years by major jurisdiction is presented below:

NOTE 11 - TAXES ON INCOME(continued):

NOTE 12 -SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:

Balance sheets:

Inventory:

NOTE 12 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION(continued):

NOTE 13 –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 (part of revenues):

The following table presents the Company’s long-lived assets by geographic region, which consist of property, plant and equipment, net and operating lease right of use assets:

NOTE 14 –SEGMENT INFORMATION

The Company hasone operating and reporting segment, that develops, manufactures and markets products for the treatment of carotid artery disease and other vascular disease, including the Company’s proprietary CGuard™ stent platform. The Company’s Chief Operating Decision Maker (“CODM”), who is the CEO evaluates the Company’s performance based on its internal reporting which is consistent with the presentation in the Company’s consolidated financial statements. Accordingly, our CODM uses consolidated net loss to measure segment profit or loss, allocate resources, and assess performance.

The CODM examines, within each operational function the employee salaries including the bonus and share based compensation, clinical trials expenses within the research and development operations and certain other expenses.

The following table summarizes the Company’s segment revenue, significant segment expenses, and segment loss.

NOTE 15 -SUBSEQUENT EVENTS:

Subsequent to December 31, 2024, the Company granted 2,253,445 restricted shares of the Company’s common stock to employees and directors. The shares to employees are subject to athree-year vesting period, with one-third of such awards vesting each year. The shares to directors are subject to aone-year vesting period.

Subsequent to December 31, 2024, the Company granted 558,417 restricted share units of the Company’s common stock to the chief executive officer. The shares are subject to athree-year vesting period, with one-third of such awards vesting each year.

Subsequent to December 31, 2024, the Company granted to employees and directors options to purchase a total of 848,204 shares of the Company’s common stock. The options have an exercise price of $2.76 per share, which was the fair market value of the Company’s common stock on the date of the grant. The options to employees are subject to athree-year vesting period, with one-third of such awards vesting each year. The options to directors are subject to aone-year vesting period.