InspireMD, Inc.

Garth Russell - KCSA Strategic Communications, IR Alan Milinazzo - President and CEO Craig Shore - CFO, CAO, Treasurer and Secretary

Josh Jennings - Cowen & Company Kathy Reiss - Empire Asset Management Josh Jennings - Cowen & Company

Thank you. Before turning the call over to Management, I would like to make the following remarks concerning forward-looking statements.

All statements on this conference call, other than historical facts, are forward-looking statements. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions typically are used to identify forward-looking statements.

These forward-looking statements are not guarantees of future performance and may involve and are subject to risks and uncertainties, and other factors that may affect InspireMD’s business, financial conditions, and other operating results which include, but are not limited to, the risk factors and other qualifications contained in InspireMD’s interim report on Form 10-K, quarterly reports on Form 10-Q, reports filed on Form 8-K, and other reports filed by InspireMD with the SEC, to which your attention is directed. Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements.

InspireMD expressly disclaims any intent or obligation to update these forward-looking statements. During this call, we may also present certain non-GAAP financial measures such as non-GAAP net income and certain ratios that use these measures and our press release with the financial tables issues earlier today which is located on our website at inspiremd.com.

You will find our definitions of these non-GAAP measures and a reconciliation of these non-GAAP financial measures with the closest GAAP measure and a discussion about why we think these non-GAAP measures are relevant. These financial measures are included for the benefit of investors and should be considered in addition to and not instead of GAAP measures.

At this time, it is now my pleasure to turn the call over to Alan Milinazzo, President and Chief Executive Officer of InspireMD. Alan, the floor is yours.

Thank you, Garth. Welcome, everyone, and thank you for joining our earnings call for the quarter ended September 30th, 2013.

On today’s call, I’ll provide some detail about the four key performance areas that I outlined in our inaugural conference call we held in September. Those areas are: number one, clinical studies; number two, commercial activities; number three, product pipeline; and number four, partnerships.

I’ll then turn the call over to Craig, who will discuss our quarterly financial results in more detail before we open up the call to questions. It’s been a very exciting last few months for the Company, as we’ve continued to report positive clinical data from MASTER I as we continue to put the operational and financial pieces in place to advance our technology and create shareholder value in the process.

I’d like to begin with an update on our clinical activities, which are timely, as we recently attended the TCT Conference in San Francisco, where we announced our 12 month follow-up results from the MASTER trial. I’d like to thank all of our employees and investigators who helped make this congress a success for the Company.

It was a busy week for everyone as we met with customers, distributors, and potential partners to discuss the 12 month results. We also held a very successful STEMI Symposium that had over 200 people in attendance, including cardiologists, hospital clinicians, and administrators.

As a quick synopsis of the event, it was a panel of eight cardiologists that discussed the different aspects of the STEMI market and touched on how the MGuard is making an impact. This event was recorded and a video will be available on our website by the end of this week.

I think anyone who wants to get a feeling for the excitement around the MGuard throughout the medical community should watch this video as it also presents some new and compelling case study data. More broadly, the TCT Conference featured no less than a dozen presentations and abstracts focused on improving the care and treatment in the AMI setting.

This underscores the demand for enhanced therapies in this critical patient population. Now, I’ll turn to our 12 month follow-up results, which we view as very positive data.

As Dr. Campbell Rogers pointed out during our investor call from the TCT, there are three key data points that we want to highlight from 12 month follow-up for MASTER I.

First, as we’ve discussed previously, the MASTER trial met its primary endpoint of superiority of ST segment resolution with the MGuard versus the control group. In fact, the superiority was nearly 30% higher with the MGuard versus the control.

Second, we have followed the MASTER I patients for a full year now, and at the recently held TCT, we reported a reduction in the mortality rate at 12 months in the patients treated with MGuard, 1%, versus 3% in the control arm. Physicians we spoke with at the TCT find these 12 month data extremely encouraging, especially as aspiration techniques failed to deliver positive results in recently reported large clinical studies.

As discussed previously by Dr. Gregg Stone, the MASTER I Study Chairman and the MASTER II principle investigator, the mortality benefit is linked to the acute benefits seen at 30 days in three key areas; ST segment resolution, TIMI flow improvement, and smaller infarct size.

MGuard showed positive results in all three categories at 30 days, and these are mechanistically linked to improvements in mortality rates. This is exactly what we demonstrated with the MGuard cohort at 12 months in MASTER I.

The third point I want to discuss was the TLR and TVR, or restenosis rates at 12 months. We view the MGuard results as encouraging in that they are in line with what we would expect to see from a non-mesh covered bare metal stent in an AMI setting.

