NSPR InspireMD Inc New

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

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

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment and regulation. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and 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:

For a discussion of these and other risks that relate to our business and investing in our common stock, you should carefully review the risks and uncertainties described in this Quarterly Report on Form 10-Q, and those described from time to time in our future reports filed with the Securities and Exchange Commission. The forward-looking statements contained in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. We do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.

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 we launched its release on a limited basis in October 2014. In January 2015, a new version of CGuard, with a rapid exchange delivery system, received CE mark approval in Europe and in September 2015, we announced the full market launch of CGuard EPS in Europe. Subsequently, we launched CGuard EPS in Russia and certain countries in Latin America and Asia, and, in January 2018, received regulatory approval to commercialize CGuard EPS in India, Vietnam and Ecuador. We consider the addressable market for our CGuard EPS consists of individuals with diagnosed, symptomatic high-grade carotid artery stenosis (HGCS, ≥70% occlusion) for whom an 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).

In April 2017, we had a pre-investigational device exemption (“IDE”) submission meeting with the U.S. Food and Drug Administration 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. We intend to further our efforts to obtain an IDE approval for CGuard EPS and to ultimately seek the U.S. Food and Drug Administration approval for commercial sales in the United States.

While entering the U.S. market remains our top development priority and therefore we are focusing on, as our highest priority, completing the testing required for an IDE submission seeking approval to conduct a human clinical trial in the United States using CGuard EPS, 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. Among other delivery system improvements, we continue to evaluate the development of a smaller delivery catheter (5 French gauge) CGuard EPS product. We believe these improvements and a smaller delivery system may allow us to reduce cost of goods, increase penetration in our existing geographies and better position us for entry into the Asia Pacific market and for transradial catheterization, which, we believe, is gaining favor among interventionalists.

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, though, 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.

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. Pursuant to our new strategy, we completed our transition away from a single distributor covering 18 European countries to a direct distribution model intended to broaden our sales efforts to key clinical specialties. All territories previously covered by our former European distributor were transferred to local distributors by June 2017. We also have begun to participate in international trade shows and industry conferences in an attempt to gain market exposure and brand recognition.

Recent Developments

Recent Financings and Recapitalization

On April 2, 2018, we closed an underwritten public offering of 2,857,143 shares of our common stock at a price to the public of $1.75 per share. Upon closing of the offering, as required by a waiver agreement, dated March 28, 2018, between us and an institutional accredited investor (the “Series D Investor”) who had purchased 750 shares of Series D Convertible Preferred Stock (the “Series D Preferred Stock”) in a private placement that closed on December 1, 2017 (the “Series D Private Placement”) pursuant to a securities purchase agreement, dated November 28, 2017 (the “Series D Purchase Agreement”), we used $300,000 of the proceeds from the offering to redeem 46,875 shares of our Series C Convertible Preferred Stock (the “Series C Preferred Stock”) held by the Series D Investor. As a result of such offering, the conversion price for each of our Series B Convertible Preferred Stock (the “Series B Preferred Stock”), our Series C Preferred Stock and our Series D Preferred Stock was reduced to $1.75 per share.

On June 28, 2018, we and the Series D Investor entered into a letter agreement (the “Letter Agreement”) which further amended the Series D Purchase Agreement to provide that, notwithstanding anything to the contrary in the prior agreements, in the event we consummate an offering of our common stock or common stock equivalents for gross proceeds of at least $8 million (a “Qualified Offering”) in which the Series D Investor and its affiliates invest at least $3 million, (i) instead of an automatic exchange of all outstanding shares of Series C Preferred Stock held by the Series D Investor into securities issued in a Qualified Offering on a $1.00 per stated value for $1.00 new subscription amount basis, all outstanding shares of Series C Preferred Stock held by the Series D Investor will be redeemed at a per share purchase price equal to the stated value of the Series C Preferred Stock, and (ii) all outstanding shares of Series D Preferred Stock will be redeemed at a per share purchase price equal to the stated value of the Series D Preferred Stock.

