Equity

9 Months Ended

Sep. 30, 2016

Stockholders' Equity Note [Abstract]

Equity

NOTE 5 - EQUITY:

a.	On January 26, 2016 the Company entered into option cancellation and release agreements with certain directors, the Chief Executive Officer (“CEO”), who at the time was acting as the Company’s Chief Operating Officer, the former Chief Executive Officer (“former CEO”) and Chief Financial Officer (“CFO”). See Note 10c.
b.	On March 21, 2016, the Company sold 117,327 shares of its common stock and warrants to purchase 58,668 shares of common stock in concurrent underwritten public offering and private placement (the “March 2016 Offering”). The common stock was sold at a price of $14.75 per share and each purchaser received a warrant to purchase one half of one share of common stock for each share of common stock that it purchased in the March 2016 Offering. The warrants, which are classified as equity, are exercisable immediately and have a term of exercise of 5 years from the date of issuance and an exercise price of $14.75. The March 2016 Offering resulted in gross proceeds to the Company of approximately $1.7 million ($1.4 million after deducting underwriting discount, placement agent fees and other offering expenses).
	In connection with the March 2016 Offering, on March 21, 2016, the Company issued to the underwriter and placement agent five-year warrants to purchase up to 5,867 shares of common stock at an exercise price of $18.44 per share. The warrants, which are classified as equity, are exercisable at any time during the period commencing six months following the date of issuance and ending five years from the date of issuance.
c.	On May 24, 2016, the stockholders of the Company approved an increase of the total number of shares of common stock available for issuance pursuant to awards under the InspireMD, Inc. 2013 Long-Term Incentive Plan by 400,000 shares, to a total of 438,800 shares of common stock.
	On September 28, 2016, the stockholders of the Company approved an increase of the total number of shares of common stock available for issuance pursuant to awards under the InspireMD, Inc. 2013 Long-Term Incentive Plan by 252,000 shares, to a total of 690,800 shares of common stock.
d.	On May 25, 2016 the Company filed with the Secretary of State of Delaware a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the Company’s number of authorized shares of common stock from 50,000,000 to 150,000,000.

e. On July 7, 2016, the Company closed a public offering of 442,424 shares of Series B Convertible Preferred Stock and accompanying warrants to purchase up to 1,769,696 shares of common stock (the “July 2016 Offering”). Each share of Series B Convertible Preferred Stock and the accompanying warrants were sold at a price of $33.00. Each share of Series B Convertible Preferred Stock is convertible into 4 shares of common stock reflecting a conversion price equal to $8.25 per share. The holders of Series B Convertible Preferred Stock will be entitled to receive cumulative dividends at the rate per share of 15% per annum of the stated value for five years, payable in cash or common stock, at the Company’s discretion.

The Series B Convertible Preferred Stock will automatically convert into shares after five years from issuance. Additionally, holders of the shares may elect to convert at anytime. The Series B Convertible Preferred Stock has certain anti-dilution provisions. In addition, the Series B Convertible Preferred Stock is subject to provisions providing for make-whole payments, pursuant to which, if the Series B Convertible Preferred Stock is converted into shares of common stock at any time prior to the fifth anniversary of the date of issuance, the holders will receive all of the dividends that, but for the early conversion, would have otherwise accrued on the applicable shares of Series B Convertible Preferred Stock being converted for the period commencing on the conversion date and ending on the fifth anniversary of the date of issuance, less the amount of all prior dividends paid on such converted Series B Convertible Preferred Stock before the date of conversion. The warrants are exercisable immediately and have a term of exercise of five years from the date of issuance and have an exercise price of $5.00 per share of common stock.

The Company received gross proceeds of approximately $14.6 million from the offering, before deducting placement agent fees and offering expenses payable by the Company.

For accounting purposes, the Company analyzed the classification of the Series B Convertible Preferred Stock, including whether the embedded conversion options should be bifurcated. As the Series B Convertible Preferred Stock is not redeemable, and the host contract was determined to be akin to equity, the entire instrument was classified as equity.

The Company has also concluded that the warrants accompanying the Series B Convertible Preferred Stock are classified as equity, since the warrants bear a fixed conversion ratio and all other criteria for equity classification have been met.

For the calculation of loss per share, the additional shares of common stock that will be issued upon conversion of the Series B Convertible Preferred Stock have been included in basic loss per share since Series B Convertible Preferred Stock will automatically convert into shares of common stock after five years, if not previously converted. Dividend payments have been excluded from the loss per share calculation, since the effect of the dividend payments in shares of common stock is anti-dilutive.

During the three month period ended September 30, 2016, 130,404 shares of Series B Convertible Preferred Stock was converted into 912,828 shares of common stock.

f.

Following the closing of the July 2016 Offering, pursuant to a warrant agreement (see Note 4), the Company issued to a lender warrants to purchase 38,691 shares of common stock.

g.

During the nine months ended September 30, 2016, the Company granted to its directors and employees stock options to purchase a total of 149,857 shares of the Company’s common stock. The options have exercise prices ranging from $3.25 to $12.50 per share, which exercise price was the fair market value of the Company’s common stock on the date of each respective grant. Of the options to purchase 149,857 shares of common stock described above, options to purchase 28,331 shares of common stock are fully vested as of their grant date, 70,500 options have vesting schedule of 12 months granted to its new CEO (see Note 10e), 23,401 options are subject to certain market and performance conditions granted to its new Vice Chairman of the Board of Directors (see Note 10a) and 27,625 options have vesting schedule of 3 years.

	In calculating the fair value of the above 28,331 options the Company used the following assumptions: dividend yield of 0%; expected term of 5 years; expected volatility of 85.81%-86.69%; and risk-free interest rate of 1.01%-1.25%.
	The fair value of the above 28,331 options, using the Black-Scholes option-pricing model, was approximately $0.2 million.
	In calculating the fair value of the above 27,625 options the Company used the following assumptions: dividend yield of 0%; expected term of 5.5-6.5 years; expected volatility of 87.29%-87.46%; and risk-free interest rate of 1.20%-1.35%.
	The fair value of the above 27,625 options, using the Black-Scholes option-pricing model, was approximately $0.1 million.
h.	During the nine months ended September 30, 2016, the Company granted to its employees 88,125 restricted shares of common stock with vesting schedule of 12 months to 3 years. The fair value of the restricted shares of common stock, using the Black-Scholes option-pricing model, was approximately $419,000. Of the 88,125 restricted shares of common stock above, 70,500 restricted shares of common stock were granted to the Company’s CEO, see also Note 10e.
i.	On September 28, 2016, the Company filed with the Secretary of State of Delaware a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a one-for-twenty five reverse stock split of its common stock, par value $0.0001 per share, effective as of October 7, 2016, which decreased the number of issued and outstanding shares of common stock from 35.7 million shares to 1.4 million shares. All related share and per share data have been retroactively applied to the financial statements and their related notes for all periods presented.