InspireMD, Inc. - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended: June 30, 2022

OR

For the transition period from              to

Commission file number: 001-35731

InspireMD, Inc.

(Exact name of registrant as specified in its charter)

4 Menorat Hamaor St.

Tel Aviv, Israel 6744832

(Address of principal executive offices)

(Zip Code)

(888) 776-6204

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

The number of shares of the registrant’s common stock, $0.0001 par value, outstanding as of August 8, 2022: 8,323,200

TABLE OF CONTENTS

INSPIREMD, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE QUARTER ENDED JUNE 30, 2022

TABLE OF CONTENTS

INSPIREMD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(U.S. dollars in thousands)

INSPIREMD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(U.S. dollars in thousands other than share and per share data)

The accompanying notes are an integral part of the consolidated financial statements.

INSPIREMD, INC.

(Unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except per share data)

The accompanying notes are an integral part of the consolidated financial statements.

INSPIREMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(U.S. dollars in thousands, except share data)

The accompanying notes are an integral part of the consolidated financial statements.

INSPIREMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(U.S. dollars in thousands, except share data)

The accompanying notes are an integral part of the consolidated financial statements.

INSPIREMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(U.S. dollars in thousands, except share data)

The accompanying notes are an integral part of the consolidated financial statements.

INSPIREMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(U.S. dollars in thousands, except share data)

The accompanying notes are an integral part of the consolidated financial statements.

INSPIREMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(U.S. dollars in thousands)

The accompanying notes are an integral part of the consolidated financial statements.

INSPIREMD, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS

NOTE 2 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements for the year ended December 31, 2021. 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 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, 2021, as found in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 7, 2022. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of results that could be expected for the entire fiscal year.

NOTE 3 - EQUITY:

As of June 30, 2022, the Company has outstanding warrants to purchase an aggregate of 1,793,815 shares of common stock as follows:

SCHEDULE OF ISSUANCE OF WARRANTS TO PURCHASE COMMON STOCK

As of June 30, 2022, 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.

b. During the six months ended June 30, 2022, the Company granted to employees and consultants’ options to purchase a total of 154,508 shares of the Company’s common stock. The options have an exercise price ranging from $2.61 - $2.97 per share, which was the fair market value of the Company’s common stock on the date of the grant. 98,838 options are subject to a three-year vesting period, with one-third of such awards vesting each year and 55,670 options with performance conditions, mainly 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 5.125-6.5 years; expected volatility ranging from 127.43%-130.93%; and risk-free interest rate ranging from 1.79%-2.88%.

The fair value of the above options, using the Black-Scholes option-pricing model, was approximately $360,356.

NOTE 4 – RELATED PARTIES TRANSACTIONS

During the six and three months ended June 30, 2022, a consulting company whose founder and CEO is a member of the company’s board of directors, provided certain marketing services in the amount of $8,776 and $2,500, respectively.

NOTE 5- 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 outstanding during the period. The calculation of diluted net loss per share excludes potential share issuances of common stock upon the exercise of share options, warrants, and restricted stocks as the effect is anti-dilutive.

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 3,010,707 for the six and three-month periods ended June 30, 2022.

The total number of shares of common stock related to outstanding options, warrants, restricted stock, restricted stock units and Series C Preferred Stock excluded from the calculations of diluted loss per share were 2,251,468 for the six and three month periods ended June 30, 2021.

NOTE 6 – LEASE AGREEMENTS

Supplemental information related to leases are as follows:

 SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES 

Other information:

Maturities of lease liabilities are as follows:

 SCHEDULE OF MATURITIES OF LEASE LIABILITIES 

NOTE 7 - FINANCIAL INSTRUMENTS:

The carrying amounts of financial instruments included in working capital 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 8 - INVENTORY:

SCHEDULE OF INVENTORY  

NOTE 9 - ACCOUNTS PAYABLE AND ACCRUALS - OTHER:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUALS - OTHER  

NOTE 10 - 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:

SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS  

By product:

SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS BY PRODUCT  

By principal customers:

SCHEDULE OF REVENUES ATTRIBUTED TO GEOGRAPHIC AREAS BY PRINCIPAL CUSTOMERS  

All tangible long lived assets are located in Israel.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.