On July 3, 2018, we closed an underwritten public offering of (i) 10,851,417 common units (“Common Units”), with each Common Unit being comprised of one share of our common stock, and one Series D warrant (collectively, the “Series D Warrants”) to purchase one share of common stock and (ii) 22,481,916 pre-funded units (“Pre-Funded Units”), with each Pre-Funded Unit being comprised of one pre-funded warrant (collectively, the “Pre-Funded Warrants”) to purchase one share of common stock and one Series D Warrant. We granted the underwriter a 30-day option to purchase up to an additional 4,999,999 shares of common stock at a purchase price of $0.29 per share and/or up to 4,999,999 additional Series D Warrants to purchase 4,999,999 shares of common stock at a purchase price of $0.01 per Series D Warrant, less the underwriting discounts and commissions of $0.0203 per share and $0.0007 per Series D Warrant. The underwriter exercised its option to purchase an additional 4,999,999 Series D Warrants to purchase 4,999,999 shares of common stock. The Series D Warrants are exercisable immediately and have a term of exercise of five years from the date of issuance and have an exercise price of $0.30 per share of common stock. Each Pre-Funded Warrant contained in a Pre-Funded Unit is exercisable for one share of our common stock at an exercise price of $0.01 per share. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. We received net proceeds from the offering and the exercise of the underwriter’s option to purchase additional 4,999,999 Series D Warrants to purchase 4,999,999 shares of common stock of approximately $8.7 million, excluding the proceeds, if any, from the exercise of the Series D Warrants and the Pre-Funded Warrants sold in the offering, and after deducting underwriting discounts and commissions and payment of other estimated expenses associated with the offering that are payable by us. Pursuant to the full ratchet anti-dilution adjustment provisions in the respective certificate of designation for the Company’s Series B Convertible Preferred Stock and Series C Preferred Stock, the conversion price of the outstanding shares of the Series B Preferred Stock and the Series C Preferred Stock was reduced to $0.30 per share, effective as of June 29, 2018.

Pursuant to the Letter Agreement, on July 3, 2018, upon closing of the public offering that was a Qualified Offering, we used $2,264,269 of the net proceeds of the offering to redeem 306,917 shares of Series C Preferred Stock and 300 shares of Series D Preferred Stock held by the Series D Investor.

Prior to the closing of the public offering, on July 2, 2018, we filed with the office of the Secretary of State of the State of Delaware a Certificate of Amendment to Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock, which removes the provision providing for an automatic exchange of all outstanding shares of Series B Preferred Stock into securities issued in a Qualified Offering on a $1.00 per stated value for $1.00 new subscription amount basis upon a Qualified Offering.

NYSE American Notification

On August 17, 2017, we received a notice from NYSE American LLC (“NYSE American”) indicating that we do not meet the continued listing standards of the NYSE American as set forth in Part 10 of the NYSE American Company Guide (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, 2017, and net losses in our five most recent fiscal years ended December 31, 2016. As a result, we became subject to the procedures and requirements of Section 1009 of the Company Guide. On October 19, 2017, NYSE American accepted our plan to regain compliance with Section 1003(a)(iii) of the Company Guide by February 17, 2019. We are subject to periodic review by the NYSE American staff during the period covered by the compliance plan. Failure to make progress consistent with the plan or to regain compliance with the continued listing standards by the end of the plan period could result in our common stock being delisted from the NYSE American.

On November 22, 2017, we received an additional letter from the NYSE American indicating that we are not in compliance with the stockholders’ equity and net income continued listing standards set forth in Section 1003(a)(ii) of the Company Guide because we reported stockholders’ equity of less than $4 million as of September 30, 2017. We have until February 17, 2019, to regain compliance with the continued listing requirements.

On January 16, 2018, we received notification from the NYSE American that we are not in compliance with certain NYSE American continued listing standards. The deficiency letter states 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 staff determined that our continued listing is predicated on us effecting a reverse stock split of our common stock or otherwise demonstrating sustained price improvement within a reasonable period of time, which the staff determined to be until July 16, 2018. On July 16, 2018, we received notification from the NYSE American that we have resolved the continued listing deficiency with respect to low selling price, described in Section 1003(f)(v) of the company Guide.

