PART
I
In
this Annual Report on Form 10-K, unless the context requires otherwise, the terms “we,” “our,” “us,”
or “the Company” refer to InspireMD, Inc., a Delaware corporation, and its subsidiaries, including InspireMD Ltd.,
taken as a whole.
Item
1. Business.
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.
Our 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, as discussed below, 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.
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,
CARENET-III, for prevention of stroke in patients in the United States. CARENET-lll 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 will enroll approximately 315 subjects
in a maximum of 40 study sites located in the United States. Additional sites in Europe may also participate in the study, contributing
a maximum of ~50% of the total enrollees. The primary endpoint of the study will be the composite of the following: incidence
of the following major adverse events: death (all- cause mortality), all stroke, and myocardial infarction (DSMI) through 30-days
post-index procedure, based on the clinical events committee (CEC) adjudication or ipsilateral stroke from 31-365 day follow-up,
based on Clinical Events Committee (CEC) adjudication.
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. 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.
We
consider the 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 was approximately $1.0 billion in 2017 (source: Health Research International 2017 Results of Update Report on Global
Carotid Stenting Procedures and Markets by Major Geography and Addressable Markets).
Our
MGuard™ Prime™ embolic protection system (“MGuard Prime EPS”) is marketed for use in patients with acute
coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions (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. However, as a
result of a shift in industry preferences away from bare-metal stents in favor of drug-eluting (drug-coated) stents, in 2014 we
decided to curtail further development of this product in order to focus on the development of a drug-eluting stent product, MGuard
DES™. Due to limited resources, however, our efforts have been limited to testing drug-eluting stents manufactured by potential
partners for compatibility with MicroNet and seeking to incorporate MicroNet onto a drug-eluting stent manufactured by a potential
partner. The FDA has clarified that the primary mode of action for drug-eluting cardiovascular stents, which are regulated as
combination products, is that of the device component and has assigned the FDA Center for Devices and Radiological Health (CDRH)
primary responsibility for premarket review and regulation, providing some clarity about what to expect regarding the regulatory
framework related to the development of MGuard DES™.
We
also intend to develop a pipeline of other products and additional applications by leveraging our MicroNet technology to new applications
to improve peripheral vascular and neurovascular procedures, such as the treatment of the superficial femoral artery disease,
vascular disease below the knee and neurovascular stenting to seal aneurysms in the brain.
Presently,
none of our products may be sold or marketed in the United States.
We
were organized in the State of Delaware on February 29, 2008.
Recent
Developments
Public
Offerings
On
February 8, 2021, we closed an underwritten public offering of 29,032,258 units, with each such unit being comprised of one share
of our common stock, par value $0.0001 per share, and one Series G Warrant to purchase one-half of one share of common stock (the
“February 2021 Offering”). The offering price to the public was $0.62 per unit. The Series G Warrants were immediately
exercisable at a price of $0.682 per share, subject to adjustment in certain circumstances, and expire five years from the date
of issuance. We also granted the underwriter of the offering an option to purchase an additional 4,354,838 shares of common stock
and Series G Warrants to purchase 2,177,419 shares of common stock, which the underwriter exercised in full. , In connection with
the offering we granted to the underwriter a compensation warrant to purchase up to 1,669,355 shares of common stock with an exercise
price of $0.682 per share and which are exercisable for five years from February 3, 2021. Our net proceeds from the offering,
after giving effect to the exercise of the underwriter’s over-allotment option, were approximately $18.9 million, after
deducting underwriting discounts and commissions and payment of other expenses associated with the offering, but excluding the
proceeds, if any, from the exercise of Series G Warrants sold in the offering.
On
June 5, 2020, we closed an underwritten public offering of (i) 7,635,800 Units, with each Unit being comprised of one share of
our common stock, par value $0.0001 per share, and one Series F warrant to purchase one share of common stock, and (ii) 14,586,400
Pre-Funded Units, with each Pre-Funded Unit being comprised of one Pre-Funded Warrant to purchase one share of common stock and
one Series F Warrant. In connection with this public offering, the underwriter exercised the option practically in full, for 3,333,300
shares of common stock and 3,333,300 Series F Warrants. The offering price to the public was $0.45 per Unit and $0.449 per Pre-Funded
Unit. Our net proceeds from the offering and the exercise of the underwriter’s over-allotment option were approximately
$10.7 million, after deducting underwriting discounts and commissions and payment of other estimated expenses associated with
the offering, but excluding the proceeds, if any, from the exercise of Series F Warrants and the Pre-Funded Warrants sold in the
offering.
Distribution
and Purchase Agreement with Chinese Partners
On
February 3, 2021, we entered into a Distribution Agreement with three China-based partners, pursuant to which the Chinese partners
will be responsible for conducting the necessary registration trials for commercial approval of our products in China, followed
by an eight-year exclusive distribution right to sell our products in China with the term of the agreement continuing on a year-to-year
basis unless terminated. Under the Distribution Agreement, the China-based partners will be subject to minimum purchase obligations.
The Distribution Agreement may be terminated for cause upon failure to meet minimum purchase obligations, failure to obtain regulatory
approvals or for other material breaches.
In
addition, and on the same day, we entered into an investment transaction with QIDI, which included (i) an SPA, pursuant to which
QIDI agreed to invest $900,000 in exchange for shares of our common stock at a purchase price of $0.6708 per share, and (ii) an
IRA, whereby QIDI was provided certain customary registration rights, including a commitment by us to file a registration statement
with the SEC on Form S-1 or Form S-3 and have such registration statement become effective not later than 150 days following the
closing of the transactions under the SPA.
The
transactions closed on February 5, 2021.
Sixth
Amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan
Effective
as of August 31, 2020, our stockholders approved the Sixth Amendment to the Plan and, accordingly, increased the number of shares
of common stock available for issuance pursuant to awards under such Plan by 6,500,000 shares, to a total of 7,178,395 shares
of common stock.
Regained
Compliance with New York Stock Exchange
On
August 7, 2019, we received a notification from the NYSE American that we did not meet the continued listing standards of the
NYSE American as set forth in Part 10 of the Company Guide. Specifically, we were not in compliance with Section 1003(a)(iii)
of the Company Guide because we reported stockholders’ equity of less than $6 million as of September 30, 2019, and net
losses in our five most recent fiscal years ended December 31, 2018. As a result, we became subject to the procedures and requirements
of Section 1009 of the Company Guide. On October 11, 2019, the NYSE American accepted our plan to regain compliance with Section
1003(a)(iii) of the Company Guide by August 7, 2020.
On
August 7, 2020, following our submission to the NYSE American of our plan for regaining compliance, the NYSE American approved
such plan and, accordingly and as of such date, we are compliant with all of the NYSE American LLC continued listing standards
set forth in Part 10 of the NYSE American Company Guide. In particular, we regained compliance with the continued listing requirement
under NYSE American Company Guide Section 1003(a)(iii). The return to compliance was achieved as a result of our recently-consummated
public offering, in which we raised approximately $10.7 million of net proceeds from the sale of units and pre-funded units.
FDA
Approval of IDE
On
September 8, 2020, we received approval from the FDA of our IDE, thereby allowing us to proceed with a pivotal study of our CGuard™
Carotid Stent System, CARENET-III, for prevention of stroke in patients in the United States.
ATM
Offering
On
July 28, 2020, we entered into a Sales Agreement with 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 $9,300,000 of shares of common stock (the “ATM Facility”).
Any shares to be offered and sold under the Sales Agreement will be issued and sold pursuant to the Company’s Registration
Statement on Form S-3 (File No. 333-223130), filed with the SEC on February 21, 2018 and the prospectus supplement thereto filed
with the SEC on July 28, 2020, by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated
under the Securities Act of 1933, as amended, or if specified by us, by any other method permitted by law. On January 11, 2021,
we increased the aggregate amount of our shares of common stock that may be sold under the Sales Agreement from $9,300,000 to
$10,382,954, and, as a result, utilized and sold the maximum amount allowable under the ATM Facility, which resulted in an aggregate
amount of $10,381,958.
Registration
Clearance for CGuard™ MicroNet® in Brazil
On
July 23, 2020, we announced that we obtained registration from the Brazilian registration authority, Agéncia Nacional de
Vigiláncia Sanitária (ANVISA), for our CGuard MicroNet covered stent, clearing it for sale and distribution in Brazil.
New
Trial Results for CGuard EPS
On
June 10, 2020, we reported the publication of the results of our PARADIGM trial in the EuroIntervention journal. In that
trial, 101 unselected consecutive real-life patients were treated with our CGuard MicroNET covered stent for carotid stenosis
and were monitored for postprocedural neurologic events for a period of 12 months. The results displayed sustained protection
against any such neurologic events. At 30 days, only one adverse event occurred (a minor transient stroke with no other strokes,
myocardial infarctions, or deaths). Furthermore, those study results showed that no strokes occurred between 30 days and twelve
months.
On
June 25, 2020, we reported the results from an investigator-initiated SIBERIA randomized clinical trial of our CGuard EPS, which
evaluated 30-day silent brain infarcts associated with the use of the Acculink™ conventional open-cell nitinol stent vs.
our CGuard Micronet-covered stent. Those results displayed that CGuard had a statistically significant (greater than three-fold)
reduction in the procedure-generated mean cerebral lesion volume relative to Acculink. At 30 days, there were zero new cerebral
lessons in the CGuard arm, compared to six in the Acculink arm, also statistically significant.
On
September 3, 2020 we reported the award for Best ESC Congress Poster for the presentation of updated data from the large, long-term
PARADIGM-EXTEND study of the CGuard™ Embolic Prevention System (EPS), as part of the European Society of Cardiology 2020
Carotid Update e-presentation at the European Society of Cardiology (ESC) Congress 2020. PARADIGM/EXTEND is an investigator-driven
on-going study performed with CGuard Carotid stent for primary and secondary stroke prevention in a large, consecutive all-comers
population, with 5 years (60 months) follow-up. The results for 480 patients of the expected total of 550 that completed the 30-day
follow-up were presented were no peri-procedural major strokes or death. The total death/stroke /myocardial incidence at 30 days
was 1.04% (5/480) due to two minor strokes, one myocardial infarction and two stent-unrelated deaths. In the study, 354/480 patients
completed the 12-month follow-up with only 1 patient experiencing in-stent restenosis, 0.28% (1/354). At the 12-month follow-up
there were no other device-related adverse clinical events. Finally, 46/480 patients completed the 60-month follow-up period with
one more case of in-stent restenosis and no additional cases of device-related stroke.
Appointment
of Dr. Gary Roubin, M.D. to our Board of Directors
On
October 12, 2020, our board of directors, or the Board, appointed Dr. Gary S. Roubin as a Class I member of the Board, effective
as of that date, with a term expiring at the Company’s 2021 annual meeting of stockholders. Dr. Roubin is an internationally
renowned interventional cardiologist recognized for his pioneering work in carotid stenting and embolic and protection devices.
He is also acknowledged for the development of coronary stenting and the first FDA-approved coronary stent. In connection with
his appointment, Dr. Roubin was granted options to purchase 79,650 shares of common stock and 238,950 shares of restricted stock.
Shortly after his appointment as a director, and on October 16, 2020, Dr. Roubin invested $100,000 in the Company in exchange
for 222,223 units consisting of (i) one share of common stock and (ii) one warrant to purchase our common stock with an exercise
price of $0.495. For additional biographical information about Dr. Roubin, please see “Management” herein.
COVID-19
Developments
In
an effort to contain and mitigate the spread of COVID-19, which the World Health Organization, or WHO, declared to be a pandemic
on March 12, 2020, many countries have imposed unprecedented restrictions on travel, quarantines and other public health safety
measures. As of the beginning of the second quarter of 2020, we began to experience a significant COVID-19 related impact on our
financial condition and results of operations, which we primarily attribute to the postponement of CGuard EPS procedures (non-emergency
procedures), as hospitals shifted resources to patients affected by COVID-19. To our knowledge, most European countries in which
we operate are slowly reinstating elective procedures, but we do not know when the hospitals will resume to normal pre-pandemic
levels with such procedures in light of recent increases in COVID-19 cases in the territories we sell into. We anticipate that
the continuation of the pandemic and related restrictions and safety measures would likely result in continued fluctuations in
sales of our products for the upcoming periods. For more discussion on our risks related to COVID-19, please see risk factors
included under “Item 1A. Risk Factors” herein.
In
response to significant market volatility and uncertainties relating to COVID-19, the fees and salaries of our Board, management
and most of our employees were reduced in order to alleviate corporate operating expenses.
Effective
April 1, 2020, the Board approved a 50% decrease in the annual cash compensation for non-employee directors from an aggregate
amount of $154,000 to $77,000.
On
April 21, 2020, Marvin Slosman, our President, Chief Executive Officer and Director, signed a waiver reducing his monthly base
salary from $33,333 to $16,666 for the period beginning April 1, 2020 and ending on such date as Mr. Slosman was to determine,
and Craig Shore, our Chief Financial Officer, Chief Administrative Officer, Secretary and Treasurer, signed a waiver reducing
his monthly base salary from NIS 80,125 to NIS 40,063 for the period beginning April 1, 2020 and ending on such date as Mr. Shore
was to determine.
Effective
April 1, 2020, we reduced the annual salaries of most of our employees by 20% to 30% until further notice.
Based
on a determination made by each of Mr. Slosman and Mr. Shore on June 10, 2020, following the closing of our underwritten public
offering in June 2020, as described above, each of Mr. Slosman’s and Mr. Shore’s monthly base salaries were reinstated
to $33,333 and NIS 80,125, respectively, effective as of June 1, 2020. Each of the salaries for the remaining officers, directors
and employees was similarly reinstated by no later than June 30, 2020.
As
a result of the reduction of those fees and salaries during the second quarter of 2020, our operating expenses were reduced by
approximately $235,000 in the second quarter of 2020.
Release
from Former Underwriter
The
terms of our engagement of the underwriter for our September 2019 financing contained a purported 12 month right of first refusal
in favor of such underwriter with respect to future financings. Due to, among other things, difficulties in the relationship with
that prior underwriter and our need to raise additional funds to finance our ongoing operations, we engaged A.G.P./Alliance Global
Partners in May 2020 as underwriter for our June 2020 public offering, and again in July 2020 for an ATM Facility.
On
July 28, 2020, we entered into a settlement agreement and release with that prior underwriter, under which it provided us a final,
unconditional release from any further obligations arising out of or related to the engagement agreements, underwriting agreements
and placement agency agreements which we had been party to with it and with respect to any services which it had provided to us.
We, in turn, provided the prior underwriter a final, unconditional release from any further obligations arising out of or related
to the prior agreements and services.
As
consideration for the final release provided to us, we paid to the prior underwriter $400,000 in cash and reduced, to $0.495,
the exercise price per share of warrants to purchase 274,029 shares of our common stock that had been issued by us to the prior
underwriter in various offerings that took place between March 2018 and September 2019. That reduced exercise price represents
the exercise price for the Series F Warrants that we issued in our June 2020 public offering. The warrants that were repriced
had existing exercise prices per share ranging from $187.50 to $2.25 and a weighted average exercise price per share of $7.32.
All other terms of those warrants remained unchanged. The related increase in expenses of $400,000 was recorded during the three
months ended June 30, 2020 to “General and Administrative expense” within the Consolidated Statements of Operations.
Our
Industry
Carotid
Carotid
arteries are located on each side of the neck and provide the primary blood supply to the brain. Carotid artery disease, also
called carotid artery stenosis, is a type of atherosclerosis (hardening of the arteries) that is one of the major risk factors
for ischemic stroke. In carotid artery disease, plaque accumulates in the artery walls, narrowing the artery and disrupting the
blood supply to the brain. This disruption in blood supply, together with plaque debris breaking off the artery walls and traveling
to the brain, are the primary causes of stroke. According to the World Health Organization (https://www.who.int/cardiovascular_diseases/resources/atlas/en/)
every year, 15 million people worldwide suffer a stroke, and nearly six million die and another five million are left permanently
disabled. According to the same source, stroke is the second leading cause of disability, after dementia.
In
2017, 2.2 million people were diagnosed with carotid artery disease, of which, approximately 600,000 patients had high grade carotid
stenosis requiring intervention for carotid artery disease (2017 Health Research International Market Report). Carotid
artery stenting is a minimally invasive treatment option for carotid artery disease and an alternative to carotid endarterectomy,
where a surgeon accesses the blocked carotid artery though an incision in the neck, and then surgically removes the plaque. Endovascular
techniques using stents and carotid embolic prevention system protect against plaque and debris traveling downstream, blocking
off the vessel and disrupting blood flow. We believe that the use of a stent with an embolic protection system should increase
the number of patients being treated since it would avoid the need for complex surgery.
Coronary
Physicians
and patients may select from a variety of treatments to address coronary artery disease, including pharmaceutical therapy, balloon
angioplasty, stenting with bare metal or drug-eluting stents, and coronary artery bypass graft procedures, with the selection
often depending upon the stage of the disease.
The
global market for coronary stents is estimated at $5.5 billion and projected to grow to $8 billion by 2025. (Global Market Insights,
Inc. Nov 06, 2019). Growth will be driven by a continued increases in incidence (Coronary heart disease burden is projected to
rise from around 47 million DALYs globally in 1990 to 82 million DALYs (Disability Adjusted Life Year)in 2020 – WHO Global
Burden of Coronary Heart Disease) – especially in developing countries). However, this market is dominated by drug eluting
stents (DES) which limits the opportunity for MGuard.
Neurovascular
The
neurovascular market focuses on catheter-delivered products used to treat strokes that already happened or unruptured brain aneurysms
that could lead to strokes. In the latter case, coils are wound into blood vessel bulges to block blood flow entering the aneurysms
to prevent the aneurysms from rupturing. Endovascular treatment of arterial aneurysm has evolved substantially over the past two
decades, transitioning from an investigational therapy into routine clinical practice and ultimately emerging as the treatment
of choice for many lesions (source: Medtech Ventures 2009, Aneurysm Flow Modulating Device Market). We believe that the
market for aneurysm flow modulating devices is still in the embryonic stage with windows of opportunities for early entrance.
The
neurovascular market includes over-the-wire, flow-guided microcatheters, guiding catheters, coil and liquid embolics, neurovascular
stents and flow diversion stents. According to iData Research, the market is expected to be driven by the conversion from surgical
procedures to endovascular techniques in the treatment of aneurysms and arteriovenous malformations.
Peripheral
Peripheral
vascular diseases (“PVD”) are caused by the formation of atherosclerotic plaques in arteries, which carry blood to
organs, limbs and head. It is also known as peripheral artery occlusive disease or peripheral artery disease. It comprises diseases
pertaining to both peripheral veins and peripheral arteries, affecting the peripheral and cardiac circulation in the body. PVD
includes diseases outside of the heart and brain, but most times refers to the leg and foot.
Peripheral
stents are more often used in combination with balloon angioplasty to open the veins, so that blood can flow through the blocked
veins in the body.
The
growing prevalence of PVD is expected to cause increased demand for treatment options. PVD is age related and its prevalence increases
markedly with advancing age. In addition PVD is more prevalent in lower and medium income countries than in higher income countries
(https://www.thelancet.com/journals/langlo/article/PIIS2214-109X(19)30255-4)
Our
Products
Below
is a summary of our current products and products under development, and their intended applications.
MicroNet
MicroNet
is our proprietary circular knitted mesh which wraps around a stent to protect patients from plaque debris flowing downstream
upon deployment. MicroNet is made of a single fiber from a biocompatible polymer widely used in medical implantations. The size,
or aperture, of the current MicroNet ‘pore’ is only 150-180 microns in order to maximize protection against the potentially
dangerous plaque and thrombus.
CGuard
– Carotid Applications
Our
CGuard EPS combines our MicroNet mesh and a self-expandable nitinol stent (a stent that expands without balloon dilation pressure
or need of an inflation balloon) in a single device for use in carotid artery applications. MicroNet is placed over and attached
to an open cell nitinol metal stent platform which is designed to trap debris and emboli that can dislodge from the diseased carotid
artery and potentially travel to the brain and cause a stroke. This danger is one of the greatest limitations of carotid artery
stenting with conventional carotid stents and stenting methods. The CGuard EPS technology is a highly flexible stent system that
conforms to the carotid anatomy.
We
believe that our CGuard EPS design provides advantages over existing therapies in treating carotid artery stenosis, such as conventional
carotid stenting and surgical endarterectomy, given the superior embolic protection characteristics provided by the MicroNet.
We believe the MicroNet will provide acute embolic protection at the time of the procedure, but more importantly, we believe that
CGuard EPS will provide post-procedure protection against embolic dislodgement, which can occur up to 48 hours post-procedure.
It is in this post-procedure time frame that embolization is the source of post-procedural strokes in the brain. Schofer, et al.
(“Late cerebral embolization after emboli-protected carotid artery stenting assessed by sequential diffusion-weighted magnetic
resonance imaging,” Journal of American College of Cardiology Cardiovascular Interventions, Volume 1, 2008) have
shown that the majority of the incidents of embolic showers associated with carotid stenting occur post-procedure.
Our
CGuard EPS with over-the-wire delivery system received CE mark approval in the European Union in March 2013. In October 2014,
we initiated a limited market release of CGuard EPS with over-the-wire delivery system for use in carotid artery applications
in Germany, Poland and Italy.
In
September 2014, we reported the results of the CGuard CARENET trial at the Transcatheter Cardiovascular Therapeutics (“TCT”)
conference in Washington D.C. In the CARENET trial, the CGuard EPS system demonstrated better results over historical data using
conventional commercially available carotid stents. In the third quarter of 2015 the results of the CGuard CARENET trial were
published in the Journal of the American College of Cardiology. In November 2015, positive twelve-month follow-up data from the
CGuard CARENET trial was presented at the 42nd Annual Symposium on Vascular and Endovascular Issues, documenting the benefits
of the CGuard MicroNet technology as well as the patency benefits (maintaining the artery open) of the internal and external carotid
arteries at twelve months.
In
the first quarter of 2015, we introduced CGuard RX, the new rapid exchange delivery system for CGuard EPS. The rapid exchange
delivery system has a guidewire that passes through the delivery system, running through the guiding catheter. It has one port,
and thus, can be operated by one operator, while an over-the-wire-delivery system has two lumens and ports and requires two operators
to perform the procedure. Our rapid exchange delivery system received CE mark approval in January 2015. We launched our CGuard
EPS in Europe with the rapid exchange delivery system in multiple medical specialties that perform carotid artery stenting. These
customers include interventional cardiologists, vascular surgeons, interventional neuroradiologists and interventional radiologists.
In
September 2015, we announced full market launch of CGuard EPS in Europe. 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 we are seeking strategic partners for a potential launch of CGuard EPS in Japan and China.
In
April 2017, we had a pre-IDE submission meeting with the FDA regarding CGuard EPS where we presented materials that we believed
would support a formal IDE submission seeking approval to conduct a human clinical trial in the United States which included our
draft synopsis for the clinical trial design. The FDA agreed to our pre-clinical test plan and clinical trial design. On July
26, 2019, we submitted an IDE application for CGuard EPS. In connection with such application, on August 23, 2019, we received
a request for additional information from the FDA in support of our application. On September 8, 2020, we received IDE approval
for CGuard™ Carotid Stent System, CARENET-III.
Additionally,
we intend to continue to evaluate potential product enhancements and manufacturing enhancements for CGuard EPS expected to reduce
cost of goods and/or provide the best-in-class performing delivery system. We cannot give any assurance that we will receive sufficient
(or any) proceeds from future financings or the timing of such financings, if ever for potential product enhancements and manufacturing
enhancements. In addition, such additional financings may be costly or difficult to complete. Even if we receive sufficient proceeds
from future financings, there is no assurance that we will be able to timely apply for CE mark approval following our receipt
of such proceeds. We believe these improvements may allow us to reduce cost of goods and increase penetration in our existing
geographies and better position us for entry into new markets.
MGuard
Products– Coronary Applications
Bare-Metal
Stent MGuard Product. Our MGuard Prime EPS coronary product is comprised of MicroNet wrapped around a cobalt-chromium
based bare-metal stent. In comparison to a conventional bare-metal stent, we believe our MGuard Prime EPS coronary product with
MicroNet mesh provides protection from dangerous embolic showers in patients experiencing ST-segment elevation myocardial infarction,
the most severe form of a heart attack, referred to as STEMI. Standard stents were not engineered for heart attack patients. Rather,
they were designed for treating stable angina patients whose occlusion is different from that of an occlusion in a heart attack
patient. In acute heart attack patients, the plaque or thrombus is unstable and often breaks up as the stent is implanted causing
downstream blockages in a significant portion of heart attack patients. Our MGuard Prime EPS is integrated with a precisely engineered
micro net mesh that is designed to prevent the unstable arterial plaque and thrombus that caused the heart attack blockage from
breaking off.
NGuard
— Neurovascular Applications
We
began developing a neurovascular flow diverter, which we refer to as NGuard, which is an endovascular device that diverts blood
flow away from cerebral aneurysms and ultimately seals the aneurysms. We have tested early flow diverter prototypes in initial
pre-clinical testing in both simulated aneurysm bench models using various MicroNet configurations with varying aperture sizes,
as well as in standard in vivo pre-clinical models, in which we observed aneurysm sealing and also wide open side branch vessels
across which the device was placed. We have suspended all further development activity of NGuard until we obtain sufficient funding
for such purpose.
PVGuard
— Peripheral Vascular Applications
We
intend to develop our MicroNet mesh sleeve and a self-expandable stent for use in peripheral vascular applications, to which we
refer to as PVGuard. PVDs are usually characterized by the accumulation of plaque in arteries in the legs. This accumulation can
lead to the need for amputation or even death, when untreated. PVD is treated either by trying to clear the artery of the blockage,
or by implanting a stent in the affected area to push the blockage out of the way of normal blood flow.
As
in carotid procedures, peripheral procedures are characterized by the necessity of controlling embolic showers both during and
post-procedure. Controlling embolic showers is so important in these indications that physicians often use fully covered stents,
at the risk of blocking branching vessels, to ensure that emboli do not fall into the bloodstream and move to the brain. We believe
that our MicroNet design will provide substantial advantages over existing therapies in treating peripheral artery stenosis.
However,
as we plan to focus our resources on the further expansion of our sales and marketing activities for CGuard EPS and, provided
that we have sufficient resources, potential product enhancements and manufacturing enhancements for CGuard EPS expected to reduce
cost of goods and/or provide the best-in-class performing delivery system and its submission for CE mark approval, we do not intend
to pursue the development of PVGuard in the near future.
Completed
Clinical Trials for CGuard EPS
CARENET
The
CARENET trial was the first multi-center study of CGuard EPS following the receipt of CE mark of this device in March 2013. The
CARENET trial was designed to evaluate feasibility and safety of CGuard EPS in treatment of carotid lesions in consecutive patients
suitable for coronary artery stenting (“CAS”) in a multi-operator, real-life setting. The acute, 30 day, magnetic
resonance imaging (“MRI”), ultrasound and six month clinical event results were presented at the LINC conference in
Leipzig, Germany in February, 2015. In the third quarter of 2015, the results of the CGuard CARENET trial were published in the
Journal of the American College of Cardiology. In November 2015, positive twelve month follow-up data from the CGuard CARENET
trial was presented at the 42nd Annual Symposium on Vascular and Endovascular Issues, documenting the benefits of the CGuard MicroNet
technology as well as the patency benefits (maintaining the artery open) of the internal and external carotid arteries at twelve
months.
