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.

UNAUDITED NOTES TO THE 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.statements. In the opinion of the Company, the financial statements reflect all adjustments, consideredwhich include only normal recurring adjustments, necessary for a fair statement of theits financial position as of March 31, 2023 and its results of operations, changes in equity and cash flows for the interim periods reported herein have been included (consisting only of normal recurring adjustments).three months ended March 31, 2023 and 2022. 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, 2021,2022, as found in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 7, 2022.30, 2023. The results of operations for the three and nine months ended September 30, 2022March 31, 2023 are not necessarily indicative of results that could be expected for the entire fiscal year.

NOTE 3 - RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

NOTE 34 - EQUITY:

As of September 30, 2022,March 31, 2023, the Company has outstanding warrants to purchase an aggregate of 1,793,815 1,793,504shares of common stock as follows:

 SCHEDULE OF ISSUANCE OF WARRANTS TO PURCHASE COMMON STOCK

As of September 30, 2022,March 31, 2023, 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 ninethree months ended September 30, 2022,March 31, 2023, the Company granted to employees and consultants’a consultant options to purchase a total of 154,50850,000 shares of the Company’s common stock. The options have an exercise price ranging fromof $2.61 - $2.971.15 per share, which was the fair market value of the Company’s common stock on the date of the grant. 98,83845,000 options are subject to a three-year vesting period with one-third of such awards(of which 20,000 options are vesting eachin the first year, 15,000 options are vesting in the second year and 55,67010,000 options are vesting in the third year) and 5,000 options with performance conditions mainly related to clinical activitiesmarketing activities..

In calculating the fair value of the above options, the Company used the following assumptions: dividend yield of 0% and expected term of 5.1255.5-6.5 years; expected volatility ranging from 127.43124.58%-130.93125.61%; and risk-free interest rate ranging from 1.793.65%-2.883.68%.

The fair value of the above options, using the Black-Scholes option-pricing model, was approximately $360,35650,658.

NOTE 45 – RELATED PARTIES TRANSACTIONS

During the nine and three months ended September 30,March 31, 2022, a consulting Companycompany whose founder and CEO is aour board member of the Company’s board of directors, provided certain marketing services in the amount of $9,276 6,276and $500, respectively..

NOTE 5-6 - 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 unvested restricted stockstocks and unvested restricted stock units 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 2,932,284 for the nine and three month periods ended September 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 2,773,675. This amount includes 2,163,741342,766 forof unvested restricted stock included in the ninenumber of issued and three month periods ended September 30, 2021.

NOTE 6 – LEASE AGREEMENTSoutstanding shares as of March 31, 2023.

Supplemental informationThe total number of shares of common stock related to leases areoutstanding options, warrants, restricted stock, restricted stock units, Series C Preferred Stock excluded from the calculations of diluted loss per share were 2,903,634. This amount includes 547,383 of unvested restricted stock included in the number of issued and outstanding shares as follows:

SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES

Other information:of March 31, 2022.

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.

NOTE 11 – SUBSEQUENT EVENTS

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 12,914,086 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 Pre-Funded Warrants will be immediately exercisable at an exercise price of $0.0001 per share and will not expire until exercised in full. The Warrants will be immediately exercisable upon issuance at an exercise price of $1.3827 per share, subject to adjustment as set forth therein. 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 from the Food and Drug Administration (“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 and CGuard Prime 80 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 begins. The Warrants may be exercised on a cashless basis if there is no effective registration statement registering the shares underlying the warrants.

In connection with the Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company is required to file a resale registration statement (the “Registration Statement”) with the SEC to register for resale the Private Placement Shares and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and Warrants, within 20 days of the signing date of the Purchase Agreement (the “Signing Date”), and to have such Registration Statement declared effective within 45 days after the Signing Date in the event the Registration Statement is not reviewed by the SEC, or 90 days of the Signing Date in the event the Registration Statement is reviewed by the SEC. The Company will be obligated to pay certain liquidated damages if the Company fails to file the Registration Statement when required, fails to cause the Registration Statement to be declared effective by the SEC when required, of if the Company fails to maintain the effectiveness of the Registration Statement.

Aggregate gross proceeds to the Company in respect of the Private Placement Offering are expected to be approximately $42.2 million, before deducting fees payable to the placement agent and other offering expenses payable by the Company which are expected to amount to approximately $4.6 million. If the Warrants are exercised in cash in full this would result in an additional $71.4 million of proceeds. The Private Placement Offering is expected to close on or about May 15, 2023, subject to satisfaction of customary closing conditions.

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.regulation, including revenue growth. 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 complexcarotid artery disease and other vascular and coronary disease. A stent is an expandable “scaffold-like” device, usually constructed of a metallic material, that is inserted into anthe lumen of the artery to expand the inside passagecreate patency and improverevascularization of blood flow. MicroNet, a micron mesh sleeve, is wrappedattached over a stent to provide embolic protection inboth during and after stenting procedures.

Our CGuard™ carotid embolic prevention system (“CGuard EPS”EPS™”) combines MicroNet and a unique self-expandable nitinol stent in a single device for use in carotid artery applications.revascularization. Our CGuard EPS originally received CE mark approval under Medical Device Directive 93/42/EEC (“MDD”) in the European Union (“EU”) in March 2013 and was fully launched in Europe in September 2015. Subsequently, we launched CGuard EPS in Russia and certainover 30 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.the Asian markets. 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 expiresunder the MDD expired on November 12, 2022 and we are in the final stages of technical documentation review by the Notified Body auditor to meet the Medical Device Regulation (“MDR”) (MDR 2017/745) requirements (which replaced the MDD) for recertification. In the meantime, on February 14, 2023, we received a derogation per Article 97 paragraph 1 of Regulation 2017/745 from the Agency for Medicines and Health Products (FAMHP) allowing us to continue marketing CGuard EPS in the EU until August 15, 2023 subject to certain procedural requirements. Subsequently, on March 20, 2023, Regulation (EU) 2023/607 was published allowing us to continue marketing CGuard EPS in EU countries under the MDD directive until December 31, 2027. As a result of the foregoing, we may market and sell CGuard EPS in the EU and certain other jurisdictions subject to certain procedural requirements while weour MDR CE recertification is pending. We continue to seek to expedite the review process for recertification under the new European Medical Device Regulation, we do not expect to receive recertification by November 12, 2022 (see Part II – Item 1A. Risk Factors “Failure to satisfy regulatory requirements of the new European Medical Device Regulation by November 12, 2022 will prevent us from marketing CGuard EPS in countries requiring the CE mark).MDR.

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 StentSten 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. The composite index will be compared to a performance goal based on the observed rate of the two components of the primary endpoint from previous pivotal stent trials which are considered industry standard. The performance goal will be considered met if the upper bound of the two-sided 95% confidence interval calculated from the observed primary endpoint rate is < 11.6% and the p-value is less than 0.025.

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. TheseThere 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, weenrolment phase at approximately 20 trial sites and expect it to be completed our first European recruitment.approximately at the end of the second quarter of 2023.

Additionally, we intend to continue to invest in current and future potential productnew indications, products and manufacturing enhancements for CGuard EPS that are expected to reduce cost of goods and/or provide the best-in-class performing delivery system,systems, such as CGuard Prime.Prime™for transfemoral access. In furtherance of our strategy that focuses on establishing CGuard EPS as a viable alternative to vascular surgery, we are exploring addingdeveloping a new transcarotid artery revascularization (TCAR) delivery systemssystem, SwitchGuard™, for transcarotid access and accessory solutionsneuro protection. In addition, we intend to explore new indications for proceduralCGuard EPS to leverage the advantages of stent design and mesh protection, to our portfoliowell suited in labels such as SwitchGuard.acute stroke with tandem lesions.

We consider theour 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$1.3 billion in 20222023 (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)Markets and internal estimates). According to this same report, and internal estimates, 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$9.3 billion.

Our MGuard™ Prime™ embolic protection system (“MGuard Prime EPS”) was marketed for usemission is to offer a comprehensive set of delivery solutions (TCAR and Transfemoral) in patientsorder to deliver best in class results through patient outcomes by way of stent performance 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.CGuard EPS.

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

Recent Developments

Private Placement

On May 12, 2023, we entered into a securities purchase agreement (the “Purchase Agreement”) pursuant to which we 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 our 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 12,914,086 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 Pre-Funded Warrants will be immediately exercisable at an exercise price of $0.0001 per share and will not expire until exercised in full. The Warrants will be immediately exercisable upon issuance at an exercise price of $1.3827 per share, subject to adjustment as set forth therein. 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 from the Food and Drug Administration (“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 and CGuard Prime 80 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 begins. The Warrants may be exercised on a cashless basis if there is no effective registration statement registering the shares underlying the warrants.

In connection with the Purchase Agreement, we entered into a registration rights agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, we are required to file a resale registration statement (the “Registration Statement”) with the SEC to register for resale the Private Placement Shares and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and Warrants, within 20 days of the signing date of the Purchase Agreement (the “Signing Date”), and to have such Registration Statement declared effective within 45 days after the Signing Date in the event the Registration Statement is not reviewed by the SEC, or 90 days of the Signing Date in the event the Registration Statement is reviewed by the SEC. We will be obligated to pay certain liquidated damages if we fail to file the Registration Statement when required, fails to cause the Registration Statement to be declared effective by the SEC when required, of if we fail to maintain the effectiveness of the Registration Statement.

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

We agreed to pay LifeSci Capital LLC, a placement fee equal to 5.6% of the aggregate gross proceeds from the closing of the Private Placement Offering and a non-accountable expense allowance of $25,000. In addition, we have agreed to pay Piper Sandler & Co. a financial advisory fee of $1.5 million and AGP/Alliance Global Partners a financial advisory fee of $250,000.

The Private Placement Offering is expected to close on or about May 15, 2023, subject to satisfaction of customary closing conditions.

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 nine and three months ended September 30, 2022 our sales to Russia, Ukraine and Belarus were 12.1% and 22.2% respectively. 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, 2021.2022. There have not been any material changes to such critical accounting policies since December 31, 2021.2022.

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 September 30, 2022,March 31, 2023, compared to the three months ended September 30, 2021March 31, 2022

Revenues. For the three months ended September 30, 2022,March 31, 2023, revenue increased by $360,000,$56,000, or 33.6%4.7%, to $1,431,000,$1,239,000, from $1,071,000$1,183,000 during the three months ended September 30, 2021.March 31, 2022. This increase was predominantly driven by a 38.8%6.7% increase in sales of CGuard EPS from $1,031,000$1,161,000 during the three months ended September 30, 2021,March 31, 2022, to $1,431,000$1,239,000 during the three months ended September 30, 2022. ThisMarch 31, 2023. During the second half of the quarter, our CE mark was reinstated under the MDD directive allowing us to resume sales increase was dueand shipments to growththe EU countries and we spent the remainder of the quarter shipping product in existing markets and sales inorder to reduce the United States related to stents used in our C-Guardians FDA study as enrollment accelerated.

With respect to geographical regions,backlog of orders that accumulated over the past few months. We believe the quarter over quarter increase in revenue was primarily attributable to a $270,000 increase in Europe, a $79,000 increase in Latin America, and a $4,000 decrease in other geographies. This growth was mainly due to growth in existing markets. In addition, there was a $14,000 increase in revenue from North America due to sales inis not representative of the United States related to stents used in our C-Guardians FDA study.

Our CE markreal market demand for CGuard EPS, expires on November 12, 2022 and while wedue to our inability to ship product for the first half of the quarter. We continue to seek to expedite the review process for recertification under the new European Medical Device Regulation, we do not expect to receive recertification by November 12, 2022. If our CE mark lapses, then we will not be able to promote and sell CGuard EPS into countries requiring the CE mark. If the duration of the lapsed CE mark continues for a prolonged period, then we expect our revenues to decrease significantly until such time that we obtain recertification.

Gross Profit. For the three months ended September 30, 2022, gross profit (revenue less cost of revenues) increased by $274,000, or 297.8%, to $366,000, from $92,000 during the three months ended September 30, 2021. This increase in gross profit resulted from a $95,000 increase in revenues (as mentioned above), less the associated related material and labor costs, a decrease in write-offs of $64,000, due to components supply issues in 2021, a $64,000 decrease in new employee training costs, and a decrease of $51,000 in miscellaneous expenses during the three months ended September 30, 2021. Gross margin (gross profits as a percentage of revenue) increased to 25.6% during the three months ended September 30, 2022 from 8.6% during the three months ended September 30, 2021, driven by the factors mentioned above.

Research and Development Expenses. For the three months ended September 30, 2022, research and development expenses increased by $566,000, or 37.9%, to $2,061,000, from $1,495,000 during the three months ended September 30, 2021. This increase resulted primarily from an increase of $455,000 in expenses related to the acceleration of enrollment in the C-Guardians FDA study as the number of patients enrolling increased, an increase in share-based compensation-related expenses to employees and consultants of $78,000 and an increase of $33,000 in miscellaneous expenses.

Selling and Marketing Expenses. For the three months ended September 30, 2022, selling and marketing expenses increased by $43,000, or 5.4%, to $845,000, from $802,000 during the three months ended September 30, 2021. This increase resulted primarily from an increase in share-based compensation expenses of $61,000 due to the expense recognition of grants made during the fourth quarter of 2021 offset, in part, by a decrease of $18,000 in miscellaneous expenses

General and Administrative Expenses. For the three months ended September 30, 2022, general and administrative expenses increased by $244,000, or 13.4%, to $2,070,000, from $1,826,000 during the three months ended September 30, 2021. This increase resulted primarily from an increase in share-based compensation-related expenses of $211,000, mainly due to the expense recognition of grants made during the fourth quarter of 2021 and an increase of $33,000 in miscellaneous expenses.

Financial Income (Expenses). For the three months ended September 30, 2022, financial income increased by $121,000, to $81,000 of financial income, from $40,000 of financial expenses during the three months ended September 30, 2021. The increase in financial income primarily resulted from a $67,000 increase in interest income from short-term bank deposits and an increase of $52,000 in financial income related to changes in exchange rates.

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

Net Loss. Our net loss increased by $458,000, or 11.3%, to $4,529,000, for the three months ended September 30, 2022, from $4,071,000 during the three months ended September 30, 2021. The increase in net loss resulted primarily from an increase of $853,000 in operating expenses partially offset by an increase of $274,000 in gross profit and an increase of $121,000 in financial income.

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

Revenues. For the nine months ended September 30, 2022, revenue increased by $1,030,000, or 33.1%, to $4,145,000, from $3,115,000 during the nine months ended September 30, 2021. This increase was predominantly driven by a 35.7% increase in sales of CGuard EPS from $3,018,000 during the nine months ended September 30, 2021, to $4,097,000 during the nine months ended September 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 as enrollment accelerated.MDR.

With respect to geographical regions, the increase in revenue was primarily attributable to a $559,000$177,000 increase in Europe, for reasons mentioned in the paragraph above, and a $224,000$13,000 increase from the Middle East. This increase was offset by a $87,000 decrease in Latin America a $84,000 increase in Asia and a $29,000 increase in other geographies. This growth was mainly due to growth in existing and new markets. In addition, there was a $133,000 increase$52,000 decrease in revenue from North Americaother regions such as Australia and Asia due to sales in the United States relatedtiming of shipments to stents used in our C-Guardians FDA study which occurred in the nine months ended September 30, 2022, but not in the corresponding period in 2021.