Reverse Stock Split

Effective as of 5:00 p.m. Eastern Time on February 7, 2018, we amended our amended and restated certificate of incorporation in order to effectuate a 1-for-35 reverse stock split of our outstanding shares of common stock. Although we expect that the reverse stock split will result in an increase in the market price of our common stock, the reverse stock split may not result in a permanent increase in the market price of our common stock, which is dependent on many factors, including general economic, market and industry conditions and other factors. We have adjusted all outstanding restricted stock units, stock options, preferred stock and warrants entitling the holders to purchase shares of our common stock as a result of the reverse stock split, as required by the terms of these securities. In particular, we have reduced the conversion ratio for each security, and increased the exercise price in accordance with the terms of each security based on the reverse stock split ratio (i.e., the number of shares issuable under such securities has been divided by thirty-five, and the exercise price per share has been multiplied by thirty-five). Also, we reduced the number of shares reserved for issuance under the InspireMD, Inc. 2013 Long-Term Incentive Plan and the 2011 UMBRELLA Option Plan, proportionately based on the reverse stock split ratio. The reverse stock split did not otherwise affect any of the rights currently accruing to holders of our common stock, or options or warrants exercisable for our common stock. All share and related option and warrant information presented in this Annual Report on Form 10-K have been retroactively adjusted to reflect the reduced number of shares outstanding and the increase in share price which resulted from this action.

Critical Accounting Policies

A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies are more fully described in both (i) “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) Note 2 of the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2017. There have not been any material changes to such critical accounting policies since December 31, 2017.

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

Contingencies

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

Results of Operations

Three months ended September 30, 2018 compared to the three months ended September 30, 2017

Revenues . For the three months ended September 30, 2018, revenue increased by $51,000, or 7.1%, to $769,000, from $718,000 during the three months ended September 30, 2017. This increase was predominantly driven by a 14.8% increase in sales of CGuard EPS from $526,000 in the three months ended September 30, 2017, to $604,000 in the three months ended September 30, 2018, because of our transition from our prior exclusive distribution partner for most of Europe to local distributors and expansion into new geographies such as India, Mexico and Vietnam. The transition to local distributors reflects an effort to broaden our sales from only interventional neuroradiologists to include vascular surgeons, interventional cardiologists and interventional radiologists, as well. This increase in sales of CGuard EPS was partially offset by a 14.0% decrease in sales of MGuard Prime EPS from $192,000 in the three months ended September 30, 2017, to $165,000 in the three months ended September 30, 2018, largely driven by doctors continuously predominantly using drug-eluting stents rather than bare metal stents such as MGuard Prime EPS in ST-Elevation Myocardial Infarction (“STEMI”) patients.

With respect to regions, the increase in revenue was primarily attributable to an increase of $53,000 in revenue from sales of CGuard EPS made in Asia (for reasons mentioned above).

Gross Profit . For the three months ended September 30, 2018, gross profit (revenue less cost of revenues) increased by 29.4%, or 45,000, to $198,000, compared to $153,000 during the three months ended September 30, 2017. This increase resulted primarily from an increase of $61,000 due to the increase in revenues (as mentioned above), less the related material and labor costs, partially offset by an increase of $16,000 in miscellaneous expenses. Gross margin (gross profits as a percentage of revenue) increased to 25.7% in the three months ended September 30, 2018 from 21.3% in the three months ended September 30, 2017, driven mainly by a higher average sales price of MGuard Prime EPS and a reduction in costs of one of the main components of CGuard EPS.

Research and Development Expenses . For the three months ended September 30, 2018, research and development expenses increased by 44.4% or $128,000, to $416,000, from $288,000 during the three months ended September 30, 2017. This increase resulted primarily from an increase of $124,000 in quality assurance and regulatory expenses related to annual routine audit activities which included validation reviews required every two years, and an increase of $4,000 in miscellaneous expenses.