Unless the context requires otherwise, references in this Form 10-Q to the “Company,” “InspireMD,” “we,” “our” and “us” refer to InspireMD, Inc., a Delaware corporation, and its subsidiaries.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment and regulation. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. For a discussion of these and other risks that relate to our business and investing in our common stock, you should carefully review the risks and uncertainties described in this Quarterly Report on Form 10-Q, and those described from time to time in our future reports filed with the Securities and Exchange Commission. The forward-looking statements contained in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. We do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.

All information in this Quarterly Report on Form 10-Q relating to shares or price per share reflects the 1-for-15 reverse stock split effected by us on April 26, 2021.

Overview

We are a medical device company focusing on the development and commercialization of our proprietary MicroNet™ stent platform technology for the treatment of complex vascular and coronary disease. A stent is an expandable “scaffold-like” device, usually constructed of a metallic material, that is inserted into an artery to expand the inside passage and improve blood flow. MicroNet, a micron mesh sleeve, is wrapped over a stent to provide embolic protection in stenting procedures.

Our CGuard™ carotid embolic prevention system (“CGuard EPS”) combines MicroNet and a self-expandable nitinol stent in a single device for use in carotid artery applications. Our CGuard EPS received CE mark approval in the European Union in March 2013 and was fully launched in Europe in September 2015. Subsequently, we launched CGuard EPS in Russia and certain countries in Latin America and Asia, including India. In September 2020, we launched CGuard EPS in Brazil after receiving regulatory approval in July 2020 and on February 3, 2021, we executed a distribution agreement with Chinese partners for the purpose of expanding our presence in China. Currently, we are seeking strategic partners for a potential launch of CGuard EPS in Japan and other Asian countries. Our CE mark for CGuard EPS expires on November 12, 2022 and we are currently in the process of seeking recertification under the new European Medical Device Regulation (see Part II – Item 1A. Risk Factors “Failure to satisfy regulatory requirements of the new European Medical Device Regulation by November 12, 2022 could prevent us from marketing CGuard EPS in Europe”).

On September 8, 2020, we received approval from the U.S. Food and Drug Administration (“FDA”) of our Investigation Device Exemption (“IDE”), thereby allowing us to proceed with a pivotal study of our CGuard™ Carotid Stent System, C-Guardians, for prevention of stroke in patients in the United States. C-Guardians is a prospective, multicenter, single-arm, pivotal study to evaluate the safety and efficacy of the CGuard™ Carotid Stent System when used to treat symptomatic and asymptomatic carotid artery stenosis in patients undergoing carotid artery stenting. The trial was designed to enroll approximately 315 subjects in a maximum of 40 study sites located in the United States and Europe. Study sites in Europe may contribute a maximum of approximately 50% of the total enrollees. The primary endpoint of the study will be the composite of incidence of death (all-cause mortality), all stroke, and myocardial infarction (DSMI) through 30-days post-index procedure, based on the clinical events committee (CEC) adjudication and ipsilateral stroke from 31-365 day follow-up, based on Clinical Events Committee (CEC) adjudication.

On July 23, 2021, we announced the initiation of enrollment and successful completion of the first cases of our C-Guardian trial of CGuard EPS. The first patients, who were under the care of principal investigator, Chris Metzger, M.D., system chair of clinical research at Ballard Health System in Eastern Tennessee, were successfully implanted with the CGuard EPS stent device. These are the first of 315 patients who are expected to be enrolled in the trial and receive CGuard EPS in the treatment of carotid artery stenosis in symptomatic and asymptomatic patients undergoing carotid artery stenting. We are currently continuing with the enrollment phase. In April 2022, we completed our first European recruitment.

Additionally, we intend to continue to invest in current and future potential product and manufacturing enhancements for CGuard EPS that are expected to reduce cost of goods and/or provide the best-in-class performing delivery system, CGuard Prime. In furtherance of our strategy that focuses on establishing CGuard EPS as a viable alternative to vascular surgery, we are exploring adding new delivery systems and accessory solutions for procedural protection to our portfolio such as SwitchGuard.

