InspireMD(NSPR) - 2024 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion for the quarter and six months ended June 30, 2024 Item 1. Financial Statements Presents unaudited condensed consolidated financial statements for Q2 and H1 2024, including balance sheets, operations, equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets Provides a snapshot of assets, liabilities, and equity for InspireMD, Inc. as of June 30, 2024, and December 31, 2023 Condensed Consolidated Balance Sheets (U.S. dollars in thousands) | ASSETS | June 30, 2024 | December 31, 2023 | | :-------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $28,385 | $9,640 | | Marketable securities | $18,778 | $29,383 | | Total Current Assets | $51,843 | $44,159 | | Total Non-Current Assets | $3,816 | $3,484 | | TOTAL ASSETS | $55,659 | $47,643 | | | | | | LIABILITIES AND EQUITY | June 30, 2024 | December 31, 2023 | | Total Current Liabilities | $6,965 | $6,020 | | Total Long-Term Liabilities | $1,931 | $2,122 | | TOTAL LIABILITIES | $8,896 | $8,142 | | Total Equity | $46,763 | $39,501 | | TOTAL LIABILITIES AND EQUITY | $55,659 | $47,643 | Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net loss for the three and six months ended June 30, 2024 and 2023 Condensed Consolidated Statements of Operations (U.S. dollars in thousands, except per share data) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $1,739 | $1,649 | $3,250 | $2,888 | | Cost of Revenues | $1,408 | $1,158 | $2,627 | $2,024 | | Gross Profit | $331 | $491 | $623 | $864 | | Total Operating Expenses | $8,591 | $5,806 | $16,297 | $10,560 | | Loss From Operations | $(8,260) | $(5,315) | $(15,674) | $(9,696) | | Financial Income, net | $351 | $238 | $733 | $363 | | Net Loss | $(7,909) | $(5,077) | $(14,941) | $(9,333) | | Net Loss Per Share - basic and diluted | $(0.22) | $(0.24) | $(0.43) | $(0.64) | Condensed Consolidated Statements of Changes in Equity Outlines the changes in the company's equity components, including net loss, warrant exercises, and share-based compensation, for the six months ended June 30, 2024 - Total equity increased from $39,501 thousand at January 1, 2024, to $46,763 thousand at June 30, 2024, despite a net loss of $14,941 thousand, primarily driven by proceeds from the exercise of pre-funded warrants and common stock, and share-based compensation[10][11] Key Changes in Equity (Six months ended June 30, 2024, U.S. dollars in thousands) | Item | Common Shares | Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total Equity | | :------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | :------------ | :----------- | :------------------------- | :------------------ | :----------- | | Balance at January 1, 2024 | 21,841,215 | 2 | 261,000 | (221,501) | 39,501 | | Net loss | | | | (14,941) | (14,941) | | Exercise of pre-funded warrants and common stock, net of issuance costs | 1,821,386 | 1 | 16,853 | | 16,854 | | Share-based compensation related to stock, restricted stock, restricted stock units and stock options award, net of forfeitures of 112,382 shares | 1,533,878 | * | 5,349 | | 5,349 | | BALANCE AT June 30, 2024 | 25,196,479| 3 | 283,202 | (236,442) | 46,763 | Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2024 and 2023 Condensed Consolidated Statements of Cash Flows (U.S. dollars in thousands) | Cash Flow Activity | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(9,418) | $(8,156) | | Net cash provided by (used in) investing activities | $10,323 | $(22,442) | | Net cash provided by financing activities | $17,854 | $37,534 | | Increase in cash and cash equivalents | $18,745 | $6,913 | | Cash and cash equivalents at end of period | $28,385 | $11,545 | - Net cash used in operating activities increased by 15.5% to $9,418 thousand for the six months ended June 30, 2024, primarily due to increased payments for third-party expenses, professional services, and compensation costs[13][79][80] - Investing activities shifted from a net cash outflow of $22,442 thousand in 2023 to a net cash inflow of $10,323 thousand in 2024, driven by proceeds from matured marketable securities[13][80] - Financing activities provided $17,854 thousand, mainly from the exercise of Series H warrants[13][81] Notes to the Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements NOTE 1 - DESCRIPTION OF BUSINESS Describes InspireMD, Inc. as a medical device company focused on its MicroNet™ stent platform for vascular and coronary disease, primarily CGuard™ EPS - InspireMD, Inc. is a medical device company specializing in its proprietary MicroNet™ stent platform technology for complex vascular and coronary disease, with its primary product, CGuard™ EPS, marketed internationally, mainly in Europe[15][17] - The company's operations and production facility are located in Israel, which has been largely unaffected by the ongoing war against Hamas as of June 30, 2024, with immaterial impact on financial results[17] - The company expects to continue incurring losses and negative cash flows until CGuard™ EPS reaches commercial profitability, necessitating potential additional fundraising[16] NOTE 2 - BASIS OF PRESENTATION Explains that the unaudited interim financial statements are prepared consistently with annual statements, with results not necessarily indicative of the full year - The unaudited condensed consolidated financial statements are prepared on the same basis as the annual statements for December 31, 2023, including all necessary recurring adjustments, with interim results not necessarily indicative of the full fiscal year[18] NOTE 3 - RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS Discusses the adoption of ASU 2020-06 and the evaluation of ASU 2023-07 and ASU 2023-09 for future financial reporting impacts - The company adopted ASU 2020-06 on January 1, 2024, with no material impact, and is currently evaluating ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures) for potential future impacts[20][21][22] NOTE 4 – FAIR VALUE MEASUREMENTS Details the categorization of financial assets into a three-level fair value hierarchy, with cash equivalents as Level 1 and marketable securities as Level 2 - Fair value measurements are categorized into a three-level hierarchy, with cash equivalents (money market funds) as Level 1 and marketable securities (U.S. government bonds) as Level 2 as of June 30, 2024[23][24][25] Fair Value Measurements (As of June 30, 2024, $ in thousands) | Assets | Total | Level 1 | Level 2 | Level 3 | | :-------------------------- | :------- | :------- | :------- | :------ | | Cash equivalents (Money market funds) | $20,340 | $20,340 | $- | $- | | Marketable securities (U.S. government bonds) | $18,778 | $- | $18,778 | $- | NOTE 5 - MARKETABLE SECURITIES Provides a breakdown of marketable securities, primarily U.S. government bonds, and explains changes in their balance Marketable Securities (U.S. government bonds, $ in thousands) | Period | June 30, 2024 | December 31, 2023 | | :-------------------------- | :------------ | :---------------- | | U.S. government bonds | $18,778 | $29,383 | | Amounts maturing within one year | $18,778 | $24,523 | | Amounts maturing after one year through two years | $- | $4,860 | - The balance of marketable securities decreased from $29,383 thousand at the beginning of the period to $18,778 thousand at June 30, 2024, primarily due to $13,000 thousand in maturities, partially offset by $1,960 thousand in additions and $557 thousand in fair value changes[29] NOTE 6 - EQUITY Discusses significant equity changes, including the exercise of Series H warrants and the granting of various share-based awards - Following positive one-year follow-up results from the C-GUARDIANS trial, Series H warrants for 12,914,086 shares were fully exercised, generating $16.9 million in net proceeds[31] - As of June 30, 2024, the company has 26,347,323 outstanding pre-funded warrants and warrants to purchase an aggregate of 40,479,588 shares of common stock[33] - During the six months ended June 30, 2024, the company granted 1,634,403 restricted shares ($5.07 million fair value), 563,499 restricted share units ($1.77 million fair value), and options to purchase 715,614 shares ($1.85 million fair value) to employees and directors, and options for 125,000 shares ($233,169 fair value) to consultants[34][35][36][37] NOTE 7 – RELATED PARTIES TRANSACTIONS Discloses transactions with related parties, specifically administrative services provided by a CEO immediate family member - A CEO immediate family member provided administrative services for U.S. expansion, totaling $30,000 for the six months and $15,000 for the three months ended June 30, 2024[38] NOTE 8 - NET LOSS PER SHARE Explains the calculation of basic and diluted net loss per share, including the treatment of pre-funded warrants and anti-dilutive instruments - Basic and diluted net loss per share calculations include pre-funded warrants due to negligible consideration and lack of vesting/contingencies[39][40] - Potential dilutive effects from options, warrants, and unvested restricted stock/units are excluded as they are anti-dilutive[41] Weighted