Selling and Marketing Expenses. For the three months ended September 30, 2018, selling and marketing expenses decreased by 9.8%, or $66,000, to $605,000, from $671,000 during the three months ended September 30, 2017. This decrease resulted primarily from a decrease of $74,000 due to a salary accrual in 2017 and a decrease of $37,000 in share-based compensation expenses primarily due to the forfeiture of the unvested options caused by the expiration of the employment agreement with our former chief commercial officer, partially offset by an increase of $34,000 in other salary expenses due primarily to an increase in our headcount to further support the new local distributors in Europe and an increase of $11,000 in miscellaneous expenses.

General and Administrative Expenses . For the three months ended September 30, 2018, general and administrative expenses decreased by 9.6%, or $123,000, to $1,156,000, from $1,279,000 during the three months ended September 30, 2017. This decrease resulted primarily from a decrease of $86,000 in share-based compensation expenses primarily due to the Company incurring a large expense in the three months ended September 30, 2017, which resulted from an equity grant made to our chief executive officer in 2016, which vested over one year, for which there was no similar expense incurred in the three months ended September 30, 2018 and a decrease of $67,000 due to a salary accrual in 2017. These decreases in general and administrative expenses were partially offset by an increase of $30,000 in miscellaneous expenses.

Financial Expenses (Income) . For the three months ended September 30, 2018, financial expenses (income) increased by $31,000, to $32,000, from $1,000 during the three months ended September 30, 2017. The increase in financial income primarily resulted from an increase of $31,000 in miscellaneous expenses.

Tax Expenses. For the three months ended September 30, 2018, there was no material change in tax expenses (income) compared to the same period in 2017.

Net Loss . Our net loss decreased by $75,000, or 3.6%, to $2,011,000 for the three months ended September 30, 2018, from $2,086,000 during the three months ended September 30, 2017. The decrease in net loss resulted primarily from a decrease of $61,000 in operating expenses and an increase of $45,000 in gross profit, partially offset by an increase of $31,000 in financial expenses.

Nine months ended September 30, 2018 compared to the nine months ended September 30, 2017

Revenues . For the nine months ended September 30, 2018, revenue increased by $852,000, or 44.2%, to $2,779,000, from $1,927,000 during the nine months ended September 30, 2017. This increase was predominantly driven by a 72.5% increase in sales of CGuard EPS from $1,315,000 in the nine months ended September 30, 2017, to $2,268,000 in the nine months ended September 30, 2018, as a result of our transition from our prior exclusive distribution partner for most of Europe to local distributors, expansion into new geographies such as India and continued focus on expanding existing markets such as Italy. This increase in sales of CGuard EPS was partially offset by a 16.5% decrease in sales of MGuard Prime EPS from $612,000 in the nine months ended September 30, 2017, to $511,000 in the nine months ended September 30, 2018, largely driven by doctors continuously predominantly using drug-eluting stents rather than bare metal stents such as MGuard Prime EPS in STEMI patients.

With respect to regions, the increase in revenue was primarily attributable to an increase of $754,000 in revenue from sales made in Europe (driven by $773,000 growth of CGuard EPS for reasons mentioned above), as well as an increase of $178,000 in revenue from sales made in Asia (driven by $153,000 growth of CGuard EPS for reasons mentioned above). These increases in Europe and Asia were partially offset by a decrease of $82,000 in sales made in Latin America (driven primarily by a decrease of $91,000 in revenues of MGuard Prime EPS largely driven by doctors increasingly using drug-eluting stents rather than bare metal stents such as MGuard Prime EPS in STEMI patients).

Gross Profit . For the nine months ended September 30, 2018, gross profit (revenue less cost of revenues) increased by 105.3%, or $394,000, to $768,000, compared to $374,000 during the same period in 2017. This increase resulted primarily from an increase of $410,000 due to the increase in revenues (as mentioned above), less the related material and labor costs and a decrease of $41,000 in expenses related to the underutilization of our manufacturing resources. These increases in gross profit were partially offset by an increase of $42,000 in write-offs of inventory of MGuard Prime EPS, which primarily resulted from a reversal of write-offs of inventory in the nine months ended September 30, 2017, for which, no such reversal occurred in the same period in 2018 and an increase of $15,000 in miscellaneous expenses. Gross margin (gross profits as a percentage of revenue) increased to 27.6% in the nine months ended September 30, 2018 from 19.4% in the nine months ended September 30, 2017, driven mainly by more efficient utilization of our fixed manufacturing resources.