MACCE
(myocardial infarction (“MI”), stroke or death) rate was 0.0% at 30 days. At six months, there was one death, which
was not device or procedure-related but did result in a MACCE rate of 3.6% at six months. At twelve months there were two additional
deaths, which were not device or procedure-related resulting in a MACCE rate of 10.7% at one year.
|
|
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30 days
(n=30)
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|
|
|
6 months
(n=28)
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|
|
|
12 months
(n=28)
|
|
MACCE (MI, stroke, death)
|
|
|
(0) 0.0
|
%
|
|
|
(1) 3.6
|
%
|
|
|
(3) 10.7
|
%
|
MI
|
|
|
(0) 0.0
|
%
|
|
|
(0) 0.0
|
%
|
|
|
(0) 0.0
|
%
|
stroke
|
|
|
(0) 0.0
|
%
|
|
|
(0) 0.0
|
%
|
|
|
(0) 0.0
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%
|
death
|
|
|
(0) 0.0
|
%
|
|
|
(1) 3.6
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%
|
|
|
(3) 10.7
|
%
|
CAS
carries the risk of cerebral embolization during and following the procedure, leading to life-threatening complications, mainly
cerebral ischemic events. Diffusion-weighted magnetic resonance imaging (DW-MRI) is a sensitive tool used to identify cerebral
emboli during CAS by measuring “lesions” within the brain which are areas that are ischemic and do not receive oxygenated
blood due to cerebral emboli. In the CARENET trial, 37.0% of patients treated with CGuard EPS had new ischemic lesions at 48 hours
after the procedure, with an average volume of 0.039 cm3. Of these lesions, there was only one that remained at 30 days following
the procedure and all others had resolved. Complete details appear in the following table. Where there is a second number shown
below after a ± symbol, it indicates the potential error in the measurement.
|
|
48 hours
n=27
|
|
|
30 days
n=26
|
|
Subjects with new Acute Ischemic Lesions (“AIL”)
|
|
|
10
|
|
|
|
1
|
|
Incidence of new lesions
|
|
|
37.0
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%
|
|
|
4.0
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%
|
Total number new AIL
|
|
|
83
|
|
|
|
1
|
|
Avg. number new AIL per patient
|
|
|
3.19 ± 10.33
|
|
|
|
0.04 ± 0.20
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|
Average lesion volume (cm3)
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|
|
0.039 ± 0.08
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|
|
|
0.08 ± 0.00
|
|
Maximum lesion volume (cm3)
|
|
|
0.445
|
|
|
|
0.116
|
|
Permanent AIL at 30 days
|
|
|
—
|
|
|
|
1
|
|
The
healing process of the tissue and in-stent restenosis can be measured by a non-invasive form of ultrasound called duplex ultrasound.
This type of ultrasound measures the velocity of the blood that flows within the carotid arteries, which increases exponentially
as the lumen of the internal carotid artery narrows and the percent stenosis increases. One of the measurements is called PSV
(peak systolic volume) and is known to be highly correlated to the degree of in-stent restenosis; PSV values higher than 300 cm/sec
are indicative of >70% stenosis, while PSV values lower than 104 cm/sec are indicative of <30% restenosis and healthy healing.
In the CARENET trial, duplex ultrasound measurements done at 30 days, 6 months and 12 months following the stenting procedure
all attest to healthy normal healing without restenosis concerns, as the PSV values were 60.96 cm/sec ± 22.31, 85.24 cm/sec
± 39.56, and 90.22 cm/sec ± 37.72 respectively. The internal carotid artery was patent in all patients (100%).
The
conclusions of the CARENET trial were:
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●
|
The
CARENET trial demonstrated safety of the CGuard EPS stent, with a 30 day MACCE rate of 0%.
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●
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Incidence
of new ipsilateral lesions (percent of patients with new lesions on the ipsilateral side (same side where the stent was employed))
at 48 hours was reduced by almost half compared to published data, and volume was reduced almost tenfold.
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|
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|
|
●
|
All
but one lesion had resolved completely by 30 days.
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|
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|
|
●
|
Twelve
month data showed no stroke or stroke-related deaths, and no cardiac adverse events.
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|
|
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●
|
CGuard
EPS offers enhanced benefits for patients undergoing CAS with unprecedented safety.
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Physician-Sponsored
Clinical Trials for CGuard—PARADIGM-101 Study
PARADIGM-101
(Prospective evaluation of All-comer peRcutaneous cArotiD
revascularization In symptomatic and increased-risk asymptomatic carotid artery stenosis, using CGuard™
Mesh-covered embolic prevention stent system-101) was an investigator-led, single center study with the objective
of evaluating feasibility and outcome of routine use of CGuard EPS in 101 consecutive unselected all-comer patients referred for
carotid revascularization, initiated in 2015. In May 2016, the 30-day results were presented at the EuroPCR 2016 Late-Breaking
Clinical Trial Session in Paris, and in the Journal of EuroIntervention.
Key
findings from the PARADIGM-101 study and the follow-up data are as follows:
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●
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CGuard
EPS delivery success was 99.1%. The clinical evaluation also found no device foreshortening or elongation;
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●
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Angiographic
diameter stenosis or vessel narrowing was reduced from 83±9% to only 6.7±5% (p<0.001);
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|
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|
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●
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Periprocedural
death/major stroke/ myocardial infarction (“MI”) rates were 0%;
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●
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One
event was adjudicated by the Clinical Events Committee as a minor stroke (0.9%), with no change in NIH Stroke Scale or modified
Ranking scale;
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The
results of the PARADIGM-101 study demonstrated that CGuard EPS can safely be used in a high risk, all-comer population of patients
with carotid artery stenosis and indicated that routine use of CGuard EPS may prevent cerebral events, such as strokes, by holding
plaque against the vessel wall, preventing emboli from being released into the blood stream. The PARADIGM-101 study found that
CGuard EPS is applicable in up to 90% of all-comer patients with carotid stenosis.
Clinical
Results and Mechanical Properties of the Carotid CGUARD Double-Layered Embolic Prevention Stent Study
“Clinical
Results and Mechanical Properties of the Carotid CGUARD Double-Layered Embolic Prevention Stent Study” was an investigator-led,
prospective single-center study which evaluated CGuard EPS in 30 consecutive patients with internal carotid artery stenosis disease
with the objective of reporting early clinical outcomes with a novel MicroNet covered stent for the internal carotid artery and
the in vitro investigation of the device’s mechanical properties. In October 2016, the 30-day positive results were published
online-ahead-of-print in the Journal of Endovascular Therapy.
Key
findings from the study are as follows:
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●
|
100%
success in implanting CGuard EPS without residual stenosis;
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●
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No
peri- or post-procedural complications;
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|
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●
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No
deaths, major adverse events, minor or major strokes, or new neurologic symptoms during the six months following the procedure;
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|
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|
|
●
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Modified
Rankin Scale improved for the symptomatic patients from 1.56 prior to the procedure to 0 afterwards;
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|
|
|
|
●
|
All
vessels treated with CGuard EPS remained patent (open) at six months; and
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|
|
|
|
●
|
DW-MRI
performed in 19 of 30 patients found no new ipsilateral lesions after 30 days and after six months compared with the baseline
DW-MRI studies.
|
Additionally,
based on engineering evaluations, the study concluded that CGuard EPS provides a high radial force and strong support in stenotic
lesions. The stent is easy to use and safe to implant because it does not foreshorten and its structure adapts well to changes
in diameter and direction of tortuous vascular anatomies. The MicroNet mesh of CGuard did not cause any changes to specific mechanical
parameters of the underlying stent.
CGUARD
Mesh-Covered Stent in Real World: The IRON-Guard Registry
“CGUARD
Mesh-Covered Stent in Real World: The IRON-Guard Registry using CGuard EPS” was a physician initiated prospective multi-center
registry that included 200 patients from 12 medical centers in Italy. The objective of the study was to report 30-day outcomes
(including MACCE) in a prospective series of patients who were treated with CGuard EPS between April 2015 and June 2016. In January
2017, 30-day results were presented at the Leipzig Interventional Course (LINC) 2017 and published in the Journal of EuroIntervention
in May 2017. The 12 month follow-up was published in the Journal of EuroIntevention in October 2018.
Key
30-day results presented were:
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●
|
100%
success in implanting CGuard EPS;
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●
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No
MI, major stroke or death at 30 days;
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|
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●
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There
were two transient ischemic attacks and five periprocedural minor strokes, including one thrombosis solved by surgery.
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●
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Total
elimination of post-procedural neurologic complications by 30 days;
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|
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●
|
DW-MRI
performed pre-procedure and between 24 and 72 hours post-procedure in 61 patients, indicated that 12 patients had new micro
emboli (19%).
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●
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At
12 months, there were no new major neurological adverse events, thrombosis or external carotid occlusion recorded;
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●
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One
myocardial infarction occurred at 12 months.
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Peri-procedural
brain lesions prevention in CAS (3PCAS): Randomized trial comparing CGuard stent vs. WallStent™ Study
3PCAS
study was an independent investigator-led single center randomized clinical trial, comparing CGuard EPS vs. WallStent™,
intended to evaluate the incidence of peri-procedural diffusion-weighted-magnetic-resonance-imaging (DW-MRI) new brain lesions
after carotid artery stenting. Sixty-one consecutive patients referred for carotid revascularization (between January 2015 and
October 2016) were eligible for the study. The results of the 3PCAS study was published in the International Journal of Cardiology
in September 2018. The discussion distinguished between peri-procedural (from procedure to 48h -72h) and post-procedural periods
(72h to 30 days) where the CGuard EPS demonstrated a reduction in the post-procedural embolic effect during the carotid plaque
healing period. In contrast, there was no difference between the two stent groups during the peri-procedural stage because of,
according to the published article, the presence of bilateral/contralateral lesions (lesions resulting from the contralateral
artery from the non-treated carotid) which suggest that the peri-procedural neurological damage may have originated from extra-carotid
sources (outside of the artery which was treated and outside the stent itself).
Initial
Clinical Study of the New CGuard EPS MicroNet Covered Carotid Stent: “One Size Fits All”
“Initial
Clinical Study of the New CGuard EPS MicroNet Covered Carotid Stent: ‘One Size Fits All’” was an investigator-led,
single-center study, which evaluated CGuard EPS in 30 consecutive patients with symptomatic stenosis of the internal carotid artery
with the objective of evaluating the CGuard EPS MicroNet covered stent for its ability to adjust to different vessel diameters.
The results of the study were published in the Journal of Endovascular Therapy in May 2019. The conclusion of the study as reported
was that CGuard EPS has high conformability combined with an almost equivalent outward radial force at expansion diameters ranging
from 5.5 to 9.0 mm. The first clinical results demonstrate the “One Size Fits All” stent can be implanted in internal
carotid arteries with reference diameters within this range.
Key
findings from the study were as follows:
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●
|
100%
technical success in implanting CGuard EPS;
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|
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|
●
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No
neurological events within 30 days;
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●
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The
chronic outward force normalized by stent length demonstrated a near-equivalent radial force outcome; and
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|
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|
●
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The
stent displayed only a minor difference between the minimal radial force at 9.0 mm (0.195 N/mm) and the maximal radial force
at 5.5 mm (0.330 N/mm).
|
Preliminary
Results from a Prospective Real-World Multicenter Clinical Practice of Carotid Artery Stenting Using the CGuard Embolic Prevention
System: The IRONGUARD 2 Study
“Preliminary
Results From a Prospective Real-World Multicenter Clinical Practice of Carotid Artery Stenting Using the CGuard Embolic Prevention
System: The IRONGUARD 2 Study” is a physician initiated prospective multi-center registry enrolling 733 patients from 20
medical centers in Italy, from January 2017 to June 2019. The objective of the study is to evaluate periprocedural (24 hours),
post-procedural (up to 30 days), and 12-month outcomes in a largest, prospective, multicenter series of patients submitted for
protected carotid artery stenting with the CGuard Embolic Prevention System. The 24-hour, 30-day and 12-month preliminary results
(data available on 726 patients out of the 733 treated) were presented at the Leipzig Interventional Course (LINC) in January
2021. The study’s preliminary results from the IRONGUAURD 2 study suggested in a real-world evaluation of carotid artery
stenting, Cguard EPS can be safely used for treatment of extracranial carotid artery stenosis, allowing a low rate of post procedural
adverse events by 12 months.
Key
findings from the study are as follows:
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●
|
100%%
procedural success in implanting CGuard EPS;
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|
|
|
|
●
|
1
death from hemorrhagic stroke (patient was admitted for immediate treatment of CAS due to stroke), 2 minor strokes, 6 TIAs
and one nonfatal AMI at 24 hours;
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|
|
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|
1
minor stroke, 2 TIAs, three AMIs, no deaths and no stent thrombosis/occlusions between 24 hours and 30 days; and
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|
|
|
|
●
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1
minor stroke, 4 TIAs, 2 AMIs and 8 deaths (the 2 mentioned AMIs, 4 malignancies, 1 suicide and 1 undefined complication in
Guillain-Barré Syndrome) between 30 days and 1 year.
|
The
SIBERIA Trial for Carotid Artery Stenosis: A Randomized Controlled Trial of Conventional Versus Micronet™-Covered Stent
Use in Percutaneous Neuroprotected Carotid Artery Revascularization: Peri-procedural and 30-day Diffusion-Weighted Magnetic Resonance
Imaging and Clinical Outcomes
“The
SIBERIA Trial for Carotid Artery Stenosis: A Randomized Controlled Trial of Conventional Versus Micronet™-Covered Stent
Use in Percutaneous Neuroprotected Carotid Artery Revascularization: Peri-procedural and 30-day Diffusion-Weighted Magnetic Resonance
Imaging and Clinical Outcomes” was an investigator-initiated randomized clinical trial, single-center study, which evaluated
one hundred patients who qualified for carotid revascularization with high risk for surgery and were randomized 1:1 to either
CGuard EPS or AcculinkTM. The primary endpoints were incidence and volume of new cerebral embolic post-procedural lesions
(24-48 hours) as determined by diffusion weighted magnetic resonance imaging (DW-MRI). The principal secondary endpoints included
incidence of periprocedural or postprocedural stroke, myocardial infarction and death at 30 days. The results of the study were
presented in a late-breaking session at the EuroPCR in June 2020. The conclusion of the study was that the CGuard™ Micronet™-covered
stent use in consecutive unselected patients subjected to neuroprotected carotid artery stenting was associated with a greater
than three-fold reduction in the procedure-generated mean cerebral lesion volume, and with zero post-procedural cerebral embolisms
observed.
Key
findings from the study are as follows:
|
●
|
Post
Procedure (24-48 hours), the CGuard™ arm was observed to have a 78% reduction in the average volume of new cerebral
lesions (157 mm3 vs. 700 mm3), a statistically significant improvement (p=0.007;
|
|
|
|
|
●
|
At
30 days, DW-MRI showed zero new cerebral lessons in the CGuard™ arm versus six in the Acculink™ arm (p=0.03);
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|
|
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|
●
|
At
30 days, there were zero strokes, myocardia infarctions or deaths in the CGuard arm and three events the Acculink™ arm
(two strokes and one myocardial infarction).
|
Completed
Clinical Trials for MGuard Bare-Metal Coronary Products
We
have completed eight clinical trials with respect to our first generation stainless steel-based MGuard coronary device and our
cobalt-chromium based MGuard Prime EPS stent. Our first generation MGuard stent combining the MicroNet with a stainless steel
stent received CE mark approval for the treatment of coronary artery disease in the European Union in October 2007. We subsequently
replaced the stainless steel stent with a more advanced cobalt-chromium based stent for MGuard Prime EPS.
The
First in Men (FIM) study conducted in Germany from the fourth quarter of 2006 through the second quarter of 2008 focused on patients
with occlusion in their stent graft. This group is considered to be in “high risk” for complications during and shortly
after the procedure due to the substantial risk of occurrence of a thromboembolic event. The study demonstrated MGuard’s
safety in this high risk group. This study was followed by the GUARD study in Brazil in 2007 with a similar patient population
which reinforced the safety profile of MGuard in patients prone to procedural complications. The MAGICAL study was a pilot study
in STEMI patients conducted in Poland from 2008 through 2012 which demonstrated safety, measured by MACE rates at 30 days following
the procedure, as well as efficacy results, measured by the ability of MGuard to reestablish blood flow into the infarcted area
of the muscle. Furthermore, we conducted three registries (iMOS, IMR and iMOS Prime) that confirmed the feasibility of MGuard
and MGuard Prime EPS for the treatment of STEMI patients and the safety of MGuard and MGuard Prime EPS in the STEMI patient group.
Safety was repeatedly demonstrated in these trials and registries by the low mortality rate in the first month after the procedure.
In
the second calendar quarter of 2011, we began the MGuard for Acute ST Elevation Reperfusion Trial (which we refer to as our “MASTER
I trial”), a prospective, randomized study, which demonstrated that among patients with acute STEMI undergoing emergency
PCI, patients treated with MGuard had superior rates of epicardial coronary flow (blood flow within the vessels that run along
the outer surface of the heart) and complete ST-segment resolution, or restoration of blood flow to the heart muscle after a heart
attack, compared to those treated with commercially-approved bare metal or drug-eluting stents. The results of this trial are
summarized in greater detail below.
Finally,
the MASTER II trial, which we initially initiated as part of our efforts to seek approval of our MGuard Prime EPS by the FDA,
was discontinued at our election in its current form in light of market conditions moving toward the use of drug-eluting stents
over bare-metal stents. Analysis of the patients already enrolled in the MASTER II trial prior to its suspension, however, reconfirmed
the MASTER I safety results due to a continued low mortality rate.
MASTER
I Trial
In
the second calendar quarter of 2011, we began the MASTER I trial, a prospective, randomized study in Europe, South America and
Israel to compare the MGuard with commercially-approved bare metal and drug-eluting stents in achieving superior myocardial reperfusion
(the restoration of blood flow) in primary angioplasty for the treatment of acute STEMI, the most severe form of heart attack.
The MASTER I trial enrolled 433 subjects, 50% of whom were treated with MGuard and 50% of whom were treated with a commercially-approved
bare metal or drug-eluting stents. The detailed acute and 30 days results from the trial were presented at the TCT conference
on October 24, 2012 and published (Prospective, Randomized, Multicenter Evaluation of a Polyethylene Terephthalate Micronet Mesh–Covered
Stent (MGuard) in ST-Segment Elevation Myocardial Infarction, Stone et. al, JACC, 60; 2012). The results were as follows:
|
●
|
The
primary endpoint of post-procedure complete ST-segment resolution (restoration of blood flow to the heart muscle after a heart
attack) was statistically significantly improved in patients randomized to the MGuard compared to patients receiving a commercially-approved
bare metal or drug-eluting stent (57.8% vs. 44.7%).
|
|
|
|
|
●
|
Patients
receiving MGuard exhibited superior rates of thrombolysis in myocardial infarction (TIMI) 3 flow, which evidences normal coronary
blood flow that fills the distal coronary bed completely, as compared to patients receiving a commercially-approved bare metal
or drug-eluting stent (91.7% vs. 82.9%), with comparable rates of myocardial blush grade 2 or 3 (83.9% vs. 84.7%) and corrected
TIMI frame count (cTFC) (17.0 vs. 18.1
|
|
|
|
|
●
|
Angiographic
success rates (attainment of <50% final residual stenosis of the target lesion and final TIMI 3 flow) were higher in the
MGuard group compared to commercially-approved bare metal or drug-eluting stents (91.7% vs 82.4%).
|
|
|
|
|
●
|
Mortality
(0% vs. 1.9%) and major adverse cardiac events (1.8% vs. 2.3%) at 30 days post procedure were not statistically significantly
different between patients randomized to MGuard as opposed to patients randomized to commercially-approved bare metal or drug-eluting
stents. All other major adverse cardiac event components, as well as stent thrombosis, were comparable between the MGuard
and commercially-approved bare metal or drug-eluting stents.
|
The
six month results from the MASTER I trial were presented at the 2013 EuroPCR Meeting, the official annual meeting of the European
Association for Percutaneous Cardiovascular Interventions, on May 23, 2013 in Paris, France. The results were as follows:
|
●
|
Mortality
(0.5% vs. 2.8%) and major adverse cardiac events (5.2% vs. 3.4%) at 6 months post procedure were not statistically significantly
different between patients randomized to the MGuard as compared to patients randomized to commercially-approved bare metal
or drug-eluting stents. All other major adverse cardiac event components, as well as stent thrombosis, were comparable between
patients treated with MGuard and those treated with commercially-approved bare metal or drug-eluting stents.
|
The
twelve month results from the MASTER I trial were presented at the TCT conference on October 29, 2013 and published (Mesh-Covered
Embolic Protection Stent Implantation in ST-Segment–Elevation Myocardial Infarction Final 1-Year Clinical and Angiographic
Results From the MGUARD for Acute ST Elevation Reperfusion Trial, Dudek et. al, Coronary Interventions, 2014). The results
were as follows:
|
●
|
Mortality
(1.0% vs. 3.3%) and major adverse cardiac events (9.1% vs. 3.3%) at 12 months post procedure were not statistically significantly
different between patients randomized to the MGuard as opposed to those randomized to commercially-approved bare metal or
drug-eluting stents. All other major adverse cardiac events, as well as stent thrombosis, were comparable between the MGuard
and commercially-approved bare metal or drug-eluting stents.
|
In
summary, the MASTER I trial demonstrated that among patients with acute STEMI undergoing emergency PCI patients treated with MGuard
had superior rates of epicardial coronary flow (blood flow within the vessels that run along the outer surface of the heart) and
complete ST-segment resolution compared to those treated with commercially-approved bare metal or drug-eluting stents. In addition,
patients treated with MGuard showed a slightly lower mortality rate and a slightly higher major adverse cardiac event rate as
compared to patients treated with commercially-approved bare metal or drug-eluting stents six and twelve months post procedure.
A
detailed table with the results from the MASTER I trial is set forth below. The “p-Value” refers to the probability
of obtaining a given test result. Any p value less than 0.05 is considered statistically significant.
|
|
MGuard
|
|
|
Bare Metal Stents/Drug
Eluting Stents
|
|
|
p-Value
|
|
Number of Patients
|
|
|
217
|
|
|
|
216
|
|
|
|
—
|
|
TIMI 0-1
|
|
|
1.8
|
|
|
|
5.6
|
|
|
|
0.01
|
|
TIMI 3
|
|
|
91.7
|
|
|
|
82.9
|
|
|
|
0.006
|
|
Myocardial blush grade 0-1
|
|
|
16.1
|
|
|
|
14.8
|
|
|
|
0.71
|
|
Myocardial blush grade 3
|
|
|
74.2
|
|
|
|
72.1
|
|
|
|
0.62
|
|
ST segment resolution >70
|
|
|
57.8
|
|
|
|
44.7
|
|
|
|
0.008
|
|
30 day major adverse cardiac event
|
|
|
1.8
|
|
|
|
2.3
|
|
|
|
0.75
|
|
6 month major adverse cardiac event
|
|
|
5.2
|
|
|
|
3.4
|
|
|
|
0.34
|
|
12 month major adverse cardiac event
|
|
|
9.1
|
|
|
|
3.3
|
|
|
|
0.02
|
|
Future
Clinical Trials for CGuard EPS and MGuard Prime EPS
Post-marketing
clinical trials (outside the United States) could be conducted to further evaluate the safety and efficacy of CGuard EPS in specific
indications. These trials would be designed to facilitate market acceptance and expand the use of the product. We expect to be
able to rely upon CE mark approval of the product and other supporting clinical data to obtain local approvals.
We
do not anticipate conducting additional post-marketing clinical trials for our bare-metal MGuard coronary products.
Growth
Strategy
Our
primary business objective is to utilize our proprietary MicroNet technology and products to become the industry standard for
treatment of stroke, complex vascular and coronary disease and to provide a superior solution to the common acute problems caused
by current stenting procedures, such as restenosis, embolic showers and late thrombosis. We are pursuing the following business
strategies to achieve this objective.
|
●
|
Widen
the adoption of CGuard EPS. We are seeking to expand the population of CGuard EPS patients in those countries in which
CGuard EPS is commercially available. In particular, our focus is on establishing CGuard EPS as a viable alternative (in appropriate
cases) to conventional carotid stents and vascular surgery within the applicable medical communities. We intend to accomplish
this goal by continuing to publish and present our clinical data, support investigator-initiated clinical registries and exploring
addition of a procedural protection device to our portfolio incorporating the principal of reverse flow of the carotid artery
as an adjuctive alternative to femoral access. We have partnered and will continue to seek out partnerships with organizations
focused on the treatment of stroke. We will also continue to engage advisory boards and to develop a network of key opinion
leaders to assist us in our efforts to widen the adoption of CGuard EPS.
|
|
|
|
|
●
|
Grow
our presence in existing and new markets for CGuard EPS. We have launched CGuard EPS in most European and Latin American
countries through a comprehensive distributor sales organizations network. We are continuing to focus on larger growing markets
through this network by supporting our distributors with a comprehensive marketing and clinical education programs. In November
2018, we obtained approval for reimbursement and commercial sale for CGuard EPS in Australia and immediately launched the
product. We are also pursuing additional product registrations and distribution contracts with local distributors in other
countries in Europe, Asia and Latin America.
|
|
●
|
Continue
to leverage our MicroNet technology to develop additional applications for interventional cardiologists and vascular surgeons.
In addition to the applications described above, we believe that we will eventually be able to utilize our proprietary
MicroNet technology to address imminent market needs for new product innovations to significantly improve patients’
care. We continue to broadly develop and protect intellectual property using our mesh technology. Examples of some areas include
peripheral vascular disease, neurovascular disease, renal artery disease and bifurcation disease.
|
|
|
|
|
●
|
Establish
relationships with collaborative and development partners to fully develop and market our existing and future products. We
are seeking strategic partners for collaborative research, development, marketing, distribution, or other agreements, which
could assist with our development and commercialization efforts for CGuard EPS and MGuard DES, and other potential products
that are based on our MicroNet technology.
|
|
|
|
|
●
|
Resume
development and successfully commercialize MGuard DES. While we have limited the focus of product development to our carotid
products, if we resume development of our coronary products, we plan to evaluate opportunities to further develop MGuard DES.
|
|
|
|
|
●
|
Portfolio
expansion and pipeline development We will continue to invest in advancing our portfolio with new delivery system alternatives
to facilitate the use of CGuard by all physicians. Our delivery systems will enable all endovascular access points including
accessory devices for Arterial Venous (AV) shunting.
|
Competition
The
markets in which we compete are highly competitive, subject to change and impacted by new product introductions and other activities
of industry participants.
Carotid
The
carotid stent markets in the United States and Europe are dominated by Abbott Laboratories, Boston Scientific Corporation, Covidien
Ltd. (currently part of Medtronic, Inc.), and Cordis Corporation (currently part of Cardinal Health, Inc.). Gore Medical and Terumo
Medical Corporation produce a polytetrafluoroethylene mesh-covered stent and a double layer metal stent, respectively. All of
these larger companies have substantially greater capital resources, larger customer bases, broader product lines, larger sales
forces, greater marketing and management resources, larger research and development staffs and larger facilities than ours and
have established reputations and relationships with our target customers, as well as worldwide distribution methods that are more
effective than ours. However, we believe that the European market is somewhat fragmented, and, in our opinion, smaller competitors
may be able to gain market share with greater flexibility.
Coronary
The
bare-metal stent and the drug-eluting stent markets in the United States and Europe are dominated by Abbott Laboratories, Boston
Scientific Corporation, and Medtronic, Inc. In Europe, the market is now almost exclusively dominated by drug eluding stents and
is rapidly becoming so in the rest of the world. (Catheter Cardiovasc Interv. 2018 Oct 1;(92(4):E262-E270. doi: 10.1002/ccd.27375.