We consider the current addressable market for our CGuard EPS to be individuals with diagnosed, symptomatic high-grade carotid artery stenosis (HGCS, ≥70% occlusion) for whom intervention is preferable to medical (drug) therapy. This group includes not only carotid artery stenting patients but also individuals undergoing carotid endarterectomy, as the two approaches compete for the same patient population. Assuming full penetration of the intervention caseload by CGuard EPS, we estimate that the addressable market for CGuard EPS will be approximately $666 million in 2022 (source: Health Research International Personal Medical Systems, Inc. September 13, 2021 Results of Update Report on Global Carotid Stenting Procedures and Markets by Major Geography and Addressable Markets). According to this same report, assuming full penetration of the caseload for all individuals diagnosed with high-grade carotid artery stenosis, we estimate that the total available market for CGuard EPS in 2022 will be approximately $5 billion.

Our 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 we believe this is largely driven by the predominant industry preferences favoring drug-eluting, or drug-coated, stents, during the second quarter of 2022 we ceased sales of our MGuard Prime EPS following a phase out period.

We also intend to develop a pipeline of other products and additional applications by leveraging our MicroNet technology to improve peripheral procedures such as the treatment of the superficial femoral artery disease and vascular disease below the knee as well as neurovascular procedures, such as the treatment of acute stroke.

Presently, none of our products may be sold or marketed in the United States, but we do derive revenues from the use of our products in the currently ongoing trials.

We were organized in the State of Delaware on February 29, 2008.

Recent Developments

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. We experienced a significant COVID-19 related impact on our financial condition and results of operations, primarily during the year ended December 31, 2020, which we 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 we anticipate that the continuation of the pandemic and related restrictions and safety measures will likely result in continued fluctuations in sales of our products and potentially enrollments in our studies as well as potential disruptions to our supply chain for the upcoming periods.

In February 2022, Russia launched a military invasion into Ukraine. We derived approximately 10.5% of total sales in Russia, Ukraine and Belarus in 2021 while during the six and three months ended June 30, 2022 our sales to Russia were 6.8% and 10.9% respectively, there were no sales to Ukraine and minimal sales in Belarus. The escalation of geopolitical instability in Russia and Ukraine as well as currency fluctuations in the Russian Ruble could negatively impact our operations, sales, and future growth prospects in that region. As a result of the crisis in Ukraine both 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. Our global operations expose us to risks that could adversely affect our business, financial condition, results of operations, cash flows or the market price of our 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 our 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 our 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 we believe that the executive orders currently do not preclude us from conducting business with our 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 us from engaging with them. If we are unable to conduct business with new or existing customers or vendors or pursue business opportunities in Russia, Ukraine or Belarus, our business, including revenue, profitability and cash flows, and operations could be adversely affected. We cannot provide assurance that current sanctions or potential future changes in sanctions will not have a material impact on our operations in Russia, Ukraine and Belarus or on our financial results.

Critical Accounting Policies

A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies are more fully described in both (i) “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) Note 2 of the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2021. There have not been any material changes to such critical accounting policies since December 31, 2021.

The currency of the primary economic environment in which our operations are conducted is the U.S. dollar (“$” or “dollar”).

Contingencies

We and our subsidiaries are involved in legal proceedings that arise from time to time in the ordinary course of business. We record accruals for these types of contingencies to the extent that we conclude the occurrence of such contingencies is probable and that the related liabilities are estimable. When accruing these costs, we recognize an accrual in the amount within a range of loss that is the best estimate within the range. When no amount within the range is a better estimate than any other amount, we accrue for the minimum amount within the range. Legal costs are expensed as incurred.