Research and Development Expenses . For the nine months ended September 30, 2018, research and development expenses decreased by 13.7%, or $143,000, to $898,000, from $1,041,000 during the nine months ended September 30, 2017. This decrease resulted primarily from a decrease of $89,000 due to a salary accrual in 2017, a decrease of $79,000 in development and clinical expenses associated with CGuard EPS, mainly related to pre-IDE efforts in 2017, a decrease of $34,000 in other salary expenses due to a reduced headcount and a decrease of $61,000 in miscellaneous expenses. These decreases in expenses were partially offset by an increase of $120,000 in quality assurance and regulatory expenses related to annual routine audit activities which included validation reviews required every two years.

Selling and Marketing Expenses . For the nine months ended September 30, 2018, selling and marketing expenses decreased by 8.6%, or $158,000, to $1,677,000, from $1,835,000 during the nine months ended September 30, 2017. This decrease resulted primarily from a decrease of $178,000 due to a salary accrual in 2017, a decrease of $69,000 in share-based compensation expenses primarily due to the forfeiture of the unvested options caused by the expiration of the employment agreement with our former chief commercial officer, a decrease of $34,000 in consulting expenses and a decrease of $32,000 in miscellaneous expenses. The decrease in expenses related to consulting and miscellaneous expenditures is primarily due to the Company not incurring in the nine months ended September 30, 2018, the expenditures made during the nine months ended September 30, 2017 to support the newly launched CGuard EPS-related sales and marketing activities in connection with the transition from our prior exclusive distribution partner for most of Europe to local distributors. These decreases in expenses were partially offset by an increase of $155,000 in other salary expenses due primarily to an increase in our headcount to further support the new local distributors in Europe.

General and Administrative Expenses . For the nine months ended September 30, 2018, general and administrative expenses decreased by 16.0%, or $683,000, to 3,598,000, from 4,281,000 during the nine months ended September 30, 2017. This decrease resulted primarily from a decrease of $494,000 due to a salary accrual in 2017, a decrease of $453,000 in share-based compensation expenses primarily due to the Company incurring a large expense in the nine months ended September 30, 2017, which resulted from an equity grant made to our chief executive officer in 2016, which vested over one year, for which there was no similar expense incurred in the nine months ended September 30, 2018, and a decrease of $6,000 in miscellaneous expenses. These decreases in general and administrative expenses were partially offset by an increase of $270,000 in legal expenses.

Financial Expenses (Income) . For the nine months ended September 30, 2018, financial income increased by $533,000, to $378,000 of financial income, from $155,000 of financial expenses during the nine months ended September 30, 2017. The increase in financial income primarily resulted from an increase of $438,000 in financial income related to the revaluation of the embedded derivative of the Series C Preferred Stock and a decrease in interest expenses of $119,000 due to the repayment of the remaining balance of our outstanding indebtedness of $1.2 million on March 21, 2017. These decreases in expenses were partially offset by an increase of $24,000 in miscellaneous expenses.

Tax Expenses (Income). For the nine months ended September 30, 2018, tax expenses decreased by $1,000 to $0, from $1,000 in the nine months ended September 30, 2017

Net Loss . Our net loss decreased by $1,912,000, or 27.6%, to $5,027,000, for the nine months ended September 30, 2018, from $6,939,000 during the nine months ended September 30, 2017. The decrease in net loss resulted primarily from a decrease of $984,000 in operating expenses, an increase of $533,000 in financial income and an increase of $394,000 in gross profit.

