InspireMD(NSPR) - 2019 Q2 - Quarterly Report

Part I Item 1. Financial Statements InspireMD, Inc.'s June 30, 2019, unaudited financials show decreased assets, widened net loss, and growing deficit, raising going concern doubts - The company has an accumulated deficit of $153 million as of June 30, 2019, and its current cash position is only sufficient to fund operations until the end of Q4 2019, which raises substantial doubt about its ability to continue as a going concern[31] Consolidated Balance Sheets As of June 30, 2019, total assets decreased to $9.28 million, primarily due to lower cash, while total equity declined to $5.57 million Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2019 | December 31, 2018 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $4,823 | $9,384 | -$4,561 | | Total Current Assets | $7,222 | $11,419 | -$4,197 | | Total Assets | $9,284 | $12,288 | -$3,004 | | Total Current Liabilities | $1,945 | $2,920 | -$975 | | Total Liabilities | $3,710 | $3,525 | +$185 | | Total Equity | $5,574 | $8,763 | -$3,189 | Consolidated Statements of Operations Q2 2019 revenues increased to $1.35 million, but net loss widened to $2.21 million; six-month revenues decreased to $1.77 million, with net loss growing to $5.41 million Quarterly and Six-Month Operating Results (in thousands, except per share data) | Metric | Q2 2019 | Q2 2018 | Six Months 2019 | Six Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,354 | $1,003 | $1,769 | $2,010 | | Gross Profit | $442 | $277 | $369 | $570 | | Loss from Operations | $(2,183) | $(1,473) | $(5,313) | $(3,426) | | Net Loss | $(2,206) | $(627) | $(5,413) | $(3,016) | | Net Loss Per Share | $(1.59) | $(7.66) | $(4.86) | $(38.48) | Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $6.38 million for H1 2019, while financing cash decreased, resulting in a $4.56 million net cash decrease Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,382) | $(3,974) | | Net cash used in investing activities | $(224) | $(41) | | Net cash provided by financing activities | $2,046 | $6,780 | | Decrease in Cash and Cash Equivalents | $(4,561) | $2,732 | | Cash at End of Period | $4,823 | $6,442 | Notes to the Consolidated Financial Statements Notes detail business, liquidity, new accounting standards, equity changes including a reverse stock split, disaggregated revenue, and a new $2.0 million lawsuit - The company effected a one-for-fifty reverse stock split of its common stock, effective March 29, 2019. All share and per-share data have been retroactively adjusted[44] - In April 2019, the company closed a public offering of common stock, receiving net proceeds of approximately $2.0 million[43] - In July 2019, a former distributor filed a suit seeking damages up to €1,830,000 (approx. $2.0 million) related to a 2014 voluntary field action[59] Revenue by Product for Six Months Ended June 30 (in thousands) | Product | 2019 | 2018 | | :--- | :--- | :--- | | CGuard | $1,492 | $1,664 | | MGuard | $277 | $346 | | Total | $1,769 | $2,010 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses MicroNet stent focus, Q2 revenue growth, six-month revenue decline, increased R&D for CGuard IDE, and critical need for additional financing due to limited liquidity - The company is focusing on the development and commercialization of its proprietary MicroNet stent platform technology, with the CGuard EPS product being a key priority[67] - On July 26, 2019, the company submitted an Investigational Device Exemption (IDE) application to the FDA to commence a human clinical trial of CGuard EPS in the United States[70] - The company has sufficient resources to fund operations only until the end of the fourth quarter of 2019, creating substantial doubt about its ability to continue as a going concern[103] Results of Operations Q2 2019 revenue grew 35% to $1.35 million, but net loss widened significantly due to R&D surge; six-month revenue fell 12% to $1.77 million, with net loss increasing 79.5% Q2 2019 vs Q2 2018 Performance (in thousands) | Metric | Q2 2019 | Q2 2018 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $1,354 | $1,003 | +35.0% | | Gross Profit | $442 | $277 | +59.6% | | R&D Expenses | $865 | $230 | +276.1% | | Net Loss | $(2,206) | $(627) | +251.8% | Six Months 2019 vs 2018 Performance (in thousands) | Metric | H1 2019 | H1 2018 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $1,769 | $2,010 | -12.0% | | Gross Profit | $369 | $570 | -35.3% | | R&D Expenses | $1,990 | $482 | +312.9% | | Net Loss | $(5,413) | $(3,016) | +79.5% | Liquidity and Capital Resources Cash and equivalents fell to $4.8 million by June 30, 2019, with $6.4 million used in operations; existing cash is only sufficient through Q4 2019, making additional capital critical - Cash and cash equivalents decreased from $9,384,000 at Dec 31, 2018, to $4,823,000 at June 30, 2019[112] - Net cash used in operating activities for H1 2019 increased to $6,382,000 from $3,974,000 in H1 2018, driven by higher payments for R&D, professional services, and salaries[113] - Cash from financing activities in H1 2019 was $2,046,000 from a public offering, compared to $6,780,000 in H1 2018 which came from two separate offerings[115] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that this item is not applicable - The company states that Quantitative and Qualitative Disclosures About Market Risk are not applicable[121] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting identified - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2019[122] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[123] Part II Item 1. Legal Proceedings The company settled a lawsuit with Medpace Inc. in April 2019 and faces a new $2.0 million suit from a former distributor regarding a 2014 product recall - The lawsuit with Medpace Inc. was settled confidentially, and the case was dismissed with prejudice in April 2019[126] - On July 10, 2019, former distributor Bosti Trading Ltd. filed a suit against the company's subsidiary seeking damages of approximately $1.1 million to $2.0 million related to a voluntary field corrective action from 2014[127] Item 1A. Risk Factors The primary risk is potential delisting from NYSE American due to low stock price, despite resolving a prior non-compliance notice, with immediate suspension possible if price falls below $0.06 - Although the company resolved its low selling price deficiency with NYSE American on July 8, 2019, it remains at risk of delisting[132] - If the company is found to be non-compliant again within 12 months of July 8, 2019, it may face truncated compliance procedures or immediate delisting proceedings[132] - The NYSE American policy is to immediately suspend trading and begin delisting if a stock's market price falls below $0.06 per share at any time[133] Item 5. Other Information The company states that this item is not applicable - The company states that this item is not applicable[134] Item 6. Exhibits This section provides an index of exhibits filed with the Form 10-Q, including corporate governance documents and Sarbanes-Oxley certifications - The report includes an index of all exhibits filed, such as certificates of incorporation, bylaws, and Sarbanes-Oxley certifications[135][137]