Average Pre-funded Warrants Used in EPS Calculation | Period | Weighted Average Pre-funded Warrants | | :-------------------------- | :----------------------------------- | | Six months ended June 30, 2024 | 15,385,212 | | Three months ended June 30, 2024 | 15,515,802 | NOTE 9 - FINANCIAL INSTRUMENTS States that the carrying amounts of financial instruments approximate their fair value due to their nature and short-term maturities - The carrying amounts of financial instruments approximate their fair value due to presentation at fair value or short-term maturities, with allowance for expected credit loss being immaterial as of June 30, 2024, and December 31, 2023[42] NOTE 10- INVENTORY Presents a detailed breakdown of inventory components, including finished goods, work in process, and raw materials Inventory Breakdown ($ in thousands) | Category | June 30, 2024 | December 31, 2023 | | :---------------------- | :------------ | :---------------- | | Finished goods | $124 | $210 | | Work in process | $537 | $562 | | Raw materials and supplies | $1,545 | $1,334 | | Total Inventory | $2,206 | $2,106 | - Total inventory increased by $100 thousand from December 31, 2023, to June 30, 2024, primarily driven by an increase in raw materials and supplies[44] NOTE 11 - ACCOUNTS PAYABLE AND ACCRUALS - OTHER Provides a detailed breakdown of other accounts payable and accruals, highlighting changes in key categories Accounts Payable and Accruals - Other ($ in thousands) | Category | June 30, 2024 | December 31, 2023 | | :---------------------------------- | :------------ | :---------------- | | Employees and employee institutions | $1,656 | $2,188 | | Accrued vacation and recreation pay | $384 | $287 | | Accrued expenses | $1,149 | $1,115 | | Issuance costs not yet paid | $1,000 | $- | | Clinical trial accrual | $1,128 | $744 | | Current Operating lease liabilities | $538 | $557 | | Other | $183 | $190 | | Total | $6,038 | $5,081 | - Total other accounts payable and accruals increased by $957 thousand, primarily due to $1,000 thousand in issuance costs not yet paid and an increase in clinical trial accruals, partially offset by a decrease in amounts owed to employees and employee institutions[45] NOTE 12 - DISAGGREGATED REVENUE AND ENTITY WIDE DISCLOSURES Discloses revenue breakdown by geographic area and principal customers, along with overall revenue trends Revenues by Geographic Area ($ in thousands) | Geographic Area | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Germany | $307 | $276 | $549 | $490 | | Italy | $264 | $338 | $558 | $605 | | Poland | $207 | $79 | $359 | $198 | | Other* | $961 | $956 | $1,784 | $1,595 | | Total | $1,739 | $1,649 | $3,250 | $2,888 | Revenues by Principal Customers (Percentage of Total Revenue) | Customer | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Customer A | 18% | 17% | 17% | 17% | | Customer B | 12% | 5% | 11% | 7% | | Customer C | 6% | 11% | 9% | 12% | - For the six months ended June 30, 2024, total revenue increased by 12.5% to $3,250 thousand, primarily driven by growth in Europe, partially offset by decreases in the United States (due to C-GUARDIANS enrollment conclusion), Asia, and Latin America[70][71] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on financial performance, liquidity, strategic developments, and external factors affecting the company Forward-Looking Statements Warns that the report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements regarding future events, financial performance, strategies, and competitive environment, which are subject to risks and uncertainties that could cause actual results to differ materially[50] - Key risks include recurring losses, need for additional capital, market acceptance, regulatory approvals, clinical trial results, intense competition, intellectual property protection, and geopolitical instability in the Middle East[50][51] Overview Provides a general description of InspireMD's business, its CGuard™ EPS product, and strategic initiatives including clinical trials and market expansion - InspireMD is a medical device company focused on its MicroNet™ stent platform for carotid artery disease, with its CGuard™ EPS product combining MicroNet and a self-expandable nitinol stent, holding CE mark approval and marketed in over 30 countries[52][53] - The C-GUARDIANS pivotal study for CGuard™ Carotid Stent System in the U.S. completed enrollment in June 2023, with positive one-year follow-up results announced on May 28, 2024, showing a 30-day DSMI and Ipsilateral stroke rate of 1.95%[55][57][60] - The