Epub 2017 Oct 13. https://www.ncbi.nlm.nih.gov/pubmed/29027735). We believe physicians look to next-generation stent technology
to compete with existing therapies. Such next-generation technologies include bio-absorbable stents, stents that focus on treating
bifurcated lesions, and stents with superior polymer and drug coatings, and many industry participants are working to improve
stenting procedures as the portfolio of available stent technologies rapidly increases.
According
to the MEDTECH OUTLOOK, the three major players (Abbott Laboratories, Boston Scientific Corporation and Medtronic, Inc.) in the
worldwide coronary stent market have a combined total market share of approximately 92%. To date, our sales are not significant
enough to register in market share. As such, one of the challenges we face to further our product growth is the competition from
numerous pharmaceutical and biotechnology companies in the therapeutics area, as well as competition from academic institutions,
government agencies and research institutions. Most of our current and potential competitors, including but not limited to those
listed above, have, and will continue to have, substantially greater financial, technological, research and development, regulatory
and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do. Due to ongoing consolidation
in the industry, there are high barriers to entry for small manufacturers in the European and the U.S. markets and the rest of
the world.
Neurovascular
Leading
industry players in the global neurovascular devices market include Medtronic, Stryker, Terumo and Johnson & Johnson. Acquisitions
and mergers are increasingly used as a strategy for product portfolio expansion and to grow footprint. (Global Market Insights,
Inc. - Devices Market Share 2018-2024 Industry Size Report. https://www.gminsights.com/industry-analysis/neurovascular-devices-market)
Sales
and Marketing
Sales
and Marketing
Based
on the positive CGuard EPS clinical data, we initiated the commercial launch of CGuard EPS in CE marked countries in early 2015.
In September 2015, we announced full market launch of CGuard EPS in Europe.
In
2017, we decided to shift our commercial strategy to focus on sales of our products through local distribution partners and our
own internal sales initiatives to gain greater reach into all the relevant clinical specialties and to expand our geographic coverage.
Our current strategy seeks to broaden our sales efforts to transition vascular surgeons from carotid endarterectomy procedures
to carotid stenting with CGuard EPS, which we believe can greatly expand our customer base. We have focused and we plan to continue
to focus our marketing efforts primarily on key growth markets and to evaluate opportunities in new territories if and when they
become available. In addition, we are using international trade shows and industry conferences to gain market exposure and brand
recognition. We continue to work with leading physicians to enhance our marketing effort and are developing relationships with
new key opinion leaders to champion our technology and work with us in clinical studies
Currently,
we are actively selling our MGuard coronary products with a bio-stable MicroNet through local distributors in Europe, Latin America,
the Middle East and Asia.
Product
Positioning
When
treating carotid artery disease, we believe that there is an opportunity to enter the market with bare-metal stent platform and
to become a competitive player without a drug-eluting stent platform. Therefore, we believe that CGuard EPS is poised for commercial
growth in 2020 as more and more positive clinical data is presented.
Additionally,
we intend to continue to evaluate potential product enhancements and manufacturing enhancements for CGuard EPS expected to reduce
cost of goods or provide the best-in-class performing delivery system. We believe these improvements may allow us to reduce cost
of goods and increase penetration in our existing geographies and better position us for entry into new markets. Finally, we do
not expect that it would be crucial to use a drug-eluting stent platform to compete in certain new markets such as the neurovascular
market, and hence, we plan to continue to explore this area of opportunity.
The
MGuard coronary products have initially penetrated the market by entering segments with indications that present high risks of
embolic dislodgement, notably acute MI and saphenous vein graft coronary interventions. Even though MGuard technology has demonstrated
its advantages with clinical data, it is based on a bare-metal platform while the market demand has shifted away from bare-metal
stents in favor of drug-eluting stents.
Insurance
Reimbursement
In
most countries, a significant portion of a patient’s medical expenses is covered by third-party payors. Third-party payors
can include both government funded insurance programs and private insurance programs. While each payor develops and maintains
its own coverage and reimbursement policies, payors, in many instances, have similarly established policies, and in the U.S.,
for example, coverage policies and reimbursement rates of private payors are often influenced by those established by the U.S.
Department of Health and Human Services Centers for Medicare and Medicaid Services (CMS). The CGuard products and MGuard coronary
products sold to-date in applicable foreign countries have been designed and labeled to facilitate the utilization of existing
reimbursement codes for such countries, and we intend to continue to design and label our present and future products in a manner
consistent with this goal.
While
most countries have established reimbursement codes for stenting procedures, certain countries may require additional clinical
data before recognizing coverage and/or to obtain a certain level of reimbursement for one or more of our products. In these situations,
we intend to complete the required clinical studies to obtain reimbursement approval in countries where it makes economic sense
to do so.
Intellectual
Property
Patents
We
have 52 issued patents, including 14 patents issued in the U.S., and seven pending patent applications, four of which are pending
in the United States. Many of these patents and applications cover aspects of our CGuard and MGuard technology. Patents outside
the U.S. have been filed in Canada, China, Europe, Israel, India, Japan, Australia, and South Africa. The patents and applications
fall into a number of patent families, as listed below:
Base
Title of Patent Family
|
|
Pending
patent
applications
(Countries)
|
|
Issued
patents
(Country
and Patent No.)
|
|
Issue
Date
|
Bifurcated
Stent Assemblies
|
|
|
|
US
8,961,586
China ZL200780046676.2
|
|
02/24/2015
9/26/2012
|
Deformable
Tip for Stent Delivery and Methods of Use
|
|
|
|
US
10,258,491
Israel 260,945
|
|
4/16/2019
07/01/2020
|
|
|
|
|
|
|
|
Visualization
of blood flow in a venous/arterial shunting system
|
|
US
|
|
|
|
|
|
|
|
|
|
|
|
In
Vivo Filter Assembly
|
|
|
|
US
9,132,261
|
|
09/15/2015
|
Filter
Assemblies
|
|
|
|
Israel
198,189
|
|
2/1/2014
|
Knitted
Stent Jackets
|
|
|
|
Canada
2,666,728
Canada 2,887,189
China ZL200780046697.4
China ZL201210320950.3
Israel 198,190
EP 2076212
(Germany, France, & UK)
US 10,137,015
|
|
6/23/2015
5/1/2018
10/10/2012
12/2/2015
2/1/2014
3/29/2017
11/27/2018
|
|
|
|
|
India
323792
|
|
10/28/2019
|
Optimized
Stent Jacket
|
|
Canada
EPO
US
|
|
Canada
2,670,724
China ZL201210454357.8
China ZL200780043259.2
India 297,257
Israel 230,922
US 9,132,003
US 9,526,644
US 9,782,281
US 10,070,976
US 10,406,006
US 10,406,008
EP 2088962
(validated in 9 countries: BE, CH, DE, FR, UK, IT, IE, LX, NL)
|
|
12/11/2018
12/9/2015
1/2/2013
5/30/2018
10/01/2020
9/15/2015
12/27/2016
10/10/2017
9/11/2018
9/10/2019
9/10/2019
10/11/2017
|
Stent
Apparatuses for Treatment Via Body Lumens and Methods of Use
|
|
US
EPO
|
|
South
Africa 2007/10751
Canada 2,609,687
Canada 2,843,097
EP 1885281
(CH, DE, FR, GB, IE, IT)
US 10,058,440
US 10,070,977
|
|
10/27/2010
4/22/2015
10/27/2015
2/13/2019
3/1/2017
8/28/2018
9/11/2018
|
Stent
Thermoforming Apparatus and Methods
|
|
|
|
JP
6553178
US 9,527,234
US 10,376,393
Australia 2015326517
Canada 2962713
|
|
7/12/2019
12/27/2016
8/13/2019
05/21/2020
02/19/2019
|
Methods
or using a self-adjusting stent assembly and kits including the same
|
|
US
PCT
|
|
|
|
|
The
patents and patent applications listed above cover various aspects of our products, specifically focusing on the mesh sleeve covering
our stents, as well as methods for production and delivery mechanisms of the stents. We believe that our patents, in particular
those covering the use of a knitted micron-level mesh sleeve over a stent for various indications, as well as our pending patent
applications (if issued as patents with claims substantially in their present form), create a significant barrier against other
companies seeking to use similar technology. We believe these patents and patent applications collectively cover all our existing
products and may be useful in protecting our future technological developments. We intend to aggressively continue patenting new
technologies and to actively pursue any infringement of our key patents.
Trade
Secrets
We
also rely on trade secret protection to protect our interests in proprietary know-how and/or for processes for which patents are
difficult to obtain or enforce. As part of our trade secret policy, we rely on non-disclosure and confidentiality agreements with
employees, consultants and other parties to protect trade secrets and other proprietary technology.
Trademarks
We
have registered or applied to register the following trademarks, which we use in connection with our products:
|
●
|
InspireMD®
(US, European Union, and UK)
|
|
●
|
MGuard®
(European Union, and UK)
|
|
●
|
CGuard®
(US, European Union, and UK)
|
|
●
|
MGuard
Prime® (US, European Union, and UK)
|
|
●
|
NGuard®
US, European Union)
|
|
●
|
PVGuard®
(US, European Union, and UK)
|
|
●
|
Micronet®
)US(
|
|
●
|
MNP
Micronet Protection logo )European Union and UK)
|
|
●
|
Carenet®
)European Union and UK)
|
|
●
|
SmartFit™
(US)
|
The
trademarks are renewable indefinitely, so long as we continue using the marks and make the appropriate filings when required.
We also use and may have common-law rights to various trademarks, trade names, and service marks.
Government
Regulation
The
manufacture and sale of our products are subject to regulation by numerous governmental authorities, principally the European
Union CE mark and other corresponding foreign agencies.
Sales
of medical devices outside the United States are subject to foreign regulatory requirements that vary widely from country to country.
These laws and regulations range from simple product registration requirements in some countries to complex approval process,
clinical trials and production controls in others. As a result, the processes and time periods required to obtain foreign marketing
approval may be longer or shorter than those necessary to obtain FDA market authorization. These differences may affect the timeliness
of international market introduction of our products. For the European Union nations, medical devices must obtain a CE mark before
they may be placed on the market. In order to obtain and maintain the CE mark, we must comply with the Medical Device Directive
93/42/EEC (“MDD”) by presenting comprehensive technical files for our products demonstrating safety and efficacy of
the product to be placed on the market and passing initial and annual quality management system audit as per ISO 13485 standard
by an European Notified Body. We have obtained ISO 13485 quality system certification and the products we currently distribute
into the European Union display the required CE mark. In order to maintain certification, we are required to pass an annual surveillance
audit conducted by Notified Body auditors. The European Union replaced the MDD with the new European Medical Devices Regulation,
or MDR (MDR 2017/745). The MDR will apply after a transitional period of three years ending on May 26, 2020, which is expected
to change several aspects of the existing regulatory framework in Europe. Manufacturers have the duration of the transition period
to update their technical documentation and processes to meet the new requirements in order to obtain a CE Mark. After May 26,
2020, medical devices can still be placed on the market under the provision of the MDD until May 27, 2024; provided the CE Mark
was issued prior to this date and the manufacturer continues to comply with this directive. By May 27, 2024, all medical devices
entering the EU will need to have a CE Mark under the MDR, even if they have been on the market previously under the MDD. In our
case, CGuard and MGuard can continue to be marketed under the MDD until November 12, 2022. Specifically, the EU MDR will require
changes in the clinical evidence required for medical devices, post-market clinical follow-up evidence, annual reporting of safety
information for Class III products, Unique Device Identification (“UDI”) for all products, submission of core data
elements to a European UDI database prior to placement of a device on the market, and multiple other labeling changes. Approvals
for certain of our currently-marketed products could be curtailed or withdrawn as a result of the implementation and recertification
process of the EU MDR and acquiring approvals for new products could be more challenging, time consuming and costly.
As
noted below, we have or had regulatory approval and made sales of CGuard EPS, MGuard Prime EPS or both products either through
distributors pursuant to distribution agreements or directly, in the following countries: Argentina, Australia, Austria, Belarus,
Belgium, Brazil, Bulgaria, Chile, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Ecuador, Estonia, Finland, France, Germany,
Hong Kong, Hungary, Ireland, Israel, Italy, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Netherlands, New Zealand,
Norway, Peru, Poland, Portugal, Romania, Russia, Saudi Arabia, Serbia, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland,
Turkey Vietnam and the United Kingdom In addition, we are awaiting regulatory approval to sell our products in Taiwan. While each
of the European Union member countries accepts the CE mark as its sole requirement for marketing approval, some of these countries
still require us to take additional steps in order to gain reimbursement rights for our products. Furthermore, while we believe
that certain of the above-listed countries that are not members of the European Union accept the CE mark as a primary requirement
for marketing approval, each such country requires additional regulatory requirements for final marketing approval of our products.
Furthermore, we are currently targeting additional countries in Europe, Asia, and Latin America, however, even if all governmental
regulatory requirements are satisfied in each such country, we anticipate that obtaining marketing approval in each country could
take as few as three months or as many as twelve months or more, due to the nature of the approval process in each individual
country, including typical wait times for application processing and review, as discussed in greater detail below.
In
October 2007, our first generation MGuard stent combining the MicroNet with a stainless steel stent received CE mark approval
for the treatment of coronary artery disease in the European Union. We subsequently replaced the first generation MGuard product
with MGuard Prime EPS, which uses a more advanced cobalt-chromium based stent. Our MGuard Prime EPS received CE mark approval
in the European Union in October 2010 and marketing approval in those countries listed in the table below.
The
CGuard EPS received CE mark approval in the European Union on March 14, 2013 and marketing approval in the countries listed in
the table below. We are currently seeking marketing approval for CGuard EPS in, South Korea and Taiwan.
Please
refer to the table below setting forth the approvals and sales made for CGuard EPS and the MGuard Prime EPS on a country-by-country
basis
Approvals
and Sales of MGuard Prime EPS and CGuard EPS on a Country-by-Country Basis
Countries
|
|
CGuard
EPS Approval
|
|
CGuard
EPS Sales
|
|
MGuard
Prime
EPS Approval
|
|
MGuard
Prime EPS Sales
|
|
Argentina
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Australia
|
|
Y
|
|
Y
|
|
N
|
|
Y
|
(1)
|
Austria
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Belarus
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Belgium
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Brazil
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Bulgaria
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Chile
|
|
Y
|
|
Y
|
|
N
|
|
Y
|
(2)
|
Colombia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Croatia
|
|
Y
|
|
N
|
|
Y
|
|
Y
|
|
Cyprus
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Czech
Republic
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Denmark
|
|
Y
|
|
Y
|
|
Y
|
|
N
|
(3)
|
Dominican
Republic
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Ecuador
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Estonia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Finland
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
France
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Germany
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Greece
|
|
Y
|
|
Y
|
|
Y
|
|
N
|
(3)
|
Netherlands
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Hong
Kong
|
|
Y
|
|
Y
|
|
N
|
|
N
|
|
Hungary
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Iceland
|
|
Y
|
|
N
|
|
Y
|
|
N
|
|
India
|
|
Y
|
|
Y
|
|
N
|
|
N
|
|
Ireland
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Israel
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Italy
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Latvia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Lithuania
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Liechtenstein
|
|
Y
|
|
N
|
|
Y
|
|
N
|
|
Luxembourg
|
|
Y
|
|
N
|
|
Y
|
|
Y
|
|
Malaysia
|
|
N
|
|
N
|
|
N
|
|
Y
|
(3)
|
Malta
|
|
Y
|
|
N
|
|
Y
|
|
Y
|
|
Mexico
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Montenegro
|
|
Y
|
|
N
|
|
Y
|
|
N
|
|
New
Zealand
|
|
Y
|
|
N
|
|
N
|
|
N
|
|
Norway
|
|
Y
|
|
N
|
|
Y
|
|
Y
|
|
Peru
|
|
Y
|
|
Y
|
|
Y
|
|
N
|
|
Poland
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Portugal
|
|
Y
|
|
Y
|
|
Y
|
|
N
|
|
Romania
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Russia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Saudi
Arabia
|
|
N
|
|
N
|
|
N
|
|
Y
|
(4)
|
Serbia
|
|
Y
|
|
Y
|
|
Y
|
|
N
|
|
Slovakia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Slovenia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
South
Africa
|
|
Y
|
|
Y
|
|
Y
|
(5)
|
Y
|
|
Spain
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Sweden
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Switzerland
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Turkey
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Venezuela
|
|
N
|
|
N
|
|
N
|
|
N
|
|
Vietnam
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Ukraine
|
|
Y
|
|
Y
|
|
N
|
|
N
|
|
United
Kingdom
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
(1)
|
The
approval expired and per management decision it was decided not to renew it.
|
|
|
(2)
|
Chile
is a non-regulated market, the health system in Chile only relies on CE mark or FDA certificates.
|
|
|
(3)
|
The
approval expired and per management decision it was decided not to renew it.
|
|
|
(4)
|
The
approval expired in November 2017. We have not had sales of MGuard Prime EPS in Saudi Arabia since 2014.
|
|
|
(5)
|
The
certificate evidencing regulatory approval for MGuard Prime EPS in South Africa was held by our former distributor in South
Africa, and we cannot guarantee that it is in full force and effect. Our distribution agreement with the distributor in South
Africa expired pursuant to the terms of such distribution agreement on February 1, 2015, and we have not had sales of MGuard
Prime EPS in South Africa since 2015
|
FDA
Government Regulation of Medical Devices for Human Subjects
Many
of our activities are subject to regulatory oversight by the FDA under provisions of the Federal Food, Drug, and Cosmetic Act
and regulations thereunder, including regulations governing the development, marketing, labeling, promotion, manufacturing, and
export of medical devices.
FDA
Approval/Clearance Requirements
In
the United States, Class II or III medical devices must be cleared or approved by the FDA prior to commercialization. Unless an
exemption applies, each medical device that we market or wish to market in the United States must receive 510(k) clearance or
premarket approval. Medical devices that receive 510(k) clearance are “cleared” by the FDA to market, distribute,
and sell in the United States. Medical devices that obtain a premarket approval by the FDA are “approved” to market,
distribute, and sell in the United States. We anticipate filing a premarket approval application in the future and do not anticipate
filing a 510(k) premarket notification. Even though we do not anticipate filing a 510(k), we cannot be certain that the FDA will
find it more appropriate for us to file a 510(k) premarket notification instead of a premarket approval application. Further,
we cannot be sure that we will ever obtain premarket approval. Descriptions of the premarket approval and 510(k) clearance processes
are provided below.
Class
I devices are those for which safety and effectiveness can be assured by adherence to the FDA’s general regulatory controls
for medical devices, or the General Controls, which include compliance with the applicable portions of the FDA’s quality
system regulations, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful
and non-misleading labeling, advertising, and promotional materials. Some Class I devices also require premarket clearance by
the FDA through the 510(k) process described below.
Class
II devices are subject to the FDA’s General Controls, and any other special controls as deemed necessary by the FDA
to ensure the safety and effectiveness of the device. Premarket review and clearance by the FDA for Class II devices is accomplished
through the 510(k) process. Pursuant to the Medical Device User Fee and Modernization Act of 2002 (MDUFMA), as of October 2002,
unless a specific exemption applies, 510(k) submissions are subject to user fees. Certain Class II devices are exempt from this
premarket review process. The FDA has recently indicated that it intends to modernize the 510(k) process and has issued new guidance
documents that may change the way that devices are cleared by the FDA.
Class
III includes devices with the greatest risk. Devices in this class must meet all of the requirements in Classes I and II.
In addition, Class III devices cannot generally be marketed until they receive a premarket approval. The safety and effectiveness
of Class III devices cannot be assured solely by the General Controls and the other requirements described above. These devices
require formal clinical studies to demonstrate safety and effectiveness. Under MDFUMA, premarket approval applications (and supplemental
premarket approval applications) are subject to significantly higher user fees than 510(k) applications, and they also require
considerably more time and resources.
The
FDA decides whether a device line must undergo either the 510(k) clearance or premarket approval based on statutory criteria that
utilize a risk-based classification system. Premarket approval is the FDA process of scientific and regulatory review to evaluate
the safety and effectiveness of Class III medical devices and, in many cases, Class II medical devices. Class III devices are
those that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present
a potential, unreasonable risk of illness or injury. The FDA uses these criteria to decide whether a premarket approval or a 510(k)
is appropriate, including the level of risk that the agency perceives is associated with the device and a determination by the
agency of whether the product is a type of device that is similar to devices that are already legally marketed. Devices deemed
to pose relatively less risk are placed in either Class I or II. In many cases, the FDA requires the manufacturer to submit a
510(k) requesting clearance (also referred to as a premarket notification), unless an exemption applies. The 510(k) must demonstrate
that the manufacturer’s proposed device is “substantially equivalent” in intended use and in safety and effectiveness
to a legally marketed predicate device. A “predicate device” is a pre-existing medical device to which equivalence
can be drawn, that is either in Class I, Class II, or is a Class III device that was in commercial distribution before May 28,
1976, for which the FDA has not yet called for submission of a premarket approval application.
We
expect that unless an exemption applies, each medical device that we market or wish to market in the United States must receive
510(k) clearance or premarket approval. Medical devices that receive 510(k) clearance are “cleared” by the FDA to
market, distribute, and sell in the United States. Medical devices that obtain a premarket approval by the FDA are “approved”
to market, distribute, and sell in the United States. We anticipate that each device that we wish to commercialize will be considered
a Class III device by the FDA and therefore we anticipate filing a premarket approval application in the future and do not anticipate
filing a 510(k) premarket notification. Even though we do not anticipate filing a 510(k), we cannot be certain that the FDA will
find it more appropriate for us to file a 510(k) premarket notification instead of a premarket approval application or that applications
of our technology may not be considered Class II devices. Further, we cannot be sure that we will ever obtain a premarket approval.
Descriptions of the premarket approval and 510(k) clearance processes are provided below.
Premarket
Approval Pathway
We
expect that current and future applications of our technology will result in medical devices that are considered Class III devices
subject to premarket approval. A premarket approval application must be submitted if a device cannot be cleared through the 510(k)
process. A premarket approval application must be supported by extensive data including, but not limited to, analytical, preclinical,
clinical trials, manufacturing, statutory preapproval inspections, and labeling to demonstrate to the FDA’s satisfaction
the safety and effectiveness of the device for its intended use. Before a premarket approval application is submitted, a manufacturer
must apply for an IDE. If the device presents a “significant risk,” as defined by the FDA, to human health, the FDA
requires the device sponsor to file an IDE application with the FDA and obtain IDE approval prior to initiation of enrollment
of human subjects for clinical trials. The IDE provides the manufacturer with a legal pathway to perform clinical trials on human
subjects where without the IDE, only approved medical devices may be used on human subjects.
The
IDE application must be supported by appropriate data, such as analytical, animal and laboratory testing results, manufacturing
information, and an Investigational Review Board (IRB) approved protocol showing that it is safe to test the device in humans
and that the testing protocol is scientifically sound. If the clinical trial design is deemed to have “non-significant risk,”
the clinical trial may be eligible for “abbreviated” IDE requirements.
A
clinical trial may be suspended by either the FDA or the IRB at any time for various reasons, including a belief that the risks
to the study participants outweigh the benefits of participation in the study. Even if a study is completed, clinical testing
results may not demonstrate the safety and efficacy of the device, or they may be equivocal or otherwise insufficient to obtain
approval of the product being tested. After the clinical trials have been completed, if at all, and the clinical trial data and
results are collected and organized, a manufacturer may complete a premarket approval application.
After
a premarket approval application is sufficiently complete, the FDA will accept the application and begin an in-depth review of
the submitted information. By statute, the FDA has 180 days to review the “accepted application,” although, generally,
review of the application can take between one and three years, but it may take significantly longer. During this review period,
the FDA may request additional information or clarification of information already provided. Also, during the review period, an
advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations
to the FDA as to the approvability of the device. The preapproval inspections conducted by the FDA include an evaluation of the
manufacturing facility to ensure compliance with the Quality Systems Regulations, as well as inspections of the clinical trial
sites by the Bioresearch Monitoring group to evaluate compliance with good clinical practice and human subject protections. New
premarket approval applications or premarket approval supplements are required for modifications that affect the safety or effectiveness
of the device, including, for example, certain types of modifications to the device’s indication for use, manufacturing
process, labeling and design. Significant changes to an approved premarket approval require a 180-day supplement, whereas less
substantive changes may utilize a 30-day notice, or a 135-day supplement. Premarket approval supplements often require submission
of the same type of information as a premarket approval application, except that the supplement is limited to information needed
to support any changes from the device covered by the original premarket approval application, and it may not require as extensive
clinical data or the convening of an advisory panel.
510(k)
Clearance Pathway
We
do not currently market, distribute, or sell any products that have market clearance by the FDA under its 510(k) process. If,
in the future, we develop products where 510(k) clearance is required, we would be required to submit a 510(k) demonstrating that
such proposed devices are substantially equivalent to a respective previously cleared 510(k) device or a device that was in commercial
distribution before May 28, 1976, for which the FDA has not yet called for the submission of 510(k). The FDA’s 510(k) clearance
pathway usually takes from three to twelve months but could take longer. In some cases, the FDA may require additional information,
including clinical data, to make a determination regarding substantial equivalence.
If
a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would
constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, a
premarket approval. The FDA requires each device manufacturer to determine whether the proposed change requires submission of
a new 510(k) or a premarket approval, but the FDA can review any such decision and can disagree with a manufacturer’s determination.
If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or
recall the modified device until 510(k) clearance or premarket approval of the modified device is obtained.
Pervasive
and Continuing FDA Regulation
A
host of regulatory requirements apply to our approved devices, including the quality system regulation (which requires manufacturers
to follow elaborate design, testing, control, documentation and other quality assurance procedures), the Medical Device Reporting
regulations (which require that manufacturers report to the FDA specified types of adverse events involving their products), labeling
regulations, and the FDA’s general prohibition against promoting products for unapproved or “off-label” uses.
Class II devices also can have special controls such as performance standards, post-market surveillance, patient registries, and
FDA guidelines that do not apply to Class I devices.
A
noncomprehensive list of the regulatory requirements that apply to our approved products classified as medical devices include:
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product
listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;
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Quality
Systems Regulations, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing,
control, documentation and other quality assurance procedures during all aspects of the development and manufacturing process;
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labeling
regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication;
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clearance
of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended
use of one of our cleared devices;
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approval
of product modifications that affect the safety or effectiveness of one of our cleared devices;
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medical
device reporting regulations, which require that manufacturers comply with FDA requirements to report if their device may
have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute
to a death or serious injury if the malfunction of the device or a similar device were to recur;
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post-approval
restrictions or conditions, including post-approval study commitments;
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post-market
surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness
data for the device;
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the
FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the
market a product that is in violation of governing laws and regulations;
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regulations
pertaining to voluntary recalls; and,
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notices
of corrections or removals.
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We
do not currently have a registered establishment with the FDA. If we are approved or cleared to manufacture, prepare, or process
a device in the United States, we and any third-party manufacturers that we may use must will be required to register our establishments
with the FDA. As such, we and our manufacturing facilities will be subject to FDA inspections for compliance with the FDA’s
Quality System Regulation. Additionally, some of our subcontractors may also be subject to FDA announced and unannounced inspections
for compliance with the FDA’s Quality System Regulation. These regulations will require that we manufacture our products
and maintain our documents in a prescribed manner with respect to design, manufacturing, testing and quality control activities.
As a medical device manufacturer, we will further be required to comply with FDA requirements regarding the reporting of adverse
events associated with the use of our medical devices, as well as product malfunctions that would likely cause or contribute to
death or serious injury if the malfunction were to recur. FDA regulations also govern product labeling and prohibit a manufacturer
from marketing a medical device for unapproved applications.