Liquidity and Capital Resources

We had an accumulated deficit as of September 30, 2018, of $145 million, as well as a net loss of $5,027,000 and negative operating cash flows. We expect to continue incurring losses and negative cash flows from operations until our products (primarily CGuard EPS) reach commercial profitability. As a result of these expected losses and negative cash flows from operations, along with our current cash position, we only have sufficient resources to fund operations through the end of the third quarter of 2019. Therefore, there is substantial doubt about our ability to continue as a going concern.

Our plans include the continued commercialization of our products and raising capital through the sale of additional equity securities, debt or capital inflows from strategic partnerships. There are no assurances, however, that we will be successful in obtaining the level of financing needed for our operations. If we are unsuccessful in commercializing our products and raising capital, we may need to reduce activities, curtail or cease operations.

On March 14, 2017, we closed a “best efforts” public offering of 1,069,822 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”), Series B warrants to purchase 122,269 shares of common stock and Series C warrants to purchase 122,269 shares of common stock. The Series C Warrants expired on September 14, 2017. The Series B warrants have a term of five years and an exercise price of $70.00 per share of common stock, subject to adjustment as provided in the Series B warrants. We received gross proceeds of approximately $6.8 million from the offering, before deducting placement agent fees and offering expenses.

On March 1, 2018, we closed an underwritten public offering of 1,000,000 shares of our common stock at a price to the public of $3.00 per share. We received gross proceeds of approximately $3.0 million from the offering, before deducting underwriter discounts and commissions and offering expenses payable by us. Upon closing of the offering, we used $450,000 of the proceeds from the offering to redeem 450 shares of Series D Preferred Stock. As a result of such offering, the conversion price for each of our Series C Preferred Stock and our Series D Preferred Stock was reduced to $3.00 per share.

On April 2, 2018, we closed an underwritten public offering of 2,857,143 shares of our common stock at a price to the public of $1.75 per share. We received gross proceeds of approximately $5.0 million from the offering, before deducting underwriter discounts and commissions and offering expenses payable by us. Upon closing of the offering, we used $300,000 of the proceeds from the offering to redeem 46,875 shares of our Series C Preferred Stock held by the Series D Investor. As a result of such offering, the conversion price for each of our Series B Preferred Stock, our Series C Preferred Stock and our Series D Preferred Stock was reduced to $1.75 per share.

On July 3, 2018, we closed an underwritten public offering of (i) 10,851,417 Common Units, with each Common Unit being comprised of one share of our common stock, and one Series D Warrant to purchase one share of common stock, (ii) 22,481,916 Pre-Funded Units (“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 D Warrant, and (iii) a 4,999,999 additional Series D Warrants to purchase 4,999,999 shares of common stock pursuant to the underwriter’s option. We received net proceeds from the offering and the exercise of the underwriter’s option to purchase additional 4,999,999 Series D Warrants to purchase 4,999,999 shares of common stock of approximately $8.7 million, excluding the proceeds, if any, from the exercise of the Series D Warrants and the Pre-Funded Warrants sold in the offering, and after deducting underwriting discounts and commissions and payment of other estimated expenses associated with the offering that are payable by us. We used $2,264,269 of the net proceeds of the offering to redeem 306,917 shares of Series C Preferred Stock and 300 shares of Series D Preferred Stock held by the Series D Investor. As a result of such offering, the conversion price of the outstanding shares of the Series B Preferred Stock and the Series C Preferred Stock was reduced to $0.30 per share, effective as of June 29, 2018.

Our outstanding shares of Series B Preferred Stock and Series C Preferred Stock contain anti-dilution provisions that may result in the reduction of the conversion price thereof in the future. This feature may result in an indeterminate number of shares of common stock being issued upon conversion of the Series B Preferred Stock or the Series C Preferred Stock. Sales of additional shares of common stock issuable upon conversion of the Series B Preferred Stock or Series C Preferred Stock as a result of anti-dilution adjustments will dilute the interests of other security holders and may depress the price of our common stock. Accordingly, we may find it more difficult to raise additional equity capital while any of our Series B Preferred Stock or Series C Preferred Stock is outstanding. As of November 5, 2018, 17,303 shares of Series B Preferred Stock and 61,423 shares of Series C Preferred Stock are outstanding.