This indicates that the MicroNet mesh is providing the embolic protection benefit without causing any incremental impact on restenosis. The control group had an extremely low reported restenosis rate, which is likely attributable to some inherent investigator bias, given the design of the trial.

Importantly, as stated above, the MGuard performance, which is in line with standard bare metal stents, was a reassuring data point for the physicians we spoke with at TCT and will give us more positive data to take back into our targeted commercial markets. An additional data point on MASTER I is the sub-set analysis of symptom to balloon time.

These data were presented by Dr. Dariusz Dudek and it showed that at all time intervals, from 120 to 480 minutes from symptom onset to treatment, the MGuard outperforms the control stent group.

In fact, the MGuard performance is better and actually improves over the control stents the longer the time period from onset to treatment. This is extremely important because it actually increases the therapeutic window the physician has to successfully treat the thrombis or clot, which resulted from the myocardial infarction.

If MGuard increases the therapeutic window, then the potential impact on treatment paradigms for these STEMI patients could be profoundly positive. Overall, we view our 12 months follow-up data as extremely positive and expect these results to inform our MASTER II trial and hopefully drive patient enrollment.

As a brief reminder, the MASTER II trial is our fully funded FDA focused trial which uses our proprietary MicroNet mesh on a state of the art cobalt chromium platform. The MASTER II trial is a multi-center, randomized trial with an anticipated population of over 1,100 STEMI patients.

The primary endpoints are superiority in ST segment resolution and non-inferiority in-depth and target vessel re-MI. We expect enrollment to take approximately 18 months, with similar follow-up times to our MASTER trial.

The MASTER II trial is intended to provide further clinical evidence for the MGuard technology, and will be the basis for the RDA registration process in the United States. Now, I’d like to take a few minutes to provide an update on our commercial efforts.

MASTER 12 month data should provide us with an excellent platform to engage physicians in our target markets. As discussed in our last quarterly investor call, we have developed a tiered selling approach, which focuses on 14 to 18 countries and uses a combination of direct sales reps, sales agents, and distributors to drive MGuard adoption rates in high volume STEMI centers around Europe and in Brazil.

We will strive to achieve 90% re-order rates within our active accounts within these Tier 1 countries, 90 days post-launch. This 90/90 metric should give us a strong indication of adoption of the technology and lead to sustainable revenue increases, once we have achieved market adoption at the local level.

During September, we began shipping product into select hospitals in our Tier 1 countries. It’s early in our launch, but so far we are transacting business effectively in these new accounts.

Moving beyond the Tier 1 countries, we intend to utilize select high quality, local distributors or strategic partners with regional AMI focus strategies that should help us further penetrate the AMI market with a broader regional coverage base. The results for the quarter ending September 30th, 2013 don’t yet reflect the benefits of this initiative from a growth standpoint, and we really expect revenue growth to ramp in calendar year 2014.

Having said that, we are encouraged with our quarterly sales results as the third quarter is typically a very soft quarter throughout Europe. Next, I’d like to take a few minutes to discuss our product development activities.

With promising data in hand and sales execution currently underway, we are accelerating our product development and clinical activities utilizing our proprietary MicroNet technology. We have a number of target indications and enhancements in the development pipeline that show great potential.

We are still in the research stages of utilizing our MicroNet technology with a drug eluting stent, but if successfully tested, a drug eluting MGuard stent could allow us to penetrate a much larger portion of the overall $6 billion worldwide stent market. In addition to the drug eluting stent opportunity, we’re also targeting other indications such as the carotid, peripheral vasculature, aneurismal, and renal areas.

Combined, these indications create another significant market opportunity that we believe our platform technology could penetrate. In calendar Q1 2014, we expect to begin gathering clinical evidence on our carotid stent with a first in man study.

This study will allow us to decide how best to continue with the clinical program. Similar to the coronary problem of protecting the vessel from embolic debris, the carotid arteries present an even more difficult challenge for conventional stents.

As such, all carotid stenting procedures are done with adjunctive devices known as filters and—to try to reduce the rate of stroke caused by this debris. The unique integrated design of our CGuard carotid stent system has the potential to improve outcomes in this critical patient population, as many of the complications from carotid stenting occur post-procedure when the filter device is withdrawn.

As the CGuard incorporates the MicroNet technology into the stent design, you effectively have ongoing protection with the mesh, which we believe will reduce late clinical events in those patients. This application has promising clinical potential and we look forward to updating you as we progress with our clinical strategy.

Turning to our fourth area of strategic focus, I’d like to provide a brief update on our partnership activities. One of our main strategies for growth involves strategic partnerships and we are in continuing dialogue with a number of potential partners.

The nature of these partnerships is evolving, but centered around three key opportunities; product development, clinical strategies, and regional distribution. As we’ve been very active in our discussions over the past two quarters, new and interesting opportunities have been brought to the Company.