Our
CGuard EPS is classified as a Class III medical device by the FDA. Class III medical devices are generally the highest risk devices
and are therefore subject to the highest level of regulatory control by the FDA, since the FDA process of premarket approval involves
scientific and regulatory review to evaluate the safety and effectiveness of Class III medical devices for the purpose(s) intended.
The FDA will either approve or deny a premarket approval application and we cannot market a device unless or until the FDA approves
a premarket approval application.
We
expect the approval process in the U.S. to take a significant amount of time, require the expenditure of significant resources,
involve rigorous clinical investigations and testing, and potentially require changes to products. The approval process may result
in limitations on the indicated uses of the medical devices for which we are able to obtain approval (since the FDA can take action
against a company that promotes off-label uses) and will also require increased post-market surveillance.
U.S.
Healthcare Laws and Regulations
In
addition to the FDA regulations, there are a variety of other healthcare laws and regulations to which we may be subject if any
of our products are marketed, sold, distributed, and/or utilized in the United States. Of specific note are federal and state
fraud and abuse laws, which prohibit the payment or receipt of kickbacks, bribes or other remuneration, including the offer or
solicitation of such payment, intended to induce or reward the purchase, recommendation or generation of business involving healthcare
products any item or service payable by a health-care program. Other provisions of federal and state laws prohibit presenting,
or causing to be presented, to third party payors (including, government program, such as Medicare and Medicaid) for reimbursement,
claims that are false or fraudulent, or which are for items or services that were not provided as claimed. In addition, other
healthcare laws and regulations may apply, such as transparency and reporting requirements, and privacy and security requirements.
Violations of these laws can lead to civil and criminal penalties, including exclusion from participation in federal and state
healthcare programs, any of which could have a material adverse effect on our business. These laws are potentially applicable
to manufacturers of products regulated by the FDA as medical devices, such as us, and hospitals, physicians and other institutional
or individual providers that may refer or purchase such products. The healthcare laws that may be applicable to our business or
operations include, but are not limited to:
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The
federal Anti-Kickback Statute, which prohibits the offer, payment, solicitation or receipt of any form of remuneration in
return for referring, ordering, leasing, purchasing or arranging for, or recommending the ordering, purchasing or leasing
of, items or services payable by Medicare, Medicaid or any other federal healthcare program;
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Federal
false claims laws and civil monetary penalty laws, including the False Claims Act, that prohibit, among other things, individuals
or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other government
healthcare programs that are false or fraudulent, or making a false statement to avoid, decrease or conceal an obligation
to pay money to the federal government;
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The
federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which includes provisions that
prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or
obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or
under the custody or control of, any healthcare benefit program, and for knowingly and willfully falsifying, concealing or
covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare
benefits, items or services;
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HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and its implementing regulations,
also imposes obligations and requirements on healthcare providers, health plans, and healthcare clearinghouses as well as
their respective business associates that perform certain services for them that involve the use or disclosure of individually
identifiable health information, with respect to safeguarding the privacy and security of certain individually identifiable
health information;
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The
federal transparency requirements under the Affordable Care Act, including the provision commonly referred to as the Physician
Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable
under Medicare, Medicaid or Children’s Health Insurance Program to report annually to Centers for Medicare and Medicaid
Services, or CMS, information related to payments and other transfers of value to physicians and teaching hospitals, and ownership
and investment interests held by physicians and their immediate family members; and
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Analogous
state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may be broader in scope and
apply to referrals and items or services reimbursed by both governmental and non-governmental third-party payors, including
private insurers, many of which differ from each other in significant ways and often are not preempted by federal law, thus
complicating compliance efforts.
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Customers
Our
customer base is varied. We began shipping our product to customers in Europe in January 2008 and have since expanded our global
distribution network to Southeast Asia, India, Latin America and Israel. We currently have distribution agreements for our CE
mark-approved MGuard Prime EPS and/or CGuard EPS with medical product distributors based in Europe, the Middle East, Asia Pacific
and Latin America. We are currently in discussions with additional distribution companies in Europe, Asia, and Latin America.
Most
of our current agreements with our distributors stipulate that, and we expect our future agreements with our distributors to stipulate
that, while we shall assist in training by providing training materials, marketing guidance, marketing materials, and technical
guidance, each distributor will be responsible for carrying out local registration, sales and marketing activities. In addition,
in most cases, all sales costs, including sales representatives, incentive programs, and marketing trials, will be borne by the
distributor. Under current agreements, distributors purchase stents from us at a fixed price. Our current agreements with distributors
are generally for a term of two to three years.
Manufacturing
and Suppliers
The
polymer fiber for MicroNet is supplied by Biogeneral, Inc., a San Diego, California-based specialty polymer manufacturer for medical
and engineering applications.
Natec
Medical Ltd. supplies us with catheters that help create the base for our CGuard EPS stents. Our agreement with Natec Medical
Ltd., as amended, may be terminated by us upon eight months’ notice. On August 1, 2017, we amended the agreement with Natec
Medical Ltd., so that we are responsible for purchasing and handling inventory of CGuard EPS delivery system, and Natec Medical
Ltd.is responsible for the manufacturing process.
Natec
Medical Ltd. supplies us with catheters that help create the base for our MGuard Prime EPS. Our agreement with Natec Medical Ltd.,
which may be terminated by either party upon six months’ notice, calls for non-binding minimum orders.
The
cobalt-chromium stent for our MGuard Prime EPS was designed by Svelte Medical Systems Inc. We have an agreement with Svelte Medical
Systems Inc., as amended, that grants us a non-exclusive, worldwide license for production and use of the MGuard Prime cobalt-chromium
stent for the life of the stent’s patent, subject to the earlier termination of the agreement upon the bankruptcy of either
party or the uncured default by either party under any material provision of the agreement. Our royalty payments to Svelte Medical
Systems Inc. are determined by the sales volume of MGuard Prime EPS. Currently, the royalty rate is 2.9% of all net sales.
We
manufacture our CGuard EPS and MGuard Prime EPS at our own facility. The bare-metal cobalt-chromium stents for our MGuard Prime
EPS and the self-expanding bare-metal stents for our CGuard EPS are being manufactured and supplied by MeKo Laserstrahl-Materialbearbeitung.
Our agreement with MeKo Laserstrahl-Materialbearbeitung for the production of electro polished L605 bare-metal stents for MGuard
Prime EPS and CGuard EPS is priced on a per-stent basis, subject to the quantity of stents ordered. The complete assembly process
for MGuard Prime EPS and CGuard EPS, including knitting and securing the sleeve to the stent and the crimping of the sleeve stent
on to a delivery catheter, is done at our Israel manufacturing site. Once MGuard Prime EPS and CGuard EPS have been assembled,
they are sent for sterilization in a third-party facility in Israel, and then back to our facility for final packaging and distribution.
During
the quarter ended March 31, 2019, our former third-party sterilizer’s equipment failures resulted in significant interruption
in sterilized product supply for the majority of the quarter. As a result of this interruption in the delivery of sterilized products
and our limited inventory levels on hand prior to this interruption, we were unable to fulfill a significant portion of the orders
received during the three months ended March 31, 2019.
Each
MGuard stent is manufactured from two main components, the stent and the mesh polymer. The stent is made out of cobalt chromium.
This material is readily available, and we acquire it in the open market. The mesh is made from polyethylene terephthalate (polyester).
This material is readily available in the market as well, because it is used for many medical applications. In the event that
our supplier can no longer supply this material in fiber form, we would need to qualify another supplier, which could take several
months. In addition, in order to retain the approval of the CE mark, we are required to perform periodic audits of the quality
control systems of our key suppliers in order to insure that their products meet our predetermined specifications.
A
CGuard EPS consists of a CGuard stent and the delivery system. Each CGuard stent is manufactured from two main components, a self-expending
nickel-titanium stent and the mesh polymer. This material is readily available and we acquire it in the open market. The mesh
is made from polyethylene terephthalate (polyester). We have pending patent rights that cover the proposed CGuard stent with mesh.
This material is readily available in the market as well, because it is used for many medical applications. In the event that
our supplier can no longer supply this material in fiber form, we would need to qualify another supplier, which could take several
months. The delivery system for CGuard is made out of polymer tubes we acquire from an original equipment manufacturer. In the
event that our supplier can no longer supply this material, we would need to qualify another supplier, which could take several
months. In addition, in order to retain the approval of the CE mark, we are required to perform periodic audits of the quality
control systems of our key suppliers in order to insure that their products meet our predetermined specifications.
Properties
Our
headquarters are located in Tel Aviv, Israel, where we lease a 1,000 square meter office and manufacturing facility that has the
capacity to manufacture and assemble 1,200 stents per month, based upon the production schedule of one shift per day. We believe
that our current facility is sufficient to meet anticipated future demand by adding additional shifts to our current production
schedule.
Legal
Proceedings
From
time to time, we may be involved in litigation that arises through the normal course of business.
On
July 10, 2019, Bosti Trading Ltd., a former distributor in Russia (“Bosti”), filed suit with the Tel Aviv-Jaffa District
Court in Israel, or the Complaint, against InspireMD Ltd., claiming damages for alleged breaches by InspireMD Ltd. under the Distribution
Agreement, dated May 26, 2011, between Bosti and InspireMD Ltd., in connection with the voluntary field corrective action of our
MGuard Prime EPS we initiated in 2014. Bosti claimed that Bosti and its Russian subsidiary returned 1,830 units of MGuard Prime
EPS to InspireMD Ltd. upon initiation of the voluntary filed action, and, since the Russian Ministry of Health prohibited distribution
of MGuard Prime EPS on August 28, 2014, and did not approve distribution MGuard Prime EPS until September 20, 2016, Bosti was
entitled to recover from InspireMD Ltd. €1,830,000 (which is approximately $2 million), the amount Bosti was due to receive
from its Russian subsidiary, or alternatively, €1,024,000 (which is approximately $1.1 million), the amount Bosti paid to
InspireMD Ltd., for the MGuard Prime EPS returned to InspireMD Ltd. On January 31, 2020, InspireMD Ltd. filed with court its letter
of defense in which it contested this matter vigorously. On January 21, 2021, we executed a Mediation Agreement with Bosti and
InspireMD Ltd., pursuant to which Bosti agreed to release the Company from all claims stated in the Complaint in exchange for
a payment of $580,000, which we paid on January 25, 2021.
As
of the date of this filing, we are not aware of any other material legal proceedings to which we or any of our subsidiaries is
a party or to which any of our property is subject, nor are we aware of any such threatened or pending litigation or any such
proceedings known to be contemplated by governmental authorities.
We
are not aware of any material proceedings in which any of our directors, officers or affiliates or any registered or beneficial
stockholder of more than 5% of our common stock, or any associate of any of the foregoing, is a party adverse to or has a material
interest adverse to, us or any of our subsidiaries.
Human
Capital Management
As
of December 31, 2020, we had 48 employees 45 full-time and 3 part-time, consisting of two in executive management, five in research
and development, four in quality assurance and compliance, five in finance and accounting, 18 in operations/production, 11 in
sales, marketing and clinical, and three in all other miscellaneous roles, including business development, information technology
services, and administration. Except for four of our employees in Europe, our employees are not party to any collective bargaining
agreements. We do not expect the collective bargaining agreements to which our employees are party to have a material effect on
our business or results of operations. We also employ two independent contractors in Poland.
We
believe that our future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel.
In particular, we depend on the skills, experience and performance of our senior management and research personnel. We compete
for qualified personnel with other medical device, biotechnology, pharmaceutical and healthcare companies, as well as universities
and non-profit research institutions.
We
provide competitive compensation and benefits programs to help meet the needs of our employees. In addition to salaries, these
programs (which vary by country/region and employment classification) include incentive compensation plan, pension, healthcare
and insurance benefits, paid time off, family leave, and on-site services, among others. We also use targeted equity-based grants
with vesting conditions to facilitate retention of personnel, particularly for our key employees.
The
success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health
and safety of our employees. In response to the COVID-19 pandemic, we implemented significant changes that we determined were
in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations.
This includes having employees work from home, while implementing additional safety measures for employees continuing critical
on-site work.
We
consider our relations with our employees to be good.
Item
1A. Risk Factors.
There
are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. You should carefully consider
the risks described below and the other information included in this Annual Report on Form 10-K, including the consolidated financial
statements and related notes. If any of the following risks, or any other risks not described below, actually occur, it is likely
that our business, financial condition, and/or operating results could be materially adversely affected. The risks and uncertainties
described below include forward-looking statements and our actual results may differ from those discussed in these forward-looking
statements.
Summary
Risk Factors
Our
business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors”
immediately following this prospectus summary. These risks include, among others, the following:
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the
COVID-19 pandemic has caused interruptions or delays of our business plan and may have a significant adverse effect on our
business;
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we
have a history of net losses and may experience future losses;
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we
will need to raise additional capital to meet our business requirements in the future, and such capital raising may be costly
or difficult to obtain and could dilute our stockholders’ ownership interests;
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we
may become subject to claims by much larger and better capitalized competitors enforcing their intellectual property rights
against us or seeking to invalidate our intellectual property or our rights thereto;
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there
are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected;
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clinical
trials necessary to support a pre-market approval application will be lengthy and expensive and will require the enrollment
of a large number of patients, and suitable patients may be difficult to identify and recruit. Any such delay or failure of
clinical trials could prevent us from commercializing our stent products, which would materially and adversely affect our
results of operations and the value of our business;
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our
products may in the future be subject to product notifications, recalls, or voluntary market withdrawals that could harm our
reputation, business and financial results;
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completing
clinical trials for CGuard EPS in the United States require meeting a number of regulatory requirements and must be conducted
in compliance with the FDA’s IDE regulations. Failure to maintain compliance with IDE regulations could have a material
adverse effect on our business;
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though
necessary to pursue FDA premarket approval, pre-clinical and clinical trials are inherently lengthy and expensive and subject
to any number of regulatory and/or clinical difficulties that can cause further delays, additional costs, and/or rejection
by the FDA, and any such delay, added cost, or failure in connection with any future clinical trials could prevent us from
commercializing our MicroNet products in the United States, which would materially and adversely affect our results of operations
and the value of our business;
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we
may be subject, directly or indirectly, to applicable U.S. federal and state anti-kickback, false claims laws, physician payment
transparency laws, fraud and abuse laws or similar healthcare and security laws and regulations, which could expose us to
criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings;
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we
may be exposed to product liability claims and insurance may not be sufficient to cover these claims;
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even
if one or more of our products are approved by the FDA, we may fail to obtain an adequate level of reimbursement for our products
by third party payors, such that there may be no commercially viable markets for our products or the markets may be much smaller
than expected;
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in
the United States and European Union, our business could be significantly and adversely affected by healthcare reform initiatives
and/or other legislation or judicial interpretations of existing or future healthcare laws and/or regulations;
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if
we are unable to obtain and maintain intellectual property protection covering our products, others may be able to make, use
or sell our products, which would adversely affect our revenue;
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we
are an international business, and we are exposed to various global and local risks that could have a material adverse effect
on our financial condition and results of operations venue;
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the
market prices of our common stock and our publicly traded warrants are subject to fluctuation and have been and may continue
to be volatile, which could result in substantial losses for investors;
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our
common stock could be delisted from the NYSE American if we fail to meet the NYSE American’s stockholders’ equity
continued listing standards. Our ability to publicly or privately sell equity securities and the liquidity of our common stock
could be adversely affected if we are delisted from the NYSE American;
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a
low trading price could lead the NYSE American to take actions toward delisting our common stock, including immediately suspending
trading in our common stock;
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offers
or availability for sale of a substantial number of shares of our common stock may cause the price of our publicly traded
securities to decline;
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we
anticipate being subject to fluctuations in currency exchange rates because we expect a substantial portion of our revenues
will be generated in Euros and U.S. dollars, while a significant portion of our expenses will be incurred in New Israeli Shekels;
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if
there are significant shifts in the political, economic and military conditions in Israel and its neighbors, it could have
a material adverse effect on our business relationships and profitability;
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it
may be difficult for investors in the United States to enforce any judgments obtained against us or some of our directors
or officers;
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Risks
Related to Our Business
The
COVID-19 pandemic has caused interruptions or delays of our business plan and may have a significant adverse effect on our business.
In
an effort to contain and mitigate the spread of COVID-19, a strain of coronavirus which the World Health Organization, or WHO,
declared to be a pandemic on March 12, 2020, many countries have imposed unprecedented restrictions on travel, quarantines and
other public health safety measures. At this point, the extent to which COVID-19 may impact our business cannot be estimated;
however, procedures with CGuard EPS, which are generally scheduled or non-emergency procedures, have mostly been postponed as
hospitals shift resources to patients affected by COVID-19, and it is highly plausible that this trend will continue. We anticipate
that the continuation of the pandemic and related restrictions and safety measures would likely result in continued fluctuations
in sales of our products for the upcoming periods.
Certain
component parts of our delivery system are sourced from countries that have been impacted by COVID-19, and the continued pandemic
and spreading of COVID-19 may adversely impact our suppliers and in turn our manufacture of CGuard EPS. Although the manufacturing
of our products in Israel has not been materially impacted by COVID-19 as of February 2021, we cannot guarantee that we will continue
to manufacture at full capacity in the event that pandemic persists and further restrictions are imposed.
The
extent to which COVID-19 will impact our results will depend on future developments, which are highly uncertain and cannot be
predicted, including new information which may emerge concerning the severity of the coronavirus. The actions to contain COVID-19
or treat its impact, the efficacy and scale of the various vaccines currently deployed across the world, among others. Moreover,
COVID-19 has had indeterminable adverse effects on general commercial activity and the world economy, and our business and results
of operations could be adversely affected to the extent that COVID-19 or any other epidemic continues to harm the global economy
generally.
We
have a history of net losses and may experience future losses.
We
have yet to establish any history of profitable operations. We reported a net loss of $10.5 million for the fiscal year ended
December 31, 2020, and had a net loss of approximately $10 million during the fiscal year ended December 31, 2019. As of December
31, 2020, we had an accumulated deficit of $168 million. We expect to incur additional operating losses for the foreseeable future.
There can be no assurance that we will be able to achieve sufficient revenues throughout the year or be profitable in the future.
We
will need to raise additional capital to meet our business requirements in the future, and such capital raising may be costly
or difficult to obtain and could dilute our stockholders’ ownership interests.
In
order for us to pursue our business objectives without materially curtailing our operations, we will need to raise additional
capital, which additional capital may not be available on reasonable terms or at all. For instance, we will need to raise additional
funds to accomplish the following:
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furthering
our efforts to ultimately seek the FDA approval for commercial sales of CGuard EPS in the United States;
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development
of our current and future products, including CGuard EPS enhancements;
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pursuing
growth opportunities, including more rapid expansion and funding regional distribution systems;
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making
capital improvements to improve our infrastructure;
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hiring
and retaining qualified management and key employees;
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responding
to competitive pressures;
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complying
with regulatory requirements such as licensing and registration; and
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maintaining
compliance with applicable laws.
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Any
additional capital raised through the sale of equity or equity-backed securities may dilute our stockholders’ ownership
percentages and could also result in a decrease in the market value of our equity securities.
The
terms of any securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences,
superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on
the holders of any of our securities then outstanding.
In
addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees,
accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to
recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may
adversely impact our financial condition.
We
operate in an intensely competitive and rapidly changing business environment, and there is a substantial risk our products could
become obsolete or uncompetitive.
The
medical device market is highly competitive. We compete with many medical device companies globally in connection with our current
products and products under development. We face intense competition from numerous pharmaceutical and biotechnology companies
in the therapeutics area, as well as competition from academic institutions, government agencies and research institutions. Abbott
Laboratories, Boston Scientific Corporation, Medtronic, Inc., and Johnson and Johnson, Gore Medical and Terumo Medical Corporation
produce a polytetrafluoroethylene mesh-covered stent and a double layer metal stent, respectively. Most of our current and potential
competitors, including but not limited to those listed above, have, and will continue to have, substantially greater financial,
technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution and personnel
resources than we do. There can be no assurance that we will have sufficient resources to successfully commercialize our products,
if and when they are approved for sale. The worldwide market for stent products is characterized by intensive development efforts
and rapidly advancing technology. Our future success will depend largely upon our ability to anticipate and keep pace with those
developments and advances. Current or future competitors could develop alternative technologies, products or materials that are
more effective, easier to use or more economical than what we or any potential licensee develop. If our technologies or products
become obsolete or uncompetitive, our related product sales and licensing revenue would decrease. This would have a material adverse
effect on our business, financial condition and results of operations.
We
may become subject to claims by much larger and better capitalized competitors enforcing their intellectual property rights against
us or seeking to invalidate our intellectual property or our rights thereto.
Based
on the prolific litigation that has occurred in the stent industry and the fact that we may pose a competitive threat to some
large and well-capitalized companies that own or control patents relating to stents and their use, manufacture and delivery, we
believe that it is possible that one or more third parties will assert a patent infringement claim against the manufacture, use
or sale of our stents based on one or more of these patents. These companies also own patents relating to the use of drugs to
treat restenosis, stent architecture, catheters to deliver stents, and stent manufacturing and coating processes and compositions,
as well as general delivery mechanism patents like rapid exchange, which might be alleged to cover one or more of our products.
In addition, it is possible that a lawsuit of which we are not aware asserting patent infringement, misappropriation of intellectual
property, or related claims may have already been filed against us. As the number of competitors in the stent market grows and
as the geographies in which we commercially market grow in number and scope, the possibility of patent infringement by us, and/or
a patent infringement or misappropriation claim against us, increases.
Our
competitors have maintained their positions in the market by, among other things, establishing intellectual property rights relating
to their products and enforcing these rights aggressively against their competitors and new entrants into the market. All the
major companies in the field of stents and related markets, including Boston Scientific Corporation, C.R. Bard, Inc., W.L. Gore
& Associates, Inc. and Medtronic, Inc., have been repeatedly involved in patent litigation relating to stents since at least
1997. The field of stents and related markets have experienced rapid technological change and obsolescence in the past, and our
competitors have strong incentives to stop or delay the introduction of new products and technologies. We may pose a competitive
threat to many of the companies in these markets. Accordingly, these companies will have a strong incentive to take steps, through
patent litigation or otherwise, to prevent us from distributing our products. Such litigation or claims would divert attention
and resources away from the development and/or commercialization of our products and could result in an adverse court judgment
that would make it impossible or impractical to sell our products in one or more territories.
If
we fail to maintain or establish satisfactory agreements or arrangements with suppliers or if we experience an interruption of
the supply of materials from suppliers, we may not be able to obtain materials that are necessary to develop our products.
We
depend on outside suppliers for certain raw materials. These raw materials or components may not always be available at our standards
or on acceptable terms, if at all, and we may be unable to locate alternative suppliers or produce necessary materials or components
on our own.
Some
of the components of our products are currently provided by only one vendor, or a single-source supplier. For CGuard EPS and MGuard
Prime EPS, we depend on MeKo Laserstrahl-Materialbearbeitung for the laser cutting of the stent, Natec Medical Ltd. for the supply
of catheters, and Biogeneral Inc. for the fiber. We may have difficulty obtaining similar components from other suppliers that
are acceptable to the FDA or foreign regulatory authorities if it becomes necessary.
If
we have to switch to a replacement supplier, we will face additional regulatory delays and the interruption of the manufacture
and delivery of our stents for an extended period of time, which would delay completion of our clinical trials or commercialization
of our products. In addition, we will be required to obtain prior regulatory approval from the FDA or foreign regulatory authorities
to use different suppliers or components that may not be as safe or as effective. As a result, regulatory approval of our products
may not be received on a timely basis or at all.
In
addition, we rely on a third-party vendor to perform the sterilization process. A third-party vendor’s failure to properly
sterilize a component may cause delays or disruptions in our manufacturing process. During the fiscal year ended December 31,
2019, our third-party sterilizer’s equipment failures resulted in significant interruption in sterilized product supply
for the majority of the first quarter. As a result of this interruption in the delivery of sterilized products and our limited
inventory levels on hand prior to this interruption, we were unable to fulfill a significant portion of the orders received during
the fiscal year ended December 31, 2019.
We
are subject to financial reporting and other requirements that place significant demands on our resources.
We
are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, including the requirements
of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires us to conduct an annual management assessment of the effectiveness
of our internal controls over financial reporting. These reporting and other obligations place significant demands on our management,
administrative, operational, internal audit and accounting resources. Any failure to maintain effective internal controls could
have a material adverse effect on our business, operating results and stock price. Moreover, effective internal control is necessary
for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud,
we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business
and reputation with investors may be harmed.
There
are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.
The
ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 require us to identify material weaknesses
in internal control over financial reporting, which is a process to provide reasonable assurance regarding the reliability of
financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Our
management, including our chief executive officer and chief financial officer, does not expect that our internal controls and
disclosure controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control
system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, in our company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Further, controls
can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the
controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Over time, a control may be inadequate because of changes in conditions, such as growth of the company or increased transaction
volume, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be detected.
In
addition, discovery and disclosure of a material weakness, by definition, could have a material adverse impact on our financial
statements. Such an occurrence could discourage certain customers or suppliers from doing business with us and adversely affect
how our stock trades. This could in turn negatively affect our ability to access equity markets for capital.
Risks
Related to our Products, Clinical Trials and Regulatory Matters
Clinical
trials necessary to support a pre-market approval application will be lengthy and expensive and will require the enrollment of
a large number of patients, and suitable patients may be difficult to identify and recruit. Any such delay or failure of clinical
trials could prevent us from commercializing our stent products, which would materially and adversely affect our results of operations
and the value of our business.
Clinical
trials necessary to support a pre-market approval application to the FDA for our CGuard EPS stent will be expensive and will require
the enrollment of a large number of patients, and suitable patients may be difficult to identify and recruit, which may cause
a delay in the development and commercialization of our product candidates. Patient enrollment in clinical trials and the ability
to successfully complete patient follow-up depends on many factors, including the size of the patient population, the nature of
the trial protocol, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial and patient compliance.
For example, patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo
extensive post-treatment procedures or follow-up to assess the safety and efficacy of our products, or they may be persuaded to
participate in contemporaneous clinical trials of competitive products. In addition, patients participating in our clinical trials
may die before completion of the trial or suffer adverse medical events unrelated to or related to our products. Delays in patient
enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays or
result in the failure of the clinical trial.
In
addition, the length of time required to complete clinical trials for pharmaceutical and medical device products varies substantially
according to the degree of regulation and the type, complexity, novelty and intended use of a product, and can continue for several
years and cost millions of dollars. The commencement and completion of clinical trials for our products under development may
be delayed by many factors, including governmental or regulatory delays and changes in regulatory requirements, policy and guidelines
or our inability or the inability of any potential licensee to manufacture or obtain from third parties materials sufficient for
use in preclinical studies and clinical trials.
Our
products may in the future be subject to product notifications, recalls, or voluntary market withdrawals that could harm our reputation,
business and financial results.
The
manufacturing and marketing of medical devices involves an inherent risk that our products may prove to be defective and cause
a health risk even after regulatory clearances have been obtained. Medical devices may also be modified after regulatory clearance
is obtained to such an extent that additional regulatory clearance is necessary before the device can be further marketed. In
these events, we may voluntarily implement a recall or market withdrawal or may be required to do so by a regulatory authority.
In
the European Economic Area, we must comply with the EU Medical Device Vigilance System. Under this system, manufacturers are required
to take Field Safety Corrective Actions (“FSCAs”) to reduce a risk of death or serious deterioration in the state
of health associated with the use of a medical device that is already placed on the market. A FSCA may include the recall, modification,
exchange, destruction or retrofitting of the device. FSCAs must be communicated by the manufacturer or its legal representative
to its customers and/or to the end users of the device through Field Safety Notices.