company anticipates submitting a PMA application in Q3 2024 for potential FDA approval in H1 2025[60] - The company is developing SwitchGuard™ NPS for transcarotid artery revascularization (TCAR) and exploring new indications for CGuard, targeting an addressable market of approximately $1.3 billion, potentially expanding to $9.3 billion[58][59] Recent Developments Highlights key recent events, including positive C-GUARDIANS trial results, warrant exercises, and the impact of the Israel-Hamas war - Positive one-year follow-up results from the C-GUARDIANS trial were announced on May 28, 2024, showing a 30-day DSMI and Ipsilateral stroke rate of 1.95%[60] - Series H warrants were fully exercised following the C-GUARDIANS trial results announcement, generating $16.9 million in net proceeds for the company[61] - The ongoing Israel-Hamas war has not materially affected company operations or financial results as of June 30, 2024, but potential escalation could have a material impact[62] Critical Accounting Policies Confirms no material changes to critical accounting policies since December 31, 2023, with the U.S. dollar as the primary operating currency - There have been no material changes to the company's critical accounting policies since December 31, 2023, and the U.S. dollar is the primary currency of the company's operations[63] Results of Operations Analyzes the company's financial performance, including revenues, gross profit, operating expenses, and net loss, for the reported periods Three months ended June 30, 2024, compared to the three months ended June 30, 2023 Compares financial performance metrics for the second quarter of 2024 against the same period in 2023, detailing revenue, gross profit, and expense changes Financial Performance (Three months ended June 30, $ in thousands) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :-------------------------- | :------ | :------ | :--------- | :--------- | | Revenues | $1,739 | $1,649 | $90 | 5.4% | | Gross Profit | $331 | $491 | $(160) | (32.6%) | | Gross Margin | 19.0% | 29.8% | (10.8 pp) | | | Research and Development Expenses | $3,401 | $1,993 | $1,408 | 70.6% | | Selling and Marketing Expenses | $1,445 | $892 | $553 | 62.0% | | General and Administrative Expenses | $3,745 | $2,921 | $824 | 28.2% | | Financial Income, net | $351 | $238 | $113 | 47.5% | | Net Loss | $(7,909) | $(5,077) | $(2,832) | 55.8% | - Revenue increased by 5.4% due to growth in existing and new markets, partially offset by reduced clinical trial revenue[64] - Gross profit decreased by 32.6% due to higher material and labor costs[65] - Operating expenses significantly increased across R&D (70.6%), Selling & Marketing (62.0%), and G&A (28.2%), primarily driven by increased compensation and development activities[66][67][69] - Net loss increased by 55.8%[70] Six months ended June 30, 2024, compared to the six months ended June 30, 2023 Compares financial performance metrics for the first half of 2024 against the same period in 2023, detailing revenue, gross profit, and expense changes Financial Performance (Six months ended June 30, $ in thousands) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :-------------------------- | :------- | :------- | :--------- | :--------- | | Revenues | $3,250 | $2,888 | $362 | 12.5% | | Gross Profit | $623 | $864 | $(241) | (27.9%) | | Gross Margin | 19.2% | 29.9% | (10.7 pp) | | | Research and Development Expenses | $6,026 | $3,836 | $2,190 | 57.1% | | Selling and Marketing Expenses | $2,682 | $1,680 | $1,002 | 59.6% | | General and Administrative Expenses | $7,589 | $5,044 | $2,545 | 50.5% | | Financial Income, net | $733 | $363 | $370 | 102.0% | | Net Loss | $(14,941) | $(9,333) | $(5,608) | 60.1% | - Revenue increased by 12.5% driven by Europe, offset by decreases in the U.S. and Asia[70][71] - Gross profit decreased by 27.9% due to higher material and labor costs[72] - Operating expenses saw significant increases: R&D (57.1%), Selling & Marketing (59.6%), and G&A (50.5%), primarily from compensation and development[73][74][75] - Net loss increased by 60.1%[75] Liquidity and Capital Resources Assesses the company's cash position, marketable securities, working capital, and ability to fund operations, noting the need for additional capital - As of June 30, 2024, the company had $28,385 thousand in cash and cash equivalents and $18,778 thousand in marketable securities[76] - The company can fund operations for at least the next 12 months but anticipates needing additional funds due to expected continued losses and