Results of Operations

Three months ended June 30, 2022, compared to the three months ended June 30, 2021

Revenues. For the three months ended June 30, 2022, revenue increased by $493,000, or 47.6%, to $1,531,000, from $1,038,000 during the three months ended June 30, 2021. This increase was predominantly driven by a 47.8% increase in sales volume of CGuard EPS from $1,019,000 during the three months ended June 30, 2021, to $1,505,000 during the three months ended June 30, 2022. This sales increase was mainly due to growth in existing and new markets and sales in the United States related to stents used in our C-Guardians FDA study which occurred in the three months ended June 30, 2022, but not in the corresponding period in 2021.

With respect to geographical regions, the increase in revenue was primarily attributable to a $279,000 increase in Europe, a $95,000 increase in Latin America, a $62,000 increase in Asia and a $2,000 decrease in other geographies. This growth was mainly due to growth in existing and new markets. In addition, there was a $59,000 increase in revenue from North America due to sales in the United States related to stents used in our C-Guardians FDA study which occurred in the three months ended June 30, 2022, but not in the corresponding period in 2021.

Gross Profit. For the three months ended June 30, 2022, gross profit (revenue less cost of revenues) increased by $169,000, or 64.4%, to $431,000, from $262,000 during the three months ended June 30, 2021. This increase in gross profit resulted from a $197,000 increase in revenues (as mentioned above), less the associated related material and labor costs and a reduction in miscellaneous expenses of $55,000, partially offset by a $83,000 reduction in costs of goods sold due to an inventory adjustment that occurred during the three months ended June 30, 2021 which did not occur during the three months ended June 30, 2022. Gross margin (gross profits as a percentage of revenue) increased to 28.1% during the three months ended June 30, 2022 from 25.2% during the three months ended June 30, 2021, driven by the factors mentioned above.

Research and Development Expenses. For the three months ended June 30, 2022, research and development expenses increased by $766,000, or 59.4%, to $2,056,000, from $1,290,000 during the three months ended June 30, 2021. This increase resulted primarily from an increase of $738,000 in expenses related to the commencement of enrollment in the second half of 2021 of the C-Guardians FDA study and an increase of $28,000 in miscellaneous expenses.

Selling and Marketing Expenses. For the three months ended June 30, 2022, selling and marketing expenses increased by $350,000, or 55.0%, to $986,000, from $636,000 during the three months ended June 30, 2021. This increase resulted primarily from an increase in tradeshows and travel expenses of $204,000 in light of resumed marketing activities following lifting of restrictions related to COVID-19, an increase in salary expenses of $85,000, and increase in share-based compensation expenses of $60,000 due to the expense recognition of grants made during the fourth quarter of 2021.

General and Administrative Expenses. For the three months ended June 30, 2022, general and administrative expenses increased by $294,000, or 16.6%, to $2,070,000, from $1,776,000 during the three months ended June 30, 2021. This increase resulted primarily from an increase in share-based compensation-related expenses of $147,000, mainly due to the expense recognition of grants made during the fourth quarter of 2021 ,an increase in directors’ and officers’ liability insurance expenses of $47,000, due to increased premiums caused by recent trends in the overall insurance industry, an increase of $75,000 in regulatory expenses mainly related to implementation of the new European Medical Devices Regulation and an increase of $25,000 in miscellaneous expenses.

Financial Income (Expenses).  For the three months ended June 30, 2022, financial income increased by 167.2%, or $112,000, to $45,000 of financial income, from $67,000 of financial expenses during the three months ended June 30, 2021. The increase in financial income primarily resulted from an increase of $69,000 in financial income related to changes in exchange rates and a $45,000 increase in interest income from short-term bank deposits.

Tax Expenses. For the three months ended June 30, 2022, there was no change in our tax expenses as compared to the three months ended June 30, 2021.

Net Loss. Our net loss increased by $1,129,000, or 32.2%, to $4,636,000, for the three months ended June 30, 2022, from $3,507,000 during the three months ended June 30, 2021. The increase in net loss resulted primarily from an increase of $1,410,000 in operating expenses partially offset by an increase of $169,000 in gross profit and an increase of $112,000 in financial income.