Any
adverse event involving our products could result in other future voluntary corrective actions, such as recalls or customer notifications,
or agency action, such as inspection or enforcement action. Adverse events have been reported to us in the past, and we cannot
guarantee that they will not occur in the future. Any corrective action, whether voluntary or involuntary, as well as defending
ourselves in a lawsuit, would require the dedication of our time and capital, distract management from operating our business
and could harm our reputation and financial results.
We
expect to derive our revenue from sales of our CGuard EPS and MGuard Prime EPS stent products and other products we may develop,
such as CGuard EPS with enhancements. If we fail to generate revenue from these sources, our results of operations and the value
of our business would be materially and adversely affected.
We
expect our revenue to be generated from sales of our CGuard EPS and MGuard Prime EPS stent products and other products we may
develop. Future sales of CGuard EPS will be subject to the receipt of regulatory approvals and commercial and market uncertainties
that may be outside our control. In addition, sales of MGuard Prime EPS have been hampered by weakened demand for bare metal stents,
which may never improve, and we may not be successful in developing a drug-eluting stent product. In addition, there may be insufficient
demand for other products we are seeking to develop, such as CGuard EPS with enhancements. If we fail to generate expected revenues
from these products, our results of operations and the value of our business and securities would be materially and adversely
affected.
If
our manufacturing facilities are unable to provide an adequate supply of products, our growth could be limited and our business
could be harmed.
We
currently manufacture our CGuard EPS and MGuard Prime EPS products at our facility in Tel Aviv, Israel. If there were a disruption
to our existing manufacturing facility, we would have no other means of manufacturing our CGuard EPS or MGuard Prime EPS stents
until we were able to restore the manufacturing capability at our facility or develop alternative manufacturing facilities. If
we were unable to produce sufficient quantities of our CGuard EPS or MGuard Prime EPS stents to meet market demand or for use
in our current and planned clinical trials, or if our manufacturing process yields substandard stents, our development and commercialization
efforts would be delayed.
Additionally,
any damage to or destruction of our Tel Aviv facility or its equipment, prolonged power outage or contamination at our facility
would significantly impair our ability to produce either CGuard EPS or MGuard Prime EPS stents.
Finally,
the production of our stents must occur in a highly controlled, clean environment to minimize particles and other yield and quality-limiting
contaminants. In spite of stringent quality controls, weaknesses in process control or minute impurities in materials may cause
a substantial percentage of defective products in a lot. If we are unable to maintain stringent quality controls, or if contamination
problems arise, our clinical development and commercialization efforts could be delayed, which would harm our business and results
of operations.
Completing
clinical trials for CGuard EPS in the United States require meeting a number of regulatory requirements and must be conducted
in compliance with the FDA’s IDE regulations. Failure to maintain compliance with IDE regulations could have a material
adverse effect on our business.
Clinical
trials involve use of a medical device candidate (or drug, biological, or other product candidate, as applicable) on human subjects
under the supervision of qualified investigators in accordance with current Good Clinical Practices, including the requirement
that all research subjects provide informed consent for their participation in the clinical study. The FDA classifies medical
device candidates into “significant risk” and “non-significant risk” devices. Significant risk devices
present a potential for serious risk to the health, safety, or welfare of a subject. Examples may include implants, devices that
support or sustain human life, and devices that are substantially important in diagnosing, curing, mitigating, or treating disease
or in preventing impairment to human health. If a medical device candidate presents a significant risk, an IDE application must
be submitted and approved prior to commencing any human clinical trials in the United States in connection with such device. The
FDA may approve, conditionally approve, or deny an IDE or it may require further information and, thus, delay approval. On September
8, 2020, we received IDE approval for CGuard™ Carotid Stent System, CARENET-III.
In
addition to our recent IDE approval for CGuard™ Carotid Stent System, CARENET-III, we must apply for and obtain IRB approval
of the proposed CGuard EPS clinical study in connection with each clinical site before commencing any study activities. A written
protocol with predefined end points, an appropriate sample size, and pre-determined patient inclusion and exclusion criteria,
is also required before we may initiate or conduct the CGuard EPS trial. If we obtain IDE approval, IRB approval, and meet all
of the other applicable requirements that must be met before beginning clinical trials in the United States, we will, then, be
able to lawfully initiate the clinical investigation of the safety and effectiveness of CGuard EPS in the United States.
Importantly,
the CGuard EPS clinical trial and any others that we may conduct in the future, must be conducted in accordance with the FDA’s
IDE regulations, which, among other things, establish requirements for investigational device labeling, prohibit pre-approval
promotion of a device candidate, and specify recordkeeping, reporting, and monitoring responsibilities of study sponsors and study
investigators.
We
may not be able to obtain IRB approval to undertake clinical trials in the United States for CGuard EPS or any new devices we
intend to market in the United States in the future. If we do obtain such approvals, we may not be able to conduct studies which
comply with the IDE and other regulations governing clinical investigations or the data from any such trials may not support clearance
or approval of the investigational device. Failure to obtain such approvals or to comply with such regulations could have a material
adverse effect on our business, financial condition and results of operations.
Relatedly,
certainty that clinical trials will meet desired endpoints, produce meaningful or useful data, and be free of unexpected adverse
effects, or that the FDA will accept the validity of foreign clinical study data, as applicable, cannot be guaranteed, and such
uncertainty could preclude or delay regulatory approvals and commercialization, resulting in significant financial costs and reduced
revenue. Moreover, the timing of the commencement, continuation, and completion of any future clinical trial may be subject to
significant delays attributable to various causes, including, but not limited to, scheduling conflicts with participating clinicians
and clinical institutions, difficulties in identifying and enrolling patients who meet trial eligibility criteria, failure of
patients to complete the clinical trial, delay in or failure to meet regulatory and/or IRB requirements to conduct a clinical
trial at a one or more prospective sites, and shortages of supply in the investigational device.
Though
necessary to pursue FDA’s premarket approval, pre-clinical and clinical trials are inherently lengthy and expensive and
subject to any number of regulatory and/or clinical difficulties that can cause further delays, additional costs, and/or rejection
by the FDA, and any such delay, added cost, or failure in connection with any future clinical trials could prevent us from commercializing
our MicroNet products in the United States, which would materially and adversely affect our results of operations and the value
of our business.
As
part of the regulatory process, we must conduct clinical trials for each product candidate to demonstrate safety and efficacy
to the satisfaction of the regulatory authorities, including, if we seek in the future to sell our products in the United States,
the FDA. Clinical trials are subject to rigorous regulatory requirements and are expensive and time-consuming to design and implement.
They require the enrollment of a large number of patients, and suitable patients may be difficult to identify and recruit, which
may cause a delay in the development and commercialization of our product candidates. In some trials, a greater number of patients
and a longer follow-up period may be required. Patient enrollment in clinical trials and the ability to successfully complete
patient follow-up depends on many factors, including the size of the patient population, the nature of the trial protocol, the
proximity of patients to clinical sites, the eligibility criteria for the clinical trial and patient compliance. For example,
patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment
procedures or follow-up to assess the safety and efficacy of our products, or they may be persuaded to participate in contemporaneous
clinical trials of competitive products. In addition, patients participating in our clinical trials may die before completion
of the trial or suffer adverse medical events unrelated to or related to our products. Delays in patient enrollment or failure
of patients to continue to participate in a clinical trial may cause an increase in costs and delays or result in the failure
of the clinical trial.
In
addition, the length of time required to complete clinical trials for pharmaceutical and medical device products varies substantially
according to the degree of regulation and the type, complexity, novelty and intended use of a product, and can continue for several
years and cost millions of dollars. The commencement and completion of clinical trials for our existing products and those under
development may be delayed by many factors, including governmental or regulatory delays and changes in regulatory requirements,
policy and guidelines or our inability or the inability of any potential licensee to manufacture or obtain from third parties
materials sufficient for use in preclinical studies and clinical trials. In addition, market demand may change for products being
tested due to the length of time needed to complete requisite clinical trials.
Physicians
may not widely adopt our products unless they determine, based on experience, long-term clinical data and published peer reviewed
journal articles, among other standard-of-care considerations, that the use of our stents provides a safe and effective alternative
to other existing treatments for coronary artery disease and carotid artery disease.
We
believe that physicians will not widely adopt our products unless they determine, based on experience, long-term clinical data,
published peer reviewed journal articles and payor coverage policies, among other factors, that the use of our products provide
a safe and effective alternative to other existing treatments for the conditions we are seeking to address.
If
we fail to demonstrate safety and efficacy that is at least comparable to existing and future therapies available on the market,
our ability to successfully market our products will be significantly limited. Even if the data collected from clinical studies
or clinical experience indicate positive results, each physician’s actual experience with our products will vary. Clinical
trials conducted with our products may involve procedures performed by physicians who are technically proficient and are high-volume
stent users of such products. Consequently, both short-term and long-term results reported in these clinical trials may be significantly
more favorable than typical results of practicing physicians, which could negatively affect rates of adoptions of our products.
We also believe that published peer-reviewed journal articles and recommendations and support by influential physicians regarding
our products will be important for market acceptance and adoption, and we cannot assure you that we will receive these recommendations
and support, or that supportive articles will be published.
Physicians
currently consider drug-eluting stents to be the industry standard for treatment of coronary artery disease. MGuard Prime EPS,
our current coronary product, is not drug-eluting, and this may adversely affect our business.
Our
ability to attract customers depends to a large extent on our ability to provide goods that meet the customers’ and the
market’s demands and expectations. If we do not have a product that is expected by the market, we may lose customers. The
market demand has shifted away from bare metal stents in favor of drug-eluting stents for coronary artery disease. Our MGuard
Prime EPS is a bare-metal stent product and has experienced no growth in sales over the past five years. Such sales may never
grow and we do not currently have the resources to develop a drug-eluting stent product. Our failure to provide industry standard
devices could adversely affect our business, financial condition and results of operations.
We
have only limited experience in regulatory affairs, which may affect our ability or the time required to navigate complex regulatory
requirements and obtain necessary regulatory approvals, if such approvals are received at all. Regulatory delays or denials may
increase our costs, cause us to lose revenue and materially and adversely affect our results of operations and the value of our
business.
Because
long-term success measures have not been completely validated for our products, especially CGuard EPS, regulatory agencies may
take a significant amount of time in evaluating product approval applications. Treatments may exhibit a favorable measure using
one metric and an unfavorable measure using another metric. Any change in accepted metrics may result in reconfiguration of, and
delays in, our clinical trials. Additionally, we have only limited experience in filing and prosecuting the applications necessary
to gain regulatory approvals, and our clinical, regulatory and quality assurance personnel are currently composed of only five
employees. As a result, we may experience delays in connection with obtaining regulatory approvals for our products.
In
addition, the products we and any potential licensees license, develop, manufacture and market are subject to complex regulatory
requirements, particularly in the United States, Europe and Asia, which can be costly and time-consuming. There can be no assurance
that such approvals will be granted on a timely basis, if at all. Furthermore, there can be no assurance of continued compliance
with all regulatory requirements necessary for the manufacture, marketing and sale of the products we will offer in each market
where such products are expected to be sold, or that products we have commercialized will continue to comply with applicable regulatory
requirements. If a government regulatory agency were to conclude that we were not in compliance with applicable laws or regulations,
the agency could institute proceedings to detain or seize our products, issue a recall, impose operating restrictions, enjoin
future violations and assess civil and criminal penalties against us, our officers or employees and could recommend criminal prosecution.
Furthermore, regulators may proceed to ban, or request the recall, repair, replacement or refund of the cost of, any device manufactured
or sold by us. Furthermore, there can be no assurance that all necessary regulatory approvals will be obtained for the manufacture,
marketing and sale in any market of any new product developed or that any potential licensee will develop using our licensed technology.
Even
if our products are approved by regulatory authorities, if we or our suppliers fail to comply with ongoing regulatory requirements,
or if we experience unanticipated problems with our products, these products could be subject to restrictions or withdrawal from
the market.
Any
regulatory approvals that we receive for our products will require surveillance to monitor the safety and efficacy of the product
and may require us to conduct post-approval clinical studies. In addition, if a regulatory authority approves our products, the
manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import,
export and recordkeeping for our products will be subject to extensive and ongoing regulatory requirements.
Moreover,
if we obtain regulatory approval for any of our products, we will only be permitted to market our products for the indication
approved by the regulatory authority, and such approval may involve limitations on the indicated uses or promotional claims we
may make for our products. In addition, later discovery of previously unknown problems with our products, including adverse events
of unanticipated severity or frequency, or with our suppliers or manufacturing processes, or failure to comply with regulatory
requirements, may result in, among other things:
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restrictions
on the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory
product recalls;
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fines,
warning letters, or untitled letters;
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holds
on clinical trials;
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refusal
by the regulatory authority to approve pending applications or supplements to approved applications filed by us or suspension
or revocation of license approvals;
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product
seizure or detention, or refusal to permit the import or export of our product candidates; and
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injunctions,
the imposition of civil penalties or criminal prosecution.
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The
FDA also requires that our sales and marketing efforts, as well as promotions, be consistent with various laws and regulations.
Approved medical device promotions must be consistent with and not contrary to labeling, balanced, truthful and not false or misleading,
adequately substantiated (when required), and include adequate directions for use. In addition to the requirements applicable
to approved products, we may also be subject to enforcement action in connection with any promotion of an investigational new
device. A sponsor or investigator, or any person acting on behalf of a sponsor or investigator, may not represent in a promotional
context that an investigational new device is safe or effective for the purposes for which it is under investigation or otherwise
promote the device.
If
the FDA investigates our marketing and promotional materials or other communications and finds that any of our investigational
devices, or future commercial products, if any, are being marketed or promoted in violation of the applicable regulatory restrictions,
we could be subject to the enforcement actions listed above, among others. Any enforcement action (or related lawsuit, which could
follow such action) brought against us in connection with alleged violations of applicable device promotion requirements, or prohibitions,
could harm our business and our reputation, as well as the reputation of any devices that may be approved for marketing in the
U.S. in the future.
The
applicable regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent,
limit or delay regulatory approval of our products. We cannot predict the likelihood, nature or extent of government regulation
that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable
to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain
regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.
Failure
to obtain regulatory approval in foreign jurisdictions will prevent us from marketing our products in such jurisdictions.
We
market our products in international markets. In order to market our products in other foreign jurisdictions, we must obtain separate
regulatory approvals from the appropriate governing body in each applicable country. The approval processes vary among countries
and can involve additional testing, and the time required to obtain approval may differ from that required to obtain CE mark or
FDA approval. Foreign regulatory approval processes may include all of the risks associated with obtaining CE mark or FDA approval
in addition to other risks. We may not obtain foreign regulatory approvals on a timely basis, if at all. CE mark approval or any
future FDA approval does not ensure approval by regulatory authorities in other countries. We may not be able to file for regulatory
approvals and may not receive necessary approvals to commercialize our products in certain markets.
We
are, or may be, subject to federal, state and foreign healthcare laws and regulations and implementation of or changes to such
healthcare laws and regulations could adversely affect our business and results of operations.
In
both the United States and certain foreign jurisdictions, there are laws and regulations specific to the healthcare industry which
may affect all aspects of our business, including development, testing, marketing, sales, pricing, and reimbursement. Additionally,
there have been a number of legislative and regulatory proposals in recent years to change the healthcare system in ways that
could impact our ability to sell our products. If we are found to be in violation of any of these laws or any other federal or
state regulations, we may be subject to administrative, civil and/or criminal penalties, damages, fines, individual imprisonment,
exclusion from federal healthcare programs and the restructuring of our operations. Any of these could have a material adverse
effect on our business and financial results. Since many of these laws have not been fully interpreted by the courts, there is
an increased risk that we may be found in violation of one or more of their provisions. Any action against us for violation of
these laws, even if we ultimately are successful in our defense, will cause us to incur significant legal expenses and divert
our management’s attention away from the operation of our business.
We
may be subject, directly or indirectly, to applicable U.S. federal and state anti-kickback, false claims laws, physician payment
transparency laws, fraud and abuse laws or similar healthcare and security laws and regulations, which could expose us to criminal
sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare
providers, physicians and others will play a primary role in the recommendation, ordering and utilization of any products for
which we obtain regulatory approval. If we obtain U.S. Food & Drug Administration approval for any of our products and begin
commercializing those products in the United States, our operations may be subject to various federal and state fraud and abuse
laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician payment sunshine
laws and regulations. These laws may impact, among other things, our potential sales, marketing and education programs. In addition,
we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business.
The laws that may affect our ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering
or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or
in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of
any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such
as the Medicare and Medicaid programs;
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federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, which may be pursued
through civil whistleblower or qui tam actions, impose criminal and civil penalties against individuals or entities for knowingly
presenting, or causing to be presented, to the federal government, claims for payment or approval from Medicare, Medicaid or other
third-party payors that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay
money to the federal government;
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federal criminal statutes created through the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”),
which prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program
or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or
under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly
and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements
in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;
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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their respective implementing
regulations, which imposes requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as
well as their respective business associates that perform services for them that involve the use, or disclosure of, individually
identifiable health information, relating to the privacy, security and transmission of individually identifiable health information;
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the federal transparency requirements under The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation
Act, enacted into law in the United States in March 2010 (known collectively as the “Affordable Care Act”), including
the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, biologics, devices
and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program
to report annually to the U.S. Department of Health and Human Services information related to payments or other transfers of value
made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate
family members; and
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state and federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities
that potentially harm consumers.
Additionally,
we may be subject to state and non-U.S. equivalents of each of the healthcare laws described above, among others, some of which
may be broader in scope and may apply regardless of the payor. Many U.S. states have adopted laws similar to the federal Anti-Kickback
Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental
payors, including private insurers. Several states impose marketing restrictions or require medical device companies to make marketing
or price disclosures to the state. There are ambiguities as to what is required to comply with these state requirements, and if
we fail to comply with an applicable state law requirement we could be subject to penalties.
Because
of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some
of our future business activities could be subject to challenge under one or more of such laws. In addition, healthcare reform
legislation has strengthened these laws. For example, the Affordable Care Act, among other things, amended the intent requirement
of the federal Anti-Kickback and criminal healthcare fraud statutes. As a result of such amendment, a person or entity no longer
needs to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation. Moreover,
the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation
of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.
Violations
of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including penalties, fines and/or exclusion or suspension
from federal and state healthcare programs such as Medicare and Medicaid and debarment from contracting with the U.S. government.
In addition, private individuals have the ability to bring actions on behalf of the U.S. government under the False Claims Act
as well, as under the false claims laws of several states.
Efforts
to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations will involve
substantial costs. It is possible that governmental authorities will conclude that our existing or future business practices do
not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws
and regulations. Any such actions instituted against us could have a significant adverse impact on our business, including the
imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation
in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future
earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results
of operations. Even if we are successful in defending against such actions, we may nonetheless be subject to substantial costs,
reputational harm and adverse effects on our ability to operate our business. In addition, the approval and commercialization
of any of our products outside the United States will also likely subject us to non-U.S. equivalents of the healthcare laws mentioned
above, among other non-U.S. laws.
If
any of our employees, agents, or the physicians or other providers or entities with whom we expect to do business are found to
have violated applicable laws, we may be subject to criminal, civil or administrative sanctions, including exclusions from government
funded healthcare programs, or, if we are not subject to such actions, we may suffer reputational harm for conducting business
with persons or entities found, or accused of being, in violation of such laws. Any such events could adversely affect our ability
to operate our business and our results of operations.
We
may be exposed to product liability claims and insurance may not be sufficient to cover these claims.
We
may be exposed to product liability claims based on the use of any of our products, or products incorporating our licensed technology,
in the market or clinical trials. We may also be exposed to product liability claims based on the sale of any products under development
following the receipt of regulatory approval. Product liability claims could be asserted directly by consumers, health-care providers
or others. We have obtained product liability insurance coverage; however such insurance may not provide full coverage for our
future clinical trials, products to be sold, and other aspects of our business. Insurance coverage is becoming increasingly expensive
and we may not be able to maintain current coverage, or expand our insurance coverage to include future clinical trials or the
sale of new products or existing products in new territories, at a reasonable cost or in sufficient amounts to protect against
losses due to product liability or at all. A successful product liability claim or series of claims brought against us could result
in judgments, fines, damages and liabilities that could have a material adverse effect on our business, financial condition and
results of operations. We may incur significant expense investigating and defending these claims, even if they do not result in
liability. Moreover, even if no judgments, fines, damages or liabilities are imposed on us, our reputation could suffer, which
could have a material adverse effect on our business, financial condition and results of operations.
Even
if one or more of our products are approved by the FDA, we may fail to obtain an adequate level of reimbursement for our products
by third party payors, such that there may be no commercially viable markets for our products or the markets may be much smaller
than expected.
The
availability and levels of reimbursement by governmental and other third-party payors affect the market for our products. The
efficacy, safety, performance and cost-effectiveness of our products and of any competing products are factors that may impact
the availability and level of reimbursement. Reimbursement and healthcare payment systems in international markets vary significantly
by country and include both government sponsored healthcare and private insurance. To obtain reimbursement or pricing approval
in some countries, we may be required to produce clinical data, which may involve one or more clinical trials that compares the
cost-effectiveness of our products to other available therapies. We may not obtain international reimbursement or pricing approvals
in a timely manner, if at all. Our failure to receive international reimbursement or pricing approvals would negatively impact
market acceptance of our products in the international markets in which those approvals are sought.
We
believe that future reimbursement may be subject to increased restrictions both in the U.S. and in international markets. There
is increasing pressure by governments worldwide to contain healthcare costs by limiting both the coverage and the level of reimbursement
for therapeutic products and by refusing, in some cases, to provide any coverage for products that have not been approved by the
relevant regulatory agency. Future legislation, regulation or reimbursement policies of third party payors may adversely affect
the demand for our products and limit our ability to sell our products on a profitable basis. In addition, third party payors
continually attempt to contain or reduce the costs of healthcare by challenging the prices charged for healthcare products and
services. If reimbursement for our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory
levels, market acceptance of our products would be impaired, and future revenues, if any, would be adversely affected.
In
the United States and European Union, our business could be significantly and adversely affected by healthcare reform initiatives
and/or other legislation or judicial interpretations of existing or future healthcare laws and/or regulations.
The
Affordable Care Act, signed into law in the United States in March 2010, contains certain provisions which are not yet fully implemented
and for which it is unclear what the full impact will be from the legislation.
The
legislation also focuses on a number of provisions aimed at improving quality, broadening access to health insurance, enhancing
remedies for fraud and abuse, adding transparency requirements, and decreasing healthcare costs, among others. Uncertainties remain
regarding what negative unintended consequences these provisions will have on patient access to new technologies, pricing and
the market for our products, and the healthcare industry in general. The Affordable Care Act includes provisions affecting the
Medicare program, such as value-based payment programs, increased funding of comparative effectiveness research, reduced hospital
payments for avoidable readmissions and hospital acquired conditions, and pilot programs to evaluate alternative payment methodologies
that promote care coordination (such as bundled physician and hospital payments). Additionally, the provisions include a reduction
in the annual rate of inflation for hospitals which started in 2011 and the establishment of an independent payment advisory board
to recommend ways of reducing the rate of growth in Medicare spending. Any reduction in reimbursement from Medicare or other government
programs may result in a similar reduction in payments from private payors.
Some
of the provisions of the Affordable Care Act have yet to be implemented, and there have been judicial and Congressional challenges
to certain aspects of the Affordable Care Act, as well as recent efforts by the Trump presidential administration to repeal or
replace certain aspects of the Affordable Care Act. Since January 2017, the president has signed two executive orders and other
directives designed to delay the implementation of certain provisions of the Affordable Care Act or otherwise circumvent some
of the requirements for health insurance mandated by the Affordable Care Act. Congress has considered legislation that would repeal
or repeal and replace all or part of the Affordable Care Act. While Congress has not passed comprehensive repeal legislation,
two bills affecting the implementation of certain taxes under the Affordable Care Act have been signed into law. The TCJA includes
a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act
on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to
as the “individual mandate.” Additionally, the 2020 federal spending package permanently eliminated, effective January
1, 2020, the Affordable Care Act-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical
device tax and, effective January 1, 2021, also eliminates the health insurer tax. The Bipartisan Budget Act of 2018, among other
things, amended the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicare plans, commonly
referred to as the “donut hole.” In July 2018, the Centers for Medicare and Medicaid Services, or CMS, published a
final rule permitting further collections and payments to and from certain Affordable Care Act qualified health plans and health
insurance issuers under the Affordable Care Act risk adjustment program in response to the outcome of federal district court litigation
regarding the method CMS uses to determine this risk adjustment.
The
Trump administration has also taken executive actions to undermine or delay implementation of the Affordable Care Act. Since January
2017, the President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the Affordable
Care Act or otherwise circumvent some of the requirements for health insurance mandated by the Affordable Care Act. One Executive
Order directs federal agencies with authorities and responsibilities under the Affordable Care Act to waive, defer, grant exemptions
from, or delay the implementation of any provision of the Affordable Care Act that would impose a fiscal or regulatory burden
on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. The second
Executive Order terminates the cost-sharing subsidies that reimburse insurers under the Affordable Care Act. Several state Attorneys
General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied
by a federal judge in California on October 25, 2017. In addition, CMS has recently proposed regulations that would give states
greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect
of relaxing the essential health benefits required under the Affordable Care Act for plans sold through such marketplaces. Further,
on June 14, 2018, U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more
than $12 billion in Affordable Care Act risk corridor payments to third-party payors who argued such payments were owed to them,
which the U.S. Supreme Court is reviewing during its current term. The effects of this gap in reimbursement on third-party payors,
the viability of the Affordable Care Act marketplace, providers, and potentially our business, are not yet known.
We
cannot predict the impact that such actions against the Affordable Care Act will have on our business, and there is uncertainty
as to what healthcare programs and regulations may be implemented or changed at the federal and/or state level in the United States,
or the effect of any future legislation or regulation. Furthermore, we cannot predict what actions the Biden administration will
implement in connection with the Affordable Care Act. However, it is possible that such initiatives could have an adverse effect
on our ability to obtain approval and/or successfully commercialize products in the United States in the future. For example,
any changes that reduce, or impede the ability to obtain, reimbursement for the type of products we intend to commercialize in
the United States (or our products more specifically, if approved) or reduce medical procedure volumes could adversely affect
our business plan to introduce our products in the United States.
In
May 2017, the European parliament and the council of the European Union approved a new Medical Device Regulation (EU) 2017/745
which has replaced the existing medical device directives (93/42/EEC). The new regulations will come into full application in
May 2020. The new Medical Device Regulation imposes stricter requirements on medical device manufacturers and strengthens the
supervising competences of the competent authorities of European Union member states, the notified bodies and the authorized representatives.
As a result, the new legislation can prevent or delay the CE marking and certifications of our products under development or impact
our ability to modify our currently CE marked products on a timely basis. If we fail to comply with the modified regulation and
requirements it can adversely affect our business, operating results and prospects.
General
Risk Factors
If
we are unable to obtain and maintain intellectual property protection covering our products, others may be able to make, use or
sell our products, which would adversely affect our revenue.
Our
ability to protect our products from unauthorized or infringing use by third parties depends substantially on our ability to obtain
and maintain valid and enforceable patents. Similarly, the ability to protect our trademark rights might be important to prevent
third party counterfeiters from selling poor quality goods using our designated trademarks, and trade names. Due to evolving legal
standards relating to the patentability, validity and enforceability of patents covering medical devices and pharmaceutical inventions
and the scope of claims made under these patents, our ability to enforce patents is uncertain and involves complex legal and factual
questions. Accordingly, rights under any of our pending patent applications and patents may not provide us with commercially meaningful
protection for our products or may not afford a commercial advantage against our competitors or their competitive products or
processes. In addition, patents may not be issued from any pending or future patent applications owned by or licensed to us, and
moreover, patents that may be issued to us now or in the future may later be found invalid or unenforceable. Further, even if
valid and enforceable, our patents may not be sufficiently broad to prevent others from marketing products like ours, despite
our patent rights.
The
validity of our patent claims depends, in part, on whether prior art references exist that describe or render obvious our inventions
as of the filing date of our patent applications. We may not have identified all prior art, such as U.S. and foreign patents or
published applications or published scientific literature, that could adversely affect the patentability of our issued patents
and pending patent applications. For example, some material references may be in a foreign language and may not be uncovered during
examination of our patent applications. Additionally, patent applications in the United States are maintained in confidence for
up to 18 months after their filing. In some cases, however, patent applications remain confidential in the U.S. Patent and Trademark
Office for the entire time prior to issuance as a U.S. patent. Patent applications filed in countries outside the U.S. are not
typically published until at least 18 months from their first filing date. Similarly, publication of discoveries in the scientific
or patent literature often lags behind actual discoveries. Therefore, we cannot be certain that we were the first to invent, or
the first to file patent applications relating to, our stent technologies. Third parties may initiate adversarial proceedings,
known as an inter-partes review (IPR) in the U.S. Patent and Trademark Office to challenge the validity of our patent claims in
the United States. It is possible that we may be unsuccessful in the proceedings, resulting in a loss of some portion or all of
our patent rights in the United States.
In
addition, statutory differences in patentable subject matter among jurisdictions may limit the protection we can obtain on certain
of the technologies we develop. The laws of some foreign jurisdictions do not offer the same protection to, or may make it more
difficult to effect the enforcement of, proprietary rights as in the United States. This risk may be exacerbated if we move our
manufacturing to certain countries in Asia. If we encounter such difficulties or are otherwise precluded from effectively protecting
our intellectual property rights in any foreign jurisdictions, our business prospects could be substantially harmed.
Our
initiation of litigation to enforce our patent rights may prompt adversaries in such litigation to challenge the validity, scope,
ownership, or enforceability of our patents. Third parties can sometimes bring challenges against a patent holder to resolve these
issues, as well. If a court decides that any such patents are not valid, not enforceable, not wholly owned by us, or are of a
limited scope, we may not have the right to stop others from using our inventions. Also, even if our patent rights are determined
by a court to be valid and enforceable, they may not be sufficiently broad to prevent others from marketing products similar to
ours or designing around our patents, despite our patent rights, nor do they provide us with freedom to operate unimpeded by the
patent and other intellectual property rights of others that may cover our products. We may be forced into litigation to uphold
the validity of the claims in our patent portfolio, as well as our ownership rights to such intellectual property, and litigation
is often an uncertain and costly process.
We
may not be able to protect our trade secrets adequately. Although we rely on non-disclosure and confidentiality agreements with
employees, consultants and other parties to protect, in part, trade secrets and other proprietary technology, these agreements
may be breached and we may not have adequate remedies for such breach. Moreover, others may independently develop equivalent proprietary
information, and third parties may otherwise gain access to our trade secrets and proprietary knowledge. Any disclosure of confidential
data into the public domain or to third parties could allow competitors to learn our trade secrets and use the information in
competition against us.
We
face risks associated with litigation and claims.
We
may, in the future, be involved in one or more lawsuits, claims or other proceedings. These suits could concern issues including
contract disputes, employment actions, employee benefits, taxes, environmental, health and safety, fraud and abuse, personal injury
and product liability matters.
Our
business and operations would suffer in the event of computer system failures, cyber-attacks or deficiencies in our cyber-security.
In
the ordinary course of our business, we collect and store sensitive data, including intellectual property, research data, our
proprietary business information and that of our suppliers, technical information about our products, clinical trial plans and
employee records. Similarly, our third-party providers possess certain of our sensitive data and confidential information. The
secure maintenance of this information is critical to our operations and business strategy. Despite the implementation of security
measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses,
malware, ransomware, cyber fraud, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks
or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems
inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including
by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication
of attempted attacks and intrusions from around the world have increased. Any such breach could compromise our networks and the
information stored there could be accessed, publicly disclosed, encrypted, lost or stolen. Any such access, inappropriate disclosure
of confidential or proprietary information or other loss of information, including our data being breached at third-party providers,
could result in legal claims or proceedings, liability or financial loss under laws that protect the privacy of personal information,
disruption of our operations or our product development programs and damage to our reputation, which could adversely affect our
business. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays
in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
The
loss of key members of our senior management team or our inability to attract and retain highly skilled scientists and laboratory
and field personnel could adversely affect our business.
We
depend on the skills, experience and performance of our senior management and research personnel. The efforts of each of these
persons will be critical to us as we continue to further develop our products, increase sales and broaden our product offerings.
If we were to lose one or more of these key employees, we may experience difficulties in competing effectively, developing our
technologies and implementing our business strategies. Our research and development programs and commercial laboratory operations
depend on our ability to attract and retain highly skilled scientists and technicians. We may not be able to attract or retain
qualified scientists and technicians in the future due to the intense competition for qualified personnel among life science businesses.
There can be no assurance that we will be able to attract and retain necessary personnel on acceptable terms given the intense
competition among medical device, biotechnology, pharmaceutical and healthcare companies, universities and non-profit research
institutions for experienced management, scientists, researchers, sales and marketing and manufacturing personnel. If we are unable
to attract, retain and motivate our key personnel to accomplish our business objectives, we may experience constraints that will
adversely affect our ability to support our operations, and our results of operations may be materially and adversely affected.
We
are an international business, and we are exposed to various global and local risks that could have a material adverse effect
on our financial condition and results of operations.
We
operate globally and develop and market products in multiple countries. Consequently, we face complex legal and regulatory requirements
in multiple jurisdictions, which may expose us to certain financial and other risks. In addition, we are subject to global events
beyond our control, including war, public health crises, such as pandemics and epidemics, trade disputes and other international
events. Any of these changes could have a material adverse effect on our reputation, business, financial condition or results
of operations.
For
example, the COVID-19 pandemic has significantly affected most of the world, including each of our primary markets, resulting
in, among other things, government-imposed quarantines and other public health safety measures. At this point, the extent to which
the coronavirus may impact our business cannot be estimated; however, procedures with CGuard EPS, which are generally scheduled
or non-emergency procedures, have seen extended postponements since the onset of COVID-19 as hospitals shift resources to patients
affected by the coronavirus, and it is highly plausible that this trend will continue. The extent to which COVID-19 impacts our
results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which
may emerge concerning the severity of the coronavirus, the actions to contain COVID-19 or treat its impact, the efficacy and scale
of the various vaccines currently deployed across the world, among others. Moreover, COVID-19 has had indeterminable adverse effects
on general commercial activity and the world economy, and our business and results of operations could be adversely affected to
the extent that COVID-19 or any other epidemic continues to harm the global economy generally.
International
sales and operations are subject to a variety of risks, including:
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currency exchange rate fluctuations;
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greater
difficulty in staffing and managing foreign operations;
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greater
risk of uncollectible accounts;
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longer
collection cycles;
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logistical
and communications challenges;
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potential
adverse changes in laws and regulatory practices, including export license requirements, trade barriers, tariffs and tax laws;
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changes
in labor conditions;
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burdens
and costs of compliance with a variety of foreign laws;
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political
and economic instability;
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the
escalation of hostilities in Israel, which could impair our ability to manufacture our products;
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increases
in duties and taxation;
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foreign
tax laws and potential increased costs associated with overlapping tax structures;
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greater
difficulty in protecting intellectual property;
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the
risk of third party disputes over ownership of intellectual property and infringement of third party intellectual property
by our products; and
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general
economic and political conditions in these foreign markets.
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International
markets are also affected by economic pressure to contain reimbursement levels and healthcare costs. Profitability from international
operations may be limited by risks and uncertainties related to regional economic conditions, regulatory and reimbursement approvals,
competing products, infrastructure development, intellectual property rights protection and our ability to implement our overall
business strategy. We expect these risks will increase as we pursue our strategy to expand operations into new geographic markets.
We may not succeed in developing and implementing effective policies and strategies in each location where we conduct business.
Any failure to do so may harm our business, results of operations and financial condition.
Risks
Related to Operating in Israel
We
anticipate being subject to fluctuations in currency exchange rates because we expect a substantial portion of our revenues will
be generated in Euros and U.S. dollars, while a significant portion of our expenses will be incurred in New Israeli Shekels.
We
expect a substantial portion of our revenues will be generated in U.S. dollars and Euros, while a significant portion of our expenses,
principally salaries and related personnel expenses, is paid in New Israeli Shekels, or NIS. As a result, we are exposed to the
risk that the rate of inflation in Israel will exceed the rate of devaluation of the NIS in relation to the Euro or the U.S. dollar,
or that the timing of this devaluation will lag behind inflation in Israel. Because inflation has the effect of increasing the
dollar and Euro costs of our operations, it would therefore have an adverse effect on our dollar-measured results of operations.
The value of the NIS, against the Euro, the U.S. dollar, and other currencies may fluctuate and is affected by, among other things,
changes in Israel’s political and economic conditions. Any significant revaluation of the NIS may materially and adversely
affect our cash flows, revenues and financial condition. Fluctuations in the NIS exchange rate, or even the appearance of instability
in such exchange rate, could adversely affect our ability to operate our business.
If
there are significant shifts in the political, economic and military conditions in Israel and its neighbors, it could have a material
adverse effect on our business relationships and profitability.
Our
executive office, sole manufacturing facility and certain of our key personnel are located in Israel. Our business is directly
affected by the political, economic and military conditions in Israel and its neighbors. Since the establishment of the State
of Israel in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. A state of hostility, varying
in degree and intensity, has caused security and economic problems in Israel. Although Israel has entered into peace treaties
with Egypt and Jordan, and various agreements with the Palestinian Authority, there has been a marked increase in violence, civil
unrest and hostility, including armed clashes, between the State of Israel and the Palestinians since September 2000. The establishment
in 2006 of a government in the Gaza Strip by representatives of the Hamas militant group has created heightened unrest and uncertainty
in the region. In mid-2006, Israel engaged in an armed conflict with Hezbollah, a Shiite Islamist militia group based in Lebanon,
and in June 2007, there was an escalation in violence in the Gaza Strip. From December 2008 through January 2009 and again in
November and December 2012, Israel engaged in an armed conflict with Hamas, which involved missile strikes against civilian targets
in various parts of Israel and negatively affected business conditions in Israel. In July and August 2014, an armed conflict took
place between Israel and Hamas, and since September 2015, there has been an increase in sporadic terror incidents conducted by
individuals not necessarily associated with terror organizations. Political uprisings and social unrest in Syria are affecting
its political stability, which has led to the deterioration of the political relationship between Syria and Israel and have raised
new concerns regarding security in the region and the potential for armed conflict. Similar civil unrest and political turbulence
is currently ongoing in many countries in the region. The continued political instability and hostilities between Israel and its
neighbors and any future armed conflict, terrorist activity or political instability in the region could adversely affect our
operations in Israel and adversely affect the market price of our shares of common stock. In addition, several countries restrict
doing business with Israel and Israeli companies have been and are today subjected to economic boycotts. The interruption or curtailment
of trade between Israel and its present trading partners could adversely affect our business, financial condition and results
of operations.
In
addition, many of our officers or key employees may be called to active duty at any time under emergency circumstances for extended
periods of time. See “— Our operations could be disrupted as a result of the obligation of certain of our personnel
residing in Israel to perform military service.”
Our
operations could be disrupted as a result of the obligation of certain of our personnel residing in Israel to perform military
service.
Many
of our officers and employees reside in Israel and may be required to perform annual military reserve duty. Currently, all male
adult citizens and permanent residents of Israel under the age of 40 (or older, depending on their position with the Israeli Defense
Forces reserves), unless exempt, are obligated to perform military reserve duty annually and are subject to being called to active
duty at any time under emergency circumstances. Our operations could be disrupted by the absence for a significant period of one
or more of our key officers and employees due to military service. Any such disruption could have a material adverse effect on
our business, results of operations and financial condition.
We
may not be able to enforce covenants not-to-compete under current Israeli law.
We
have non-competition agreements with most of our employees, many of which are governed by Israeli law. These agreements generally
prohibit our employees from competing with us or working for our competitors for a specified period following termination of their
employment. However, Israeli courts are reluctant to enforce non-compete undertakings of former employees and tend, if at all,
to enforce those provisions for relatively brief periods of time in restricted geographical areas and only when the employee has
unique value specific to that employer’s business and not just regarding the professional development of the employee. Any
such inability to enforce non-compete covenants may cause us to lose any competitive advantage resulting from advantages provided
to us by such confidential information.
We
may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could
result in litigation and adversely affect our business.
A
significant portion of our intellectual property has been developed by our Israeli employees in the course of their employment
for us. Under the Israeli Patent Law, 5727-1967 (the “Israeli Patent Law”), inventions conceived by an employee during
the term and as part of the scope of his or her employment with a company are regarded as “service inventions,” which
belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights.
The Israeli Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation
and Royalties Committee (the “C&R Committee”), a body constituted under the Israeli Patent Law, shall determine
whether the employee is entitled to remuneration for his inventions. The C&R Committee (decisions of which have been upheld
by the Israeli Supreme Court) has held that employees may be entitled to remuneration for their service inventions despite having
specifically waived any such rights. We generally enter into intellectual property assignment agreements with our employees pursuant
to which such employees assign to us all rights to any inventions created in the scope of their employment or engagement with
us. Although our employees have agreed to assign to us service invention rights and have specifically waived their right to receive
any special remuneration for such assignment beyond their regular salary and benefits, we may face claims demanding remuneration
in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration
or royalties to our current or former employees, or be forced to litigate such claims, which could negatively affect our business.
It
may be difficult for investors in the United States to enforce any judgments obtained against us or some of our directors or officers.
The
majority of our assets other than cash are located outside the U.S. In addition, certain of our officers are nationals and/or
residents of countries other than the U.S., and all or a substantial portion of such persons’ assets are located outside
the U.S. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us
or any of our non-U.S. officers, including judgments predicated upon the civil liability provisions of the securities laws of
the U.S. or any state thereof. Additionally, it may be difficult to assert U.S. securities law claims in actions originally instituted
outside of the U.S. Israeli courts may refuse to hear a U.S. securities law claim because Israeli courts may not be the most appropriate
forums in which to bring such a claim. Even if an Israeli court agrees to hear a claim, it may determine that the Israeli law,
and not U.S. law, is applicable to the claim. Further, if U.S. law is found to be applicable, certain content of applicable U.S.
law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of procedure would still be
governed by the Israeli law. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal and state
securities laws against us or any of our non-U.S. directors or officers.
The
tax benefits that are currently available to us under Israeli law require us to satisfy specified conditions. If we fail to satisfy
these conditions, we may be required to pay increased taxes and would likely be denied these benefits in the future.
InspireMD
Ltd. has been granted a “Beneficiary Enterprise” status by the Investment Center in the Israeli Ministry of Industry
Trade and Labor, and we are therefore eligible for tax benefits under the Israeli Law for the Encouragement of Capital Investments,
1959. The main benefit is a two-year exemption from corporate tax, commencing when we begin to generate net income derived from
the beneficiary activities in facilities located in Israel, and a reduced corporate tax rate for an additional five to eight years,
depending on the level of foreign investment in each year. In addition, under the January 1, 2011 amendment to the Israeli Law
for the Encouragement of Capital Investments, 1959, a uniform corporate tax rate of 16% applies to all qualifying income of “Preferred
Enterprise,” which we may be able to apply as an alternative tax benefit.
The
tax benefits available to a Beneficiary Enterprise or a Preferred Enterprise are dependent upon the fulfillment of conditions
stipulated under the Israeli Law for the Encouragement of Capital Investments, 1959 and its regulations, as amended, which include,
among other things, maintaining our manufacturing facilities in Israel. If we fail to comply with these conditions, in whole or
in part, the tax benefits could be cancelled and we could be required to refund any tax benefits that we received in the past.
If we are no longer eligible for these tax benefits, our Israeli taxable income would be subject to regular Israeli corporate
tax rates. The standard corporate tax rate for Israeli companies in 2019 and thereafter is 23% of taxable income. The termination
or reduction of these tax benefits would increase our tax liability, which would reduce our profits.
In
addition to losing eligibility for tax benefits currently available to us under Israeli law, if we do not maintain our manufacturing
facilities in Israel, we will not be able to realize certain tax credits and deferred tax assets, if any, including any net operating
losses to offset against future profits.
The
tax benefits available to Beneficiary Enterprises may be reduced or eliminated in the future. This would likely increase our tax
liability.
The
Israeli government may reduce or eliminate in the future tax benefits available to Beneficiary Enterprises and Preferred Enterprises.
Our Beneficiary Enterprise status and the resulting tax benefits may not continue in the future at their current levels or at
any level. The tax benefit period is twelve years from the year of election, which means that after a year of election, the two-year
exemption and eight years of reduced tax rate can only be used within the next twelve years. The Company elected the year 2007,
as a year of election and 2011 as an additional year of election. The 2011 amendment regarding Preferred Enterprise may not be
applicable to us or may not fully compensate us for the change. The termination or reduction of these tax benefits would likely
increase our tax liability. The amount, if any, by which our tax liability would increase will depend upon the rate of any tax
increase, the amount of any tax benefit reduction, and the amount of any taxable income that we may earn in the future.
Risks
Related to Our Common Stock, Preferred Stock and Warrants
The
market prices of our common stock and our publicly traded warrants are subject to fluctuation and have been and may continue to
be volatile, which could result in substantial losses for investors.
The
market prices of our common stock and our Series A Warrants and Series B Warrants have been and are likely to continue to be highly
volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following:
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technological
innovations or new products and services by us or our competitors;
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additions
or departures of key personnel;
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our
ability to execute our business plan;
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operating
results that fall below expectations;
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loss
of any strategic relationship;
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industry
developments;
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economic,
political and other external factors; and
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period-to-period
fluctuations in our financial results.
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In
addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. These market fluctuations may also significantly affect the market prices
of our common stock and our publicly traded warrants.
Our
Planned Reverse Split may not result in a proportional increase in the per share price of our common stock.
We
intend to effect the Planned Reverse Split (as defined below) with the primary intent of increasing the price of our common stock
in order to meet the initial listing requirements of the Nasdaq Capital Market and, secondly, to provide appropriate flexibility
we require to issue shares in the event that our board of directors determines that it is necessary or appropriate to (i) raise
additional capital through the sale of equity securities, (ii) enter into strategic business transactions, (iii) provide equity
incentives to directors, officers and employees pursuant to equity compensation plans or (iv) further other corporate purposes.
The effect of the Planned Reverse Split on the market price for our common stock cannot be accurately predicted. In particular,
we cannot assure you that the proportionate increase in the price of our common stock immediately after the Planned Reverse Split
from the price for shares of our common stock immediately before the Planned Reverse Split will be maintained for us to meet the
initial listing requirements of the Nasdaq Capital Market or that the such market prices will be maintained for a substantial
period of time. It is not uncommon for the market price of a company’s common stock to decline in the period following a
reverse stock split. If the market price of our common stock declines following the Planned Reverse Split, the percentage decline
may be greater than would occur in the absence of the Planned Reverse Split. The market price of our common stock may also be
affected by other factors which may be unrelated to the Planned Reverse Split or the number of shares outstanding.
Moreover,
because some investors may view the Planned Reverse Split negatively, we cannot assure you that the Planned Reverse Split will
not adversely impact the market price of our common stock. Accordingly, our total market capitalization after the Planned Reverse
Split may be lower than the market capitalization before the Planned Reverse Split.
Our
common stock could be delisted from the NYSE American if we fail to meet the NYSE American’s stockholders’ equity
continued listing standards. Our ability to publicly or privately sell equity securities and the liquidity of our common stock
could be adversely affected if we are delisted from the NYSE American.
On
August 7, 2019, we received a notice indicating that we do not meet certain of the NYSE American’s continued listing standards
as set forth in Part 10 of the Company Guide. Specifically, we were not in compliance with Section 1003(a)(iii) of the Company
Guide because we reported stockholders’ equity of less than $6 million as of June 30, 2019, and had net losses in our five
most recent fiscal years ended December 31, 2018. As a result, we had become subject to the procedures and requirements of Section
1009 of the Company Guide. On August 25, 2019, we submitted a plan of compliance to NYSE Regulation, addressing how we intend
to regain compliance with Section 1003(a)(iii) of the Company Guide by August 7, 2020, and on October 11, 2019, NYSE American
accepted our plan. On August 7, 2020, the NYSE American approved such plan and, accordingly and as of such date, we are compliant
with all of the NYSE American LLC continued listing standards set forth in Part 10 of the NYSE American Company Guide. In particular,
we regained compliance with the continued listing requirement under NYSE American Company Guide Section 1003(a)(iii).
Notwithstanding
NYSE American’s approval of our plan, there is no assurance that we will be able to maintain compliance with Section 1003(a)(iii)
of the Company Guide moving forward. Additionally, we will be subject to ongoing review for compliance with NYSE American requirements
and there can be no assurance that we will continue to remain in compliance with this standard.
In
the event the NYSE American issues a future notice and recommences proceedings against us, delisting from NYSE American would
adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly
affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock.
Delisting could also have additional negative ramifications, including the potential loss of confidence by employees, the loss
of institutional investor interest and fewer business development opportunities.
A
low trading price could lead the NYSE American to take actions toward delisting our common stock, including immediately suspending
trading in our common stock.
On
January 7, 2019, we received notification from the NYSE American that our shares of common stock have been selling for a low price
per share for a substantial period of time. Pursuant to Section 1003(f)(v) of the Company Guide, the NYSE American could take
action to delist our common stock in the event that our common stock trades at levels viewed as abnormally low for a substantial
period of time. NYSE American advised us that if our common stock trades below $0.20 on a 30 trading day average, then it will
be considered non-compliant with NYSE American’s low selling price requirement. On March 29, 2019, we effected a 1-for-50
reverse stock split of our common stock.
If
in the future we fall below the continued listing criterion of a minimum average share price of $0.20 over a 30-day trading period,
our common stock will be subject to immediate review by NYSE American. There can be no assurance that the market price of our
common stock will remain above the levels viewed as abnormally low for a substantial period of time. In any event, other factors
unrelated to the number of shares of our common stock outstanding, such as negative financial or operational results, could adversely
affect the market price of our common stock, causing it to fall below the level viewed as a low selling price for a substantial
period of time, and lead the NYSE American to immediately suspend trading in our common stock.
In
addition, the NYSE American has advised us that its policy is to immediately suspend trading in shares of, and commence delisting
procedures with respect to, a listed company if the market price of its shares falls below $0.06 per share at any time during
the trading day.
We
are subject to financial reporting and other requirements that place significant demands on our resources.
We
are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, including the requirements
of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires us to conduct an annual management assessment of the effectiveness
of our internal controls over financial reporting. These reporting and other obligations place significant demands on our management,
administrative, operational, internal audit and accounting resources. Any failure to maintain effective internal controls could
have a material adverse effect on our business, operating results and stock price. Moreover, effective internal control is necessary
for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud,
we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business
and reputation with investors may be harmed.
There
are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.
The
ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 require us to identify material weaknesses
in internal control over financial reporting, which is a process to provide reasonable assurance regarding the reliability of
financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Our
management, including our chief executive officer and chief financial officer, does not expect that our internal controls and
disclosure controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control
system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, in our company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Further, controls
can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the
controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Over time, a control may be inadequate because of changes in conditions, such as growth of the company or increased transaction
volume, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be detected.
In
addition, discovery and disclosure of a material weakness, by definition, could have a material adverse impact on our financial
statements. Such an occurrence could discourage certain customers or suppliers from doing business with us and adversely affect
how our stock trades. This could in turn negatively affect our ability to access equity markets for capital.
Delaware
law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that
stockholders may consider favorable.
Our
board of directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences
and other rights and limitations of the preferred stock. Accordingly, we may issue shares of preferred stock with a preference
over our common stock with respect to dividends or distributions on liquidation or dissolution, or that may otherwise adversely
affect the voting or other rights of the holders of common stock. Issuances of preferred stock, depending upon the rights, preferences
and designations of the preferred stock, may have the effect of delaying, deterring or preventing a change of control, even if
that change of control might benefit our stockholders. In addition, we are subject to Section 203 of the Delaware General Corporation
Law. Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with
an “interested stockholder” for a period of three years after the date of the transaction in which the person became
an interested stockholder, unless (i) prior to the date of the transaction, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (ii)
the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also
officers and (b) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange offer; or (iii) on or subsequent to the date
of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders,
and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder.
Section
203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage
attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price
above the prevailing market price.
We
have a staggered board of directors, which could impede an attempt to acquire us or remove our management.
Our
board of directors is divided into three classes, each of which serves for a staggered term of three years. This division of our
board of directors could have the effect of impeding an attempt to take over our company or change or remove management, since
only one class will be elected annually. Thus, only approximately one-third of the existing board of directors could be replaced
at any election of directors.
As
a former shell company, resales of shares of our restricted common stock in reliance on Rule 144 of the Securities Act are subject
to the requirements of Rule 144(i).
We
previously were a “shell company” and, as such, sales of our securities pursuant to Rule 144 under the Securities
Act of 1933, as amended, cannot be made unless, among other things, at the time of a proposed sale, we are subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and have filed all reports and other materials
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended, as applicable, during the preceding
12 months, other than Form 8-K reports. Because, as a former shell company, the reporting requirements of Rule 144(i) will apply
regardless of holding period, restrictive legends on certificates for shares of our common stock cannot be removed except in connection
with an actual sale that is subject to an effective registration statement under, or an applicable exemption from the registration
requirements of, the Securities Act of 1933, as amended. Because our unregistered securities cannot be sold pursuant to Rule 144
unless we continue to meet such requirements, any unregistered securities we issue will have limited liquidity unless we continue
to comply with such requirements.
If
securities and/or industry analysts fail to continue publishing research about our business, if they change their recommendations
adversely or if our results of operations do not meet their expectations, our stock price and trading volume could decline.
The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish
about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly,
we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. In
addition, it is likely that in some future period our operating results will be below the expectations of securities analysts
or investors. If one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their
expectations, our stock price could decline.
Aspects
of the tax treatment of the securities may be uncertain.
The
tax treatment of our preferred stock and our warrants is uncertain and may vary depending upon whether you are an individual or
a legal entity and whether or not you are domiciled in the United States. In the event you are a non-U.S. investor, you should
consult your tax advisors as to the consequences, under the tax laws of the country where you are resident for tax purposes, of
acquiring, holding and disposing of our preferred stock and our warrants.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K 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 will probably 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:
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our
need to raise additional capital to meet our business requirements in the future and such capital raising may be costly or
difficult to obtain and could dilute out stockholders’ ownership interests;
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the
impact of the COVID-19 pandemic on our manufacturing, sales, business plan and the global economy;
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negative
clinical trial results or lengthy product delays in key markets;
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our
ability to maintain compliance with the NYSE American listing standards;
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our
ability to generate revenues from our products and obtain and maintain regulatory approvals for our products;
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our
ability to adequately protect our intellectual property;
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our
dependence on a single manufacturing facility and our ability to comply with stringent manufacturing quality standards and
to increase production as necessary;
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the
risk that the data collected from our current and planned clinical trials may not be sufficient to demonstrate that our technology
is an attractive alternative to other procedures and products;
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market
acceptance of our products;
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an
inability to secure and maintain regulatory approvals for the sale of our products;
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intense
competition in our industry, with competitors having substantially greater financial, technological, research and development,
regulatory and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do;
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entry
of new competitors and products and potential technological obsolescence of our products;
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inability
to carry out research, development and commercialization plans;
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loss
of a key customer or supplier;
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technical
problems with our research and products and potential product liability claims;
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product
malfunctions;
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price
increases for supplies and components;
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adverse
economic conditions;
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insufficient
or inadequate reimbursement by governmental and other third-party payers for our products;
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our
efforts to successfully obtain and maintain intellectual property protection covering our products, which may not be successful;
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adverse
federal, state and local government regulation, in the United States, Europe or Israel and other foreign jurisdictions;
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the
fact that we conduct business in multiple foreign jurisdictions, exposing us to foreign currency exchange rate fluctuations,
logistical and communications challenges, burdens and costs of compliance with foreign laws and political and economic instability
in each jurisdiction;
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the
escalation of hostilities in Israel, which could impair our ability to manufacture our products; and
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loss
or retirement of key executives and research scientists.
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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. You should review carefully the risks and uncertainties described under the heading “Item 1A. Risk Factors”
in this Annual Report on Form 10-K for a discussion of these and other risks that relate to our business and investing in shares
of our common stock. The forward-looking statements contained in this Annual Report on Form 10-K 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.
Item
1B. Unresolved Staff Comments.
Not
applicable.
Item
2. Properties.
Our
headquarters are located in Tel Aviv, Israel, where we lease a 1,050 square meter office and manufacturing facility that has the
capacity to manufacture and assemble 1,200 stents per month, based upon the production schedule of one shift per day. We believe
that our current facility is sufficient to meet anticipated future demand by adding additional shifts to our current production
schedule.
Item
3. Legal Proceedings.
From
time to time, we may be involved in litigation that arises through the normal course of business.
On
July 10, 2019, Bosti Trading Ltd., a former distributor in Russia (“Bosti”), filed suit with the Tel Aviv-Jaffa District
Court in Israel, or the Complaint, against InspireMD Ltd., claiming damages for alleged breaches by InspireMD Ltd. under the Distribution
Agreement, dated May 26, 2011, between Bosti and InspireMD Ltd., in connection with the voluntary field corrective action of our
MGuard Prime EPS we initiated in 2014. Bosti claimed that Bosti and its Russian subsidiary returned 1,830 units of MGuard Prime
EPS to InspireMD Ltd. upon initiation of the voluntary filed action, and, since the Russian Ministry of Health prohibited distribution
of MGuard Prime EPS on August 28, 2014, and did not approve distribution MGuard Prime EPS until September 20, 2016, Bosti was
entitled to recover from InspireMD Ltd. €1,830,000 (which is approximately $2 million), the amount Bosti was due to receive
from its Russian subsidiary, or alternatively, €1,024,000 (which is approximately $1.1 million), the amount Bosti paid to
InspireMD Ltd., for the MGuard Prime EPS returned to InspireMD Ltd. On January 31, 2020, InspireMD Ltd. filed with court its letter
of defense in which it contested this matter vigorously. On January 21, 2021, we executed a Mediation Agreement with Bosti and
InspireMD Ltd., pursuant to which Bosti agreed to release the Company from all claims stated in the Complaint in exchange for
a payment of $580,000, which we paid on January 25, 2021.
As
of the date of this filing, we are not aware of any other material legal proceedings to which we or any of our subsidiaries is
a party or to which any of our property is subject, nor are we aware of any such threatened or pending litigation or any such
proceedings known to be contemplated by governmental authorities.
We
are not aware of any material proceedings in which any of our directors, officers or affiliates or any registered or beneficial
stockholder of more than 5% of our common stock, or any associate of any of the foregoing, is a party adverse to or has a material
interest adverse to, us or any of our subsidiaries.
Item
4. Mine Safety Disclosures.
Not
applicable.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance.
Executive
Officers and Directors
The
following table sets forth information regarding our executive officers and the members of our board of directors.
Name
|
|
Age
|
|
Position
|
Marvin
Slosman
|
|
57
|
|
President,
Chief Executive Officer and Director
|
Craig
Shore
|
|
59
|
|
Chief
Financial Officer, Chief Administrative Officer, Secretary and Treasurer
|
Michael
Berman(1)(2)
|
|
63
|
|
Director
|
Campbell
Rogers, M.D.
|
|
59
|
|
Director
|
Paul
Stuka(1)(2)(3)
|
|
66
|
|
Chairman
of the Board of Directors
|
Thomas
J. Kester(1)(3)
|
|
74
|
|
Director
|
Gary
Roubin, M.D.
|
|
72
|
|
Director
|
(1)
|
Member
of our audit committee
|
|
|
(2)
|
Member
of our nominating and corporate governance committee
|
|
|
(3)
|
Member
of our compensation committee
|
Our
directors hold office until the earlier of their death, resignation or removal by stockholders or until their successors have
been qualified. Our directors are divided into three classes. Paul Stuka and Gary Roubin are our Class 1 directors, with their
terms of office to expire at our 2021 annual meeting of stockholders. Michael Berman and Campbell Rogers, M.D. are our Class 2
directors, with their terms of office to expire at our 2022 annual meeting of stockholders. Marvin Slosman and Thomas J. Kester
are our Class 3 directors, with their terms of office to expire at our 2023 annual meeting of stockholders. At each annual meeting
of stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire
at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her
successor shall have been duly elected and qualified.
Our
officers hold office until the earlier of their death, resignation or removal by our board of directors or until their successors
have been selected. They serve at the pleasure of our board of directors.
Marvin
Slosman has served as our president, chief executive officer and director since January 1, 2020. Mr. Slosman has served as
chief operating officer for MEDCURA Inc. from May 2019 to December 2019. From September 2017 to September 2019, Mr. Slosman served
as a Business Consultant, overseeing international commercial strategy and market development, at Integra Life Sciences, a leading
innovator in orthopedic extremity surgery, neurosurgery, and reconstructive and general surgery. From 2010 to 2014 Mr. Slosman
served as President of Itamar Medical, Inc., a medical technology company focused on cardiovascular and sleep diagnostics. Mr.
Slosman also served as chief executive officer of Ovalum Vascular Ltd. from 2008 to 2010. Mr. Slosman’s qualifications to
serve on the board of directors of the Company include his significant experience in senior management positions of leading medical
device companies.
Craig
Shore has served as our chief financial officer, secretary and treasurer since March 31, 2011 and as our chief administrative
officer since May 3, 2013. In addition, from November 10, 2010 through March 31, 2011, Mr. Shore served as InspireMD Ltd.’s
vice president of business development. Mr. Shore has over 30 years of experience in financial management in the United States,
Europe and Israel for companies such as Pfizer Pharmaceuticals, Bristol Myers Squibb and General Electric. His experience includes
raising capital both in the private and public markets. Mr. Shore graduated with honors and received a B.Sc. in Finance from Pennsylvania
State University and an M.B.A. from George Washington University.
Michael
Berman has served as our director since February 7, 2013. Mr. Berman is a medical device entrepreneur who works with high-potential
development and early-stage commercial companies. From 2005 to 2012, when the company was sold to Boston Scientific, Mr. Berman
was a co-founder and the chairman of BridgePoint Medical, Inc., which developed technology to treat coronary and peripheral vascular
chronic total occlusions. Mr. Berman was also a member of the board of Lutonix, Inc. from 2007 until 2011, when the company was
sold to C.R. Bard, Inc. From 2011 to 2019, Mr. Berman served as a co-founder and director of Rebiotix Inc., a company developing
an innovative treatment for C Diff colitis. Rebiotix was sold to Ferring Pharmaceuticals in 2018. From 2014 till 2018 Mr. Berman
served as a director Mazor Robotics, a company pioneering Spinal Robotic Surgery. Mr. Berman has served (i) since 2011 as an advisor
to, and since 2012 as a director of, Cardiosonic, Inc., a company developing a system for hypertension reduction via renal denervation,
(ii) since 2005 as a director of PharmaCentra, LLC, which creates customizable marketing programs that help pharmaceutical companies
communicate with physicians and patients, (iii) since 2018 as a Director of STMedical, a medical device company that has developed
a temporary stent for the treatment of chronic sinusitis, (iv) since 2019 as a director of CardiacSense Inc, a medical device
company that has developed a smart watch vital sign monitor, (v) since 2017 as a Director of Owlytics Healthcare, (vi) since 2013
as a Director of ClearCut Inc., a medical device company that has developed an MRI system for tumor margin assessment, (vii) since
2013 as a director of PulmOne Ltd., a medical device company developing an innovative Pulmonary Function Testing system, (viii)
since 2014 as a director of SoniVie, a medical device company, (ix) since 2014 as a venture partner at RiverVest Ventures and
(x) since 2017 as a Director of Truleaf Medical. Mr. Berman brings to the board his extensive executive and entrepreneurial experiences
in the field of medical devices and vascular intervention, which should assist in strengthening and advancing our strategic focus.
Campbell
Rogers, M.D. has served as a director since September 3, 2013. Dr. Rogers is the executive vice president and chief medical
officer of HeartFlow, Inc., a cardiovascular diagnostics company, since March 2012. Prior to joining HeartFlow, Inc., he was the
chief scientific officer and global head of research and development at Cordis Corporation (currently part of Cardinal Health,
Inc.), Johnson & Johnson, where he was responsible for leading investments and research in cardiovascular devices. Prior to
that, he was associate professor of medicine at Harvard Medical School and the Harvard-M.I.T. Division of Health Sciences and
Technology and director of the cardiac catheterization and experimental cardiovascular interventional laboratories at Brigham
and Women’s Hospital. He served as principal investigator for numerous interventional cardiology device, diagnostic, and
pharmacology trials, is the author of numerous journal articles, chapters, and books in the area of coronary artery and other
cardiovascular diseases and was the recipient of research grant awards from the National Institute of Health and the American
Heart Association. He received his A.B. from Harvard College and his M.D. from Harvard Medical School. Dr. Rogers’ qualifications
to serve on the board include his significant experience in cardiovascular devices, as well as his familiarity with the operations
of medical device companies.
Paul
Stuka has served as a director since August 8, 2011 and has served as our chairman since June 2, 2017. Mr. Stuka has served
as the managing member of Osiris Partners, LLC, an investment fund, since 2000. Prior to forming Osiris Partners, LLC, Mr. Stuka,
with 40 years of experience in the investment industry, was a managing director of Longwood Partners, managing small cap institutional
accounts. In 1995, Mr. Stuka joined State Street Research and Management as manager of its Market Neutral and Mid Cap Growth Funds.
From 1986 to 1994, Mr. Stuka served as the general partner of Stuka Associates, where he managed a U.S.-based investment partnership.
Mr. Stuka began his career in 1980 as an analyst at Fidelity Management and Research. As an analyst, Mr. Stuka followed a wide
array of industries including healthcare, energy, transportation, and lodging and gaming. Early in his career he became the assistant
portfolio manager for three Fidelity Funds, including the Select Healthcare Fund which was recognized as the top performing fund
in the United States for the five-year period ending December 31, 1985. Mr. Stuka has been serving as a director of Caliber Imaging
& Diagnostics, Inc. (formerly Lucid, Inc.) since June 2013. Mr. Stuka’s qualifications to serve on the board include
his significant strategic and business insight from his years of experience investing in the healthcare industry.
Thomas
J. Kester has served as a director since September 6, 2016. Mr. Kester has been serving as the chief financial officer of
Kester Search Group, Inc., a private executive search firm specializing in sales force placement for medical, dental and diagnostic
device companies, since October 2014. From 2004 to 2010, Mr. Kester served as a director of Orthofix International, NV (NASDAQ:
OFIX), a global medical device company. Mr. Kester’s experience includes 28 years at KPMG LLP, including 18 years as an
audit partner, advising public and private companies in connection with annual audit and financings. Mr. Kester’s qualifications
to serve on the board include his significant strategic and business insight from his years of experience auditing global companies
and serving on the boards of several public and not-for-profit organizations. Mr. Kester received his B.S. in mechanical engineering
from Cornell University and an M.B.A. from Harvard University.
Gary
Roubin, M.D. has served as a director since October 13, 2020. Dr. Roubin cofounded Essential Medical Inc., which has had success
in bringing a large bore vascular closure device to world markets and was recently acquired by Teleflex Inc. From 2002 to 2003,
Dr. Roubin served as Chief Medical Officer of the Medicines Company during the release of its Angiomax product. From 2003 to 2012,
Dr. Roubin served as Department Chairman and Chief of Service of the Lenox Hill Hospital Cardiac and Vascular program in New York.
From 1989 to 1997, he served as Chief of Interventional Cardiology at the University of Alabama at Birmingham, to which he joined
in 1989 as Professor of Medicine and Radiology and Director of the Cardiac Catheterization Laboratories and Interventional Cardiology
Section at the University Hospital. In 2001, Dr. Roubin played a pivotal role in the success of Mednova Inc., which was acquired
by Abbott Vascular, resulting in the introduction and marketing in the U.S. of the top selling carotid embolic protection system
(NAV6) and stent system (XACT). In 1987, he developed and placed the world’s first balloon expandable coronary stent. In
1984, Dr. Roubin joined Andreas Gruentzig at Emory University to continue his post-doctoral research. He is also acknowledged
for the development of coronary stenting and the first FDA-approved coronary stent. Dr. Roubin received his M.D. from the University
of Queensland medical school and his Ph.D. from Sydney University.
Mr.
Slosman and Mr. Shore are parties to certain agreements related to their service as executive officers and directors described
under “Executive Compensation – Agreements with Executive Officers.”
Family
Relationships
We
have no family relationships amongst our directors and executive officers.
Board
Committees
Our
board of directors has established an audit committee, a nominating and corporate governance committee and a compensation committee,
each of which has the composition and responsibilities described below.
Audit
Committee. Our audit committee is currently comprised of Messrs. Berman, Stuka and Kester, each of whom our board has
determined to be financially literate and qualify as an independent director under Section 803(B)(2) of the NYSE American rules.
Mr. Kester is the chairman of our audit committee and qualifies as a financial expert, as defined in Item 407(d)(5)(ii) of Regulation
S-K. The audit committee’s duties are to recommend to our board of directors the engagement of independent auditors to audit
our financial statements and to review our accounting and auditing principles. The audit committee will review the scope, timing
and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent public
accountants, including their recommendations to improve the system of accounting and internal controls. The audit committee operates
under a formal charter adopted by the board of directors that governs its duties and conduct. Copies of the charter can be obtained
free of charge from the Company’s web site, www.inspiremd.com, by contacting the Company.
Nominating
and Corporate Governance Committee. Our nominating and corporate governance committee is currently comprised of Messrs.
Berman and Stuka, each of whom qualify as an independent director under Section 803(A) of the NYSE American rules. Mr. Berman
is the chairman of our nominating and corporate governance committee. The nominating and corporate governance committee identifies
and recommends to our board of directors individuals qualified to be director nominees. In addition, the nominating and corporate
governance committee recommends to our board of directors the members and chairman of each board committee who will periodically
review and assess our code of business conduct and ethics and our corporate governance guidelines. The nominating and corporate
governance committee also makes recommendations for changes to our code of business conduct and ethics and our corporate governance
guidelines to our board of directors, reviews any other matters related to our corporate governance and oversees the evaluation
of our board of directors and our management. The nominating and corporate governance committee operates under a formal charter
adopted by the board of directors that governs its duties and conduct. Copies of the charter can be obtained free of charge from
the Company’s web site, www.inspiremd.com, by contacting the Company.
Compensation
Committee. Our compensation committee is currently comprised of Messrs. Stuka and Kester, each of whom qualify as an
independent director under Sections 803(A) and 805(c)(1) of the NYSE American rules. Mr. Stuka is the chairman of our compensation
committee. The compensation committee reviews and approves our salary and benefits policies, including compensation of executive
officers and directors. The compensation committee also administers our stock option plans and recommends and approves grants
of stock options under such plans. The compensation committee operates under a formal charter adopted by the board of directors
that governs its duties and conduct. Copies of the charter can be obtained free of charge from the Company’s web site, www.inspiremd.com,
by contacting the Company.
Code
of Ethics
We
have adopted a code of ethics and business conduct that applies to our officers, directors and employees, including our principal
executive officer, principal financial officer and principal accounting officer, which is posted on our website at www.inspiremd.com.
We intend to disclose future amendments to certain provisions of the code of ethics, or waivers of such provisions granted to
executive officers and directors, on this website within four business days following the date of such amendment or waiver.
Item
11. Executive Compensation.
Summary
Compensation Table
The
table below sets forth the compensation earned by our named executive officers for the twelve-month period ended December 31,
2020 and 2019.
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus ($)
|
|
|
Restricted
Stock
Awards
($)(1)
|
|
|
Option
Awards
($)(1)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Marvin Slosman
|
|
|
2020
|
|
|
|
366,666
|
(2)
|
|
|
150,000
|
(3)
|
|
|
658,981
|
|
|
|
196,162
|
(7)
|
|
|
10,309
|
(4)
|
|
|
1,382,118
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig Shore
|
|
|
2020
|
|
|
|
265,004
|
(2)(5)
|
|
|
138,692
|
(3)(5)
|
|
|
264,745
|
|
|
|
78,955
|
|
|
|
121,626
|
(6)
|
|
|
869,022
|
|
Chief Financial Officer, Secretary and Treasurer
|
|
|
2019
|
|
|
|
269,758
|
(5)
|
|
|
60,000
|
(5)
|
|
|
57,000
|
|
|
|
-
|
|
|
|
114,395
|
(6)
|
|
|
501,153
|
|
(1)
|
For
awards of stock, the aggregate grant date fair value is computed in accordance with FASB ASC Topic 718. Fair value is based
on the Black-Scholes option pricing model using the fair value of the underlying shares at the measurement date.
|
|
|
(2)
|
On
April 21, 2020, Mr. Slosman and Mr. Shore each signed waivers in connection with the COVID-19 pandemic and certain cost-reduction
measures, whereby Mr. Slosman’s monthly base salary was reduced from $33,333 to $16,666 and Mr. Shore’s monthly
base salary was reduced from NIS 80,125 to NIS 40,063. On June 10, 2020, following the closing of our underwritten public
offering in June 2020, each of Mr. Slosman’s and Mr. Shore’s monthly base salaries were reinstated to $33,333
and NIS 80,125, respectively, effective as of June 1, 2020.
|
|
|
(3)
|
Cash
bonus awards for the 2020 calendar year were approved by the compensation committee in January 2021.
|
|
|
(4)
|
Mr.
Slosman’s other compensation for 2020 consisted of benefits related to health insurance.
|
|
|
(5)
|
Compensation
amounts received in non-U.S. currency have been converted into U.S. dollars using the average exchange rate for the applicable
period, except for bonus amounts which have been converted into U.S. dollars using 3.215 NIS per dollar which was the exchange
rate as of December 31, 2020. The average exchange rate for the twelve month period ended December 31, 2020 and 2019 were
3.437 NIS per dollar and 3.564 NIS per dollar, respectively.
|
|
|
(6)
|
Mr.
Shore’s other compensation consisted solely of benefits in the twelve months ended December 31, 2020 and 2019. In each
of the periods reported, Mr. Shore’s benefits included our contributions to his severance, pension, vocational studies
and disability funds, an annual recreation payment, a company car or car allowance and cell phone, and a daily food allowance.
|
|
|
(7)
|
182,381
shares of common stock issuable upon the exercise of Restricted Stock Units outside our 2013 Long-Term Incentive Plan.
|
Agreements
with Executive Officers
Marvin
Slosman
On
December 9, 2019, we entered into an Employment Agreement with Marvin Slosman, which was subsequently amended on December 31,
2019 (as amended, the “Slosman Employment Agreement”), pursuant to which Mr. Slosman was appointed as our new chief
executive officer and president. Mr. Slosman’s term of employment commenced on January 1, 2020, which will remain in effect
for three years (the “Initial Employment Term”), unless earlier terminated, and to be automatically renewed for successive
one-year terms after the Initial Employment Term. Mr. Slosman was also appointed as a Class 3 director, effective January 1, 2020,
with a term expiring on the 2020 annual meeting of our stockholders.
As
consideration for his services as chief executive officer, Mr. Slosman will be entitled to receive (i) an annual base salary of
$400,000, less applicable payroll deductions and tax (“Base Salary”), which will be reviewed by the Board on an annual
basis for increase; (ii) reimbursement of up to $50,000 for any reasonable and customary, documented out-of-pocket relocation
expenses actually incurred by Mr. Slosman in 2019 or 2020 calendar years, in connection with his relocation to Europe; (iii) annual
performance bonuses in an amount up to 50% percent of the Base Salary, as may be in effect from time to time, for each calendar
year during his employment with us based on the extent to which performance criteria/financial results for the applicable year
have been met; and (iv) equity awards as of the date of the Slosman Employment Agreement that represent, in the aggregate, 5%
of the Company’s issued and outstanding common stock determined on a fully diluted basis as of the date of grant (the “Equity
Awards”), with 75% of the Equity Awards being granted as restricted stock units and with the remaining 25% of the Equity
Awards being granted as stock options, all of which Equity Awards shall be outside of the 2013 Long-Term Incentive Plan and subject
to terms and conditions of the award agreements entered by Mr. Slosman. In addition, on or before December 31, 2020, Mr. Slosman
shall become eligible to receive an additional grant of equity awards under the 2013 Long-Term Incentive Plan and the applicable
award agreements up to 5% (including the Equity Awards) of the Company’s actual outstanding shares of Common Stock on the
date of grant, provided that the actual amount of the grant shall be based on the achievement of certain performance/financial
criteria as established by the Board after consultation with Mr. Slosman, in its reasonable discretion. For the purposes of the
equity award calculation, “fully diluted basis” is defined as the sum of the total shares of common stock then outstanding,
the shares of common stock issuable upon the conversion of our then outstanding shares of Series B Convertible Preferred Stock
and Series C Convertible Preferred Stock and the shares of common stock issuable upon the exercise of our then outstanding pre-funded
warrant. On January 2, 2020, pursuant to the Slosman Employment Agreement, we granted Mr. Slosman restricted stock units for 182,381
shares and a stock option to purchase 60,794 shares of common stock at $1.10 per share.
In
the event Mr. Slosman voluntarily resigns without good reason, we may, in our sole discretion, shorten the notice period and determine
the date of termination without any obligation to pay Mr. Slosman any additional compensation other than the accrued obligations
and without triggering a termination of Mr. Slosman’s employment without cause. In the event the Slosman Employment Agreement
expires, or we terminate Mr. Slosman’s employment for cause or Mr. Slosman voluntarily resigns without good reason, we shall
have no further liability or obligation to Mr. Slosman under the Slosman Employment Agreement. Notwithstanding the foregoing,
in the event that this the Slosman Employment Agreement expires as a result of our decision not to renew the Slosman Employment
Agreement, we shall, subject to the execution and timely return by Mr. Slosman of a release of claims, pay Mr. Slosman cash payments
totaling $100,000 in the aggregate, payable in equal installments on our regular pay dates that occur during the period commencing
on 60th day following his employment termination date and ending on the last day of the Restricted Period (as defined below);
provided, however, that if, at any time within the period commencing on the date that is 3 months prior to the expiration of the
Initial Employment Term or the then current renewal term, as applicable, and ending on the date that is 3 months following the
expiration of the Slosman Employment Agreement, we and a third party execute a definitive, written, and binding agreement (a “Sale
Agreement”) to enter into certain transactions described therein that, if consummated, would constitute a change in control
in us, then Mr. Slosman’s termination shall be deemed a termination by us without cause or for good reason, as of the date
such Sale Agreement is executed, provided further that any amounts payable to Mr. Slosman pursuant to such termination shall be
reduced by any amounts previously paid to him upon expiration of the Slosman Employment Agreement, termination by us for cause
or voluntary resignation by Mr. Slosman without good reason.
If
Mr. Slosman’s employment is terminated (i) by us without cause or (ii) by Mr. Slosman for good reason, then we must pay
Mr. Slosman, (a) a severance pay in an amount equal to twelve months of his then-current base salary, (b) his entire performance
bonus for any calendar year for which Mr. Slosman has already worked the entire year but the bonus has yet to be paid, (c) a pro-rated
performance bonus in an amount equal to the target annual performance bonus to which Mr. Slosman may have been entitled for the
year in which the termination occurs that he would have received had his employment not been terminated during such year. In addition,
50% of all unvested stock options, shares of restricted stock, restricted stock units, stock appreciation rights, or similar stock-based
rights granted to Mr. Slosman shall vest and, if applicable, be immediately exercisable and any risk of forfeiture included in
such restricted or other stock grants previously made to Mr. Slosman shall immediately lapse, and Mr. Slosman may exercise any
outstanding stock options or stock appreciation rights until the earlier of (x) the last date on which such stock options or stock
appreciation rights could have been exercised pursuant to the terms of the applicable award agreement, irrespective of Mr. Slosman’s
termination of employment; and (y) the date that is two years following his employment termination date.
Craig
Shore
We
have been a party to an employment agreement with Craig Shore since November 28, 2010. On May 5, 2014, we entered into an amended
and restated employment agreement with Mr. Shore, which was amended on January 5, 2015, July 25, 2016, and on March 25, 2019.
The employment agreement, as amended, has an initial term that ends on December 31, 2020, and will automatically renew for additional
one-year periods on January 1st thereafter unless either party gives the other party written notice of its election not to extend
such employment at least six months prior to the next January 1st renewal date. If a change in control occurs when less than two
full years remain in the initial term or during any renewal term, the employment agreement will automatically be extended for
two years from the change in control date and will terminate on the second anniversary of the change in control date.
Under
the terms of the employment agreement, as amended by the third amendment to the amended and restated employment agreement, dated
March 25, 2019, Mr. Shore is entitled to an annual base salary of at least $250,000. Such amount may be reduced only as part of
an overall cost reduction program that affects all of our senior executives and does not disproportionately affect Mr. Shore,
so long as such reduction does not reduce the base salary to a rate that is less than 90% of the amount set forth above (or 90%
of the amount to which it has been increased). The base salary will be reviewed annually by our chief executive officer for increase
(but not decrease, except as permitted as part of an overall cost reduction program) as part of our annual compensation review.
Mr. Shore is also eligible to receive an annual bonus in an amount equal to 60% of his then-annual salary upon the achievement
of reasonable target objectives and performance goals, to be determined by the board of directors in consultation with Mr. Shore.
Mr. Shore is eligible to receive the percentage of his annual bonus corresponding to the percentage of his achievement of such
target objectives and performance goals. The annual bonus will be reviewed annually by our chief executive officer for increase
in the amount of the percentage of his then-base salary (but not decrease), as well as the criteria and the goals, as part of
our annual compensation review. In addition, Mr. Shore is eligible to receive such additional bonus or incentive compensation
as the board may establish from time to time in its sole discretion. Mr. Shore will also be considered for grants of equity awards
each year as part of the board’s annual compensation review, which will be made at the sole discretion of the board of directors.
Each grant will, with respect to any awards that are options, have an exercise price equal to the fair market value of our common
stock as of the date of grant, and will be subject to a three-year vesting period subject to Mr. Shore’s continued service
with us, with one-third of each additional grant vesting equally on the first, second, and third anniversary of the date of grant
for such awards.