negative cash flows[78] - Net cash used in operating activities increased by 15.5% to $9,418 thousand for the six months ended June 30, 2024[79] - Investing activities provided $10,323 thousand, a significant shift from a $22,442 thousand outflow in the prior year, mainly from matured marketable securities[80] - Financing activities provided $17,854 thousand from warrant exercises[81] - Working capital increased by $6,739 thousand to $44,878 thousand as of June 30, 2024, with current assets exceeding current liabilities by a multiple of 7.4[81] Off Balance Sheet Arrangements Confirms the absence of material off-balance sheet transactions, arrangements, obligations, or relationships with unconsolidated entities - The company has no off-balance sheet transactions, arrangements, obligations, or relationships with unconsolidated entities that have a material effect on its financial condition or results of operations[82] Factors That May Affect Future Operations Identifies various factors, including distributor patterns, regulatory approvals, and currency fluctuations, that could cause quarterly variations in operating results - Future operating results are subject to quarterly variations due to distributor ordering patterns, regulatory approvals, clinical trial phases, manufacturing efficiencies, currency fluctuations (Euro/NIS against USD), and country-specific reimbursement policies[83] Contractual Obligations and Commitments States that there were no material changes to contractual obligations and commitments during the six months ended June 30, 2024 - There were no material changes to contractual obligations and commitments during the six months ended June 30, 2024, compared to December 31, 2023[84] Recently Adopted and Issued Accounting Pronouncements Directs readers to Note 3 of the financial statements for details on recently adopted and issued accounting pronouncements - Refer to Note 3 of the condensed financial statements for details on recently adopted and issued accounting pronouncements[85] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there are no applicable quantitative and qualitative disclosures about market risk for the company Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control over financial reporting - Disclosure controls and procedures were deemed effective at the reasonable assurance level as of June 30, 2024[86] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2024[87] PART II - OTHER INFORMATION Contains additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings Confirms the absence of any material legal proceedings or claims that would significantly impact the company's business or financial results - No pending material legal proceedings or claims are currently known that would significantly affect the company's business[87] Item 1A. Risk Factors Updates risk factors, emphasizing potential adverse effects from political, economic, and military conditions in Israel, particularly the ongoing war against Hamas - Significant shifts in political, economic, and military conditions in Israel and its neighbors, including the ongoing war against Hamas, could materially adversely affect the company's business relationships and profitability[88] - The company's executive office, sole manufacturing facility, and key personnel are located in Israel, making it vulnerable to regional conflicts, military service call-ups, and supply chain disruptions, despite operations being largely unaffected to date[88][90][91] - Commercial insurance does not cover war-related losses, and while the Israeli government provides some coverage, its maintenance and sufficiency are uncertain[93][94] - Political instability within Israel could also negatively impact the economy and the company's business[95] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company Item 5. Other Information Reports that no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2024[95] Item 6. Exhibits Lists all exhibits filed with the Quarterly Report on Form 10-Q, including various amendments to the Certificate of Incorporation, Bylaws, Certifications (Sarbanes-Oxley Act), and Inline XBRL documents - The exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), certifications from the CEO and CFO (Sarbanes-Oxley Act), and Inline XBRL data files[96][97] SIGNATURES Confirms the official signing of the report by the Chief Financial Officer and Chief Executive Officer on August 5, 2024 - The report was signed by Craig Shore (CFO, Secretary, Treasurer) and Marvin Slosman (President, CEO) on August 5, 2024[97]