Six months ended June 30, 2022 compared to the six months ended June 30, 2021

Revenues. For the six months ended June 30, 2022, revenue increased by $670,000, or 32.8%, to $2,714,000, from $2,044,000 during the six months ended June 30, 2021. This increase was predominantly driven by a 34.2% increase in sales volume of CGuard EPS from $1,987,000 during the six months ended June 30, 2021, to $2,666,000 during the six months ended June 30, 2021. This sales increase was mainly due to growth in existing and new markets and sales in the United States related to stents used in our C-Guardians FDA study which occurred in the three months ended June 30, 2022, but not in the corresponding period in 2021.

With respect to geographical regions, the increase in revenue was primarily attributable to a $289,000 increase in Europe, a $145,000 increase in Latin America, a $93,000 increase in Asia and a $24,000 increase in other geographies. This growth was mainly due to growth in existing and new markets. In addition, there was a $119,000 increase in revenue from North America due to sales in the United States related to stents used in our C-Guardians FDA study which occurred in the six months ended June 30, 2022, but not in the corresponding period in 2021.

Gross Profit. For the six months ended June 30, 2022, gross profit (revenue less cost of revenues) increased by 50.2%, or $185,000, to $553,000, compared to a $368,000 for the same period in 2021. This increase in gross profit resulted from a $223,000 increase in revenues (as mentioned above) less the associated related material and labor costs. This increase was partially offset by an increase of $38,000 in miscellaneous expenses. Gross margin (gross profits as a percentage of revenue) increased to 20.4% during the six months ended June 30, 2022 from 18.0% during the six months ended June 30, 2021, driven by the reasons mentioned above.

Research and Development Expenses. Research and Development Expenses. For the six months ended June 30, 2022, research and development expenses increased by 75.4%, or $1,606,000, to $3,736,000, from $2,129,000 during the six months ended June 30, 2021. This increase resulted primarily from an increase of $1,648,000 in expenses related to the commencement of enrollment in the second half of 2021 of the C-Guardians FDA study offset, in part, by a decrease of $41,000 in miscellaneous expenses.

Selling and Marketing Expenses. For the six months ended June 30, 2022, selling and marketing expenses increased by 28.9%, or $388,000, to $1,732,000, from $1,344,000 during the six months ended June 30, 2021. This increase resulted primarily from an increase in tradeshows and travel expenses of $207,000 in light of resumed marketing activities following lifting of restrictions related to COVID-19, an increase in share-based compensation expenses of $114,000 due to the expense recognition of grants made during the fourth quarter of 2021 and an increase in salary expenses of $66,000.

General and Administrative Expenses. For the six months ended June 30, 2022, general and administrative expenses increased by 16.5%, or $603,000, to $4,252,000, from $3,649,000 during the six months ended June 30, 2021. This increase resulted primarily from an increase in share-based compensation-related expenses of $363,000, mainly due to the expense recognition of grants made during the fourth quarter of 2021 ,an increase in directors’ and officers’ liability insurance expenses of $106,000, due to increased premiums caused by recent trends in the overall insurance industry, an increase of $95,000 in regulatory expenses mainly related to implementation of the new European Medical Devices Regulation, an increase in travel expenses of $91,000 in light of resumed activities following governments lifting restrictions related to COVID-19 offset, in part, by a decrease of $52,000 in miscellaneous expenses.

Financial Income. For the six months ended June 30, 2022, financial income increased by $46,000, to $50,000 of financial income, from $4,000 of financial income during the six months ended June 30, 2021. The increase in financial income primarily resulted from a $73,000 increase in interest income from short-term bank deposits, offset, in part, by a decrease of $18,000 in financial income related to changes in exchange rates.

Tax Expenses. For the six months ended June 30, 2022, there was no material change in our tax expenses as compared to the six months ended June 30, 2021.

Net Loss. Our net loss increased by $2,367,000, or 35.1%, to $9,117,000, for the six months ended June 30, 2022, from $6,750,000 during the six months ended June 30, 2021. The increase in net loss resulted primarily from an increase of $2,598,000 in operating expenses, offset by an increase of $185,000 in gross profit.