We plan to evaluate all such opportunities against our strategic plans for growth and our plan for creating shareholder value. Broadly speaking, the partnership conversations give us greater confidence that we are focused on the right things to advance our technology and enhance shareholder value.

We remain on track with our partnership efforts and expect that we can take advantage of one or more of these partnerships within the first quarter of 2014. A final point I’d like to touch on before turning the call over to Craig; we recently announced that we’ve secured $10 million in venture debt financing.

With this additional capital, we can accelerate critical product development and clinical programs to expand our MicroNet therapeutic platform, as well as facilitate ongoing discussions with potential strategic partners. We view this ability to accelerate certain key activities as highly important to our overall strategy and positions us to capitalize on the momentum we have built coming out of the TCT with our positive MASTER I 12 month data in hand.

With that, I will turn the call over to Craig to discuss our financial results. Craig?

Thank you, Alan, and thank you all for joining us. As Alan mentioned, the Company has been extremely busy announcing positive news and moving forward with this enhanced strategy to drive future results.

Revenue for the quarter ended September 30th, 2013 was approximately $1.6 million, compared to $500,000 for the same period in 2012. Although revenue performance year-over-year is significant, the more appropriate way to measure the positive impact of our current strategy is the improved revenue trend sequentially from last quarter to this quarter.

Gross profit for the quarter ended September 30th, 2013 totaled $800,000, compared to $300,000 for the same period in 2012. The increase in gross profit is attributable to an increase in revenue of approximately $1.1 million, partially offset by an increase in cost of revenues of approximately $500,000.

Gross margin for the three months ended September 30th, 2013 was 51.7%, a decrease from 54.8% in the three months ended September 30th, 2012. If the non-recurring effects of the consolidation of our manufacturing facilities in the three months ended September 30th, 2013 are removed, gross margin for the three months ended September 30th, 2013 would have been 63.1%.

Total operating expenses for the quarter ended September 30th, 2013 were $4.7 million, an increase of 31.7% compared to 3.6 million for the same period in 2012. The increase was primarily due to startup costs associated with initiating the MASTER II Trial, as well as increased sales and marketing expenses as we begin to build the appropriate sales infrastructure for future growth.

The loss from operations for the quarter ended September 30th, 2013 was $3.9 million, an increase of 18.4% compared to a loss of $3.3 million for the same period in 2012. Total financial expenses for the quarter ended September 30th, 2013 were approximately $100,000, a decrease of 98.6% compared to $4.2 million in the same period in 2012.

The decrease in financial expenses resulted primarily from the absence of any non-cash revaluations of our warrants or amortization expenses during the three months ended September 30th, 2013. In contrast, during the three months ended September 30th, 2012, we recognized approximately $4 million in non-recurring, non-cash costs associated with our previously retired convertible debt and associated warrants.

If the non-cash effects in the three months ended September 30th, 2012 as well as the non-cash effects in the three months ended September 30th, 2013 are removed, financial expenses for the three months ended September 30th, 2012 would have totaled approximately $200,000 as compared to approximately $20,000 of financial income for the three months ended September 30th, 2013. The net loss for the quarter ended September 30th, 2013 totaled $3.9 million, or $0.12 per basic and diluted share, a decrease of 47.4% compared to a net loss of 7.5 million, or $0.44 per basic and diluted share in the same period in 2012.

Non-GAAP net loss for the quarter ended September 30th, 2013 was $3 million, or $0.09 per basic and diluted share, an increase of 15.7% compared to a non-GAAP net loss of 2.6 million, or $0.15 for the same period in 2012. The non-GAAP net loss for the quarter ended September 30th, 2013 primarily excludes $900,000 of share-based compensation.

The non-GAAP net loss for the quarter ended September 30th, 2012 primarily excludes $4 million in non-recurring, non-cash costs associated with our previously retired convertible debt and associated warrants, and $1 million in share-based compensation. At September 30th, 2013 cash and cash equivalents were $11.4 million, compared to $14.8 million at June 30th, 2013.

The decrease is in line with our anticipated burn rate of slightly over $1 million a month. This amount does not include the $10 million received in venture debt from Hercules Technology Growth Capital.

Lastly, as we announced on our last quarterly call, we’ll be changing our fiscal reporting year-end from June 30th to December 31st. The three month period ending September 30th was the first half of the transitional six month fiscal year from July 1st to December 31st, 2013.

This change will allow us to better align our financial periods and annual budget planning with our business cycle, as well as assist the investment community in following our progress moving forward. With that, I’d like to turn the call back over to Alan.

Thanks, Craig. Briefly, the financial results outlined by Craig begin to show that the operational and organizational changes we have made in the past two quarters are showing early signs of positive results.