If
during the term of the employment agreement, Mr. Shore’s employment is terminated upon his death or disability, by us without
cause (as such term is defined in Mr. Shore’s employment agreement), or upon his resignation for “good reason”
(as such term is defined in Mr. Shore’s employment agreement), Mr. Shore will be entitled to receive, in addition to any
amounts he is entitled to receive under the manager’s insurance policy: (i) any unpaid base salary and accrued unpaid vacation
or earned incentive compensation and the pro rata amount of any bonus plan incentive compensation for the fiscal year of such
termination (based on the number of business days he was actually employed by us during the fiscal year of such termination and
based on the percentage of the goals that he actually achieved under the bonus plan) that he would have received had his employment
not been terminated; (ii) a one-time lump sum severance payment equal to 100% of his base salary, provided that he executes a
release relating to employment matters and the circumstances surrounding his termination in favor of us, our subsidiaries and
our officers, directors and related parties and agents, in a form reasonably acceptable to us at the time of such termination;
(iii) vesting of all unvested stock options, stock appreciation rights or similar stock-based rights granted to him and immediate
lapse of any risk of forfeiture included in restricted or other stock grants previously made to Mr. Shore; (iv) an extension of
the exercise period of all vested stock options granted to Mr. Shore until the earlier of (a) two years from the date of termination
or (b) the latest date that each stock option would otherwise expire by its original terms; (v) to the fullest extent permitted
by our then-current benefit plans, continuation of health, dental, vision and life insurance coverage for the lesser of 12 months
after termination or until Mr. Shore obtains coverage from a new employer; and (vi) reimbursement of up to $30,000 for executive
outplacement services, subject to certain restrictions. The severance payment described in (ii) of the foregoing sentence upon
Mr. Shore’s death or disability will be reduced by any payments received by Mr. Shore pursuant to any of our employee welfare
benefit plans providing for payments in the event of death or disability. If, during or after the term of his employment agreement,
Mr. Shore’s employment is terminated by us for cause or by Mr. Shore voluntarily, Mr. Shore will only be entitled to unpaid
amounts owed to him (e.g., base salary, accrued vacation and earned incentive compensation through the date of such termination)
and whatever rights, if any, are available to him pursuant to our stock-based compensation plan or any award documents related
to any stock-based compensation.
Mr.
Shore may terminate his employment for good reason by delivering a notice of termination to us 30 days in advance of the date
of termination; provided, however, that Mr. Shore agreed to not terminate his employment for good reason until he has given us
at least 30 days’ notice from which to cure the circumstances set forth in the notice of termination constituting good reason,
and if such circumstances are not cured by the 30th day, Mr. Shore’s employment shall terminate on such date.
Pursuant
to terms contained in Mr. Shore’s stock option and restricted stock award agreements, in the event of a change of control
of our company, the stock options and restricted stock granted to Mr. Shore that were unvested will vest immediately upon such
change of control, in the case of stock options, if such stock options are not assumed or substituted by the surviving company.
If
we terminate Mr. Shore’s employment without cause, Mr. Shore will be entitled, under Israeli law, to severance payments
equal to his last month’s salary multiplied by the number of years Mr. Shore has been employed with us. In order to finance
this obligation, we make monthly contributions equal to 8.33% of Mr. Shore’s salary to a severance payment fund. The total
amount accumulated in Mr. Shore’s severance payment fund as of December 31, 2020 was $206,000, as adjusted for conversion
from New Israeli Shekels to U.S. Dollars. However, if Mr. Shore’s employment is terminated without cause, on account of
a disability or upon his death, as of December 31, 2020, Mr. Shore would have been entitled to receive $270,000 in severance under
Israeli law, thereby requiring us to pay Mr. Shore $64,000, in addition to releasing the $206,000 in Mr. Shore’s severance
payment fund. On the other hand, pursuant to his employment agreement, Mr. Shore is entitled to the total amount contributed to
and accumulated in his severance payment fund in the event of the termination of his employment as a result of his voluntary resignation.
In addition, Mr. Shore would be entitled to receive his full severance payment under Israeli law, including the total amount contributed
to and accumulated in his severance payment fund, if he retires from our company at or after age 67.
We
are entitled to terminate Mr. Shore’s employment immediately at any time for “cause” (as such term is defined
in the agreement and the Israeli Severance Payment Act 1963), upon which, after meeting certain requirements under the applicable
law and recent Israeli Labor court requirements, we believe we will have no further obligation to compensate Mr. Shore.
Also,
upon termination of Mr. Shore’s employment for any reason, we will compensate him for all unused or previously uncompensated
vacation days accrued.
The
employment agreement also contains certain standard noncompetition, non-solicitation, confidentiality, and assignment of inventions
requirements for Mr. Shore.
Mr.
Shore is also entitled to participate in or receive benefits under our social insurance and benefits plans, including but not
limited to our manager’s insurance policy and education fund, which are customary benefits provided to executive employees
in Israel. A management insurance policy is a combination of severance savings (in accordance with Israeli law), defined contribution
tax-qualified pension savings and disability pension payments. An education fund is a savings fund of pre-tax contributions to
be used after a specified period of time for advanced educational training and other permitted purposes, as set forth in the by-laws
of the education fund. We will make periodic contributions to these insurance and social benefits plans based on certain percentages
of Mr. Shore’s base salary, including (i) 7.5% to the education fund and (ii) 15.83% to the manager’s insurance policy,
of which 8.33% will be allocated to severance pay, 5.5% to pension fund payments and up to 2.5% to disability pension payments.
Upon the termination of Mr. Shore’s employment for any reason other than for cause, Mr. Shore will be entitled to receive
the total amount contributed to and accumulated in his manager insurance policy fund.
On
August 14, 2020, we entered into the fourth amendment to that certain Amended and Restated Employment Agreement dated as of May
5, 2014, as amended on January 5, 2015, July 25, 2016, and on March 25, 2019, in order to, among other things, (i) amend the term
of Mr. Shore’s employment, so that the initial term of Mr. Shore employment will end on July 31, 2022, which will automatically
be renewed for additional one-year periods on August 1, 2022 and on each August 1 thereafter; (ii) increase Mr. Shore’s
monthly base salary to NIS 86,000; and (iii) amend certain terms related to termination of Mr. Shore’s employment without
Cause (as defined therein)
Change
of Control Agreements
We
do not currently have any plans providing for the payment of retirement benefits to our officers or directors, other than as described
under “Agreements with Executive Officers” above.
We
do not currently have any change-of-control or severance agreements with any of our executive officers or directors, other than
as described under “Agreements with Executive Officers” above. In the event of the termination of employment of the
named executive officers, any and all unexercised stock options shall expire and no longer be exercisable after a specified time
following the date of the termination, other than as described under “Agreements with Executive Officers” above.
Outstanding
Equity Awards at December 31, 2020
The
following table shows information concerning unexercised options and unvested shares of restricted stock outstanding as of December
31, 2020 for each of our named executive officers.
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of securities underlying unexercised options (#) exercisable
|
|
|
Number of securities underlying unexercised options (#) unexercisable
|
|
|
Option exercise price ($)
|
|
|
Option expiration date
|
|
|
Number of shares of stock that have not vested (#)
|
|
|
Market value of shares of stock that have not vested ($)
|
|
Marvin Slosman (1)
|
|
|
-
|
|
|
|
60,794
|
(2)
|
|
|
1.10
|
|
|
|
1/2/2030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
182,381
|
(3)
|
|
|
62,010
|
|
|
|
|
-
|
|
|
|
391,762
|
(4)
|
|
|
0.39
|
|
|
|
8/31/2030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,175,287
|
(5)
|
|
|
399,598
|
|
Craig Shore
|
|
|
11
|
|
|
|
-
|
|
|
|
8,312.50
|
|
|
|
07/25/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
(6)
|
|
|
1,360
|
|
|
|
|
-
|
|
|
|
226,278
|
(4)
|
|
|
0.39
|
|
|
|
8/31/2030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
678,834
|
(7)
|
|
|
230,804
|
|
(1)
|
Mr.
Slosman was appointed as chief executive officer effective as of January 1, 2020
|
|
|
(2)
|
These
options vest annually, with one-third vesting on each of January 2, 2021, January 2, 2022 and January 2, 2023.
|
|
|
(3)
|
These
RSU’s vest annually, with one-third vesting on each of January 2, 2021, January 2, 2022 and January 2, 2023.
|
|
|
(4)
|
These
options vest annually, with one-third vesting on each of August 31, 2021, August 31, 2022 and August 31, 2023.
|
|
|
(5)
|
These
RSU’s vest annually, with one-third vesting on each of August 31, 2021, August 31, 2022 and August 31, 2023.
|
|
|
(6)
|
These
restricted shares vest annually, with one-half vesting on each of February 4, 2021 and February 4, 2022.
|
|
|
(7)
|
These
Restricted Stock vest annually, with one-third vesting on each of August 31, 2021, August 31, 2022 and August 31, 2023.
|
Option
Exercises and Stock Vested
There
were no stock options exercised by our named executive officers during the twelve months ended December 31, 2020.
2011
UMBRELLA Option Plan
On
March 28, 2011, our board of directors and stockholders adopted and approved the InspireMD, Inc. 2011 UMBRELLA Option Plan, which
was subsequently amended on October 31, 2011 and December 21, 2012. Under the InspireMD, Inc. 2011 UMBRELLA Option Plan, we have
reserved 11 shares of our common stock as awards to the employees, consultants, and service providers to InspireMD, Inc. and its
subsidiaries and affiliates worldwide.
The
InspireMD, Inc. 2011 UMBRELLA Option Plan currently consists of three components, the primary plan document that governs all awards
granted under the InspireMD, Inc. 2011 UMBRELLA Option Plan, and two appendices: (i) Appendix A, designated for the purpose of
grants of stock options and restricted stock awards to Israeli employees, consultants, officers and other service providers and
other non-U.S. employees, consultants, and service providers, and (ii) Appendix B, which is the 2011 U.S. Equity Incentive Plan,
designated for the purpose of grants of stock options and restricted stock awards to U.S. employees, consultants, and service
providers who are subject to the U.S. income tax. On December 21, 2012, the stockholders approved the awarding of “incentive
stock options” pursuant to the U.S. portion of the plan.
The
purpose of the InspireMD, Inc. 2011 UMBRELLA Option Plan is to provide an incentive to attract and retain employees, officers,
consultants, directors, and service providers whose services are considered valuable, to encourage a sense of proprietorship and
to stimulate an active interest of such persons in our development and financial success. The InspireMD, Inc. 2011 UMBRELLA Option
Plan is administered by our compensation committee. Unless terminated earlier by the board of directors, the InspireMD, Inc. 2011
UMBRELLA Option Plan will expire on March 27, 2021. We have no shares of common stock available for future issuance under our
2011 UMBRELLA Option Plan.
2013
Long-Term Incentive Plan
On
December 16, 2013, our stockholders approved the InspireMD, Inc. 2013 Long-Term Incentive Plan, which was adopted by our board
of directors on October 25, 2013.
The
purpose of the InspireMD, Inc. 2013 Long-Term Incentive Plan is to provide an incentive to attract and retain employees, officers,
consultants, directors, and service providers whose services are considered valuable, to encourage a sense of proprietorship and
to stimulate an active interest of such persons in our development and financial success. The InspireMD, Inc. 2013 Long-Term Incentive
Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock,
restricted stock units, performance awards, dividend equivalent rights, and other awards, which may be granted singly, in combination,
or in tandem. The InspireMD, Inc. 2013 Long-Term Incentive Plan is administered by our compensation committee.
The
InspireMD, Inc. 2013 Long-Term Incentive Plan is intended to serve as an “umbrella” plan for us and our subsidiaries
worldwide. Therefore, if so required, appendices may be added to the InspireMD, Inc. 2013 Long-Term Incentive Plan in order to
accommodate local regulations that do not correspond to the scope of the InspireMD, Inc. 2013 Long-Term Incentive Plan. Attached
as Appendix A to the InspireMD, Inc. 2013 Long-Term Incentive Plan is the InspireMD, Inc. 2013 Employee Stock Incentive Plan,
for the purpose of making grants of stock options, restricted stock, and other stock incentive awards pursuant to Sections 102
and 3(i) of the Israeli Income Tax Ordinance (New Version), 1961 to Israeli employees and officers and any other service providers
or control holders of us who are subject to Israeli Income Tax.
When
the InspireMD, Inc. 2013 Long-Term Incentive Plan was adopted, a total of 11 shares of common stock were reserved for awards under
the InspireMD, Inc. 2013 Long-Term Incentive Plan.
On
September 9, 2015, our stockholders approved an amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to increase the
number of shares of common stock available for issuance pursuant to awards under the InspireMD, Inc. 2013 Long-Term Incentive
Plan by 11 shares of common stock, to a total of 22 shares of common stock.
On
May 24, 2016, our stockholders approved the second amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to increase
the number of shares of common stock available for issuance pursuant to awards under the InspireMD, Inc. 2013 Long-Term Incentive
Plan by 229 shares of common stock, to a total of 251 shares of common stock.
On
September 28, 2016, our stockholders approved the third amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to increase
the number of shares of common stock available for issuance pursuant to awards under the InspireMD, Inc. 2013 Long-Term Incentive
Plan by 144 shares of common stock, to a total of 395 shares of common stock.
On
October 24, 2018, our stockholders approved the fourth amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to (i) increase
the number of shares of common stock available for issuance pursuant to awards under such InspireMD, Inc. 2013 Long-Term Incentive
Plan by 178,000 shares, to a total of 178,395 shares of common stock, and (ii) remove the cap on the number of shares of common
stock with respect to which stock options or stock appreciation rights may be granted to certain executive officers of the Company
during any calendar year.
On
March 21, 2019, our stockholders approved the fifth amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to increase
the total number of shares of common stock issuable under the InspireMD, Inc. 2013 Long-Term Incentive Plan by 500,000 shares
to a total of 678,395 shares of common stock
On
August 31, 2020, our stockholders approved the sixth amendment to the InspireMD, Inc. 2013 Long-Term Incentive Plan to increase
the total number of shares of common stock issuable under the InspireMD, Inc. 2013 Long-Term Incentive Plan by 6,500,000 shares
to a total of 7,178,395 shares of common stock.
As
of December 31, 2020, we had 2,306,956 shares of common stock available for future issuance under our 2013 Long-Term Incentive
Plan.
As
of March 8, 2021, we had 2,234,642 shares of common stock available for future issuance under our 2013 Long-Term Incentive Plan.
Director
Compensation
The
following table shows information concerning our directors during the twelve months ended December 31, 2020.
Name
|
|
Fees
Earned
or Paid in Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Paul Stuka
|
|
|
47,250
|
|
|
|
93,191
|
|
|
|
27,792
|
|
|
|
-
|
|
|
|
168,233
|
|
Michael Berman
|
|
|
29,750
|
|
|
|
61,633
|
|
|
|
18,381
|
|
|
|
-
|
|
|
|
109,764
|
|
Campbell Rogers, M.D.
|
|
|
21,875
|
|
|
|
61,633
|
|
|
|
18,381
|
|
|
|
-
|
|
|
|
101,889
|
|
Thomas Kester
|
|
|
35,875
|
|
|
|
61,633
|
|
|
|
18,381
|
|
|
|
-
|
|
|
|
115,889
|
|
Gary Roubin, M.D.
|
|
|
5,503
|
|
|
|
78,854
|
|
|
|
23,516
|
|
|
|
-
|
|
|
|
107,873
|
|
For
the 2020 calendar year, our board approved the following compensation for our independent directors: (i) a $40,000 stipend, payable
quarterly to the chairman of the board; (ii) a $25,000 stipend, payable quarterly to the other directors; (iii) annual committee
chair compensation of $12,000 for the chairman of the audit committee, $8,000 for the chairman of the compensation committee and
$5,000 for the chairmen of the nominating and corporate governance committee and the research and development committee; and (iv)
annual committee membership compensation of $4,000 for members of the audit committee and the compensation committee and $2,000
for members of the nominating and corporate governance committee and the research and development committee for members of the
nominating and corporate governance committee and the research and development committee. Notwithstanding the foregoing, effective
April 1, 2020, the Board approved a 50% decrease in the annual cash compensation for non-employee directors from an aggregate
amount of $154,000 to $77,000, and on July 1, 2020, the Board reinstated the original annual cash compensation for non-employee
directors.
Directors’
and Officers’ Liability Insurance
We
currently have directors’ and officers’ liability insurance insuring our directors and officers against liability
for acts or omissions in their capacities as directors or officers, subject to certain exclusions. Such insurance also insures
us against losses which we may incur in indemnifying our officers and directors. In addition, we have entered into indemnification
agreements with key officers and directors and such persons shall also have indemnification rights under applicable laws, and
our certificate of incorporation and bylaws.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The
following table sets forth information with respect to the beneficial ownership of our common stock as of March 8, 2021 by:
|
●
|
each
person known by us to beneficially own more than 5.0% of our common stock;
|
|
|
|
|
●
|
each
of our directors;
|
|
|
|
|
●
|
each
of the named executive officers; and
|
|
|
|
|
●
|
all
of our directors and executive officers as a group.
|
The
percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission
(the “SEC”) governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person
is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or
to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition
of the security.
Except
as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting and sole investment
power with respect to all shares beneficially owned and each person’s address is c/o InspireMD, Inc., 4 Menorat Hamaor St.,
Tel Aviv, Israel 6744832. As of March 8, 2021, we had 117,832,226 shares outstanding
Name of Beneficial Owner
|
|
Number of
Shares
Beneficially
Owned(1)
|
|
|
Percentage
Beneficially
Owned(1)
|
|
5% Owners
|
|
|
|
|
|
|
|
|
Armistice Capital, LLC
|
|
|
9,677,415
|
(2)
|
|
|
8.2
|
%
|
FiveT Capital AG
|
|
|
7,258,050
|
(3)
|
|
|
6.2
|
%
|
Officers and Directors
|
|
|
|
|
|
|
|
|
Marvin Slosman
|
|
|
252,638
|
(4)
|
|
|
*
|
|
Craig Shore
|
|
|
1,499,251
|
(5)
|
|
|
1.27
|
%
|
Michael Berman
|
|
|
120,976
|
(6)
|
|
|
*
|
|
Campbell Rogers, M.D.
|
|
|
160,650
|
(7)
|
|
|
*
|
|
Paul Stuka
|
|
|
243,634
|
(8)
|
|
|
*
|
|
Thomas Kester
|
|
|
392,081
|
(9)
|
|
|
*
|
|
Gary Roubin, M.D.
|
|
|
1,046,291
|
(10)
|
|
|
*
|
|
All directors and executive officers as a group (7 persons)
|
|
|
3,715,521
|
|
|
|
3.14
|
%
|
*
|
Represents
ownership of less than one percent.
|
|
|
(1)
|
Shares
of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assumes the exercise
of all options, warrants and other securities convertible into common stock beneficially owned by such person or entity currently
exercisable or exercisable within 60 days of March 8, 2021. Shares issuable pursuant to the exercise of stock options and
warrants exercisable within 60 days are deemed outstanding and held by the holder of such options or warrants for computing
the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing
the percentage of outstanding common stock beneficially owned by any other person.
|
|
|
(2)
|
Consists
of (i) 6,451,610 shares of common stock purchased in connection with the February 2021 Offering, and (ii) warrants to purchase
3,225,805 shares of common stock, at an exercise price of $0.682 per share, purchased in the February 2021 Offering. We are
not aware whether this stockholder has sold any of the foregoing securities it purchased in the February 2021
Offering.
|
|
|
(3)
|
Consists
of (i) 4,838,700 shares of common stock purchased in the February 2021 Offering, and (ii) warrants to purchase 2,419,350 shares
of common stock, at an exercise price of $0.682 per share, purchased in the February 2021 Offering. We are not aware whether
this stockholder has sold any of the foregoing securities it purchased in the February 2021 Offering.
|
(4)
|
Consists
of (i) 95,870 shares of common stock, (ii) 60,794 Restricted Stock Units granted outside the plan that are currently exercisable
or exercisable within 60 days of March 8, 2021, (iii) options to purchase 20,264 shares of common stock that are currently
exercisable or exercisable within 60 days of March 8, 2021, and (iv) 75,710 warrants to purchase shares of common stock that
are currently exercisable.
|
|
|
(5)
|
Consists
of (i) 4,021 shares of common stock, (ii) options to purchase 11 shares of common stock that are currently exercisable or
exercisable within 60 days of March 8, 2021, (iii) 680,828 shares of restricted stock granted under the Israeli Appendix of
the InspireMD, Inc. 2013 Long-Term Incentive Plan and (iv) 814,391 shares of restricted stock granted to employees under the
Israeli Appendix of the InspireMD, Inc. 2013 Long-Term Incentive Plan held in trust, and with respect to which Mr. Shore was
granted a proxy with the right to vote such shares at his discretion.
|
|
|
(6)
|
Consists
of (i) 80,642 shares of common stock, (ii) 40,320 warrants to purchase shares of common stock that are currently exercisable,
and (iii) options to purchase 14 shares of common stock that are currently exercisable or exercisable within 60 days of March
8, 2021. Excludes 160,633 shares of common stock and restricted stock granted under the Israeli Appendix of InspireMD, Inc.
2013 Long-Term Incentive Plan held in trust, with respect to which the trustee has a proxy with the right to vote such shares
at his discretion.
|
|
|
(7)
|
Consists
of (i) 1,736 shares of common stock, (ii) 158,899 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term
Incentive Plan, (iii) options to purchase 14 shares of common stock that are currently exercisable or exercisable within 60
days of March 8, 2021, and (iv) one warrant to purchase a share of common stock that is currently exercisable or exercisable
within 60 days of March 8, 2021.
|
|
|
(8)
|
Paul
Stuka is the principal and managing member of Osiris Investment Partners, L.P., and, as such, has beneficial ownership of
(A) (i) 264 shares of common stock, (ii) warrants to purchase 6 shares of common stock that are currently exercisable or exercisable
within 60 days of March 8, 2021 in addition to (B) personally holding (i) options to purchase 15 shares of common stock that
are currently exercisable or exercisable within 60 days of March 8, 2021, (ii) 240,250 shares of restricted stock granted
under the InspireMD, Inc. 2013 Long-Term Incentive Plan, (iii) warrants to purchase 7 shares of common stock that are currently
exercisable or exercisable within 60 days of March 8, 2021, and (iv) 3,092 shares of common stock.
|
|
|
(9)
|
Consists
of (i) 172,694 shares of common stock, (ii) 158,899 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term
Incentive Plan, (iii) 60,480 warrants to purchase shares of common stock that are currently exercisable and (iv) options to
purchase 8 shares of common stock that are currently exercisable or exercisable within 60 days of March 8, 2021.
|
|
|
(10)
|
Consists
of (i) 464,153 shares of common stock, (ii) 238,950 shares of restricted stock granted under the InspireMD, Inc. 2013 Long-Term
Incentive Plan, and (iii) 343,188 warrants to purchase shares of common stock that are currently exercisable.
|
Equity
Compensation Plan Information
The
following table provides certain information as of December 31, 2020, with respect to our equity compensation plans under which
our equity securities are authorized for issuance:
Plan Category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
|
|
Weighted-average exercise price of outstanding options, warrants and rights
|
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
|
|
|
|
(a)
|
|
|
|
(b)
|
|
|
|
(c)
|
|
Equity compensation
plans approved by
security holders
|
|
|
1,169,665
|
|
|
|
37.69
|
|
|
|
2,306,956
|
|
Equity compensation
plans not approved
by security holders
|
|
|
205,615
|
(1)
|
|
|
50.36
|
|
|
|
-
|
|
Total
|
|
|
1,375,280
|
|
|
|
39.59
|
|
|
|
2,306,956
|
|
(1)
|
Comprised
of awards made to individuals outside the InspireMD, Inc. 2011 UMBRELLA Option Plan and 2013 Long Term Incentive Plan, as
described below:
|
|
●
|
Options
issued to former director: In November 2011, we issued options to purchase an aggregate of 3 shares of common stock to Dr.
Barer, then chairman of our board of directors who resigned from the board of directors effective as of June 2, 2017. The
exercise price of these options is $3,412,500 per share and the options may be exercised at any time prior to the tenth anniversary
of the grant date, pursuant to the nonqualified stock option agreement, as amended on June 2, 2017.
|
|
|
|
|
●
|
On
January, 2020, we issued to Mr. Marvin Slosman, our Chief Executive Officer, President and Director, 182,381 shares of restricted
stock and 60,794 shares of common stock, as inducement awards outside the Company’s 2013 Long-Term Incentive Plan.
|
|
|
|
|
●
|
On
October 6, 2020, we issued to Mr. Patrick Jamnik, our Vice President of Business Development and Strategic Initiatives, options
to purchase 54,307 shares of our common stock, as inducement awards outside the Company’s 2013 Long-Term Incentive Plan.
|
|
|
|
|
●
|
On
November 3, 2020, we issued to Mr. Andrea Tommasoli, our Senior Vice President of Global Sales and Marketing, options to purchase
90,511 shares of our common stock, as inducement awards outside the Company’s 2013 Long-Term Incentive Plan.]
|
Item
13. Certain Relationships and Related Transactions, and Director Independence.
In
accordance with our audit committee charter, the audit committee is required to approve all related party transactions. In general,
the audit committee will review any proposed transaction that has been identified as a related party transaction under Item 404
of Regulation S-K. A related party includes (i) a director, director nominee or executive officer of us, (ii) a security holder
known to be an owner of more than 5% of our voting securities, (iii) an immediate family member of the foregoing or (iv) a corporation
or other entity in which any of the foregoing persons is an executive, principal or similar control person or in which such person
has a 5% or greater beneficial ownership interest.
There
were no related party transactions that are required to be disclosed pursuant to Regulation S-K promulgated under the Securities
Act of 1933, as amended.
Director
Independence
The
board of directors has determined that Dr. Rogers and Messrs. Stuka, Berman and Kester, satisfy the requirement for independence
set out in Section 803 of the NYSE American rules and that each of these directors has no material relationship with us (other
than being a director and/or a stockholder). In making its independence determinations, the board of directors sought to identify
and analyze all of the facts and circumstances relating to any relationship between a director, his immediate family or affiliates
and our company and our affiliates and did not rely on categorical standards other than those contained in the NYSE American rule
referenced above.
Item
14. Principal Accountant Fees and Services.
The
fees billed for professional services provided to us by Kesselman & Kesselman, Certified Public Accountants (“Kesselman”),
a member of PricewaterhouseCoopers International Limited, for the years ended December 31, 2020 and 2019 are described below.
Audit
Fees
Kesselman
billed us audit fees in the aggregate amount of $160,000 and $160,000 for the years ended December 31, 2020 and 2019, respectively.
These fees relate to the audit of our annual financial statements and the review of our interim quarterly financial statements.
Audit-Related
Fees
Kesselman
billed us audit-related fees in the aggregate amount of $53,900 and $60,000 for the year ended December 31, 2020 and 2019, respectively.
The fees for the year ended December 31, 2020 mostly related to registration statement on Form S-1 filed with the SEC in June
2020 and to our prospectus supplements filed with the Securities and Exchange Commission in July 2020.
The
fees for the year ended December 31, 2019 mostly related to our prospectus supplements filed with the Securities and Exchange
Commission in April 2019 and to our registration statement on Form S-1 filed with the Securities and Exchange Commission in August
and September of 2019.
Tax
Fees
Kesselman
billed us tax fees in the aggregate amount of $39,209 and $38,675 for the year ended December 31, 2020 and 2019, respectively.
These fees relate to professional services rendered for tax compliance, tax advice and tax planning.
All
Other Fees
Kesselman
did not bill us for any other fees for the year ended December 31, 2020 and 2019.
Our
audit committee pre-approves all auditing services, internal control-related services and permitted non-audit services (including
the fees and terms thereof) to be performed for us by our independent auditor, except for de minimis non-audit services that are
approved by the audit committee prior to the completion of the audit. The audit committee may form and delegate authority to subcommittees
consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit
services, provided that decisions of such subcommittee to grant pre-approvals is presented to the full audit committee at its
next scheduled meeting. The Audit Committee pre-approved all of the fees set forth above.