During January and February 2018, the placement agent from the public offering that closed in July 2016 exercised its unit purchase option to purchase 13,508 units and received 13,508 shares of Series B Preferred Stock and Series A warrants to purchase 1,545 shares of common stock. The placement agent subsequently converted its Series B Preferred Stock and received an aggregate of 111,442 shares of common stock. We received an aggregate of $557,205 from the placement agent for the exercise of the unit purchase option.

Nine months ended September 30, 2018 compared to the nine months ended September 30, 2017

General . At September 30, 2018, we had cash and cash equivalents of $11,247,000, as compared to $3,710,000 as of December 31, 2017. We have historically met our cash needs through a combination of issuing new shares, borrowing activities and product sales. Our cash requirements are generally for research and development, marketing and sales activities, finance and administrative cost, capital expenditures and general working capital.

For the nine months ended September 30, 2018, net cash used in our operating activities decreased by $553,000 to $5,803,000, from $6,356,000 in the same period in 2017. The primary reason for the decrease in cash used in our operating activities was an increase of $939,000 in payments received from customers to $2,711,000 in the nine months ended September 30, 2018, from $1,772,000 in the same period in 2017, and a decrease of payments for third party related expenses and for professional services of $224,000 (primarily due to the end of term charge of $520,000 paid to Hercules in the nine months ended September 30, 2017, compared to no such payment made in 2018). The decreases in cash used in operating activities was partially offset by an increase of $610,000 in salary payments from $3,094,000 in the nine months ended September 30, 2017 to $3,704,000 in the same period in 2018.

Cash used by our investing activities was $0 during the nine months ended September 30, 2018 compared to $282,000 in the nine months ended September 30, 2017 resulting primarily from the purchase of production equipment.

Cash provided by financing activities for the nine months September 30, 2018 was $13,351,000, compared to $3,883,000 during the same period in 2017. The principal source of the cash provided by financing activities during the nine months ended September 30, 2018, was the funds received from our July 2018 public offering of common stock, Pre-Funded Warrants and warrants, as well as the subsequent exercise of the Pre-Funded Warrants, that resulted in approximately $8,866,000 of aggregate net proceeds, funds received from our April 2018 public offering of common stock that resulted in approximately $4,439,000 of aggregate net proceeds and the funds received from our March 2018 public offering of common stock that resulted in approximately $3,060,000 of aggregate net proceeds, offset by a redemption of Series C and Series D Preferred Stock from the proceeds of the offering in an aggregate amount of $3,014,000. The principal source of the cash provided by financing activities during the nine months ended September 30, 2017 was the funds received from our March 2017 public offering of preferred stock and warrants that resulted in approximately $6,072,000 of aggregate net proceeds, offset by loan repayments of $2,179,000.

As of September 30, 2018, our current assets exceeded our current liabilities by a multiple of 5.5. Current assets increased by $7,932,000 during the period and current liabilities decreased by $109,000 during the period. As a result, our working capital increased by $8,041,000 to $10,714,000 at September 30, 2018.

Off Balance Sheet Arrangements

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

Recent Accounting Pronouncements

See Note 3 – “Recently Issued Accounting Pronouncements” in the accompanied financial statements.

Factors That May Affect Future Operations

We believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including the cyclical nature of the ordering patterns of our distributors, timing of regulatory approvals, the implementation of various phases of our clinical trials and manufacturing efficiencies due to the learning curve of utilizing new materials and equipment. Our operating results could also be impacted by a weakening of the Euro and strengthening of the New Israeli Shekel, or NIS, both against the U.S. dollar. Lastly, other economic conditions we cannot foresee may affect customer demand, such as individual country reimbursement policies pertaining to our products. For a discussion of these and other risks that relate to our business, you should carefully review the risks and uncertainties described under the heading “Part II – Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2017, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

Contractual Obligations and Commitments

During the nine months ended September 30, 2018, there were no material changes to our contractual obligations and commitments.