We intend to remain focused on our four key performance areas and monitor our progress daily, and look forward to updating all of you quarterly as we move forward in building a successful and highly valued business. Lastly, I wanted to take this opportunity to thank Asher Holzer and Eyal Weinstein for serving on our Board of Directors and for the many contributions from Asher as a co-founder of InspireMD.

Both Asher and Eyal will not be standing for re-election at this year’s Annual Meeting, but will serve out their respective terms through the end of 2013. We continue to evaluate industry leadership which can strengthen our Board governance and enhance our performance as an organization.

The addition of Mike Berman and Dr. Campbell Rogers to our Board of Directors in 2013 is already having a very positive impact on the organization.

With our 12 month results in hand, additional funding in place, and continued improvement in our operations, we are looking forward to a successful close to the year and a bright 2014. This concludes the prepared remarks, and now we are ready to open the call for questions.

Hi. Good evening, gentlemen.

Thanks for taking the questions. I guess first I wanted to ask one on the 12 month MASTER trial data and the mortality benefit trend that was sustained and was durable out to 12 months.

Can you give us just a sense and color of the international customers and how they responded to six month mortality benefit trend results and now, and how that could potentially, you know, benefit even more from a marketing perspective, but with the 12 month data that’s—that you now have secured?

Yes, thanks, Josh. So, the interim look at six months, I think a lot of the physicians use six month results as interesting, but not conclusive, and this really goes back.

You know, a number of companies—at Medtronic we started doing this with the Endeavour program at four months. Really the—I think the key timeline for physicians we talk to is they want to see the acute results because that’s a good predictor.

If you look at numerous studies around acute results, ST segment resolution in particular, TIMI flow infarc size, they often correlate with long-term benefits; but long-term is defined as 12 months. And so, from our standpoint, we’ve really had, you know, a lot of physicians interested in what we’re talking about with six months, but sort of: “show us the 12 month results and we’ll be impressed.”

So, from our standpoint, we think the early conversations, as evidenced by physicians we’ve engaged at TCT and subsequently we’ve had a week to get back into our territories, you know, there is a very positive response to the mortality benefit. Again, it’s a trend.

The study’s not power for mortality, but it’s mechanistically linked with those acute outcomes that we talked about. So, I’d say the early reaction is quite favorable to the 12 month results.

Hi. Good afternoon.

Thanks for having the call. I was wanting to focus back on MASTER II.

I know that patient enrollment is just starting and I don’t want to get too granular, but maybe to help a little bit with our timing expectations. Are the sites already recruited?

Or, is that recruitment still ongoing?

So Kathy, we have 70 sites approved by the FDA, 35 in the U.S. and 35 outside the U.S; so we’ve identified those sites.

We also are identifying additional sites should we want to increase the number of sites. We’d want to have those sites qualified.

Obviously, we’d have to go back to the FDA to ask for additional sites, but our timeline—the 18 months we spoke about earlier, we started in July. So, our timeline is to fully enroll MASTER II by the end of 2014, and again, that is with the 70 sites.

Good, thank you. That’s very helpful.

Hi. Thanks again.

I wanted to also ask a question on—second question on MASTER 12 month data and how you’ve—the response—the feedback you’ve gotten from KOLs and European adopters on the control group TLR and TVR rates. You know, they were inexplicably low outside of any historic norms, and is that realized in the clinical community from your standpoint?

Are docs looking at and understanding that the separation there was outside of historic norms?

Yes. I think, Josh, going back to, you know, the design of MASTER I and that this is similar for MASTER II, because our control is any stent on MASTER I that physicians, when they were randomized to a control stent, they could do whatever they would normally do, there was likely an inherent bias that the treatment of that patient in the control group was standard therapy.

And so, more likely than not, those physicians weren’t—may not have been as aggressive in terms of bringing patients back if there was minor discomfort on follow-up. This was noted by a couple of the investigators and we sort of validated it as we went around.

So, you could say that, based on the design of the study, there could be some inherent bias. This was helpful for us to understand going into MASTER II because it can allow us to better train our physicians who are participating that, even in those situations, we really still want to have those patients come back for—you know, for a look.

But, the best explanation we have, Josh, is that just given the design of the study, which is a very—you know, very strong design in that it really does demonstrate MGuard versus current therapy, we think that that may be one of the trade-offs. The only other limitation in MASTER II, as a reminder, is that, because it’s an FDA trial, the limitation on our investigators for the control is an FDA approved stent.

So, we’ll be limiting the universe of control stents to only FDA approved stents.

Okay. Thank you very much.

Well, in closing, I want to thank everyone for joining us today. We appreciate your continued support and interest in InspireMD and we look forward to continuing to update you on the progress that we’re making.

Have a good afternoon.