Liquidity and Capital Resources

As of June 30, 2022, we have the ability to fund our planned operations for at least the next 12 months from issuance date of the financial statement. However, we expect to continue incurring losses and negative cash flows from operations until CGuard™ EPS reaches commercial profitability. Therefore, in order to fund our operations until such time that we can generate substantial revenues, we may need to raise additional funds.

On June 3, 2022, we entered into a Sales Agreement with A.G.P./Alliance Global Partners, as sales agent (“A.G.P.”), pursuant to which we may offer and sell from time to time, at our option, through or to A.G.P., up to an aggregate of approximately $8,313,000 of shares of our common stock. The issuance and sale of shares by us under the program will be made pursuant to our effective “shelf” registration statement on Form S-3 (Registration Statement No. File No. 333-265409) filed with the SEC on June 3, 2022, and declared effective on June 14, 2022. No shares have been sold under the program.

Six months ended June 30, 2022 compared to the six months ended June 30, 2021

General. At June 30, 2022, we had cash and cash equivalents of $6,393,000 as compared to $12,004,000 as of December 31, 2021. We have historically met our cash needs through a combination of issuing new shares, borrowing activities and product sales. Our cash requirements are generally for research and development, marketing and sales activities, finance and administrative costs, capital expenditures and general working capital.

For the six months ended June 30, 2022, net cash used in our operating activities increased by $1,074,000, or 17.4%, to $7,243,000, from $6,169,000 during the same period in 2021. The primary reason for the increase in cash used in our operating activities was an increase of $1,623,000 in payments for third party related expenses and for professional services and an increase of $613,000 in compensation costs paid during the three months ended June 30, 2022 from $4,012,000 in the three months ended June 30, 2021 to $4,625,000 during the same period in 2022, offset by an increase of $1,162,000 in payments received from customers, to $2,707,000 during the three months ended June 30, 2022 from $1,545,000 during the same period in 2021.

Cash provided by our investing activities increased by $1,915,000 or $1,679.8%, to $1,801,000 during the six months ended June 30, 2022, compared to cash used of $114,000 during the six months ended June 30, 2021. The primary reasons for the increase in cash provided by our investing activities is a withdrawal of $2,000,000 of short-term deposits.

Cash used by financing activities for the six months ended June 30, 2022 was $37,000, the cash used by financing activities during the six months ended June 30, 2022 were due to issuance cost associated with a shelf registration statement on Form S-3 filed with the SEC on June 3, 2022. Cash provided by financing activities for the six months ended June 30, 2021 was $35,069,000, the principal sources of which were our February 2021 public offering of common stock and warrants, exercise of Series F and Series G warrants, proceeds from an at-the-market offering as well as proceeds from the issuance of shares to Chinese distributor that resulted in approximately $35,069,000 of aggregate net proceeds.

As of June 30, 2022, our current assets exceeded our current liabilities by a multiple of 6.3. Current assets decreased by $7,594,000 during the period and current liabilities increased by $365,000 during the period. As a result, our working capital decreased by $7,959,000 to $24,788,000 as of June 30, 2022.

Off Balance Sheet Arrangements

We have no off-balance sheet transactions, arrangements, obligations (including contingent obligations) or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Factors That May Affect Future Operations

We believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including the cyclical nature of the ordering patterns of our distributors, timing of regulatory approvals, the implementation of various phases of our clinical trials and manufacturing efficiencies due to the learning curve of utilizing new materials and equipment, the impact of the COVID-19 pandemic and the ongoing conflict in the Ukraine. Our operating results could also be impacted by a weakening of the Euro and strengthening of the NIS, both against the U.S. dollar. Lastly, other economic conditions we cannot foresee may affect customer demand, such as individual country reimbursement policies pertaining to our products.

Contractual Obligations and Commitments

Except as set forth below, during the three months ended June 30, 2022, there were no material changes to our contractual obligations and commitments. As further described in Note 6 of the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, during the three months ended June 30, 2022, we extended our lease agreement for a facility in Israel until December 31, 2026 and amended the lease to add additional space in the facility.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures