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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>As filed with the Securities and Exchange
Commission on September 24, 2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><B>File No. 333-</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WASHINGTON, D.C. 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>______________________</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM S-1</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>______________________</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 16pt"><B>InspireMD,
    Inc.</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact name of registrant as specified in
        its charter)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 33%; font-size: 10pt; font-weight: bold; text-align: center">Delaware</TD>
    <TD STYLE="width: 34%; font-size: 10pt; font-weight: bold; text-align: center">3841</TD>
    <TD STYLE="width: 33%; font-size: 10pt; font-weight: bold; text-align: center">26-2123838</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>(State or other jurisdiction of</I></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>incorporation or organization)</I></P></TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>(Primary Standard Industrial</I></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>Classification Code Number)</I></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="font-size: 10pt; font-style: italic; text-align: center">(I.R.S. Employer Identification No.)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>4 Menorat Hamaor St.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Tel Aviv, Israel 67448</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>972-3-691-7691</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>(Address, including zip code, and telephone
        number,</I></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>&nbsp;including area code, of registrant&rsquo;s
        principal executive offices)</I></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Ofir Paz</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Chief Executive Officer</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>InspireMD, Inc.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>4 Menorat Hamaor St.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Tel Aviv, Israel 67448</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>972-3-691-7691</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>(Name, address, including zip code, and
        telephone number,</I></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>&nbsp;including area code, of agent for
        service)</I></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>Copies of all communications,
including communications sent to agent for service, should be sent to:</I></B></P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Rick A. Werner, Esq.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Haynes and Boone, LLP</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>30 Rockefeller Plaza, 26th Floor</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, New York 10112</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Tel. (212) 659-7300</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Fax (212) 884-8234</B></P></TD>
    <TD STYLE="width: 50%"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Yvan-Claude J. Pierre, Esq.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Jodi L. Lashin, Esq.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Reed Smith LLP</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>599 Lexington Avenue, 22<SUP>nd
        </SUP>Floor</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, New York 10022</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Tel. (212) 521-5400</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Fax (212) 521-5450</B></P></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Approximate date of commencement of proposed
sale to the public:</B>&nbsp;&nbsp;As soon as practicable after the effective date of this Registration Statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box. <FONT STYLE="font-family: Wingdings">o</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings">o</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings">o</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings">o</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer&rdquo; and &ldquo;smaller reporting company&rdquo; in Rule 12b-2
of the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Large accelerated filer <FONT STYLE="font-family: Wingdings">o</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="width: 50%; font-size: 10pt">Accelerated filer <FONT STYLE="font-family: Wingdings">x</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt">Non-accelerated filer <FONT STYLE="font-family: Wingdings">o</FONT></TD>
    <TD NOWRAP STYLE="font-size: 10pt">Smaller reporting company <FONT STYLE="font-family: Wingdings">o</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="font-size: 10pt">(Do not check if a smaller reporting company)</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CALCULATION OF REGISTRATION FEE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border: windowtext 1pt solid">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 51%; border: windowtext 1pt solid; padding: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TITLE OF EACH</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CLASS OF SECURITIES</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TO BE REGISTERED</B></P></TD>
    <TD STYLE="width: 28%; border: windowtext 1pt solid; padding: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROPOSED MAXIMUM</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AGGREGATE OFFERING PRICE(1)</B></P></TD>
    <TD STYLE="width: 21%; border: windowtext 1pt solid; padding: 1.5pt; font-size: 10pt; font-weight: bold; text-align: center">AMOUNT OF REGISTRATION FEE</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="border: windowtext 1pt solid; padding: 1.5pt; font-size: 10pt">Common Stock, par value $0.0001 per share</TD>
    <TD STYLE="border: windowtext 1pt solid; padding: 1.5pt; font-size: 10pt; text-align: center">$46,000,000(2)</TD>
    <TD STYLE="border: windowtext 1pt solid; padding: 1.5pt; font-size: 10pt; text-align: center">$5,271.60</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font-size: 10pt">(1)</TD>
    <TD STYLE="font-size: 10pt">Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font-size: 10pt">(2)</TD>
    <TD STYLE="font-size: 10pt">Includes shares of our common stock that the underwriters have the option to purchase to cover overallotments, if any.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant
to said section 8(a), may determine.</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: red"><B>The information in this prospectus is not complete
and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission
is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; font-size: 10pt; color: red; font-weight: bold; text-align: left">PROSPECTUS (Subject to Completion)</TD>
    <TD STYLE="width: 50%; font-size: 10pt; color: red; font-weight: bold; text-align: right"><B>Dated <FONT STYLE="font-family: Times New Roman, Times, Serif">September 24, 2012</FONT></B></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>Shares</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><IMG SRC="image_003.gif" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; color: Red"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock. Our common stock
is quoted on the OTC Bulletin Board under the symbol &ldquo;NSPR.&rdquo; On September 21, 2012, the last reported sale price of
our common stock was $2.25 per share. This does not reflect a one-for- &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse stock split that is expected to occur immediately
prior to the effectiveness of the registration statement of which this prospectus is a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have applied to list our shares of common stock on the
Nasdaq Capital Market under the symbol &ldquo;NSPR.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our business and an investment in our common stock
involve significant risks. These risks are described under the caption &lsquo;&lsquo;Risk Factors&rsquo;&rsquo; beginning on
page  11 of this prospectus.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 67%; padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 15%; border-bottom: windowtext 1pt solid; padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt; font-style: italic; text-align: center">Per Share</TD>
    <TD STYLE="width: 2%; padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt; font-style: italic; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 16%; border-bottom: windowtext 1pt solid; padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt; font-style: italic; text-align: center">Total</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt; font-weight: bold">Public offering price</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt">$</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt; font-weight: bold">Underwriting discount (1)</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt">$</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt; font-weight: bold">Proceeds, before expenses, to InspireMD, Inc.</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-size: 10pt">$</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">(1)</TD><TD STYLE="text-align: justify">The underwriters will receive compensation in addition
to the discount. See &ldquo;Underwriters&rdquo; for a description of compensation payable to the underwriters.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The underwriters may also purchase up to an additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares
from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover
overallotments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The underwriters expect to deliver the shares against payment
in New York, New York on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font: 12pt Times New Roman, Times, Serif"><B>Cowen
and Company&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font: 12pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font: 12pt Times New Roman, Times, Serif"><B>&nbsp;JMP
Securities</B>&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-size: 12pt">, 2012</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 38%; padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="width: 2%; padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="width: 6%; border-bottom: windowtext 1pt solid; padding-right: 0.5pt; padding-left: 0.5pt">Page</TD>
    <TD STYLE="width: 2%; padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="width: 44%; padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="width: 2%; border-bottom: windowtext 1pt solid; padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="width: 6%; border-bottom: windowtext 1pt solid; padding-right: 0.5pt; padding-left: 0.5pt">Page</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Prospectus Summary</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">1</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Quantitative and Qualitative Disclosures</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Risk Factors</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">11</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">About Market Risk</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">49</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Special Note Regarding Forward Looking</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt"></TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Business</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">50</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Statements</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">29</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Management</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">73</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Use of Proceeds</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">30</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Executive Compensation</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">79</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Market for Our Common Stock</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">31</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Principal Stockholders</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">101</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Dividend Policy</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">31</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Certain Relationships and Related Party</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Capitalization</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">32</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Transactions</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">103</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Dilution</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">33</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Description of Capital Stock</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">104</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Selected Financial Information and Other</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt"></TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Material U.S. Federal Income and Estate Tax</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Data</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">35</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Considerations for Non-U.S. Holders</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">111</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Selected Quarterly Financial Data</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">36</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Underwriting</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">115</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Management&rsquo;s Discussion and Analysis of</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt"></TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Legal Matters</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">118</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Financial Condition and Results of</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt"></TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Experts</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">118</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Operations</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">37</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Where You Can Find Additional Information</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">118</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt"></TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt"></TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Index to Consolidated Financial Statements</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">F-1</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information.
If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters
are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business,
financial condition, results of operations and prospects may have changed since that date.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Information contained on our website is not part of this
prospectus.</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></p>
<DIV STYLE="padding: 0.5in; border: Black 1pt solid">



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>This summary provides an overview
of selected information contained elsewhere in this prospectus and does not contain all of the information you should
consider before investing in our common stock. You should carefully read the prospectus and the registration statement of
which this prospectus is a part in their entirety before investing in our common stock, including the information discussed
under &quot;Risk Factors&quot; beginning on page&nbsp;11 and our financial statements and notes thereto that appear elsewhere in
this prospectus. As used in this prospectus, unless the context otherwise indicates, the terms &quot;we,&quot;
&quot;our,&quot; &quot;us,&quot; or &quot;the Company&quot; for periods prior to the closing of our share exchange
transactions on March 31, 2011 refer to InspireMD Ltd., a private company incorporated under the laws of the State of Israel
that is now our wholly-owned subsidiary, and its subsidiary, taken as a whole, and the terms &ldquo;we,&rdquo;
&ldquo;our,&rdquo; &quot;us,&quot; or &quot;the Company&quot; for periods subsequent to the closing of the share exchange
transactions refer to InspireMD, Inc., a Delaware corporation, and its subsidiaries, including InspireMD Ltd., taken as a
whole. </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"><B>The Company</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt"><B><I>Overview</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a medical device company focusing
on the development and commercialization of our proprietary stent platform technology, MGuard<SUP>TM</SUP>.&nbsp;&nbsp;MGuard provides
embolic protection in stenting procedures by placing a micron mesh sleeve over a stent. Our initial products are marketed for use
mainly in patients with acute coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary
interventions (bypass surgery). According to the TYPHOON STEMI trial (New England Journal of Medicine, 2006) and the SOS SVG Trial
(Journal of the American College of Cardiology, 2009), of patients with acute myocardial infarction and saphenous vein graft coronary
interventions, 7.5% to 44% experience major adverse cardiac events, including cardiac death, heart attack and restenting of the
artery. When performing stenting procedures in patients with acute coronary symptoms, interventional cardiologists face a difficult
dilemma in choosing between bare-metal stents, which have a high rate of restenosis (formation of new blockages), and drug-eluting
(drug-coated) stents, which have a high rate of late thrombosis (formation of clots months or years after implantation), require
administration of anti-platelet drugs for at least one year post procedure, are more costly than bare-metal stents and have additional
side effects.&nbsp;&nbsp;We believe that MGuard is a simple and seamless solution for these patients.&nbsp;&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also intend to apply our technology to
develop additional products used for other vascular procedures, specifically carotid (the arteries that supply blood to the brain)
and peripheral (other arteries) procedures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In October 2007, our first generation product,
the MGuard Coronary, received CE Mark approval for treatment of coronary arterial disease in the European Union. CE Mark is a mandatory
conformance mark on many products marketed in the European Economic Area and certifies that a product has met European Union consumer
safety, health or environmental requirements. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our initial MGuard Coronary products incorporated
a stainless steel stent. We subsequently replaced this stainless steel platform with a more advanced cobalt-chromium based platform,
which we refer to as the MGuard Prime<SUP>TM</SUP> version of our MGuard Coronary. We believe the new platform will prove to be
superior because cobalt-chromium stents are generally known in the industry to provide better deliverability and possibly even
a reduction in major adverse cardiac events.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The MGuard Prime version of the MGuard Coronary
received CE Mark approval in the European Union in October 2010 for improving luminal diameter and providing embolic protection.
We believe we can use and leverage the clinical trial results of our original stainless steel based MGuard Coronary to market our
new cobalt-chromium based MGuard Prime version of the MGuard Coronary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Unless otherwise indicated, in this prospectus,
references to MGuard Coronary are to both our initial stainless steel based MGuard Coronary and our more current cobalt-chromium
based MGuard Prime version of the MGuard Coronary, as applicable.</P>

</DIV>
<p>&nbsp;</P>

<P></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<DIV STYLE="padding: 0.5in; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the six months ended June 30, 2012,
our total revenue was approximately $2.1 million and our net loss was approximately $7.1 million. For the year ended December 31,
2011, our total revenue was approximately $6.0 million and our net loss was approximately $14.7 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt"><B><I>Recent Events</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 1, 2012, our board of directors
approved a change in our fiscal year-end from December 31 to June 30, effective June 30, 2012. This prospectus includes our financial
results and other information for the six month period from January 1, 2012 through June 30, 2012, which we refer to as the &ldquo;transition
period.&rdquo; Following the transition period, we will file annual reports for each twelve month period ended June 30 of each
year beginning with the twelve month period ended June 30, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We anticipate that in the near term, Ofir
Paz will resign from his position as our chief executive officer. Mr. Paz intends to remain in his position while we conduct a
thorough search for an appropriate replacement. We have retained a search firm to assist in this process. Mr. Paz&rsquo;s resignation
reflects our transition from a private medical device start-up company with a promising new technology to a publicly traded company
with a successfully tested, commercialized, CE Mark approved product. After his resignation, we anticipate that Mr. Paz will remain
one of our directors and maintain his involvement with us, as necessary, on a consulting basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On October 31, 2011, our stockholders authorized
our board of directors to amend our amended and restated certificate of incorporation to effect a reverse stock split of our common
stock at a ratio of one-for-two to one-for-four, at any time prior to our 2012 annual stockholders&rsquo; meeting, the exact ratio
of the reverse stock split to be determined by the board. As of the date of this prospectus, we have not effected the reverse stock
split. We intend to effectuate a one-for- &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse stock split, in order to comply with the listing requirements of the Nasdaq Capital
Market. The reverse stock split is expected to occur the day immediately following the effectiveness of the registration statement
of which this prospectus is a part. Such reverse stock split would immediately increase our stock price. In addition, such reverse
stock split would reduce the number of shares of common stock outstanding and may affect the liquidity of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Industry</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">According to Fact Sheet No. 310/June 2011
of the World Health Organization, approximately 7.3 million people worldwide died of coronary heart disease in 2008. Physicians
and patients may select from among 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. A stent is an expandable &ldquo;scaffold-like&rdquo; device, usually constructed
of a stainless steel material, that is inserted into an artery to expand the inside passage and improve blood flow.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">According to the January 3, 2011 2011 MEDTECH
OUTLOOK produced by the Bank of Montreal Investment Banking Group, known as BMO Capital Markets, after registering a compounded
annual growth rate from 2002 to 2009 of approximately 13%, revenues from the global coronary stent market is predicted to remain
relatively constant, although in volume of stents the market is predicted to continue to grow. The growth in volume is due to the
appeal for less invasive percutaneous coronary intervention procedures and advances in technology coupled with the increase in
the elderly population, obesity rates and advances in technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Coronary artery disease is one of the leading
causes of death worldwide. The treatment of coronary artery disease includes alternative treatment methodologies, that is, coronary
artery bypass grafting or angioplasty (percutaneous coronary intervention) with or without stenting. According to the January 3,
2011 2011 MEDTECH OUTLOOK produced by the BMO Capital Markets, the percutaneous coronary intervention procedures involving stents
are increasingly being used to treat coronary artery diseases with an 88.3% penetration rate in 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Products and Applications</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Below is a summary of our current products
and products under development, and their intended applications.</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<DIV STYLE="padding: 0.5in; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt"><B><I>MGuard&ndash; Coronary Applications</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our MGuard Coronary with a bio-stable mesh
and our planned MGuard Coronary with a drug-eluting mesh are aimed at the treatment of coronary arterial disease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>MGuard Coronary with a bio-stable
mesh. </B><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Our first MGuard product, the MGuard Coronary with a
bio-stable mesh, is comprised of our mesh sleeve wrapped around a stainless steel bare-metal stent.&nbsp;The
current&nbsp;MGuard Prime version of our MGuard Coronary with a bio-stable mesh is comprised of our mesh sleeve wrapped
around a cobalt-chromium bare-metal stent.&nbsp;&nbsp;In comparison to a conventional bare-metal stent, we believe the MGuard
Coronary with a bio-stable mesh provides protection from embolic showers. Results of clinical trials on the MGuard Coronary
stent, including the MAGICAL, PISCIONE and MGuard international registry (iMOS) clinical trials described below (see
&ldquo;Business &ndash; Comparison of Clinical Trial Results to Date with Results Achieved Using Bare Metal or Drug-Eluting
Stents in the STEMI population&rdquo; below), indicate positive outcomes and safety measures. The results of these clinical
trials for the MGuard Coronary stent suggest higher levels of reperfusion (blood flow through the microcirculatory system,
those blood vessels which are the only visible with a microscope), and lower rates of 30 day and 1 year major adverse cardiac
events and high levels of complete ST resolution (an indication that heart muscle activity has returned to normal), as
compared to the levels and rates of other bare-metal and drug-eluting stents.<B> </B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>MGuard Coronary with a drug eluting bio-absorbable
mesh.</B>&nbsp;&nbsp;Based upon the clinical profile of MGuard Coronary, we anticipate that the MGuard Coronary with a drug-eluting
bio-absorbable mesh will offer both the comparable myocardial blush grade 3 levels and 30-day and 1-year major adverse cardiac
event rates as the MGuard Coronary with a bio-stable mesh, as described above, and a comparative restenosis rate, which is the
rate at which patients experience formation of new blockages in their arteries, when compared to existing drug-eluting stents.&nbsp;&nbsp;This
product is currently planned, but not yet under development. The bio-absorbability of MGuard Coronary with a drug eluting bio-absorbable
mesh is intended to improve upon the bio-absorbability of other drug-eluting stents, in light of the large surface area of the
mesh and the small diameter of the fiber. We intend to study whether the protective sleeve on the MGuard Coronary with a drug-eluting
bio-absorbable mesh can improve uniform distribution of the applied drug to the vessel wall for improved drug therapy management
compared to other drug-eluting stents, where the drug is distributed on the struts only. If this intended result is achieved with
respect to the improved and uniform distribution of the applied drug to the vessel wall, the total dosage of the medication potentially
could be reduced while increasing its efficacy.&nbsp;&nbsp;MGuard Coronary with a drug-eluting bio-absorbable mesh is expected
to promote smooth and stable endothelial cell growth and subsequent attachment to the lumen of the vessel wall, which is essential
for rapid healing and recovery.&nbsp;&nbsp;In addition, we believe bio-absorbable drug-eluting mesh may enable the use of more
effective drug therapies that presently cannot be effectively coated on a metal-based stent due to their poor diffusion capabilities.&nbsp;&nbsp;Because
the drug-eluting bio-absorbable mesh will be bio-absorbable, we anticipate that the mesh will completely dissolve after four months,
which we expect will result in fewer of the chronic long term side effects that are associated with the presence of the drug.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt"><B><I>MGuard &ndash; Carotid Applications</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to market our mesh sleeve coupled
with a self-expandable stent (a stent that expands without balloon dilation pressure or need of an inflation balloon) for use in
carotid-applications. This product is currently under development.<B>&nbsp; </B>We believe that our MGuard design will provide
substantial advantages over existing therapies in treating carotid artery stenosis (blockage or narrowing of the carotid arteries),
like conventional carotid stenting and endarterectomy (surgery to remove blockage), given the superior embolic protection characteristics
witnessed in coronary arterial disease applications. We intend that the embolic protection will result from the mesh sleeve, as
it traps emboli at their source.&nbsp;&nbsp;In addition, we believe that MGuard Carotid will provide post-procedure protection
against embolic dislodgement, which can occur immediately after a carotid stenting procedure and is often a source of post-procedural
strokes in the brain.&nbsp;&nbsp;Schofer, et al. (&ldquo;Late cerebral embolization after emboli-protected carotid artery stenting
assessed by sequential diffusion-weighted magnetic resonance imaging,&rdquo; <I>Journal of American College of Cardiology Cardiovascular
Interventions</I> , Volume 1, 2008) have also shown that the majority of the incidents of embolic showers associated with carotid
stenting occur immediately post-procedure.</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<DIV STYLE="padding: 0.5in; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt"><B><I>MGuard &ndash; Peripheral Applications</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to market our mesh sleeve coupled
with a self-expandable stent (a stent that expands without balloon dilation pressure or need of an inflation balloon) for use in
peripheral applications.&nbsp; This product is currently under development.&nbsp; Peripheral Artery Disease, also known as peripheral
vascular disease, is usually characterized by the accumulation of plaque in arteries in the legs, need for amputation of affected
joints or even death, when untreated.&nbsp;&nbsp;Peripheral Artery Disease 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 covered stents, at the risk of blocking branching vessels, to ensure
that emboli does not fall into the bloodstream.&nbsp;&nbsp;We believe that our MGuard design will provide substantial advantages
over existing therapies in treating peripheral artery stenosis (blockage or narrowing of the peripheral arteries).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Product Development and Critical Milestones</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Below is a list of the products described
above and our projected critical milestones with respect to each.&nbsp;As used below, &ldquo;Q&rdquo; stands for our fiscal quarter.&nbsp;&nbsp;While
we currently anticipate seeking approval from the U.S. Food and Drug Administration for all of our products in the future, we have
only outlined a timetable to seek U.S. Food and Drug Administration approval for our MGuard Coronary plus with bio-stable mesh
product in our current business plan.&nbsp;&nbsp;The use of the term &ldquo;to be determined&rdquo; in the table below with regard
to certain milestones indicates that the achievements of such milestones is unable to be accurately predicted as such milestones
are too far in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 39%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">Product</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">Indication</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 10%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">Start<BR> Development</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">CE Mark</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">European<BR> Union Sales</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">FDA<BR> Approval</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">U.S. Sales</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.8pt">MGuard Coronary Plus Bio-Stable Mesh</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Bypass/ Coronary</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">2005</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Oct.&nbsp;2007</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q1-2008</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q4-2015</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">2016</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.8pt">MGuard Peripheral Plus Bio-Stable Mesh</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Peripheral Arteries</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q1-2011</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q4-2012</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.8pt">MGuard Carotid Plus Bio-Stable Mesh</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Carotid Arteries</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q1-2011</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q4-2012</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.8pt">MGuard Coronary Plus Bio-Absorbable Drug-Eluting Mesh</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Bypass/ Coronary</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With respect to MGuard Carotid with bio-stable
mesh, we have determined that the expected commencement of sales in the European Union cannot be accurately predicted since we
have delayed the development of this product until additional funding for its development is secured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We anticipate that our MGuard Coronary with
bio-stable mesh will be classified as a Class III medical device by the U.S. Food and Drug Administration.</P>

</DIV>
<p>&nbsp;</p>


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<P>&nbsp;</P>

<DIV STYLE="padding: 0.5in; border: Black 1pt solid; text-align: justify; overflow: visible">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Growth Strategy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt; text-indent: 0.5in">Our primary business objective is to utilize
our proprietary technology to become the industry standard for treatment of acute coronary syndromes and to provide a superior
solution to the common acute problems caused by current stenting procedures, such as restenosis, embolic showers and late thrombosis.&nbsp;
We are pursuing the following business strategies in order to achieve this objective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B>Successfully
                                                                                                              commercialize MGuard
                                                                                                              Coronary with bio-stable
                                                                                                              mesh.</B><FONT STYLE="font: 10pt Times New Roman, Times, Serif">
                                                                                                              &nbsp;&nbsp;We have
                                                                                                              begun commercialization
                                                                                                              of MGuard Coronary
                                                                                                              with a bio-stable
                                                                                                              mesh in Europe,
                                                                                                              Russia, Asia and
                                                                                                              Latin America through
                                                                                                              our distributor
                                                                                                              network and we are
                                                                                                              aggressively pursuing
                                                                                                              additional registrations
                                                                                                              and contracts in
                                                                                                              other countries
                                                                                                              such as, Canada,
                                                                                                              South Korea, Belgium,
                                                                                                              the and certain
                                                                                                              smaller countries
                                                                                                              in Latin America.&nbsp;&nbsp;By
                                                                                                              the time we begin
                                                                                                              marketing this product
                                                                                                              in the U.S., we
                                                                                                              expect to have introduced
                                                                                                              the MGuard Coronary
                                                                                                              technology to clinics
                                                                                                              and interventional
                                                                                                              cardiologists around
                                                                                                              the world, and to
                                                                                                              have fostered brand
                                                                                                              name recognition
                                                                                                              and widespread adoption
                                                                                                              of MGuard Coronary.&nbsp;&nbsp;We
                                                                                                              plan to accomplish
                                                                                                              this by participating
                                                                                                              in national and
                                                                                                              international conferences,
                                                                                                              conducting and sponsoring
                                                                                                              clinical trials,
                                                                                                              publishing articles
                                                                                                              in scientific journals,
                                                                                                              holding local training
                                                                                                              sessions and conducting
                                                                                                              electronic media
                                                                                                              campaigns.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B>Successfully
                                                                                                              develop the next
                                                                                                              generation of MGuard
                                                                                                              stents.</B><FONT STYLE="font: 10pt Times New Roman, Times, Serif">
                                                                                                              &nbsp; While we
                                                                                                              market our MGuard
                                                                                                              Coronary with bio-stable
                                                                                                              mesh, we intend
                                                                                                              to develop the MGuard
                                                                                                              Coronary with a
                                                                                                              drug-eluting mesh.&nbsp;&nbsp;We
                                                                                                              are also working
                                                                                                              on our MGuard stents
                                                                                                              for peripheral and
                                                                                                              carotid, for which
                                                                                                              we expect to have
                                                                                                              CE Mark approval
                                                                                                              by the first quarter
                                                                                                              of 2013.&nbsp;&nbsp;In
                                                                                                              addition, we released
                                                                                                              our cobalt-chromium
                                                                                                              version of MGuard
                                                                                                              Coronary, MGuard
                                                                                                              Prime, in 2010,
                                                                                                              which we anticipate
                                                                                                              will replace the
                                                                                                              original stainless
                                                                                                              steel-based version
                                                                                                              of MGuard Coronary
                                                                                                              over the next few
                                                                                                              years.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B>Continue to leverage MGuard technology to develop additional applications for interventional cardiologists and vascular
surgeons. &nbsp;</B> In addition to the applications described above, we believe that we will eventually be able to utilize our
proprietary technology to address imminent market needs for new product innovations to significantly improve patients&rsquo; care.&nbsp;&nbsp;We
have secured intellectual property using our mesh technology in the areas of brain aneurism, treating bifurcated blood vessels
and a new concept of distal protective devices.&nbsp;&nbsp;We believe these areas have large growth potential given, in our view,
that present solutions are far from satisfactory, and there is a significant demand for better patient care.&nbsp;&nbsp;We believe
that our patents can be put into practice and that they will drive our growth at a later stage.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B>Work with
                                                                                                              world-renowned physicians
                                                                                                              to build awareness
                                                                                                              and brand recognition
                                                                                                              of MGuard portfolio
                                                                                                              of products.</B><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;
                                                                                                              We intend to work
                                                                                                              closely with leading
                                                                                                              cardiologists to
                                                                                                              evaluate and ensure
                                                                                                              the efficacy and
                                                                                                              safety of our products.&nbsp;&nbsp;We
                                                                                                              intend that some
                                                                                                              of these prominent
                                                                                                              physicians will
                                                                                                              serve on our Scientific
                                                                                                              Advisory Board,
                                                                                                              which is our advisory
                                                                                                              committee that advises
                                                                                                              our board of directors,
                                                                                                              and run clinical
                                                                                                              trials with the
                                                                                                              MGuard Coronary.&nbsp;We
                                                                                                              believe these individuals,
                                                                                                              once convinced of
                                                                                                              the MGuard Coronary&rsquo;s
                                                                                                              appeal, will be
                                                                                                              invaluable assets
                                                                                                              in facilitating
                                                                                                              the widespread adoption
                                                                                                              of the stent.&nbsp;&nbsp;In
                                                                                                              addition, we plan
                                                                                                              to look to these
                                                                                                              cardiologists to
                                                                                                              generate and publish
                                                                                                              scientific data
                                                                                                              on the use of our
                                                                                                              products, and to
                                                                                                              present their findings
                                                                                                              at various conferences
                                                                                                              they attend.&nbsp;&nbsp;Dr.
                                                                                                              Gregg W. Stone,
                                                                                                              director of Cardiovascular
                                                                                                              Research and Education
                                                                                                              at the Center for
                                                                                                              Interventional Vascular
                                                                                                              Therapy of New York
                                                                                                              Presbyterian Hospital/Columbia
                                                                                                              University Medical
                                                                                                              Center and the co-director
                                                                                                              of Medical Research
                                                                                                              and Education at
                                                                                                              The Cardiovascular
                                                                                                              Research Foundation
                                                                                                              is the study chairman
                                                                                                              for the MASTER Trial.&nbsp;&nbsp;Dr.
                                                                                                              Donald Cutlip, Executive
                                                                                                              Director of Clinical
                                                                                                              Investigation at
                                                                                                              the Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              will provide scientific
                                                                                                              leadership of the
                                                                                                              U.S. Food and Drug
                                                                                                              Administration trials
                                                                                                              and Dr. Stone will
                                                                                                              act as principal
                                                                                                              investigator.&nbsp;&nbsp;On
                                                                                                              October 4, 2011,
                                                                                                              InspireMD Ltd.,
                                                                                                              our wholly-owned
                                                                                                              subsidiary, entered
                                                                                                              into a clinical
                                                                                                              trial services agreement
                                                                                                              with Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              Inc., pursuant to
                                                                                                              which Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              Inc. will conduct
                                                                                                              a study entitled
                                                                                                              &ldquo;MASTER II
                                                                                                              - MGuard Stent System
                                                                                                              Clinical Trial in
                                                                                                              Patients with Acute
                                                                                                              Myocardial Infarction&rdquo;
                                                                                                              on our behalf. We
                                                                                                              will pay Harvard
                                                                                                              Clinical Research
                                                                                                              Institute, Inc,
                                                                                                              Cardio Research
                                                                                                              Foundations (CRF),
                                                                                                              as a core laboratory,
                                                                                                              and MedPass International,
                                                                                                              as our European
                                                                                                              monitoring group,
                                                                                                              an estimated aggregate
                                                                                                              fee of approximately
                                                                                                              $15 million for
                                                                                                              conducting the study,
                                                                                                              subject to adjustment
                                                                                                              dependent upon changes
                                                                                                              in the scope and
                                                                                                              nature of the study,
                                                                                                              as well as other
                                                                                                              costs to be determined
                                                                                                              by the parties.</FONT></TD></TR></TABLE>



</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in"></P>

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<DIV STYLE="padding: 0.5in; border: Black 1pt solid">

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B>Continue to protect and expand our portfolio of patents. &nbsp;</B> Our patents and their protection are critical to our
success. We have filed nine separate patent applications for our MGuard technology in the U.S. (including one that is still in
the Patent Cooperation Treaty international phase) and corresponding patent applications in Canada, China, Europe, Israel, India,
and South Africa. We believe these patents and patent applications cover all of our existing products, and can be useful for future
technology. We intend to continue patenting new technology as it is developed, and to actively pursue any infringement upon our
patents. To date, we have secured patent protection in each of the United States, South Africa and China for one patent. See &ldquo;Business
&ndash; Intellectual Property &ndash; Patents&rdquo;).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Associated with Our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our ability to operate our business and
achieve our goals and strategies is subject to numerous risks as discussed more fully in the section titled &ldquo;Risk Factors,&rdquo;
including, without limitation:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our history of recurring losses and negative cash flows from operating activities, significant future commitments and the uncertainty
regarding the adequacy of our liquidity to pursue our complete business objectives;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability to complete clinical trials as anticipated and obtain and maintain regulatory approvals for our products;&nbsp;&nbsp;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability to adequately protect our intellectual property;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our dependence on a single manufacturing facility and our ability to comply with stringent manufacturing quality standards
and to increase production as necessary;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the risk that the data collected from our current and planned clinical trials may not be sufficient to demonstrate that the
MGuard technology is an attractive alternative to other procedures and products;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>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;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>entry of new competitors and products and potential technological obsolescence of our products;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>loss of a key customer or supplier;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>technical problems with our research and products and potential product liability claims;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>adverse economic conditions;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>adverse federal, state and local government regulation, in the U.S., Europe or Israel;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>price increases for supplies and components;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>inability to carry out research, development and commercialization plans; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>loss or retirement of key executives and research scientists.</TD></TR></TABLE>



</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<DIV STYLE="padding: 0.5in; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Corporate and Other Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We were organized in the State of Delaware
on February 29, 2008 as Saguaro Resources, Inc. to engage in the acquisition, exploration and development of natural resource properties.
On March 28, 2011, we changed our name from &ldquo;Saguaro Resources, Inc.&rdquo; to &ldquo;InspireMD, Inc.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our principal executive offices are located
at 4 Menorat Hamaor St., Tel Aviv, Israel 67448.&nbsp;&nbsp;Our telephone number is 972-3-691-7691.&nbsp;&nbsp;Our website address
is www.inspire-md.com.&nbsp;&nbsp;Information accessed through our website is not incorporated into this prospectus and is not
a part of this prospectus.</P>

</DIV>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>
<DIV STYLE="padding: 0.5in; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The Offering<FONT STYLE="font-family: Times New Roman, Times, Serif"><SUP></SUP></FONT></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">Common stock offered by the Company:</TD>
    <TD STYLE="width: 50%; padding-left: 9pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 9pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Common stock to be outstanding after this offering:</TD>
    <TD STYLE="padding-left: 9pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 9pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Use of proceeds:</TD>
    <TD STYLE="padding-left: 9pt">We intend to use the net proceeds of this offering to support the worldwide commercialization of MGuard in acute myocardial infarction and pursue FDA approval in the U.S., to redeem our convertible debentures and for general corporate purposes.&nbsp; See &ldquo;Use of Proceeds&rdquo; beginning on page 30 of this prospectus.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 9pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Risk factors:</TD>
    <TD STYLE="padding-left: 9pt">You should carefully consider the information set forth in this prospectus and, in particular,
    the specific factors set forth in the &ldquo;Risk Factors&rdquo; section beginning on page 11 of this prospectus before
    deciding whether or not to invest in shares of our common stock.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 9pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>OTC Bulletin Board symbol:</TD>
    <TD STYLE="padding-left: 9pt">NSPR</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 9pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Proposed symbol and listing:</TD>
    <TD STYLE="padding-left: 9pt">We have applied for to list our shares of common stock on the Nasdaq Capital Market under the symbol &ldquo;NSPR.&rdquo;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 9pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">________________&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The number of shares of common stock outstanding
after this offering is based on 68,511,911 shares outstanding on September 21, 2012 and excludes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>7,814,849 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.80
per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>2,550,000 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.50
per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>784,510 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.23
per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>6,934,623<B>
                                                                                                              </B>shares of common
                                                                                                              stock issuable upon
                                                                                                              the conversion of
                                                                                                              our senior secured
                                                                                                              convertible debentures
                                                                                                              due April 5, 2014.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>13,637,133<B>
                                                                                                              </B>shares of common
                                                                                                              stock issuable upon
                                                                                                              the exercise of
                                                                                                              currently outstanding
                                                                                                              options with exercise
                                                                                                              prices ranging from
                                                                                                              $0.001 to $2.60
                                                                                                              and having a weighted
                                                                                                              average exercise
                                                                                                              price of <B>$</B>1.05
                                                                                                              per share; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>5,221,450 shares of common stock available for future issuance under our 2011 UMBRELLA Option Plan.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Unless otherwise stated, all information
contained in this prospectus:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>assumes no exercise of the overallotment
option granted to the underwriters; and</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD><FONT STYLE="font-family: Symbol">&middot;</FONT>&nbsp;</TD><TD>is not adjusted for the anticipated one-for
                                                                               -&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; reverse stock split
                                                                               that is expected to occur the day immediately following
                                                                               the effectiveness of the registration statement
                                                                               of which this prospectus is a part.&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P></DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<DIV STYLE="padding: 0.25in 0.25in 0.25in 0.5in; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Summary Consolidated Financial Data</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following summary consolidated financial
data should be read in conjunction with the consolidated financial statements and the related notes thereto and the section entitled
&ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations&rdquo; included elsewhere in
this prospectus. The balance sheet data at June 30, 2012 and the statement of operations data for the six months ended June 30,
2012 and each of the three years ended December 31, 2011, 2010 and 2009 have been derived from the audited consolidated financial
statements for such years, included in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The discussion below does not give effect
to the anticipated one-for-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Summary&nbsp;of&nbsp;Operations&nbsp;Data</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; padding-left: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">Six
    Months Ended</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif">Year
    Ended December 31,</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; padding-left: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif">June
    30, 2012</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif">2011</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif">2010</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif">2009</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-left: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">(amounts
    in thousands, except per share and percentage data)</FONT></TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 52%; font-size: 10pt; font-weight: normal; padding-left: 0; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal; font-style: normal">Revenues</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="width: 9%; font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">2,071</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal; width: 9%"><FONT STYLE="font-family: Times New Roman, Times, Serif">6,004</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal; width: 9%"><FONT STYLE="font-family: Times New Roman, Times, Serif">4,949</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal; width: 9%"><FONT STYLE="font-family: Times New Roman, Times, Serif">3,411</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; padding-left: 0; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal; font-style: normal">Cost
    of revenues</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">1,377</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">3,011</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">2,696</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">2,291</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding-left: 0; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal; font-style: normal">Gross
    profit (loss)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">694</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">2,993</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">2,253</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">1,120</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding-left: 0; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal; font-style: normal">Gross
    margin</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">34</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">%</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">50</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">%</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">46</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">%</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">33</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding-left: 0; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal; font-style: normal">Total
    operating expenses</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">7,852</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">16,722</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">5,472</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">3,837</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding-left: 0; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal; font-style: normal">Net
    loss</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">(7,081</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">(14,665</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">(3,420</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">(2,724</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding-left: 0; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">Net
    loss per share &ndash; basic and diluted</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">(0.10</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">(0.24</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">(0.07</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">(0.06</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding-left: 0; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">Weighted
    average number of ordinary shares used in computing net loss per share &ndash; basic and diluted</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">68,176,882</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">61,439,700</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">49,234,528</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: right; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">47,658,853</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding-left: 0; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal; font-style: normal">As
    adjusted(1) net loss per share &ndash; basic and diluted (Unaudited)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding-left: 0; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal; font-style: normal">As
    adjusted(1) weighted average number of ordinary shares used computing net loss per share &ndash; basic and diluted</FONT>  (Unaudited)</TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; font-style: normal"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">(1)</TD><TD STYLE="text-align: justify">The unaudited as adjusted amounts give effect to our
receipt of the net proceeds from the sale by us in this offering, after deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us and the application of the net proceeds we will receive from this offering to
redeem the convertible debentures, as described in &ldquo;Use of Proceeds.&rdquo;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Balance Sheet Data</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June 30, 2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Actual</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">As adjusted(1)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: left; padding-left: 0.5pt">Cash and cash equivalents</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 9%; font-size: 10pt; text-align: right">10,284</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"></TD><TD STYLE="width: 9%; font-size: 10pt; text-align: right"></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Restricted cash</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">37</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.5pt">Working capital(2)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">10,759</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Total assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">16,014</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.5pt">Long-term liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,078</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Equity (capital deficiency)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">5,386</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">(1)</TD><TD STYLE="text-align: justify">The unaudited as adjusted amounts give effect to our
receipt of the net proceeds from the sale by us in this offering, after deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us and the application of the net proceeds we will receive from this offering to
redeem the convertible debentures, as described in &ldquo;Use of Proceeds.&rdquo;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<DIV STYLE="padding: 0.5in; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Working capital is equal to the difference between total current assets and total current liabilities.</TD></TR></TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Investing in our common stock involves
a high degree of risk. You should carefully consider the risks described below and all of the other information set forth in this
prospectus before deciding to invest in shares of our common stock. If any of the events or developments described below occur,
our business, financial condition or results of operations could be negatively affected. In that case, the trading price of our
common stock could decline, and you could lose all or part of your investment in our common stock.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>The report of our independent registered public
accounting firm contains an explanatory paragraph as to our ability to continue as a going concern, which could prevent us from
obtaining new financing on reasonable terms or at all.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because we have had recurring losses and
negative cash flows from operating activities and have significant future commitments, substantial doubt exists regarding our ability
to remain in operating at the same level we are currently performing. &nbsp;Further, the report of Kesselman &amp; Kesselman C.P.A.s
(Isr.), our independent registered public accounting firm, with respect to our financial statements at June 30, 2012, December
31, 2011 and 2010, and for the six month period ended June 30, 2012 contains an explanatory paragraph as to our potential inability
to continue as a going concern. Additionally, this may adversely affect our ability to obtain new financing on reasonable terms
or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>We have a history of net losses and may experience
future losses.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To date, we have experienced net losses.
A substantial portion of the expenses associated with our manufacturing facilities are fixed in nature (i.e., depreciation) and
will reduce our operating margin until such time, if ever, as we are able to increase utilization of our capacity through increased
sales of our products. The clinical trials necessary to support our anticipated growth will be expensive and lengthy. In addition,
our strategic plan will require a significant investment in clinical trials, product development and sales and marketing programs,
which may not result in the accelerated revenue growth that we anticipate. Furthermore, we have significant future commitments
with respect to our convertible debentures. Since we expect to continue incurring negative cash flows from operations and in light
of the potential cash expenditures that may be required to satisfy our convertible debentures, there can be no assurance that we
will ever generate sufficient revenues to become profitable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>We expect to derive our revenue from sales
of our MGuard stent products and other products we may develop.&nbsp;&nbsp;If we fail to generate revenue from this source, our
results of operations and the value of our business would be materially and adversely affected.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We expect our revenue to be generated from
sales of our MGuard stent products and other products we may develop.&nbsp;&nbsp;Future sales of these products, if any, will be
subject to the receipt of regulatory approvals and commercial and market uncertainties that may be outside our control.&nbsp;&nbsp;If
we fail to generate such revenues, our results of operations and the value of our business and securities would be materially and
adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.&nbsp;&nbsp;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.&nbsp;&nbsp;Accordingly, rights under any of our pending patents
may not provide us with commercially meaningful protection for our products or afford a commercial advantage against our competitors
or their competitive products or processes.&nbsp;&nbsp;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 in the future may not be valid or enforceable.&nbsp;&nbsp;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.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.&nbsp;&nbsp;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 pending patent applications.&nbsp;&nbsp;For
example, patent applications in the U.S. are maintained in confidence for up to 18 months after their filing.&nbsp;&nbsp;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.&nbsp;&nbsp;Patent applications filed in countries outside the U.S. are not typically published until at least
18 months from their first filing date.&nbsp;&nbsp;Similarly, publication of discoveries in the scientific or patent literature
often lags behind actual discoveries.&nbsp;&nbsp;Therefore, we cannot be certain that we were the first to invent, or the first
to file patent applications relating to, our stent technologies.&nbsp;&nbsp;In the event that a third party has also filed a U.S.
patent application covering our stents or a similar invention, we may have to participate in an adversarial proceeding, known as
an interference, declared by the U.S. Patent and Trademark Office to determine priority of invention in the U.S.&nbsp;&nbsp;It
is possible that we may be unsuccessful in the interference, resulting in a loss of some portion or all of our position in the
U.S.&nbsp;&nbsp;The laws of some foreign jurisdictions do not protect intellectual property rights to the same degree as in the
U.S., and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions.&nbsp;&nbsp;If
we encounter such difficulties or are otherwise precluded from effectively protecting our intellectual property rights in foreign
jurisdictions, our business prospects could be substantially harmed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may initiate litigation to enforce our
patent rights on any patents issued on pending patent applications, which may prompt adversaries in such litigation to challenge
the validity, scope or enforceability of our patents.&nbsp;&nbsp;If a court decides that such patents are not valid, not enforceable
or of a limited scope, we may not have the right to stop others from using our inventions.&nbsp;&nbsp;Also, even if our patents
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 provide us with freedom to operate unimpeded by
the patent rights of others.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also rely on trade secret protection
to protect our interests in proprietary know-how and for processes for which patents are difficult to obtain or enforce.&nbsp;&nbsp;We
may not be able to protect our trade secrets adequately.&nbsp;&nbsp;In addition, we rely on non-disclosure and confidentiality
agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary technology.&nbsp;&nbsp;These
agreements may be breached and we may not have adequate remedies for any breach.&nbsp;&nbsp;Moreover, others may independently
develop equivalent proprietary information, and third parties may otherwise gain access to our trade secrets and proprietary knowledge.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>We have limited manufacturing capabilities
and manufacturing personnel, and if our manufacturing facilities are unable to provide an adequate supply of products, our growth
could be limited and our business could be harmed.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently manufacture our MGuard stent
at our facilities in Tel Aviv, Israel, and we have contracted with QualiMed Innovative Medizinprodukte GmbH, a German manufacturer,
to assist in production.&nbsp;&nbsp;If there were a disruption to our existing manufacturing facility, we would have no other means
of manufacturing our MGuard stent until we were able to restore the manufacturing capability at our facility or develop alternative
manufacturing facilities.&nbsp;&nbsp;If we were unable to produce sufficient quantities of our MGuard stent 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently have limited resources, facilities
and experience to commercially manufacture our product candidates.&nbsp;&nbsp;In order to produce our MGuard stent in the quantities
that we anticipate will be required to meet anticipated market demand, we will need to increase, or &ldquo;scale up,&rdquo; the
production process by a significant factor over the current level of production.&nbsp;&nbsp;There are technical challenges to scaling-up
manufacturing capacity, and developing commercial-scale manufacturing facilities will require the investment of substantial funds
and hiring and retaining additional management and technical personnel who have the necessary manufacturing experience.&nbsp;&nbsp;We
may not successfully complete any required scale-up in a timely manner or at all.&nbsp;&nbsp;If unable to do so, we may not be
able to produce our MGuard stent in sufficient quantities to meet the requirements for the launch of the product or to meet future
demand, if at all.&nbsp;&nbsp;If we develop and obtain regulatory approval for our MGuard stent and are unable to manufacture a
sufficient supply of our MGuard stent, our revenues, business and financial prospects would be adversely affected and we may suffer
reputational harm, which could further adversely affect our revenues, business and financial prospects.&nbsp;&nbsp;In addition,
if the scaled-up production process is not efficient or produces stents that do not meet quality and other standards, our future
gross margins may decline.&nbsp;&nbsp;Also, our current and planned personnel, systems, procedures and controls may not be adequate
to support our anticipated growth.&nbsp;&nbsp;If we are unable to manage our growth effectively, our business could be harmed.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Additionally, any damage to or destruction
of our Tel Aviv facilities or its equipment, prolonged power outage or contamination at our facility would significantly impair
our ability to produce MGuard stents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Finally, the production of our MGuard stent
must occur in a highly controlled, clean environment to minimize particles and other yield and quality-limiting contaminants.&nbsp;&nbsp;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.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>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.&nbsp;&nbsp;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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Clinical trials necessary to support a pre-market
approval application to the U.S. Food and Drug Administration for our MGuard 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.&nbsp;&nbsp;Clinical trials supporting a pre-market approval applications for the
Cypher stent developed by Johnson &amp; Johnson and the Taxus Express2 stent developed by Boston Scientific Corporation, which
were approved by the U.S. Food and Drug Administration and are currently marketed, involved patient populations of approximately
1,000 and 1,300, respectively, and a 12-month follow up period.&nbsp;&nbsp;In some trials, a greater number of patients and a longer
follow up period may be required. The U.S. Food and Drug Administration may require us to submit data on a greater number of patients
or for a longer follow-up period than those for pre-market approval applications for the Cypher stent and the Taxus Express2 stent.&nbsp;&nbsp;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.&nbsp;&nbsp;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.&nbsp;&nbsp;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.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.&nbsp;&nbsp;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.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Physicians may not widely adopt the MGuard
stent unless they determine, based on experience, long-term clinical data and published peer reviewed journal articles, that the
use of the MGuard stent provides a safe and effective alternative to other existing treatments for coronary artery disease.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that physicians will not widely
adopt the MGuard stent unless they determine, based on experience, long-term clinical data and published peer reviewed journal
articles, that the use of our MGuard stent provides a safe and effective alternative to other existing treatments for coronary
artery disease, including coronary artery bypass grafting balloon angioplasty, bare-metal stents and other drug-eluting stents,
provided by Johnson &amp; Johnson, Boston Scientific Corporation, Medtronic Inc., Abbott Laboratories and others.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We cannot provide any assurance that the
data collected from our current and planned clinical trials will be sufficient to demonstrate that the MGuard stents are an attractive
alternative to other procedures.&nbsp;&nbsp;If we fail to demonstrate safety and efficacy that is at least comparable to other
drug-eluting stents or bare-metal stents that have received regulatory approval and that are available on the market, our ability
to successfully market the MGuard stent will be significantly limited.&nbsp;&nbsp;Even if the data collected from clinical studies
or clinical experience indicate positive results, each physician&rsquo;s actual experience with our MGuard stent will vary.&nbsp;&nbsp;Clinical
trials conducted with the MGuard Coronary stent have involved procedures performed by physicians who are technically proficient
and are high-volume stent users.&nbsp;&nbsp;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.&nbsp;&nbsp;We also believe that published per-reviewed journal articles and recommendations and support by influential
physicians regarding our MGuard Coronary stent 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, currently, physicians consider
drug-eluting stents to be the industry standard for treatment of coronary artery disease.&nbsp;&nbsp;While we believe that the
MGuard Coronary stent is a safe and effective alternative, it is not a drug-eluting stent, which may further hinder its support
and adoption by physicians.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Our products are based on a new technology,
and 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.&nbsp;&nbsp;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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because our products are new and long-term
success measures have not been completely validated, regulatory agencies, including the U.S. Food and Drug Administration, may
take a significant amount of time in evaluating product approval applications.&nbsp;&nbsp;For example, there are currently several
methods of measuring restenosis and we do not know which of these metrics, or combination of these metrics, will be considered
appropriate by the U.S. Food and Drug Administration for evaluating the clinical efficacy of stents.&nbsp;&nbsp;Treatments may
exhibit a favorable measure using one of these metrics and an unfavorable measure using another metric.&nbsp;&nbsp;Any change in
the accepted metrics may result in reconfiguration of, and delays in, our clinical trials.&nbsp;&nbsp;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&nbsp;9 employees.&nbsp;&nbsp;As a result, we may experience delays
in connection with obtaining regulatory approvals for our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, the products we and any potential
licensees license, develop, manufacture and market are subject to complex regulatory requirements, particularly in the U.S., Europe
and Asia, which can be costly and time-consuming.&nbsp;&nbsp;There can be no assurance that such approvals will be granted on a
timely basis, if at all.&nbsp;&nbsp;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.&nbsp;&nbsp;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.&nbsp;&nbsp;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.&nbsp;&nbsp;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.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Any product for which we obtain marketing
approval in the U.S., along with the manufacturing processes, post-approval clinical data and promotional activities for such product,
will be subject to continual review and periodic inspections by the U.S. Food and Drug Administration and other regulatory bodies.&nbsp;&nbsp;In
particular, we and our suppliers will be required to comply with the U.S. Food and Drug Administration&rsquo;s Quality System Regulation
for the manufacture of our MGuard stent, which covers the methods and documentation of the design, testing, production, control,
quality assurance, labeling, packaging, storage and shipping of any product for which we obtain marketing approval in the U.S.&nbsp;&nbsp;The
U.S. Food and Drug Administration enforces the Quality System Regulation through unannounced inspections.&nbsp;&nbsp;We and our
third-party manufacturers and suppliers have not yet been inspected by the U.S. Food and Drug Administration and will have to successfully
complete such inspections before we receive U.S. regulatory approval for our products.&nbsp;&nbsp;Failure by us or one of our suppliers
to comply with statutes and regulations administered by the U.S. Food and Drug Administration and other regulatory bodies, or failure
to take adequate response to any observations, could result in, among other things, any of the following enforcement actions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>warning letters or untitled letters;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>fines and civil penalties;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>unanticipated expenditures;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>delays in approving, or refusal to approve, our products;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>withdrawal or suspension of approval by the U.S. Food and Drug Administration or other regulatory bodies;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>product recall or seizure;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>orders for physician notification or device repair, replacement or refund;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>interruption of production;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>operating restrictions;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>injunctions; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>criminal prosecution.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If any of these actions were to occur, it
could harm our reputation and could cause our product sales and profitability to suffer.&nbsp;&nbsp;Furthermore, key component
suppliers may not currently be or may not continue to be in compliance with applicable regulatory requirements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Even if regulatory approval of a product
is granted in the U.S., the approval may be subject to limitations on the indicated uses for which the product may be marketed.&nbsp;&nbsp;If
the U.S. Food and Drug Administration determines that our promotional materials, training or other activities constitutes promotion
of an unapproved use, it could request that we cease or modify our training or promotional materials or subject us to regulatory
enforcement actions.&nbsp;&nbsp;It is also possible that other federal, state or foreign enforcement authorities might take action
if they consider our training or other promotional materials to constitute promotion of an unapproved use, which could result in
significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Moreover, any modification to a device that
has received U.S. Food and Drug Administration approval that could significantly affect its safety or effectiveness, or that would
constitute a major change in its intended use, design or manufacture, requires a new approval from the U.S. Food and Drug Administration.&nbsp;&nbsp;If
the U.S. Food and Drug Administration disagrees with any determination by us that new approval is not required, we may be required
to cease marketing or to recall the modified product until approval is obtained.&nbsp;&nbsp;In addition, we could also be subject
to significant regulatory fines or penalties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Additionally, we may be required to conduct
costly post-market testing and surveillance to monitor the safety or efficacy of our products, and we will be required to report
adverse events and malfunctions related to our products.&nbsp;&nbsp;Later discovery of previously unknown problems with our products,
including unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure
to comply with regulatory requirements, such as Quality System Regulation, may result in restrictions on such products or manufacturing
processes, withdrawal of the products from the market, voluntary or mandatory recalls, fines, suspension of regulatory approvals,
product seizures, injunctions or the imposition of civil or criminal penalties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Further, healthcare laws and regulations
may change significantly in the future.&nbsp;&nbsp;Any new healthcare laws or regulations may adversely affect our business.&nbsp;&nbsp;A
review of our business by courts or regulatory authorities may result in a determination that could adversely affect our operations.&nbsp;&nbsp;In
addition, the healthcare regulatory environment may change in a way that restricts our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Failure to obtain regulatory approval in foreign
jurisdictions will prevent us from marketing our products in such jurisdictions.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to market our products in international
markets.&nbsp;&nbsp;In order to market our products in other foreign jurisdictions, we must obtain separate regulatory approvals
from those obtained in the U.S. and Europe.&nbsp;&nbsp;The approval procedure varies among countries and can involve additional
testing, and the time required to obtain approval may differ from that required to obtain CE Mark or U.S. Food and Drug Administration
approval.&nbsp;&nbsp;Foreign regulatory approval processes may include all of the risks associated with obtaining CE Mark or U.S.
Food and Drug Administration approval in addition to other risks.&nbsp;&nbsp;We may not obtain foreign regulatory approvals on
a timely basis, if at all.&nbsp;&nbsp;CE Mark does not ensure approval by regulatory authorities in other countries.&nbsp;&nbsp;We
may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in certain
markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>We operate in an intensely competitive and
rapidly changing business environment, and there is a substantial risk our products could become obsolete or uncompetitive.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The medical device market is highly competitive.&nbsp;&nbsp;We
compete with many medical service companies in the U.S. and internationally in connection with our current product and products
under development.&nbsp;&nbsp;We face competition from numerous pharmaceutical and biotechnology companies in the therapeutics
area, as well as competition from academic institutions, government agencies and research institutions.&nbsp;&nbsp;When we commercialize
our products, we expect to face intense competition from Cordis Corporation, a subsidiary of Johnson &amp; Johnson, Boston Scientific
Corporation, Guidant, Medtronic, Inc., Abbott Vascular Devices, Terumo and others.&nbsp;&nbsp;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.&nbsp;&nbsp;There can be no assurance that we will have sufficient resources to successfully commercialize
our products, if and when they are approved for sale.&nbsp;&nbsp;The worldwide market for stent products is characterized by intensive
development efforts and rapidly advancing technology.&nbsp;&nbsp;Our future success will depend largely upon our ability to anticipate
and keep pace with those developments and advances.&nbsp;&nbsp;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.&nbsp;&nbsp;If
our technologies or products become obsolete or uncompetitive, our related product sales and licensing revenue would decrease.&nbsp;&nbsp;This
would have a material adverse effect on our business, financial condition and results of operations.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>We may become subject to claims by much larger
and better capitalized competitors seeking to invalidate our right to our intellectual property.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 MGuard stent based on
one or more of these patents.&nbsp;&nbsp;It is also possible that a lawsuit asserting patent infringement and related claims may
have already been filed against us of which we are not aware.&nbsp;&nbsp;A number of these patents are owned by very large and
well-capitalized companies that are active participants in the stent market.&nbsp;&nbsp;As the number of competitors in the stent
market grows, the possibility of patent infringement by us, or a patent infringement claim against us, increases.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">These companies have maintained their position
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.&nbsp;&nbsp;All of the major companies in the stent
and related markets, including Boston Scientific Corporation, Johnson &amp; Johnson and Medtronic, Inc., have been repeatedly involved
in patent litigation relating to stents since at least 1997.&nbsp;&nbsp;The stent 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.&nbsp;&nbsp;We may pose a competitive threat to many of the companies in the stent and related markets.&nbsp;&nbsp;Accordingly,
many of these companies will have a strong incentive to take steps, through patent litigation or otherwise, to prevent us from
commercializing our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>If we fail to maintain or establish satisfactory
agreements with suppliers, we may not be able to obtain materials that are necessary to develop our products.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We depend on outside suppliers for certain
raw materials.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Some of the components of our products are
currently provided by only one vendor, or a single-source supplier.&nbsp;&nbsp;We depend on QualiMed Innovative Medizinprodukte
GmbH, which manufactures the body of the stent, 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 U.S. Food and Drug Administration or foreign regulatory authorities if it becomes
necessary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 MGuard stent for an extended
period of time, which would delay completion of our clinical trials or commercialization of our products.&nbsp;&nbsp;In addition,
we will be required to obtain prior regulatory approval from the U.S. Food and Drug Administration or foreign regulatory authorities
to use different suppliers or components that may not be as safe or as effective.&nbsp;&nbsp;As a result, regulatory approval of
our products may not be received on a timely basis or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>We may be exposed to product liability claims
and insurance may not be sufficient to cover these claims.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may be exposed to product liability claims
based on the use of any of our products, or products incorporating our licensed technology, in clinical trials.&nbsp;&nbsp;We may
also be exposed to product liability claims based on the sale of any such products following the receipt of regulatory approval.&nbsp;&nbsp;Product
liability claims could be asserted directly by consumers, health-care providers or others.&nbsp;&nbsp;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.&nbsp;&nbsp;We also have liability insurance for an ongoing clinical trial in Europe.&nbsp;&nbsp;Insurance
coverage is becoming increasingly expensive and we may not be able to maintain current coverages, or expand our insurance coverage
to include future clinical trials or the sale of products incorporating our licensed technology if marketing approval is obtained
for such products, at a reasonable cost or in sufficient amounts to protect against losses due to product liability or at all.&nbsp;&nbsp;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.&nbsp;&nbsp;We may incur
significant expense investigating and defending these claims, even if they do not result in liability.&nbsp;&nbsp;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.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>We may implement a product recall or voluntary
market withdrawal due to product defects or product enhancements and modifications, which would significantly increase our costs.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The manufacturing and marketing of our MGuard
stent products involves an inherent risk that our products may prove to be defective. In that event, we may voluntarily implement
a recall or market withdrawal or may be required to do so by a regulatory authority. A recall of one of our products, or a similar
product manufactured by another manufacturer, could impair sales of the products we market as a result of confusion concerning
the scope of the recall or as a result of the damage to our reputation for quality and safety.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>The successful management of operations depends
on our ability to attract and retain talented personnel.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We depend on the expertise of our senior
management and research personnel, which would be difficult to replace.&nbsp;&nbsp;The loss of the services of any of our senior
management could compromise our ability to achieve our objectives.&nbsp;&nbsp;Furthermore, recruiting and retaining qualified personnel
will be crucial to future success.&nbsp;&nbsp;There can be no assurance that we will be able to attract and retain necessary personnel
on acceptable terms given the 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.&nbsp;&nbsp;If we are unable to attract, retain and motivate our key personnel, our operations may be jeopardized and
our results of operations may be materially and adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We operate globally and develop and manufacture
products in our research and manufacturing facilities in multiple countries.&nbsp;&nbsp;Consequently, we face complex legal and
regulatory requirements in multiple jurisdictions, which may expose us to certain financial and other risks.&nbsp;&nbsp;International
sales and operations are subject to a variety of risks, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>foreign currency exchange rate fluctuations;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>greater difficulty in staffing and managing foreign operations;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>greater risk of uncollectible accounts;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>longer collection cycles;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>logistical and communications challenges;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>potential adverse changes in laws and regulatory practices, including export license requirements, trade barriers, tariffs
and tax laws;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in labor conditions;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>burdens and costs of compliance with a variety of foreign laws;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>political and economic instability;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>increases in duties and taxation;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>foreign tax laws and potential increased costs associated with overlapping tax structures;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>greater difficulty in protecting intellectual property; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>general economic and political conditions in these foreign markets.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">International markets are also affected
by economic pressure to contain reimbursement levels and healthcare costs.&nbsp;&nbsp;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.&nbsp;&nbsp;We expect these risks will increase as we pursue our strategy to expand operations into new geographic markets.&nbsp;&nbsp;We
may not succeed in developing and implementing effective policies and strategies in each location where we conduct business.&nbsp;&nbsp;Any
failure to do so may harm our business, results of operations and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>If we fail to obtain an adequate level of reimbursement
for our products by third party payors, there may be no commercially viable markets for our product candidates or the markets may
be much smaller than expected.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The availability and levels of reimbursement
by governmental and other third party payors affect the market for our product candidates.&nbsp;&nbsp;The efficacy, safety, performance
and cost-effectiveness of our product candidates and of any competing products will determine the availability and level of reimbursement.&nbsp;&nbsp;Reimbursement
and healthcare payment systems in international markets vary significantly by country, and include both government sponsored healthcare
and private insurance.&nbsp;&nbsp;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.&nbsp;&nbsp;We may not obtain international reimbursement or pricing approvals in a timely manner, if at all.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 health care 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.&nbsp;&nbsp;Future
legislation, regulation or reimbursement policies of third party payors may adversely affect the demand for our products currently
under development and limit our ability to sell our product candidates on a profitable basis.&nbsp;&nbsp;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.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>In the U.S., our business could be significantly
and adversely affected by recent healthcare reform legislation and other administration and legislative proposals.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Patient Protection and Affordable Care
Act and Health Care and Educational Reconciliation Act in the U.S. were enacted into law in March 2010. Certain provisions of these
acts will not be effective for a number of years and there are many programs and requirements for which the details have not yet
been fully established or consequences not fully understood, and it is unclear what the full impacts will be from the legislation.&nbsp;&nbsp;The
legislation does levy a 2.3% excise tax on all U.S.&nbsp;medical device sales beginning in 2013. If we commence sales of our MGuard
Coronary stent in the U.S., this new tax may materially and adversely affect our business and results of operations.&nbsp;&nbsp;The
legislation also focuses on a number of Medicare provisions aimed at improving quality and decreasing costs.&nbsp;&nbsp;It is uncertain
at this point what negative unintended consequences these provisions will have on patient access to new technologies.&nbsp;&nbsp;The
Medicare provisions include 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).&nbsp;&nbsp;Additionally, the provisions include
a reduction in the annual rate of inflation for hospitals starting in 2011 and the establishment of an independent payment advisory
board to recommend ways of reducing the rate of growth in Medicare spending.&nbsp;&nbsp;We cannot predict what healthcare programs
and regulations will be ultimately implemented at the federal or state level in the U.S., or the effect of any future legislation
or regulation.&nbsp;&nbsp;However, any changes that lower reimbursements for our products or reduce medical procedure volumes could
adversely affect our business plan to introduce our products in the U.S.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Our strategic business plan may not produce
the intended growth in revenue and operating income.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our strategies include making significant
investments in sales and marketing programs to achieve revenue growth and margin improvement targets.&nbsp;&nbsp;If we do not achieve
the expected benefits from these investments or otherwise fail to execute on our strategic initiatives, we may not achieve the
growth improvement we are targeting and our results of operations may be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, as part of our strategy for
growth, we may make acquisitions and enter into strategic alliances such as joint ventures and joint development agreements.&nbsp;&nbsp;However,
we may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully, and
our strategic alliances may not prove to be successful.&nbsp;&nbsp;In this regard, acquisitions involve numerous risks, including
difficulties in the integration of the operations, technologies, services and products of the acquired companies and the diversion
of management&rsquo;s attention from other business concerns.&nbsp;&nbsp;Although our management will endeavor to evaluate the
risks inherent in any particular transaction, there can be no assurance that we will properly ascertain all such risks.&nbsp;&nbsp;In
addition, acquisitions could result in the incurrence of substantial additional indebtedness and other expenses or in potentially
dilutive issuances of equity securities.&nbsp;&nbsp;There can be no assurance that difficulties encountered with acquisitions will
not have a material adverse effect on our business, financial condition and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>We may have violated Israeli securities law.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may have violated section 15 of the Israeli
Securities Law of 1968.&nbsp;&nbsp;Section 15 of the Israeli Securities Law of 1968 requires the filing of a prospectus with the
Israel Securities Authority and the delivery thereof to purchasers in connection with an offer or sale of securities to more than
35 parties during any 12 month period.&nbsp;&nbsp;We allegedly issued securities to more than 35 investors during certain 12-month
periods, ending in October 2008.&nbsp;&nbsp;Our wholly-owned subsidiary, InspireMD Ltd., a private company incorporated under the
laws of the State of Israel, applied for a no-action determination from the Israel Security Authority on February 14, 2011 in connection
with the foregoing.&nbsp;&nbsp;To date, the Israel Securities Authority has not responded to InspireMD Ltd.&rsquo;s application
for no-action determination and we are unable to predict when a response will be received.&nbsp;&nbsp;The maximum penalties for
violating section 15 of the Israeli Securities Law of 1968 are as follows: imprisonment of 5 years; a fine of up to approximately
$317,000 to be paid by management of the violating company; and a fine of up to approximately $1,590,000 to be paid by the violating
company, any of which penalties could result in a material adverse effect on our operations. We believe that it is not likely that
we will be subject to fines or other penalties on an individual or company level.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Following the completion of this offering,
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 stockholders&rsquo; ownership interests.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In order to fully realize all of our business
objectives, we will need to raise additional capital following the completion of this offering, which may not be available on
reasonable terms or at all.&nbsp;&nbsp; For instance, we will need to raise additional funds to accomplish the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>developing MGuard Carotid, MGuard Peripheral, MGuard Coronary with a drug eluting bio-absorbable mesh and any additional products;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>pursuing growth opportunities, including more rapid expansion;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>acquiring complementary businesses;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>making capital improvements to improve our infrastructure;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>hiring qualified management and key employees;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>developing new services, programming or products;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>responding to competitive pressures;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>complying with regulatory requirements such as licensing and registration; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>maintaining compliance with applicable laws.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35in; text-indent: -25.15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Any additional capital raised through the
sale of equity or equity backed securities may dilute stockholders&rsquo; ownership percentages and could also result in a decrease
in the market value of our equity securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Furthermore, any additional debt or equity
financing that we may need may not be available on terms favorable to us, or at all.&nbsp;&nbsp;If we are unable to obtain such
additional financing on a timely basis, we may have to curtail our development activities and growth plans and/or be forced to
sell assets, perhaps on unfavorable terms, which would have a material adverse effect on our business, financial condition and
results of operations, and ultimately could be forced to discontinue our operations and liquidate, in which event it is unlikely
that stockholders would receive any distribution on their shares.&nbsp;&nbsp;Further, we may not be able to continue operating
if we do not generate sufficient revenues from operations needed to stay in business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Operating in Israel</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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&rsquo;s
political and economic conditions. Any significant revaluation of the NIS may materially and adversely affect our cash flows, revenues
and financial condition.<B> </B>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.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">Our
principal executive offices and 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, 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. Recent political uprisings and social
unrest in various countries in the Middle East and north Africa are affecting the political stability of those countries.
This instability may lead to deterioration of the political relationships that exist between Israel and these countries, and
have raised new concerns</FONT> <FONT STYLE="font-size: 10pt">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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our operations could be disrupted as a result of the obligation
of certain of our personnel residing in Israel to perform military service.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Many of our executive officers and key 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 military rank), unless exempt, are obligated to perform up to an
average of 18 to 28 days of 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 officers or key
employees due to military service. Any such disruption could have a material adverse effect on our business, results of operations,
prospectus and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We may not be able to enforce covenants not-to-compete
under current Israeli law.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have non-competition agreements with
all of our employees, all of which are governed by Israeli law. These agreements generally prohibit our employees from competing
with us or working for our competitors for a period of five years 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&rsquo;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.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>It may be difficult for investors in the U.S.
to enforce any judgments obtained against us or any of our directors or officers.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All of our assets are located outside the
U.S. and we do not currently maintain a permanent place of business within the U.S. In addition, three of our directors and all
of our officers are nationals and/or residents of countries other than the U.S., and all or a substantial portion of such persons&rsquo;
assets are located outside the U.S. As a result, it may be difficult for investors to enforce within the U.S. any judgments obtained
against us or any of our non-U.S. directors or 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 United States. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Organization, Our Common Stock and This
Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><FONT STYLE="font-size: 10pt"><B><I>Purchasers in
this offering will experience immediate and substantial dilution in the book value of their investment.<BR STYLE="mso-special-character: line-break">
<BR STYLE="mso-special-character: line-break">
</I></B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The public offering price of our common
stock will be substantially higher than the net tangible book value per share of our common stock immediately after this offering.
Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%) in net tangible
book value per share from the price you paid, based on an assumed public offering price of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (which is not adjusted
for the anticipated one-for- &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part<B>)</B>, the midpoint of the range set forth on
the cover page of this prospectus.<B> </B>The exercise of outstanding warrants and options may result in further dilution of your
investment, but only if the public offering price is greater than the per share exercise price of such warrants and options. In
addition, if we raise funds by issuing additional shares or convertible securities in the future, the newly issued shares may
further dilute your ownership interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>We may apply the proceeds of this offering
to uses that ultimately do not improve our operating results or increase the value of your investment.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to use the net proceeds of this
offering to support the worldwide commercialization of MGuard in acute myocardial infarction and pursue FDA approval in the U.S.,
to redeem our convertible debentures and for general corporate purposes. Depending on several factors, including the availability
of alternate sources of capital and the possibility that the execution or timing of our business plans may change, management may
use these proceeds in a manner different than originally intended. These proceeds could be applied in ways that do not improve
our operating results or otherwise increase the value of your investment.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>We are subject to financial reporting and other
requirements that place significant demands on our resources.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, we became 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 and to obtain a report by our independent auditors addressing these assessments. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>There are inherent limitations in all control
systems, and misstatements due to error or fraud may occur and not be detected.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The ongoing internal control provisions
of Section 404 of the Sarbanes-Oxley Act of 2002 require us to identify of 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 U.S. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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, cause downgrades in our future debt ratings leading to higher
borrowing costs and affect how our stock trades. This could in turn negatively affect our ability to access public debt or equity
markets for capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;<B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Our stock price has been and may continue to
be volatile, which could result in substantial losses for investors.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The market price of our common stock has
been and is 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>technological innovations or new products and services by us or our competitors;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>additions or departures of key personnel;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>sales of our common stock, particularly under any registration statement for the purposes of selling any other securities,
including management shares;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>limited availability of freely-tradable &ldquo;unrestricted&rdquo; shares of our common stock to satisfy purchase orders and
demand;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability to execute our business plan;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>operating results that fall below expectations;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>loss of any strategic relationship;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>industry developments;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>economic and other external factors; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>period-to-period fluctuations in our financial results.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>There has been a limited market for our common
stock and we cannot ensure investors that an active market for our common stock will be sustained.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;There has been limited trading in
our common stock and there can be no assurance that an active trading market in our common stock will be maintained. Due to the
illiquidity, the market price may not accurately reflect our relative value.&nbsp;&nbsp;If our common stock is thinly traded, a
large block of shares traded can lead to a dramatic fluctuation in the share price and investors may not be able to liquidate their
investment in us at all or at a price that reflects the value of the business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, our common stock currently
trades on the OTC Bulletin Board, which generally lacks the liquidity, research coverage and institutional investor following of
a national securities exchange like the NYSE MKT, the New York Stock Exchange or the Nasdaq Capital Market. While we have applied
to list our common stock on the Nasdaq Capital Market, there can be no assurance that trading of our common stock on such market
will be sustained or desirable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Delaware law and our corporate charter and
bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.&nbsp;&nbsp;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.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Offers or availability for sale of a substantial
number of shares of our common stock may cause the price of our common stock to decline.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Sales of a significant number of shares
of our common stock in the public market could harm the market price of our common stock and make it more difficult for us to
raise funds through future offerings of common stock. As of September 21, 2012, there were 18,083,982<B> </B>shares of our common
stock issuable upon the conversion of our outstanding convertible debentures and the exercise of our outstanding warrants, all
of which are currently registered for resale. In addition, there are 68,390,169<B> </B>shares of our common stock currently saleable
under Rule 144. The availability of these shares of our common stock for resale in the public market has the potential to cause
the supply of our common stock to exceed investor demand, thereby decreasing the price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;In addition, the fact that our stockholders,
warrant holders and debenture holders can sell substantial amounts of our common stock in the public market, whether or not sales
have occurred or are occurring, could make it more difficult for us to raise additional financing through the sale of equity or
equity-related securities in the future at a time and price that we deem reasonable or appropriate.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>We do not expect to pay dividends in the future.
As a result, any return on investment may be limited to the value of our common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not anticipate paying cash dividends
on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on our earnings, financial
condition and other business and economic factors as our board of directors may consider relevant. If we do not pay dividends,
our common stock may be less valuable because a return on an investment in our common stock will only occur if our stock price
appreciates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to our Convertible Debentures</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Our obligations to the holders of our convertible
debentures are secured by all of our assets, so if we default on those obligations, the convertible debenture holders could foreclose
on our assets.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holders of our convertible debentures
have a security interest in all of our assets and those of our subsidiaries. As a result, if we default under our obligations to
the convertible debenture holders, the convertible debenture holders could foreclose on their security interests and liquidate
some or all of these assets, which would harm our business, financial condition and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Our convertible debentures and the associated
securities purchase agreement contain covenants that could limit our financing options and liquidity position, which would limit
our ability to grow our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The terms of our convertible debentures
could have negative consequences to us, such as:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we may be unable to obtain additional financing to fund working capital, operating losses, capital expenditures or acquisitions
on terms acceptable to us, or at all;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we may be unable to refinance our indebtedness on terms acceptable to us, or at all; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we may be more vulnerable to economic downturns and limit our ability to withstand competitive pressures.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Additionally, covenants in our convertible
debentures and the associated securities purchase agreement impose operating and financial restrictions on us. These restrictions
prohibit or limit our ability, and the ability of our subsidiaries, to, among other things:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>pay cash dividends to our stockholders;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>redeem, repurchase or otherwise acquire more than a de minimis number of shares of our common stock or common stock equivalents;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>incur additional indebtedness;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>permit liens on assets or conduct sales of assets;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>effectuate stock splits until April 5, 2013, except in connection with an initial listing on a national securities exchange
or to meet the continued listing requirements of such exchange;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>cease making public filings under the Securities Exchange Act of 1934, as amended;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>engage in transactions with affiliates; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>amend our charter documents in a way that would materially and adversely affect any holder of our convertible debentures.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">These restrictions may limit our ability
to obtain additional financing, withstand downturns in our business or take advantage of business opportunities. Moreover, additional
debt financing we may seek may contain terms that include more restrictive covenants, may require repayment on an accelerated schedule
or may impose other obligations that limit our ability to grow our business, acquire needed assets, or take other actions we might
otherwise consider appropriate or desirable.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><I>The
conversion of our convertible debentures and the exercise of the warrants issued to the purchasers of our convertible debentures
would have a dilutive impact on our existing stockholders.</I></B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of September 21, 2012, there were
6,934,623 shares of common stock underlying our convertible debentures and 3,655,775 shares of common stock underlying
warrants that were issued to purchasers and placement agents in connection with the issuance of the convertible debentures,
for a total of 10,587,466 shares of common stock (not adjusted for the anticipated one-for-
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse stock split of our common stock that is expected to occur the day immediately following
the effectiveness of the registration statement of which this prospectus is a part<B>)</B>. If and when issued, these
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock will equal approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of
our then outstanding shares of common stock (assuming that this offering is completed using the midpoint of the price range
set forth on the cover page of this prospectus), and would immediately dilute our current stockholders in terms of ownership
percentage and voting power. The terms of the convertible debentures and related warrants contain provisions that restrict
the amount of shares a holder can receive upon conversion or exercise to 4.99% of the then outstanding number of shares of
our common stock. However, these restrictions do not prevent the holders from selling some of their holdings and
then receiving additional shares. In this way, the holders could sell more than these limits while never holding more than
the limits. As a result, even with the restrictions, the holders of these convertible debentures and warrants could
ultimately convert and exercise, and then sell, the full amount issuable upon conversion and exercise of the convertible
debentures and warrants, respectively, in which case our current stockholders would suffer the full amount of dilution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><I>The
holders of our convertible debentures might be able to exert substantial influence over us in the event that Sol J.</I></B></FONT><B><I>
Barer, Ph.D. ceases to remain our chairman.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the terms of the securities purchase
agreement pursuant to which our convertible debentures were sold, if Sol J. Barer, Ph.D. ceases to serve as our chairman due to
Dr. Barer&rsquo;s resignation following a material adverse change to the condition of Dr. Barer or any member of Dr. Barer&rsquo;s
immediate family or the vote or written consent of independent stockholders, we would be required to appoint two persons to our
board of directors designated by Genesis Capital Advisors LLC, the investment advisor to our lead investors in the convertible
debenture offering, and support the election of such persons until the convertible debentures are either repaid or converted in
full. In addition, in the event that Dr. Barer ceases to serve as our chairman for any other reason while the convertible debentures
are outstanding, it would be an event of default under the convertible debentures, which could result in the acceleration of our
convertible debentures at the election of the holders of 60% of the outstanding principal of the convertible debentures, an amount
that Genesis Capital Advisors LLC presently controls. As a result, Genesis Capital Advisors LLC, or its assigns, have the potential
to exert substantial influence over our management and governance in the event Dr. Barer ceases to serve as our chairman and they
may exert such influence in a manner that is not consistent with the best interests of our common stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><I>We
may default upon our obligations under our convertible debentures.</I></B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holders of our convertible debentures
may require us to redeem our convertible debentures after October 5, 2013 or upon the occurrence of an event of a default under
our convertible debentures for 112% of the then outstanding principal amount, plus all accrued interest. In the event that we are
required to redeem some or all of our convertible debentures, we may not have sufficient resources to do so and we may have to
seek additional debt or equity financing to cover the costs of redeeming our convertible debentures. Any additional debt or equity
financing that we may need may not be available on terms favorable to us, or at all. Because our obligations under our convertible
debentures are secured by a security interest in substantially all of our assets and properties, if we cannot repay our obligations
under our convertible debentures, the holders of our convertible debentures may have claims against, and ultimately may foreclose
upon and take possession of, substantially all of our assets and properties. In such an event, the holders of our convertible debentures
would have control of us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Intended Reverse Stock Split</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>There can be no assurance that we will be able
to meet all of the requirements for listing our common stock on any national securities exchange or to meet the continued listing
standards of any national securities exchange after a reverse stock split.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each national securities exchange has numerous
initial listing requirements applicable to the listing of our common stock and its continued listing thereafter. We cannot assure
you that our common stock will be accepted for listing on the Nasdaq Capital Market or any other national securities exchange following
the reverse stock split or that we will maintain compliance with all of the requirements for our common stock to remain listed.
Moreover, there can be no assurance that the market price of our common stock after the reverse stock split will adjust to reflect
the decrease in common stock outstanding or that the market price following a reverse stock split will either exceed or remain
in excess of the current market price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>If the reverse stock split is implemented,
the resulting per-share price may not attract institutional investors, investment funds or brokers and may not satisfy the investing
guidelines of these investors or brokers, and consequently, the trading liquidity of common stock may not improve.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">While we believe that a higher share price
may help generate investor and broker interest in our common stock, the reverse stock split may not result in a share price that
will attract institutional investors or investment funds or satisfy the investing guidelines of institutional investors, investment
funds or brokers. A decline in the market price of our common stock after the reverse stock split may result in a greater percentage
decline than would occur in the absence of the reverse stock split. If the reverse stock split is implemented and the market price
of our common stock declines, the percentage decline may be greater than would occur in the absence of the reverse stock split.
The market price of our common stock is also based on our performance and other factors, which are unrelated to the number of shares
of common stock outstanding.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This prospectus contains &ldquo;forward-looking
statements,&rdquo; which include information relating to future events, future financial performance, strategies, expectations,
competitive environment and regulation. Words such as &ldquo;may,&rdquo; &ldquo;should,&rdquo; &ldquo;could,&rdquo; &ldquo;would,&rdquo;
&ldquo;predicts,&rdquo; &ldquo;potential,&rdquo; &ldquo;continue,&rdquo; &ldquo;expects,&rdquo; &ldquo;anticipates,&rdquo; &ldquo;future,&rdquo;
&ldquo;intends,&rdquo; &ldquo;plans,&rdquo; &ldquo;believes,&rdquo; &ldquo;estimates,&rdquo; 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&rsquo;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.&nbsp;&nbsp;Important factors
that could cause such differences include, but are not limited to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our history of recurring losses and negative cash flows from operating activities, significant future commitments and the uncertainty
regarding the adequacy of our liquidity to pursue our complete business objectives;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability to complete clinical trials as anticipated and obtain and maintain regulatory approvals for our products;&nbsp;&nbsp;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability to adequately protect our intellectual property;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our dependence on a single manufacturing facility and our ability to comply with stringent manufacturing quality standards
and to increase production as necessary;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the risk that the data collected from our current and planned clinical trials may not be sufficient to demonstrate that the
MGuard technology is an attractive alternative to other procedures and products;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>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;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>entry of new competitors and products and potential technological obsolescence of our products;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>loss of a key customer or supplier;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>technical problems with our research and products and potential product liability claims;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>adverse economic conditions;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>adverse federal, state and local government regulation, in the U.S., Europe or Israel;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>price increases for supplies and components;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>inability to carry out research, development and commercialization plans; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>loss or retirement of key executives and research scientists.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You should review carefully the section
entitled &ldquo;Risk Factors&rdquo; beginning on page 11 of this prospectus 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 prospectus 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.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>USE OF PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We estimate that the net proceeds from the
sale of the shares of common stock we are offering will be approximately $40 million. If the underwriters fully exercise the overallotment
option, the total net proceeds of the shares we sell will be approximately $46 million. &ldquo;Net proceeds&rdquo; is what we expect
to receive after paying the underwriting discount and other expenses of the offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to use the net proceeds as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>We expect to use approximately $24.1 million to support the worldwide commercialization of MGuard Coronary in acute myocardial
infarction. This is expected to include expanding our manufacturing capability, building our sales and marketing capacity, completing
clinical trials and obtaining necessary government approvals, including FDA approval in the U.S.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in"></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>We expect to use approximately $13.1 million to redeem our convertible debentures due April 5, 2014, which bear interest at
an annual rate of 8% and may be redeemed commencing October 5, 2012 for a price equal to 112% of the amount of principal to be
redeemed plus all accrued but unpaid interest and other amounts due thereunder. The proceeds from the convertible debentures were
used to support the commercialization of MGuard Coronary, including sales and marketing efforts, our MASTER Trial and FDA trial
and as working capital.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Any balance of the net proceeds will be used for general corporate purposes, including the development of future products.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Investors are cautioned, however, that
expenditures may vary substantially from these estimates. Investors will be relying on the judgment of our management, who will
have broad discretion regarding the application of the proceeds of this offering. The amounts and timing of our actual expenditures
will depend upon numerous factors, including the amount of cash generated by our operations, the amount of competition and other
operational factors. We may find it necessary or advisable to use portions of the proceeds from this offering for other purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">From time to time, we evaluate these and
other factors and we anticipate continuing to make such evaluations to determine if the existing allocation of resources, including
the proceeds of this offering, is being optimized. Circumstances that may give rise to a change in the use of proceeds include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a change in development plan or strategy;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the addition of new products or applications;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>technical delays;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>delays or difficulties with our clinical trials;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>negative results from our clinical trials;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>failure to achieve sales as anticipated; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the availability of other sources of cash including cash flow from operations and new bank debt financing arrangements, if
any.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Until we use the net proceeds of this offering,
we will invest the funds in short-term, investment grade, interest-bearing securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MARKET FOR OUR COMMON STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our common stock has been quoted on the
OTC Bulletin Board since April 11, 2011 under the symbol NSPR.&nbsp;&nbsp;Prior to that date, there was no active market for our
common stock.&nbsp;&nbsp;The following table sets forth the high and low bid prices for our common stock for the periods indicated,
as reported by the OTC Bulletin Board.&nbsp;&nbsp;The quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission, and may not represent actual transactions. The quotations are not adjusted for the anticipated one-for-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse
stock split of our common stock that is expected to occur the day immediately following the effectiveness of the registration statement
of which this prospectus is a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">Fiscal Year Ending June 30, 2013</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: left">High</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: left">Low</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 72%; font-size: 10pt; padding-left: 0.5pt">First Quarter (through September 21, 2012)</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2.50</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">0.96</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-left: 0.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-left: 0.5pt">Transition Period Ended June 30, 2012</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">High</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Low</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-left: 0.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">First Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2.15</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1.10</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Second Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1.85</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.60</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-left: 0.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-left: 0.5pt">Fiscal Year Ended December 31, 2011</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">High</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Low</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-left: 0.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Second Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2.89</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Third Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2.74</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1.80</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Fourth Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2.59</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1.60</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The last reported sales price of our common
stock on the OTC Bulletin Board on September 21, 2012, was $2.25 per share. As of September 21, 2012, there were approximately
183 holders of record of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to effectuate a one-for- &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse
stock split, in order to comply with the listing requirements of the Nasdaq Capital Market that is expected to occur the day immediately
following the effectiveness of the registration statement of which this prospectus is a part. Such reverse stock split would immediately
increase our stock price. In addition, such reverse stock split would reduce the number of shares of common stock outstanding and
may affect the liquidity of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIVIDEND POLICY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the past, we have not declared or paid
cash dividends on our common stock, and we do not intend to pay any cash dividends on our common stock. Rather, we intend to retain
future earnings, if any, to fund the operation and expansion of our business and for general corporate purposes.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CAPITALIZATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table summarizes
our cash and cash equivalents, certain other items from our historical consolidated balance sheet, and capitalization as of
June 30, 2012:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>on an actual basis; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>on an unaudited as adjusted basis, giving effect to our receipt of the net proceeds from the sale by us in this
                                                                                                              offering, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds we will receive from this offering to redeem the convertible debentures, as described
                                                                                                              in &ldquo;Use of Proceeds.&rdquo;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The table below does not give effect to
the anticipated one-for-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse stock split of our common stock that is expected to occur the day immediately following the effectiveness
of the registration statement of which this prospectus is a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">June 30, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 39%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 28%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">Actual</TD>
    <TD STYLE="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 28%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">As Adjusted</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Cash and cash equivalents</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">10,284</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Convertible loan</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">5,018</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-weight: normal; font-style: normal">Deferred
    debt issuance costs</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; border-bottom: Black 1pt solid">961</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Equity (capital deficiency):</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">Common stock, par value $0.0001 per share; 125,000,000 shares authorized; 68,160,161 and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued and outstanding at June 30, 2012, actual and as adjusted, respectively</TD>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">7</TD>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Additional paid-in capital</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">49,101</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Accumulated deficit</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(43,722)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 9.35pt">Total equity (capital deficiency)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">5,386</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DILUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The discussion below does not give effect
to the anticipated one-for-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our net tangible book value on June 30,
2012 was approximately $5.4 million, or $0.08 per share. &ldquo;Net tangible book value&rdquo; is total assets minus the sum
of liabilities and intangible assets. &ldquo;Net tangible book value per share&rdquo; is net tangible book value divided by the
total number of shares outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">After giving effect to adjustments relating
to the offering, our pro forma net tangible book value on June 30, 2012, would have been $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
or $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. The adjustments made to determine pro forma net tangible book value per share are
the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>An increase in total assets to reflect the net proceeds of the offering as described under &ldquo;Use of Proceeds.&rdquo;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The addition of the number of shares offered by this prospectus to the number of shares outstanding.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table illustrates the pro
forma increase in net tangible book value of $ per share and the dilution (the difference between the offering price per share
and net tangible book value per share) to new investors:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 81%; padding-left: 0.5pt">Public offering price per share</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right"></TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.5pt">Net tangible book value per share as of June 30, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.08</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.5pt">Increase in net tangible book value per share attributable to the offering</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$&nbsp;</TD><TD STYLE="text-align: right"> &nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.5pt">Pro forma net tangible book value per share as of June 30, 2012 after giving effect to the offering</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$&nbsp;</TD><TD STYLE="text-align: right">&nbsp;&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.5pt">Dilution per share to new investors in the offering</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$&nbsp;</TD><TD STYLE="text-align: right">&nbsp;&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table shows the difference
between existing stockholders and new investors with respect to the number of shares purchased from us, the total consideration
paid and the average price paid per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="4" STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares Purchased</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="5" STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total Consideration</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" ROWSPAN="2" STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; vertical-align: bottom; border-bottom: Black 1pt solid">Average Price Per Share</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 10%">Existing stockholders</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 1%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 9%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 1%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 1%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; text-align: right; width: 9%">%</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 1%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 9%">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 1%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 1%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 9%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 1%">%</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 1%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 9%">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">New investors</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; text-align: right">%</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">%</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Total</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; text-align: right">%</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">%</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The foregoing tables and calculations are
based on the number of shares of our common stock outstanding as of June 30, 2012 and exclude:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>7,814,849 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.80
per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>2,550,000 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.50
per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>1,014,510 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.23
per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>6,812,975 shares of common stock issuable upon the conversion of our senior secured convertible debentures due April 5, 2014.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>13,451,717 shares of common stock issuable upon the exercise of currently outstanding options with exercise prices ranging
from $0.001 to $2.60 and having a weighted average exercise price of $1.03 per share; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>5,331,867 shares of common stock available for future issuance under our 2011 UMBRELLA Option Plan.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELECTED FINANCIAL INFORMATION AND OTHER
DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following selected consolidated financial
data should be read in conjunction with the consolidated financial statements and the related notes thereto and the section entitled
&ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations&rdquo; included elsewhere in
this prospectus. The balance sheet data at June 30, 2012 and December 31, 2011 and 2010 and the statement of operations data for
the six months ended June 30, 2012 and each of the three years ended December 31, 2011, 2010 and 2009 have been derived from the
audited consolidated financial statements for such years, included in this prospectus. The balance sheet data at December 31, 2009
has been derived from audited consolidated financial statements not included in this prospectus. The balance sheet data at December
31, 2008 and 2007, and the statement of operations data for each of the two years ended December 31, 2008 and 2007, have been derived
from our books and records.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The discussion below does not give effect
to the anticipated one-for-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>Summary&nbsp;of&nbsp;Operations&nbsp;Data</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Six Months</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="18" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year Ended December 31,</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Ended June 30, 2012</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2008</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2007</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt"><B>&nbsp;</B></TD>
    <TD COLSPAN="22" STYLE="font-size: 10pt; text-align: center"><B>(in thousands, except per share and percentage data)</B></TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 16%; font-size: 10pt; padding-left: 0.5pt">Revenues</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2,071</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">6,004</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">4,949</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">3,411</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.5pt">Cost of revenues</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,377</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,696</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,291</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">404</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">328</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Gross profit (loss)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">694</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,993</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,253</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,120</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(404</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(328</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Gross margin</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">34</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">50</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">46</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">33</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Total operating expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,852</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">16,722</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">5,472</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,837</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">5,627</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">5,903</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Net loss</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(7,081</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(14,665</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(3,420</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(2,724</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(6,495</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(6,138</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Net loss per share - basic and diluted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.10</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.24</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.07</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.06</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.14</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.14</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Weighted average number of ordinary shares used in computing net loss per share &ndash; basic and diluted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">68,176,882</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">61,439,700</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">49,234,528</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">47,658,853</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">46,364,731</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">42,647,151</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Balance Sheet Data</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">June 30,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="18" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>December 31,&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>2012</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2008</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2007</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">(in thousands)</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 16%; font-size: 10pt; text-align: left; padding-left: 0.5pt">Cash and cash equivalents</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">10,284</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">5,094</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">636</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">376</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,571</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2,717</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Restricted cash</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">37</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">91</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">250</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">302</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">30</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">34</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.5pt">Working capital(1)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">10,759</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">6,389</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(53</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(1,289</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">589</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,625</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Total assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">16,014</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">10,465</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">4,355</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">4,509</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">4,448</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,923</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.5pt">Long-term liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,078</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">270</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,325</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">484</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">898</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">87</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Equity (capital deficiency)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">5,386</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">6,754</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(914</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(1,339</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">134</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,949</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) Working capital is equal to the difference between total
current assets and total current liabilities.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELECTED QUARTERLY FINANCIAL DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt">The following selected quarterly consolidated
unaudited financial data should be read in conjunction with the consolidated financial statements and the related notes thereto
and the section entitled &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations&rdquo;
included elsewhere in this prospectus. The following table sets forth selected financial information for the dates and periods
indicated.&nbsp;&nbsp;Our results for any of these periods are not necessarily indicative of the results to be expected for the
year ending June 30, 2013 or for any other future period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt">The discussion below does not give effect
to the anticipated one-for-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Six Months Ended June 30, 2012</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Quarter Ended March 31, 2012</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Quarter Ended June 30, 2012</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">(unaudited)</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">(in thousands, except per share and percentage data)</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; font-size: 10pt; padding-left: 0.5pt">Revenues</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">1,138</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">933</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.5pt">Cost of revenues</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">574</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">803</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Gross profit (loss)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">564</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">130</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Gross margin</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">50</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">14</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Total operating expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,690</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">4,162</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Net loss</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(3,140</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(3,941</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Basic and diluted loss per common share</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.05</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(0.06</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Basic and diluted common shares outstanding</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">68,178,946</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">68,174,817</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fiscal Year Ended December 31, 2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">First Quarter</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Second Quarter</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Third Quarter</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fourth Quarter</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="font-size: 10pt; font-weight: bold; text-align: center">(unaudited)</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="font-size: 10pt; font-weight: bold; text-align: center">(in thousands, except per share and percentage data)</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 44%; font-size: 10pt; padding-left: 0.5pt">Revenues</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,686</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,040</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,986</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,292</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.5pt">Cost of revenues</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">899</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">640</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">801</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">671</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Gross profit (loss)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">787</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">400</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,185</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">621</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Gross margin</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">47</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">38</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">60</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">48</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Total operating expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,957</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,572</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,335</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">8,858</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Net loss</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(1,895</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(2,254</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(2,283</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(8,233</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Basic and diluted loss per common share</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.037</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.04</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.04</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.12</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Basic and diluted common shares outstanding</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">50,798,900</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">63,934,260</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">64,300,685</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">66,697,424</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fiscal Year Ended December 31, 2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">First Quarter</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Second Quarter</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Third Quarter</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fourth Quarter</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="font-size: 10pt; font-weight: bold; text-align: center">(unaudited)</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="font-size: 10pt; font-weight: bold; text-align: center">(in thousands, except per share and percentage data)</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 44%; font-size: 10pt; padding-left: 0.5pt">Revenues</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2,097</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">908</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,223</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">721</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.5pt">Cost of revenues</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,337</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">479</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">561</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">319</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Gross profit (loss)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">760</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">429</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">662</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">402</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Gross margin</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">36</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">47</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">54</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">56</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Total operating expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,404</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,118</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,379</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,571</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Net loss</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(729</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(663</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(847</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(1,181</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Basic and diluted loss per common share</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.015</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.01</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.02</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.02</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt">Basic and diluted common shares outstanding</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">48,595,241</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">49,113,463</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">49,490,460</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">49,680,214</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>You should read the following discussion
and analysis of financial condition and results of operations in conjunction with the &ldquo;Selected Financial Information and
Other Data,&rdquo; &ldquo;Selected Quarterly Financial Data&rdquo; and our consolidated financial statements and the related notes
included elsewhere in this prospectus. In addition to historical information, the following discussion and analysis includes forward-looking
information that involves risks, uncertainties and assumptions. Our actual results and the timing of events could differ materially
from those anticipated by these forward-looking statements as a result of many factors, including those discussed under &ldquo;Risk
Factors&rdquo; and elsewhere in this prospectus. See &quot;Special Note Regarding Forward-Looking Statements&quot; included elsewhere
in this prospectus.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a medical device company focusing
on the development and commercialization of our proprietary stent platform technology, MGuard. MGuard provides embolic protection
in stenting procedures by placing a micron mesh sleeve over a stent. Our initial products are marketed for use mainly in patients
with acute coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions
(bypass surgery).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, we completed a series
of share exchange transactions pursuant to which we acquired all of the capital stock of InspireMD Ltd., a company formed under
the laws of the State of Israel, in exchange for an aggregate of 50,666,663 shares of our common stock. As a result of these share
exchange transactions, InspireMD Ltd. became our wholly-owned subsidiary, we discontinued our former business and succeeded to
the business of InspireMD Ltd. as our sole line of business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The share exchange transactions were accounted
for as a recapitalization. InspireMD Ltd. is the acquirer for accounting purposes and we are the acquired company. Accordingly,
the historical financial statements presented and the discussion of financial condition and results of operations herein are those
of InspireMD Ltd., retroactively restated for, and giving effect to, the number of shares received in the share exchange transactions,
and do not include the historical financial results of our former business. The accumulated earnings of InspireMD Ltd. were also
carried forward after the share exchange transactions and earnings per share have been retroactively restated to give effect to
the recapitalization for all periods presented. Operations reported for periods prior to the share exchange transactions are those
of InspireMD Ltd.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On October 31, 2011, our stockholders authorized
our board of directors to amend our amended and restated certificate of incorporation to effect a reverse stock split of our common
stock at a ratio of one-for-two to one-for-four, at any time prior to our 2012 annual stockholders&rsquo; meeting, the exact ratio
of the reverse stock split to be determined by the board. We intend to effectuate a one-for- reverse stock split, in order to comply
with the listing requirements of Nasdaq Capital Market. Such reverse stock split would immediately increase our stock price. In
addition, such reverse stock split would reduce the number of shares of common stock outstanding and may affect the liquidity of
our common stock. The reverse stock split is expected to occur the day immediately following the effectiveness of the registration
statement of which this prospectus is a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Critical Accounting Policies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Use of estimates</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The preparation of financial statements
in conformity with generally accepted accounting principles in the U.S. requires management to make estimates using assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of sales and expenses during the reporting periods. Actual results could differ
from those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As applicable to these consolidated financial
statements, the most significant estimates and assumptions relate to inventory write-off, provisions for returns, legal contingencies,
estimation of the fair value of share-based compensation and estimation of the fair value of warrants.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Functional currency</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The currency of the primary economic environment
in which our operations are conducted is the U.S. dollar (&ldquo;$&rdquo; or &ldquo;dollar&rdquo;). Accordingly, the functional
currency of us and of our subsidiaries is the dollar.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The dollar figures are determined as follows:
transactions and balances originally denominated in dollars are presented in their original amounts. Balances in foreign currencies
are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. The
resulting translation gains or losses are recorded as financial income or expense, as appropriate. For transactions reflected in
the statements of operations in foreign currencies, the exchange rates at transaction dates are used. Depreciation and changes
in inventories and other changes deriving from non-monetary items are based on historical exchange rates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Fair value measurement</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In determining fair value, we use various
valuation approaches, including market, income and/or cost approaches. Hierarchy for inputs is used in measuring fair value that
maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs
be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed
based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about
the assumptions market participants would use in pricing the asset or liability developed based on the best information available
in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Concentration of credit risk and allowance
for doubtful accounts</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Financial instruments that may potentially
subject us to a concentration of credit risk consist of cash, cash equivalents and restricted cash, which are deposited in major
financial institutions in the U.S., Israel and Germany, and trade accounts receivable. Our trade accounts receivable are derived
from revenues earned from customers from various countries. We perform ongoing credit evaluations of our customers&rsquo; financial
condition and, generally, require no collateral from our customers. We also have a credit insurance policy for some of our customers.
We maintain an allowance for doubtful accounts receivable based upon the expected ability to collect the accounts receivable. We
review our allowance for doubtful accounts quarterly by assessing individual accounts receivable and all other balances based on
historical collection experience and an economic risk assessment. If we determine that a specific customer is unable to meet its
financial obligations to us, we provide an allowance for credit losses to reduce the receivable to the amount our management reasonably
believes will be collected. To mitigate risks, we deposit cash and cash equivalents with high credit quality financial institutions.
Provisions for doubtful debts are netted against &ldquo;Accounts receivable-trade.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Inventory</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Inventories include finished goods, work
in process and raw materials. Inventories are stated at the lower of cost (cost is determined on a &ldquo;first-in, first-out&rdquo;
basis) or market value. Our inventories generally have a limited shelf life and are subject to impairment as they approach their
expiration dates. We regularly evaluate the carrying value of our inventories and when, in our opinion, factors indicate that impairment
has occurred, we establish a reserve against the inventories&rsquo; carrying value. Our determination that a valuation reserve
might be required, in addition to the quantification of such reserve, requires us to utilize significant judgment. Although we
make every effort to ensure the accuracy of forecasts of future product demand, any significant unanticipated decreases in demand
could have a material impact on the carrying value of our inventories and reported operating results. With respect to inventory
on consignment, see &ldquo;Revenue recognition&rdquo; below.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Revenue recognition</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenue is recognized when delivery has
occurred, evidence of an arrangement exists, title and risks and rewards for the products are transferred to the customer, collection
is reasonably assured and product returns can be reliably estimated. When product returns can be reliably estimated a provision
is recorded, based on historical experience, and deducted from revenues. The provision for sales returns and related costs are
included in &ldquo;Accounts payable and accruals - Other&rdquo; under &ldquo;Current liabilities&rdquo; and &ldquo;Inventory on
consignment,&rdquo; respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">When returns cannot be reliably estimated,
both related revenues and costs are deferred, and presented under &ldquo;Deferred revenues&rdquo; and &ldquo;Inventory on consignment,&rdquo;
respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of June 30, 2012, there are no deferred
revenues related to sales for which the rate of return cannot be reliably estimated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our revenue arrangements may contain delivery
of free products upon the achievement of sales targets. Each period, we estimate the amount of free products to which these distributors
will be entitled based upon the expected achievement of sales targets and defer a portion of revenues accordingly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recognize revenue net of value added
tax.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Research and development costs</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Research and development costs are charged
to the statement of operations as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Share-based compensation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Employee option awards are classified as
equity awards and accounted for using the grant-date fair value method. The fair value of share-based awards is estimated using
the Black-Scholes valuation model, which is expensed over the requisite service period, net of estimated forfeitures. We estimate
forfeitures based on historical experience and anticipated future conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We elected to recognize compensation expense
for awards with only service conditions that have graded vesting schedules using the accelerated multiple option approach.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We account for equity instruments issued
to third party service providers (non-employees) by recording the fair value of the options granted using an option pricing model,
at each reporting period, until rewards are vested in full. The expense is recognized over the vesting period using the accelerated
multiple option approach. The expense relates to options granted to third party service providers with respect to successful investor
introductions that are recorded at their fair value in equity, as issuance costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, certain of our share-based
awards are performance based, i.e., the vesting of these awards depends upon achieving certain goals. We estimate the expected
pre-vesting award probability, i.e., the expected likelihood that the performance conditions will be achieved, and only recognize
expense for those shares expected to vest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Uncertain tax and value added tax positions</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We follow a two-step approach to recognizing
and measuring uncertain tax and value added tax positions. The first step is to evaluate the tax and value added tax position for
recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will
be sustained on audit. The second step is to measure the tax and value added tax benefit as the largest amount that is more than
50% and 75%, respectively, likely of being realized upon ultimate settlement. Such liabilities are classified as long-term, unless
the liability is expected to be resolved within twelve months from the balance sheet date. Our policy is to include interest and
penalties related to unrecognized tax benefits within financial expenses.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>&nbsp; Six Month Period Ended June 30, 2012
Compared to the Six Month Period Ended June 30, 2011</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Revenue.</B>&nbsp;&nbsp;For the six month
period ended June 30, 2012, total revenue decreased approximately $0.6 million, or 24.0%, to approximately $2.1 million from approximately
$2.7 million during the same period in 2011. The $0.6 million decrease was attributable to a decrease in sales volume, as described
more fully below. The following is an explanation of the approximately $0.6 million decrease in revenue broken down by its main
two components, a decrease in gross revenues of approximately $0.5 million and a net decrease in deferred revenues recognized of
approximately $0.1 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the six month period ended June 30,
2012, total gross revenue decreased by approximately $0.5 million, or 19.6%, to approximately $2.0 million from approximately $2.5
million during the same period in 2011.&nbsp;&nbsp;This decrease in total gross revenue is predominantly sales volume based, with
decreased sales volume accounting for approximately $340,000, or approximately 13.0%, and price decreases to our repeat distributors
accounting for the remaining approximately $150,000, or approximately 6.0%.&nbsp;&nbsp;With respect to individual markets, this
decrease in gross revenue was mainly attributable to the fact that we did not have any sales to our distributor in India during
the six month period ended June 30 2012, compared to sales of approximately $1.2 million to this distributor during the same period
in 2011, a decrease of approximately $0.2 million of gross revenue from our distributor in Spain, a decrease of approximately $0.1
million of gross revenue from our distributor in Argentina, a decrease of approximately $0.1 million of gross revenue from our
distributor in France and a decrease of approximately $0.1 million of gross revenue from our distributor in Israel. These decreases
were partially offset by an increase of approximately $0.5 million of gross revenues from our distributor in Russia, an increase
of approximately $0.2 million of gross revenue from our distributor in Italy, an increase of approximately $0.2 million of gross
revenue from our distributor in Germany, an increase of approximately $0.1 million of gross revenue from our distributor in Poland,
and an increase of approximately $0.1 million of gross revenue from our distributor in Mexico, and an increase of approximately
$0.1 million from our remaining distributors, all due to higher sales volumes to these distributors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the six month period ended June 30,
2012, net deferred revenue recognized decreased by approximately $0.1 million, or 66.8%, to approximately $0.1 million from approximately
$0.2 million during the same period in 2011. This decrease was almost entirely sales volume based, partially offset by approximately
$0.1 million in price increases to our repeat distributors. The deferred revenue recognized during the six month period ended June
30, 2012 was comprised primarily of approximately $0.1 million of revenue that we deferred from a shipment to India in the first
six months of 2011. Our net deferred revenue for the six month period ended June 30, 2011 consisted of approximately $0.1 million
of deferred revenue from our distributor in India, offset by recognized revenue of approximately $0.1 million from our distributors
in Israel, approximately $0.1 million from our distributor in Brazil, and approximately $0.1 million from other distributors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Gross Profit.</B>&nbsp;&nbsp;For the
six month period ended June 30, 2012, gross profit (revenue less cost of revenues) decreased 41.5%, or approximately $0.5 million,
to approximately $0.7 million from approximately $1.2 million during the same period in 2011. Gross margin decreased from 43.5%
in the six month period ended June 30, 2011 to 33.5% in the six month period ended June 30, 2012. In addition to our decrease in
sales, the primary reason for the decrease in gross profit was a write-off of approximately $0.4 million of slow moving inventory,
which accounted for approximately 89.7% of the decrease mentioned above. We were able to partially offset these decreases with
reduced production cost per stent driven by economies of scale. For the six month period ended June 30, 2012, our average selling
price per stent recognized in revenue was $584, and we recognized the sale of 3,548 stents, compared to an average price of $541
per stent and 5,040 stents recognized in revenue for the same period in 2011.&nbsp;&nbsp;Our cost of goods sold per stent increased
from an average of $305 per stent recognized in revenue for the six month period ended June 30, 2011 to an average of $388 per
stent for the same period in 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Research and Development Expense.&nbsp;</B>&nbsp;For
the six month period ended June 30, 2012, research and development expense increased 138.5% or approximately $1.5 million, to approximately
$2.6 million, from approximately $1.1 million during the same period in 2011. The increase in cost resulted primarily from higher
clinical trial expenses of approximately $1.2 million, attributable mainly to the MGuard for Acute ST Elevation Reperfusion Trial
(MASTER Trial) (approximately $0.7 million), the U.S. Food and Drug Administration clinical trial (approximately $0.3 million)
and the MGuard Carotid clinical trial (approximately $0.2 million), an increase of approximately $0.1 million in salaries, approximately
$0.1 million in share-based compensation and approximately $0.1 million in miscellaneous expenses. Research and development expense
as a percentage of revenue increased to 125.9% for the six month period ended June 30, 2012 from 40.1% in the same period in 2011.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Selling and Marketing Expense.</B>&nbsp;&nbsp;For
the six month period ended June 30, 2012, selling and marketing expense increased 19.2%, or approximately $0.2 million, to approximately
$1.2 million, from approximately $1.0 million during the same period in 2011.&nbsp;&nbsp;The increase in selling and marketing
expense resulted primarily from approximately $0.2 million of additional salaries and approximately $0.1 million of additional
share-based compensation principally for newly hired sales personnel in connection with the expansion of our sales activities worldwide,
and approximately $0.2 million in advertising expenses. This increase was partially offset by a decrease of approximately $0.1
million of commissions pertaining mainly to our first time shipment of approximately $1.2 million to our distributor in India during
the six month period ended June 30, 2011 (no such sale occurred in the same period of 2012), approximately $0.1 million in share-based
compensation to consultants and approximately $0.1 million in miscellaneous expenses. Selling and marketing expense as a percentage
of revenue increased to 60.2% for the six month period ended June 30, 2012 from 38.3% in the same period in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>General and Administrative Expense.</B>&nbsp;&nbsp;For
the six month period ended June 30, 2012, general and administrative expense increased 67.3%, or approximately $1.6 million, to
approximately $4.0 million from $2.4 million during the same period in 2011. The increase resulted primarily from an increase in
share-based compensation of $1.2 million, predominately related to directors&rsquo; compensation, an increase of approximately
$0.2 million in rent expense related to our move to a new location to support our expanding sales activities, an increase of approximately
$0.1 million in audit fees to accommodate and comply with the reporting requirements of the Securities and Exchange Commission,
approximately $0.1 million in legal fees, related primarily to compliance with the reporting requirements of the Securities and
Exchange Commission, approximately $0.1 million of fees paid to consultants that was also related primarily to compliance with
the reporting requirements of the Securities and Exchange Commission, and approximately $0.3 million in miscellaneous expenses.
This increase was partially offset by a decrease of approximately $0.4 million in litigation expenses. General and administrative
expense as a percentage of revenue increased to 193.1% for the six month period ended June 30, 2012 from 87.7% in the same period
in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Financial Expenses (Income).</B>&nbsp;&nbsp;For
the six month period ended June 30, 2012, financial expense decreased 113.9%, or approximately $0.9 million, to approximately $0.1
million of financial income from $0.8 million of financial expense during the same period in 2011. The decrease in expense resulted
primarily from approximately $1.3 million of financial income from the revaluation of warrants pertaining to our convertible debentures,
partially offset by approximately $1.2 million of amortization expense pertaining to the same convertible debentures and their
related issuance costs in the six month period ended June 30, 2012, as compared to a one-time financial expense recording of approximately
$0.6 million in the first six month period of 2011 pertaining to the revaluation of an outstanding convertible loan at fair value
prior to redemption and approximately $0.2 million for the favorable impact of exchange rate differences for the six month period
ended June 30, 2011. Financial expense as a percentage of revenue was 28.9% for the six month period ended June 30, 2011, compared
to 5.3% of financial income for the same period in 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Tax Expenses.</B>&nbsp;&nbsp;Tax expense
remained relatively flat at $32,000 for the six month period ended June 30, 2012, as compared to $20,000 during the same period
in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Net Loss.</B>&nbsp;&nbsp;Our net loss
increased by approximately $2.9 million, or 70.7%, to $7.1 million for the six month period ended June 30, 2012, from $4.2 million
during the same period in 2011. The increase in net loss resulted primarily from an increase in operating expenses of approximately
$3.3 million (see above for explanation) and a decrease of approximately $0.5 million in gross profit (see above for explanation).
This increase was partially offset by a decrease in financial expenses (income) of approximately $0.9 million (see above for explanation).</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Twelve Months Ended December 31, 2011 Compared
to Twelve Months Ended December 31, 2010</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Revenue.</B>&nbsp;&nbsp;For the twelve
months ended December 31, 2011, total revenue increased approximately $1.1 million, or 21.3%, to approximately $6.0 million from
approximately $4.9 million during the same period in 2010. The $1.1 million increase was attributable primarily to an increase
in sales volume, as described more fully below. The following is an explanation of the approximately $1.1 million increase in revenue
broken down by its main two components, an increase in gross revenues of approximately $2.5 million offset by a net decrease in
deferred revenues of approximately $1.4 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the twelve months ended December 31,
2011, total gross revenue increased by approximately $2.5 million, or 77.6%, to approximately $5.7 million from approximately $3.2
million during the same period in 2010.&nbsp;&nbsp;This increase in total gross revenue was predominantly sales volume based, with
increased sales volume accounting for approximately $2.3 million, or approximately 72.5%, and price increases accounting for the
remaining approximately $0.2 million, or approximately 5.1%.&nbsp;&nbsp;In general, we focused on opening new markets, such as
India, and also increasing sales in existing markets by presenting clinical data at conferences and individual presentations to
doctors about the merits of MGuard Coronary.&nbsp;&nbsp;With respect to individual markets, this increase in gross revenue is mainly
attributable to the first time shipment of approximately $1.2 million to our distributor in India during the twelve months ended
December 31, 2011, an increase of approximately $0.4 million of gross revenue from our new distributor in Russia, an increase of
approximately $0.4 million of gross revenue from our distributor in Israel, an increase of approximately $0.3 million of gross
revenue from our distributor in Brazil, an increase of approximately $0.2 million of gross revenue from our distributor in Spain,
an increase of approximately $0.2 million of gross revenue from our distributor in Argentina, an increase of approximately $0.1
million of gross revenue from our distributor in South Africa, an increase of approximately $0.1 million of gross revenue from
our new distributor in Ukraine, an increase of approximately $0.1 million of gross revenue from our new distributor in the Netherlands
and an increase of approximately $0.1 million of gross revenue from our distributor in Mexico.&nbsp;&nbsp;This increase was partially
offset by a decrease of approximately $0.2 million in gross revenue from our distributor in Germany, a decrease of approximately
$0.2 million in gross revenue from our distributor in Pakistan, a decrease of approximately $0.2 million from our distributor in
Poland, a decrease of approximately $0.1 million in gross revenue from our distributor in Italy, and a decrease of approximately
$0.1 million in gross revenue to our distributor in France, all due to lower sales volume to these distributors. We also shipped
and recognized gross revenue for approximately $0.2 million more from our remaining distributors during the twelve months ended
December 31, 2011, as compared to the same period in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the twelve months ended December 31,
2011, net deferred revenue recognized decreased by approximately $1.4 million, or 83.8%, to approximately $0.3 million from approximately
$1.7 million during the same period in 2010. The key driver of this decrease was a decrease in the volume of revenue deferred to
2011 compared to the volume of revenue deferred to 2010, accounting for approximately $1.3 million or approximately 74.5%, with
the remaining approximately $0.1 million, or 9.3%, being driven by price decreases in the revenue deferred to 2011 compared to
the revenue deferred to 2010. Revenue recognition out of deferred income had less of an impact in 2011 as compared to 2010 due
to the fact that we deferred mainly shipments in 2008 and 2009 that were recognized in 2010. In 2010, only a small set of customers
had a large portion of their revenues deferred until 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the twelve months ended December 31,
2011, our net deferred revenue consisted of approximately $0.2 million attributable to our distributor in Israel, approximately
$0.1 million to our distributor in Brazil, and approximately $0.1 million to our distributor in Poland, offset by approximately
$0.1 million deferred for a shipment to our distributor in India. Our distributor in Israel had a contractual right to return all
purchases to us within 18 months of the purchase date. Due to our inability to accurately estimate the amount of future returns,
all sales to this distributor were deferred until this 18 month return period elapsed.&nbsp;&nbsp;On May 9, 2011, our distributor
in Israel agreed to revoke its previous rights to return purchases, resulting in all future sales being final. The deferred revenue
of approximately $0.2 million recognized during the twelve months period ended December 31, 2011 accounted for all previous purchases
by the distributor that the distributor no longer had a contractual right to return and were not yet recognized as revenues. Our
distributor in Brazil has a contractual right to return all purchases for up to six months from the delivery date. Due to our inability
to accurately estimate the amount of future returns by our distributor in Brazil, all sales made to it were also deferred until
the six month return period elapsed. The deferred revenue of approximately $0.1 million recognized during the twelve months period
ended December 31, 2011 accounted for purchases made in December 2010 that were not returned by the Brazilian distributor and were
not yet recognized as revenues. In 2011, it was decided that due to lack of actual returns from the Brazilian distributor, despite
the clause in its contract, we will no longer defer revenue pertaining to current shipments. Our distributor in India made its
first purchase in 2011. Because of our inexperience with this distributor, management decided to defer a portion of the shipment
to 2012, when it could better determine if a portion of it would be returned.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the twelve months ended December 31,
2010, net deferred revenue recognized of approximately $1.7 million was comprised mainly of shipments from 2008 and 2009 to our
distributor in Poland of approximately $1.3 million, to our distributor in Brazil of approximately $0.3 million, and to our distributor
in Sri Lanka of approximately $0.1 million. For the twelve months ended December 31, 2010, our distributor in Poland, subject to
our sole discretion, had the right to return our products.&nbsp;&nbsp;Because we were unable to develop estimates for the level
of returns, the $1.3 million worth of shipments made to the distributor in Poland that we recorded as deferred revenues were only
recognized during the twelve months ended December 31, 2010 as revenues. As noted above, our distributor in Brazil has a contractual
right to return all purchases for up to six months from the delivery date. As also noted above, due to our inability to accurately
estimate the rate of return by this distributor, all sales made to it were also deferred until the six month return period elapsed.
The deferred revenue of approximately $0.3 million recognized during the twelve months period ended December 31, 2010 accounted
for purchases made in December 2009 that were not returned and were not yet recognized as revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Gross Profit.</B>&nbsp;&nbsp;For the
twelve months ended December 31, 2011, gross profit increased 32.8%, or approximately $0.7 million, to approximately $3.0 million
from approximately $2.3 million during the same period in 2010.&nbsp;&nbsp;Gross margin increased from 45.5% in the twelve months
ended December 31, 2010 to 49.9% in the twelve months ended December 31, 2011.&nbsp;&nbsp;In addition to an increase in sales,
we were able to improve our gross profit because of reduced production cost per stent driven by reduction in price per unit from
our subcontractor and economies of scale. For the twelve months ended December 31, 2011, our average selling price per stent recognized
in revenue was $571, and we recognized the sale of 10,523 stents, compared to an average price of $606 per stent and 8,171 stents
recognized in revenue for the same period in 2010.&nbsp;&nbsp;Our cost of goods sold per stent decreased from an average of $330
per stent recognized in revenue for the twelve months ended December 31, 2010 to an average of $286 per stent for the same period
in 2011.&nbsp;&nbsp;The higher price per stent for the twelve months ended December 31, 2010 was effected by the price of stents
sold in 2008 and 2009 to one of our European distributors in Euros when the Euro was much stronger than the U.S. dollar, at an
average price of $997 when translated to U.S. dollars.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Research and Development Expense.</B>&nbsp;&nbsp;For
the twelve months ended December 31, 2011, research and development expense increased 84.9%, or approximately $1.2 million, to
approximately $2.5 million from approximately $1.3 million during the same period in 2010. The increase in cost resulted primarily
from higher clinical trial expenses of approximately $1.2 million, attributable mainly to the U.S. Food and Drug Administration
clinical trial (approximately $0.9 million) and the MGuard for Acute ST Elevation Reperfusion Trial (MASTER Trial) (approximately
$0.3 million), and an increase of approximately $0.3 million in salaries, offset by an approximately $0.2 million reduction in
miscellaneous expenses and an approximately $0.1 million reduction in share-based compensation. Research and development expense
as a percentage of revenue increased to 41.2% for the twelve months ended December 31, 2011 from 27.0% in the same period of 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Selling and Marketing Expense.</B>&nbsp;&nbsp;For
the twelve months ended December 31, 2011, selling and marketing expense increased 59.6%, or approximately $0.7 million, to approximately
$2.0 million, from approximately $1.3 million during the same period in 2010.&nbsp;&nbsp;The increase in selling and marketing
expense resulted primarily from approximately $0.3 million of additional salaries and approximately $0.4 of share-based compensation
principally for newly hired sales personnel in connection with the expansion of our sales activities worldwide, and approximately
$0.1 million of commissions pertaining mainly to our first time shipment of approximately $1.2 million to our distributor in India.
This increase was partially offset by a decrease of approximately $0.1 million in advertising expenses. Selling and marketing expense
as a percentage of revenue increased to 32.9% in 2011 from 25.0% in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>General and Administrative Expense.</B>&nbsp;&nbsp;For
the twelve months ended December 31, 2011, general and administrative expense increased 323.6%, or approximately $9.4 million,
to approximately $12.3 million from $2.9 million during the same period in 2010. The increase resulted primarily from an increase
in share-based compensation of $7.5 million, which predominately pertains to directors&rsquo; compensation, an increase of approximately
$0.5 million in salary expenses (due to an increase in employee infrastructure to accommodate and comply with the reporting requirements
of the Securities and Exchange Commission), an increase in investor related activities of approximately $0.5 million (due to us
having been a publicly reporting company during the twelve months ended December 31, 2011, but not during the same period in 2010),
an increase of approximately $0.5 million in litigation expenses (primarily due to a provision for our potential loss related to
a threatened lawsuit from a finder claiming a future success fee and commissions for assistance in finding our distributor in Brazil),
approximately $0.3 million in legal fees (also related primarily to compliance with the reporting requirements of the Securities
and Exchange Commission), and approximately $0.2 million in audit fees to accommodate and comply with the reporting requirements
of the Securities and Exchange Commission. This increase was partially offset by a decrease of approximately $0.1 million in miscellaneous
expenses. General and administrative expense as a percentage of revenue increased to 204.4% in 2011 from 58.6% in 2010.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Financial Expenses (Income).</B>&nbsp;&nbsp;For
the twelve months ended December 31, 2011, financial expense increased 506.5%, or approximately $0.8 million, to approximately
$1.0 million from $0.2 million during the same period in 2010. The increase in expense resulted primarily from a one-time financial
expense recording of approximately $0.6 million in the first quarter of 2011 pertaining to the revaluation of an outstanding convertible
loan at fair value prior to redemption and approximately $0.2 million for the favorable impact of exchange rate differences for
the twelve months ended December 31, 2010 that did not occur during the twelve months ended December 31, 2011. Financial expense
as a percentage of revenue increased from 3.1% in 2010, to 15.6% in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Tax Expenses.</B>&nbsp;&nbsp;Tax expense
remained relatively flat at $2,000 for the twelve months ended December 31, 2011, as compared to $47,000 during the same period
in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Net Loss.</B>&nbsp;&nbsp;Our net loss
increased by approximately $11.3 million, or 328.8%, to $14.7 million for the twelve months ended December 31, 2011 from $3.4 million
during the same period in 2010. The increase in net loss resulted primarily from an increase in operating expenses of approximately
$11.2 million (see above for explanation) and an increase of approximately $0.8 million in financial expenses (income) (see above
for explanation). This increase was partially offset by an increase in gross profit of approximately $0.7 million (see above for
explanation).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Twelve Months Ended December 31, 2010 Compared
to Twelve Months Ended December 31, 2009</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Revenues.</B> For the twelve months ended
December 31, 2010, total revenue increased approximately $1.5 million, or 45.1%, to approximately $4.9 million from approximately
$3.4 million in 2009. The $1.5 million increase in revenue was primarily attributable to an increase in the amount of net deferred
revenues recognized during 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For a description of the revenue deferred
to 2010, see &ldquo;Twelve months ended December 31, 2011 compared to twelve months ended December 31, 2010&rdquo; above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the twelve months ended December 31,
2009, net deferred revenue of approximately $0.1 million was comprised mainly of shipments made in 2009 but deferred and recognized
in 2010 to our distributor in Brazil in the amount of approximately $0.4 million, to our distributor in Poland in the amount of
$0.2 million and to our distributor in Israel in the amount of $0.2 million, offset by shipments made in 2008 but deferred and
recognized in revenue in 2009 from our distributor in Italy in the amount of $0.5 million, and from our distributor in Cyprus in
the amount of $0.2 million. Because 2008 was our first year of sales and we were unable to accurately estimate the amount of future
returns of our products, all revenues from shipments made in 2008 were deferred and recognized in 2009. The deferred revenue for
each distributor recognized during the twelve month period ended December 31, 2009 accounted for the purchases made in the twelve
month period ended December 31, 2008 that were not returned by either distributor and were not yet recognized as revenues. See
also &ldquo;Twelve months ended December 31, 2011 compared to twelve months ended December 31, 2010&rdquo; above for the reasons
why such revenue was deferred and/or recognized for certain of the distributors listed above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Total gross revenue for the twelve months
ended December 31, 2010 remained relatively flat in comparison to the twelve months ended December 31, 2009, increasing by approximately
$46,000. This increase was predominantly sales volume based, with increased sales volume accounting for approximately $263,000,
offset by price decreases in the amount of $217,000. The increase in sales volume was evenly distributed among our distributors.
The decrease in prices were due to our penetration of newly opened markets, namely Brazil, Slovakia and Cyprus in 2010, which required
reduced prices as compared to 2009.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Gross Profit.</B> For the twelve months
ended December 31, 2010, gross profit (revenue less cost of revenues) increased 101.2%, or approximately $1.1 million, to approximately
$2.2 million from approximately $1.1 million during the same period in 2010. Our gross margin percentage for the twelve months
ended December 31, 2010 increased to 45.5% of revenues, compared to 32.8% during the same period in 2009. In addition to an increase
in sales, we were able to improve our gross profit because of reduced production cost per stent driven by reduction in price per
unit from our subcontractor and economies of scale. For the twelve months ended December 31, 2010, our average selling price per
stent recognized in revenue was $606, and we recognized the sale of 8,171 stents, compared to an average price of $577 per stent
and 5,910 stents recognized in revenue for the same period in 2009. Our cost of goods sold per stent decreased from an average
of $380 per stent recognized in revenue for the twelve months ended December 31, 2009 to an average of $330 per stent for the same
period in 2010. The higher price per stent for the twelve months ended December 31, 2010 was affected by the price of stents sold
in 2008 and 2009 to one of our Europeans distributors in Euros when the Euro was much stronger than the U.S. dollar, at an average
price of $997 when translated to U.S. dollars.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Research and Development Expense.</B>
For the twelve months ended December 31, 2010, research and development expense remained relatively flat at approximately $1.3
million as compared to the same period in 2009. Research and development expense as a percentage of revenue decreased to 27.0%
in 2010 from 39.0% in 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Selling and Marketing Expense.</B> For
the twelve months ended December 31, 2010, selling and marketing expense increased by approximately $0.2 million, or 18.8%, to
approximately $1.2 million from approximately $1.0 million during the same period in 2009. The increase in cost resulted primarily
from an increase of approximately $0.2 million in advertising expenses. Selling and marketing expense as a percentage of revenue
decreased to 25.0% in 2010 from 30.5% in 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>General and Administrative Expense.</B>
For the twelve months ended December 31, 2010, general and administrative expense increased approximately $1.4 million, or 97.5%,
to approximately $2.9 million from approximately $1.5 million during the same period in 2009. The increase resulted primarily from
an increase in share-based compensation of approximately $0.7 million (of which approximately $0.5 million related to employees
and $0.2 million related to directors), an increase of approximately $0.2 million in audit fees (as we prepared for the transition
from generally accepted accounting principles in Israel to the U.S.), an increase of $0.1 million in salary expenses, and an increase
of approximately $0.4 million in other expenses (due to our overall expansion). General and administrative expense as a percentage
of revenue increased to 58.6% in 2010 from 43.0% in 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Financial Expenses (Income).</B>&nbsp;&nbsp;For
the twelve months ended December 31, 2010, financial expense increased to approximately $0.2 million from income of $4,000 for
the same period in 2009. The increase in expense resulted primarily from a one-time financial income recording of $0.3 million
in 2009 pertaining to the cancellation of the conversion feature of a convertible loan that was repaid in the same year. Financial
expense as a percentage of revenue increased to 3.1% in 2010, compared to financial income as a percent of revenue of 1.2% in 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Tax Expenses.</B> Tax expense remained
flat at $47,000 for the twelve months ended December 31, 2010 and 2009. Our expenses for income taxes reflect primarily the tax
liability due to potential tax exposure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Net Loss.</B> Our net loss increased
by approximately $0.7 million, or 25.6%, to approximately $3.4 million in 2010 from approximately $2.7 million during the same
period in 2009. The increase in net loss resulted primarily from an increase in operating expenses of approximately $1.6 million
(see above for explanation) and an increase of approximately $0.2 million in financial expenses (see above for explanation). This
increase was partially offset by an increase in gross profit of approximately $1.1 million (see above for explanation).</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Liquidity and Capital Resources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Six Month Period Ended June 30, 2012 Compared
to the Six Month Period Ended June 30, 2011</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Since our formation, we have had recurring
losses and negative cash flows from operating activities and have significant future commitments. For the six months ended June
30, 2012, we had losses of approximately $7.1 million and negative cash flows from operating activities of approximately $4.4 million.
We believe that our working capital as of June 30, 2012 of approximately $10.8 million should enable us to continue funding the
negative cash flows from operating activities until October 2013, when our convertible debentures are subject to a non-contingent
redemption option that could require us to make a payment of approximately $13.3 million, including accrued interest. Since we
expect to continue incurring negative cash flows from operations and in light of the potential cash requirement in connection with
our convertible debentures, there is substantial doubt about our ability to continue operating as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Based on our financial position as of June
30, 2012, we will need to raise further capital at some future point in time, through the sale of additional equity securities
or debt. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability
to successfully commercialize our MGuard products, our development of future products and competing technological and market developments.
However, we may be unable to raise sufficient additional capital when we require it or upon terms favorable to us. In addition,
the terms of any securities we issue in future financings 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. If we are unable to obtain adequate funds on reasonable terms, we will
need to curtail operations significantly, including possibly postponing or halting our U.S. Food and Drug Administration clinical
trials or entering into financing agreements with unattractive terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>General.</B> At June 30, 2012, we had
cash and cash equivalents of approximately $10.3 million, as compared to $8.0 million at June 30, 2011. The increase is attributable
primarily to the issuance of senior secured convertible debentures and warrants on April 5, 2012. We have historically met our
cash needs through a combination of issuance of new shares, borrowing activities and sales. Our cash requirements are generally
for product development, clinical trials, marketing and sales activities, finance and administrative cost, capital expenditures
and general working capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash used in our operating activities was
approximately $4.4 million for the six month period ended June 30, 2012, and approximately $1.8 million for the same period in
2011. The principal reasons for the usage of cash in our operating activities for the six month period ended June 30, 2012 included
a net loss of approximately $7.1 million and approximately $1.3 million in non-cash financial income related to the revaluation
of warrants pertaining to our convertible debentures, offset by approximately $1.9 million in non-cash share-based compensation,
approximately $1.0 million in non-cash financial expense related to our convertible debentures, a decrease in working capital of
approximately $0.9 million (driven primarily from a decrease in our accounts receivable of approximately $0.5 million due to our
decrease in sales and an increase of approximately $0.5 million in other payables due to accruals recorded pertaining to the MGuard
for Acute ST Elevation Reperfusion Trial (MASTER Trial) and the U.S. Food and Drug Administration clinical trial) and approximately
$0.2 million of all other adjustments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash used by our investing activities was
approximately $0.2 million during the six month period ended June 30, 2012, compared to approximately $0.1 million during the same
period in 2011. The principal reason for the increase in cash used in investing activities during 2012 was the purchase of approximately
$0.2 million of new equipment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash flow generated from financing activities
was approximately $9.8 million for the six month period ended June 30, 2012, and $9.4 million for the same period in 2011. The
principal source of cash flow from financing activities during 2012 was the proceeds from our convertible debentures and warrants
issued on April 5, 2012 of approximately $9.9 million, offset by the repayment of a long-term loan in the amount of approximately
$0.1 million. The principal source of cash flow from financing activities during the six month period ended June 30, 2011 was the
private placement conducted in conjunction with the share exchange transactions on March 31, 2011 and other private equity issuances
prior to and after the share exchange transactions in the aggregate amount of approximately $10.6 million, offset by the repayment
of a convertible loan in the amount of approximately $1.0 million and the partial repayment of a long-term loan in the amount of
approximately $0.2 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of June 30, 2012, our current assets
exceeded current liabilities by a multiple of 4.1. Current assets increased approximately $4.5 million during the six month period
ended June 30, 2012, mainly due to cash raised from the convertible debenture and warrant offering on April 5, 2012, and current
liabilities increased by approximately $0.1 million during the same period. As a result, our working capital surplus increased
by approximately $4.4 million to approximately $10.8 million during the six month period ended June 30, 2012.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Long-Term Loan.</B> Prior to June 30,
2012, we had a long-term loan in the amount of approximately $0.1 million bearing interest at the three month U.S. Dollar LIBOR
rate plus 4% per annum. The loan was payable in eight quarterly installments during a period of three years that began in April
2010. According to the loan agreement, in case of an &ldquo;exit transaction&rdquo; (defined as certain merger or sale transactions,
or an initial public offering), we were required to pay to the bank an additional $0.25 million if the sum received in the transaction
was higher than $100 million. The loan was repaid in January 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Sales of Stock/Issuance of Debt and Securities.</B>
For the six month period ended June 30, 2012, we issued senior secured convertible debentures due April 5, 2014 in the original
aggregate principal amount of $11,702,128 and five-year warrants to purchase an aggregate of 3,343,465 shares of our common stock
at an exercise price of $1.80 per share in exchange for aggregate gross proceeds of $11.0 million, with corresponding net proceeds
of approximately $9.9 million. The convertible debentures were issued with a 6% original issuance discount, bear interest at an
annual rate of 8% and are convertible at any time into shares of common stock at an initial conversion price of $1.75 per share.
Upon conversion of the convertible debentures, investors will receive a conversion premium equal to 8% per annum, with a limit
of 12% for the term of the convertible debentures, of the principal amount being converted. In addition, the investors may require
us to redeem the convertible debentures at any time after October 5, 2013 (18 months after the date of issuance) for 112% of the
then outstanding principal amount, plus all accrued interest, and we may prepay the convertible debentures after six months for
112% of the then outstanding principal amount, plus all accrued interest. In connection with this financing, we paid placement
agent fees of $848,750 and issued placement agents warrants to purchase 312,310 shares of common stock, with terms identical to
the warrants issued to the investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Twelve Months Ended December 31, 2011 Compared
to Twelve Months Ended December 31, 2010</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>General.</B> At December 31, 2011, we
had cash and cash equivalents of approximately $5.1 million, as compared to $0.6 million at December 31, 2010. The increase was
primarily attributable to the private placement conducted in conjunction with the share exchange transactions on March 31, 2011
and other private equity issuances prior to and after the share exchange transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash used in our operating activities was
approximately $6.0 million for the twelve months ended December 31, 2011, and approximately $2.7 million for the same period in
2010. The principal reasons for the usage of cash in our operating activities for the twelve months ended December 31, 2011 included
a net loss of approximately $14.7 million and a decrease in working capital of approximately $2.0 million, offset by approximately
$9.6 million in non-cash share-based compensation, an approximately $0.9 million in non-cash financial expenses related to the
revaluation of a convertible loan and approximately $0.2 million of all other adjustments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash provided by our investing activities
was approximately $13,000 during the twelve months ended December 31, 2011, compared to approximately $46,000 of cash used by investing
activities during the same period in 2010. The principal reason for the decrease in cash flow from investing activities during
2011 was a decrease in restricted cash of approximately $160,000, offset by the purchase of approximately $140,000 of new manufacturing
equipment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash flow generated from financing activities
was approximately $10.7 million for the twelve months ended December 31, 2011, and $3.0 million for the same period in 2010. The
principal reason for the increase in cash flow from financing activities during 2011 was the private placement conducted in conjunction
with the share exchange transactions on March 31, 2011 and other private equity issuances and exercise of options prior to and
after the share exchange transactions in the aggregate amount of approximately $12.1 million, offset by the repayment of a convertible
loan in the amount of approximately $1.0 million and the partial repayment of a long-term loan in the amount of approximately $0.4
million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of December 31, 2011, our current assets
exceeded current liabilities by a multiple of 2.8. Current assets increased approximately $5.9 million during 2011, mainly due
to cash raised from the private placements in 2011, while current liabilities decreased approximately $0.5 million during the same
period. As a result, our working capital surplus increased by approximately $6.4 million to approximately $6.3 million during the
twelve months ended December 31, 2011.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Long-Term Loan.</B> As of December 31,
2011, we had a long-term loan outstanding in the amount of approximately $0.1 million bearing interest at the three month U.S.
Dollar LIBOR rate plus 4% per annum. See &ldquo;Six month period ended June 30, 2012 compared to six month period ended June 30,
2011 &mdash; Long-Term Loan.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Convertible Loans.</B> Prior to December
31, 2011, we had convertible loans outstanding with an aggregate principal amount outstanding of approximately $1.58 million that
bore interest at the rate of 8% per annum. Following the share exchange transactions on March 31, 2011, $580,000 plus accrued interest
converted into shares of our common stock and warrants to purchase shares of our common stock. The remaining principal in the amount
of $1.0 million, plus all accrued interest, was repaid on May 15, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Sales of Stock.</B> For the twelve months
ended December 31, 2011, we issued an aggregate of 12,315,145 shares of common stock and warrants to purchase 6,709,073 shares
of common stock for gross proceeds of approximately $13.7 million and corresponding net proceeds of approximately $12.1 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Twelve Months Ended December 31, 2010 Compared
to Twelve Months Ended December 31, 2009</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>General.</B> At December 31, 2010, we
had cash and cash equivalents of approximately $0.6 million, as compared to $0.4 million at December 31, 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash used in our operating activities was
approximately $2.7 million for the twelve months ended December 31, 2010, and approximately $1.5 million for the same period in
2009. The principal reasons for the increase in cash used in operations in 2010 included a net loss of approximately $3.4 million,
a decrease of approximately $1.6 million in deferred revenues offset by approximately $1.6 million of non-cash share-based compensation
expense, an increase of approximately $0.4 million in other working capital and $0.3 million of other non-cash adjustments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash used in investing activities was approximately
$46,000 for the twelve months ended December 31, 2010 and approximately $0.3 million for the same period in 2009. The principal
reasons for the decrease in cash flow from investing activities included approximately $81,000 for plant and equipment purchases
offset by a decrease of approximately $52,000 in restricted cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash flow generated from financing activities
was approximately $3.0 million for the twelve months ended December 31, 2010, and approximately $0.7 million for the same period
in 2009. The principal reasons for the increase in cash flow from financing activities during 2010 were the issuance of approximately
$1.8 million in new shares and the issuance of convertible loans of approximately $1.5 million, offset by the repayment of a long-term
loan in the amount of approximately $0.3 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of December 31, 2010, current assets
were approximately equal with our current liabilities. Current assets decreased approximately $0.2 million during the twelve months
ended December 31, 2010 while current liabilities decreased by approximately $1.5 million during the same period. As a result,
our working capital deficiency decreased by approximately $1.2 million to approximately $53,000 during the twelve months ended
December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Newly Adopted Accounting Guidance</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In May 2011, the Financial Accounting Standards
Board issued Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (&ldquo;ASU 2011-04&rdquo;). ASU 2011-04 changes certain fair value
measurement principles and clarifies the application of existing fair value measurement guidance. These amendments include, among
others, (1) the application of the highest and best use and valuation premise concepts, (2) measuring the fair value of an instrument
classified in a reporting entity&rsquo;s shareholders&rsquo; equity and (3) disclosing quantitative information about the unobservable
inputs used within the Level 3 hierarchy. Effective January 1, 2012, we adopted ASU 2011-04. The adoption of this accounting standards
update did not have a material impact on our consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Factors That May Affect Future Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Tabular Disclosure of Contractual Obligations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table summarizes our outstanding
contractual obligations as of June 30, 2012:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="18" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Payments Due By Period</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="18" STYLE="font-size: 10pt; font-weight: bold; text-align: center">(in thousands)</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">More<BR> than</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Contractual Obligations</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Less than<BR> 1 year</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">1 &ndash; 3<BR> years</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">3 &ndash; 5<BR> years</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">5<BR> years</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 30%; font-size: 10pt">Convertible loan<SUP>(1)</SUP>&#9;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">14,745</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">703</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">14,043</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">0</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">0</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Operating lease obligations<SUP>(2)</SUP>&#9;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">913</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">403</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">510</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Accounts Payable</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">1,983</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">1,983</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">0</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">0</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">0</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">Total</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">17,641</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">3,089</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">14,553</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Our convertible loan obligations as of June 30, 2012 consisted of senior secured convertible debentures issued to certain investors
on April 5, 2012 in the aggregate amount of $11.7 million. Our convertible debentures bear interest at the rate of 8% per annum
and are convertible at any time into shares of common stock at an initial conversion price of $1.75 per share. The holders of our
convertible debentures may require us to redeem our convertible debentures at any point 18 months after the date of issuance for
112% of the outstanding principal amount.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Our operating lease obligations consist of the lease for our offices and manufacturing facilities in Tel Aviv, Israel and the
leases for the majority of our company cars.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are exposed to market risk related to
fluctuations in interest rates and in foreign currency exchange rates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Interest Rate Exposure</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our exposure to market risk relates primarily
to short-term investments, including funds classified as cash equivalents. As of June 30, 2012, all excess funds were invested
in time deposits and other highly liquid investments, therefore our interest rate exposure is not considered to be material.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Foreign Currency Exchange Rate Exposure</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our foreign currency exchange rate exposure
continues to evolve as we grow internationally. Our exposure to foreign currency transaction gains and losses is the result of
certain revenues and expenses being denominated in currencies other than the U.S. dollar, primarily the Euro and the New Israeli
Shekel. We do not currently engage in hedging or similar transactions to reduce these risks. Fluctuations in currency exchange
rates could impact our results of operations, financial position, and cash flows.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>History</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We were organized in the State of Delaware
on February 29, 2008 as Saguaro Resources, Inc. to engage in the acquisition, exploration and development of natural resource properties.
On March 28, 2011, we changed our name from &ldquo;Saguaro Resources, Inc.&rdquo; to &ldquo;InspireMD, Inc.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, we completed a series
of share exchange transactions pursuant to which we issued the shareholders of InspireMD Ltd. 50,666,663 shares of common stock
in exchange for all of InspireMD Ltd.&rsquo;s issued and outstanding ordinary shares, resulting in the former shareholders of InspireMD
Ltd. holding a controlling interest in us and InspireMD Ltd. becoming our wholly-owned subsidiary. In addition, all options, warrants
or other securities convertible into or exercisable for ordinary shares of InspireMD Ltd. were exchanged for options, warrants
or other securities convertible into or exercisable for shares of our common stock.<BR>
&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Immediately following the share exchange
transactions, we transferred all of our pre-share exchange operating assets and liabilities to our wholly-owned subsidiary, Saguaro
Holdings, Inc., a Delaware corporation, and transferred all of Saguaro Holdings, Inc.&rsquo;s outstanding capital stock to Lynn
Briggs, our then-majority stockholder and our former president, chief executive officer, chief financial officer, secretary-treasurer
and sole director, in exchange for the cancellation of 7,500,000 shares of our common stock held by Ms. Briggs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">After the share exchange transactions and
the divestiture of our pre-share exchange operating assets and liabilities, we succeeded to the business of InspireMD Ltd. as our
sole line of business, and all of our then-current officers and directors resigned and were replaced by some of the officers and
directors of InspireMD Ltd.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 1, 2012, our board of directors
approved a change in our fiscal year-end from December 31 to June 30, effective June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a medical device
company focusing on the development and commercialization of our proprietary stent platform technology,
MGuard.&nbsp;&nbsp;MGuard provides embolic protection in stenting procedures by placing a micronet mesh sleeve over a stent
(see photograph below of an MGuard stent). Our initial products are marketed for use mainly in patients with acute coronary
syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions (bypass
surgery). According to the TYPHOON STEMI trial (New England Journal of Medicine, 2006) and the SOS SVG Trial (Journal of the
American College of Cardiology, 2009), of patients with acute myocardial infarction and saphenous vein graft coronary
interventions, 7.5% to 44% experience major adverse cardiac events, including cardiac death, heart attack and restenting of
the artery. When performing stenting procedures in patients with acute coronary symptoms, interventional cardiologists face a
difficult dilemma in choosing, with the aim of ensuring adequate protection from distal embolization (the dislodgement of
particles from the artery wall that results in blood clot), between bare-metal stents, which have a high rate of restenosis
(formation of new blockages), and drug-eluting (drug-coated) stents, which have a high rate of late thrombosis (formation of
clots months or years after implantation), require administration of anti-platelet drugs for at least one year post
procedure, are more costly than bare-metal stents and have additional side effects.&nbsp;&nbsp;We believe that MGuard is a
simple and seamless solution for these patients.&nbsp;&nbsp;For the six months ended June 30, 2012, our total revenue was
approximately $2.1 million and our net loss was approximately $7.1 million. For the year ended December 31, 2011, our total
revenue was approximately $6.0 million and our net loss was approximately $14.7 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MGuard Sleeve &ndash; Microscopic View</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;<IMG SRC="p52.jpg" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to study our MGuard technology
for use in a broad range of coronary related situations in which complex lesions are required and intend to seek to make it an
industry standard for treatment of acute coronary syndromes. We believe that patients will benefit from a cost-effective alternative
which we believe will prove to have a superior clinical efficacy and safety profile than other stent technologies. We believe that
with our MGuard technology, we are well positioned to emerge as a key player in the global stent market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also intend to apply our technology to
develop additional products used for other vascular procedures, specifically carotid (the arteries that supply blood to the brain)
and peripheral (other arteries) procedures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In October 2007, our first generation product,
the MGuard Coronary, received CE Mark approval for treatment of coronary arterial disease in the European Union. CE Mark is a mandatory
conformance mark on many products marketed in the European Economic Area and certifies that a product has met European Union consumer
safety, health or environmental requirements. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our initial MGuard Coronary product incorporated
a stainless steel stent. We replaced this stainless steel platform with a more advanced cobalt-chromium based platform, which we
refer to as the MGuard Prime version of the MGuard Coronary. We believe the new platform will prove to be superior because cobalt-chromium
stents are generally known in the industry to provide better deliverability and possibly even a reduction in major adverse cardiac
events. In particular, according to Jabara, et al. (&ldquo;A Third Generation Ultra-thin Strut Cobalt Chromium Stent: Histopathological
Evaluation in Porcine Coronary Arteries,&rdquo; EuroIntervention, November 2009), due to its greater density, cobalt-chromium enables
the construction of stents that have both thinner struts and similar radial strength as stainless steel, with its thicker struts.
In turn, Jabara, et al. found that the reduced thickness of the struts provides more flexibility and lower crossing profiles, thereby
reducing the inflammatory response and neointimal thickening, potentially lowering restenosis and target vessel revascularization
rates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The MGuard Prime version of the MGuard Coronary
received CE Mark approval in the European Union in October 2010 for improving luminal diameter and providing embolic protection.
We believe we can use and leverage the clinical trial results of our original stainless steel based MGuard Coronary to market our
new cobalt-chromium based MGuard Prime version of the MGuard Coronary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">However, we face a number of challenges
to the further growth of our MGuard Coronary and other planned MGuard products. For example, we face 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 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. In addition, none of our products is currently approved by the U.S. Food and Drug Administration.
Clinical trials necessary to support a pre-market approval application to the U.S. Food and Drug Administration for our MGuard
products 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. Furthermore,
our rights to our intellectual property with respect to our products could be challenged. 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 MGuard products based
on one or more of these patents. Additionally, there is a strong preference to use drug-eluting stents in some countries. Over
the last decade, there has been an increasing tendency to use drug-eluting stents in percutaneous coronary intervention (PCI),
commonly known as angioplasty (a therapeutic procedure to treat narrowed coronary arteries of the heart found in patients with
heart disease), with a usage rate of drug-eluting stents in PCI approaching 70-80% in some countries, even though drug-eluting
stents do not address thrombus management in acute myocardial infarction. Also, the use of other bare-metal stents is preferred
over the use of MGuard products in certain circumstances, such as when placing the stent at the entrance to large side branches,
known as &ldquo;jailing large side branches.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Unless otherwise indicated, in this prospectus,
references to MGuard Coronary are to both our initial stainless steel based MGuard Coronary and our more current cobalt-chromium
based MGuard Prime version of the MGuard Coronary, as applicable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Business Segment and Geographic Areas</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For financial information about our one
operating and reportable segment and geographic areas, refer to &ldquo;Management&rsquo;s Discussion and Analysis of Financial
Condition and Results of Operations&rdquo; and Note&nbsp;13. &ldquo;Entity Wide Disclosures&rdquo; to our consolidated financial
statements included elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Industry</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">According to Fact Sheet No. 310/June 2011
of the World Health Organization, approximately 7.3 million people worldwide died of coronary heart disease in 2008. Physicians
and patients may select from among 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. A stent is an expandable &ldquo;scaffold-like&rdquo; device, usually constructed
of a stainless steel material, that is inserted into an artery to expand the inside passage and improve blood flow.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">According to the January 3, 2011 2011 MEDTECH
OUTLOOK produced by BMO Capital Markets, after registering a compounded annual growth rate from 2002 to 2009 of approximately 13%,
revenues from the global coronary stent market is predicted to remain relatively constant, although in volume of stents the market
is predicted to continue to grow. The growth in volume is due to the appeal for less invasive percutaneous coronary intervention
procedures and advances in technology coupled with the increase in the elderly population, obesity rates and advances in technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Coronary artery disease is one of the leading
causes of death worldwide. The treatment of coronary artery disease includes alternative treatment methodologies, that is, coronary
artery bypass grafting or angioplasty (percutaneous coronary intervention) with or without stenting. According to the January 3,
2011 2011 MEDTECH OUTLOOK produced by the BMO Capital Markets, the percutaneous coronary intervention procedures involving stents
are increasingly being used to treat coronary artery diseases with an 88.3% penetration rate in 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Products</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The MGuard stent is an embolic protection
device based on a protective sleeve, which is constructed out of an ultra-thin polymer mesh and wrapped around the stent. The protective
sleeve is comprised of a micron level fiber-knitted mesh, engineered in an optimal geometric configuration and designed for utmost
flexibility while retaining strength characteristics of the fiber material (see illustration below). The sleeve expands seamlessly
when the stent is deployed, without affecting the structural integrity of the stent, and can be securely mounted on any type of
stent.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MGuard Deployed in Artery</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><IMG SRC="p54.jpg" ALT="">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The protective sleeve is designed to provide
several clinical benefits:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the mesh diffuses the pressure and the impact of deployment exerted by the stent on the arterial wall and reduces the injury
to the vessel;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the protective sleeve reduces plaque dislodgement and blocks debris from entering the bloodstream during and post procedure
(called embolic showers);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>in future products, when drug coated, the mesh is expected to deliver better coverage and uniform drug distribution on the
arterial wall and therefore potentially reduce the dosage of the active ingredient when compared to approved drug-eluting stents
on the market; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the protective sleeve maintains the standards of a conventional stent and therefore should require little to no additional
training by physicians.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>MGuard &ndash; Coronary Applications</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our MGuard Coronary with a bio-stable mesh
and our planned MGuard Coronary with a drug-eluting mesh are aimed at the treatment of coronary arterial disease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>MGuard Coronary with a bio-stable mesh.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our first MGuard product, the MGuard
Coronary with a bio-stable mesh, is comprised of our mesh sleeve wrapped around a stainless steel bare-metal stent. The
current MGuard Prime version of our MGuard Coronary with a bio-stable mesh is comprised of our mesh sleeve wrapped around a
cobalt-chromium bare-metal stent. In comparison to a conventional bare-metal stent, we believe the MGuard Coronary with a
bio-stable mesh provides protection from embolic showers. Results of clinical trials on the MGuard Coronary stent, including
the MAGICAL, PISCIONE and MGuard international registry (iMOS) clinical trials described below (see &ldquo;Business &ndash;
Comparison of Clinical Trial Results to Date with Results Achieved Using Bare Metal or Drug-Eluting Stents in the STEMI
population&rdquo; below), indicate positive outcomes and safety measures. The results of these clinical trials for the MGuard
Coronary stent suggest higher levels of reperfusion, lower rates of 30 day and 1 year major adverse cardiac events, and high
levels of complete ST resolution, as compared to the levels and rates of other bare-metal and drug-eluting stents. MGuard
Coronary demonstrated high levels of complete ST resolution (occurrence in 61% of patients in the MAGICAL study and 90% of
patients in the PISCIONE study for the MGuard Coronary stent) and lower rates of 30 day and 1 year major adverse cardiac
events (2.4% and 5.9%, respectively, for the MGuard Coronary stent), as compared to the levels and rates of other bare-metal
and drug-eluting stents, as reported by Svilaas, et. al. (&ldquo;Thrombus Aspiration during Primary Percutaneous Coronary
Intervention,&rdquo; New England Journal of Medicine , Volume 358, 2008). As reported in the study by Svilaas, et. al.,
complete ST resolution occurred in 44.2% of patients with a bare-metal stent and 56.6% of patients with a bare-metal stent
preceded by an aspiration procedure, and the 30 day and 1 year major adverse cardiac event rates were 9.4% and 20.3%,
respectively, for patients with a bare-metal stent and 6.8% and 16.6%, respectively, for patients with a bare-metal stent
preceded by an aspiration procedure. Furthermore, results from a recent HORIZONS-AMI trial demonstrated that 1 year
major adverse cardiac event rates were 10.9% for patients with drug eluting stents. Complete ST resolution is the evidence of
a quick and adequate disappearance of the pathologic ST elevation in the patient&rsquo;s electrocardiogram, which is the
clear marker of STEMI. The faster and more complete the resolution is, the better recovery of the myocardium and the better
prognosis for the patient. Vlaar et. al. (Cardiac death and reinfarction after 1 year in the Thrombus Aspiration during
Percutaneous coronary intervention in Acute myocardial infarction Study (TAPAS): a 1-year follow-up study, Lancet 2008; 371:
1915&ndash;20) reported that a higher completeST resolution correlates with lower mortality and/or reinfarction rates among
affected patients (cardiac mortality was 1.4% for patients with complete ST resolution compared to 15.3% for patients with no
ST resolution).</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>MGuard Coronary with a drug eluting bio-absorbable
mesh.</B>&nbsp;&nbsp;Based upon the clinical profile of MGuard Coronary, we anticipate that the MGuard Coronary with a drug-eluting
bio-absorbable mesh will offer both the comparable reperfusion levels and 30-day and 1-year major adverse cardiac
event rates as the MGuard Coronary with a bio-stable mesh, as described above, and a comparative restenosis rate, which is the
rate at which patients experience formation of new blockages in their arteries, when compared to existing drug-eluting stents.&nbsp;&nbsp;This
product is currently planned, but not yet under development. The bio-absorbability of MGuard Coronary with a drug eluting bio-absorbable
mesh is intended to improve upon the bio-absorbability of other drug-eluting stents, in light of the large surface area of the
mesh and the small diameter of the fiber. We intend to study whether the protective sleeve on the MGuard Coronary with a drug-eluting
bio-absorbable mesh can improve uniform distribution of the applied drug to the vessel wall for improved drug therapy management
compared to other drug-eluting stents, where the drug is distributed on the struts only. If this intended result is achieved with
respect to the improved and uniform distribution of the applied drug to the vessel wall, the total dosage of the medication potentially
could be reduced while increasing its efficacy.&nbsp;MGuard Coronary with a drug-eluting bio-absorbable mesh is expected to promote
smooth and stable endothelial cell growth and subsequent attachment to the lumen of the vessel wall, which is essential for rapid
healing and recovery.&nbsp;In addition, we believe bio-absorbable drug-eluting mesh may enable the use of more effective drug therapies
that presently cannot be effectively coated on a metal-based stent due to their poor diffusion capabilities.&nbsp;&nbsp;Because
the drug-eluting bio-absorbable mesh will be bio-absorbable, we anticipate that the mesh will completely dissolve after four months,
which we expect will result in fewer of the chronic long term side effects that are associated with the presence of the drug.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>MGuard &ndash; Carotid Applications</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to market our mesh
sleeve coupled with a self-expandable stent (a stent that expands without balloon dilation pressure or need of an inflation
balloon) for use in carotid-applications. This product is currently under development.<B>&nbsp;</B> We believe that our
MGuard design will provide substantial advantages over existing therapies in treating carotid artery stenosis (blockage or
narrowing of the carotid arteries), like conventional carotid stenting and endarterectomy (surgery to remove blockage), given
the superior embolic protection characteristics witnessed in coronary arterial disease applications in high risk patient
populations. We intend that the embolic protection will result from the mesh sleeve, as it traps emboli at their
source.&nbsp;In addition, we believe that MGuard Carotid will provide post-procedure protection against embolic dislodgement,
which can occur immediately after a carotid stenting procedure and is often a source of post-procedural strokes in the
brain.&nbsp;&nbsp;Schofer, et al. (&ldquo;Late cerebral embolization after emboli-protected carotid artery stenting assessed
by sequential diffusion-weighted magnetic resonance imaging,&rdquo; <I>Journal of American College of Cardiology
Cardiovascular Interventions</I> , Volume 1, 2008) have also shown that the majority of the incidents of embolic showers
associated with carotid stenting occur immediately post-procedure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>MGuard &ndash; Peripheral Applications</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to market our mesh sleeve coupled
with a self-expandable stent (a stent that expands without balloon dilation pressure or need of an inflation balloon) for use in
peripheral applications.&nbsp; This product is currently under development.<B>&nbsp;</B> Peripheral Artery Disease, also known
as peripheral vascular disease, is usually characterized by the accumulation of plaque in arteries in the legs, need for amputation
of affected joints or even death, when untreated.&nbsp;&nbsp;Peripheral Artery Disease 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 covered stents, at the risk of blocking branching vessels, to ensure
that emboli does not fall into the bloodstream.&nbsp;&nbsp;We believe that our MGuard design will provide substantial advantages
over existing therapies in treating peripheral artery stenosis (blockage or narrowing of the peripheral arteries).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Product Development and Critical Milestones</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Below is a list of the products described
above and our projected critical milestones with respect to each.&nbsp;&nbsp;As used below, &ldquo;Q&rdquo; stands for our fiscal
quarter.&nbsp;&nbsp;While we currently anticipate seeking approval from the U.S. Food and Drug Administration for all of our products
in the future, we have only outlined a timetable to seek U.S. Food and Drug Administration approval for our MGuard Coronary plus
with bio-stable mesh product in our current business plan.&nbsp;&nbsp;The use of the term &ldquo;to be determined&rdquo; in the
table below with regard to certain milestones indicates that the achievements of such milestones is unable to be accurately predicted
as such milestones are too far in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 39%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">Product</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">Indication</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 10%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">Start<BR> Development</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">CE Mark</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">European<BR> Union Sales</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">FDA<BR> Approval</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: black 1pt solid; padding-right: 0.8pt; font-weight: bold">U.S. Sales</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.8pt">MGuard Coronary Plus Bio-Stable Mesh</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Bypass/ Coronary</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">2005</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Oct.&nbsp;2007</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q1-2008</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q4-2015</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">2016</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.8pt">MGuard Peripheral Plus Bio-Stable Mesh</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Peripheral Arteries</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q1-2011</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q4-2012</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.8pt">MGuard Carotid Plus Bio-Stable Mesh</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Carotid Arteries</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q1-2011</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Q4-2012</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0.8pt">MGuard Coronary Plus Bio-Absorbable Drug-Eluting Mesh</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">Bypass/ Coronary</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">To be determined</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With respect to MGuard Carotid with bio-stable
mesh, we have determined that the expected commencement of sales in the European Union cannot be accurately predicted since we
have delayed the development of this product until additional funding for its development is secured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We anticipate that our MGuard Coronary with
bio-stable mesh will be classified as a Class III medical device by the U.S. Food and Drug Administration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Pre-Clinical Studies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We performed laboratory and animal testing
prior to submitting an application for CE Mark approval for our MGuard Coronary with bio-stable mesh.&nbsp;&nbsp;We also performed
all CE Mark-required mechanical testing of the stent.&nbsp;&nbsp;We conducted pre-clinical animal trials at Harvard and MIT Biomedical
Engineering Center BSET lab in July 2006 and August 2007.&nbsp;&nbsp;In these animal trials, on average, the performance of the
MGuard Coronary with bio-stable mesh was comparable with the performance of control bare-metal stents.&nbsp;&nbsp;Analysis also
indicated that in these animal trials, the mesh produced levels of inflammation comparable with those levels produced by standard
bare-metal stents.&nbsp;&nbsp;No human trials were conducted as part of these pre-clinical trials.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The table below describes our completed
and planned pre-clinical trials. The use of the term &ldquo;To be determined&rdquo; in the table below with regard to milestone
dates in our pre-clinical studies indicates that we have not yet decided when to schedule such milestones.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 19%; border-top: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-right-color: windowtext; border-right-width: 1.5pt; font-weight: bold">Product</TD>
    <TD STYLE="width: 22%; border-top: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Stent</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Platform</B></P></TD>
    <TD STYLE="width: 20%; border-top: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; font-weight: bold">Approval Requirement</TD>
    <TD STYLE="width: 20%; border-top: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; font-weight: bold">Start of Study</TD>
    <TD STYLE="width: 19%; border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; font-weight: bold">End&nbsp;&nbsp;of Study</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="border-top: windowtext 1pt solid; border-left: windowtext 1.5pt solid">MGuard&nbsp;Coronary</TD>
    <TD STYLE="border-left: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Bare-Metal Stent Plus Bio-Stable</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mesh</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="border-left: windowtext 1.5pt solid">CE Mark (European Union + Rest of World)</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid">Q4-2006</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid">Q3-2007</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="border-left: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-left: windowtext 1.5pt solid">Drug-Eluting Mesh (Bare-Metal Stent Plus Drug-Eluting Mesh)&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-left: windowtext 1.5pt solid">CE Mark (European Union + Rest of World)</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid">To be determined</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">To be determined</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="border-left: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-left: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-left: windowtext 1.5pt solid">FDA (U.S.)</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid">To be determined</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">To be determined</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Cobalt-Chromium Stent Plus Bio-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Stable Mesh</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="vertical-align: top; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid">FDA</TD>
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Q2-2011</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q2-2012</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="border-left: windowtext 1.5pt solid">MGuard Peripheral/Carotid</TD>
    <TD STYLE="border-left: windowtext 1.5pt solid">Self-Expanding System Plus Mesh</TD>
    <TD STYLE="border-left: windowtext 1.5pt solid">CE Mark (European Union + Rest of World)</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid">Q3 2012</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid">Q1 2013</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With respect to the preclinical studies
for MGuard Coronary with a drug eluting bio-absorbable mesh, the trials have been indefinitely suspended due to our determination
to focus our time and resources on other trials at this time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With respect to the preclinical studies
for MGuard Peripheral/Carotid, the start of study of the Self Expending System Plus Mesh trial has been delayed from our previously
announced target due to a delay in our receipt of anticipated funding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Clinical Trials</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The table below describes our completed
and planned clinical trials.&nbsp;&nbsp;The use of the term &ldquo;To be determined&rdquo; in the table below with regard to milestone
dates in our clinical trials indicates that we have not yet decided when to schedule such milestones.&nbsp;&nbsp;All milestone
dates set forth in the table below are our best estimates based upon the current status of each clinical trial.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD ROWSPAN="2" STYLE="border-top: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-right-color: windowtext; border-left: windowtext 1.5pt solid; border-right-width: 1.5pt; font-weight: bold">Product</TD>
    <TD ROWSPAN="2" STYLE="border-top: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Stent</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Platform</B></P></TD>
    <TD ROWSPAN="2" STYLE="border-top: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Clinical</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Trial Sites</B></P></TD>
    <TD ROWSPAN="2" STYLE="border-top: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; font-weight: bold">Follow-up Requirement</TD>
    <TD ROWSPAN="2" STYLE="border-top: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; font-weight: bold">Objective</TD>
    <TD COLSPAN="4" STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; font-weight: bold">Study Status</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="4" STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; font-weight: bold">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; font-weight: bold">No. of Patients</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; font-weight: bold">Start Enrollment</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>End</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Enrollment</B></P></TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; font-weight: bold">End of Study</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">MGuard Coronary</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Bare-Metal Stent Plus Bio-Stable</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mesh</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Germany &ndash; two sites</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">12 months</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Study to</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">evaluate safety and</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">performance of MGuard system</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">41</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q4-2006</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q4- 2007</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q2-2008</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Brazil &ndash; one site</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">12 months</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">30</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q4-2007</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q1-2008</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q2-2009</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Poland &ndash; four sites</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">3 years</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">60</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q2-2008</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q3-2008</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q2-2009</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">International MGuard Observational Study - worldwide - 50 sites</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">12 months</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Up to 1,000</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q1-2008</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q4-2013</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q4-2013</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Israeli MGuard Observational Study - Israel - 8 sites</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">6 months</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Up to 100</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q2-2008</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q3-2011</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q3-2012</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Master randomized control trial -</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">9 countries, 50 centers in South America, Europe and Israel</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">12 months</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">433</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q2-2011</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q2-2012</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q2-2013</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Brazil Observational Study &ndash; 25 sites</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">12 months</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Up to 500</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q3-2010</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">To be determined</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">To be determined</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">FDA Study - 70 sites, U.S. and out of U.S.</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">12 months</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pilot study to</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">evaluate safety and</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">performance of</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">MGuard system for FDA approval</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">1,100</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q1-2013</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q2-2014</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Q3-2015</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Drug-Eluting Stent (Bare-Metal Stent + Drug Eluting Mesh)</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">South America</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">and Europe &ndash; 10 sites</P></TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">12 months</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pilot study to</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">evaluate safety and</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">performance of</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">MGuard system for FDA and CE Mark approval</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">500</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">To be determined</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">To be determined</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">To be determined</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">U.S. &ndash; 50 sites</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">12 months</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">2,000</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">To be determined</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">To be determined</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">To be determined</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Rest of World as an Observational Study</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">12 months to 3 years</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Evaluation of safety</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">and efficacy&nbsp;&nbsp;for specific indications</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">400</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">To be determined</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">To be determined</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">To be determined</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR>
    <TD STYLE="border-top: black 1.5pt solid; border-left: black 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-top: black 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-top: black 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-top: black 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: black 1.5pt solid">&nbsp;</TD>
    <TD COLSPAN="4" STYLE="border-top: black 1.5pt solid; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; border-left-color: black; border-left-width: 1.5pt; font-weight: bold">Study Status</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: windowtext 1.5pt solid; border-left: black 1.5pt solid; font-weight: bold">Product</TD>
    <TD STYLE="border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Stent</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Platform</B></P></TD>
    <TD STYLE="border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Clinical</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Trial Sites</B></P></TD>
    <TD STYLE="border-bottom: windowtext 1.5pt solid; font-weight: bold">Follow-up Requirement</TD>
    <TD STYLE="border-bottom: windowtext 1.5pt solid; font-weight: bold">Objective</TD>
    <TD STYLE="border-bottom: windowtext 1.5pt solid; font-weight: bold">No. of Patients</TD>
    <TD STYLE="border-bottom: windowtext 1.5pt solid; font-weight: bold">Start Enrollment</TD>
    <TD STYLE="border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>End</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Enrollment</B></P></TD>
    <TD STYLE="border-right: black 1.5pt solid; border-bottom: windowtext 1.5pt solid; font-weight: bold">End of Study</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">MGuard &nbsp;&nbsp;Peripheral</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Self-Expanding System + Mesh</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">South America and Europe &ndash; four sites</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">12 months</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pilot study to</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">evaluate safety and</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">performance of MGuard system for CE Mark approval</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">50</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To be determined</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To be determined</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To be determined</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">MGuard Carotid</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Self-Expanding System + Mesh</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Rest of World as a registry study</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">9 months</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Evaluation of safety and efficacy for specific indications post-marketing</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">150</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To be determined</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To be determined</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To be determined</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each of the patient numbers and study dates
set forth in the tables above are management&rsquo;s best estimate of the timing and scope of each referenced trial.&nbsp;&nbsp;Actual
dates and patient numbers may vary depending on a number of factors, including, without limitation, feedback from reviewing regulatory
authorities, unanticipated delays by us, regulatory authorities or third party contractors, actual funding for the trials at the
time of trial initiation and initial trial results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The MGuard Coronary clinical trials for
the drug-eluting stent have been delayed from our previously announced target due to a delay in our receipt of anticipated funding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With respect to the MGuard Peripheral clinical
trial for the self-expanding system plus mesh, the start date has been delayed from our previously announced start date due to
a delay in our receipt of anticipated funding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With respect to the MGuard Carotid clinical
trial for the self-expanding system plus mesh, the number of patients has been decreased due to feedback from the clinical trial
leaders that a smaller patient population would be sufficient for this clinical trial.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Completed Clinical Trials for MGuard
Coronary Bare-Metal Stent Plus Bio-Stable Mesh</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As shown in the table above, we have completed
three clinical trials with respect to our MGuard Coronary with bio-stable mesh.&nbsp;&nbsp;Our first study, conducted at two centers
in Germany, included 41 patients with either saphenous vein graft coronary interventions or native coronary lesions treatable by
a stenting procedure (blockages where no bypass procedure was performed).&nbsp;&nbsp;The MGuard Coronary rate of device success,
meaning the stent was successfully deployed in the target lesion, was 100% and the rate of procedural success, meaning there were
no major adverse cardiac events prior to hospital discharge, was 95.1%.&nbsp;&nbsp;At six months, only one patient (2.5% of participants)
had major myocardial infarction (QWMI) and 19.5% of participants had target vessel revascularization (an invasive procedure required
due to a stenosis in the same vessel treated in the study).&nbsp;&nbsp;This data supports MGuard Coronary&rsquo;s safety in the
treatment of vein grafts and native coronary legions.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our 2007 study in Brazil included 30 patients
who were candidates for a percutaneous coronary intervention (angioplasty) due to narrowing of a native coronary artery or a bypass
graft. In all patients, the stent was successfully deployed with perfect blood flow parameters (the blood flow parameter is a measurement
of how fast the blood flows in the arteries and the micro circulation system in the heart). There were no major cardiac events
at the time of the follow-up 30 days after the deployment of the stents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The MAGICAL study, which was conduct in
Poland, included 60 patients with acute ST-segment elevation myocardial infarction (the most severe form of a heart attack, referred
to as &ldquo;STEMI&rdquo;).&nbsp;&nbsp;The purpose of the study was to evaluate the clinical performance of MGuard Coronary with
bio-stable mesh when used in STEMI patients where percutaneous coronary intervention is the primary line of therapy.&nbsp;&nbsp;Perfect
blood flow in the artery was achieved in 90% of patients, perfect blood flow into the heart muscle was achieved in 73% of patients
and complete restoration of electrocardiogram normality was achieved in 61% of patients. The total major adverse cardiac events
rate during the six-month period following the deployment of the stents was 0% and after a three-year period was 10.5%.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Ongoing Clinical Trials for MGuard
Coronary Bare-Metal Stent Plus Bio-Stable Mesh</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our ongoing observation study in
Europe is an open registry launched in the first fiscal quarter of 2009.&nbsp;&nbsp;This registry is expected to enroll up to
1,000 patients and is aimed at evaluating the performance of MGuard Coronary with bio-stable mesh in a &ldquo;real
world&rdquo; population. To date, the primary countries to join are Austria, Czech Republic and Hungary. The primary endpoint
that this registry will evaluate is the occurrence of major adverse cardiac events at six months following deployment of the
stent, and the clinical follow-up will continue for a period of up to one year per patient. As of September 1, 2012, 548
patients of the prospective 1,000 have been enrolled in 19 sites.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our ongoing observational study in Israel
is an open registry launched in the fourth fiscal quarter of 2009.&nbsp;&nbsp;This registry is expected to enroll up to 100 patients.&nbsp;&nbsp;The
purpose of this study is to support local Israeli regulatory approval. The primary endpoint that this registry will evaluate is
the occurrence of major adverse cardiac events at 30 days following deployment of the stent, and the clinical follow-up will be
conducted at six months following deployment of the stent. As September 1, 2012, 86 patients of the prospective 100 have been enrolled.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the third fiscal quarter of 2010, we
launched a Brazilian registry to run in 25 Brazilian sites and enroll 500 patients. The primary endpoint that this registry will
evaluate is the occurrence of major adverse cardiac events at six months following the deployment of the stent, and the clinical
follow-up will continue for a period of up to one year per patient.&nbsp;&nbsp;As of September 1, 2012, 24 patients of the prospective
500 have been enrolled.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the second quarter of 2011, we began
the MGuard for Acute ST Elevation Reperfusion Trial (MASTER Trial), a prospective, randomized study in Europe, South America and
Israel to compare the MGuard Coronary stent with commercially-approved bare-metal and drug-eluting stents in achieving better myocardial
reperfusion (the restoration of blood flow) in primary angioplasty for the treatment of acute STEMI. The MASTER Trial enrolled
433 subjects, 50% of whom were treated with an MGuard Coronary stent and 50% of whom were treated with a commercially-approved
bare-metal or drug-eluting stent. The study was designed to evaluate the MGuard Coronary embolic protection stent compared to commercially-approved
bare metal or drug-eluting stents in heart attack patients undergoing primary percutaneous coronary intervention. On August 17,
2012, we were advised that the MASTER Trial demonstrated a positive outcome for the MGuard Coronary in treating acute STEMI when
compared to commercially-approved bare metal or drug-eluting stents. We expect detailed results of the study will be released in
October 2012.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Comparison of Clinical Trial Results to Date with Results
Achieved Using Bare Metal or Drug-Eluting Stents in the STEMI Population From Non-Comparative Study and Pooled Data.</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We conducted a meta-analysis of data from
four clinical trials in which MGuard Coronary was used:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The&nbsp;&nbsp;MAGICAL study, a single arm study in which 60 acute ST-segment elevation myocardial infarction (the most severe
form of a heart attack, referred to as STEMI) patients with less than 12 hours symptom onset were enrolled, as reported in &ldquo;Mesh
Covered Stent in ST-segment Elevation Myocardial Infarction&rdquo; in <I>EuroIntervention</I>, 2010;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the PISCIONE study, a single arm study in which 100 STEMI patients were enrolled, as reported in &ldquo;Multicentre Experience
with MGuard Net Protective Stent in ST-elevation Myocardial Infarction: Safety, Feasibility, and Impact on Myocardial Reperfusion&rdquo;
in <I>Catheter Cardiovasc Interv</I> , 2009;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the iMOS study, a Registry on MGuard Coronary use in the &ldquo;real-world&rdquo; population, from a study whose data was not
published; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the Jain study, which looks at a small group of 51 STEMI patients, as reported in &ldquo;Prevention of Thrombus Embolization
during Primary Percutaneous Intervention Using a Novel Mesh Covered Stent&rdquo; in <I>Catheter Cardiovasc Interv</I>, 2009.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our meta-analysis included data from the
following trials:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The CADILLAC (Controlled Abciximab and Device Investigation to Lower Late Angioplasty Complications) study, which found that
primary stent implantation is a preferred strategy for the treatment of acute myocardial infarction, as reported in &ldquo;A Prospective,
Multicenter, International Randomized Trial Comparing Four Reperfusion Strategies in Acute Myocardial Infarction: Principal Report
of the Controlled Abciximab and Device Investigation to Lower Late Angioplasty Complications (CADILLAC)&rdquo; Trial in <I>Journal
of American College of Cardiology</I>, 2001;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The EXPORT trial which was a randomized open-label study whose primary endpoint was to evaluate flow improvement in AMI patients
using either conventional stenting or aspiration followed by stenting, as reported in &ldquo;Systematic Primary Aspiration in Acute
Myocardial Percutaneous Intervention: A Multicentre Randomised Controlled Trial of the Export Aspiration Catheter&rdquo; in <I>EuroIntervention</I>,
2008;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The EXPIRA trial which was a single-center study aimed to explore pre-treatment with manual thrombectomy as compared to conventional
stenting, as reported in &ldquo;Thrombus Aspiration During Primary Percutaneous Coronary Intervention Improves Myocardial Reperfusion
and Reduces Infarct Size: The EXPIRA (Thrombectomy with Export Catheter in Infarct-related Artery During Primary Percutaneous Coronary
Intervention) Prospective, Randomized Trial&rdquo; in <I>Journal of American College of Cardiology</I>, 2009;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The REMEDIA trial, whose objective was to assess the safety and efficacy of the EXPORT catheter for thrombus aspiration in
STEMI patients, as reported in &ldquo;Manual Thrombus-Aspiration Improves Myocardial Reperfusion: The Randomized Evaluation of
the Effect of Mechanical Reduction of Distal Embolization by Thrombus-Aspiration in Primary and Rescue Angioplasty (REMEDIA) Trial&rdquo;
in <I>Journal of American College of Cardiology</I>, 2005;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The Horizons-AMI (Harmonizing Outcomes with RevascularIZatiON and Stents in Acute MI), which is the largest randomized trial
which compared DES to BMS in MI patients, as reported in &ldquo;Paclitaxel-Eluting Stents Versus Bare-Metal Stents in Acute Myocardial
Infarction&rdquo; in <I>New England Journal of Medicine</I>, 2009; <I>&nbsp;</I> and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The TAPAS Trial which showed that thrombus aspiration before stenting benefits MI patients, as reported in &ldquo;Thrombus
Aspiration During Primary Percutaneous Coronary Intervention&rdquo; in <I>New England Journal of Medicine</I> , 2009.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The non-randomized, pooled data analysis
of MGuard Coronary outcomes in STEMI population show comparable rates of thrombolysis in myocardial infarction (TIMI) 3 flow with
no significant difference of the historical control as compared to MGuard Coronary (88.5% and 91.7%, respectively), while the rates
of myocardial blush grade score 3 (37.3% for the historical control and 81.6% for MGuard Coronary) and ST segment resolution&gt;70%
(53.6% for the historical control and 79.1% for MGuard Coronary) are significantly better with the MGuard Coronary. MGuard Coronary
also appears consistently superior at the 30 days major adverse cardiac event (8.4% for the historical control and 2.4% for MGuard
Coronary) and 1 year major adverse cardiac event (13.3% for the historical control and 5.9% for MGuard Coronary) endpoints. The
data appears in the following tables.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="border: windowtext 1.5pt solid">&nbsp;</TD>
    <TD COLSPAN="4" STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt">NAME OF STUDY</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 45%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="width: 11%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">MAGICAL</TD>
    <TD STYLE="width: 11%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">PISCIONE</TD>
    <TD STYLE="width: 11%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">iMOS</TD>
    <TD STYLE="width: 11%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Jain</TD>
    <TD STYLE="width: 11%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Average</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Number of Patients</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">60</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">100</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">203</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">51</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">414 (Total)</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Thrombolysis in myocardial infarction 0-1,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">1.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">0.6</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Thrombolysis in myocardial infarction 3,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">90</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">85</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">93.5</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">100</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">91.7</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Myocardial blush grade 0-1,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">3.3</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">1.2</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Myocardial blush grade 3,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">73</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">90</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">80</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">81.6</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">ST segment resolution&gt;70%,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">61</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">90</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">79.1</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">ST segment resolution&gt;50%,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">88</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">85.4</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">96</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">87.6</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">30 day major adverse cardiac event,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">2.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">3.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">2.4</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">6 month major adverse cardiac events,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">4.5</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">6.0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">4.6</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">1 year major adverse cardiac events,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">5.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">6.0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">6.0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">5.9</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">1 year target vessel revascularization</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">2.3</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">2.3</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">6.0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">2.8</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Acute Binary Resteonosis 6M,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">19.0*</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">19.0</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="border: windowtext 1.5pt solid">&nbsp;</TD>
    <TD COLSPAN="4" STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">THREE YEAR FOLLOW UP STUDIES</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NAME OF STUDY</P></TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 45%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">&nbsp;</TD>
    <TD STYLE="width: 11%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">MAGICAL</TD>
    <TD STYLE="width: 11%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">PISCIONE</TD>
    <TD STYLE="width: 11%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">iMOS</TD>
    <TD STYLE="width: 11%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Jain</TD>
    <TD STYLE="width: 11%; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Average</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Number of Patients</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">57 out of 60</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">89</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Cardiac death at 3Y</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">7%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">2.2%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Non Cardiac death at 3Y</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">1.8%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">6.8%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Re-MI at 3Y</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">0%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">7.9%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">TLR at 3Y</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">1.8%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Not Reported</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">TVR at 3Y Include TLR</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">3.6%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">4.5%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Stroke</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">1.8%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Not Reported</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Stent thrombosis Definite / Probable</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">0%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">2.2%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">MACE &nbsp;(Cardiac death, RE-MI, TLR)</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">8.8%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">10.1%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-top-color: windowtext; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">MACCE&nbsp; (All death, target vessel MI, TVR, Stroke)</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">10.5%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Not Reported</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&mdash;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR>
    <TD STYLE="border: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">Trial</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">CADILLAC</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">Horizons-<BR> AMI</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">Horizons-<BR> AMI</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">TAPAS</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">TAPAS</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">EXPORT</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">EXPORT</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">EXPIRA</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">EXPIRA</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">REMEDIA</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">REMEDIA</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">Historical<BR> comparison</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-left: 1pt; text-align: center">MGuard</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; padding-right: -1.2pt; padding-left: 1pt; text-align: center">Level of<BR> Significance</TD></TR>
<TR>
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt; text-align: center">Group</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">Stent + Abciximab</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">BMS</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">DES</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">Thrombus aspiration</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">control</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">control</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">TA</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">control</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">Thrombus aspiration</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">Thrombus aspiration</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">control</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">Average</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">Average</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">Number of Patients</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">524</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">749</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">2257</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">535</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">536</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">129</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">120</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">87</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">88</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">50</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">49</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">5124 (total)</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">414 (total)</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">Thrombolysis in myocardial infarction 0-1,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">3.9</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">2.4</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">1.1</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">2.1</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">0.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">Thrombolysis in myocardial infarction 3,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">96.9</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">87.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">89.8</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">86</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">82.5</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">76.9</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">82</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">88.5</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">91.7</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">Myocardial blush grade 0-1,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">48.7</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">17.1</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">26.3</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">31.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">27.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">40.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">11.4</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">32</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">55.1</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">35.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">1.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt; text-align: center">*</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">Myocardial blush grade 3,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">17.4</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">45.7</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">32.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">25.4</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">35.8</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">37.3</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">81.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt; text-align: center">**</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">ST segment resolution&gt;70%,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">62</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">56.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">44.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">39.1</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">63.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">58</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">36.7</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">53.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">79.1</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">ST segment resolution&gt;50%,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">71.9</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">85</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">78.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">87.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">30 day major adverse cardiac event,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">4.4</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">6.8</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">9.4</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">10</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">10.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">8.4</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">2.4</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt; text-align: center">**</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">6 month major adverse cardiac events,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">10.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">10.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">4.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">1 year major adverse cardiac events,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">13.1</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">10.9</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">16.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">20.3</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">13.3</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">5.9</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt; text-align: center">*</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">Acute Binary Resteonosis 6 month,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">20.8</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">20.8</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">19.0</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">1 year target vessel revascularization</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&nbsp;&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">7.4</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">4.6</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">12.9</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">11.2</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&nbsp;&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&nbsp;&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt; padding-left: 1pt">Acute Binary Resteonosis 1 year,%</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">21</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">8.3</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">11.5</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-left: 1pt; text-align: center">&mdash;&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; padding-right: -1.2pt; padding-left: 1pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Future Clinical Trials for MGuard Coronary</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We anticipate that additional studies will
be conducted to meet registration requirements in key countries, particularly the U.S.&nbsp;&nbsp;We have currently budgeted about
$15 million for the U.S. Food and Drug Administration trial, which amount may change based on the final design of the study that
is approved by the U.S. Food and Drug Administration.&nbsp;&nbsp;We expect that post-marketing trials will be conducted to further
evaluate the safety and efficacy of the MGuard Coronary with bio-stable mesh in specific indications.&nbsp;&nbsp;These trials will
be designed to facilitate market acceptance and expand the use of the product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also plan to conduct a
large clinical study for U.S. Food and Drug Administration approval in the U.S. We expect that this study will be a
prospective, multicenter, randomized clinical trial. Its primary objective will be to compare the safety and the
effectiveness of the MGuard Coronary stent in the treatment of de novo stenotic lesions in coronary arteries in patients
undergoing primary revascularization (a surgical procedure for the provision of a new, additional, or augmented blood supply
to the heart) due to acute myocardial infarction with currently approved bare metal stents and drug eluting stents. We expect
total enrollment of approximately 1,100 subjects, at up to 70 sites throughout the U.S. and Europe. The combined primary
endpoint of this study is intended to demonstrate the MGuard Coronary stent&rsquo;s superiority in the occurrence of
myocardial reperfusion, which is measured by restoration of ST segment resolution of greater than 70%, and its
non-inferiority in the occurrence of target vessel failure (a composite endpoint of cardiac death, reoccurrence of a heart
attack and the need for a future invasive procedure to correct narrowing of the coronary artery), as compared to other
stents. This study is expected to start in the first quarter of 2013, and the enrollment phase is expected to last 18 months.
We expect that subjects will be followed for 12 months with assessments at 30 days, 6 months and 12 months, with angiographic
subgroup analysis occurring after the 13<SUP>th</SUP> month. This plan is tentative, and is subject to change to conform with
U.S. Food and Drug Administration regulations and requirements.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In other countries outside of the U.S.,
we believe that we generally will be able to rely upon the CE Mark approval of the product, as well as the results of the U.S.
Food and Drug Administration trial and MASTER Trial in order to obtain local approvals.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Growth Strategy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our primary business objective is to utilize our proprietary
technology to become the industry standard for treatment of acute coronary syndromes and to provide a superior solution to the
common acute problems caused by current stenting procedures, such as restenosis, embolic showers and late thrombosis.&nbsp; We
are pursuing the following business strategies in order to achieve this objective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B>Successfully
                                                                                                              commercialize MGuard
                                                                                                              Coronary with bio-stable
                                                                                                              mesh.</B><FONT STYLE="font: 10pt Times New Roman, Times, Serif">
                                                                                                              &nbsp;&nbsp;We have
                                                                                                              begun commercialization
                                                                                                              of MGuard Coronary
                                                                                                              with a bio-stable
                                                                                                              mesh in Europe,
                                                                                                              Russia, Asia and Latin America through
                                                                                                              our distributor
                                                                                                              network and we are
                                                                                                              aggressively pursuing
                                                                                                              additional registrations
                                                                                                              and contracts in
                                                                                                              other countries
                                                                                                              such as Canada,
                                                                                                              South Korea, Belgium,
                                                                                                              and certain smaller
                                                                                                              countries in Latin
                                                                                                              America.&nbsp;&nbsp;By
                                                                                                              the time we begin
                                                                                                              marketing this product
                                                                                                              in the U.S., we
                                                                                                              expect to have introduced
                                                                                                              the MGuard Coronary
                                                                                                              technology to clinics
                                                                                                              and interventional
                                                                                                              cardiologists around
                                                                                                              the world, and to
                                                                                                              have fostered brand
                                                                                                              name recognition
                                                                                                              and widespread adoption
                                                                                                              of MGuard Coronary.&nbsp;We
                                                                                                              plan to accomplish
                                                                                                              this by participating
                                                                                                              in national and
                                                                                                              international conferences,
                                                                                                              conducting and sponsoring
                                                                                                              clinical trials,
                                                                                                              publishing articles
                                                                                                              in scientific journals,
                                                                                                              holding local training
                                                                                                              sessions and conducting
                                                                                                              electronic media
                                                                                                              campaigns.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B>Successfully
                                                                                                              develop the next
                                                                                                              generation of MGuard
                                                                                                              stents.</B><FONT STYLE="font: 10pt Times New Roman, Times, Serif">
                                                                                                              &nbsp; While we
                                                                                                              market our MGuard
                                                                                                              Coronary with bio-stable
                                                                                                              mesh, we intend
                                                                                                              to develop the MGuard
                                                                                                              Coronary with a
                                                                                                              drug-eluting mesh.&nbsp;&nbsp;We
                                                                                                              are also working
                                                                                                              on our MGuard stents
                                                                                                              for peripheral and
                                                                                                              carotid, for which
                                                                                                              we expect to have
                                                                                                              CE Mark approval
                                                                                                              by the first quarter
                                                                                                              of 2013.&nbsp;&nbsp;In
                                                                                                              addition, we released
                                                                                                              our cobalt-chromium
                                                                                                              version of MGuard
                                                                                                              Coronary, MGuard
                                                                                                              Prime, in 2010,
                                                                                                              which we anticipate
                                                                                                              will replace the
                                                                                                              original stainless
                                                                                                              steel based version
                                                                                                              of MGuard Coronary
                                                                                                              over the next few
                                                                                                              years.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B>Continue to leverage MGuard technology to develop additional applications for interventional cardiologists and vascular
surgeons. &nbsp;</B> In addition to the applications described above, we believe that we will eventually be able to utilize our
proprietary technology to address imminent market needs for new product innovations to significantly improve patients&rsquo; care.&nbsp;&nbsp;We
have secured intellectual property using our mesh technology in the areas of brain aneurism, treating bifurcated blood vessels
and a new concept of distal protective devices.&nbsp;&nbsp;We believe these areas have large growth potential given, in our view,
that present solutions are far from satisfactory, and there is a significant demand for better patient care.&nbsp;&nbsp;We believe
that our patents can be put into practice and that they will drive our growth at a later stage.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B>Work with
                                                                                                              world-renowned physicians
                                                                                                              to build awareness
                                                                                                              and brand recognition
                                                                                                              of MGuard portfolio
                                                                                                              of products.</B><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;
                                                                                                              We intend to work
                                                                                                              closely with leading
                                                                                                              cardiologists to
                                                                                                              evaluate and ensure
                                                                                                              the efficacy and
                                                                                                              safety of our products.&nbsp;&nbsp;We
                                                                                                              intend that some
                                                                                                              of these prominent
                                                                                                              physicians will
                                                                                                              serve on our Scientific
                                                                                                              Advisory Board,
                                                                                                              which is our advisory
                                                                                                              committee that advises
                                                                                                              our board of directors,
                                                                                                              and run clinical
                                                                                                              trials with the
                                                                                                              MGuard Coronary
                                                                                                              stent.&nbsp;&nbsp;We
                                                                                                              believe these individuals,
                                                                                                              once convinced of
                                                                                                              the MGuard Coronary
                                                                                                              stent&rsquo;s appeal,
                                                                                                              will be invaluable
                                                                                                              assets in facilitating
                                                                                                              the widespread adoption
                                                                                                              of the stent.&nbsp;&nbsp;In
                                                                                                              addition, we plan
                                                                                                              to look to these
                                                                                                              cardiologists to
                                                                                                              generate and publish
                                                                                                              scientific data
                                                                                                              on the use of our
                                                                                                              products, and to
                                                                                                              present their findings
                                                                                                              at various conferences
                                                                                                              they attend.&nbsp;&nbsp;Dr.
                                                                                                              Gregg W. Stone,
                                                                                                              director of Cardiovascular
                                                                                                              Research and Education
                                                                                                              at the Center for
                                                                                                              Interventional Vascular
                                                                                                              Therapy of New York
                                                                                                              Presbyterian Hospital/Columbia
                                                                                                              University Medical
                                                                                                              Center and the co-director
                                                                                                              of Medical Research
                                                                                                              and Education at
                                                                                                              The Cardiovascular
                                                                                                              Research Foundation
                                                                                                              is the study chairman
                                                                                                              for the MASTER Trial.&nbsp;&nbsp;Dr.
                                                                                                              Donald Cutlip, Executive
                                                                                                              Director of Clinical
                                                                                                              Investigation at
                                                                                                              the Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              will provide scientific
                                                                                                              leadership of the
                                                                                                              U.S. Food and Drug
                                                                                                              Administration trials
                                                                                                              and Dr. Stone will
                                                                                                              act as principal
                                                                                                              investigator.&nbsp;&nbsp;On
                                                                                                              October 4, 2011,
                                                                                                              InspireMD Ltd.,
                                                                                                              our wholly-owned
                                                                                                              subsidiary, entered
                                                                                                              into a clinical
                                                                                                              trial services agreement
                                                                                                              with Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              Inc., pursuant to
                                                                                                              which Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              Inc. will conduct
                                                                                                              a study entitled
                                                                                                              &ldquo;MASTER II
                                                                                                              - MGuard Stent System
                                                                                                              Clinical Trial in
                                                                                                              Patients with Acute
                                                                                                              Myocardial Infarction&rdquo;
                                                                                                              on our behalf. We
                                                                                                              will pay Harvard
                                                                                                              Clinical Research
                                                                                                              Institute, Inc.,
                                                                                                              Cardio Research
                                                                                                              Foundations (CRF),
                                                                                                              as a core laboratory,
                                                                                                              and MedPass International,
                                                                                                              as our European
                                                                                                              monitoring group,
                                                                                                              an estimated aggregate
                                                                                                              fee of approximately
                                                                                                              $15 million for
                                                                                                              conducting the study,
                                                                                                              subject to adjustment
                                                                                                              dependent upon changes
                                                                                                              in the scope and
                                                                                                              nature of the study,
                                                                                                              as well as other
                                                                                                              costs to be determined
                                                                                                              by the parties.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B>Continue to protect and expand our portfolio of patents. &nbsp;</B> Our patents and their protection are critical to our
success.&nbsp;&nbsp;We have filed nine separate patents for our MGuard technology in Canada, China, Europe, Israel, India, South
Africa and the U.S.&nbsp;&nbsp;We believe these patents cover all of our existing products, and can be useful for future technology.&nbsp;&nbsp;We
intend to continue patenting new technology as it is developed, and to actively pursue any infringement upon our patents.&nbsp;&nbsp;To
date, we have secured patent protection in each of the U.S., South Africa and China for one patent. See &ldquo;Business &ndash;
Intellectual Property &ndash; Patents&rdquo;).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As noted above, we previously filed patents
for our MGuard technology in China, as part of our intended growth strategy.&nbsp;&nbsp;However, upon further consideration of
the cost and resources required to achieve patent protection in China, we elected to prioritize our pursuit of growth opportunities
in other countries and, as such, have ceased our growth efforts in China for the current time period.&nbsp;&nbsp;We intend to reevaluate
our strategy towards commercialization of our MGuard technology in China in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Competition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The stent industry is highly competitive.&nbsp;&nbsp;The
bare-metal stent and the drug-eluting stent markets in the U.S. and Europe are dominated by Abbott Laboratories, Boston Scientific
Corporation, Johnson &amp; Johnson and Medtronic, Inc. Due to ongoing consolidation in the industry, there are high barriers to
entry for small manufacturers in both the European and the U.S. markets.&nbsp;&nbsp;However, we believe that the European market
is somewhat more fragmented, and small competitors appear able to gain market share with greater ease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the future, we believe that physicians
will look to next-generation stent technology to compete with existing therapies.&nbsp;&nbsp;These new technologies will likely
include bio-absorbable stents, stents that are customizable for different lesion lengths, stents that focus on treating bifurcated
lesions, and stents with superior polymer and drug coatings.&nbsp;&nbsp;Some of the companies developing new stents are The Sorin
Group, Xtent, Inc., Cinvention AG, OrbusNeich, Biotronik SE &amp; Co. KG, Svelte Medical Systems, Inc., Reva Inc. and Stentys SA,
among others.&nbsp;&nbsp;To address current issues with drug-eluting stents, The Sorin Group and Cinvention AG have developed stents
that do not require a polymer coating for drug delivery, thereby expanding the types of drugs that can be used on their respective
stents.&nbsp;&nbsp;OrbusNeich has addressed the problem differently, developing a stent coated with an antibody designed to eliminate
the need for any drug at all.&nbsp;&nbsp;Xtent, Inc. has been concentrating on a stent that can be customized to fit different
sized lesions, so as to eliminate the need for multiple stents in a single procedure.&nbsp;&nbsp;Biotronik SE &amp; Co. KG is currently
developing bio-absorbable stent technologies, and Abbott Laboratories is currently developing a bio-absorbable drug-eluting stent.&nbsp;&nbsp;These
are just a few of the many companies working to improve stenting procedures in the future as the portfolio of available stent technologies
rapidly increases.&nbsp;&nbsp;As the market moves towards next-generation stenting technologies, minimally invasive procedures
should become more effective, driving the growth of the market in the future.&nbsp;&nbsp;We plan to continue our research and development
efforts in order to be at the forefront of the acute myocardial infarction solutions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">According to the January 3, 2011 2011 MEDTECH
OUTLOOK produced by the BMO Capital Markets, the worldwide stent market is dominated by four major players, with a combined total
market share of approximately 96%. Within the bare metal stent market and drug-eluting stent market, the top four companies have
approximately 92% and 98% of the market share, respectively. These four companies are Abbott Laboratories, Boston Scientific Corporation,
Johnson &amp; Johnson and Medtronic, Inc.&nbsp;&nbsp;To date, our sales are not significant enough to register in market share.&nbsp;&nbsp;As
such, one of the challenges we face to the further growth of MGuard 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.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition to the challenges from our competitors,
we face challenges related specifically to our products.&nbsp;&nbsp;&nbsp;None of our products is currently approved by the U.S.
Food and Drug Administration.&nbsp;&nbsp;Clinical trials necessary to support a pre-market approval application to the U.S. Food
and Drug Administration for our MGuard products 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.&nbsp;&nbsp;Furthermore, our rights to our intellectual property with respect to our products could be
challenged.&nbsp;&nbsp;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 MGuard products based on one or more of these patents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We note that an additional challenge facing
our products comes from drug-eluting stents. Over the last decade, there has been an increasing tendency to use drug-eluting stents
in percutaneous coronary intervention (PCI), with a usage rate of drug-eluting stents in PCI approaching 70-80% in some countries,
even though drug-eluting stents do not address thrombus management in acute myocardial infarction. A recent HORIZONS-AMI trial
that compared drug-eluting stents to bare-metal stents in STEMI patients failed to show any benefit of drug-eluting stents as compared
to bare-metal stents with regard to safety (death, re-infarction, stroke, or stent thrombosis), but showed the 1 year target vessel
revascularization (TLR) rate for drug-eluting stent patients was only 4.6%, as compared to 7.4% for patients with bare-metal stents.
However, based on data from over 350 patients across three clinical trials, the TLR rate for MGuard Coronary was 2.8%. (This data
is comprised of: (i) a TLR rate of 2.3% for a 100-patient study, as reported in &ldquo;Multicentre Experience with MGuard Net Protective
Stent in ST-elevation Myocardial Infarction: Safety, Feasibility, and Impact on Myocardial Reperfusion&rdquo; in <I>Catheter Cardiovasc
Interv</I> , 2009; (ii) a TLR rate of 2.3% for a sub-group of 203 STEMI patients from the International MGuard Observational Study;
and (iii) a TLR rate of 6.0% for a group of 51 heart attack patients, as reported in &ldquo;Prevention of Thrombus Embolization
during Primary Percutaneous Intervention Using a Novel Mesh Covered Stent&rdquo; in <I>Catheter Cardiovasc Interv</I>, 2009).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Another challenge facing the MGuard products
is that placing the stent at the entrance to large side branches, known as jailing large side branches, is not recommended with
the MGuard Coronary stent, because there is a risk of thrombosis. Jailing requires the need to cross the stent with guidewire and
to create an opening with the balloon to allow proper flow, which can be achieved with lower risk by using other bare-metal stents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Research and Development Expenses</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During each of the six months ended June
30, 2012 and the twelve months ended December 31, 2011, 2010 and 2009, we spent approximately $2.6 million, $2.5 million, $1.3
million and $1.3 million, respectively, on research and development.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Sales and Marketing</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Sales and Marketing</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In October 2007, MGuard Coronary with a
bio-stable mesh received CE Mark approval in the European Union, and shortly thereafter was commercially launched in Europe through
local distributors.&nbsp;&nbsp;We are also in negotiations with additional distributors in Europe, Asia and Latin America and are
currently selling our MGuard Coronary with a bio-stable mesh in more than 30 countries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Until U.S. Food and Drug Administration
approval of our MGuard Coronary with a bio-stable mesh, which we are targeting for 2015, we plan to focus our marketing efforts
primarily on Europe, Asia and Latin America.&nbsp;&nbsp;Within Europe, we have focused on markets with established healthcare reimbursement
from local governments such as Russia, Italy, Germany, France, Greece, Austria, Hungary, Poland, Slovenia, Czech Republic and Slovakia.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition to utilizing local and regional
distributor networks, we are using international trade shows and industry conferences to gain market exposure and brand recognition.&nbsp;&nbsp;We
plan to work with leading physicians to enhance our marketing efforts.&nbsp;&nbsp;As sales volume increases, we may engage in direct
sales in certain geographic markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Product Positioning</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The MGuard Coronary has initially penetrated
the market by entering market segments with indications that present high risks of embolic dislodgement, notably acute myocardial
infarction and saphenous vein graft coronary interventions. The market penetration of the MGuard Coronary in 2011 was minimal,
with total sales in the twelve months ended December 31, 2011 of approximately $6 million representing less than 1% of the total
sales of the acute myocardial infarction solutions market and the market penetration for the six months ended June 30, 2012 was
also minimal, with total sales in the six months ended June 30, 2012 of approximately $2.1 million representing less than 1% of
the total sales of the acute myocardial infarction solutions market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">When performing stenting procedures in patients
with acute coronary symptoms, interventional cardiologists face a difficult dilemma in choosing between bare-metal stents, which
have a high rate of restenosis, and drug-eluting stents, which have a high rate of late stent thrombosis, require administration
of anti-platelet drugs for at least one year post procedure and are more costly than bare-metal stents.&nbsp;&nbsp;We are marketing
our platform technology, MGuard Coronary, as a superior and cost effective solution to these currently unmet needs of interventional
cardiologists.&nbsp;&nbsp;We believe our MGuard Coronary technology is clinically superior to bare-metal stents because it provides
embolic protection during and post-procedure.&nbsp;&nbsp;We believe our MGuard Coronary technology is clinically superior to drug-eluting
stents, due to its lower stent thrombosis rate and protection from embolic showers during and post-procedure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition to the advantages of the MGuard
Coronary technology that we believe to exist, the MGuard Coronary technology maintains the deliverability, crossing profile, and
dilatation pressure of a conventional stent, and interventional cardiologists do not have to undergo any training before utilizing
the product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Insurance Reimbursement</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In most countries, a significant portion
of a patient&rsquo;s medical expenses is covered by third-party payors.&nbsp;&nbsp;Third-party payors can include both government
funded insurance programs and private insurance programs.&nbsp;&nbsp;While each payor develops and maintains its own coverage and
reimbursement policies, the vast majority of payors have similarly established policies.&nbsp;&nbsp;All of the MGuard products
sold to date have been designed and labeled in such a way as to facilitate the utilization of existing reimbursement codes, and
we intend to continue to design and label our products in a manner consistent with this goal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">While most countries have established reimbursement
codes for stenting procedures, certain countries may require additional clinical data before recognizing coverage and reimbursement
for the MGuard products or in order to obtain a higher reimbursement price.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the U.S., once the MGuard Coronary with
bio-stable mesh is approved by the U.S. Food and Drug Administration, it will be eligible for reimbursement from the Centers for
Medicare and Medicaid Services, which serve as a benchmark for all reimbursement codes.&nbsp;&nbsp;While there is no guarantee
these codes will not change over time, we believe that the MGuard Coronary will be eligible for reimbursement through both governmental
healthcare agencies and most private insurance agencies in the U.S. once it is approved by the U.S. Food and Drug Administration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Intellectual Property</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Patents</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have filed nine patent applications
in the U.S. (including one that is still in the Patent Cooperation Treaty international phase) covering aspects of our MGuard
technology. We have filed corresponding patent applications in Canada, China, Europe, Israel, India and South Africa, for an aggregate
total of 35 patents and pending applications. These patents cover percutaneous therapy, knitted stent jackets, stent and filter
assemblies, in vivo filter assembly, optimized stent jackets, stent apparatuses for treatment via body lumens and methods of use,
stent apparatuses for treatment via body lumens and methods of manufacture and use, and stent apparatuses for treatment of body
lumens, among others. In lay terms, these patents generally cover three parts of our products: the mesh sleeve, with and without
a drug, the product and the delivery mechanism of the stent.&nbsp;&nbsp;On October 27, 2010, our patent application pertaining
to &ldquo;stent apparatus for treatment via body lumens and method of use&rdquo;, South Africa patent application 2007/10751,
was issued as South Africa patent 2007/10751. On October 25, 2011, our patent application pertaining to &ldquo;in vivo filter
assembly&rdquo;, U.S. patent application 11/582,354, was issued as U.S. Patent 8,043,323.&nbsp;&nbsp;On June 13, 2012, our patent
application pertaining to &ldquo;filter assemblies&rdquo;, China patent application ZL200780046659.9, was issued as China patent
ZL200780046659.9. None of the other patents has been granted to date.&nbsp;&nbsp;We believe these patents, once issued, will cover
all of our existing products and be useful for future technology.&nbsp;&nbsp;We also believe that the patents we have filed, in
particular those covering the use of a knitted micron-level mesh sleeve over a stent for various indications, would create a significant
barrier for another company seeking to use similar technology.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To date, we are not aware of other companies
that have patent rights to a micron fiber, releasable knitted fiber sleeve over a stent.&nbsp;&nbsp;However, larger, better funded
competitors own patents relating to the use of drugs to treat restenosis, stent architecture, catheters to deliver stents, and
stent manufacturing and coating processes as well as general delivery mechanism patents like rapid exchange. Stent manufacturers
have historically engaged in significant litigation, and we could be subject to claims of infringement of intellectual property
from one or more competitors. Although we believe that any such claims would be un-founded, such litigation would divert attention
and resources away from the development of MGuard stents.&nbsp;&nbsp;Other manufacturers may also challenge the intellectual property
that we own, or may own in the future. We may be forced into litigation to uphold the validity of the claims in our patent portfolio,
an uncertain and costly process.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Trademarks</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We use the InspireMD and MGuard trademarks.
We have registered these trademarks in Europe. The trademarks are renewable indefinitely, so long as we continue to use the mark
in Europe and make the appropriate filings when required.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Government Regulation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The manufacture and sale of our products
are subject to regulation by numerous governmental authorities, principally the European Union CE Mark, the U.S. Food and Drug
Administration and other corresponding foreign agencies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Sales of medical devices outside the U.S.
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 clearance 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
U.S. Food and Drug Administration market authorization. These differences may affect the efficiency and timeliness of international
market introduction of our products. For countries in the European Union, medical devices must display a CE Mark before they may
be imported or sold.&nbsp;&nbsp;In order to obtain and maintain the CE Mark, we must comply with the Medical Device Directive 93/42/EEC
and pass an initial and annual facilities audit inspections to ISO 13485 standards by an European Union inspection agency. 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 annual facilities audit inspections conducted by European
Union inspectors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As noted below, we currently have distribution
agreements for our products with distributors in the following countries: Italy, Germany, Austria, Czech Republic, Slovakia, France,
Slovenia, Greece, Cyprus, Portugal, Spain, Poland, Hungary, Estonia, Lithuania, Ukraine, United Kingdom, Holland, Russia, Latvia,
Brazil, Chile, Costa Rica, Mexico, Argentina, Colombia, India, Sri Lanka, South Africa, Pakistan, Israel, Uruguay, Venezuela, Ireland,
Belarus and Egypt. We are subject to governmental regulation in each of these countries and we are not permitted to sell all of
our products in each of these countries. 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 each of the above-listed countries that is not a member of the European Union
accepts the CE Mark as its primary requirement for marketing approval, each such country requires additional regulatory requirements
for final marketing approval of the MGuard Prime version of the MGuard Coronary. Additionally, in Canada, we are required to pass
annual facilities audit inspections performed by Canadian inspectors. Furthermore, we are currently targeting additional countries
in Europe, Asia, and Latin America. We believe that each country that we are targeting also accepts the CE Mark as its primary
requirement for marketing approval. We intend that the results of the MASTER Trial will satisfy any additional governmental regulatory
requirements in each of the countries where we currently distribute our products and in any countries that we are currently targeting
for expansion. 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, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The MGuard Prime version of the MGuard Coronary
received CE Mark approval in the European Union in October 2010 and marketing approval in Israel in September 2011. We are currently
seeking marketing approval for the MGuard Prime version of the MGuard Coronary in Brazil, Malaysia, Mexico, Russia, Serbia, Singapore,
Argentina, India, Sri Lanka, Pakistan, South Korea, Ukraine, Belarus and Canada. We are focused on seeking marketing approval in
these countries because we believe that these countries represent the strongest opportunities for us to grow with respect to our
sales. We have determined that other countries with better organized and capitalized healthcare systems may not present us the
same opportunities for growth due to the lack of use of stents in treatment of cardiac episodes and less advantageous healthcare
reimbursement policies, among other reasons. While each of the countries in which we are seeking marketing approval for the MGuard
Prime version of the MGuard Coronary accepts the CE Mark as its primary requirement for marketing approval and does not require
any additional tests, each country does require some additional regulatory requirements for marketing approval. More specifically,
for the approval process in Malaysia, we need to submit an application for regulatory approval, which we anticipate will be granted
in three months. For the approval process in Mexico, we need to submit an application for regulatory approval, which we anticipate
will be granted in twelve months. For the approval process in Serbia, we need to submit an application for regulatory approval,
which we anticipate will be granted in four months. For the approval process in Singapore, we need to submit an application for
regulatory approval, which we anticipate will be granted in ten months. For the approval process in Argentina, we need to submit
an application for regulatory approval, which we anticipate will be granted in approximately twelve months. For the approval process
in India, we need to submit an application for regulatory approval, which we anticipate will be granted in November or December
2012. For the approval process in Sri Lanka, we need to submit an application for regulatory approval, which we anticipate will
be granted in six to twelve months. For the approval process in Pakistan, we need to submit an application for regulatory approval,
which we anticipate will be granted in six to twelve months. For the approval process in South Korea, we need to submit an application
for regulatory approval, which we anticipate will be granted in two years. For the approval process in Ukraine, we need to submit
an application for regulatory approval, which we anticipate will be granted in six months. For the approval process in Belarus,
we need to submit an application for regulatory approval, which we anticipate will be granted in six months. For the approval process
in Canada, we need to submit an application for regulatory approval, which we anticipate will be granted in twelve months. In Israel,
where we received marketing approval in September 2011, we will be subject to annual renewal of our marketing approval. Regulators
in Israel may request additional documentation or other materials and results of studies from medical device manufacturers such
as us as part of the renewal process. Generally, however, the annual renewal of marketing approval is given automatically, barring
a material change in circumstances or results. In Russia, we received market approval in February 2012. In Chile, we received market
approval for our previous distributor in December 2010. We have terminated our relationship with our previous distributor in Chile
and once we enter into a relationship with a new distributor, we will be required to submit a new application for regulatory approval
in Chile, which we anticipate will be granted twelve months after our submission for approval.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the approval process in Brazil, we must
comply with Brazilian Good Manufacturing Practice, or GMP, quality system requirements.&nbsp;&nbsp;ANVISA, Brazil&rsquo;s regulatory
agency, must conduct an inspection of the manufacturing of the MGuard Prime version of the MGuard Coronary to determine compliance
with Brazil GMP regulations.&nbsp;&nbsp;Upon successful completion of an audit, ANVISA will then issue the GMP certificate necessary
to register a medical device in Brazil.&nbsp;&nbsp;Once we receive the necessary GMP certificate, we can apply for regulatory approval.&nbsp;&nbsp;We
anticipate that the approval process in Brazil will take between one and two years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Please refer to the table below setting
forth the approvals and sales for original stainless steel based MGuard Coronary and the cobalt-chromium based MGuard Prime version
of the MGuard Coronary on a country-by-country basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold; text-decoration: underline; text-align: center">Approvals and Sales of the Original MGuard Coronary and the MGuard Prime version of the MGuard Coronary on a Country-by-Country Basis</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR>
    <TD STYLE="border: windowtext 1.5pt solid; font-weight: bold">Countries</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Original</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>MGuard</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Approval</B></P></TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Original MGuard</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Sales</B></P></TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>MGuard Prime</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Approval</B></P></TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; font-weight: bold">MGuard Prime Sales</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; font-weight: bold">Countries</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Original MGuard</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Approval</B></P></TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Original MGuard</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Sales</B></P></TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>MGuard<BR>
        Prime</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Approval</B></P></TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left-color: windowtext; border-left-width: 1.5pt; font-weight: bold">MGuard Prime Sales</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Argentina</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Italy</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Austria</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Latvia</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Brazil</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Lithuania</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Chile</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N(1)</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Malaysia</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Colombia</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Mexico</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Costa Rica</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Pakistan</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Cyprus</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Poland</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Czech Rep</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Portugal</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">UK</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Russia</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Estonia</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Serbia</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">France</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Singapore</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y(2)</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Germany</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Slovakia</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Greece</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Slovenia</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Holland (Netherlands)</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">South Africa</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Hungary</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Spain</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">India</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Sri Lanka</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; border-top-color: windowtext; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid; border-left: windowtext 1.5pt solid; border-top-width: 1.5pt">Israel</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: top; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Ukraine</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">Y</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD>
    <TD STYLE="vertical-align: bottom; border-right: windowtext 1.5pt solid; border-bottom: windowtext 1.5pt solid">N</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">__________</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>We terminated our relationship with our previous distributor in Chile and we will be required to obtain regulatory approval
upon our selection of a new distributor in Chile.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>At time the sales were made, we satisfied the regulatory requirements in Singapore. The regulatory requirements in Singapore
were subsequently changed and we no longer meet these requirements.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the U.S., the medical devices that will
be manufactured and sold by us will be subject to laws and regulations administered by the U.S. Food and Drug Administration, including
regulations concerning the prerequisites to commercial marketing, the conduct of clinical investigations, compliance with the Quality
System Regulation and labeling.&nbsp;&nbsp;We anticipate that our MGuard Coronary with bio-stable mesh product will be classified
as a Class III medical device by the U.S. Food and Drug Administration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A manufacturer may seek market authorization
for a new medical device through the rigorous Premarket Approval application process, which requires the U.S. Food and Drug Administration
to determine that the device is safe and effective for the purposes intended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will also be required to register with
the U.S. Food and Drug Administration as a medical device manufacturer. As such, our manufacturing facilities will be subject to
U.S. Food and Drug Administration inspections for compliance with 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 U.S. Food and Drug Administration
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. U.S. Food and Drug Administration
regulations also govern product labeling and prohibit a manufacturer from marketing a medical device for unapproved applications.
If the U.S. Food and Drug Administration believes that a manufacturer is not in compliance with the law, it can institute enforcement
proceedings to detain or seize products, issue a recall, enjoin future violations and assess civil and criminal penalties against
the manufacturer, its officers and employees.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Customers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our customer base is varied.&nbsp;&nbsp;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. For the six months ended June 30, 2012, 75% of our revenue was generated in Europe, 8%&nbsp;of
our revenue was generated in Central America, 6% of our revenue was generated in&nbsp;South America, 6% of our revenue was generated
in Asia with the remaining 5% of our revenue generated in the rest of the world.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our major customers in the six months ended
June 30, 2012 were Bosti Trading Ltd., a distributor in the Russian Federation that accounted for 22% of our revenues, Euromed
Deutschland GmbH, a distributor in Germany that accounted for 14% of our revenues, and Kardia Srl, a distributor in Italy that
accounted for 9% of our revenues. Our agreement with Bosti Trading Ltd. grants Bosti Trading Ltd. the right to be the exclusive
distributor of MGuard products in the Russian Federation until May 2014, subject to the achievement of certain order minimums.
Under our agreement with Bosti Trading Ltd., Bosti Trading Ltd. is required to purchase 3,500 stents from us in 2012, 6,000 stents
in 2013 and 4,000 stents in the first six months of 2014, at a price per stent of 560 Euros, for total minimum order values of
1,960,000 Euros, 3,360,000 Euros and 2,240,000 Euros, respectively. Our agreement with Euromed Deutschland GmbH grants Euromed
Deutschland GmbH the right to be the exclusive distributor of MGuard products in Germany until May 2013, with no order minimums
currently in place. Our agreement with Kardia Srl grants Kardia Srl the right to be the exclusive distributor of MGuard products
in Italy until August 2013, with no order minimums currently in place.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our major customers in the twelve months
ended December 31, 2011 were Kirloskar Technologies (P) Ltd., a distributor in India that accounted for 18% of our revenues, Tzamal
Jacobsohn Ltd., a distributor in Israel that accounted for 12% of our revenues, and Izasa Distribuciones Tecnicas SA, a distributor
in Spain that accounted for 9% of our revenues.&nbsp;&nbsp;Our agreement with Kirloskar Technologies (P) Ltd. grants Kirloskar
Technologies (P) Ltd. the right to be the exclusive distributor of MGuard products in India until May 2013, subject to achievement
of certain order minimums.&nbsp;&nbsp;Under our agreement with Kirloskar Technologies (P) Ltd., Kirloskar Technologies (P) Ltd.
was required to purchase 15,000 stents from us in 2011 and is required to purchase 20,000 stents from us in 2012, at a price per
stent of $600, for total minimum order values of $9,000,000 in 2011 and $12,000,000 in 2012, respectively.&nbsp;&nbsp;Kirloskar
Technologies (P) Ltd. will also be eligible to receive free stents representing 15% or 20% of the total value of stents purchased,
depending upon the annual volume of the purchases of our stents.&nbsp;&nbsp;Although Kirloskar Technologies (P) Ltd. did not achieve
its order minimum for 2011, we did not terminate either our agreement with Kirloskar Technologies (P) Ltd. or Kirloskar Technologies
(P) Ltd.&rsquo;s right to be the exclusive distributor of MGuard products in India.&nbsp;&nbsp;Our agreement with Tzamal Jacobsohn
Ltd. grants Tzamal Jacobsohn Ltd. the right to be the exclusive distributor MGuard products in Israel until December 2012, subject
to achievement of certain order minimums.&nbsp;&nbsp;Under our agreement with Tzamal Jacobsohn Ltd., Tzamal Jacobsohn Ltd. must
achieve at least 85% of the following order minimums: 1,400 stents during the twelve months ending March 31, 2012 and 1,600 stents
during the twelve months ending March 31, 2013, at a price per stent, per an oral agreement, of 400 Euros, for total minimum order
values of 560,000 Euros and 640,000 Euros, respectively.&nbsp;&nbsp;Tzamal Jacobsohn Ltd. will be granted options to purchase 8,116
shares of our common stock for each $100,000 in sales upon achievement of the order minimums. Tzamal Jacobsohn Ltd. did not meet
its order minimum for the twelve months ended March 31, 2012 and, accordingly, no options were granted to Tzamal Jacobsohn Ltd.
under this agreement, however, we did not terminate either our agreement with Tzamal Jacobsohn Ltd. or Tzamal Jacobsohn Ltd.&rsquo;s
right to be the exclusive distributor of MGuard products in Israel.&nbsp; Our agreement with Izasa Distribuciones Tecnicas SA grants
Izasa Distribuciones Tecnicas SA the right to be the exclusive distributor of MGuard products in Spain until May 2012, subject
to achievement of certain order minimums.&nbsp;&nbsp;Under our agreement with Izasa Distribuciones Tecnicas SA, Izasa Distribuciones
Tecnicas SA was required to purchase 4,000 stents from us in 2011, at a price per stent of 700 Euros, for a total minimum order
value of 2,800,000 Euros in 2011.&nbsp;&nbsp;<B> </B>Izasa Distribuciones Tecnicas SA did not achieve its order minimum for 2011,
however, we did not terminate either our agreement with Izasa Distribuciones Tecnicas SA or Izasa Distribuciones Tecnicas SA&rsquo;s
right to be the exclusive distributor of MGuard products in Spain.&nbsp;&nbsp;In addition, pursuant to an amendment to our agreement
with Izasa Distribuciones Tecnicas SA, Izasa Distribuciones Tecnicas SA, through its subsidiaries, was required to purchase 500
MGuard Prime stents from us at a price per stent of 700 Euros in February 2011.&nbsp;&nbsp;Izasa Distribuciones Tecnicas SA met
its purchase requirement in February 2011 and received a bonus of 100 free stents.&nbsp;&nbsp;Izasa Distribuciones Tecnicas SA
also agreed to partner with us in a study to be conducted in Spain entitled MGuard Prime Implementation in STEMI (acute myocardial
infarction with ST elevation).&nbsp;&nbsp;In addition, other current significant customers are in Germany, Argentina, and Brazil.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our major customer in 2010 was Hand-Prod
Sp. Z o.o, a Polish distributor, that accounted for 29% of our revenues.&nbsp;&nbsp;We have an agreement with Hand-Prod Sp. Z o.o
that grants Hand-Prod Sp. Z o.o the right to be the exclusive distributor of MGuard products in Poland until December 2012, subject
to achievement of certain order minimums.&nbsp;&nbsp;Under our agreement with Hand-Prod Sp. Z o.o, Hand-Prod Sp. Z o.o was required
to purchase 1,250 stents from us in 2010, 1,500 stents from us in 2011 and 2,500 stents from us in 2012, at a price per stent of
400 Euro, for total minimum order values of 500,000 Euro in 2010, 600,000 Euro in 2011 and 1,000,000 Euro in 2012, respectively.&nbsp;&nbsp;Hand-Prodwill
Sp. Z o.o was eligible to receive 278 free stents in 2010, 300 free stents in 2011 and 500 free stents in 2012 upon achievement
of the respective purchase minimums described above. Hand-Prod Sp. Z o.o did not achieve its order minimum for 2010, however, we
agreed to provide them with a pro-rata amount of free stents, based on the amount of stents they purchased. Hand-Prod Sp. Z o.o
did not achieve its order minimum for 2011 and therefore did not receive any free stents in 2011, but will be eligible to receive
500 free stents in 2012 if it achieves the minimum order values for that year.&nbsp;&nbsp;Although Hand-Prod Sp. Z o.o did not
achieve its order minimum for 2010 or 2011, we did not terminate either our agreement with Hand-Prod Sp. Z o.o or Hand-Prod Sp.
Z o.o&rsquo;s right to be the exclusive distributor of MGuard products in Poland.&nbsp;&nbsp;In addition, in 2011, we granted Hand-Prod
Sp. Z o.o an option to purchase 48,697 shares of our common stock as consideration for its assistance in promoting our business
in Poland. In May 2012, Hand-Prod Sp. Z o.o sent us a termination notice, effective December 2012, that notified us that it would
not be renewing its exclusive distribution agreement due to an organizational restructuring.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Manufacturing and Suppliers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We manufacture our stainless steel MGuard
stent through a combination of outsourcing and assembly at our own facility. Third parties in Germany manufacture the base stent
and catheter materials, and we add our proprietary mesh sleeve to the stent. Our current exclusive product supplier is QualiMed
Innovative Medizinprodukte GmbH. QualiMed Innovative Medizinprodukte GmbH is a specialized German stent manufacturer that electro
polishes and crimps the stent onto a balloon catheter that creates the base for our stainless steel MGuard stents. QualiMed Innovative
Medizinprodukte GmbH has agreed to take responsibility for verifying and validating the entire stent system by performing the necessary
bench test and biocompatibility testing. During the production process, QualiMed Innovative Medizinprodukte GmbH is responsible
for integrating the mesh covered stent with the delivery system, sterilization, packaging and labeling. Our manufacturing agreement
with QualiMed Innovative Medizinprodukte GmbH expires in September 2017, unless earlier terminated by either party in the event
of breach of material terms of the agreement, liquidation of the other party, our failure to receive requested products for more
than 60 days, a substantiated intellectual property claim is brought against the other party or the development agreement between
the parties is terminated.&nbsp;&nbsp;The manufacturing agreement provides for a rebate program that rewards us for increases in
sales of our products. Our proprietary mesh sleeve 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 MGuard stents.&nbsp;&nbsp;Our agreement with Natec Medical Ltd., which may be terminated by either party upon six months&rsquo;
notice, calls for non-binding minimum orders and discounted catheters upon reaching certain purchasing thresholds.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our MGuard Prime&nbsp;cobalt-chromium stent
was designed by Svelte Medical Systems Inc.&nbsp;&nbsp;We have an agreement with Svelte Medical Systems Inc. that grants us a non-exclusive,
worldwide license for production and use of the MGuard Prime&nbsp;cobalt-chromium stent for the life of the stent&rsquo;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.&nbsp;&nbsp;Our royalty payments to Svelte Medical Systems Inc. are determined by
the sales volume of MGuard Prime stents.&nbsp;&nbsp;We will pay a royalty of 7% for all product sales outside of the U.S. and,
for products sales within the U.S., a rate of 7% for the first $10 million of sales and a rate of 10% for all sales exceeding $10
million.&nbsp;&nbsp;We will also share with Svelte Medical Systems Inc. in the cost of obtaining the CE Mark approval, with their
costs not to exceed $85,000, and the U.S. Food and Drug Administration approval, with their costs not to exceed $200,000. We have
mutual indemnification obligations with Svelte Medical Systems Inc. for any damages suffered as a result of third party actions
based upon breaches of representations and warranties or the failure to perform certain covenants in the license agreement, and
Svelte Medical Systems Inc. will also indemnify us for any damages suffered as a result of third party actions based upon intellectual
property or design claims against the MGuard Prime&nbsp;cobalt-chromium stent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our MGuard Prime&nbsp;cobalt-chromium stent
is being manufactured and supplied by MeKo Laserstrahl-Materialbearbeitung.&nbsp;&nbsp;Our agreement with MeKo Laserstrahl-Materialbearbeitung
for the production of electro polished L605 bare metal stents for MGuard Prime is priced on a per-stent basis, subject to the quantity
of stents ordered.&nbsp;&nbsp;The complete assembly process for MGuard Prime, including knitting and securing the sleeve to the
stent and the crimping of the sleeve stent on to a balloon catheter, is done at our Israel manufacturing site.&nbsp;&nbsp;Once
MGuard Prime has been assembled, it is sent for sterilization in Germany and then back to Israel for final packaging.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each MGuard stent is manufactured from two
main components, the stent and the mesh polymer. The stent is made out of stainless steel or cobalt chromium.&nbsp;&nbsp;Both of
these materials are readily available and we acquire them in the open market. The mesh is made from polyethylene terephthalate
(PET).&nbsp;&nbsp;This material is readily available in the market as well, because it is used for many medical applications.&nbsp;&nbsp;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.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Distributors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently have exclusive distribution
agreements for our CE Mark-approved MGuard Coronary with bio stable mesh with medical product distributors based in Italy, Germany,
Austria, Czech Republic, Slovakia, France, Slovenia, Greece, Cyprus, Portugal, Spain, Poland, Hungary, Estonia, Lithuania, Ukraine,
United Kingdom, Holland, Russia, Latvia, Brazil, Chile, Costa Rica, Mexico, Argentina, Colombia, India, Sri Lanka, South Africa,
Pakistan, Belarus, Croatia, Ireland and Israel.&nbsp;&nbsp;We are currently in discussions with multiple distribution companies
in Europe, Asia, and Latin America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Current and future agreements with distributors
stipulate that while we are responsible for training, providing marketing guidance, marketing materials, and technical guidance,
distributors will be responsible for carrying out local registration, marketing activities and sales.&nbsp;&nbsp;In addition, in
most cases, all sales costs, including sales representatives, incentive programs, and marketing trials, will be borne by the distributor.&nbsp;&nbsp;Under
current agreements, distributors purchase stents from us at a fixed price. Our current agreements with distributors are for a term
of approximately three years and automatically renew for an additional three years unless modified by either party.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of September 21, 2012, we had 66 full-time
employees.&nbsp;&nbsp;Our employees are not party to any collective bargaining agreements.&nbsp;&nbsp;We consider our relations
with our employees to be good. We believe that our future success will depend, in part, on our continued ability to attract, hire
and retain qualified personnel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Properties</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our headquarters are located in Tel Aviv,
Israel, where we currently have a 1,000 square meter office facility and a 420 square meter manufacturing facility that employs
26 manufacturing personnel and has the capacity to manufacture and assemble 5,000 stents per month, should we hire more employees.
We believe that our current facility is sufficient to meet anticipated future demand by adding additional shifts to our current
production schedule.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">From time to time, we may be involved in
litigation that arises through the normal course of business. As of the date of this filing, we are not a party to any material
litigation nor are we aware of any such threatened or pending litigation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There are no material proceedings in which
any of our directors, officers or affiliates or any registered or beneficial shareholder of more than 5% of our common stock is
an adverse party or has a material interest adverse to our interest.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth information
regarding our executive officers and the members of our board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36%; padding-right: 0.8pt; font-weight: bold; text-decoration: underline">Name</TD>
    <TD STYLE="width: 5%; padding-right: 0.8pt; font-weight: bold; text-decoration: underline; text-align: center">Age</TD>
    <TD STYLE="width: 59%; padding-right: 0.8pt; font-weight: bold; text-decoration: underline">Position(s)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.7pt">Ofir Paz</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">46</TD>
    <TD STYLE="padding-right: 0.8pt">Chief Executive Officer and Director</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 0.7pt">Craig Shore</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">51</TD>
    <TD STYLE="padding-right: 0.8pt">Chief Financial Officer, Secretary and Treasurer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.7pt">Eli Bar</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">47</TD>
    <TD STYLE="padding-right: 0.8pt">Senior Vice President of Research and Development and Chief Technical Officer of InspireMD Ltd.</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 0.7pt">Robert Ratini</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">50</TD>
    <TD STYLE="padding-right: 0.8pt">Vice President of Sales and Marketing of InspireMD Ltd.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.7pt">Sol J. Barer, Ph.D</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">65</TD>
    <TD STYLE="padding-right: 0.8pt">Chairman of the Board of Directors</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.7pt">James Barry, Ph.D</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">53</TD>
    <TD STYLE="padding-right: 0.8pt">Director</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 0.7pt">Asher Holzer, Ph.D</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">62</TD>
    <TD STYLE="padding-right: 0.8pt">Director</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 0.7pt">James J. Loughlin</TD>
    <TD STYLE="padding-right: 0.8pt; font-weight: normal; text-align: center; font-style: normal; text-decoration: none">69</TD>
    <TD STYLE="padding-right: 0.8pt">Director</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 0.7pt">Paul Stuka</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">57</TD>
    <TD STYLE="padding-right: 0.8pt">Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.7pt">Eyal Weinstein</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">57</TD>
    <TD STYLE="padding-right: 0.8pt">Director</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.&nbsp;&nbsp;Sol J. Barer, Ph.D. and Paul Stuka are our class 1 directors, with their terms of office to expire
at our 2012 annual meeting of stockholders.&nbsp;&nbsp;Asher Holzer, Ph.D. and Eyal Weinstein are our class 2 directors, with their
terms of office to expire at our 2013 annual meeting of stockholders.&nbsp;&nbsp;Ofir Paz, James Barry, Ph.D. and James J. Loughlin
are our class 3 directors, with their terms of office to expire at our 2014 annual meeting of stockholders.&nbsp;&nbsp;At each
annual meeting of stockholders, commencing with the 2012 annual meeting, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Executive Officers and Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Ofir Paz</B> has served as our chief
executive officer and a director since March 31, 2011. In addition, Mr. Paz has served as the chief executive officer and a director
of InspireMD Ltd. since May 2005. From April 2000 through July 2002, Mr. Paz headed the Microsoft TV Platform Group in Israel.
In this capacity, Mr. Paz managed the overall activities of Microsoft TV Access Channel Server, a server-based solution for delivering
interactive services and Microsoft Windows-based content to digital cable set-top boxes.&nbsp;&nbsp;Mr. Paz joined Microsoft in
April 2000 when it acquired Peach Networks, which he founded and served as its chief executive officer. Mr. Paz was responsible
for designing Peach Networks&rsquo; original system architecture, taking it from product design to product viability, and then
managing and leading the company up to and after its acquisition, which was valued at approximately $100 million at the time of
such acquisition. Mr. Paz currently serves on the board of directors of A. S. Paz Investment and Management Ltd., S.P. Market
Windows Israel Ltd. and <FONT STYLE="font-weight: normal; font-style: normal">Cell Buddy Network Ltd.</FONT>&nbsp;&nbsp;Mr.
Paz received a B.Sc. in Electrical Engineering, graduating cum laude, and a M.Sc. from Tel Aviv University. Mr. Paz&rsquo;s qualifications
to serve on the board include his prior experience in successfully establishing and leading technology companies in Israel.&nbsp;&nbsp;In
addition, as chief executive officer, Mr. Paz&rsquo;s position on the board ensures a unity of vision between the broader goals
our company and our day-to-day operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Craig Shore</B> has served as our chief
financial officer, secretary and treasurer since March 31, 2011. In addition, since November 10, 2010, Mr. Shore has served as
InspireMD Ltd.&rsquo;s vice president of business development. From February 2008 through June 2009, Mr. Shore served as chief
financial officer of World Group Capital Ltd. and Nepco Star Ltd., both publicly traded companies on the Tel Aviv Stock Exchange,
based in Tel Aviv, Israel. From March 2006 until February 2008, Mr. Shore served as the chief financial officer of Cellnets Solutions
Ltd., a provider of advanced cellular public telephony solutions for low to middle income populations of developing countries based
in Azur, Israel. Mr. Shore has over 25 years of experience in financial management in the U.S., Europe and Israel. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Eli Bar</B> has served as InspireMD Ltd.&rsquo;s
senior vice president of research and development and chief technical officer since February 2011.&nbsp;&nbsp;Prior to that, he
served as InspireMD Ltd.&rsquo;s vice president of research and development since October 2006 and engineering manager since June
2005.&nbsp;&nbsp;Mr. Bar has over 15 years&rsquo; experience in medical device product development. Mr. Bar has vast experience
building a complete research and development structure, managing teams from the idea stage to an advanced marketable product. He
has been involved with many medical device projects over the years and has developed a synthetic vascular graft for femoral and
coronary artery replacement, a covered stent and a fully implantable ventricular assist device. Mr. Bar has more than nine filed
device and method patents and he has initiated two medical device projects. Mr. Bar is also a director of Blue Surgical Ltd., a
medical device company based in Israel. Mr. Bar graduated from New Haven University in Connecticut with a B.Sc. in Mechanical Engineering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Robert Ratini</B> has served as InspireMD
Ltd.&rsquo;s vice president of sales and marketing in a full-time capacity since June 1, 2012 and served in a part-time capacity
from March 27, 2012 until May 31, 2012. From April 2011 through March 26, 2012, Mr. Ratini served as a business consultant and
the vice president of business development for Easy Med Services, Inc. in Geneva, Switzerland, which focuses on telemedicine software
products, Stentys SA in Paris, France, which focuses on self-expanding coronary stents, and Parvulus SA in Lonay, Switzerland,
which concentrates on intra annular heart valve repair rings.&nbsp;&nbsp;From October 2009 through March 2011, Mr. Ratini served
as the director of marketing for Orbusneich Medical, which produces and sells interventional cardiology products, and from October
2006 through September 2009, Mr. Ratini served as vice president global marketing and EMEA sales for&nbsp;Biosensors International,
Switzerland, where he established a global sales and marketing department and led the launch of the Bio Matrix drug eluting stent.&nbsp;
Mr. Ratini has extensive cardiology and vascular experience and has worked in the medical information technology industry since
1989.&nbsp;&nbsp;Mr. Ratini graduated from the University of Applied Sciences in Bienne, Switzerland with a Master of Computer
Science.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Sol J. Barer, Ph.D.,</B> has served as
a director since July 11, 2011 and has served as our chairman since November 16, 2011. Dr. Barer has over 30 years of experience
with publicly traded biotechnology companies. In 1980, when Dr. Barer was with Celanese Research Company, he formed the biotechnology
group that was subsequently spun out to form Celgene Corporation. Dr. Barer spent 18 years leading Celgene Corporation as president,
chief operating officer and chief executive officer, culminating with his tenure as Celgene Corporation&rsquo;s executive chairman
and chairman beginning in May 2006 until his retirement in June 2011. Dr. Barer is also a director of Cerecor, Inc., Edge Therapeutics,
Inc., Medgenics, Inc., ContraFect Corporation, Amicus Therapeutics, Inc. and Aegerion Pharmaceuticals, Inc. and serves as a senior
advisor to a number of other biotechnology companies. Dr.&nbsp;Barer received a Ph.D. in organic chemistry from Rutgers University.&nbsp;&nbsp;Dr.
Barer brings to the board significant scientific and executive leadership experience in the U.S. biotechnology industry and prior
service on the board of directors of other publicly-held biopharmaceutical companies, as well as a unique perspective on the best
methods of growth for a biotechnology company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>James Barry, Ph.D.,</B> has served as
a director since January 30, 2012.&nbsp;&nbsp;Dr. Barry has served as executive vice president and chief operating officer at Arsenal
Medical Inc., a medical device company focused on local therapy, since September 2011.&nbsp;&nbsp;Dr. Barry also heads his own
consulting firm, Convergent Biomedical Group LLC, advising medtech companies on product development, strategy, regulatory challenges
and fund raising.&nbsp;&nbsp;Until June 2010, he was senior vice president, corporate technology development at Boston Scientific
Corporation, where he was in charge of the corporate research and development and pre-clinical sciences functions. Dr. Barry joined
Boston Scientific in 1992 and oversaw its efforts in the identification and development of drug, device and biological systems
for applications with implantable and catheter-based delivery systems. He currently serves on a number of advisory boards including
the College of Biomedical Engineering at Yale University, the College of Sciences at University of Massachusetts-Lowell, and the
Massachusetts Life Science Center. Dr. Barry received his Ph.D. in Biochemistry from the University of Massachusetts-Lowell and
holds a B.A. degree in Chemistry from Saint Anselm College.&nbsp;&nbsp;Dr. Barry brings to the board over 20 years of experience
in leadership roles in the medical device industry and significant medical technology experience, in particular with respect to
interventional cardiology products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Asher Holzer, PhD.,</B> has
served as our director since March 31, 2011. Dr. Holzer served as our president from March 31, 2011 until June 1, 2012 and
served as our chairman from March 31, 2011 until November 16, 2011. In addition, Dr. Holzer served as the president and
chairman of the board of InspireMD Ltd. from April 2007 until June 1, 2012. Previously, Dr. Holzer founded Adar Medical Ltd.,
an investment firm specializing in medical device startups, and served as its chief executive officer from 2002 through 2004.
Dr. Holzer currently serves on the board of directors of Adar Medical Ltd., O.S.H.-IL The Israeli Society of Occupational
Safety and Health Ltd., Theracoat Ltd. (where he serves as chairman of the board), 2to3D Ltd., and S.P. Market Windows
Cyprus.&nbsp;&nbsp;Dr. Holzer earned his PhD in Applied Physics from the Hebrew University.&nbsp;&nbsp;Dr. Holzer is also an
inventor and holder of numerous patents.&nbsp;&nbsp;Dr. Holzer brings to the board his more than 25 years of experience in
advanced medical devices, as well as expertise covering a wide range of activities, including product development, clinical
studies, regulatory affairs, market introduction and the financial aspects of the stent business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>James J. Loughlin</B> has served as our
director since September 19, 2012. Mr.&nbsp;Loughlin served as the National Director of the Pharmaceuticals Practice at KPMG LLP,
and a five-year term as member of the board of directors of KPMG LLP. Additionally, Mr.&nbsp;Loughlin served as Chairman of the
Pension and Investment Committee of the KPMG LLP board from 1995 through 2001. He also served as Partner in charge of Human Resources,
Chairman of the Personnel and Professional Development Committee, Secretary and Trustee of the Peat Marwick Foundation and a member
of the Pension, Operating and Strategic Planning Committees. In addition, Mr.&nbsp;Loughlin has served as a member of the board
of directors of Celgene Corporation, a global biopharmaceutical company focused on novel therapies for the treatment of cancer
and inflammatory diseases, since 2006, including as chairman of the audit committee since June 2008&nbsp;and a member of the compensation
committee since June 2008. Mr. Loughlin served as a member of the board of directors of Alfacell Corporation, a biopharmaceutical
company primarily focused on therapeutic drugs for the treatment of cancer and other pathological conditions, until 2008&nbsp;and
Datascope Corp., a medical device company engaged in the interventional cardiology and radiology, cardiovascular and vascular surgery,
and critical care fields, until January 2009. Mr.&nbsp;Loughlin brings to the board his valuable experiences as National Director
of the Pharmaceuticals Practice at KPMG LLP, an extensive background in accounting and financial reporting, qualifying him as an
audit committee financial expert, and prior service on the board of directors of other publicly-held biopharmaceutical companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Paul Stuka</B> has served as a director
since August 8, 2011.&nbsp;&nbsp;Mr. Stuka has served as the managing member of Osiris Partners, LLC, an investment fund, since
2000.&nbsp;&nbsp;Prior to forming Osiris Partners, LLC, Mr. Stuka, with 30 years of experience in the investment industry, was
a managing director of Longwood Partners, managing small cap institutional accounts.&nbsp;&nbsp;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 U.S. for the five-year period
ending December 31, 1985. Mr. Stuka&rsquo;s qualifications to serve on the board include his significant strategic and business
insight from his years of experience investing in the healthcare industry.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Eyal Weinstein</B> has served as a
director since August 8, 2011.&nbsp;&nbsp;Mr. Weinstein is the chief executive officer of LEOREX Ltd., a company developing
and marketing Dermo Cosmetic products. From 2001 to 2007, Mr. Weinstein worked as manager-partner of C.I.G., an economic and
accounting consultancy, consulting for leading Israeli banks, including Bank Leumi, Bank Hapoalim, Israeli Discount Bank and
Bank Hamizrachi. From 2000 to 2001, he was manager-partner of Exseed, a venture capital fund that invested in early-stage
companies. Beginning in 1996, Mr. Weinstein was a partner and founder in the establishment of three high-tech companies that
were ultimately sold, two to Microsoft Corporation. Mr. Weinstein currently serves on the board of directors of cell Buddy
Network Ltd. &nbsp;Mr. Weinstein brings to the board his considerable management and business experience as an executive of several
companies and investment funds in Israel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Family Relationships</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have no family relationships amongst
our directors and executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Transition Plan</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We anticipate that in the near term, Ofir
Paz will resign from his position as our chief executive officer. Mr. Paz intends to remain in his position while we conduct a
thorough search for an appropriate replacement. We have retained a search firm to assist in this process. Mr. Paz&rsquo;s resignation
reflects our transition from a private medical device start-up company with a promising new technology to a publicly traded company
with a successfully tested, commercialized, CE Mark approved product. After his resignation, we anticipate that Mr. Paz will remain
one of our directors and maintain his involvement with us, as necessary, on a consulting basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Agreements with Executive Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Ofir Paz</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 1, 2005, InspireMD Ltd. entered
into an employment agreement with Ofir Paz to serve as InspireMD Ltd.&rsquo;s chief executive officer. Such employment agreement
was subsequently amended on October 1, 2008 and March 28, 2011. Pursuant to this employment agreement, as amended, Mr. Paz was
entitled to a monthly gross salary of $15,367. Mr. Paz was also entitled to certain social and fringe benefits as set forth in
the employment agreement, which totaled 25% of his gross salary, as well as a company car. Mr. Paz was also entitled to a minimum
bonus equivalent to three monthly gross salary payments based on achievement of objectives and the approval of the board of directors.
Mr. Paz was eligible to receive stock options pursuant to this agreement following its six month anniversary, subject to board
approval. If Mr. Paz&rsquo;s employment was terminated with or without cause, he was entitled to at least six months&rsquo; prior
notice and would have been paid his salary and all social and fringe benefits in full during such notice period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 1, 2011, in order to obtain more
favorable tax treatment in Israel, the employment agreement with Mr. Paz was terminated and InspireMD Ltd. entered into a consultancy
agreement with A.S. Paz Management and Investment Ltd., an entity wholly-owned by Mr. Paz, through which Mr. Paz was retained to
serve as InspireMD Ltd.&rsquo;s chief executive officer. Pursuant to this consultancy agreement, Mr. Paz was entitled to a monthly
consultancy fee of $21,563. Mr. Paz was also entitled to a minimum bonus equivalent to three monthly gross salary payments based
on achievement of objectives and the approval of the board of directors. The consultancy agreement also contains certain confidentiality,
non-competition and non-solicitation requirements for Mr. Paz. If Mr. Paz&rsquo;s employment was terminated without cause, he was
entitled to at least six months&rsquo; prior notice and would have been paid his consultancy fee during such notice period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At the request of the compensation committee,
Mr. Paz agreed, effective as of December 1, 2011, to be compensated as an employee, rather than as a consultant, on substantially
the same terms as the consultancy agreement.&nbsp;&nbsp;Since December 1, 2011, Mr. Paz has been treated as an employee of ours
and has received the same level of compensation ( <I>i.e.</I> , base salary and benefits) as was mandated under his consultancy
agreement. We have otherwise complied with the terms of the consulting agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For a description of certain severance and
pension payments to which Mr. Paz was and will be entitled under his agreements, see &ldquo;Executive Compensation&mdash;Potential
Payments Upon Termination or Change of Control.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Craig Shore</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On November 28, 2010, InspireMD Ltd. entered
into an employment agreement with Craig Shore to serve as InspireMD Ltd.&rsquo;s vice president of business development. Pursuant
to the employment agreement, Mr. Shore was entitled to a monthly gross salary of $8,750, which amount increased to $10,200 upon
consummation of our share exchange transactions on March 31, 2011 and which further increased to $10,620 as of July 1, 2011. Mr.
Shore is also entitled to certain social and fringe benefits as set forth in the employment agreement. The employment agreement
also contains certain confidentiality, non-competition and non-solicitation requirements for Mr. Shore. Mr. Shore is also entitled
to, and received, a grant of options to purchase 45,000 restricted ordinary shares of InspireMD Ltd. which were converted into
options to purchase 365,223 shares of our common stock following the consummation of our share exchange transactions on March 31,
2011; such options shall fully vest if Mr. Shore&rsquo;s employment is terminated in connection with a change of control. If Mr.
Shore&rsquo;s employment is terminated without cause, Mr. Shore shall be entitled to at least 30 days&rsquo; prior notice and shall
be paid his salary in full and all social and fringe benefits during such notice period. If a major change of control of InspireMD
Ltd. occurs, Mr. Shore will be entitled to at least 180 days&rsquo; prior written notice and shall be paid his salary in full and
all social and fringe benefits during such notice period. If Mr. Shore is terminated for cause, he is not entitled to any notice.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For a description of certain severance and
pension payments to which Mr. Shore is entitled under his employment agreement, see &ldquo;Executive Compensation&mdash;Potential
Payments Upon Termination or Change of Control.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Eli Bar</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 26, 2005, InspireMD Ltd. entered
into an employment agreement with Eli Bar to serve as InspireMD Ltd.&rsquo;s engineering manager.&nbsp;&nbsp;Pursuant to this employment
agreement, Mr. Bar is entitled to a monthly gross salary of $8,750, which amount increased to $10,620 as of July 1, 2011.&nbsp;&nbsp;Mr.
Bar is also entitled to certain social and fringe benefits as set forth in the employment agreement including a company car.&nbsp;&nbsp;The
employment agreement also contains certain confidentiality, non-competition and non-solicitation requirements for Mr. Bar. If Mr.
Bar&rsquo;s employment is terminated, with or without cause, he is entitled to at least 60 days&rsquo; prior notice and shall be
paid his salary in full and all social and fringe benefits during such notice period.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For a description of certain severance and
pension payments to which Mr. Bar is entitled under his employment agreement, see &ldquo;Executive Compensation&mdash;Potential
Payments Upon Termination or Change of Control.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Robert Ratini</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 27, 2012, InspireMD Ltd. entered
into a consultancy agreement with Robert Ratini to serve as InspireMD Ltd.&rsquo;s vice-president of sales and marketing.&nbsp;&nbsp;Until
May 31, 2012, Mr. Ratini provided services on a part-time basis and, beginning on June 1, 2012, he has served as the full-time
vice-president of sales and marketing.&nbsp;&nbsp;Mr. Ratini is entitled to receive $20,000 per month in consideration for his
services, which was paid on a pro-rata basis for the hours he worked until May 31, 2012, and is also entitled to receive a monthly
phase-in payment of $7,000 from June 1, 2012 to December 31, 2012.&nbsp;&nbsp;Mr. Ratini is eligible to receive various performance-based
commissions, which are dependent upon the levels of revenue generated by his sales activity.&nbsp;&nbsp;The consultancy agreement
also contains certain confidentiality, non-competition and non-solicitation requirements for Mr. Ratini. The consultancy agreement
has no termination date, but may be terminated without cause by InspireMD Ltd. (i) upon 30 day prior written notice if such notice
is submitted between June 1, 2012 and August 31, 2012; or (ii) upon 90 day prior written notice if such notice is submitted after
September 1, 2012. If Mr. Ratini is terminated for cause, he is not entitled to any notice.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Asher Holzer</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 1, 2005, InspireMD Ltd. entered
into an employment agreement with Asher Holzer, Ph.D. to serve as InspireMD Ltd.&rsquo;s president. Such employment agreement was
subsequently amended on March 28, 2011. Pursuant to this employment agreement, as amended, Dr. Holzer was entitled to a monthly
gross salary of $15,367. Dr. Holzer was also entitled to certain social and fringe benefits as set forth in the employment agreement,
which totaled 25% of his gross salary, as well as a company car. Dr. Holzer was also entitled to a minimum bonus equivalent to
three monthly gross salary payments based on achievement of objectives and the approval of the board of directors. Dr. Holzer was
eligible to receive stock options pursuant to this agreement following its six month anniversary, subject to board approval. If
Dr. Holzer&rsquo;s employment was terminated with or without cause, he was entitled to at least six months&rsquo; prior notice
and would have been paid his salary and all social and fringe benefits in full during such notice period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 29, 2011, effective April 1, 2011,
in order to obtain more favorable tax treatment in Israel, the employment agreement with Dr. Holzer was terminated and InspireMD
Ltd. entered into a consultancy agreement with OSH-IL, the Israeli Society Ltd., an entity wholly-owned by Dr. Holzer, through
which Dr. Holzer was retained to serve as InspireMD Ltd.&rsquo;s president. Pursuant to this consultancy agreement, Dr. Holzer
was entitled to a monthly consultancy fee of $21,563. Dr. Holzer was also entitled to a minimum bonus equivalent to three monthly
gross salary payments based on achievement of objectives and the approval of the board of directors. The consultancy agreement
also contained certain confidentiality, non-competition and non-solicitation requirements for Dr. Holzer. If Dr. Holzer&rsquo;s
employment was terminated without cause, he was entitled to at least six months&rsquo; prior notice and would have been paid his
consultancy fee during such notice period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At the request of the compensation committee,
effective as of December 1, 2011, Dr. Holzer agreed to be treated as an employee for purposes of paying Dr. Holzer&rsquo;s salary
and benefits rather than as a consultant under Dr. Holzer&rsquo;s consultancy agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 1, 2012, Dr. Holzer, OSH-IL, the
Israeli Society of Occupational Health and Safety Ltd. and InspireMD Ltd. entered into a separation agreement and release, pursuant
to which, among other things, the consultancy agreement, dated as of April 29, 2011, by and between InspireMD Ltd. and OSH-IL the
Israeli Society Ltd. was terminated and Dr. Holzer resigned as president and director of InspireMD Ltd. and president of InspireMD,
Inc. As part of the separation agreement, Dr. Holzer agreed to release us, InspireMD Ltd., and Inspire MD GmbH from any and all
claims, rights or demands arising from or related to the previous agreement, the relations between the parties or the termination
thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 1, 2012, we entered into a consulting
agreement with Dr. Holzer, which terminates on November 30, 2012, pursuant to which Dr. Holzer will provide us with consulting
services in exchange for monthly payments of $20,337. As part of the consulting agreement, Dr. Holzer released us and our affiliates
from any and all claims other than those related to Dr. Holzer&rsquo;s position as a shareholder. Under this consulting agreement,
Dr. Holzer is not entitled to any additional benefits, other than benefit plans or programs that we provide to our directors so
long as Dr. Holzer remains on our board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For a description of certain severance and
pension payments to which Dr. Holzer was and will be entitled under his agreements, see &ldquo;Executive Compensation&mdash;Potential
Payments Upon Termination or Change of Control.&rdquo;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Compensation Discussion and Analysis</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Compensation Discussion and Analysis
discusses the principles underlying our executive compensation policies and decisions for our named executive officers. It provides
qualitative information regarding the manner in which compensation is earned by our named executive officers and places in context
the data presented in the tables that follow. In addition, we address the compensation paid or awarded during the six months ended
June 30, 2012 and the fiscal year ended December 31, 2011 to our named executive officers: Ofir Paz, our chief executive officer
(principal executive officer), Craig Shore, our chief financial officer, secretary and treasurer (principal financial and accounting
officer), Asher Holzer, Ph.D., our former president, Eli Bar, the senior vice president of research and development and chief technical
officer of InspireMD Ltd., and Sara Paz, the former vice president of sales of InspireMD Ltd.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We formed a compensation committee on September
21, 2011. Prior to that date, all compensation decisions for Mr. Paz and Dr. Holzer were made by our board of directors. Mr. Paz
was responsible for the executive compensation packages of Messrs. Shore and Bar and Ms. Paz. Because of the potential conflict
of interest, Dr. Holzer and Mr. Shore also reviewed and approved Mr. Paz&rsquo;s decision with respect to Ms. Paz&rsquo;s compensation
before it was implemented. The current compensation package of Mr. Paz and the compensation package of Dr. Holzer until his retirement
were determined before our share exchange transactions on March 31, 2011, when InspireMD Ltd. was a private Israeli company. In
accordance with Israeli law, their compensation was submitted to and approved by the stockholders of InspireMD Ltd. on February
28, 2011. Our board of directors also reviewed and approved Mr. Shore&rsquo;s compensation package after the share exchange transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Going forward, the compensation committee
of our board of directors will review at least annually and determine the executive compensation packages for Mr. Paz, including
approving any grants of stock options. Mr. Paz will remain responsible for making recommendations to our compensation committee
with respect to the executive compensation packages for Messrs. Shore and Bar, including any grants of stock options. The compensation
committee performed its annual review of named executive officer compensation in February 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In considering compensation for our named
executive officers prior to 2012, the board of directors relied upon the officer&rsquo;s performance and contribution to our development
and achievements. We did not engage in any formal benchmarking or conduct or obtain any formal surveys of executive compensation
at peer companies. We also considered general compensation trends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the compensation committee&rsquo;s
review of named executive officer compensation for 2012, the compensation committee retained the services of a compensation consultant.
The consultant provided a report that included formal benchmarking of our named executive officers&rsquo; compensation against
that at companies selected by the consultant and approved by our compensation committee. The peer group was comprised of 16 U.S.-based
public medical devices companies and four Israel-based public medical device and biopharmaceutical companies that were determined
to have a comparable business and financial profile to us, in terms of revenue, employee size and/or market value:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 34%">Antares Pharma</TD>
    <TD STYLE="width: 33%">Atricure</TD>
    <TD STYLE="width: 33%">Bacterin International Holdings</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>BioLase Technology</TD>
    <TD>Cardica</TD>
    <TD>Cerus</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Conceptus</TD>
    <TD>Cutera</TD>
    <TD>Cytori Therapeutics</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>D Medical Industries</TD>
    <TD>Palomar Medical Technologies</TD>
    <TD>Pluristem Therapeutics</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>PROLOR Biotech</TD>
    <TD>Protalix BioTherapeutics</TD>
    <TD>SEQUENOM</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>STAAR Surgical</TD>
    <TD>Stereotaxis</TD>
    <TD>SurModics</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Uroplasty</TD>
    <TD>Vision-Sciences</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The compensation consultant&rsquo;s report
and recommendations primarily called for increases in named executive officer compensation. However, in light of our current financial
position, our long-term and short-term goals, the fact that many of our named executive officers received salary increases in 2011
and the significant equity ownership of many of our named executive officers, the compensation committee determined to take only
two actions with respect to increases in named executive officer compensation in 2012, in the form of a stock option grant to Mr.
Shore, on the terms and for the reasons described under &ldquo;Named Executive Officer Compensation &ndash; Compensation of Chief
Financial Officer, Secretary and Treasurer&rdquo; below and a cash bonus to Mr. Bar, in the amount and for the reason described
under &ldquo;Named Executive Officer Compensation &ndash; Compensation of Senior Vice President of Research and Development and
Chief Technical Officer of InspireMD Ltd.&rdquo; below. The compensation committee did not determine to target our overall compensation
packages, or elements of our compensation packages, to fall within a certain percentile of the comparator group above, although
the compensation committee may determine to do so in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have entered into agreements with all
of our named executive officers. These agreements are summarized under &ldquo;Executive Officers and Directors &ndash; Agreements
with Executive Officers.&rdquo; Mr. Paz and Dr. Holzer were compensated pursuant to consultancy agreements beginning on April 1,
2011. However, at the request of the compensation committee, Mr. Paz and Dr. Holzer agreed, effective as of December 1, 2011, to
be compensated as employees rather than consultants. Since December 1, 2011, Mr. Paz has been, and from December 1, 2011 until
his resignation, Dr. Holzer was, treated as an employee of ours and received the same level of compensation ( <I>i.e.</I> , base
salary and benefits) as each would have been entitled to under his consultancy agreement. We have otherwise complied with the terms
of the consultancy agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Philosophy of Compensation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The goals of our compensation policy are
to ensure that executive compensation rewards management for helping us achieve our financial goals (increased sales, profitability,
etc.) and meet our clinical trial milestones and aligns management&rsquo;s overall goals and objectives with those of our stockholders.
To achieve these goals, our compensation committee and board of directors aims to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide a competitive compensation package that enables us to attract and retain superior management personnel;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>relate compensation to our overall performance, the individual officer&rsquo;s performance and our assessment of the officer&rsquo;s
future potential;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>reward our officers fairly for their role in our achievements; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>align executives&rsquo; objectives with the objectives of stockholders by granting equity awards to encourage executive stock
ownership.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have determined that in order to best
meet these objectives, our executive compensation program should balance fixed and bonus compensation, as well as cash and equity
compensation, as discussed below. Historically, there has been no pre-established policy or target for the allocation between either
cash and non-cash or short-term and long-term incentive compensation for our executive officers. We intend in the future to solicit
recommendations from our compensation consultants with respect to the balance of fixed and bonus compensation for our executive
officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Components of Compensation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The principal components of compensation
for our named executive officers are base salary/consulting fees, equity based grants, personal benefits and perquisites and, potentially
in the future, cash bonuses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Base Salary/Consulting Fees.</B> The primary
component of compensation for our named executive officers is base salary (or consulting fees for our named executive officers
who are employed pursuant to consultancy agreements). Base salary levels for our named executive officers have historically been
determined based upon an evaluation of a number of factors, including the individual officer&rsquo;s level of responsibility, length
and depth of experience and our assessment of the officer&rsquo;s future potential with our company, performance and, to the extent
available, general compensation levels of similarly situated executives and general compensation trends. Although our employment
and consultancy agreements with our named executive officers set forth a fixed base salary, salaries have been reviewed periodically
and changed, when deemed appropriate, by oral or written amendment to the applicable officer&rsquo;s agreement. For 2011, we generally
increased the base salaries of our executive officers, in part as a reflection of us becoming a publicly traded company in the
U.S. and the accompanying increased responsibilities for our executive officers. Prior to April 1, 2011, Ms. Paz was compensated
on an hourly basis, based on a fixed hourly consulting fee. In 2012, the compensation committee determined not to make any changes
to the base salaries of our named executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the future, the compensation committee
intends to review each named executive officer&rsquo;s base salary/consulting fee on an annual basis. In addition to the factors
described above, in setting base salary, the compensation committee intends to consider the recommendations of our compensation
consultants and more formal data regarding the compensation levels of similarly situated executives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Equity Based Grants.</B> An additional
principal component of our compensation policy for named executive officers consists of grants under the InspireMD, Inc. 2011 UMBRELLA
Option Plan. Under this plan, among other awards, executive officers may be granted stock options. Since its formation, the compensation
committee of the board of directors has administered the grants of awards under the InspireMD, Inc. 2011 UMBRELLA Option Plan,
and prior to its formation, the board of directors administered such awards. We believe that equity ownership of our company by
our named executive officers will further align the interests of our executive officers with those of our stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Prior to 2012, all equity incentive awards
were made either (i) in accordance with negotiated terms set forth in our employment or consultancy agreements, at levels deemed
necessary to attract or retain the executive at the time of such negotiations and determined taking into account the recipient&rsquo;s
overall compensation package and the goal of aligning such executive&rsquo;s interest with that of our stockholders, or (ii) at
the discretion of the board of directors or the compensation committee without reference to any formal targets or objectives, when
deemed appropriate in connection with extraordinary efforts or results or necessary in order to retain the executive in light of
the executive&rsquo;s overall compensation package.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During its 2012 compensation review, the
compensation committee determined to make only one equity incentive award, to Mr. Shore, on the terms and for the reasons described
under &ldquo;Named Executive Officer Compensation &ndash; Compensation of Chief Financial Officer, Secretary and Treasurer&rdquo;
below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our compensation committee intends to consider
during our annual compensation review whether to grant equity incentive awards to our named executive officers, and the terms of
any such awards, including whether to set any performance targets or other objective or subjective criteria related to the final
grant or vesting of such awards. The compensation committee will also retain the flexibility to make additional grants throughout
the year if deemed necessary or appropriate in order to retain our named executive officers or reward extraordinary efforts or
achievements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Personal Benefits and Perquisites.</B>
Certain of our named executive officers are entitled to additional personal benefits in accordance with what we believe to be customary
practice and law in Israel, including contributions towards pension and vocational studies funds, annual recreational allowances,
a company car, a daily food allowance and a company phone. We believe these benefits are commonly provided to executives in Israel,
and we therefore believe that it is necessary for us to provide these benefits in order to attract and retain superior management
personnel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Cash Bonus.</B> Until 2012, we had never
paid cash bonuses to our executives; however, our consultancy agreements with Mr. Paz and Dr. Holzer provided for cash bonuses
to be paid at the discretion of our board of directors in an amount not less than three months&rsquo; salary. We believe that cash
bonus payments are an appropriate means to reward significant achievement and contribution to us by an executive officer, especially
for officers that already hold significant equity positions in our company. Therefore, going forward, cash bonuses may become a
more significant component of our compensation policy for executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During its 2012 compensation review, the
compensation committee determined to make a cash bonus award, to Mr. Bar, in the amount and for the reason described under &ldquo;Named
Executive Officer Compensation &ndash; Compensation of Senior Vice President of Research and Development and Chief Technical Officer
of InspireMD Ltd.&rdquo; below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to consider the amount of cash
bonus that each of our named executive officers should be entitled to receive in connection with our annual compensation review,
taking into account each executive&rsquo;s total compensation package, the recommendations of our compensation consultant, and
any more formal data we obtain regarding the compensation levels of similarly situated executives. We will also consider in connection
with such review whether to designate certain financial or operational metrics or other objective or subjective criteria in determining
the final amounts of such awards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Compensation of Named Executive Officers</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Compensation of Chief Executive Officer.</B>
During the six months ended June 30, 2012, Mr. Paz&rsquo;s total compensation was $153,597. In 2011, Mr. Paz&rsquo;s total compensation
was $247,039, as compared to $219,160 in total compensation in 2010. Mr. Paz&rsquo;s total compensation was comprised of (i) salary
payments from December 1, 2011 through June 30, 2012, (ii) consulting fees paid pursuant to the consultancy agreement InspireMD
Ltd. entered into with A.S. Paz Management and Investment Ltd., an entity wholly-owned by Mr. Paz, through which Mr. Paz was retained
to serve as InspireMD Ltd.&rsquo;s chief executive officer from April 1, 2011 through November 30, 2011, (iii) salary payments
from January 1, 2011 through March 31, 2011, and (iv) benefits and perquisites, as more fully discussed below. For the six months
ended June 30, 2012, Mr. Paz&rsquo;s salary compensation was $121,327. In 2011, Mr. Paz&rsquo;s salary compensation was $42,425
under his employment agreement, $122,970 under the consultancy agreement with A.S. Paz Management and Investment Ltd. and $15,371
as an employee in December 2011, for a total of $180,766, as compared to $89,197 under his employment agreement and $78,491 under
a consultancy agreement that was in effect prior to his employment agreement, for a total of $167,688, in 2010. In determining
the compensation for Mr. Paz in 2011, our board of directors evaluated our corporate and organizational accomplishments in 2010,
as well as Mr. Paz&rsquo;s individual accomplishments. Mr. Paz&rsquo;s 2011 compensation was also increased in anticipation of
us becoming a publicly traded company in the U.S. and the additional obligations that would entail for our chief executive officer.
Mr. Paz&rsquo;s compensation package for 2011 was determined before our share exchange transactions on March 31, 2011, when InspireMD
Ltd. was a private Israeli company. In accordance with Israeli law, his compensation was submitted to and approved by the stockholders
of InspireMD Ltd. on February 28, 2011. The compensation committee determined that no changes were needed to Mr. Paz&rsquo;s compensation
package during 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Paz also received various benefits as
both a salaried employee and a consultant, many of which either are required by Israeli law or we believe are customarily provided
to Israeli executives. These benefits included contributions to his pension and vocational studies funds, an annual recreation
payment, a company car, a cell-phone and a daily food allowance. For the six months ended June 30, 2012, Mr. Paz&rsquo;s benefits
compensation was $32,270. In 2011, Mr. Paz&rsquo;s benefits compensation through payments made to him as an employee and through
payments made to A.S. Paz Management and Investment Ltd. was $66,273, as compared to $51,472 in 2010. Our board of directors and
compensation committee determined that equity based compensation would be inappropriate for Mr. Paz in 2011 and 2012, in light
of his current equity holdings in our company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Compensation of Chief Financial Officer,
Secretary and Treasurer.</B> Mr. Shore was initially hired as InspireMD Ltd.&rsquo;s vice president of business development and
became our chief financial officer, secretary and treasurer on March 31, 2011. During the six months ended June 30, 2012, Mr. Shore&rsquo;s
total compensation was $234,396. In 2011, Mr. Shore&rsquo;s total compensation was $419,433, as compared to $13,162 in total compensation
in 2010, which represented compensation paid from the commencement of Mr. Shore&rsquo;s employment on November 24, 2010. Mr. Shore&rsquo;s
total compensation was comprised of salary payments under his employment agreement with us, option grants under the InspireMD,
Inc. 2011 UMBRELLA Option Plan, as more fully discussed below, and benefits and perquisites, as more fully discussed below. For
the six months ended June 30, 2012, Mr. Shore&rsquo;s salary compensation was $76,717. In 2011, Mr. Shore&rsquo;s annual salary
was $118,333, as compared to $9,912 in 2010. Pursuant to his employment agreement with us, Mr. Shore&rsquo;s monthly salary was
automatically increased during 2011, upon the consummation of our share exchange transactions. Upon Mr. Paz&rsquo;s recommendation,
Mr. Shore&rsquo;s salary was further increased as of July 1, 2011 by an additional $838 per month on July 1, 2011. In determining
to make such additional increase, Mr. Paz considered the corporate and organizational accomplishments of our company since Mr.
Shore joined us, his role in such accomplishments, his general performance, his increased responsibilities as chief financial officer,
the desire to ensure that his compensation is high enough to retain his services and the desire to make his compensation consistent
with what we pay to our other senior executives. Mr. Paz recommended, and the compensation committee agreed, that no changes were
needed to Mr. Shore&rsquo;s compensation package during 2012 other than the option grant described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Shore also received various benefits,
many of which either are required by Israeli law or we believe are customarily provided to Israeli executives, including contributions
to his pension and vocational studies funds, an annual recreation payment, a company car, a company cell phone, and a daily food
allowance. For the six months ended June 30, 2012, Mr. Shore&rsquo;s benefits compensation was $18,180. In 2011, Mr. Shore&rsquo;s
benefits compensation was $35,280, as compared to $3,250 in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On February 27, 2011, Mr. Shore was granted
options that currently represent the right to acquire up to 365,223 shares of our common stock at an exercise price of $1.23 per
share. This award was part of the initial package negotiated with Mr. Shore in connection with his hiring in November 2010. The
number of shares for which such award was exercisable and the exercise price were originally set forth in Mr. Shore&rsquo;s employment
agreement and related to shares of InspireMD Ltd. The per share price was determined based on the price at which InspireMD Ltd.
had most recently raised capital. The option was converted into an option to acquire the current number of shares at the current
exercise price through the share exchange transactions. The options vest on an annual basis over three years. The options had a
fair market value of $260,554 as of February 27, 2011. In determining to grant Mr. Shore a significant portion of his compensation
in the form of options, our board of directors believed that it was important to give Mr. Shore an equity interest in us. Providing
Mr. Shore with an equity stake was viewed by our board as important, as Mr. Shore previously did not hold any such stake in us,
as opposed to Mr. Paz and Dr. Holzer. In determining the number of shares to award to Mr. Shore, Mr. Paz and our board of directors
considered the need to provide Mr. Shore with a compensation package that was sufficient to attract him to accept employment with
us, given that his base salary was believed to be relatively low for his position, and the desire to provide Mr. Shore with an
equity position in our company that was significant enough to align his objectives with those of our stockholders and allow Mr.
Shore to share in our future on financial growth and the benefits of the share exchange and us becoming a U.S. public company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On May 20, 2011, Mr. Shore was awarded a
warrant to purchase 3,000 shares of our common stock at an exercise price of $1.80 per share as a bonus payment for his work performed
in connection with our share exchange transactions. The warrant had a fair market value of $5,266 and vested immediately. The award
was given in recognition of Mr. Shore&rsquo;s extraordinary efforts related to our private placement transaction on March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On May 25, 2012, Mr. Shore was granted options
to acquire up to 300,000 shares of our common stock at an exercise price of $0.80 per share. The options vest on an annual basis
over three years. The options had a fair market value of $139,499 as of May 25, 2012. The award was given in recognition of Mr.
Shore&rsquo;s past contributions, to increase Mr. Shore&rsquo;s equity stake in us in order to further align Mr. Shore&rsquo;s
objectives with those of our stockholders and allow him to share in our future financial growth and to compensate for Mr. Shore&rsquo;s
relatively low salary for his position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Compensation of Senior Vice President
of Research and Development and Chief Technical Officer of InspireMD Ltd.</B> During the six months ended June 30, 2012, Mr. Bar&rsquo;s
total compensation was $112,432. In 2011, Mr. Bar&rsquo;s total compensation was $350,394, as compared to $942,689 in total compensation
in 2010. Mr. Bar&rsquo;s total compensation was comprised of salary payments under his employment agreement with us, a cash bonus
awarded in 2012, as more fully discussed below, option grants under the InspireMD, Inc. 2011 UMBRELLA Option Plan, as more fully
discussed below, and benefits and perquisites, as more fully discussed below. For the six months ended June 30, 2012, Mr. Bar&rsquo;s
salary compensation was $77,100. In 2011, Mr. Bar&rsquo;s annual salary was $122,760, as compared to $91,684 in 2010. In determining
the compensation for Mr. Bar in 2011, Mr. Paz evaluated the corporate and organizational accomplishments of our company in 2010,
particularly with respect to the development of our products, as well as Mr. Bar&rsquo;s individual achievements and contributions
to such accomplishments. Mr. Bar&rsquo;s increase in salary during 2011 reflected his significant contributions to our success
in 2010, and our desire to retain him going forward. His 2011 salary was increased to the level it had been in August 2008, prior
to salary reductions throughout the company. Mr. Paz recommended, and the compensation committee agreed, that no changes were needed
to Mr. Bar&rsquo;s compensation package during 2012 other than the cash bonus described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Bar received a cash bonus of $12,850
in recognition for his efforts in achieving the successful completion of enrollment of our MASTER Trial during the six months ended
June 30, 2012. The amount of the bonus was equal to an additional month of salary plus social benefits for Mr. Bar.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Bar also received various benefits,
many of which either are required by Israeli law or we believe are customarily provided to Israeli executives, including contributions
to his pension and vocational studies funds, an annual recreation payment, a company car, a company cell phone, and a daily food
allowance. During the six months ended June 30, 2012, Mr. Bar&rsquo;s benefits compensation was $22,482. In 2011, Mr. Bar&rsquo;s
benefits compensation was $42,459, as compared to $32,496, in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 1, 2011, Mr. Bar was awarded options
to acquire up to 200,000 shares of common stock at an exercise price of $2.75 per share as a bonus payment for his significant
contributions to our company. In determining to make such award, Mr. Paz considered Mr. Bar&rsquo;s continued exemplary performance
and contributions to the clinical development of our product and the desire to continue to retain his services and keep his compensation
consistent with what we pay to our other senior executives. We determined that granting Mr. Bar more of an equity interest would
further increase his opportunity to share in our future financial success and align his objectives with those of our stockholders.
The options vest on an annual basis over a three year period. The options had a fair market value of $268,381 as of June 1, 2011.
The exercise price was the fair market value of our common stock on the date of grant. On August 31, 2011, we cancelled these options
and reissued an option to purchase 200,000 shares of common stock at an exercise price of $1.93 because our board of directors
determined that the $2.75 exercise price was too far out of the money to achieve the compensatory and incentive purposes of the
options. The exercise price of the new option was the fair market value of our common stock on the date of grant. The fair value
of the 200,000 options as of August 31, 2011 was $185,175.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Bar also received two option awards
in July 2010. The first award currently represents the right to acquire up to 608,707 shares of our common stock at an exercise
price of $0.001 per share. The number of shares for which such award was exercisable and the exercise price originally related
to shares of InspireMD Ltd. The per share price was set at $0.01 per share. The option was converted into an option to acquire
the current number of shares at the current exercise price through the share exchange transactions. The second award currently
represents the right to acquire up to 81,161 shares of our common stock at an exercise price of $1.23 per share. The number of
shares for which such award was exercisable and the exercise price also originally related to shares of InspireMD Ltd. The per
share price was determined based on the price at which InspireMD Ltd. had most recently raised capital. The option was converted
into an option to acquire the current number of shares at the current exercise price through the share exchange transactions. Both
awards were made in recognition of Mr. Bar&rsquo;s contributions to our corporate and organizational achievements. The first award
was related to Mr. Bar&rsquo;s performance over the long-term of his tenure with us and to our desire to grant Mr. Bar an equity
stake that would not be at risk. In particular, in determining to make this award, the board of directors took into account the
fact that, from September 2008 to April 2009, Mr. Bar accepted several salary reductions, which resulted in his monthly salary
being reduced from approximately $10,133 to approximately $7,387. Mr. Bar&rsquo;s salary remained approximately $7,387 per month
until August 2010, at which time his monthly salary was increased to $8,000. Furthermore, our board of directors decided that recognizing
Mr. Bar&rsquo;s efforts and sacrifices through an equity award was the most appropriate form of compensation, as it would also
serve to give Mr. Bar an additional equity interest in us. Providing Mr. Bar with an increased equity stake was viewed by our board
as important, as Mr. Bar&rsquo;s existing options were deemed a very small stake in comparison to that held by Mr. Paz and Dr.
Holzer. The second award was intended as a more traditional annual incentive award and related primarily to Mr. Bar&rsquo;s performance
in 2010 and our desire to grant Mr. Bar traditional options whose value would fluctuate depending on the performance of our common
stock. Both option awards vest one-twelfth quarterly commencing with the quarter in which they were granted. The first award had
a fair market value of $750,000 as of July 25, 2010. The second award had a fair market value of $68,509 as of July 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Compensation of Former President.</B>
&nbsp;During the six months ended June 30, 2012, Dr. Holzer&rsquo;s total compensation was $189,290. In 2011, Dr. Holzer&rsquo;s
total compensation was $245,406, as compared to $209,592 in total compensation in 2010. Dr. Holzer&rsquo;s total compensation was
comprised of (i) consulting fees paid pursuant to the consultancy agreement InspireMD Ltd. entered into with OSHIL, The Israeli
Society Ltd., an entity wholly-owned by Dr. Holzer, through which Dr. Holzer was retained to serve as InspireMD Ltd.&rsquo;s president
from June 1, 2012 through June 30, 2012, (ii) salary payments from December 1, 2011 through May 31, 2012, (iii) consulting fees
paid pursuant to the consultancy agreement InspireMD Ltd. entered into with OSHIL, The Israeli Society Ltd. from April 1, 2011
through November 30, 2011, (iv) salary payments from January 1, 2011 through March 31, 2011, and (v) benefits and perquisites,
as more fully discussed below. For the six months ended June 30, 2012, Dr. Holzer&rsquo;s salary compensation was $139,654 as an
employee, which includes a payout of his unused vacation days of $36,010, and $14,474 under the consultancy agreement with OSHIL,
The Israeli Society Ltd., for a total of $154,128. In 2011, Dr. Holzer&rsquo;s salary compensation was $42,425 under his employment
agreement, $122,970 under the consultancy agreement with OSHIL, The Israeli Society Ltd., and $15,371 as an employee in December
2011, for a total of $180,766, as compared to $89,197 under his employment agreement and $74,791 under a consultancy agreement
that was in effect prior to his employment agreement, for a total of $163,988, in 2010. In determining the compensation for Dr.
Holzer in 2011, our board of directors evaluated our corporate and organizational accomplishments in 2010, as well as Dr. Holzer&rsquo;s
individual accomplishments and contributions to our accomplishments. Our board of directors determined that an increase in compensation
for Dr. Holzer was appropriate in 2011, in part, in anticipation of us becoming a U.S. publicly traded company in 2011 and the
increased responsibilities that would result for our president. Dr. Holzer&rsquo;s compensation package for 2011 was determined
before the share exchange transactions, when InspireMD Ltd. was a private Israeli company. In accordance with Israeli law, his
compensation was submitted to and approved by the stockholders of InspireMD Ltd. on February 28, 2011. The compensation committee
determined that no changes were needed to Dr. Holzer&rsquo;s compensation package during its 2012 compensation review.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Holzer also received various benefits
as both a salaried employee and a consultant, many of which either are required by Israeli law or we believe are customarily provided
to Israeli executives. These benefits included contributions to his pension and vocational studies funds, an annual recreation
payment, a company car and cell phone, and a daily food allowance. For the six months ended June 30, 2012, Dr. Holzer&rsquo;s benefits
compensation through payments made to him as an employee and through payments made to OSHIL, The Israeli Society Ltd. was $35,163.
In 2011, Dr. Holzer&rsquo;s benefits compensation through payments made to him as an employee and through payments made to OSHIL,
The Israeli Society Ltd. was $64,640, as compared to $45,604 in 2010. Our board of directors and compensation committee determined
that equity based compensation would be inappropriate for Dr. Holzer in 2011 and 2012, in light of his current equity holdings
in our company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Compensation of Former Vice President
of Sales of InspireMD Ltd.</B> During the six months ended June 30, 2012, Ms. Paz&rsquo;s total compensation was $83,569. In 2011,
Ms. Paz&rsquo;s total compensation was $782,016, as compared to $77,603 in total compensation in 2010. Ms. Paz&rsquo;s total compensation
was comprised of (i) payments for consulting fees under a consultancy agreement InspireMD Ltd. entered into with Ms. Paz which
terminated on March 31, 2011 and provided for the payment of a fixed hourly consulting fee of $45 for services provided in Israel
and a fixed daily consulting fee of $400 for services provided outside of Israel, and (ii) payments for consulting fees under a
consultancy agreement InspireMD Ltd. entered into with Sara Paz Management and Marketing Ltd, an entity wholly-owned by Ms. Paz,
through which Ms. Paz was retained to serve as InspireMD Ltd.&rsquo;s vice president of sales from April 1, 2011 until its termination
on June 30, 2012, (iii) an option grant under the InspireMD, Inc. 2011 UMBRELLA Option Plan, as more fully discussed below, and
(iv) benefits and perquisites, as more fully discussed below. Ms. Paz&rsquo;s payments under her consultancy agreements were $89,819
during the six months ended June 30, 2012. Ms. Paz&rsquo;s payments under her consultancy agreements were $112,136 in 2011, as
compared to $77,603 in 2010. In determining the compensation for Ms. Paz in 2011, Mr. Paz evaluated our corporate and organizational
achievements in 2010, with a particular emphasis on our sales growth, to which Ms. Paz&rsquo;s work contributed, her contributions
and perceived future potential on a full-time basis and the compensation paid to similarly situated executives within our company.
Dr. Holzer and Mr. Shore approved Mr. Paz&rsquo;s determination with respect to Ms. Paz&rsquo;s compensation. Mr. Paz recommended,
and the compensation committee agreed, that no changes were needed to Ms. Paz&rsquo;s compensation package during 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In conjunction with InspireMD Ltd. entering
into the consultancy agreement with Sara Paz Management and Marketing Ltd, we commenced paying Ms. Paz the benefits required by
Israeli law and comparable benefits to our other executives. As such, pursuant to the consultancy agreement, in 2011 and 2012,
Ms. Paz received various benefits, including contributions to her pension and vocational studies funds, an annual recreation payment,
a company car, a company cell phone, and a daily food allowance. During the six months ended June 30, 2012, Ms. Paz&rsquo;s benefits
compensation was $24,750. In 2011, Ms. Paz&rsquo;s benefits compensation was $30,473.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, in recognition of Ms. Paz&rsquo;s
contributions to our corporate and organizational achievements in 2010, particularly with respect to the increased sales of our
products, in June 2011, our board of directors awarded Ms. Paz options to acquire up to 365,225 shares of common stock at an exercise
price of $1.50 per share. The options vest on a monthly basis over a three year period. The options had a fair market value of
$639,407 as of June 1, 2011. The amount was determined with reference to the award made to Mr. Shore during 2011, for an approximately
equal number of shares. The exercise price was the fair market value of our common stock on the date of grant. We did not consider
the Black-Scholes valuation of the grant prior to making it. We did take into account the desire to provide Ms. Paz with an equity
position in our company, separate from that of her husband, that would further align her objectives with those of our stockholders
and allow her to share in our future financial growth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Impact of Tax Laws</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Deductibility of Executive Compensation.</B>
Generally, under U.S. law, a company may not deduct compensation of more than $1,000,000 that is paid to an individual employed
by the company who, on the last day of the taxable year, either is the company&rsquo;s principal executive officer or an individual
who is among the three highest compensated officers for the taxable year (other than the principal executive officer or the principal
financial officer). The $1,000,000 limitation on deductions does not apply to certain types of compensation, including qualified
performance-based compensation, and only applies to compensation paid by a publicly-traded corporation (and not compensation paid
by non-corporate entities). Because the compensation deducted in the U.S. for each individual to whom this rule applies has historically
been less than $1,000,000 per year, we do not believe that the $1,000,000 limitation will affect us in the near future. If the
deductibility of executive compensation becomes a significant issue, our compensation plans and policies may be modified to maximize
deductibility if our compensation committee and we determine that such action is in our best interests.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Impact of Israeli Tax Law.</B> The awards
granted to employees pursuant to Section 102 of the Tax Ordinance under the InspireMD, Inc. 2011 UMBRELLA Option Plan may be designated
by us as approved options under the capital gains alternative, or as approved options under the ordinary income tax alternative.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To qualify for the capital gains alternative,
certain requirements must be met, including registration of the options in the name of a trustee. Each option, and any shares of
common stock acquired upon the exercise of the option, must be held by the trustee for a period commencing on the date of grant
and deposit into trust with the trustee and ending 24 months thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the terms of the capital gains alternative,
we may not deduct expenses pertaining to the options for tax purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the InspireMD, Inc. 2011 UMBRELLA
Option Plan, we may also grant to employees options pursuant to Section 102(b)(3) of the Israeli Tax Ordinance that are not required
to be held in trust by a trustee. This alternative, while facilitating immediate exercise of vested options and sale of the underlying
shares, will subject the optionee to the marginal income tax rate of up to 45% as well as payments to the National Insurance Institute
and health tax on the date of the sale of the shares or options. Under the InspireMD, Inc. 2011 UMBRELLA Option Plan, we may also
grant to non-employees options pursuant to Section 3(I) of the Israeli Tax Ordinance. Under that section, the income tax on the
benefit arising to the optionee upon the exercise of options and the issuance of common stock is generally due at the time of exercise
of the options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Allotment of these options may be subject
to terms of the tax ruling that has been obtained by InspireMD Ltd. from the Israeli tax authorities according to Section 103 of
the Israeli tax ordinance, with regard to the share exchange transactions. According to the tax pre-ruling, the exchange of shares
and options of InspireMD Ltd. for shares and options of our company pursuant to the share exchange transactions will not result
in an immediate tax event for InspireMD Ltd.&rsquo;s former shareholders, but a deferred tax event, subject to certain conditions
as stipulated in the tax pre-ruling. The main condition of the tax pre-ruling is a restriction on the exchanged shares for two
years from December 31, 2010 for shareholders holding over of 5% of our outstanding shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Termination Payments</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our agreements with Messrs. Paz, Bar and
Shore and Israeli law provide, and our agreements with Dr. Holzer and Ms. Paz provided, for payments and other compensation in
the event of termination under certain circumstances, as more fully described under &ldquo;Executive Compensation &ndash; Potential
Payments Upon Termination or Change of Control.&rdquo; These provisions are comprised of (i) notice periods of varying length prior
to a termination without cause (180 days for Mr. Paz and Dr. Holzer, 30 days in general and 180 days following certain change in
control events for Mr. Shore, 60 days for Mr. Bar and 30 days for Ms. Paz), (ii) severance payments as required by Israeli law,
(iii) vesting of Mr. Shore&rsquo;s, options upon his termination in connection with a change of control and (iv) vesting of Mr.
Shore&rsquo;s, Mr. Bar&rsquo;s and Ms. Paz&rsquo;s options automatically upon a change of control if such stock options are not
assumed or substituted by the surviving company. We believe that having these provisions in our agreements with our officers enables
our officers to focus solely on the performance of their jobs by providing them with security in the event of certain terminations
of employment. With respect to the notice provisions, we believe that these provide us with a mechanism to ensure a successful
transition if we have to replace one of our named executive officers. In addition, we have provided these benefits to our officers
because we believe it is necessary for retention purposes, to attract well qualified and talented executives and, in the case of
severance payments, to comply with Israeli law. In exchange for these protections, our officers have agreed to be bound by certain
restrictive covenants, including confidentiality, non-competition and non-solicitation provisions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Risk Considerations in our Compensation Programs</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt">Our compensation committee believes that
risks arising from our policies and practices for compensating employees are not reasonably likely to have a material adverse effect
on us and do not encourage risk taking that is reasonably likely to have a material adverse effect on us. Our compensation committee
believes that the structure of our executive compensation program mitigates risks by avoiding any named executive officer placing
undue emphasis on any particular performance metric at the expense of other aspects of our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Summary Compensation Table</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The table below sets forth, for the transition
period ended June 30, 2012 and the fiscal years ended December 31, 2011, 2010 and 2009, the compensation earned by Ofir Paz, our
chief executive officer, Craig Shore, our chief financial officer, secretary and treasurer, Eli Bar, InspireMD Ltd.&rsquo;s senior
vice president of research and development and chief technical officer, Asher Holzer, Ph.D., our former president, and Sara Paz,
InspireMD Ltd.&rsquo;s former vice president of sales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Name&nbsp;and&nbsp;Principal&nbsp;Position</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year(*)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Salary <BR>($)(1)</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Bonus <BR>($)(1)</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Option <BR>Awards($)(2)</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">All&nbsp;Other<BR> Compensation <BR>($)(1)</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Total <BR>($)(1)</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 34%; font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Ofir Paz(3)</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><I>Chief Executive Officer</I></P></TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right">2012</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right">121,327</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right">32,270</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">(4)</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right">153,597</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">57,796</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">189,243</TD><TD STYLE="font-size: 10pt; text-align: left">(4)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">247,039</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">89,197</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">129,963</TD><TD STYLE="font-size: 10pt; text-align: left">(4)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">219,160</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2009</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">76,524</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">129,909</TD><TD STYLE="font-size: 10pt; text-align: left">(4)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">206,433</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Craig Shore</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><I>Chief Financial Officer, Secretary and Treasurer</I></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2012</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">76,717</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">139,499</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">18,180</TD><TD STYLE="font-size: 10pt; text-align: left">(5)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">234,396</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">118,333</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">260,554</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">40,546</TD><TD STYLE="font-size: 10pt; text-align: left">(5)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">419,433</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">9,912</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,250</TD><TD STYLE="font-size: 10pt; text-align: left">(5)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">13,162</TD><TD STYLE="font-size: 10pt; text-align: left">(6)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Eli Bar</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><I>Senior Vice President, Research and Development and Chief Technical Officer of InspireMD Ltd.</I></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2012</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">77,100</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12,850</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">22,482</TD><TD STYLE="font-size: 10pt; text-align: left">(8)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">112,432</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">122,760</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">185,175</TD><TD STYLE="font-size: 10pt; text-align: left">(7)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">42,459</TD><TD STYLE="font-size: 10pt; text-align: left">(8)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">350,394</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">91,684</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">818,509</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">32,496</TD><TD STYLE="font-size: 10pt; text-align: left">(8)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">942,689</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2009</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">86,971</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">38,585</TD><TD STYLE="font-size: 10pt; text-align: left">(8)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">125,556</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Asher Holzer, Ph.D.(3)</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><I>Former President</I></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2012</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">139,654</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">49,637</TD><TD STYLE="font-size: 10pt; text-align: left">(9)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">189,291</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">57,796</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">187,610</TD><TD STYLE="font-size: 10pt; text-align: left">(9)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">245,406</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">89,197</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">120,395</TD><TD STYLE="font-size: 10pt; text-align: left">(9)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">209,592</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2009</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">73,526</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">109,054</TD><TD STYLE="font-size: 10pt; text-align: left">(9)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">182,580</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Sara Paz</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><I>Former Vice President of Sales of InspireMD Ltd.</I></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2012</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">83,569</TD><TD STYLE="font-size: 10pt; text-align: left">(10)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">83,569</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">639,407</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">142,609</TD><TD STYLE="font-size: 10pt; text-align: left">(10)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">782,016</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">77,603</TD><TD STYLE="font-size: 10pt; text-align: left">(10)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">77,603</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2009</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">59,197</TD><TD STYLE="font-size: 10pt; text-align: left">(10)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">59,197</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 91 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">___________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(*)</TD><TD>2012 refers to our transition period from January 1 through June 30, 2012. Years 2009 to 2011 refer to our annual reporting
periods for those years.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Compensation amounts received in non-U.S. currency have been converted into U.S. dollars using the average exchange rate for
the applicable year.&nbsp;&nbsp;The average exchange rate for 2012 was 3.80 NIS per dollar, the average exchange rate for 2011
was 3.5781 NIS per dollar, the average exchange rate for 2010 was 3.7330 NIS per dollar and the average exchange rate for 2009
was 3.9326 NIS per dollar.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>The amounts in this column reflect the dollar amounts recognized for financial statement reporting purposes with respect to
the six months ended June 30, 2012 and the years ended December 31, 2009, 2010 and 2011, 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. For additional discussion of the valuation assumptions used in determining stock-based compensation and the grant date fair
value for stock options, see &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operation
&mdash; Critical Accounting Policies&mdash;Share-Based Compensation&rdquo; and Note 2&mdash;&ldquo;Significant Accounting Policies&rdquo;
and Note 10&mdash;&ldquo;Equity (Capital Deficiency)&rdquo; of the Notes to the Consolidated Financial Statements for the Six Months
Ended June 30, 2012 included herein.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Both Mr. Paz and Dr. Holzer are directors but do not receive any additional compensation for their services as directors.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>Mr. Paz&rsquo;s other compensation consisted of $57,612 in consulting salary and $72,297 in benefits in 2009, $78,491 in consulting
salary and $51,472 in benefits in 2010 and $122,970 in consulting salary and $66,273 in benefits in 2011 and consisted solely of
benefits in 2012. In each of 2009, 2010, 2011 and 2012, Mr. Paz&rsquo;s benefits included our contributions to his severance, pension,
vocational studies and disability funds, an annual recreation payment, a company car and cell phone, and a daily food allowance.
In 2012, the car-related benefits for Mr. Paz were valued at $12,549.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(5)</TD><TD>Mr. Shore&rsquo;s other compensation consisted solely of benefits in 2010 and 2012 and consisted of a warrant award valued
at $5,266 and $35,280 in benefits in 2011. In each of 2010, 2011 and 2012, Mr. Shore&rsquo;s benefits included our contributions
to his severance, pension, vocational studies and disability funds, an annual recreation payment, a company car and cell phone,
and a daily food allowance.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(6)</TD><TD>Mr. Shore&rsquo;s total compensation in 2010 represented amounts paid beginning on November 24, 2010, the date of the commencement
of Mr. Shore&rsquo;s employment with us.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(7)</TD><TD>On June 1, 2011, Mr. Bar was awarded options to acquire up to 200,000 shares of common stock at an exercise price of $2.75
per share as a bonus payment for his contributions to our company in 2010.&nbsp;&nbsp;The options had a fair market value of $268,381.
In August 2011, we cancelled the option to purchase 200,000 shares of common stock that were awarded to Mr. Bar in June 2011 and
reissued an option to purchase 200,000 shares of common stock at an exercise price of $1.93 because our board of directors determined
that the $2.75 exercise price was too far out of the money to achieve the&nbsp;compensatory and incentive purposes of the options.&nbsp;&nbsp;
The new options had a fair market value of $185,175.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(8)</TD><TD>Mr. Bar&rsquo;s other compensation in 2009, 2010, 2011 and 2012 consisted solely of benefits, including our contributions to
his severance, pension, vocational studies and disability funds, an annual recreation payment, a company car and cell phone, and
a daily food allowance.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(9)</TD><TD>Dr. Holzer&rsquo;s other compensation consisted of $55,040 in consulting salary and $54,014 in benefits in 2009, $74,791 in
consulting salary and $45,604 in benefits in 2010, $122,970 in consulting salary and $64,640 in benefits in 2011 and $14,474 in
consulting salary and $35,163 in benefits in 2012. In each of 2009, 2010, 2011 and 2012, Dr. Holzer&rsquo;s benefits included our
contributions to his severance, pension, vocational studies and disability funds, an annual recreation payment, a company car and
cell phone, and a daily food allowance.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(10)</TD><TD>Ms. Paz&rsquo;s other compensation consisted of $59,197 in consulting salary in 2009, $77,603 in consulting salary in 2010,
$112,136 in consulting salary and $30,473 in benefits in 2011 and $60,000 in consulting salary and $23,569 in benefits in 2012.
In each of 2011 and 2012, Ms. Paz&rsquo;s benefits included our contributions to her severance, pension, vocational studies and
disability funds, an annual recreation payment, a company car and cell phone, and a daily food allowance.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2012 and 2011 Grants of Plan-Based Awards</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth information
regarding grants of plan-based awards to our named executive officers in the six months ended June 30, 2012:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Name</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Grant<BR> Date</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Option</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Awards:</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Number&nbsp;of</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Securities</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Underlying</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center">(#)</P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Exercise&nbsp;or<BR> Base&nbsp;Price&nbsp;of<BR> Option<BR> Awards&nbsp;Options<BR> ($/Sh)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Grant&nbsp;Date<BR> Fair&nbsp;Value<BR> of<BR> Option<BR> Awards&nbsp;($)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Ofir Paz</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><I>Chief Executive Officer</I></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 40%; font-size: 10pt; text-align: left">Craig Shore<BR> <I>Chief Financial Officer, Secretary and Treasurer</I></TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">5/25/2012</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">300,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">(1)</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">0.80</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">139,499</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Eli Bar (2)<BR> <I>Senior Vice President, Research and Development and Chief Technical Officer of InspireMD Ltd.</I></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Asher Holzer, Ph.D.</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><I>Former President</I></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Sara Paz</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><I>Vice President of Sales of InspireMD Ltd.</I></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">___________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>On May 25, 2012, Mr. Shore was granted options to acquire up to 300,000 shares of our common stock at an exercise price of
$0.80 per share. The options vest on an annual basis over three years. The options had a fair market value of $139,499 as of May
25, 2012.&nbsp; The award was given in recognition of Mr. Shore&rsquo;s past contributions, to increase Mr. Shore&rsquo;s equity
stake in us in order to further align Mr. Shore&rsquo;s objectives with those of our stockholders and allow him to share in our
future financial growth and to compensate for Mr. Shore&rsquo;s relatively low salary for his position.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 93 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth information
regarding grants of plan-based awards to our named executive officers in the fiscal year ended December 31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Name</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Grant<BR> Date</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Option</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Awards:</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Number&nbsp;of</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Securities</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Underlying</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center">(#)</P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Exercise&nbsp;or<BR> Base&nbsp;Price&nbsp;of<BR> Option<BR> Awards&nbsp;Options<BR> ($/Sh)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Grant&nbsp;Date<BR> Fair&nbsp;Value<BR> of<BR> Option<BR> Awards&nbsp;($)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Ofir Paz</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><I>Chief Executive Officer</I></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 40%; font-size: 10pt; text-align: left">Craig Shore</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2/27/2012</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">365,223</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1.23</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">260,544</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt"><I>Chief Financial Officer, Secretary and Treasurer</I></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5/20/2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,000</TD><TD STYLE="font-size: 10pt; text-align: left">(1)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.80</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5,266</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Eli Bar(2)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6/1/2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">268,381</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt"><I>Senior Vice President, Research and Development and Chief Technical Officer of InspireMD Ltd.</I></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8/31/2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.93</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">185,175</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Asher Holzer, Ph.D.</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><I>Former President</I></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Sara Paz(3)</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><I>Vice President of Sales of InspireMD Ltd.</I></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6/1/2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">365,225</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.50</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">639,407</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">___________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>On May 20, 2011, Mr. Shore was awarded a warrant to purchase 3,000 shares of our common stock at an exercise price of $1.80
per share as a bonus payment for his work performed in connection with our share exchange transactions. The warrant had a fair
market value of $5,266 and vested immediately. The award was given in recognition of Mr. Shore&rsquo;s extraordinary efforts related
to our private placement transaction on March 31, 2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>On June 1, 2011, Mr. Bar was awarded options to acquire up to 200,000 shares of common stock at an exercise price of $2.75
per share as a bonus payment for his contributions to our company in 2010. The options had a fair market value of $268,381. In
August 2011, we cancelled the option to purchase 200,000 shares of common stock that were awarded to Mr. Bar in June 2011 and reissued
an option to purchase 200,000 shares of common stock at an exercise price of $1.93 because our board of directors determined that
the $2.75 exercise price was too far out of the money to achieve the compensatory and incentive purposes of the options. This resulted
in a change in fair market value to $185,175.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>On March 27, 2012, Ms. Paz ceased to be an executive officer upon the appointment of Robert Ratini as our new head of sales
and marketing, but has temporarily retained her title as vice president of sales.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Outstanding Equity Awards at June 30, 2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table shows information concerning
unexercised options outstanding as of June 30, 2012 for each of our named executive officers.&nbsp;&nbsp;&nbsp;There are no outstanding
stock awards with our named executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number&nbsp;of&nbsp;securities<BR> underlying<BR> unexercised&nbsp;options<BR> (#)&nbsp;exercisable</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number&nbsp;of&nbsp;securities<BR> underlying<BR> unexercised&nbsp;options<BR> (#)&nbsp;unexercisable</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Option&nbsp;exercise&nbsp;price<BR> ($)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Option&nbsp;expiration<BR> date</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Ofir Paz</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%; font-size: 10pt; text-align: left">Craig Shore</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">121,741</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">243,482</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">(1)</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1.23</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2/27/2021</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">300,000</TD><TD STYLE="font-size: 10pt; text-align: left">(2)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.80</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5/25/2022</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Eli Bar</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">243,481</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.001</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10/28/2016</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">365,224</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.001</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12/29/2016</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">405,804</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">202,903</TD><TD STYLE="font-size: 10pt; text-align: left">(3)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.001</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">7/22/2020</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">54,107</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">27,054</TD><TD STYLE="font-size: 10pt; text-align: left">(3)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.23</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">7/28/2020</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">66,667</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">133,333</TD><TD STYLE="font-size: 10pt; text-align: left">(4)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.93</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5/23/2016</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Asher Holzer, Ph.D.</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Sara Paz</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">121,742</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">243,483</TD><TD STYLE="font-size: 10pt; text-align: left">(5)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.50</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6/1/2016</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">___________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>These options were granted in February 2011 and vest annually, with 1/3 vesting on November 23, 2011, November 23, 2012 and
November 23, 2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>These options were granted on May 25, 2012 and vest annually, with 1/3 vesting on May 25, 2013, May 25, 2014 and May 25, 2015.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>These options were granted in July 2010 and vest quarterly over three years, commencing with the quarter in which they were
granted.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>These options were granted in August 2011 and vest annually, with 1/3 vesting on May 23, 2012, May 23, 2013 and May 23, 2014.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(5)</TD><TD>These options were granted in June 2011 and vest annually, with 1/3 vesting on April 8, 2012, April 8, 2013 and April 8, 2014.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Option Exercises and Stock Vested</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There were no stock options exercised by
our named executive officers during the six months ended June 30, 2012 or the fiscal year ended December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2011 UMBRELLA Option Plan</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.&nbsp;&nbsp;Under the InspireMD, Inc. 2011 UMBRELLA Option Plan, we have reserved 15,000,000 shares of our common stock
as awards to the employees, consultants, and service providers to InspireMD, Inc. and its subsidiaries and affiliates worldwide.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Potential Payments Upon Termination or Change of Control</B></P>



<P STYLE="margin: 0"></P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our agreements with Messrs. Paz, Bar and
Shore, Dr. Holzer and Ms. Paz&nbsp;as well as Israeli law provide for payments and other compensation in the event of their termination
or a change of control of us under certain circumstances, as described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Chief Executive Officer.</B> &nbsp;&nbsp;Pursuant
to Mr. Paz&rsquo;s consultancy agreement, we possess the right to terminate his employment without &ldquo;cause&rdquo; (as such
term is defined in the agreement) upon at least 180 days prior notice to Mr. Paz. During such notice period, we will continue to
compensate Mr. Paz according to his agreement and Mr. Paz will be obligated to continue to discharge and perform all of his duties
and obligations under the agreement, and to cooperate with us and use his best efforts to assist with the integration of any persons
that we have delegated to assume Mr. Paz&rsquo;s responsibilities.&nbsp;&nbsp;We believe that this arrangement will assist us in
achieving a successful transition upon Mr. Paz&rsquo;s departure.&nbsp;&nbsp;Mr. Paz is entitled to terminate his employment with
us in the event that we do not fulfill our undertakings under our agreement, upon at least 30 days prior notice to us, during which
time we may cure the breach.&nbsp;&nbsp;During such notice period, we will continue to compensate Mr. Paz according to his agreement
and Mr. Paz will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If Mr. Paz&rsquo;s employment is terminated
for any reason other than for cause, as a senior executive under Israeli law, he will also be entitled to severance payments equal
to the total amount that has been contributed to and accumulated in his severance payment fund. The total amount accumulated in
his severance payment fund as of June 30, 2012 was $86,408, as adjusted for conversion from New Israeli Shekels to U.S. Dollars.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are entitled to terminate Mr. Paz&rsquo;s
employment immediately at any time for &ldquo;cause&rdquo; (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. Paz and Mr. Paz will not be entitled to the amount that has been
contributed to and accumulated in his severance payment fund.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Also, upon termination of Mr. Paz&rsquo;s
employment for any reason, we will compensate him for all unused vacation days accrued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Chief Financial Officer, Secretary and
Treasurer.</B>&nbsp;&nbsp;Subject to certain conditions, either party to our employment agreement with Mr. Shore may terminate
the employment agreement without &ldquo;cause&rdquo; (as such term is defined in Mr. Shore&rsquo;s employment agreement with us)
upon at least 30 days prior notice to the other party or, in the event of a major change of control in terms of the ownership of
shares of our common stock or our intellectual property, upon at least 180 days prior notice.&nbsp;&nbsp;During such notice period,
we will continue to compensate Mr. Shore according to his employment agreement and Mr. Shore will be obligated to continue to discharge
and perform all of his duties and obligations under his employment agreement, and to cooperate with us and use his best efforts
to assist with the integration of any persons that we have delegated to assume Mr. Shore&rsquo;s responsibilities.&nbsp;&nbsp;We
believe that this arrangement with Mr. Shore will assist us in achieving a successful transition upon Mr. Shore&rsquo;s departure.&nbsp;&nbsp;In
addition, upon termination without &ldquo;cause,&rdquo; we have the right to pay Mr. Shore a lump payment representing his compensation
for the notice period and terminate Mr. Shore&rsquo;s employment immediately.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If we terminate Mr. Shore&rsquo;s employment
without cause, Mr. Shore will be entitled, under Israeli law, to severance payments equal to his last month&rsquo;s salary multiplied
by the number of years Mr. Shore has been employed with us.&nbsp;&nbsp;In order to finance this obligation, we make monthly contributions
equal to 8.33% of Mr. Shore&rsquo;s salary to a severance payment fund.&nbsp;&nbsp;The total amount accumulated in Mr. Shore&rsquo;s
severance payment fund as of June 30, 2012 was $14,165 as adjusted for the conversion from New Israeli Shekels to U.S. Dollars.&nbsp;&nbsp;However,
if Mr. Shore&rsquo;s employment is terminated without cause, on account of a disability or upon his death, as of June 30, 2012,
Mr. Shore would have been entitled to receive $15,498 in severance under Israeli law, thereby requiring us to pay Mr. Shore $1,333
, in addition to releasing the $14,165 in Mr. Shore&rsquo;s severance payment fund.&nbsp;&nbsp;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.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are entitled to terminate Mr. Shore&rsquo;s
employment immediately at any time for &ldquo;cause&rdquo; (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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, pursuant to Mr. Shore&rsquo;s
employment agreement, in the event of a change of control of our company, the majority of shares of our common stock or our intellectual
property that results in the termination of Mr. Shore&rsquo;s employment within one year of such change of control, the stock options
granted to Mr. Shore in accordance with the terms of his employment agreement that were unvested will vest immediately upon such
termination.&nbsp;&nbsp;Furthermore, pursuant to terms contained in Mr. Shore&rsquo;s stock option award agreement, in the event
of a change of control of our company, the stock options granted to Mr. Shore that were unvested will vest immediately upon such
change of control if such stock options are not assumed or substituted by the surviving company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Also, upon termination of Mr. Shore&rsquo;s
employment for any reason, we will compensate him for all unused vacation days accrued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Senior Vice President of Research and
Development and Chief Technical Officer of InspireMD Ltd.</B>&nbsp;&nbsp;Subject to certain conditions, either party to our employment
agreement with Mr. Bar may terminate the employment agreement without &ldquo;cause&rdquo; (as such term is defined in Mr. Bar&rsquo;s
employment agreement with us) upon at least 60 days prior written notice to the other party.&nbsp;&nbsp;During such notice period,
we will continue to compensate Mr. Bar according to his employment agreement and Mr. Bar will be obligated to continue to discharge
and perform all of his duties and obligations under his employment agreement, and to cooperate with us and use his best efforts
to assist with the integration of any persons that we have delegated to assume Mr. Bar&rsquo;s responsibilities.&nbsp;&nbsp;We
believe that our severance arrangement with Mr. Bar will assist us in achieving a successful transition upon Mr. Bar&rsquo;s departure.&nbsp;&nbsp;In
addition, upon termination without &ldquo;cause,&rdquo; we have the right to pay Mr. Bar a lump payment representing his compensation
for the notice period and terminate Mr. Bar&rsquo;s employment immediately.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If Mr. Bar&rsquo;s employment is terminated
without cause, Mr. Bar will also be entitled under Israeli law to severance payments equal to his last month&rsquo;s salary multiplied
by the number of years Mr. Bar has been employed with us.&nbsp;&nbsp;In order to finance this obligation, we make monthly contributions
equal to 8.33% of Mr. Bar&rsquo;s salary each month to a severance payment fund.&nbsp;&nbsp;The total amount accumulated in his
severance payment fund as of June 30, 2012 was $63,450, as adjusted for conversion from New Israeli Shekels to U.S. dollars.&nbsp;&nbsp;However,
if Mr. Bar&rsquo;s employment was terminated without cause, on account of a disability or upon his death, as of June 30, 2012,
Mr. Bar would be entitled to receive $68,397 in severance under Israeli law, thereby requiring us to pay Mr. Bar $4,947, in addition
to releasing the $63,450 in his severance payment fund.&nbsp;&nbsp;In addition, Mr. Bar 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are entitled to terminate Mr. Bar&rsquo;s
employment immediately at any time for &ldquo;cause&rdquo; (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. Bar.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, pursuant to terms contained
in Mr. Bar&rsquo;s stock option award agreement, in the event of a change of control of our company, the stock options granted
to Mr. Bar that were unvested will vest immediately upon such change of control if such stock options are not assumed or substituted
by the surviving company.&nbsp;&nbsp;Also, upon termination of Mr. Bar&rsquo;s employment for any reason, we will compensate him
for all unused vacation days accrued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Former President.</B> Pursuant to Dr.
Holzer&rsquo;s consultancy agreement with us dated June 1, 2012, both Dr. Holzer and we possess the right to terminate the consultancy
agreement for any reason or for no reason upon at least 15 days prior notice to other party. During such notice period, we will
continue to compensate Dr. Holzer his consulting fees according to his agreement and Dr. Holzer will be obligated to continue to
discharge and perform all of his duties and obligations under the agreement. In the event we terminate the consulting agreement
without &ldquo;cause&rdquo; (as such term is defined in the agreement), we shall pay Dr. Holzer his consulting fees for the entire
term of the consulting agreement, which terminates November 30, 2012. Upon termination of the consulting agreement, we believe
that we will have no further obligation to compensate Dr. Holzer and Dr. Holzer will not be entitled to any additional compensation,
other than as set forth above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Former Vice President of Sales of InspireMD
Ltd.</B> Subject to certain conditions, either party to our consultancy agreement with Ms. Paz may terminate the agreement without
&ldquo;cause&rdquo; (as such term is defined in her consultancy agreement) upon at least 30 days prior written notice to the other
party.&nbsp;&nbsp;During such notice period, we will continue to compensate Ms. Paz according to her consultancy agreement and
Ms. Paz will be obligated to continue to discharge and perform all of her duties and obligations under her consultancy agreement,
and to cooperate with us and use her best efforts to assist with the integration of any persons that we have delegated to assume
Ms. Paz&rsquo;s responsibilities.&nbsp;&nbsp;We believe that our severance arrangement with Ms. Paz will assist us in achieving
a successful transition upon Ms. Paz&rsquo;s departure.&nbsp;&nbsp;Ms. Paz is entitled to terminate her employment with us in the
event that we do not fulfill our undertakings under our agreement, upon at least 30 days prior notice to us, during which time
we may cure the breach.&nbsp;&nbsp;During such notice period, we will continue to compensate Ms. Paz according to her agreement
and Ms. Paz will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, pursuant to terms contained
in Ms. Paz&rsquo;s stock option award agreement, in the event of a change of control of our company, the stock options granted
to Ms. Paz that were unvested will vest immediately upon such change of control if such stock options are not assumed or substituted
by the surviving company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are entitled to terminate Ms. Paz&rsquo;s
employment immediately at any time for any reason, upon which we believe we will have no further obligation to compensate Ms. Paz
under her consultancy agreement or Israeli law, except as provided above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table shows, as of June 30,
2012, potential payments to our named executive officers for various scenarios involving a resignation, termination, change of
control, retirement, death or disability, using, where applicable, the closing price of our common stock of $1.06 (as reported
on the OTC Bulletin Board as of June 29, 2012).&nbsp;&nbsp;Compensation amounts to be paid in non-U.S. currency have been converted
into U.S. dollars using 3.923 NIS per dollar, which was the exchange rate as of June 30, 2012.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Type&nbsp;of&nbsp;Event</FONT></TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Voluntary<BR>
    Resignation<BR> Upon<BR> Breach&nbsp;By<BR> Us</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Voluntary<BR>
    Resignation</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Termination<BR>
    for Cause</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Termination<BR>
    Not&nbsp;for<BR> Cause</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Death</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Disability</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Termination<BR>
    Not&nbsp;for<BR> Cause&nbsp;in<BR> Connection<BR> with&nbsp;a<BR> Change&nbsp;of<BR> Control</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Change&nbsp;of<BR>
    Control&nbsp;(No<BR> Termination)</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left; text-indent: -8.6pt; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Ofir
    Paz</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 14%; font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Employment agreement
    payments</FONT></TD><TD STYLE="width: 1%; font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">19,873</FONT></TD><TD STYLE="width: 2%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(1)</FONT></TD><TD STYLE="width: 1%; font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">19,873</FONT></TD><TD STYLE="width: 2%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(1)</FONT></TD><TD STYLE="width: 1%; font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="width: 2%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">119,238</FONT></TD><TD STYLE="width: 2%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(2)</FONT></TD><TD STYLE="width: 1%; font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="width: 2%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="width: 2%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">119,238</FONT></TD><TD STYLE="width: 2%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(2)</FONT></TD><TD STYLE="width: 1%; font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="width: 2%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Severance payments(3)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">86,408</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">86,408</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">86,408</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">86,408</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">86,408</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">86,408</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Accrued vacation payments(4)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">61,527</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">61,527</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">61,527</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">61,527</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">61,527</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">61,527</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">61,527</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Value of accelerated options</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left; text-indent: -8.6pt; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Craig
    Shore</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Employment agreement payments</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">12,369</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(5)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">12,369</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(5)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">12,369</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(5)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">74,215</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(2)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Severance payments</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">14,165</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(6)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">14,165</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(6)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">15,498</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(7)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">15,498</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(7)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">15,498</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(7)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">15,498</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(7)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Accrued vacation payments(4)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">12,242</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">12,242</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">12,242</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">12,242</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">12,242</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">12,242</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">12,242</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Value of accelerated options</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">78,000</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(8)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">78,000</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(9)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left; text-indent: -8.6pt; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Eli
    Bar</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Employment agreement payments</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">24,942</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(10)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">24,942</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(10)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">24,942</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(10)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">24,942</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(10)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Severance payments</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">68,397</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(7)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">68,397</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(7)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">68,397</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(7)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">68,397</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(7)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Accrued vacation payments(4)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">40,591</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">40,591</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">40,591</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">40,591</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">40,591</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">40,591</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">40,591</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Value of accelerated options</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">214,874</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(11)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">214,874</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(11)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left; text-indent: -8.6pt; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Asher
    Holzer</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Employment agreement payments</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">10,169</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(12)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">10,169</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(12)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">10,169</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(12)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">101,685</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(13)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">101,685</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(13)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Severance payments(3)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Accrued vacation payments(4)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Value of accelerated options</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">Sara Paz</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Consultancy agreement payments</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">13,491</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(5)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">13,491</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(5)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">13,491</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(5)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">13,491</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">(5)</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Severance payments</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Accrued vacation payments</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; padding-left: 8.6pt"><FONT STYLE="font-size: 7pt">Value of accelerated options</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD><TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 98 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->94<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">___________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Represents total compensation for 30 days, during which time we will continue to compensate the officer according to his agreement
and the officer will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.&nbsp;&nbsp;In
the event of material breach by us, we are permitted to cure our breach of the agreement during the 30 day notice period.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Represents total compensation for 180 days, during which time we will continue to compensate the officer according to his agreement
and the officer will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Represents the total amount that has been contributed to and accumulated in his severance payment fund.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>Pursuant to Israeli law, the value of a vacation day is equal to gross salary divided by 22 working days per month.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(5)</TD><TD>Represents total compensation for 30 days, during which time we will continue to compensate the officer according to his or
her agreement and the officer will be obligated to continue to discharge and perform all of his or her duties and obligations under
the agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(6)</TD><TD>Represents the total amount that has been contributed to and accumulated in his severance payment fund, to be paid pursuant
to his employment agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(7)</TD><TD>Represents the total amount to be paid under Israeli law in the event of termination not for cause, calculated based upon the
officer&rsquo;s monthly salary as of June 30, 2012, multiplied by his years of employment with us.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(8)</TD><TD>Represents the vesting of options to purchase 300,000 shares of our common stock, multiplied by the difference between the
exercise price of $0.81 and the closing price of our common stock of $1.06 (as reported on the OTC Bulletin Board as of June&nbsp;29,
2012), which shall occur upon termination of Mr. Shore&rsquo;s employment within one year of a change of control.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(9)</TD><TD>Assumes that such stock options are not assumed or substituted by the surviving company and represents the vesting of options
to purchase 300,000 shares of our common stock, multiplied by the difference between the exercise price of $0.81 and the closing
price of our common stock of $1.06 (as reported on the OTC Bulletin Board as of June 29, 2012).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(10)</TD><TD>Represents total compensation for 60 days, during which time we will continue to compensate the officer according to his agreement
and the officer will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(11)</TD><TD>Assumes that such stock options are not assumed or substituted by the surviving company and represents the sum of the vesting
of options to purchase 202,902 shares of our common stock, multiplied by the difference between the exercise price of $0.001 and
the closing price of our common stock of $1.06 (as reported on the OTC Bulletin Board as of June&nbsp;29, 2012).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(12)</TD><TD>Represents total compensation for 15 days, during which time we will continue to compensate the officer according to his agreement
and the officer will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(13)</TD><TD>Represents total compensation for the remainder of the term of Dr. Holzer&rsquo;s consulting agreement, which terminates November
30, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table shows information concerning
our directors other than Mr. Paz and Dr. Holzer, during the six months ended June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Name</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fees&nbsp;Earned&nbsp;or<BR> Paid&nbsp;in&nbsp;Cash<BR> ($)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Stock&nbsp;Awards <BR>($)</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Option&nbsp;Awards(1)<BR> ($)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">All&nbsp;Other<BR> Compensation<BR> ($)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total<BR> ($)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 25%; font-size: 10pt; text-align: left">Sol J. Barer, Ph.D.</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"></TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">215,044</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">(2)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"></TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">215,044</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">James Barry, Ph.D.</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">129,695</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">129,695</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Paul Stuka</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">23,323</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">23,323</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Eyal Weinstein</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">23,323</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">23,323</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">___________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>The amounts in this column reflect the dollar amounts recognized for financial statement reporting purposes with respect to
the six months ended June 30, 2012, 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. For additional discussion of the valuation assumptions
used in determining stock-based compensation and the grant date fair value for stock options, see &ldquo;Management&rsquo;s Discussion
and Analysis of Financial Condition and Results of Operation &mdash; Critical Accounting Policies&mdash;Share-Based Compensation&rdquo;
and Note 2&mdash;&ldquo;Significant Accounting Policies&rdquo; and Note 10&mdash;&ldquo;Equity (Capital Deficiency)&rdquo; of the
Notes to the Consolidated Financial Statements for the Six Months Ended June 30, 2012 included herein.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>This includes the fair market value of Mr. Barer&rsquo;s option described in the table below as well as $191,721 recognized
as a result of a change in a performance condition to the vesting of options to purchase 1,450,000 shares of our common stock.
An option to purchase 750,000 shares was originally scheduled to vest upon the date we become listed on a registered national securities
exchange (such as the New York Stock Exchange, NASDAQ Stock Market, or the NYSE Amex), provided that such listing occurs on or
before June 30, 2013, and provided further that Dr. Barer is still providing services to us in some capacity as of such vesting
date. An option to purchase 750,000 shares was originally scheduled to vest upon the date that we receive research coverage from
at least two investment banks that ranked in the top 20 investment banks in terms of underwritings as of their most recently completed
fiscal year, and/or leading analysts, as ranked by either the Wall Street Journal, the Financial Times, Zacks Investment Research
or Institutional Investor, provided that we receive such coverage on or before June 30, 2013, and, provided further that Dr. Barer
is still providing services to us in some capacity as of such vesting date. On June 18, 2012, the compensation committee extended
these December 31, 2012 deadlines to June 30, 2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not currently provide cash compensation
to our directors for acting as such, although we may do so in the future. We reimburse our directors for reasonable expenses incurred
in connection with their service as directors.&nbsp;&nbsp;In addition, during the six months ended June 30, 2012, we made the following
option grants to the following directors.&nbsp;&nbsp;Each grant was made under the InspireMD, Inc. 2011 UMBRELLA Option Plan, unless
otherwise noted.</P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Name</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares
    Subject to Options</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Grant
    Date</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Exercise
    Price</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Vesting
    Schedule</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Expiration</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Fair
    Market Value on Grant Date</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 10%; font-size: 10pt; text-align: left; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">Sol J. Barer,
    Ph.D.</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">50,000</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">(1)</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 10%; font-size: 10pt; text-align: center; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">June 18, 2012</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">0.79</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 26%; font-size: 10pt; text-align: left; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">One-third annually
    in 2013, 2014 and 2015 on the anniversary of the date of grant, provided that Dr. Barer is providing services to us or our
    subsidiaries or affiliates on the applicable vesting date.</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">June
                                                                        18, 2022</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">23,323</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">James Barry, Ph.D.</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">100,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">(2)</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">January 30, 2012</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1.95</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">One-third annually in 2013,
    2014 and 2015 on the anniversary of the date of grant, provided that if Dr. Barry is (i) not reelected as a director at our
    2014 annual meeting of stockholders, or (ii) not nominated for reelection as a director at our 2014 annual meeting of stockholders,
    the option vests and becomes exercisable on the date of such failure to be reelected or nominated.</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">January
                                                             30, 2022</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">106,372</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">50,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">(1)</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">June 18, 2012</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">0.79</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">One-third annually in 2013,
    2014 and 2015 on the anniversary of the date of grant, provided that Dr. Barry is providing services to us or our subsidiaries
    or affiliates on the applicable vesting date.</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">June
                                                             18, 2022</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">23,323</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">Paul Stuka</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">50,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">(1)</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">June 18, 2012</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">0.79</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">One-third annually in 2013,
    2014 and 2015 on the anniversary of the date of grant, provided that Mr. Stuka is providing services to us or our subsidiaries
    or affiliates on the applicable vesting date.</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">June
                                                             18, 2022</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">23,323</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">Eyal Weinstein</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">50,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">(1)</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">June 18, 2012</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">0.79</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5pt"><FONT STYLE="font-size: 8pt">One-third annually in 2013,
    2014 and 2015 on the anniversary of the date of grant, provided that Mr. Weinstein is providing services to us or our subsidiaries
    or affiliates on the applicable vesting date.</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">June
                                                             18, 2022</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">23,323</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">___________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>This option was granted as the director&rsquo;s 2012 annual director compensation.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>This option was granted in connection with the appointment of this person to our board of directors.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the appointment of James
J. Loughlin to our board of directors effective September 21, 2012, Mr. Loughlin was granted an option to purchase 100,000 shares
of our common stock at an exercise price of $2.25 per share, the closing price of our common stock on September 21, 2012, the date
of grant, subject to the terms and conditions of the 2011 UMBRELLA Option Plan. The option vests and becomes exercisable in three
equal annual installments beginning on the one-year anniversary of the date of grant, provided that in the event that Mr. Loughlin
is either (i) not reelected as a director at our 2014 annual meeting of stockholders, or (ii) not nominated for reelection as a
director at our 2014 annual meeting of stockholders, the option vests and becomes exercisable on the date of Mr. Loughlin&rsquo;s
failure to be reelected or nominated. The option has a term of 10 years from the date of grant.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table shows information concerning
our directors other than Mr. Paz and Dr. Holzer, during the fiscal year ended December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Name</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fees&nbsp;Earned&nbsp;or<BR> Paid&nbsp;in&nbsp;Cash<BR> ($)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Stock&nbsp;Awards <BR>($)</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Option&nbsp;Awards(1)<BR> ($)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">All&nbsp;Other<BR> Compensation<BR> ($)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total<BR> ($)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 25%; font-size: 10pt; text-align: left">Sol J. Barer, Ph.D.</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">5,655,000 (2)</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">4,783,659</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"></TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">10,438,659</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Paul Stuka</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">111,344</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">111,344</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Eyal Weinstein</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">27,836</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">27,836</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">___________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>The amounts in this column reflect the dollar amounts recognized for financial statement reporting purposes with respect to
the year ended December 31, 2011, 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. For additional discussion of the valuation assumptions
used in determining stock-based compensation and the grant date fair value for stock options, see &ldquo;Management&rsquo;s Discussion
and Analysis of Financial Condition and Results of Operation&mdash;Critical Accounting Policies&mdash;Share-based compensation&rdquo;
and Note 2&mdash;&ldquo;Significant Accounting Policies&rdquo; and Note 10&mdash;&ldquo;Equity (Capital Deficiency)&mdash;Share
Based Compensation&rdquo; of the Notes to the Consolidated Financial Statements included herein.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>On November 16, 2011, in connection with his appointment as chairman of our board of directors, we issued Dr. Barer 2,900,000
shares of our common stock, all of which were immediately vested. The fair market value was $1.95 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During 2011, we made the following option
grants to the following directors.&nbsp;&nbsp;Each grant was made under the InspireMD, Inc. 2011 UMBRELLA Option Plan, unless otherwise
noted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares Subject to Options</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Grant Date</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Exercise
    Price</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Vesting Schedule</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Expiration</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fair Market Value on Grant Date</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 10%; font-size: 8pt; text-align: left; padding-left: 0.5pt">Sol J. Barer, Ph.D.</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">1,000,000</FONT></TD><TD NOWRAP STYLE="width: 2%; font-size: 8pt; text-align: left">(1)(2)&nbsp;</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; font-size: 8pt; padding-left: 20pt">July 11, 2011</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">$</TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right">1.50</TD><TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 29%; font-size: 8pt; text-align: left; padding-left: 0.5pt">Fully vested upon grant.</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">September 30, 2011</FONT></TD><TD STYLE="width: 2%; font-size: 8pt; text-align: left">(3)&nbsp;</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">$</TD><TD STYLE="width: 8%; font-size: 8pt; text-align: right">1,000,255</TD><TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">500,000</FONT></TD><TD NOWRAP STYLE="font-size: 8pt; text-align: left">(2)&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; padding-left: 20pt">July 11, 2011</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">2.50</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 0.5pt">One-half annually in 2012 and 2013 on the anniversary of the date of grant, provided that if Dr. Barer is (i) not reelected as a director at our 2012 annual meeting of stockholders, or (ii) not nominated for reelection as a director at our 2012 annual meeting of stockholders, the option vests and becomes exercisable on the date of such failure to be reelected or nominated.</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">July 11, 2021</FONT></TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">709,997</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">1,450,000</FONT></TD><TD NOWRAP STYLE="font-size: 8pt; text-align: left">(1)(4)&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; padding-left: 20pt">November 16, 2011</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">1.95</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 0.5pt">In substantially equal monthly installments (with any fractional shares vesting on the last vesting date) on the last business day of each calendar month over a two year period from the date of grant, with the first installment vesting on November 30, 2011, provided that Dr. Barer is still providing services to us in some capacity as of each such vesting date.</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">November 16, 2021</FONT></TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">1,536,703</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">725,000</FONT></TD><TD NOWRAP STYLE="font-size: 8pt; text-align: left">(1)(4)&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; padding-left: 20pt">November 16, 2011</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">1.95</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 0.5pt">Upon the date we become listed on a registered national securities exchange (such as the New York Stock Exchange, NASDAQ Stock Market, or the NYSE Amex), provided that such listing occurs on or before June 30, 2013, and provided further that Dr. Barer is still providing services to us in some capacity as of such vesting date.(5)</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">November 16, 2021</FONT></TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">768,352</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">725,000</FONT></TD><TD NOWRAP STYLE="font-size: 8pt; text-align: left">(1)(4)&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; padding-left: 20pt">November 16, 2011</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">1.95</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 0.5pt">Upon the date that we receive research coverage from at least two investment banks that ranked in the top 20 investment banks in terms of underwritings as of their most recently completed fiscal year, and/or leading analysts, as ranked by either the Wall Street Journal, the Financial Times, Zacks Investment Research or Institutional Investor, provided that we receive such coverage on or before June 30, 2013, and, provided further that Dr. Barer is still providing services to us in some capacity as of such vesting date.(15)</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">November 16, 2021</FONT></TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">768,352</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 0.5pt">Paul Stuka</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">100,000</FONT></TD><TD NOWRAP STYLE="font-size: 8pt; text-align: left">(2)&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; padding-left: 20pt">August 8, 2011</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">1.95</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 0.5pt">One-third annually in 2012, 2013 and 2014 on the anniversary of the date of grant, provided that if Mr. Stuka is (i) not reelected as a director at our 2012 annual meeting of stockholders, or (ii) not nominated for reelection as a director at our 2012 annual meeting of stockholders, the option vests and becomes exercisable on the date of such failure to be reelected or nominated.</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">August 8, 2021</FONT></TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">111,344</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 0.5pt">Eyal Weinstein</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">25,000</FONT></TD><TD NOWRAP STYLE="font-size: 8pt; text-align: left">(2)&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; padding-left: 20pt">August 8, 2011</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">1.95</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left; padding-left: 0.5pt">One-third annually in 2012, 2013 and 2014 on the anniversary of the date of grant, provided that if Mr. Weinstein is required to resign from the board due to medical reasons, the option vests and becomes exercisable on the date of Mr. Weinstein&rsquo;s resignation for medical reasons.</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right"><FONT STYLE="font-size: 8pt">August 8, 2021</FONT></TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">$</TD><TD STYLE="font-size: 8pt; text-align: right">27,836</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">___________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>This option was issued outside the InspireMD, Inc. 2011 UMBRELLA Option Plan.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>This option was granted in connection with the appointment of this person to our board of directors.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>This option was exercised in full by Dr. Barer on September 28, 2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>This option was granted to Dr. Barer in connection with his appointment as chairman of our board of directors on November 16,
2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(5)</TD><TD>Pursuant to the terms of the initial grant, these milestones were required to be achieved by December 31, 2012. On June 18,
2012, the compensation committee extended this deadline to June 30, 2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Directors&rsquo; and Officers&rsquo; Liability Insurance</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently have directors&rsquo; and officers&rsquo;
liability insurance insuring our directors and officers against liability for acts or omissions in their capacities as directors
or officers, subject to certain exclusions.&nbsp;&nbsp;Such insurance also insures us against losses which we may incur in indemnifying
our officers and directors.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Code of Ethics</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have adopted a code of ethics and business
conduct that applies to our officers, directors and employees, including our principal executive officer and principal accounting
officer, which is posted on our website at www.inspire-md.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 five business
days following the date of such amendment or waiver.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Independence</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The board of directors has determined that
Drs. Barer and Barry and Messrs. Loughlin, Stuka and Weinstein satisfy the requirement for independence set out in Section 5605(a)(2)
of the Nasdaq Stock Market Rules and that each of these directors has no material relationship with us (other than being a director
and/or a stockholder).&nbsp;&nbsp;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 Nasdaq rule referenced above.
&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Board Committees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Audit Committee.</B> Our audit committee
is currently comprised of Messrs. Loughlin, Stuka and Weinstein and Dr. Barer, each of whom our board has determined to be financially
literate and qualify as an independent director under Section 5605(a)(2) of the rules of the Nasdaq Stock Market. Mr. Loughlin
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&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Nominating and Corporate Governance Committee.</B>&nbsp;&nbsp;Our
nominating and corporate governance committee is currently comprised of Messrs. Stuka and Weinstein and Dr. Barer, each of whom
qualify as an independent director under Section 5605(a)(2) of the rules of the Nasdaq Stock Market.&nbsp;&nbsp;Mr. Stuka is the
chairman of our nominating and corporate governance committee.&nbsp;&nbsp;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.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Compensation Committee.</B> Our compensation
committee is currently comprised of Messrs. Stuka and Weinstein and Dr. Barer, each of whom qualify as an independent director
under Section 5605(a)(2) of the rules of the Nasdaq Stock Market. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Compensation Committee Interlocks and Insider Participation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the transition period ended June
30, 2012 and the fiscal year ended December 31, 2011, Messrs. Stuka and Weinstein and Dr. Barer served on our compensation committee.&nbsp;&nbsp;We
established our compensation committee during the fiscal year ended December 31, 2011. Prior to that, we did not have a compensation
committee and during such period, Ofir Paz, our chief executive officer, and Asher Holzer, our president and former chairman, participated
in deliberations of the board of directors concerning executive officer compensation. None of our executive officers currently
serves, or during the transition period ended June 30, 2012 or the fiscal year ended December 31, 2011 served, as a member of the
board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors
or compensation committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PRINCIPAL STOCKHOLDERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth information
with respect to the beneficial ownership of our common stock as of September 21, 2012 by:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>each person known by us to beneficially own more than 5.0% of our common stock;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>each of our directors;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>each of the named executive officers; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>all of our directors and executive officers as a group.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The percentages of common stock beneficially
owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial
ownership of securities. Under the rules of the Securities and Exchange Commission, 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&rsquo;s address is c/o InspireMD, Inc., 4 Menorat Hamaor St., Tel Aviv,
Israel 67448. As of September 21, 2012, we had 68,511,911 shares outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Name of Beneficial Owner</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Number of<BR> Shares<BR> Beneficially<BR> Owned(1)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Percentage<BR> Beneficially<BR> Owned(1)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-style: italic">5% Owners</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; font-size: 10pt; text-align: left">Yuli Ofer (2)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; font-size: 10pt; text-align: right">4,518,301</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; font-size: 10pt; text-align: right">6.6</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Genesis Capital Advisors LLC(3)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">7,795,403</TD><TD STYLE="font-size: 10pt; text-align: left">(4)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10.2</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Ayer Capital Management, LP(5)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6,738,012</TD><TD STYLE="font-size: 10pt; text-align: left">(6)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">9.4</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-style: italic; text-align: left">Officers and Directors</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Ofir Paz</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10,415,927</TD><TD STYLE="font-size: 10pt; text-align: left">(7)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">15.2</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Asher Holzer, Ph.D.</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10,300,437</TD><TD STYLE="font-size: 10pt; text-align: left">(8)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">15.0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Eli Bar</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,126,105</TD><TD STYLE="font-size: 10pt; text-align: left">(9)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.6</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Craig Shore</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">124,741</TD><TD STYLE="font-size: 10pt; text-align: left">(9)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">*</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Sara Paz</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10,415,927</TD><TD STYLE="font-size: 10pt; text-align: left">(7)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">15.2</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Sol J. Barer, Ph.D.</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,625,000</TD><TD STYLE="font-size: 10pt; text-align: left">(10)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6.7</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">James Barry, Ph.D.</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">James J. Loughlin</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">Paul Stuka(11)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,033,333</TD><TD STYLE="font-size: 10pt; text-align: left">(12)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2.9</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Eyal Weinstein(13)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8,333</TD><TD STYLE="font-size: 10pt; text-align: left">(14)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">*</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">All directors and executive officers as a group (10 persons)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">28,633,876</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">40.1</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">___________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(*)</TD><TD>Represents ownership of less than one percent.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>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 September 21, 2012. Shares issuable pursuant to the exercise of stock options,
warrants and other securities exercisable within 60 days are deemed outstanding and held by the holder of such options, warrants
or other securities 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.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Mr. Ofer&rsquo;s address is 36 Hamesila Street, Herzeliya, Israel.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Genesis Capital Advisors LLC&rsquo;s address is 1212 Avenue of the Americas, 19th Floor, New York, New York 10036.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in; text-align: left">(4)</TD><TD STYLE="text-align: left">Comprised of (i) 395,137 shares of common stock issuable
upon the exercise of a warrant held by HUG Funding LLC, (ii) 819,546 shares of common stock issuable upon the conversion of a
convertible debenture held by HUG Funding LLC, (iii) 1,276,596 shares of common stock issuable upon the exercise of a warrant
held by Genesis Opportunity Fund L.P., (iv) 2,647,765 shares of common stock issuable upon the conversion of a convertible debenture
held by Genesis Opportunity Fund L.P., (v) 1,115,518 shares of common stock issuable upon the exercise of warrants held by Genesis
Asset Opportunity Fund L.P., (vi) 1,260,841 shares of common stock issuable upon the conversion of a convertible debenture held
by Genesis Asset Opportunity Fund L.P., (vii) 100,000 shares of common stock held directly by Genesis Asset Opportunity Fund L.P.
and (viii) 180,000 shares of common stock held directly by Genesis Life Science Fund LP. Genesis Capital Advisors LLC is the investment
adviser to Genesis Opportunity Fund L.P., Genesis Asset Opportunity Fund L.P. and Genesis Life Science Fund LP, and, as such,
may be deemed to beneficially own securities owned by each of Genesis Opportunity Fund L.P., Genesis Asset Opportunity Fund L.P.
and Genesis Life Science Fund LP. Each of Genesis Capital Advisors LLC and HUG Funding LLC are controlled by Daniel Saks, Ethan
Benovitz and Jaime Hartman, and, as such, Genesis Capital Advisors LLC may be deemed to beneficially own securities held by HUG
Funding LLC. In addition, each of Daniel Saks, Ethan Benovitz and Jaime Hartman have shared voting and dispositive power over
the securities held by HUG Funding LLC, Genesis Opportunity Fund L.P., Genesis Asset Opportunity Fund L.P. and Genesis Life Science
Fund LP. Each of the convertible debentures and warrants held by HUG Funding LLC, Genesis Opportunity Fund L.P. and Genesis Asset
Opportunity Fund L.P. have contractual provisions limiting conversion and exercise to the extent such conversion or exercise would
cause the holder, together with its affiliates or members of a &ldquo;group&rdquo;, to beneficially own a number of shares of
common stock that would exceed 4.99% or 9.99% of our then outstanding shares of common stock following such conversion or exercise.
The shares and percentage ownership of our outstanding shares indicated in the table above as beneficially owned by Genesis Capital
Advisors LLC do not give effect to these limitations.</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(5)</TD><TD>Ayer Capital Management, LP&rsquo;s address is 230 California Street, Suite 600, San Francisco, CA 94111.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">(6)</TD><TD STYLE="text-align: left">Comprised of (i) 989,818 shares of common stock issuable upon the exercise of a warrant held by
                                                                                Ayer Capital Partners Master Fund, L.P., (ii) 2,052,964 shares of common stock issuable upon the conversion of a convertible
                                                                                debenture held by Ayer Capital Partners Master Fund, L.P., (iii) 19,605 shares of common stock issuable upon the exercise of
                                                                                a warrant held by Ayer Capital Partners Kestrel Fund, LP, (iv) 40,662 shares of common stock issuable upon the conversion of
                                                                                a convertible debenture held by Ayer Capital Partners Kestrel Fund, LP, (v) 54,407 shares of common stock issuable upon the
                                                                                exercise of warrants held by Epworth-Ayer Capital, (vi) 112,845 shares of common stock issuable upon the conversion of a
                                                                                convertible debenture held by Epworth-Ayer Capital, and (vii) based on a schedule 13G filed with the Securities and Exchange
                                                                                Commission on September 24, 2012 by Ayer Capital Management, LP and its affiliates, 3,467,711 shares of common stock
                                                                                beneficially owned by Ayer Capital Management, LP, ACM Capital Partners, LLC and Jay Venkatesan. The
                                                                                investment advisor for each of Ayer                                                                                 Capital
                                                                                Partners Master Fund, L.P., Ayer                                                                                 Capital
                                                                                Partners Kestrel Fund, LP and                                                                                 Epworth-Ayer
                                                                                Capital is Ayer Capital Management, LP, of which Jay Venkatesan serves as managing member. Jay Venkatesan also serves as
                                                                                managing member of ACM Partners, LLC. Jay
                                                                                Venkatesan                                                                                      may
                                                                                therefore be                                                                                  deemed
                                                                                to beneficially own                                                                                                 the
                                                                                shares of common stock                                                                                 held by Ayer Capital
                                                                                Partners Master Fund, L.P., Ayer
                                                                                Capital Partners Kestrel Fund, LP,  Epworth-Ayer Capital, Ayer Capital Management, LP and ACM Capital Partners, LLC, as he holds
                                                                                or shares                                                                                 voting
                                                                                and                                                                                                         dispositive power
                                                                                over                                                                                 such
                                                                                shares.                                                                                                     Each of the
                                                                                convertible                                                                                     debentures
                                                                                and warrants held by Ayer                                                                                 Capital Partners
                                                                                Master Fund, L.P., Ayer Capital
                                                                                Partners Kestrel Fund, LP and Epworth-Ayer Capital have contractual provisions limiting conversion and exercise to the
                                                                                extent                                                                                 such conversion or exercise would
                                                                                cause the holder, together with its affiliates or members of a &ldquo;group&rdquo;, to
                                                                                beneficially own a number of shares of common stock that would exceed 4.99% or 9.99% of our then outstanding shares of
                                                                                common                                                                                 stock following such conversion or
                                                                                exercise. The shares and percentage ownership of our outstanding shares indicated in the
                                                                                table above as beneficially owned by Ayer Capital Management, LP do not give effect to these limitations.</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(7)</TD><TD>This amount includes options to purchase 121,742 shares of common stock that are held by Sara Paz, Ofir Paz&rsquo;s wife, that
are currently exercisable within 60 days of September 21, 2012.&nbsp;&nbsp;This amount does not include 372,528 shares of common
stock that Mr. Paz presently holds as trustee for a family trust.&nbsp;&nbsp;Mr. Paz does not have either voting power or dispositive
power over these shares and disclaims all beneficial ownership therein.&nbsp;&nbsp;Ofir Paz and Sara Paz, as husband and wife,
share voting and investment power with respect to all shares reported by Mr. Paz or Ms. Paz.&nbsp;&nbsp;On March 27, 2012, Ms.
Paz ceased to be an executive officer.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(8)</TD><TD>This amount does not include 58,923 shares of common stock that Dr. Holzer presently holds as trustee for a family trust.&nbsp;&nbsp;Dr.
Holzer does not have either voting power or dispositive power over these shares and disclaims all beneficial ownership therein.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(9)</TD><TD>Represents options that are currently exercisable or exercisable within 60 days of September 21, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(10)</TD><TD>Comprised of (i) 3,900,000 shares of common stock and (ii) options to purchase 725,000 shares of common stock that are currently
exercisable or exercisable within 60 days of September 21, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(11)</TD><TD>Mr. Stuka&rsquo;s address is c/o Osiris Partners, LLC, 1 Liberty Square, 5th Floor, Boston, MA 02109.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(12)</TD><TD>Mr. Stuka is the principal and managing member of Osiris Investment Partners, L.P., and, as such, has beneficial ownership
of the (i) 1,333,333 shares of common stock and (ii) currently exercisable warrants to purchase 666,667 shares of common stock
held by Osiris Investment Partners, L.P. &nbsp;In addition, Mr. Stuka individually holds an option to purchase 33,333 shares of
common stock that is currently exercisable or exercisable within 60 days of September 21, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(13)</TD><TD>Mr. Weinstein&rsquo;s address is c/o Leorlex Ltd., P.O. Box 15067 Matam, Haifa, Israel 3190.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(14)</TD><TD>Represents options that are currently exercisable or exercisable within 60 days of September 21, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, in connection with our
share exchange transactions with the former shareholders of InspireMD Ltd. and succession to InspireMD Ltd.&rsquo;s business as
our sole line of business, we transferred all of our pre-share exchange operating assets and liabilities to Saguaro Holdings, Inc.,
a Delaware corporation and our wholly owned subsidiary. Immediately after this transfer, we transferred all of Saguaro Holdings,
Inc.&rsquo;s outstanding capital stock to Lynn Briggs, our then-majority stockholder and our former president, chief executive
officer, chief financial officer, secretary-treasurer and sole director, in exchange for the cancellation of 7,500,000 shares of
our common stock held by Ms. Briggs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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, which means a transaction,
arrangement or relationship in which we and any related party are participants in which the amount involved exceeds $120,000. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The share exchange transactions were not
approved by our audit committee, because such committee had not yet been formed.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF CAPITAL STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The discussion below does not give effect
to the anticipated one-for- &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have authorized 130,000,000 shares of
capital stock, par value $0.0001 per share, of which 125,000,000 are shares of common stock and 5,000,000 are shares of &ldquo;blank
check&rdquo; preferred stock. On September 21, 2012, there were 68,511,911 shares of common stock issued and outstanding and no
shares of preferred stock issued and outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On October 31, 2011, our stockholders authorized
our board of directors to amend our amended and restated certificate of incorporation to effect a reverse stock split of our common
stock at a ratio of one-for-two to one-for-four, at any time prior to our 2012 annual stockholders&rsquo; meeting, the exact ratio
of the reverse stock split to be determined by the board. As of the date of this prospectus, we have not effected the reverse stock
split. We intend to effectuate a one-for- &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse stock split, in order to comply with the listing requirements of Nasdaq Capital
Market. The reverse stock split is expected to occur the day immediately following the effectiveness of the registration statement
of which this prospectus is a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the securities purchase agreement
under which the convertible debentures that we issued on April 5, 2012 were sold, until April 5, 2013, we are not permitted to
effectuate any reverse stock splits without the prior written consent of the holders of at least 60% of the outstanding principal
amount of the convertible debentures other than for purposes of qualifying for initial listing on a national securities exchange
or meeting the continued listing requirements of such exchange. The intended reverse stock split described above will not require
the written consent of the convertible debenture holders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holders of our common stock are entitled
to one vote per share. Our certificate of incorporation does not provide for cumulative voting. Our directors are divided into
three classes. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire are elected
for a term of office to expire at the third succeeding annual meeting of stockholders after their election. The holders of our
common stock are entitled to receive ratably such dividends, if any, as may be declared by our board of directors out of legally
available funds; however, the current policy of our board of directors is to retain earnings, if any, for operations and growth.
Upon liquidation, dissolution or winding-up, the holders of our common stock are entitled to share ratably in all assets that are
legally available for distribution. The holders of our common stock have no preemptive, subscription, redemption or conversion
rights. The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by,
the rights of the holders of any series of preferred stock, which may be designated solely by action of our board of directors
and issued in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The board of directors is authorized, subject
to any limitations prescribed by law, without further vote or action by the stockholders, to issue from time to time shares of
preferred stock in one or more series. Each such series of preferred stock shall have such number of shares, designations, preferences,
voting powers, qualifications, and special or relative rights or privileges as shall be determined by the board of directors, which
may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>April 2012 $1.80 Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 5, 2012, we issued certain investors
warrants to purchase an aggregate of 3,343,465 shares of our common stock at an exercise price of $1.80 per share. We are prohibited
from effecting the exercise of any such warrant to the extent that as a result of such exercise the holder of the exercised warrant
beneficially owns more than 4.99% in the aggregate of the issued and outstanding shares of our common stock calculated immediately
after giving effect to the issuance of shares of our common stock upon the exercise of the warrant (subject to an increase, upon
at least 61 days&rsquo; notice by the holder of such warrant to us, of up to 9.99%). The warrants contain provisions that protect
their holders against dilution by adjustment of the purchase price in certain events such as stock dividends, stock splits and
other similar events. If there is no effective registration statement registering, or no current prospectus available for, the
resale of the shares of common stock underlying the warrants within 60 days of the issuance of the warrants, the holders of such
warrants have the right to exercise the warrants by means of a cashless exercise. The warrants are also subject to a &ldquo;most
favored nation&rdquo; adjustment pursuant to which, in the event that we issue or are deemed to have issued certain securities
with terms that are superior to those of the holders of the warrants, except with respect to exercise price and warrant coverage,
the terms of such superior issuance shall automatically be incorporated into the warrants. In addition, upon the occurrence of
a transaction involving a change of control that is (i) an all cash transaction, (ii) a &ldquo;Rule 13e-3 transaction&rdquo; as
defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended, or (iii) involving a person or entity not traded on
a national securities exchange, the holders of the warrants will have the right, among others, to have the warrants repurchased
for a purchase price in cash equal to the Black-Scholes value (as calculated pursuant to the warrants) of the then unexercised
portion of the warrants. If while the warrants are outstanding, we issue any evidences of indebtedness, assets, rights or warrants
to subscribe for or purchase any security of the company, then any holder of the warrants shall, upon exercise, have the right
to acquire the same securities as if it had exercised the warrants immediately before the date on which a record is taken for such
distribution, or, if no such record is taken, the date as of which the record holders of shares of common stock are to be determined
for the participation in such distribution. The warrants expire on April 5, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>April 2012 Placement Agent Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As consideration for serving as our placement
agents in connection with certain private placements, on April 5, 2012, we issued Palladium Capital Advisors, LLC a five-year warrant
to purchase up to 159,574 shares of common stock at an exercise price of $1.80 per share, Oppenheimer &amp; Co. Inc. a five-year
warrant to purchase up to 113,070 shares of common stock at an exercise price of $1.80 per share and JMP Securities LLC a five-year
warrant to purchase up to 39,666 shares of common stock at an exercise price of $1.80 per share. The terms of these warrants are
identical to the April 2012 $1.80 Warrants described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>March 2011 $1.80 Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011 and on April 18, 2011,
we issued certain investors five-year warrants to purchase up to an aggregate of 3,560,332 shares of common stock at an exercise
price of $1.80 per share. We are prohibited from effecting the exercise of any such warrant to the extent that as a result of such
exercise the holder of the exercised warrant beneficially owns more than 4.99% in the aggregate of the issued and outstanding shares
of our common stock calculated immediately after giving effect to the issuance of shares of our common stock upon the exercise
of the warrant. The warrants contain provisions that protect their holders against dilution by adjustment of the purchase price
in certain events such as stock dividends, stock splits and other similar events. If at any time after the one year anniversary
of the original issuance date of such warrants there is no effective registration statement registering, or no current prospectus
available for, the resale of the shares of common stock underlying the warrants, then the holders of such warrants have the right
to exercise the warrants by means of a cashless exercise. In addition, if (i) the volume-weighted average price of our common stock
for 20 consecutive trading days is at least 250% of the exercise price of the warrants; (ii) the 20-day average daily trading volume
of our common stock has been at least 175,000 shares; (iii) a registration statement providing for the resale of the common stock
issuable upon exercise of the warrants is effective and (iv) the common stock is listed for trading on a national securities exchange,
then we may require each holder to exercise all or a portion of its warrant pursuant to the terms described above within seven
business days following the delivery of a notice of acceleration. Any warrant that is not exercised as aforesaid shall expire automatically
at the end of such seven-day period.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>April 2011 $1.80 Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 18 and April 21, 2011, we issued
certain investors five-year warrants to purchase up to an aggregate of 158,334 shares of common stock at an exercise price of $1.80
per share. We are prohibited from effecting the exercise of any such warrant to the extent that as a result of such exercise the
holder of the exercised warrant beneficially owns more than 4.99% in the aggregate of the issued and outstanding shares of our
common stock calculated immediately after giving effect to the issuance of shares of our common stock upon the exercise of the
warrant. The warrants contain provisions that protect their holders against dilution by adjustment of the purchase price in certain
events such as stock dividends, stock splits and other similar events. In addition, if (i) the volume-weighted average price of
our common stock for 20 consecutive trading days is at least 250% of the exercise price of the warrants; (ii) the 20-day average
daily trading volume of our common stock has been at least 175,000 shares; and (iii) a registration statement providing for the
resale of the common stock issuable upon exercise of the warrants is effective, then we may require each holder to exercise all
or a portion of its warrant pursuant to the terms described above within three business days following the delivery of a notice
of acceleration. Any warrant that is not exercised as aforesaid shall expire automatically at the end of such three-day period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>March 2011 Placement Agent Warrant</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As consideration for serving as our placement
agent in connection with certain private placements, we issued Palladium Capital Advisors, LLC a five-year warrant to purchase
up to 430,740 shares of common stock at an exercise price of $1.80 per share. The terms of this warrant are identical to the March
2011 $1.80 Warrants described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Employee Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, for work performed in
connection with the share exchange transactions and as bonus compensation, we issued Craig Shore, our chief financial officer,
secretary and treasurer, a five-year warrant to purchase up to 3,000 shares of common stock at an exercise price of $1.80 per share.
The terms of this warrant are identical to the April 2011 $1.80 Warrants described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Consultant Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with our March 31, 2011 private
placement, we issued to Hermitage Capital Management, a consultant, a five-year warrant to purchase up to 6,667 shares of common
stock at an exercise price of $1.80 per share, in consideration for consulting services. The terms of this warrant are identical
to the April 2011 $1.80 Warrants described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In consideration for financial consulting
services, we issued to The Benchmark Company, LLC, a consultant, a five-year warrant to purchase up to 50,000 shares of common
stock at an exercise price of $1.50 per share. The terms of this warrant are identical to the April 2011 $1.80 Warrants described
above, except that the exercise price for this warrant is $1.50 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, we issued certain consultants
five-year warrants to purchase up to an aggregate of 2,500,000 shares of common stock at an exercise price of $1.50 per share.
The terms of these warrants are identical to the March 2011 $1.80 Warrants described above, except that the exercise price for
these warrants is $1.50 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>$1.23 Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with our share exchange transactions
on March 31, 2011, we issued certain investors warrants to purchase up to an aggregate of 1,014,500 shares of our common stock
at an exercise price of $1.23 per share. These warrants may be exercised any time on or before July 20, 2013 and were issued in
exchange for warrants to purchase up to 125,000 ordinary shares of InspireMD Ltd. at an exercise price of $10 per share. We are
prohibited from effecting the exercise of any such warrant to the extent that as a result of such exercise the holder of the exercised
warrant beneficially owns more than 9.99% in the aggregate of the issued and outstanding shares of our common stock calculated
immediately after giving effect to the issuance of shares of our common stock upon the exercise of the warrant. The warrants contain
provisions that protect their holders against dilution by adjustment of the purchase price in certain events such as stock dividends,
stock splits and other similar events. If at any time there is no effective registration statement registering, or no current prospectus
available for, the resale of the shares of common stock underlying the warrants, then the holders of such warrants have the right
to exercise the warrants by means of a cashless exercise. In addition, if at any time following the one year anniversary of the
original issuance date of the warrants, (i) our common stock is listed for trading on a national securities exchange, (ii) the
closing sales price of our common stock for 15 consecutive trading days is at least 165% of the exercise price of the warrants;
(iii) the 15 day average daily trading volume of our common stock has been at least 150,000 shares and (iv) a registration statement
providing for the resale of the common stock issuable upon exercise of the warrants is effective, then we may require each investor
to exercise all or a portion of its warrant pursuant to the terms described above at any time upon at least 15 trading days prior
written notice. Any warrant that is not exercised as aforesaid shall expire automatically at the end of the 15-day notice period.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Convertible Debentures</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 5, 2012, we issued senior secured
convertible debentures to certain accredited investors in the original aggregate principal amount of $11,702,128 and at an original
issue discount of 6%. The convertible debentures mature on April 5, 2014, or such earlier date as required or permitted by the
convertible debentures, upon which date the entire outstanding principal balance and any outstanding fees or interest will be due
and payable in full. The convertible debentures bear interest at the rate of 8% per annum, payable quarterly beginning on July
1, 2012, which rate is increased to 12% upon and during the occurrence of an event of default. In addition, the convertible debentures
are convertible at the option of the holders into shares of our common stock at an initial conversion price of $1.75 per share,
subject to adjustment for stock splits, fundamental transactions or similar events. Upon conversion of the convertible debentures,
investors will receive a conversion premium equal to 8% per annum, with a limit of 12% for the term of the convertible debentures,
of the principal amount being converted. The convertible debentures provide that no conversion may be made if, after giving effect
to the conversion, the holder thereof would own in excess of 4.99% of our outstanding common stock (subject to an increase, upon
at least 61 days&rsquo; notice by the holder of such warrant to us, of up to 9.99%). We may also force conversion of the convertible
debentures if, amongst other things, the closing bid price on our common stock equals or exceeds 165% of the conversion price for
twenty consecutive trading days, the minimum daily trading volume for such period is $1,100,000, all of the shares of common stock
underlying the convertible debentures during such period are either registered for resale with the Securities and Exchange Commission
or eligible for sale pursuant to Rule 144 and there is no existing event of default or event which, with the passage of time or
the giving of notice, would constitute an event of default during such period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Commencing 18 months following the original
issuance date of the convertible debentures, the investors may require us to redeem all or a portion of the convertible debentures,
for a price equal to 112% of the amount of principal to be redeemed plus all accrued but unpaid interest and other amounts due
under the convertible debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Commencing 6 months following the original
issuance date of the convertible debentures, we may redeem all or a portion of the convertible debentures for a price equal to
112% of the amount of principal to be redeemed plus all accrued but unpaid interest and other amounts due under the convertible
debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The convertible debentures are senior indebtedness
and the holders of the convertible debentures have a security interest in all of our assets and those of our subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Registration Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 5, 2012, in connection with our
private placement of convertible debentures and warrants, we entered into a registration rights agreement with the purchasers pursuant
to which we agreed to provide certain registration rights with respect to the common stock issuable upon conversion of the convertible
debentures and exercise of the warrants. Specifically, we agreed to file a registration statement with the Securities and Exchange
Commission covering the resale of the common stock issuable upon conversion of the convertible debentures and exercise of the warrants
on or before May 21, 2012 and to cause such registration statement to be declared effective by the Securities and Exchange Commission
on or before July 9, 2012 in the event that the registration statement is not reviewed by the Securities and Exchange Commission
and by August 8, 2012 in the event that the registration statement is reviewed by the Securities and Exchange Commission and the
Securities and Exchange Commission issues comments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If (i) the registration statement was not
filed by May 21, 2012, (ii) the registration statement was not declared effective by the Securities and Exchange Commission by
July 9, 2012 in the case of a no review, (iii) the registration statement was not declared effective by the Securities and Exchange
Commission by August 8, 2012 in the case of a review by the Securities and Exchange Commission pursuant to which the Securities
and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than
30 consecutive calendar days or more than an aggregate of 60 calendar days during any 12-month period after its first effective
date, then we are subject to liquidated damage payments to the holders of the securities sold in the private placement in an amount
equal to 1% of the aggregate purchase price paid by such purchasers per month of delinquency. Notwithstanding the foregoing, (i)
the maximum aggregate liquidated damages due under the registration rights agreement shall be 6% of the aggregate purchase price
paid by the purchasers, and (ii) if any partial amount of liquidated damages remains unpaid for more than seven days, we shall
pay interest of 18% per annum, accruing daily, on such unpaid amount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The registration statement required as described
above was filed on May 17, 2012 and declared effective on May 30, 2012. Pursuant to the registration rights agreement, we must
maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered
under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale
restrictions, subject to the our right to suspend or defer the use of the registration statement in certain events.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Lock-up Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On September &nbsp;&nbsp;&nbsp;, 2012,
in connection with this offering, we, our executive officers, directors and certain of our other stockholders agreed,
subject to certain exceptions, not to offer, sell, contract to sell, announce any intention to sell, pledge or otherwise
dispose of, enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership
of, directly or indirectly,or file with the Securities and Exchange Commission a registration statement under the Securities
Act of 1933, as amended, relating to, any common stock or securities convertible into or exchangeable or exercisable for
any common stock without the prior written consent of Cowen and Company, LLC, for a period of 180 days after the date of
the pricing of the offering. The 180-day restricted period will be automatically extended if (i) during the last 17 days of
the 180-day restricted period we issue an earnings release or material news or a material event relating to us occurs or
(ii) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results or become
aware that material news or a material event will occur during the 16-day period beginning on the last day of the
180-day restricted period, in either of which case the restrictions described above will continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or
material event.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Delaware Anti-Takeover Law and Provisions of our Certificate
of Incorporation and Bylaws</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Delaware Anti-Takeover Law</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are subject to Section 203 of the Delaware
General Corporation Law. Section 203 generally prohibits a public Delaware corporation from engaging in a &ldquo;business combination&rdquo;
with an &ldquo;interested stockholder&rdquo; for a period of three years after the date of the transaction in which the person
became an interested stockholder, unless:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>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;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>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 (i) shares owned by persons who are directors
and also officers and (ii) 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</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>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.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Section 203 defines a business combination
to include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any merger or consolidation involving the corporation and the interested stockholder;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder; or</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any
entity or person affiliated with, or controlling, or controlled by, the entity or person. The term &ldquo;owner&rdquo; is broadly
defined to include any person that, individually, with or through that person&rsquo;s affiliates or associates, among other things,
beneficially owns the stock, or has the right to acquire the stock, whether or not the right is immediately exercisable, under
any agreement or understanding or upon the exercise of warrants or options or otherwise or has the right to vote the stock under
any agreement or understanding, or has an agreement or understanding with the beneficial owner of the stock for the purpose of
acquiring, holding, voting or disposing of the stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The restrictions in Section 203 do not apply
to corporations that have elected, in the manner provided in Section 203, not to be subject to Section 203 of the Delaware General
Corporation Law or, with certain exceptions, which do not have a class of voting stock that is listed on a national securities
exchange or authorized for quotation on the Nasdaq Stock Market or held of record by more than 2,000 stockholders. Our certificate
of incorporation and bylaws do not opt out of Section 203.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Certificate of Incorporation and
Bylaws</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Provisions of our certificate of incorporation
and bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management,
including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders
might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common
stock. Among other things, our certificate of incorporation and bylaws:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>permit our board of directors to issue up to 5,000,000 shares of preferred stock, without further action by the stockholders,
with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change
in control;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide that the authorized number of directors may be changed only by resolution of the board of directors;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the
affirmative vote of a majority of directors then in office, even if less than a quorum;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>divide our board of directors into three classes, with each class serving staggered three-year terms;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled
to vote in any election of directors to elect all of the directors standing for election, if they should so choose);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide that special meetings of our stockholders may be called only by our board of directors; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>set forth an advance notice procedure with regard to the nomination, other than by or at the direction of our board of directors,
of candidates for election as directors and with regard to business to be brought before a meeting of stockholders.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Transfer Agent and Registrar</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The transfer agent and registrar for our
common stock is Action Stock Transfer Corp.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Listing</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The shares of our common stock are currently
quoted on the OTC Bulletin Board. We have applied for the listing of our common stock on the Nasdaq Capital Market under the symbol
&ldquo;NSPR.&rdquo;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MATERIAL U.S. FEDERAL INCOME AND ESTATE
TAX CONSIDERATIONS FOR NON-U.S. HOLDERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following is a general discussion
of the material U.S. federal income and estate tax consequences to a non-U.S. holder of the acquisition, ownership and
disposition of our common stock. For purposes of this discussion, a non-U.S. holder is any beneficial owner of our common
stock that is not for U.S. federal income tax purposes any of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>an individual citizen or resident of the U.S.;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in the United
States or under the laws of the United States or any state or the District of Columbia;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a partnership (or other entity treated as a partnership for U.S. federal income tax purposes);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>an estate whose income is subject to U.S. federal income tax regardless of its source; or</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a trust (i) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S.
persons who have the authority to control all substantial decisions of the trust or (ii) which has made a valid election to be treated
as a U.S. person.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If a partnership (or an entity treated as
a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in the partnership will
generally depend on the status of the partner and upon the activities of the partnership. Accordingly, we urge partnerships that
hold our common stock and partners in such partnerships to consult their own tax advisors regarding the tax treatment of acquiring
and holding our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This discussion assumes that a non-U.S.
holder will hold our common stock issued pursuant to the offering as a capital asset (generally, property held for investment).
This discussion does not address all aspects of U.S. federal income taxation or any aspects of state, local or non-U.S. taxation,
nor does it consider any U.S. federal income tax considerations that may be relevant to non-U.S. holders which may be subject to
special treatment under U.S. federal income tax laws, including, without limitation, U.S. expatriates, controlled foreign corporations,
passive foreign investment companies, insurance companies, tax-exempt or governmental organizations, dealers in securities or currency,
banks or other financial institutions, and investors that hold our common stock as part of a hedge, straddle or conversion transaction.
Furthermore, the following discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the &ldquo;Code&rdquo;),
and Treasury Regulations and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all
of which are subject to change, possibly with retroactive effect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We urge each prospective investor to consult
a tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of acquiring, holding and
disposing of shares of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Dividends </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If we pay dividends on our common stock,
those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax principles. To the extent those dividends exceed our current and accumulated
earnings and profits, the dividends will constitute a return of capital and will first reduce a holder&rsquo;s adjusted tax basis
in its common stock, but not below zero, and then will be treated as gain from the sale of the common stock (see &ldquo;&mdash;
Gain on Disposition of Common Stock&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Any dividend paid out of earnings and profits
to a non-U.S. holder of our common stock generally will be subject to U.S. withholding tax either at a rate of 30% of the gross
amount of the dividend or such lower rate as may be specified by an applicable tax treaty. To receive the benefit of a reduced
treaty rate, a non-U.S. holder generally must provide us (or another relevant withholding agent) with an Internal Revenue Service
(&ldquo;IRS&rdquo;) Form W-8BEN certifying qualification for the reduced rate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A non-U.S. holder eligible for a
reduced rate of U.S. federal withholding tax pursuant to an applicable income tax treaty may obtain a refund of any excess
amounts withheld by timely filing an appropriate claim for refund with the IRS.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dividends received by a non-U.S. holder
that are effectively connected with a U.S. trade or business conducted by the non-U.S. holder will be exempt from such withholding
tax. To obtain this exemption, the non-U.S. holder must provide us (or another relevant withholding agent) with an IRS Form W-8ECI
properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, generally will
be subject to U.S. federal income tax on a net income basis at the same graduated U.S. tax rates generally applicable to U.S. persons,
net of certain deductions and credits, subject to any applicable tax treaty providing otherwise. In addition to the income tax
described above, dividends received by corporate non-U.S. holders that are effectively connected with a U.S. trade or business
of the corporate non-U.S. holder may be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified
by an applicable tax treaty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Gain on Disposition of Common Stock </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A non-U.S. holder generally will not be
subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the gain is effectively connected with a U.S. trade or business of the non-U.S. holder and, if required by an applicable tax
treaty, is attributable to a U.S. permanent establishment maintained by such non-U.S. holder;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more
during the calendar year in which the sale or disposition occurs and certain other conditions are met; or</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we are or have been a U.S. real property holding corporation (&ldquo;USRPHC&rdquo;) for U.S. federal income tax purposes and
the non-U.S. holder holds or has held, directly or indirectly, at any time within the shorter of the five-year period preceding
the disposition or the non-U.S. holder&rsquo;s holding period, more than 5% of our common stock. Generally, a corporation is a
U.S. real property holding corporation if the fair market value of its U.S. real property interests equals or exceeds 50% of the
sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business.
If we are or have been a &ldquo;USRPHC&rdquo; at any time during the periods described above and
our common stock is not regularly traded on an established securities market, then the gain recognized on the sale or other disposition
of our common stock by a non-U.S. holder would be subject to U.S. federal income tax regardless of the non-U.S. holder&rsquo;s
ownership percentage.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the case of a non-U.S. holder described
in the first bullet point immediately above, the gain will be subject to U.S. federal income tax on a net income basis generally
in the same manner as if the non-U.S. holder were a U.S. person as defined under the Code (unless an applicable income tax treaty
provides otherwise), and a non-U.S. holder that is a foreign corporation may be subject to an additional branch profits tax equal
to 30% of its effectively connected earnings and profits attributable to such gain (or at such lower rate as may be specified by
an applicable income tax treaty). In the case of an individual non-U.S. holder described in the second bullet point immediately
above, except as otherwise provided by an applicable income tax treaty, the gain, which may be offset by certain U.S.-source capital
losses, will be subject to a flat 30% tax.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe we are not and do not anticipate
becoming a USRPHC for U.S. federal income tax purposes. If, however, we are or become a USRPHC, so long as our common stock is
considered to be regularly traded on an established securities market, only a non-U.S. holder who actually or constructively holds
or held (at any time during the shorter of the five year period ending on the date of disposition or the non-U.S. holder&rsquo;s
holding period) more than 5% of our common stock will be subject to U.S. federal income tax, under the third bullet point immediately
above, on the disposition of our common stock. You should consult your own advisor about the consequences that could result if
we are, or become, a USRPHC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Backup Withholding and Information Reporting </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Generally, we must report annually to the
IRS the amount of dividends paid to each non-U.S. holder, and the amount, if any, of tax withheld with respect to those dividends.
A similar report is sent to each non-U.S. holder. These information reporting requirements apply even if withholding was not required.
Pursuant to tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient&rsquo;s
country of residence.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Payments of dividends to a non-U.S. holder
may be subject to backup withholding (at a rate of 28% through 2012) unless the non-U.S. holder establishes an exemption, for example,
by properly certifying its non-U.S. status on an IRS Form W-8BEN or another appropriate version of IRS Form W-8. Notwithstanding
the foregoing, backup withholding also may apply if we have actual knowledge, or reason to know, that the beneficial owner is a
U.S. person that is not an exempt recipient.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Payments of the proceeds from sale or other
disposition by a non-U.S. holder of our common stock effected outside the United States by or through a foreign office of a broker
generally will not be subject to information reporting or backup withholding. However, information reporting will apply to those
payments if the broker does not have documentary evidence that the holder is a non-U.S. holder, an exemption is not otherwise established,
and the broker has certain relationships with the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Payments of the proceeds from a sale or
other disposition by a non-U.S. holder of our common stock effected by or through a U.S. office of a broker generally will be subject
to information reporting and backup withholding (at a rate of 28% through 2012) unless the non-U.S. holder establishes an exemption,
for example, by properly certifying its non-U.S. status on an IRS Form W-8BEN or another appropriate version of IRS Form W-8. Notwithstanding
the foregoing, information reporting and backup withholding also may apply if the broker has actual knowledge, or reason to know,
that the holder is a U.S. person that is not an exempt recipient.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Backup withholding is not an additional
tax. Rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished
to the IRS.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Additional Withholding Requirements </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Recently enacted legislation would impose
a 30% withholding tax on any dividend payments on our common stock made to a foreign financial institution or non-financial foreign
entity (including, in some cases, when such foreign financial institution or entity is acting as an intermediary), and on the gross
proceeds of the sale or other disposition of our common stock, unless (i) in the case of a foreign financial institution, such
institution enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the
U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity
and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners), (ii) in the
case of a non-financial foreign entity, such entity certifies that it does not have any substantial U.S. owners or provides the
withholding agent with a certification identifying the direct and indirect substantial U.S. owners of the entity, or (iii) the
foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Although this legislation currently applies
to payments made after December 31, 2012, the Treasury and the IRS have issued administrative guidance indicating that they plan
to issue Treasury Regulations providing that withholding will only apply to payments of dividends made on or after January 1, 2014
and to payments of gross proceeds from a sale or other disposition made on or after January 1, 2015. Proposed Treasury Regulations
have been issued which, if finalized, would confirm the extension of the effective dates for withholding. Non-U.S. holders should
consult with their own tax advisors regarding the possible implications of this legislation on an investment in our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Estate Tax </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our common stock owned or treated as owned
by an individual who is not a citizen or resident of the U.S. (as specifically defined for U.S. federal estate tax purposes) at
the time of death will be includible in the individual&rsquo;s gross estate for U.S. federal estate tax purposes and may be subject
to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNDERWRITING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We and the underwriters for the offering
named below have entered into an underwriting agreement with respect to the common stock being offered. Subject to the terms and
conditions of the underwriting agreement, each underwriter has severally agreed to purchase from us the number of shares of our
common stock set forth opposite its name below. Cowen and Company, LLC and JMP Securities LLC are the representatives of the underwriters.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Underwriter</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of<BR> Shares</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 50%; font-size: 10pt; text-align: left">Cowen and Company, LLC</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"></TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right"></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">JMP Securities LLC </TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt; padding-left: 9.5pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The underwriting agreement provides that
the obligations of the underwriters are conditional and may be terminated at their discretion based on their assessment of the
state of the financial markets. The obligations of the underwriters may also be terminated upon the occurrence of the events specified
in the underwriting agreement. The underwriters have agreed, severally and not jointly, to purchase all of the shares sold under
the underwriting agreement if any of these shares are purchased, other than those shares covered by the overallotment option described
below. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters
may be increased or the underwriting agreement may be terminated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have agreed to indemnify the underwriters
against specified liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments the underwriters
may be required to make in respect thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The underwriters are offering the shares,
subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and
other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers
to the public and to reject orders in whole or in part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Overallotment Option to Purchase Additional
Shares.</B> We have granted to the underwriters an option to purchase up to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; additional shares of common stock at the public offering
price, less the underwriting discount. This option is exercisable for a period of 30 days. The underwriters may exercise this option
solely for the purpose of covering overallotments, if any, made in connection with the sale of common stock offered hereby. To
the extent that the underwriters exercise this option, the underwriters will purchase additional shares from us in approximately
the same proportion as shown in the table above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Discounts and Commissions.</B> The following
table shows the public offering price, underwriting discount and proceeds, before expenses to us. These amounts are shown assuming
both no exercise and full exercise of the underwriters&rsquo; option to purchase additional shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We estimate that the total expenses of
the offering, excluding underwriting discount and expense reimbursement, will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and are payable by us. We have also agreed to pay the reasonable out-of-pocket costs of the
underwriters up to $75,000, and the underwriters&rsquo; outside legal fees and expenses up to $100,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total </TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Per Share</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Without<BR>Over-<BR>Allotment</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">With<BR>Over- <BR>Allotment</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 55%; font-size: 10pt">Public offering price</TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left"></TD><TD STYLE="width: 12%; font-size: 10pt; font-weight: bold; text-align: right"></TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"></TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right"></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"></TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right"></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Underwriting discount</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Proceeds, before expenses, to InspireMD, Inc.</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The underwriters propose to offer the shares
of common stock to the public at the public offering price set forth on the cover of this prospectus. The underwriters may offer
the shares of common stock to securities dealers at the public offering price less a concession not in excess of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share. The
underwriters may allow, and the dealers may reallow, a discount not in excess of $ per share to other dealers. If all of the shares
are not sold at the public offering price, the underwriters may change the offering price and other selling terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Discretionary Accounts</B>. The underwriters
do not intend to confirm sales of the shares to any accounts over which they have discretionary authority.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have applied for the quotation of our
common stock on the Nasdaq Capital Market under the symbol &lsquo;&lsquo;NSPR&rsquo;&rsquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Stabilization</I>. In connection with
this offering, the underwriters may engage in stabilizing transactions, overallotment transactions, syndicate covering transactions,
penalty bids and purchases to cover positions created by short sales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Stabilizing transactions permit bids to purchase shares of common stock so long as the stabilizing bids do not exceed a specified
maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the common stock while
the offering is in progress.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Overallotment transactions involve sales by the underwriters of shares of common stock in excess of the number of shares the
underwriters are obligated to purchase. This creates a syndicate short position which may be either a covered short position or
a naked short position. In a covered short position, the number of shares overallotted by the underwriters is not greater than
the number of shares that they may purchase in the overallotment option. In a naked short position, the number of shares involved
is greater than the number of shares in the overallotment option. The underwriters may close out any short position by exercising
their overallotment option and/or purchasing shares in the open market.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Syndicate covering transactions involve purchases of common stock in the open market after the distribution has been completed
in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters
will consider, among other things, the price of shares available for purchase in the open market as compared with the price at
which they may purchase shares through exercise of the overallotment option. If the underwriters sell more shares than could be
covered by exercise of the overallotment option and, therefore, have a naked short position, the position can be closed out only
by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that
after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors
who purchase in the offering.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally
sold by that syndicate member is purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">These stabilizing transactions, syndicate
covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing
or retarding a decline in the market price of our common stock. As a result, the price of our common stock in the open market may
be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation
or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions
may be effected on the Nasdaq Capital Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued
at any time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Passive Market Making</I>. In connection
with this offering, underwriters and selling group members may engage in passive market making transactions in our common stock
on the Nasdaq Capital Market in accordance with Rule 103 of Regulation M under the Securities Exchange Act of 1934, as amended,
during a period before the commencement of offers or sales of common stock and extending through the completion of the distribution.
A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However,
if all independent bids are lowered below the passive market maker&rsquo;s bid, that bid must then be lowered when specified purchase
limits are exceeded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Lock-Up Agreements</I>. <B> </B>Pursuant
to certain &lsquo;&lsquo;lock-up&rsquo;&rsquo; agreements, we, our executive officers, directors and certain of our
other stockholders agreed, subject to certain exceptions, not to offer, sell, contract to sell, announce any intention to
sell, pledge or otherwise dispose of, enter into any swap or other agreement that transfers, in whole or in part, the
economic consequence of ownership of, directly or indirectly, or file with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended, relating to, any common stock or securities convertible
into or exchangeable or exercisable for any common stock without the prior written consent of Cowen and Company, LLC, for a
period of 180 days after the date of the pricing of the offering. The 180-day restricted period will be automatically
extended if (i) during the last 17 days of the 180-day restricted period we issue an earnings release or material news or a
material event relating to us occurs or (ii) prior to the expiration of the 180-day restricted period, we announce that we
will release earnings results or become aware that material news or a material event will occur during the 16-day period
beginning on the last day of the 180-day restricted period, in either of which case the restrictions described above will
continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This lock-up provision applies to
common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also
applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing
the agreement later acquires the power of disposition. The exceptions permit us, among other things and subject to
restrictions, to: (a) issue common stock or options pursuant to employee benefit plans, (b) issue common stock upon exercise
of outstanding options or warrants, (c) issue securities in connection with acquisitions or similar transactions or (d) file
registration statements on Form S-8. The exceptions permit parties to the &lsquo;&lsquo;lock-up&rsquo;&rsquo; agreements,
among other things and subject to restrictions, to: (a) participate in tenders involving the acquisition of a majority of our
stock, (b) participate in transfers or exchanges involving common stock or securities convertible into common stock or (c)
make certain gifts. In addition, the lock-up provision will not restrict broker-dealers from engaging in market making and
similar activities conducted in the ordinary course of their business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Electronic Offer, Sale and Distribution
of Shares</I>. A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters
or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering
may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling
group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters
and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus
in electronic format, the information on these websites is not part of this prospectus or the registration statement of which this
prospectus forms a part, has not been approved or endorsed by us or any underwriter in its capacity as underwriter, and should
not be relied upon by investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Other Relationships</I>. Certain
of the underwriters and their affiliates have provided, and may in the future provide, various investment banking, commercial
banking and other financial services for us and our affiliates for which they are received, and may in the future receive,
customary fees.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Haynes and Boone, LLP, New York, New York,
has passed upon the validity of the shares of our common stock offered by us under this prospectus. The underwriters are being
represented by Reed Smith LLP, New York, New York, in connection with the offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXPERTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The financial statements as of June 30,
2012, December 31, 2011 and 2010 and for each of the six months ended June 30, 2012 and three years in the period ended December
31, 2012  included in this prospectus have been so included in reliance on the report (which contains an explanatory paragraph
relating to our  ability to continue as a going concern as described in Note 1 to the financial statements) of Kesselman
&amp; Kesselman C.P.A.s, a member firm of PricewaterhouseCoopers International Limited, an independent registered public accounting
firm, given on the authority of said firm as experts in auditing and accounting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WHERE YOU CAN FIND ADDITIONAL INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have filed with the Securities and Exchange
Commission a registration statement on Form S-1, together with any amendments and related exhibits, under the Securities Act of
1933, as amended, with respect to our shares of common stock offered by this prospectus. The registration statement contains additional
information about us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended. Our Securities and Exchange Commission filings are available to the public over the Internet at the Securities and Exchange
Commission&rsquo;s website at http://www.sec.gov. You may also read and copy any document we file at the Securities and Exchange
Commission&rsquo;s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. In addition,
through our website, http://www.inspire-md.com, you can access electronic copies of documents we file with the Securities and Exchange
Commission. Information on our website is not incorporated by reference in this prospectus. Access to those electronic filings
is available as soon as practicable after filing with the Securities and Exchange Commission. You may also request a copy of those
filings, excluding exhibits, from us at no cost. Any such request should be addressed to us at: 4 Menorat Hamaor St., Tel Aviv,
Israel 67448, Attention: Craig Shore, Chief Financial Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;<B>INDEX</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 90%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: center"><B>Page</B></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></TD>
    <TD STYLE="text-align: center">F-2</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><B>CONSOLIDATED FINANCIAL STATEMENTS:</B></TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Consolidated Balance Sheets</TD>
    <TD STYLE="text-align: center">F-3 - F-4</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 0.12in">Consolidated Statements of Operations</TD>
    <TD STYLE="text-align: center">F-5</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Consolidated Statements of Changes in Equity (Capital Deficiency)</TD>
    <TD STYLE="text-align: center">F-6</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 0.12in">Consolidated Statements of Cash Flows</TD>
    <TD STYLE="text-align: center">F-7</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Notes to the Consolidated Financial Statements</TD>
    <TD STYLE="text-align: center">F-8 - F-47</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><img src="tlogo.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Report of Independent Registered Public
Accounting Firm</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: red"><B>&nbsp;</B></P>

<P STYLE="font: normal 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none">To the shareholders
of</FONT></P>

<P STYLE="font: normal 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none"><B>InspireMD,
Inc.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: red"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In our opinion, the accompanying consolidated balance sheets
and the related consolidated statements of operations, changes in equity (capital deficiency) and cash flows present fairly, in
all material respects, the financial position of InspireMD, Inc. (the &ldquo;Company&rdquo;) and its subsidiaries at June 30, 2012,
December 31, 2011 and 2010, and the results of its operations and its cash flows for the six month period ended June 30, 2012 and
for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the responsibility of the Company&rsquo;s management. Our responsibility
is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements,
the Company has had recurring losses, negative cash flows from operating activities and has significant future commitments that
raise substantial doubt about its ability to continue as a going concern. Management&rsquo;s plans in regard to these matters are
also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 38%; font-size: 10pt">Tel Aviv, Israel</TD>
    <TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 60%; font-size: 10pt">/s/ Kesselman &amp; Kesselman</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt">September 11, 2012</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Certified Public Accountants (Isr.)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A member of PricewaterhouseCoopers International Limited</P></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED BALANCE SHEETS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(U.S. dollars in thousands)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">June 30</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: center">ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">CURRENT ASSETS:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 55%; text-align: left; padding-left: 0.12in">Cash and cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">10,284</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">5,094</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">636</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Restricted cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">37</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">91</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">250</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Accounts receivable:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in">Trade</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,824</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,284</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">852</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in">Other</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">264</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">118</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">93</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">72</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Inventory:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in">On hand</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,744</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,061</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,704</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.24in">On consignment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">63</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">110</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">371</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.36in">Total current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">14,309</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,830</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,891</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><B>PROPERTY, PLANT AND EQUIPMENT</B>, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">462</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">420</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">282</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">NON-CURRENT ASSETS:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Deferred debt issuance costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">961</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Fund in respect of employee rights upon retirement</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">282</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">215</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">167</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.24in">Total non-current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,243</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">215</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">182</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.24in">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,014</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,465</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,355</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The accompanying notes are an integral
part of the consolidated financial statements.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<!-- Field: Page; Sequence: 126; Value: 2 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED BALANCE SHEETS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(U.S. dollars in thousands)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">June 30</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: center">LIABILITIES AND EQUITY (CAPITAL DEFICIENCY)</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">CURRENT LIABILITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 55%; text-align: left; padding-left: 0.12in">Current maturities of long-term loan</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">94</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">355</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Accounts payable and accruals:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in">Trade</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">441</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">814</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,103</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in">Other</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,925</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,217</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,509</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Advanced payment from customers</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">174</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">316</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">559</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Loans from shareholders</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Deferred revenues</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">398</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.36in">Total current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,550</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,441</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,944</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">LONG-TERM LIABILITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Long-term loan</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Liability for employees rights upon retirement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">354</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">270</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">206</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Convertible loans</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,018</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,044</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Contingently redeemable warrants</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,706</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.36in">Total long-term liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,078</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">270</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,325</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><B>COMMITMENTS AND CONTINGENT LIABILITIES </B>(Note 9)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.48in">Total liabilities</TD><TD STYLE="text-decoration: none; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-decoration: none; text-align: right">10,628</TD><TD STYLE="padding-bottom: 1pt; text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-decoration: none; text-align: right">3,711</TD><TD STYLE="padding-bottom: 1pt; text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-decoration: none; text-align: right">5,269</TD><TD STYLE="padding-bottom: 1pt; text-decoration: none; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: right">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: right">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: right">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><B>EQUITY (CAPITAL DEFICIENCY)</B>:</TD><TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: right">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: right">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: right">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Common stock, par value $0.0001 per share; 125,000,000 shares authorized; 68,160,161, 68,178,946 and 49,863,801 shares issued and outstanding at June 30, 2012 and December 31, 2011 and 2010, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">49,101</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">43,388</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,057</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(43,722</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(36,641</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(21,976</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.24in">Total equity (capital deficiency)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,386</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,754</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(914</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: none; text-align: left; padding-bottom: 2.5pt; padding-left: 0.24in">Total liabilities and equity (less capital deficiency)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,014</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,465</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,355</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The accompanying notes are an integral
part of the consolidated financial statements.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(U.S. dollars in thousands, except per share
data)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">6 month period ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year ended December 31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June 30, 2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 52%; font-weight: bold; text-align: left">REVENUES</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">2,071</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">6,004</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">4,949</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">3,411</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">COST OF REVENUES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,377</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,011</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,696</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,291</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">GROSS PROFIT</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">694</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,993</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,253</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,120</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">OPERATING EXPENSES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Research and development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,607</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,474</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,338</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,330</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Selling and marketing</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,246</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,973</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,236</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,040</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.24in; text-indent: -0.12in">General and administrative (including $1,454, $8,542, $869 and $65 of share-based compensation for the six month period ended June 30, 2012 and the years ended December 31, 2011, 2010 and 2009, respectively)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,999</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,275</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,898</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,467</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Total operating expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,852</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">16,722</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,472</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,837</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">LOSS FROM OPERATIONS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,158</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13,729</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,219</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,717</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><B>FINANCIAL EXPENSES (INCOME),</B> net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(109</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">934</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">154</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(40</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">LOSS BEFORE TAX EXPENSES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,049</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(14,663</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,373</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,677</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">TAX EXPENSES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">32</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">47</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">47</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">NET LOSS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(7,081</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(14,665</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,420</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2,724</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.12in; text-indent: -0.12in"><B>NET LOSS PER SHARE - </B>basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.10</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.24</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.07</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.06</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.12in; text-indent: -0.12in"><B>WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES USED IN COMPUTING NET LOSS PER SHARE - </B>basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">68,176,882</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">61,439,700</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">49,234,528</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">47,658,853</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The accompanying notes are an integral
part of the consolidated financial statements.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY (CAPITAL DEFICIENCY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Ordinary&nbsp;shares</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number&nbsp;of<BR> shares</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Par<BR> value</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Additional&nbsp;<BR> paid-in<BR> capital</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Accumulated<BR> deficit</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total<BR> equity<BR> (capital<BR> deficiency)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">U.S.&nbsp;dollars&nbsp;in&nbsp;thousands</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%; font-weight: bold; text-align: left">BALANCE AT JANUARY 1, 2009</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">47,061,936</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">5</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">15,961</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(15,832</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">134</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">CHANGES DURING 2009:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Net loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,724</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,724</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Exercise of options by employees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">458,722</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Employee and non-employee share-based compensation expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">594</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">594</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Redemption of beneficial conversion feature of convertible loan</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(308</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(308</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.24in; text-indent: -0.12in">Issuance of ordinary shares, net of $44 issuance cost</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">817,722</TD><TD STYLE="padding-bottom: 1pt; text-align: left"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">*</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">965</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">965</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">BALANCE AT DECEMBER 31, 2009</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,338,380</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,212</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(18,556</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,339</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">CHANGES DURING 2010:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Net loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,420</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,420</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Employee and non-employee share-based compensation expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,640</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,640</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Issuance of warrants, net of $23 issuance costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">424</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">424</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.24in; text-indent: -0.12in">Issuance of ordinary shares, net of $97 issuance costs</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,525,421</TD><TD STYLE="padding-bottom: 1pt; text-align: left"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">*</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,781</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,781</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">BALANCE AT DECEMBER 31, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">49,863,801</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,057</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(21,976</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(914</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">CHANGES DURING 2011:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Net loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(14,665</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(14,665</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Employee and non-employee share-based compensation expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,993,785</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,605</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,606</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Issuance of shares and warrants, net of $2,835 issuance costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,992,269</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,653</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,654</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Issuance of ordinary shares, net of $185 issuance costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">802,866</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">805</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">805</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Exercise of options by employee</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000,000</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.24in; text-indent: -0.12in">Conversion of convertible loans</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">526,225</TD><TD STYLE="padding-bottom: 1pt; text-align: left"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">*</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">768</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">768</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">BALANCE AT DECEMBER 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">68,178,946</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">43,388</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(36,641</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6,754</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">CHANGES DURING THE 6 MONTH PERIOD ENDED JUNE 30, 2012:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Net loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,081</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,081</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Employee and non-employee share-based compensation expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,944</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,944</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Acquisition and cancellation of shares</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(18,785</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(21</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(21</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.24in; text-indent: -0.12in">Beneficial conversion feature of convertible loan</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,790</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,790</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">BALANCE AT JUNE 30, 2012</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">68,160,161</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">49,101</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(43,722</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,386</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>* </B>Represents an amount less than
$1</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The accompanying notes are an integral
part of the consolidated financial statements.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(U.S. dollars in thousands)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">6&nbsp;month&nbsp;period&nbsp;ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 0.12in; text-indent: -0.12in">CASH FLOWS FROM OPERATING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 60%; text-align: left; padding-left: 0.12in">Net loss</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">(7,081</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">(14,665</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">(3,420</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">(2,724</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Adjustments required to reconcile net loss to net cash &nbsp;used in operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in">Depreciation of property, plant and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">69</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">89</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">91</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">89</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in">Loss from sale of property, plant and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.36in; text-indent: -0.12in">Change in liability for employees right upon retirement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">84</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">58</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">42</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">42</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in">Financial expenses (income)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(315</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">897</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">94</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(224</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in">Share-based compensation expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,944</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,590</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,620</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">562</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.36in; text-indent: -0.12in">Loss (gains) on amounts funded in respect of employee rights upon retirement, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(10</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in">Changes in operating asset and liability items:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.36in">Decrease (increase) in prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(21</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(69</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(32</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.36in">Decrease (increase) in trade receivables</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">460</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,432</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">337</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(969</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.36in">Decrease (increase) in other receivables</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(146</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(50</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(27</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.36in">Decrease in inventory on consignment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">47</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">261</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">722</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">330</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.36in">Decrease (increase) in inventory on hand</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">317</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(357</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(758</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(241</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.36in">Increase (decrease) in trade payables</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(291</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(371</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">196</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">612</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.36in">Increase (decrease) in deferred revenues</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(398</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,577</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(507</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.48in; text-indent: -0.12in">Increase (decrease)&nbsp; in other payable and advance payment from customers</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">566</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">421</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(91</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,554</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Net cash used in operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,363</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(6,003</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,710</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,545</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">CASH FLOWS FROM INVESTING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Decrease (increase) in restricted cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">159</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">52</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(272</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Purchase of property, plant and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(193</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(139</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(81</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(34</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Proceeds from sale of property, plant and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">41</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.24in; text-indent: -0.12in">Amounts funded in respect of employee rights upon retirement, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(61</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(48</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(17</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(44</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Net cash provided (used) in investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(200</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(46</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(346</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">CASH FLOWS FROM FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Proceeds from issuance of convertible loan and warrants, net of issuance costs of $1,132 in the six month period ended June 30, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,868</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Proceeds from issuance of shares and warrants, net of issuance costs of $1,014, $78 and $11 in the years ended December 31, 2011, 2010 and 2009, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,564</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,245</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">976</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Exercise of options</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Proceeds from long-term loan, net of $41 issuance costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">419</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in; text-indent: -0.12in">Proceeds from convertible loan at fair value through
    profit or loss, net of $60 issuance costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,073</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Repayment of long-term loan</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(94</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(375</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(281</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Acquisition and cancellation of shares</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(21</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Repayment of loans from shareholders</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(20</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(20</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Repayment of convertible loans</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(720</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Net cash provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,753</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,669</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,037</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">655</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0.12in; text-indent: -0.12in">EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(221</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(21</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">41</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0.12in; text-indent: -0.12in">INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,190</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,458</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">260</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,195</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0.12in; text-indent: -0.12in">BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,094</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">636</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">376</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,571</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt; padding-left: 0.12in; text-indent: -0.12in">BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,284</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,094</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">636</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">376</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 0.12in; text-indent: -0.12in">SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.12in">Taxes on income&nbsp; paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">37</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">37</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">56</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.12in">Interest paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">224</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">24</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">30</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">88</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 0.12in; text-indent: -0.12in">SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.12in">Receivables on account of shares</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.12in">Conversion of convertible loan into shares</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">668</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.24in; text-indent: -0.12in">Purchasing of property plant and equipment in credit and in consideration of share-based payment</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">144</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The accompanying notes are an integral
part of the consolidated financial statements.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none"><B>NOTE 1 - DESCRIPTION
OF BUSINESS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt">InspireMD, Inc., formerly Saguaro Resources, Inc.,
(the &ldquo;Company&rdquo;), a public company, is a Delaware corporation formed on February 29, 2008. On March 28, 2011, the Company
changed its name to InspireMD, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt">On December 29, 2010, the Company entered into a
Share Exchange Agreement (the &ldquo;Exchange Agreement&rdquo;) by and among the Company and InspireMD Ltd., a limited company
incorporated under the laws of the State of Israel in April 2005. Subsequent to the date of execution of the Exchange Agreement,
shareholders of InspireMD Ltd., holding 91.7% of InspireMD Ltd.&rsquo;s issued and outstanding ordinary shares, executed a joinder
to the Exchange Agreement and became parties thereto (the &ldquo;InspireMD Shareholders&rdquo;). Pursuant to the Exchange Agreement,
on March 31, 2011, the InspireMD Shareholders transferred all of their ordinary shares in InspireMD Ltd. to the Company in exchange
for 46,471,907 newly issued shares of common stock of the Company (the &ldquo;Initial Share Exchange&rdquo;). In addition, the
remaining holders of InspireMD Ltd.&rsquo;s ordinary shares separately transferred all of their ordinary shares of InspireMD Ltd.
to the Company, in exchange for an aggregate of 4,194,756 newly issued shares of common stock of the Company (the &ldquo;Follow
Up Share Exchange&rdquo;) and, together with the Initial Share Exchange, the &ldquo;Share Exchange&rdquo;). As a result of the
Share Exchange, InspireMD Ltd. became a wholly owned subsidiary of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt">The Share Exchange was accounted for as a reverse
recapitalization, equivalent to the issuance of stock by InspireMD Ltd. for the net monetary assets of the Company. Accordingly,
the historical financial statements of the Company reflect the historical operations and financial statements of InspireMD Ltd.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt">The Company, together with its subsidiaries, is
a medical device company focusing on the development and commercialization of its proprietary stent platform technology, MGuard&trade;.
MGuard&trade; provides embolic protection in stenting procedures by placing a micron mesh sleeve over a stent. The Company&rsquo;s
initial products are marketed for use in patients with acute coronary syndromes, notably acute myocardial infarction (heart attack)
and saphenous vein graft coronary interventions (bypass surgery). The Company markets its products through distributors in international
markets, mainly in Europe and Latin America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt">In addition, the Company operates in Germany through
its wholly-owned subsidiary, InspireMD GmbH, a German limited liability company incorporated in November 2007, where the Company
subcontracts the manufacturing of its stents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">The Company has had recurring
losses and negative cash flows from operating activities and has significant future commitments. For the six months ended June
30, 2012, the Company had losses of approximately $7.1 million and negative cash flows from operating activities of approximately
$4.4 million. The Company&rsquo;s management believes that its working capital as of June 30, 2012 of approximately $10.8 million
should enable it to continue funding the negative cash flows from operating activities until October 2013, when its 2012 Convertible
Debentures (defined and described in Note 6a) are subject to a noncontingent redemption option that could require the Company
to make a payment of $13.3 million, including accrued interest. Since the Company expects to continue incurring negative cash
flows from operations and in light of the cash requirement in connection with the 2012 Convertible Debentures, there is substantial
doubt about the Company&rsquo;s ability to continue operating as a going concern. These financial statements include no adjustments
of the values of assets and liabilities and the classification thereof, if any, that will apply if the Company is unable to continue
operating as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">The Company will need to raise
further capital at some future point in time, through the sale of additional equity securities or debt. The Company&rsquo;s future
capital requirements and the adequacy of the Company&rsquo;s available funds will depend on many factors, including the Company&rsquo;s
ability to successfully commercialize the Company&rsquo;s MGuard<SUP>TM</SUP> products, development of future products, competing
technological and market developments, and the need to enter into collaborations with other companies or acquire other companies
or technologies to enhance or complement the Company&rsquo;s product offerings. However, the Company may be unable to raise sufficient
additional capital when the Company will need it or with favorable terms. The terms of any securities issued by the Company in
future financing 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 the Company&rsquo;s
securities then outstanding. If the Company is unable to obtain adequate funds on reasonable terms, the Company will need to curtail
operations significantly, including possibly postponing or halting the Company&rsquo;s Unites States of America (&ldquo;U.S.&rdquo;)
Food and Drug Administration clinical trials or entering into financing agreements with unattractive terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none"><B>NOTE 2 - SIGNIFICANT</B>
<B>ACCOUNTING</B> <B>POLICIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none"><B>&nbsp;</B></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>a.</B></TD><TD><B>Accounting principles</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -22.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The consolidated financial statements
are prepared in accordance with accounting principles generally accepted in the United States (&ldquo;U.S. GAAP&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>b.</B></TD><TD><B>Use of estimates</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: -19.85pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates using assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of sales and expenses during the reporting periods. Actual results could differ from those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">As applicable to these consolidated
financial statements, the most significant estimates and assumptions relate to inventory write-off, provisions for returns, legal
contingencies, estimation of the fair value of share-based compensation and estimation of the fair value of warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>c.</B></TD><TD STYLE="text-align: justify"><B>Functional currency</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.5pt; text-align: justify; text-indent: 1.55pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The currency of the primary economic
environment in which the operations of the Company and its subsidiaries are conducted is the U.S. dollar (&ldquo;$&rdquo; or &ldquo;dollar&rdquo;).
Accordingly, the functional currency of the Company and of the subsidiaries is the dollar.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The dollar figures are determined
as follows: transactions and balances originally denominated in dollars are presented in their original amounts. Balances in foreign
currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively.
The resulting translation gains or losses are recorded as financial income or expense, as appropriate. For transactions reflected
in the statements of operations in foreign currencies, the exchange rates at transaction dates are used. Depreciation and changes
in inventories and other changes deriving from non-monetary items are based on historical exchange rates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>d.</B></TD><TD STYLE="text-align: justify"><B>Principles of consolidation</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.5pt; text-align: justify; text-indent: 1.55pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The consolidated financial statements
include the accounts of the Company and of its subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>e.</B></TD><TD STYLE="text-align: justify"><B>Cash and cash equivalents</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.5pt; text-align: justify; text-indent: 1.55pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company considers all highly
liquid investments, which include short-term bank deposits (up to three months from date of deposit), that are not restricted as
to withdrawal or use, to be cash equivalents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>f.</B></TD><TD STYLE="text-align: justify"><B>Restricted cash</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.5pt; text-align: justify; text-indent: 1.55pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company maintains certain
cash amounts restricted as to withdrawal or use, related to credit cards. Restricted cash is denominated in dollars and New Israel
Shekel (&ldquo;NIS&rdquo;). See also Note 9c(2).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>g.</B></TD><TD STYLE="text-align: justify"><B>Concentration of credit risk and allowance for doubtful
accounts</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.5pt; text-align: justify; text-indent: 1.55pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Financial instruments that may potentially
subject the Company to a concentration of credit risk consist of cash, cash equivalents and restricted cash, which are deposited
in major financial institutions in the &ldquo;U.S.&rdquo;, Israel and Germany, and trade accounts receivable. The Company&rsquo;s
trade accounts receivable are derived from revenues earned from customers from various countries. The Company performs ongoing
credit evaluations of its customers&rsquo; financial condition and, generally, requires no collateral from its customers. The Company
also has a credit insurance policy for some of its customers. The Company maintains an allowance for doubtful accounts receivable
based upon the expected ability to collect the accounts receivable. The Company reviews its allowance for doubtful accounts quarterly
by assessing individual accounts receivable and all other balances based on historical collection experience and an economic risk
assessment. If the Company determines that a specific customer is<B> </B>unable to meet its financial obligations to the Company,
the Company provides an allowance for credit losses to reduce the receivable to the amount management reasonably believes will
be collected. To mitigate risks, the Company deposits cash and cash equivalents with high credit quality financial institutions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Provisions for doubtful accounts
receivable are netted against &ldquo;Accounts receivable-Trade.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 21.25pt"><B>h.</B></TD><TD><B>Inventory</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: -21.25pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Inventories include finished
goods, work in process and raw materials.&nbsp;&nbsp;Inventories are stated at the lower of cost (cost is determined on a &ldquo;first-in,
first-out&rdquo; basis) or market value. The Company&rsquo;s inventories generally have a limited shelf life and are subject to
impairment as they approach their expiration dates. The Company regularly evaluates the carrying value of the Company&rsquo;s
inventories and when, in the Company&rsquo;s opinion, factors indicate that impairment has occurred, the Company establishes a
reserve against the inventories&rsquo; carrying value. The Company&rsquo;s determination that a valuation reserve might be required
and&nbsp;the quantification of such reserve require management to utilize significant judgment. With respect to inventory on consignment,
see Note 2k.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>i.</B></TD><TD><FONT STYLE="color: black"><B>Property, plant and equipment</B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: -19.85pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Property, plant and equipment are
stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over
the estimated useful lives of the related assets: over three years for computers and other electronic equipment, five years for
vehicles and seven to fifteen&nbsp;years for office furniture and equipment and machinery and equipment (mainly seven years). Leasehold
improvements are amortized on a straight-line basis over the term of the lease, which is shorter than the estimated life of the
improvements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>j.</B></TD><TD STYLE="text-align: justify"><FONT STYLE="color: black"><B>Impairment of property,
plant and equipment</B></FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 49.65pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company reviews its property,
plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets
may not be recoverable. If the sum of the expected future cash flows (undiscounted and without interest charges) of the property,
plant and equipment is less than the carrying amount of such assets, an impairment loss would be recognized, and the assets would
be written down to their estimated fair values.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">To date, the Company has not recorded
any impairment charges relating to its property, plant and equipment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.5pt"></TD><TD STYLE="width: 21.4pt"><B>k.</B></TD><TD STYLE="text-align: justify"><B>Revenue recognition</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: -21.4pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: justify; text-indent: 0in">Revenue is recognized
when delivery has occurred, evidence of an arrangement exists, title and risks and rewards for the products are transferred to
the customer, collection is reasonably assured and product returns can be reliably estimated. When product returns can be reliably
estimated a provision is recorded, based on historical experience, and deducted from revenues. The provision for product returns
and related costs are included in &ldquo;Accounts payable and accruals-other&rdquo; under &ldquo;Current liabilities&rdquo; and
&ldquo;Inventory-On consignment,&rdquo; respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">When returns cannot be reliably estimated,
both related revenues and costs are deferred, and presented under &ldquo;Deferred revenues&rdquo; and &ldquo;Inventory-On consignment,&rdquo;
respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">As of June 30, 2012, there are
no deferred revenues related to sales for which the rate of return cannot be reliably estimated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company&rsquo;s revenue arrangements
may contain delivery of free products upon the achievement of sales targets. Each period, the Company estimates the amount of free
products to which these distributors will be entitled based upon the expected achievement of sales targets and defers a portion
of revenues accordingly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company recognizes revenue net
of value added tax (VAT).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>l.</B></TD><TD STYLE="text-align: justify"><B>Research and development costs</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.5pt; text-align: justify; text-indent: 0.15pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Research and development costs are
charged to the statement of operations as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>m.</B></TD><TD STYLE="text-align: justify"><B>Share-based compensation</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: -21.25pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Employee option awards are classified
as equity awards and accounted for using the grant-date fair value method. The fair value of share-based awards is estimated using
the Black-Scholes valuation model and expensed over the requisite service period, net of estimated forfeitures. The Company estimates
forfeitures based on historical experience and anticipated future conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: justify; text-indent: 0in">The Company
elected to recognize compensation expenses for awards with only service conditions that have graded vesting schedules using the
accelerated multiple option approach.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: justify; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in"><B>NOTE 2 - SIGNIFICANT</B> <B>ACCOUNTING</B>
<B>POLICIES </B>(continued):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: justify; text-indent: 0in">The Company
accounts for equity instruments issued to third party service providers (non-employees), by recording the fair value of the options
granted using an option pricing model, at each reporting period, until awards are vested in full. The expense is recognized over
the vesting period using the accelerated multiple option approach.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: justify; text-indent: 0in">However,
when the grant relates to options granted to third parties as consideration for introducing investors to the Company, the costs
are recorded as issuance costs, of the various financial instruments issued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In addition, certain share-based
awards of the Company are performance based and dependent upon achieving certain goals. With respect to these awards, the company
estimates the expected pre-vesting award probability that the performance conditions will be achieved. The Company only recognizes
expense for the shares that are expected to vest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 21.25pt"><B>n.</B></TD><TD STYLE="text-align: justify"><B>Uncertain tax positions</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: -21.25pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company follows a two-step approach
to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining
if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit. If
under the first step a tax provision is assessed to be more likely than not of being sustained on audit, the second step is performed,
under which the tax benefit is measured as the largest amount that is more than 50% likely to be realized upon ultimate settlement.
Such liabilities are classified as long-term, unless the liability is expected to be resolved within twelve months from the balance
sheet date. The Company&rsquo;s policy is to include interest and penalties related to unrecognized tax benefits within &ldquo;Financial
expenses (income)-net&rdquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>o.</B></TD><TD STYLE="text-align: justify"><B>Deferred income taxes</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48.2pt; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Deferred taxes are determined utilizing
the &ldquo;asset and liability&rdquo; method based on the estimated future tax effects of differences between the financial accounting
and tax bases of assets and liabilities under the applicable tax laws, and on tax rates anticipated to be in effect when the deferred
taxes are expected to be paid or realized. The Company assesses realization of deferred income tax assets and, based on all available
evidence, concludes whether it is more likely than not that the net deferred income tax assets will be realized. A valuation allowance
is provided for the amount of deferred income tax assets not considered to be realizable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company may incur additional
tax liability in the event of intercompany dividend distributions by its subsidiary. Such additional tax liability in respect of
these foreign subsidiaries has not been provided for in these financial statements as it is the Company&rsquo;s policy to permanently
reinvest the subsidiaries&rsquo; earnings and to consider distributing dividends only when this can be facilitated in connection
with a specific tax opportunity that may arise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Taxes that would apply in the event
of disposal of investments in the foreign subsidiary have not been taken into account in computing the deferred taxes, as it is
the Company&rsquo;s intention to hold, and not to realize, this investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 21.25pt"><B>p.</B></TD><TD STYLE="text-align: justify"><B>Advertising</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: -21.25pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Costs related to advertising and
promotion of products are charged to sales and marketing expense as incurred. Advertising expenses were $361 thousand for the six
month period ended June 30, 2012, and $400 thousand, $467 thousand and $275 thousand for the years ended December 31, 2011, 2010
and 2009, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>q.</B></TD><TD STYLE="text-align: justify"><B>Net loss per share</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.5pt; text-indent: 1.55pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Basic and diluted net loss per share
is computed by dividing the net loss for the year by the weighted average number of ordinary shares outstanding during the year.
The calculation of diluted net loss per share excludes potential ordinary shares as the effect is anti-dilutive. Potential ordinary
shares are comprised of incremental ordinary shares issuable upon the exercise of share options, warrants and convertible loans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">For the six month period ended June
30, 2012, as well as the years ended December&nbsp;31, 2011, 2010 and 2009, all ordinary shares underlying outstanding options,
warrants and convertible loans have been excluded from the calculation of the diluted loss per share since their effect was anti-dilutive.
The total number of ordinary shares related to outstanding options, warrants and convertible loans excluded from the calculations
of diluted loss per share were 32,470,307 for the six month period ended June 30, 2012, and 21,626,451, 9,502,111 and 5,877,388
for the years ended December 31, 2011, 2010 and 2009, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>r.</B></TD><TD><B>Segment reporting</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: -19.85pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company has one operating and
reportable segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>s.</B></TD><TD STYLE="text-align: justify"><B>Factoring of receivables</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 49.65pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company entered into factoring
agreements amounting to $1,200 thousand and $942 thousand during the years ended December 31, 2011 and 2010, respectively, with
certain banking institutions on a non-recourse basis. The factoring of trade receivables under these agreements were accounted
for as sales. Under the terms of these factoring agreements, the Company transferred ownership of eligible trade receivables without
recourse to the respective banking institutions in exchange for cash. Proceeds on the transfers reflect the face value of the account
less a discount. The discounts, $12 thousand and $37 thousand during the years ended December 31, 2011 and 2010, respectively,
were recorded to &ldquo;Financial expenses (income)-net&rdquo; within the Consolidated Statements of Operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The receivables sold pursuant to
these factoring agreements are excluded from &rsquo;Accounts receivable-Trade&rdquo; on the Consolidated Balance Sheets and are
reflected as cash provided by operating activities on the Consolidated Statements of Cash Flows. The banking institution had no
recourse to the Company&rsquo;s assets for failure of debtors to pay when due.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The related commissions on the sales
of trade receivables sold under these factoring agreements amounting to $23 thousand and $4 thousand during the years ended December
31, 2011 and 2010, respectively, were recorded to &ldquo;Financial expenses (income)-net&rdquo; within the Consolidated Statements
of Operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>t.</B></TD><TD STYLE="text-align: justify"><B>Fair value measurement:</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: -19.85pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company measures fair value and
discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The accounting standard establishes
a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels,
which are described below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Level 1: Quoted prices (unadjusted)
in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest
priority to Level 1 inputs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>
<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Level 2: Observable prices that are
based on inputs not quoted on active markets, but corroborated by market data.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Level 3: Unobservable inputs are
used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In determining fair value, the Company
utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
possible and considers counterparty credit risk in its assessment of fair value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>u.</B></TD><TD STYLE="text-align: justify"><B>Put warrants</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: -19.85pt"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 50.15pt"></TD><TD STYLE="width: 19.85pt"></TD><TD STYLE="text-align: left">Put warrants that embody an obligation to repurchase the Company&rsquo;s equity shares, or are indexed
to such an obligation, and that require or may require the Company to settle the obligation by transferring assets are within the
scope of Accounting Standards Codification (&ldquo;ASC&rdquo;) 480-10-25-8, and are recognized as a liability and measured at fair
value at each reporting date, with changes in fair value recorded in earnings. See Note 6a(4)(A).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: left; text-indent: -19.85pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>v.</B></TD><TD STYLE="text-align: justify"><B>Beneficial conversion feature (&ldquo;BCF&rdquo;)</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: left; text-indent: -19.85pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: left; text-indent: 0.9pt">When the
Company issues convertible debt, if the stock price is greater than the effective conversion price (after allocation of the total
proceeds) on the measurement date, the conversion feature is considered &quot;beneficial&quot; to the holder.<FONT STYLE="font-family: Times New Roman, Times, Serif">
</FONT>If there is no contingency, this difference is treated as issued equity and reduces the carrying value of the host debt;
the discount is accreted as deemed interest on the debt. See Note 6a(4)(B).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: left; text-indent: -19.85pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>w.</B></TD><TD STYLE="text-align: justify"><B>Embedded derivatives</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: -19.85pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: left; text-indent: 0.9pt">Embedded derivatives
in debt contracts that are not clearly and closely related to the host debt are bifurcated and accounted for separately. Those
embedded derivatives are measured at fair value each reporting date, with changes in fair value recorded in earnings. <FONT STYLE="color: black">See
Note 6a(4)(B).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: left; text-indent: 0.9pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>x.</B></TD><TD STYLE="text-align: justify"><B>Allocation of issuance proceeds</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: -19.85pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: left; text-indent: 0.9pt">The Company allocated
proceeds from its issuance of debt that was sold with detachable warrants that are classified as liability as follows: first to
the warrants based on their full fair value; then to any embedded derivatives in the debt that require bifurcation at their fair
values; then the residual amount of the proceeds to the debt. See Note 6a(4)(B).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: left; text-indent: 0.9pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt; text-align: left"><B>y.</B></TD><TD STYLE="text-align: justify"><B>Newly adopted accounting guidance</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48.2pt; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in"><B>Fair value measurement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In May 2011, the FASB issued Accounting
Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs (&ldquo;ASU 2011-04&rdquo;). ASU 2011-04 changes certain fair value measurement principles
and clarifies the application of existing fair value measurement guidance. These amendments include, among others, (1) the application
of the highest and best use and valuation premise concepts, (2) measuring the fair value of an instrument classified in a reporting
entity&rsquo;s shareholders&rsquo; equity and (3) disclosing quantitative information about the unobservable inputs used within
the Level 3 hierarchy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Effective January 1, 2012, the Company
adopted ASU 2011-04. The adoption of this accounting standards update did not have a material impact on the Company&rsquo;s consolidated
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">NOTE 3 - FAIR VALUE MEASURMENT</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-align: left; text-indent: -36.15pt"><B>Items
Measured at Fair Value on a Recurring Basis</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-align: left; text-indent: -36.15pt"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>a.</B></TD><TD>The following table summarizes the balances for those financial liabilities where fair value measurements are estimated utilizing
Level 2 and Level 3 inputs:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">June 30</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Level</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($ in thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; text-align: left">2010 Convertible Debentures</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">3</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,044</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">2012 Warrants at fair value&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,706</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Embedded derivative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">49</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,755</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,044</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>b.</B></TD><TD>The following tables summarize the activity for those financial liabilities where fair value measurements are estimated utilizing
Level 3 inputs:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: -19.85pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Embedded Derivative</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Convertible Loan</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($ in thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($ in thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Balance as of January 1, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; text-align: left">Issuances</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">1,133</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in; text-indent: -0.12in">Total losses (gains) (realized and unrealized)
    - included in earnings - Financial expenses (income), net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(89</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Balance as of December 31, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,044</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in; text-indent: -0.12in">Total losses (gains) (realized and unrealized)
    - included in earnings - Financial expenses (income), net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">624</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Convertion to Company&rsquo;s shares of common stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(668</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Redemption</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Balance as of December 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Issuances</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in; text-indent: -0.12in; padding-bottom: 1pt">Total losses (gains) (realized and unrealized)
    - included in earnings - Financial expenses (income), net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">41</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Balance as of June 30, 2012</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">49</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Level 3 liabilities include an embedded
derivative related to the Company&rsquo;s senior secured convertible debenture due April 5, 2014, as described in Note 6a.&nbsp;The
Company values the Level&nbsp;3 embedded derivative using an internally developed valuation model, whose inputs include recovery
rates, credit spreads, stock prices, and volatilities, as described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>
<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt">In calculating the fair value of embedded derivative,
the Company used the following assumptions: Company&rsquo;s credit spread of 23.1% and 26.5% for the transaction date and for
June 30, 2012, respectively, Company&rsquo;s recovery rate of 49.8% and 49.8% for the transaction date and for June 30, 2012,
respectively, probability of non-financial event of default 5% and 5% for the transaction date and for June 30, 2012, respectively.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt">The credit spread is the yield to maturity of
risky bonds over risk free bonds and was based on an average of sample comparable companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt">The recovery rate is the estimated amount to be
recovered through <FONT STYLE="text-underline-style: none; color: windowtext">bankruptcy</FONT> procedures in event of a <FONT STYLE="text-underline-style: none; color: windowtext">default</FONT>,
expressed as a percentage of <FONT STYLE="text-underline-style: none; color: windowtext">face value</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt">A non-financial event of default is a contractual
event of default which does not result from a declining financial standing of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The fair value of the warrants included
in Level 2 is estimated using the Black &amp; Scholes model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In calculating the fair value
of warrants, the Company used the following assumptions: expected term of 5 and 4.76 years for the transaction date and for June
30, 2012, respectively; expected volatility of 66.1% and 69.6% for the transaction date and for June 30, 2012, respectively; risk-free
interest rate of 1.01% and 0.72% for the transaction date and for June 30, 2012, respectively; and dividend yield of 0%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The carrying amounts of financial
instruments included in working capital approximate their fair value either because these amounts are presented at fair value or
due to the relatively short-term maturities of such instruments. The carrying amount of the Company&rsquo;s other financial long-term
assets and other financial long-term liabilities (other than the debentures) approximate their fair value. The fair value of the
Company&rsquo;s senior secured convertible debenture due April 5, 2014 approximates the carrying amount (after considering the
BCF, as described in Note 6a).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>NOTE 4 - PROPERTY, PLANT AND EQUIPMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>a.</B></TD><TD>Composition of assets, grouped by major classifications, is as follows:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 82%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">June 30</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($ in thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Cost:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 61%; text-align: left; padding-left: 0.12in">Vehicles</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">44</TD><TD STYLE="width: 1%; text-align: left"></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Computer equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">142</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">123</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.12in">Office furniture and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">83</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">56</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in">Machinery and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">598</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">597</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">416</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Leasehold improvements</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">111</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">47</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">47</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">934</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">823</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">636</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less - accumulated depreciation and amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(472</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(403</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(354</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net carrying amount</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">462</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">420</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">282</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>b.</B></TD><TD>Depreciation and amortization expenses totaled approximately $69 thousand for the six month period ended June 30, 2012, and
$89 thousand, $91 thousand and $89 thousand for the years ended December 31, 2011, 2010 and 2009, respectively.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>NOTE 5 - LIABILITY FOR EMPLOYEES RIGHT
UPON RETIREMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 50pt; text-align: left; text-indent: -0.35pt">Israeli labor
law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other
circumstances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 50pt; text-align: left; text-indent: -0.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 50pt; text-align: left; text-indent: -0.35pt">Pursuant to
section 14 of the Israeli Severance Compensation Act, 1963, some of the Company&rsquo;s employees are entitled to have monthly
deposits, at a rate of 8.33% of their monthly salary, made in their name with insurance companies. Payments in accordance with
section 14 relieve the Company from any future severance payments to these employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 50pt; text-align: left; text-indent: -0.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 50pt; text-align: left; text-indent: -0.35pt"><FONT STYLE="font-size: 10pt">The
severance pay liability of the Company for the rest of its employees, which reflects the undiscounted amount of the liability,
is based upon the number of years of service and the latest monthly salary. The severance pay liability is partly covered by insurance
policies and by regular deposits with recognized severance payment funds. The Company may only make withdrawals from the amounts
funded for the purpose of paying severance pay. The severance pay expenses were approximately $117 thousand in the six month period
ended June 30, 2012, and $155 </FONT>thousand<FONT STYLE="font-size: 10pt">, $114 </FONT>thousand<FONT STYLE="font-size: 10pt">
and $78 thousand in the years ended December 31, 2011, 2010 and 2009, respectively.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 50pt; text-align: left; text-indent: -0.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 50pt; text-align: left; text-indent: -0.35pt"><FONT STYLE="font-size: 10pt">Defined
contribution plan expenses were $96 in the six month period ended June 30 2012, and $197, $90 and $82 in the years ended December
31, 2011, 2010 and 2009, respectively. Gain&nbsp;(loss) on amounts funded with respect to employee rights upon retirement totaled
to approximately $6 thousand for the six month period ended June 30 2012, and $(8) </FONT>thousand<FONT STYLE="font-size: 10pt">,
$11 </FONT>thousand <FONT STYLE="font-size: 10pt"> and $10 thousand for the years ended December&nbsp;31, 2011, 2010 and 2009,
respectively.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 50pt; text-align: left; text-indent: -0.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 50pt; text-align: left; text-indent: -0.35pt">The Company
expects contribution plan expenses in fiscal year 2013 to be approximately $198 thousand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 50pt; text-align: left; text-indent: -0.35pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: left">NOTE 6 - convertible
LOANS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 19.85pt"><B>a.</B></TD><TD STYLE="text-align: left">On April 5, 2012, the Company issued senior secured convertible debentures (the &ldquo;2012 Convertible
Debentures&rdquo;) due April 5, 2014 in the original aggregate principal amount of $11,702,128 and five-year warrants (the &ldquo;2012
Warrants&rdquo;) to purchase an aggregate of 3,343,465 shares of its common stock at an exercise price of $1.80 per share in a
private placement transaction in exchange for aggregate gross proceeds of $11,000 thousand. The 2012 Convertible Debentures bear
interest at an annual rate of 8% (payable quarterly beginning on July 1, 2012) and are convertible at any time into shares of common
stock at an initial conversion price of $1.75 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.1pt; text-align: left; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left; text-indent: 0.5in">The relevant
features of the 2012 Convertible Debentures and 2012 Warrants are summarized below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><B>1)</B></TD><TD STYLE="text-align: left"><FONT STYLE="color: black"><B>2012 Convertible Debentures</B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>A.</I></TD><TD STYLE="text-align: left"><I>Conversion and contingent conversion</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">The 2012 Convertible Debentures, including
accrued interest on such 2012 Convertible Debentures, are convertible at any time, in whole or part, at the option of the holders
into shares of common stock at an initial conversion price of $1.75 per share, subject to adjustment for stock splits, fundamental
transactions or similar events and an additional conversion adjustment described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">The number of conversion shares
issuable upon a conversion shall be determined by the quotient obtained by dividing (x) the sum of (a) the outstanding principal
amount to be converted, (b) at the option of the holder, a portion or all of any accrued and unpaid interest to be converted and
(c) the conversion adjustment amount by (y) the conversion price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">The &ldquo;conversion&nbsp;adjustment
amount&rdquo; is calculated by multiplying the principal amount being converted by a fraction, the numerator of which is (a) the
number of days elapsed from the original issue date multiplied by (b) .021917808; and the denominator of which is 100. The maximum
number of days elapsed to be used in calculating the conversion adjustment amount will not be greater than 548 days regardless
of the actual number of days elapsed from the original issue date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">The Company may force conversion of
the 2012 Convertible Debentures if the closing bid price of the Company&rsquo;s common stock equals or exceeds 165% of the conversion
price for twenty consecutive trading days, the minimum daily trading volume for such period is $1,100 thousand, all of the underlying
shares during such period are either registered for resale with the Securities and Exchange Commission or eligible for resale pursuant
to Rule 144 and there is no existing event of default or existing event which, with the passage of time or the giving of notice,
would constitute an event of default during such period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">The 2012 Convertible Debentures contain
certain limitations on conversion. No conversion may be made if, after giving effect to the conversion, any holder would beneifially
own in excess of 4.99% of the Company&rsquo;s outstanding shares of common stock. This percentage may be increased to a percentage
not to exceed 9.99%, at the option of such holder, except any increase will not be effective until the holder has given 61 days&rsquo;
prior notice to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">The 2012 Convertible Debentures impose
penalties on the Company for any failure to timely deliver any shares of its common stock issuable upon conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>B.</I></TD><TD STYLE="text-align: left"><I>Events of default and holder&rsquo;s contingent redemption option</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">If there is an event of default as
stipulated in the agreement, then by election of the holders holding at least 60% of the 2012 Convertible Debentures, the Company
must redeem all of the 2012 Convertible Debentures in cash for 112% of the outstanding principal, together with all unpaid and
accrued interest, all interest that would have been payable through the maturity date and any other amounts due under the 2012
Convertible Debentures (such amount, the &ldquo;Mandatory Default Amount&rdquo;). The Mandatory Default Amount will accrue interest
at a rate of 24% per annum commencing on the fifth calendar date following the relevant event of default.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>C.</I></TD><TD STYLE="text-align: left"><I>Holder&rsquo;s noncontingent redemption option</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">Commencing 18 months following the
original issuance date of the 2012 Convertible Debentures, the holders may require the Company to redeem all or a portion of the
2012 Convertible Debentures, for a price equal to 112% of the amount of principal to be redeemed plus all accrued but unpaid interest
and other amounts due under the 2012 Convertible Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>D.</I></TD><TD STYLE="text-align: left"><I>Company&rsquo;s noncontingent redemption option</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">Commencing 6 months following the
original issuance date of the 2012 Convertible Debentures, the Company may redeem all or a portion of the 2012 Convertible Debentures
for a price equal to 112% of the amount of principal to be redeemed plus all accrued but unpaid interest and other amounts due
under the 2012 Convertible Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>E.</I></TD><TD STYLE="text-align: left"><I>Covenants</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">The 2012 Convertible Debentures contain
certain covenants which prohibit or limit the Company&rsquo;s and its subsidiaries ability to, among other things:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.5in"></TD><TD STYLE="width: 0.25in">1.</TD><TD STYLE="text-align: left">pay cash dividends to stockholders;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: left; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.5in"></TD><TD STYLE="width: 0.25in">2.</TD><TD STYLE="text-align: left">redeem, repurchase or otherwise
                                                               acquire more than a de minimis number of shares of its common stock
                                                               or common stock equivalents;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.5in"></TD><TD STYLE="width: 0.25in">3.</TD><TD STYLE="text-align: left">incur additional indebtedness;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.5in"></TD><TD STYLE="width: 0.25in">4.</TD><TD STYLE="text-align: left">permit liens on assets or conduct sales of assets;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.5in"></TD><TD STYLE="width: 0.25in">5.</TD><TD STYLE="text-align: left">effectuate stock splits until April 5, 2013, except in connection with an initial listing on a national
securities exchange or to meet the continued listing requirements of such exchange;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.5in"></TD><TD STYLE="width: 0.25in">6.</TD><TD STYLE="text-align: left">cease making public filings under
                                                               the Securities Exchange Act of 1934, as amended;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.5in"></TD><TD STYLE="width: 0.25in">7.</TD><TD STYLE="text-align: left">engage in transactions with affiliates;
                                                               and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.5in"></TD><TD STYLE="width: 0.25in">8.</TD><TD STYLE="text-align: left">amend its charter documents in
                                                               a way that would materially and adversely affect any holder of
                                                               the 2012 Convertible Debentures.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: left; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>F.</I></TD><TD STYLE="text-align: left"><I>Pro rata distributions</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">If the Company, at any time while
the 2012 Convertible Debentures are outstanding, distributes to all holders of common stock evidences of its indebtedness or assets
(including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the common stock,
then, upon any conversion of the 2012 Convertible Debentures, the holder shall be entitled to receive such distribution to the
same extent that the holder would have if the holder had held the number of conversion shares issued upon such conversion of the
2012 Convertible Debentures immediately before the date on which a record was taken for such distribution, or, if no such record
was taken, the date as of which the record holders of shares of common stock were determined for the participation in such distribution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><B>2)</B></TD><TD STYLE="text-align: left"><FONT STYLE="color: black"><B>2012 Warrants</B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>A.</I></TD><TD STYLE="text-align: left"><I>Exercisability</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">The 2012 Warrants are immediately
exercisable and, in the aggregate, entitle the holders to purchase up to 3,343,465 shares of common stock. The 2012 Warrants have
an initial exercise price of $1.80 per share payable in cash. &rdquo; The 2012 Warrants expire on April 5, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">Similar to the 2012 Convertible Debentures,
the 2012 Warrants also contain limitations on exercise that would cause the holder to beneficially own in excess of 4.99% or 9.99%
of the Company&rsquo;s outstanding common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>B.</I></TD><TD STYLE="text-align: left"><I>Anti-dilution protection</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">The exercise price of the 2012
Warrants and the number of shares issuable upon exercise of the 2012 Warrants are subject to adjustments for stock splits, combinations
or similar events.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>C.</I></TD><TD STYLE="text-align: left"><I>&ldquo;Most favored nation&rdquo;</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">The 2012 Warrants are also subject
to an adjustment pursuant to which, in the event that the Company issues or is deemed to have issued certain securities with terms
that are superior to those of the 2012 Warrants, except with respect to exercise price and warrant coverage, the superior terms
will automatically be incorporated into the 2012 Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>D.</I></TD><TD STYLE="text-align: left"><I>Contingent holder redemption
                                                                    option</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">Upon the occurrence of a transaction
involving a change of control that is (i) an all cash transaction, (ii) a &ldquo;Rule 13e-3 transaction&rdquo; as defined in Rule
13e-3 under the Securities Exchange Act of 1934, as amended, or (iii) involving a person or entity not traded on a national securities
exchange, the holders of the 2012 Warrants will have the right, among others, to have the 2012 Warrants repurchased for a purchase
price in cash equal to the Black-Scholes value of the then unexercised portion of the 2012 Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>E.</I></TD><TD STYLE="text-align: left"><I>Pro rata distributions</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">Similar to the 2012 Convertible
Debentures, the 2012 Warrants allow exercising holders to participate in pro rata distributions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>F.</I></TD><TD STYLE="text-align: left"><I>Public information failure</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">If the Company fails for any reason
to satisfy the current public information requirement under Rule 144(c) then, in addition to any other remedies available to the
holders, the Company must pay to the holders, in cash, partial liquidated damages as set forth in the agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><B>3)</B></TD><TD STYLE="text-align: left"><FONT STYLE="color: black"><B>Transaction costs</B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">In connection with the Transaction,
the Company paid issuance costs, including placement agent and legal fees, of approximately $1,200 thousand, and issued five-year
warrants (&ldquo;2012 Placement Agents Warrants&rdquo;) to purchase 312,310 shares of the Company&rsquo;s common stock at an exercise
price of $1.80 per share to the placement agent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><B>4)</B></TD><TD STYLE="text-align: left"><FONT STYLE="color: black"><B>Accounting treatment</B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>A.</I></TD><TD STYLE="text-align: left"><I>2012 Warrants</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">The Company determined, based on
the provisions of ASC 480-10-25-8, that equity classification is precluded because of the redeemable option of the holders in the
event of a change in control (in certain conditions), which is an event that is not within the Company&rsquo;s control. Accordingly,
the 2012 Warrants are classified as a liability in the Consolidated Balance Sheets and measured at fair value at each reporting
period. The fair value of the 2012 Warrants is estimated using the Black-Scholes valuation model. See Note 2u.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">In calculating the fair value
of the 2012 Warrants (including the 2012 Placement Agents Warrants), the Company used the following assumptions: expected term
of 5 and 4.76 years for the transaction date and for June 30, 2012, respectively; expected volatility of 66.1% and 69.6% for the
transaction date and for June 30, 2012, respectively; risk-free interest rate of 1.01% and 0.72% for the transaction date and
for June 30, 2012, respectively; and dividend yield of 0%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 87.9pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>B.</I></TD><TD STYLE="text-align: left"><I>2012 Convertible Debentures</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">In accordance with ASC 470-20,
&ldquo;Debt with Conversion and Other Options,&rdquo; the Company determined that a BCF existed at the issuance date of the 2012
Convertible Debentures. The BCF amounting to $3,790 thousand was recorded in equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 92.95pt; text-align: left">In addition, the Company analyzed
the holders&rsquo; contingent<FONT STYLE="color: black"> redemption option </FONT>based on the guidance stipulated in Topic 815,
and concluded that <FONT STYLE="color: black">the </FONT>holders&rsquo; contingent<FONT STYLE="color: black"> redemption option
is not clearly and closely related to the debt host contract. Thus, the Company bifurcated and accounted for it separately as an
embedded </FONT>derivative and classified it, together with the 2012 Convertible Debentures, in its statement of financial position.
This embedded derivative will be measured at fair value at each reporting period. The fair value of the embedded derivative is
estimated using the binominal valuation model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 92.95pt; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 92.95pt; text-align: left">In addition, the Company analyzed
the holders&rsquo; noncontingent redemption option and determined that the prepayment options are clearly and closely related to
the debt host contract and should not be bifurcated from the 2012 Convertible Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 92.95pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 92.95pt; text-align: left">The gross proceeds amounting to
$11,000 thousand from the 2012 Convertible Debentures transaction were allocated as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">2012
Warrants at fair value - $2,807 thousand based on their fair value;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">embedded
derivative - $8 thousand based on its fair value; and</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">2012 Convertible Debentures - $8,185 thousand based on the residual
amount after the allocation of other components as described above. In addition, an amount of $3,790 thousand was recognized as
a BCF against the 2012 Convertible Debentures.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">The 2012 Convertible Debentures
are subsequently measured at amortized cost on the basis of the effective interest method over the loan period until the maturity
date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><I>C.</I></TD><TD STYLE="text-align: left"><I>Transaction costs</I></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left; text-indent: -0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">Direct transaction costs of $1,394
thousand, which included the placement agents fees and the 2012 Placement Agents Warrants valued at $262 thousand as of the transaction
date , as well as other issuance costs, were allocated to the various instruments associated with the 2012 Convertible Debentures
pro-rata to the amount such instruments were recorded as of the transaction date. The amounts that were allocated to the 2012 Warrants
at fair value and embedded derivative were recorded in &ldquo;Financial expenses&rdquo; and the remainder amounting to $1,037 thousand
was recorded as &ldquo;Deferred debt issuance costs&rdquo; in the Consolidated Balance Sheets and will be amortized over the loan
period using the effective interest method until the maturity date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><B>b.</B></TD><TD STYLE="text-align: left">In July 2010, InspireMD Ltd. entered into a securities purchase agreement, pursuant to which InspireMD
Ltd. issued (i) 8% senior convertible debentures in the principal amount of $1.58 million (the &ldquo;2010 Convertible Debentures&rdquo;)
and (ii) three year warrants (the &ldquo;2010 Warrants&rdquo;) to purchase up to 1,014,513 shares of common stock at an exercise
price of $1.23 per share (as adjusted for the Share Exchange) in exchange for aggregate gross proceeds of $1.58 million. The 2010
Convertible Debentures accrued interest at the annual rate of 8% and were payable on the later of (i) two months following receipt
by InspireMD Ltd. of a tax ruling from the Israeli Tax Authority that the issuance of shares of a U.S. &ldquo;shell company&rdquo;
in exchange for securities held by shareholders and option holders of InspireMD Ltd. would constitute a deferred tax event for
InspireMD Ltd. and/or its security holders or (ii) the six month anniversary of the issuance of the 2010 Convertible Debentures
(the &ldquo;Original Maturity Date); provided however, that so long as the Company was not in default under the 2010 Convertible
Debentures, InspireMD Ltd. had the right to extend the maturity date of the 2010 Convertible Debentures to nine months following
the Original Maturity Date (the &ldquo;Second Maturity Date&rdquo;).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0in">If InspireMD
Ltd. completed a qualified financing in connection with a reverse merger prior to the Original Maturity Date, or the Second Maturity
Date, if applicable, the holders of the 2010 Convertible Debentures had the option to convert the 2010 Convertible Debentures into
shares of common stock of the surviving corporation at $1.50 per share or be repaid in cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">In addition, provided that there was
not an event of default, if InspireMD Ltd. completed a financing for at least $3 million prior to the Second Maturity Date, the
2010 Convertible Debentures would automatically convert into ordinary shares of InspireMD Ltd. at a 15% discount to the pricing
of the new financing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">Finally, if an event of default had
not occurred, and any 2010 Convertible Debentures were still outstanding, following the Second Maturity Date, such 2010 Convertible
Debentures would automatically convert into ordinary shares of InspireMD Ltd. (i) if InspireMD Ltd. completed a financing for at
least $3 million prior to the one year anniversary of the Second Maturity Date, at a 15% discount to the pricing of the new financing,
or (ii) or if InspireMD Ltd. did not complete a financing for at least $3 million prior to the one year anniversary of the Second
Maturity Date, at $10 per ordinary share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">Upon an event of default under the
2010 Convertible Debentures, the holders had the right to demand payment of all then unpaid principal and accrued but unpaid interest
under the 2010 Convertible Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The Company elected to apply the
fair value option regarding the 2010 Convertible Debentures in accordance with ASC 825 (i.e. the 2010 Convertible Debentures were
measured at each balance sheet date at fair value and the changes in their fair value were recorded in profit and loss). See Note
3.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The proceeds from the 2010 Convertible
Debenture Transaction were allocated to the 2010 Convertible Debentures at their fair value with the residual proceeds ascribed
to the 2010 Warrants as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">2010
Debenture at fair value - $1,133 thousand; and</FONT></TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">2010
Warrants - $447 thousand, net of $23 thousand direct transaction costs.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 92.95pt; text-align: justify; text-indent: 1.55pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The issuance of the 2010 Warrants
was recorded in the &ldquo;Additional paid-in capital&rdquo;, net of $23 thousand direct transaction costs allocated to the 2010
Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">On March 31, 2011, holders of the
2010 Convertible Debentures surrendered $667,596 of outstanding principal and interest due under such debentures in exchange for
shares of common stock and warrants as part of the Company&rsquo;s private placement on such date (the &ldquo;Debt Conversions&rdquo;)
as described in Note 10b.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">As a result of the Debt Conversions,
there was $1 million of unpaid principal outstanding remaining under the 2010 Convertible Debentures on March 31, 2011, which was
repaid by the Company in May 2011, plus all accrued interest thereon.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><B>c.</B></TD><TD STYLE="text-align: justify">On January 4, 2011, InspireMD Ltd. entered into a convertible loan agreement with its distributor
in Israel (the &ldquo;Lender&rdquo;), in the amount of $100 thousand subject to the following conditions:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the convertible loan did not bear annual interest;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">in the event of a share exchange or similar transaction, the Lender
would have, at its sole discretion, the option to convert the loan into either (i) shares of the Company&rsquo;s common stock at
a price of $1.23 per share ($10 prior to the Share Exchange), or (ii) the Company&rsquo;s product at a price of 400 euro per unit
(which represented the market price for the Lender);</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">in the event that the Company did not close a share exchange or similar
transaction by June 1, 2011, the Lender had the right to extend the loan and its terms for up to an additional 6 months (as noted
in Note 1, the Exchange Agreement was closed on March 31, 2011); and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">in
no event was cash required to be repaid by the Company.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">On June 1, 2011 the Lender surrendered
the $100 thousand convertible loan in exchange for 81,161 shares of common stock of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><B>d.</B></TD><TD STYLE="text-align: justify">In April 2008 InspireMD Ltd. entered into a convertible loan agreement with certain lenders. Under
this agreement, the lenders were issued convertible notes in the aggregate principal amount of $720 thousand, bearing annual interest
of 10%, in exchange for $720 thousand. While the notes did not have a maturity date, they were repayable on demand upon an event
of default. The notes were convertible, at any time, into ordinary shares of InspireMD Ltd. at the option of the holders.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The notes were automatically convertible
into ordinary shares of InspireMD Ltd. if InspireMD Ltd. completed a financing that resulted in at least $1 million (&ldquo;qualified
financing&rdquo;), at the lower conversion price of: (i) $1.48; or (ii) a discount of 30% on the price per share in such qualified
financing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0in">The notes were
also automatically convertible into ordinary shares of InspireMD Ltd. upon an initial public offering (&ldquo;IPO&rdquo;) or upon
a consolidation, merger or sale of all assets or shares of InspireMD Ltd. (&ldquo;exit transaction&rdquo;), at the lower conversion
price of: (i) $1.48; or (ii) a discount of 20% on the price per share in such exit transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0in">In accordance
with ASC 470-20, &quot;Debt with Conversion and Other Options&quot;, the Company determined that a BCF existed at the issuance
date of these notes, totaling $308 thousand. Because these notes did not have a stated redemption date (except on an event of
default), and could be converted by the holder at any time, the BCF was recognized immediately on the issuance date under &ldquo;Financial
expenses (income)-net&rdquo; in the Consolidated Statements of Operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0in">In March
2009 these convertible notes were fully repaid (principal and accrued interest) due to a breach of the covenants by InspireMD
Ltd. InspireMD Ltd. allocated the proceeds paid between the portion related to the redemption of the beneficial conversion feature
and that related to the convertible loan, based on the guidance in ASC 470-20. The Company measured the portion allocated to the
beneficial conversion feature based on the intrinsic value of the conversion feature at the extinguishment date, which amounted
to $308 thousand (which equals the original BCF since the price of InspireMD Ltd.&rsquo;s shares on the issuance date and the
redemption date was the same). Accordingly, the difference between the amount allocated to the BCF plus the loan&rsquo;s carrying
amount, and the cash paid, was recognized as financial income in the Consolidated Statements of Operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>NOTE 7 - LONG-TERM LOAN</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">In January 2009, InspireMD
Ltd. signed a loan agreement with Mizrahi Tefahot Bank. According to the agreement, InspireMD Ltd. was entitled to receive the
following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">1.</TD><TD>A loan (the &ldquo;First Loan&rdquo;) amounting to $750 thousand, bearing annual interest (paid quarterly) equal to the London
Interbank Offer Rate plus 4%. The loan was payable in eight quarterly installments beginning in April 2010.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">2.</TD><TD STYLE="text-align: justify">An additional loan (the &ldquo;Second Loan&rdquo;) amounting to $750 thousand, to be received no
later than August 3, 2009, subject to certain terms. InspireMD Ltd. did not meet the specific terms and therefore was not able
to receive the Second Loan.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">3.</TD><TD STYLE="text-align: justify">A credit line amounting to $500 thousand for the purpose of financing export shipments. The credit
line was not utilized by the Company.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-align: justify; text-indent: 0in">In addition,
InspireMD Ltd. was required to pay an additional $250 thousand in the following events:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">1.</TD><TD STYLE="text-align: justify">A liquidity event of at least $100 million (as stipulated in the agreement); or</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">2.</TD><TD STYLE="text-align: justify">An IPO in which the Company&rsquo;s valuation was at least $100 million.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">InspireMD Ltd. granted to the
bank a floating lien on all of its assets, as well as a fixed lien on all of its intellectual property and rights of future payments
from the Company&rsquo;s clients. InspireMD Ltd. also committed to maintain in its bank account a minimum of $250 thousand in order
to support an estimated cash burn rate of three months of activity based on average monthly cash flow in the preceding three months.
This amount was recorded in the Consolidated Balance Sheets under &ldquo;Restricted cash.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">On February 2009 InspireMD Ltd.
received the First Loan and in accordance with the loan agreement, issued 234,814 ordinary shares to the bank. Subsequently, InspireMD
Ltd. estimated the fair value of the First Loan, the Second Loan, the credit line and the 234,814 ordinary shares issued to the
bank using the following assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">1.</TD><TD STYLE="text-align: justify">Discount rate of 25.13% per year calculated by using Altman-Z score model</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">2.</TD><TD STYLE="text-align: justify">Probability of realizing the Second Loan - 40%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">3.</TD><TD STYLE="text-align: justify">Probability of realizing the credit line - 80%</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 53.45pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-align: justify; text-indent: 0in">The relative
fair value of each component based on the valuation report was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">1.</TD><TD STYLE="text-align: justify">The First Loan - $540 thousand</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">2.</TD><TD STYLE="text-align: justify">The Second Loan option - $20 thousand</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">3.</TD><TD STYLE="text-align: justify">The credit line - $59 thousand</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in">4.</TD><TD STYLE="text-align: justify">The 234,814 ordinary shares issued to the bank - $290 thousand</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">The First Loan was subsequently
measured at amortized cost on the basis of the effective interest method over the loan period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">The Second Loan option and the
credit line have been recorded in the Consolidated Financial Statements in &ldquo;Financial expenses&rdquo; during 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">The 234,814 ordinary shares were
recorded as equity according to their fair market value at the time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">Direct transaction costs of $41
thousand were recorded as deferred debt issuance costs in the Consolidated Balance Sheet and were amortized over the First Loan
period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">In November 2010, InspireMD Ltd.
was asked by Mizrahi Tefahot Bank to grant it a fixed lien in the amount of $300 thousand that would replace the $250 thousand
of restricted cash since the actual cash burn rate was higher than the cash amount maintained in the Company&rsquo;s bank account.
The transaction was effectuated in January 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">On July 20, 2011, Mizrahi Tefahot
Bank approved the release of a fixed lien in the amount of $300 thousand. Following the approval, $300 thousand of restricted cash
was classified to cash and cash equivalents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 0in">In March 2012, following the complete
repayment of the loan, Mizrahi Tefahot Bank approved the release of the floating lien.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>NOTE 8 - RELATED PARTIES TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>a.</B></TD><TD>In January 2009, InspireMD Ltd. signed a sub-lease agreement with a company controlled by the Company&rsquo;s shareholders,
for a period of 12.5 months, for a monthly rent payment of $1 thousand. In 2010, the rent period was extended for an additional
year, and the rent payments increased by 10%. In 2011, the rent period was extended for an additional year, through February 2012.
The sub-lease agreement was not renewed.</TD></TR>                                                  <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>b.</B></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">On
                                                                       May 6, 2008, InspireMD Ltd. entered into a consultancy
                                                                       agreement (the &ldquo;2008 Consultancy Agreement&rdquo;)
                                                                       for marketing services with a member of the immediate family
                                                                       of the CEO. Pursuant to the 2008 Consultancy Agreement,
                                                                       InspireMD Ltd. paid a fixed hourly fee of $45 (154 NIS)
                                                                       in Israel and a fixed daily fee of $400 when traveling
                                                                       abroad with respect to the consulting services. On September
                                                                       1, 2011, effective April 1, 2011, the 2008 Consultancy
                                                                       Agreement was terminated and InspireMD Ltd. entered into
                                                                       a new consultancy agreement (the &ldquo;2011 Consultancy
                                                                       Agreement&rdquo;) pursuant to which the consultant was
                                                                       retained to serve as the Company&rsquo;s vice president
                                                                       of sales. Pursuant to the agreement, she was paid a monthly
                                                                       consultancy fee of $12,500 from April 1, 2011 through June
                                                                       30, 2011 and a monthly consultancy fee of $15,500 thereafter.
                                                                       On July 2, 2012, effective August 1, 2012, the 2011 Consultancy
                                                                       Agreement was termainated and InspireMD Ltd. entered into
                                                                       a new consultancy agreement (the &ldquo;2012 Consultancy
                                                                       Agreement&rdquo;) pursuant to which the consultant would
                                                                       be retained for sale services. Pursuant to the agreement,
                                                                       she would be entitled to a fixed fee of $625 (2,500 NIS)
                                                                       for each full working day and a bonus fee up to $10,000
                                                                       (40,000 NIS) upon 100% achievement of set objectives. The
                                                                       2012 Consultancy Agreement has a termination date of September
                                                                       30, 2012, but can be terminated without cause by InspireMD
                                                                       Ltd. upon 7 days&rsquo; notice, and may be terminated with
                                                                       cause by InspireMD Ltd. immediately, upon the occurrence
                                                                       of certain events, such as a breach of fiduciary duties
                                                                       owed to the Company.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt; text-indent: 0in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>c.</B></TD><TD>During 2007, InspireMD Ltd received a loan of $40 thousand from its controlling shareholders. Half of the loan was paid during
2009, and the second half was paid during 2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: left; text-indent: -21.25pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>d.</B></TD><TD>On April 1, 2005, InspireMD Ltd. entered into employment agreements with the Company&rsquo;s president and the Company&rsquo;s
CEO (both are directors and shareholders). Such employment agreements were subsequently amended on October 1, 2008 (in the case
of the Company&rsquo;s CEO) and March 28, 2011 (in the case of both the president and the CEO). Pursuant to these employment agreements,
as amended on March 28, 2011, each officer was entitled to a monthly gross salary of $15,367. Each officer was also entitled to
certain social and fringe benefits as set forth in the employment agreements, which totaled 25% of their gross salary, as well
as a company car. Each officer was also entitled to a minimum bonus equivalent to three monthly gross salary payments based on
achievement of objectives and board of directors&rsquo; approval. If such officer&rsquo;s employment was terminated with or without
cause, he was entitled to at least six months&rsquo; prior notice, and would have been paid his salary and all social and fringe
benefits in full during such notice period.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.1pt; text-indent: 0in">On April 1, 2011, the employment
agreements with the Company&rsquo;s president and CEO were terminated and the Company entered into consulting agreements with the
Company&rsquo;s president and CEO for a monthly consultancy fee of $21,563 each.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.1pt; text-indent: 0in">At the request of the compensation
committee, the Company&rsquo;s CEO and president agreed, effective as of December 1, 2011, to be treated as employees for purposes
of paying their salary and benefits, rather than as consultants under their consulting agreements. In addition, the Company&rsquo;s
CEO and president agreed to formally terminate their consulting agreement upon the execution of an employment agreement with the
Company on substantially the same terms as their consultancy agreements. A new employment agreement, however, was never executed
with either party.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: -19.85pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.1pt; text-indent: 0in">On June 1, 2012, the president
of the Company resigned. In connection with his resignation, effective June 1, 2012, he remains on the Company&rsquo;s board of
directors. In connection with the resignation, the Company and the president entered into a consulting agreement, pursuant to which,
among other things, the president agreed to provide the Company with consulting services for a period of six months, terminating
on November 30, 2012, in exchange for payments by the Company of $20 thousand per month.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: -19.85pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: -19.85pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: -19.85pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>e.</B></TD><TD>During the second half of 2008, InspireMD Ltd. decreased the salaries for most of its employees due to the economic slowdown.
InspireMD Ltd. also decreased the salaries of the former president and the CEO. Their salaries were decreased 25%, and an additional
25% was accrued and recorded in &ldquo;Accounts payable-trade.&rdquo; The accrued amounts were fully paid as of December 31, 2010.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In September 2009, the 25% decrease
in salaries described above was cancelled.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>f.</B></TD><TD STYLE="text-align: left">InspireMD Ltd. entered into a license agreement to use a unique stent design developed by an American
company owned by a former director of InspireMD Ltd. (&ldquo;MGuard Prime&rdquo;). See Note 9b.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>g.</B></TD><TD STYLE="text-align: left">Certain directors of the Company were granted options to purchase shares of the Company&rsquo;s common
stock. See Note 10.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt; text-align: left; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in; text-align: left"><B>h</B>.</TD><TD STYLE="text-align: justify">Balances with related parties:</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.1pt; text-align: left; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 72%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">June&nbsp;30</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December&nbsp;31</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($ in thousands)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Current liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 61%; text-align: left; padding-left: 9pt">Trade payable</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">3</TD><TD STYLE="width: 1%; text-align: left"></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Other accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">45</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">22</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">121</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Loans from shareholders</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">20</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: left; text-indent: -28.35pt"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in; text-align: left"><B>i</B>.</TD><TD STYLE="text-align: justify">Transactions with related parties:</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: left; text-indent: -28.35pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="margin-left: 1in; border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">6&nbsp;month&nbsp;period&nbsp;ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Expenses:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; text-align: left; padding-left: 9pt">Share-based compensation</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,365</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">8,212</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">236</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Salaries and related expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">261</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">147</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">241</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">152</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Consulting fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">105</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">445</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">226</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">194</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Financial expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Rent income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(2</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(16</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(15</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(13</TD><TD STYLE="text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>NOTE 9 - COMMITMENTS AND CONTINGENT LIABILITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in; text-align: left"><B>a.</B></TD><TD STYLE="text-align: justify"><B>Lease commitments:</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 49.6pt"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 70.9pt"></TD><TD STYLE="width: 28.35pt">1)</TD><TD>The Company is a party to two lease agreements for its facilities, which expire in March 2014 and December 2014. The Company
has the option, under both agreements, to extend the agreements for two additional two year periods, for a total of four years
each.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">Rent expense included in the Consolidated
Statements of Operations totaled approximately $167 for the six month period ended June 30, 2012, and $119 thousand, $131 thousand
and $126 thousand for the years ended December 31, 2011, 2010 and 2009, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">As of June 30, 2012, the aggregate
future minimum lease obligations for office rent under non-cancelable operating lease agreements were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 14.2pt">Year Ended June 30:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 77%; text-align: left; text-indent: 29.75pt">2013</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 20%; text-align: right">345</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 29.75pt">2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">320</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 29.75pt">2015</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">122</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">787</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 70.9pt"></TD><TD STYLE="width: 28.35pt">2)</TD><TD>The Company leases its motor vehicles under non-cancelable operating lease agreements.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.65pt; text-indent: 0in">As of June 30, 2012, the aggregate
future minimum lease obligations for motor vehicles under non-cancelable operating lease agreements were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: left; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in">Year&nbsp;Ended&nbsp;June&nbsp;30:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in; width: 77%">2013</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 20%; text-align: right">58</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in">2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">46</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in">2015</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">22</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">126</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 49.6pt"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in; text-align: left"><B>b.</B></TD><TD STYLE="text-align: justify"><B>License Agreement:</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 92.15pt; text-indent: -42.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.85pt; text-indent: 0in">In March 2010, the Company
entered into a new license agreement to use MGuard Prime, a unique stent design developed by an American company owned by a former
director of InspireMD Ltd. According to the agreement, the licensor is entitled to receive 7% royalties for sales outside the
U.S. and inside the U.S. as follows: 7% royalties for the first $10 million of net sales and 10% royalties for net sales exceeding
the first $10 million. Royalties accrued for these sales are included in &ldquo;Accounts payable and accruals -Other.&rdquo; Royalties
expenses for the six month period ended June 30, 2012 and the year ended December 31, 2011 amounted to $136 thousand and $39 thousand,
respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 74.7pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in; text-align: left"><B>c.</B></TD><TD STYLE="text-align: justify"><B>Liens and pledges</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.3in">1)</TD><TD>The Company&rsquo;s obligations under the 2012 Convertible Debentures (Note 6)&nbsp;are secured by a first priority perfected
security interest in all of the assets and properties of the Company and InspireMD Ltd., including the stock of InspireMD Ltd.
and InspireMD GmbH.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.3in">2)</TD><TD>As of June 30, 2012, the Company had fixed liens amounting to $37 thousand to Bank Mizrahi in connection with the Company&rsquo;s
credit cards.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 87.05pt; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in; text-align: left"><B>d.</B></TD><TD STYLE="text-align: justify"><B>Litigation:</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company is a party to various
claims arising in the ordinary course of its operations in the aggregate amount of $10 thousand. The Company has not recorded an
expense provision related to damages in connection with these matters because management, after considering the views of its legal
counsel as well as other factors, is of the opinion that a loss to the Company is neither probable nor in an amount or range of
loss that is estimable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.85pt; text-indent: 0in">In February 2011, representatives
of a third party indicated that they intended to seek damages from the Company in connection with certain finders&rsquo; fees that
they claim are owed to them. The claimants&rsquo; demand was for approximately $1 million. The claimants&rsquo; most recent settlement
demand, conveyed in April 2011, was for a total of $250 thousand in cash and 250,000 shares of the Company common stock. To date,
no lawsuit has been filed and the Company has not accrued a provision in connection with this matter because the Company&rsquo;s
management, after considering the views of its legal counsel as well as other factors, is of the opinion that a loss to the Company
is neither probable nor in an amount or range of loss that is estimable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In November 2010, a former senior
employee submitted a claim against the Company in the total amount of $430 thousand and options to purchase 2,029,025 shares of
the Company&rsquo;s common stock at an exercise price of $0.001 per share in the Magistrate&rsquo;s Court in Tel Aviv, claiming
unpaid back wages and commissions. The fair value of those options was valued using the Black-Scholes valuation model at $2.5 million
as of the period he claimed to be entitled to the options. In June 2012, the parties reached a settlement agreement for a payment
of $88 thousand by the Company to the plaintiff and following the a mutual petition filed by the parties , on July 6, 2012 the
Labor Court dismissed the claim. As of June 30, 2012, a provision of $88 thousand was included in the Company&rsquo;s Consolidated
Financial Statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In November 2010, an alleged founder
and former legal advisor of the Company submitted a claim against the Company for options to purchase 496,056 shares of the Company&rsquo;s
common stock at an exercise price of $0.001 per share in the Magistrate&rsquo;s Court in Tel Aviv. The fair value of those options
was estimated using the Black-Scholes valuation model at $134 thousand as of the grant date. It was during 2005 and 2006 that the
Company first became aware of the events that gave rise to this litigation. Also, during this time, the Company had discussions
with the plaintiffs on an informal basis. The Company&rsquo;s management, after considering the views of its legal counsel as well
as other factors, recorded a share-based compensation expense of $134 thousand in 2006, in respect of services allegedly provided
in 2005 and 2006.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In November 2010, a former legal
advisor of the Company submitted in the Magistrate&rsquo;s Court in Tel Aviv a claim against the Company in the total amount of
$53 thousand due to an alleged breach of employment promise. It was during 2005 and 2006 that the Company first became aware of
the events that gave rise to this litigation. Also during this time, the Company had discussions with the plaintiff on an informal
basis. The Company&rsquo;s management, after considering the views of its legal counsel as well as other factors, recorded a provision
of $53 thousand in 2006.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">With respect to the two claims against
the Company submitted by an alleged founder and former legal advisor of the Company in November 2010, described above, following
a mediation held in January 2012, the parties reached the following settlement agreement: (i) the plaintiff shall be the owner
of options to purchase 194,786 shares of common stock of the Company and withdraw their claim for the remaining 301,272 options;
and (ii) the Company would withdraw its counterclaim against the plaintiff. In January 2012, the District Court in Tel Aviv approved
the settlement and a corresponding judgment was given by the court. Following the settlement agreement, as of December 31, 2011,
the provision in the amount of $53 thousand was reversed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In February 2011, a service provider
submitted a claim against the Company in the amount of $327 thousand in the Magistrate&rsquo;s Court in Tel Aviv, claiming a future
success fee and commission for assistance in finding the Company&rsquo;s distributor in Brazil. The Company&rsquo;s management,
after considering the views of its legal counsel as well as other factors, recorded a provision of $327 thousand in the financial
statements in the first quarter of 2011. The related expense has been recorded to &ldquo;General and administrative&rdquo; within
the Consolidated Statements of Operations. On October 5, 2011, the Company filed a counter claim against the plaintiff in the amount
of $29 thousand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In&nbsp;August 2011, a former senior
employee submitted&nbsp;to the Regional Labor Court in Tel Aviv a claim against the Company&nbsp;for (i) compensation of&nbsp;$118
thousand and (ii) a declaratory ruling that he is entitled to exercise&nbsp;486,966 options&nbsp;to purchase shares of the Company&rsquo;s
common stock at an exercise price of $0.001 per share. After consulting with its legal advisor, the Company is unable to assess
the probable outcome of this claim.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In November 2011, a previous service
provider of InspireMD Ltd. submitted to the Magistrate Court in Tel Aviv a claim against the Company, InspireMD Ltd. and the Company&rsquo;s
President and the Company&rsquo;s CEO for a declaratory ruling that it is entitled to convert options to purchase 13,650 of InspireMD
Ltd.&rsquo;s ordinary shares at an exercise price of $3.67 per share into options to purchase 110,785 shares of the Company&rsquo;s
common stock at an exercise price of $0.45 per share, and to convert options to purchase 4,816 of InspireMD Ltd.&rsquo;s ordinary
shares at an exercise price of $10 per share into options to purchase 39,087 shares of the Company&rsquo;s common stock at an exercise
price of $1.23 per share. On July 30, 2012, the parties held a mediation which resulted in a settlement agreement according to
which the Company paid $7 thousand plus value added taxes to the plaintiff and the plaintiff waived all of his claims to any options
and agreed to the irrevocable dismissal of the above mentioned claim. On August 5, 2012, the court approved the settlement and
dismissed the claim.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: justify; text-indent: 0in">In December
2011, a statement of claim against the Company was submitted by an alleged finder of the Company, regarding 584,357 options to
purchase the Company&rsquo;s shares. The Company filed its defense in this case on March 11, 2012. The Company and the plaintiff
agreed to refer the case to mediation. A second hearing in this case was set for September 20, 2012. After consulting the views
of its legal counsel as well as other factors, the Company is unable to assess the probable outcome of this claim.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">In July 2012, a purported assignee
of options in InspireMD Ltd. submitted a statement of claim against the Company, InspireMD Ltd., and the Company&rsquo;s CEO and
former President for a declaratory and enforcement order that it is entitled to options to purchase 334,546 shares of the Company&rsquo;s
common stock at an exercise price of $0.19 per share. The Company must file its defense to the abovementioned claim by September
30, 2012. After consulting the views of its legal counsel as well as other factors, the Company is unable to assess the probable
outcome of this claim.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; background-color: white"><B>NOTE 10 &ndash;
EQUITY (CAPITAL DEFICIENCY) </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; background-color: white">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>a.</B></TD><TD><B>Share capital</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">As of June 30, 2012, the Company
has authorized 130,000,000 shares of capital stock, par value $0.0001 per share, of which 125,000,000 are shares of common stock
and 5,000,000 are shares of &ldquo;blank check&rdquo; preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">On October 31, 2011, the stockholders
approved the authorization of the board of directors, in its discretion, to amend the Amended and Restated Certificate of Incorporation
of the Company to effect a reverse stock split of the Company&rsquo;s common stock at a ratio of one-for-two to one-for-four, such
ratio to be determined by the board of directors (the &ldquo;Reverse Stock Split&rdquo;), which approval will allow the board of
directors to effect the Reverse Stock Split any time prior to the Company&rsquo;s annual meeting of stockholders in 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">As of June 30, 2012, the Company
had yet to effect the Reverse Stock Split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>b.</B></TD><TD><B>Share exchange and private placement agreements and share issuance</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">As noted in Note 1 above, in connection
with the Share Exchange, the Company issued 50,666,663 shares of its common stock in exchange for 6,242,754 ordinary shares of
InspireMD Ltd., which represented all of InspireMD Ltd.&rsquo;s outstanding shares, resulting in InspireMD Ltd. became a wholly
owned subsidiary of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">In connection with the Share Exchange,
the Company also assumed all of InspireMD Ltd.&rsquo;s obligations under InspireMD Ltd.&rsquo;s outstanding stock options. Immediately
prior to the Share Exchange, InspireMD Ltd. had outstanding stock options to purchase an aggregate of 937,256 ordinary shares,
which outstanding options became options to purchase an aggregate of 7,606,770 shares of common stock of the Company after giving
effect to the Share Exchange. In addition, three-year warrants to purchase up to 125,000 ordinary shares of InspireMD Ltd. at an
exercise price of $10 per share were assumed by the Company and converted into warrants to purchase 1,014,500 shares of the Company&rsquo;s
common stock at an exercise price of $1.23 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: -1.1pt"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">In connection with the closing
of the Share Exchange, the Company sold 6,454,002 shares of its common stock at a purchase price of $1.50 per share and five-year
warrants to purchase up to 3,226,999 shares of common stock at an exercise price of $1.80 per share in a private placement to accredited
investors (the &ldquo;Private Placement&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">As part of the Private Placement,
certain holders of the 2010 Convertible Debentures surrendered $667,596 of outstanding principal and interest due under the 2010
Convertible Debentures in exchange for 445,064 shares of common stock and warrants to purchase an aggregate of 225,532 shares of
common stock. The number of shares of common stock and warrants issued in connection with the Debt Conversions are included in
the aggregate figures for the Private Placement. As a result, the Company received aggregate cash proceeds of $9,013,404 in the
Private Placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48.55pt; text-indent: 1.1pt"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.5pt"><FONT STYLE="text-underline-style: none">In connection
with the Share Exchange, the Company also entered into a stock escrow agreement with certain stockholders, pursuant to which these
stockholders deposited 1,015,622 shares of common stock held by them and warrants to purchase 832,500 shares of common stock into
escrow. These shares and warrants were to be released to the Company for cancellation or surrender to an entity designated by the
Company should the Company have $10 million in consolidated revenue, as certified by the Company&rsquo;s independent auditors,
during the first 12 months following the closing of the Private Placement, yet fail, after a good faith effort, to have the Company&rsquo;s
common stock approved for listing on a national securities exchange. If the Company failed to record at least $10 million in consolidated
revenue during the first 12 months following the closing of the Private Placement or have its common stock listed on a national
securities exchange within 12 months following the closing on the Private Placement, these escrowed shares were to be released
back to the stockholders.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">As it appeared unlikely&nbsp;that
the Company would satisfy the&nbsp;revenue&nbsp;threshold set forth above,&nbsp;on November 16, 2011, the Company&rsquo;s board
of directors approved&nbsp;the release of the&nbsp;1,015,622 shares of common stock and warrants to purchase 832,500 shares of
common stock&nbsp;then held in escrow in order to immediately increase the Company&rsquo;s&nbsp;public float.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">In connection with the Share Exchange,
the Company issued certain consultants five-year warrants to purchase up to an aggregate of 2,500,000 shares of common stock at
an exercise price of $1.50 per share in consideration for consulting services related to the Share Exchange, which warrants have
a fair value of $1.5 million. The expenses related to the issuance of the warrants are recorded as share-based compensation and
treated as issuance costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">In connection with the Private
Placement, the Company paid placement agent fees of approximately $300 thousand and issued five-year warrants to purchase 373,740
shares of the Company&rsquo;s common stock at an exercise price of $1.80 per share to the placement agent. The fair value of the
warrants is $212 thousand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">During the first quarter of 2011
and prior to the Share Exchange, InspireMD Ltd. raised approximately $990 thousand and issued approximately 803,000 ordinary shares
through private placements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 1.4pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">On April 18, 2011, the Company
issued 666,667 shares of its common stock and five-year warrants to purchase 333,333 shares of the Company&rsquo;s common stock
at an exercise price of $1.80 per share, for an aggregate purchase price of $1,000 thousand, in a private placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: 1.4pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">On April 18, 2011, the Company
issued 283,334 shares of its common stock and five-year term warrants to purchase 141,667 shares of the Company&rsquo;s common
stock at an exercise price of $1.80 per share, for an aggregate purchase price of $425 thousand, in a private placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">In connection with the above-referenced
transactions from April 18, 2011, the Company paid placement agent fees of approximately $471 thousand, which were recorded as
issuance costs, and five-year term warrants to purchase 57,000 shares of the Company common stock at an exercise price of $1.80
per share to the placement agent. The fair value of those warrants, amounting to $67 thousand, is estimated using the Black-Scholes
valuation model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: -1.1pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt; text-indent: 0in">On April 21, 2011, the Company
issued 33,333 shares of its common stock, and five-year term warrants to purchase 16,667 shares of the Company&rsquo;s common stock
at an exercise price of $1.80 per share, for an aggregate purchase price of $50 thousand, in a private placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>c.</B></TD><TD><B>Share-Based Compensation</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.65pt"><FONT STYLE="text-underline-style: none"><I>&nbsp;</I></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in">1.</TD><TD>On March 28, 2011, the board of directors and stockholders of the Company adopted and approved the InspireMD, Inc. 2011 UMBRELLA
Option Plan (the &ldquo;Umbrella Plan&rdquo;). Under the Umbrella Plan, the Company reserved 9,468,100 shares of the Company&rsquo;s
common stock as awards to the employees, consultants, and service providers to the Company and its subsidiaries and affiliates
worldwide. At a special meeting of stockholders of the Company held on October 31, 2011, the stockholders approved an amendment
to the Umbrella Plan to add an additional 5,531,900 shares of common stock for a total of 15,000,000 shares.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 99pt; text-indent: -27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">The Umbrella Plan currently consists
of three components, the primary plan document that governs all awards granted under the Umbrella Plan, and two appendices: (i)
Appendix A, designated for the purpose of grants of stock options and restricted stock 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 US 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">The Umbrella Plan is
administered by the compensation committee of the board of directors. Unless terminated earlier by the board of directors,
the Umbrella Plan will expire on March 27, 2021.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">U.S. federal income tax consequences
relating to the transactions described under the Umbrella Plan are set forth in Section 409A of the Internal Revenue Code of 1986,
as amended (the &ldquo;Code&rdquo;) and treasury regulations in 2004 to regulate all types of deferred compensation. If the requirements
of Section 409A of the Code are not satisfied, deferred compensation and earnings thereon will be subject to tax as it vests, plus
an interest charge at the underpayment rate plus 1% and a 20% penalty tax. Certain stock options and certain types of restricted
stock are subject to Section 409A of the Code.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">Pursuant to the current Section
102 of the Ordinance, which came into effect on January 1, 2003, options may be granted through a trustee (i.e., Approved 102 Options)
or not through a trustee (i.e., Unapproved 102 Options).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in; text-align: left">2.</TD><TD STYLE="text-align: justify">On July 11, 2011, the board of directors of the Company
appointed Mr. Sol J. Barer as a new director (&ldquo;Director A&rdquo;), with a term expiring at the Company&rsquo;s 2012 annual
meeting of stockholders. In connection with his appointment, Director A was granted an option to purchase 1,000,000 shares of
the Company&rsquo;s common stock at an exercise price of $1.50 per share (the &ldquo;$1.50 Option&rdquo;). The $1.50 Option was
exercisable immediately until September 30, 2011. In calculating the fair value of the $1.50 Option, the Company used the following
assumptions: dividend yield of 0% and expected term of 0.11 years; expected volatility of 53%; and risk-free interest rate of
0.17%.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: left; text-indent: -23.4pt; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">In addition, in connection with
his appointment, Director A was granted an option to purchase 500,000 shares of common stock at an exercise price of $2.50 per
share, the closing price of the common stock on the date of grant (the &ldquo;$2.50 Option&rdquo;), subject to the terms and conditions
of the 2011 US Equity Incentive Plan under the Umbrella Plan. The $2.50 Option vests and becomes exercisable in three equal annual
installments beginning on the one-year anniversary of the date of grant, provided that in the event that Director A is either (i)
not reelected as a director at the Company&rsquo;s 2012 annual meeting of stockholders, or (ii) not nominated for reelection as
a director at the Company&rsquo;s 2012 annual meeting of stockholders, the option vests and becomes exercisable on the date Director
A fails to be reelected or nominated. The $2.50 Option has a term of 10 years from the date of grant. In calculating the fair value
of the $2.50 Option, the Company used the following assumptions: dividend yield of 0% and expected term of 5.5-6 years; expected
volatility of 62%-63%; and risk-free interest rate of 1.67%-1.85%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">The fair value of the options granted
to Director A, using the Black-Scholes option pricing model, was approximately $1.7 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">On September 28, 2011, Director
A exercised the $1.50 Option to purchase 1,000,000 shares of common stock, resulting in gross proceeds to the Company of $1,500
thousand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">On November 16, 2011, the Company&rsquo;s
board of directors approved the appointment of Director A as the chairman of the board of directors. In connection with his appointment
as chairman of the board of directors, the Company issued Director A 2,900,000 shares of common stock and an option to purchase
2,900,000 shares of common stock at an exercise price of $1.95 per share, the closing price of the common stock on the date of
grant. The fair value of the granted shares is approximately $5.7 million and was recorded as an expense in the Consolidated Financial
Statements ended December 31, 2011. In calculating the fair value of these options, the Company used the following assumptions:
dividend yield of 0% and expected term of 5.5 years; expected volatility of 61.6%; and risk-free interest rate of 1.07%. The options
have terms of 10 years from the date of grant, and the vesting terms are as follows: tranche A vests and become exercisable in
twenty four equal monthly installments, tranches B and C vest and become exercisable upon meeting certain performance conditions.
The fair value of the options, using the Black-Scholes option-pricing model was approximately $3.1 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">On June 18, 2012, the Company&rsquo;s
board of directors approved the extension of the date by which the conditions to the vesting of tranches B and C must occur. As
of this date the performance condition of tranche B was deemed probable and the performance condition of tranche C was deemed not
probable. The Company continues to record expense related to tranche B, in accordance with the fair value that was caculated at
the grant date. Tranche C was treated as a new grant, and the Company calculated the fair value of the new grant on the date of
the extension using the following assumptions: dividend yield of 0% and expected term of 5 years; expected volatility of 66%; and
risk-free interest rate of 0.69%. The fair value using the Black-Scholes option-pricing model was approximately $192 thousand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in">3.</TD><TD>On August 5, 2011 and effective August 8, 2011, the Board appointed another two new directors ( &ldquo;Director B&rdquo; and
&ldquo;Director C&rdquo;). Director B was appointed for a term expiring at the Company&rsquo;s 2012 annual meeting of stockholders
and Director C was appointed for a term expiring at the Company&rsquo;s 2013 annual meeting of stockholder. In connection with
their appointment, the directors were each granted an option to purchase shares of common stock at an exercise price of $1.95 per
share, the closing price of the common stock on the date of grant (the &ldquo;$1.95 Options&rdquo;). The grant to Director B was
for 100,000 shares and is subject to the terms and conditions of the 2011 US Equity Incentive Plan.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">The grant to Director C was for
25,000 shares and is subject to the 2006 Employee Stock Option Plan, a sub-plan of the Company&rsquo;s 2011 Umbrella Option Plan.
The $1.95 Options vests and become exercisable in two equal annual installments beginning on the one-year anniversary of the date
of grant. In the case of Director B&rsquo;s option, in the event that Director B is either (i) not reelected as a director at the
Company&rsquo;s 2012 annual meeting of stockholders, or (ii) not nominated for reelection as a director at the Company&rsquo;s
2012 annual meeting of stockholders, the option vests and becomes exercisable on the date of Director B&rsquo;s failure to be reelected
or nominated. In the case of Director C&rsquo;s option, in the event that Director C is required to resign from the board due to
medical reasons, the option vests and becomes exercisable on the date of Director C&rsquo;s resignation for medical reasons. The
$1.95 Options have terms of 10 years from the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: left; text-indent: -23.4pt; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">In calculating the fair value of
the $1.95 Options, the Company used the following assumptions: dividend yield of 0% and expected term of 3-4 years; expected volatility
of 67%-70%; and risk-free interest rate of 0.45%-0.78%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: left; text-indent: -23.4pt; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">The fair value of the options granted
to the above-mentioned new directors, using the Black-Scholes option-pricing model, is approximately $118 thousand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in">4.</TD><TD>On August 5, 2011, options to purchase 324,644 shares of common stock were granted to former directors at a cash exercise price
of $1.23 per share replacing options to purchase 324,644 shares of common stock held by former directors that expired during the
second quarter of 2011. The options had terms of five years. In calculating the fair value of the options, the Company used the
following assumptions: dividend yield of 0% and expected term of 3.5 years; expected volatility of 69%; and risk-free interest
rate of 0.62%.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">The fair value of the options granted
to the former directors, using the Black-Scholes option-pricing model, is approximately $424,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in">5.</TD><TD>During 2011, the Company entered into investor relations
                                                                consulting agreements with investor relations companies to provide
                                                                investor relations services. Pursuant to the consulting agreements,
                                                                in addition to monthly fees in a range of $3,000 to $16,500, the
                                                                Company issued to the investor relations companies:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: -1.1pt"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: -1.1pt"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: -1.1pt"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.7in"></TD><TD STYLE="width: 0.3in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a one-year warrant to purchase 81,161 shares of common stock of the
Company at an exercise price of $1.23 per share, valued at $21 thousand;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.7in"></TD><TD STYLE="width: 0.3in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">50,000 restricted shares of the Company&rsquo;s common stock, valued
at $62 thousand, and a five-year warrant to purchase 50,000 shares of common stock of the Company at an exercise price of $1.50
per share, valued at $30 thousand; and </FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.7in"></TD><TD STYLE="width: 0.3in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">25,000 shares of the Company&rsquo;s common stock, valued at $68.75
thousand. </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: -1.1pt"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">The Company recorded share-based
compensation expenses of $181.75 thousand related to these issuances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: -19.85pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in">6.</TD><TD>On January 30, 2012, the Company appointed a new director (&ldquo;Director D&rdquo;) to its board of directors. In connection
with his appointment, the Company issued Director D an option to purchase 100,000 shares of its common stock, which will vest one-third
annually in 2013, 2014 and 2015 on the anniversary of the date of grant, provided that if he is (i) not reelected as a director
at our 2014 annual meeting of stockholders, or (ii) not nominated for reelection as a director at our 2014 annual meeting of stockholders,
the option vests and becomes exercisable on the date of such failure to be reelected or nominated.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: -19.85pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">In calculating the fair value
of these options, the Company used the following assumptions: dividend yield of 0% and expected term of 5.5-6.5 years;
expected volatility of 58-60%; and risk-free interest rate of 1.01-1.26%. The options have terms of 10 years from the date of
grant, and the fair value of the options, using the Black-Scholes option-pricing model, was approximately $106,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in">7.</TD><TD>On June 18, 2012 the Company&rsquo;s board of directors issued Directors A, B, C and D options to purchase 50,000 shares of
common stock at an exercise price of $0.79 per share, the closing price of the common stock on the date of grant. In calculating
the fair value of these options, the Company used the following assumptions: dividend yield of 0% and expected term of 5.5-6.5
years; expected volatility of 65%-66%; and risk-free interest rate of 0.78%-0.97%. The options have terms of 10 years from the
date of grant, and become exercisable in three equal annual installments. The fair value of the options, using the Black-Scholes
option-pricing model, was approximately $23 thousand each.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in; text-align: left">8.</TD><TD STYLE="text-align: justify">As of June
                                                                                  30, 2012, the Company had reserved 5,331,867
                                                                                  ordinary shares for issuance under the plans
                                                                                  as described above. The following table summarizes
                                                                                  information about warrants and share options
                                                                                  to employees:</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: justify; text-indent: -21.3pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: justify; text-indent: -21.3pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">6 month period
    ended</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="22" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Year
    Ended December 31,</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">June
    30, 2012</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">2010</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">2009</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number<BR>
    of<BR> warrants<BR> and<BR> options</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Weighted<BR>
    average<BR> exercise price</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number<BR>
    of<BR> warrants<BR> and<BR> options</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Weighted<BR>
    average<BR> exercise<BR> price</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number<BR>
    of<BR> warrants<BR> and<BR> options</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Weighted<BR>
    average<BR> exercise<BR> price</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number
    of<BR> warrants<BR> and options</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Weighted<BR>
    average<BR> exercise<BR> price</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 28%; text-align: left; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Outstanding -
    &nbsp;beginning of period</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">8,071,024</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">1.4</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">3,502,097</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0.69</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">2,057,430</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0.65</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">2,447,166</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0.53</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Granted*</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,335,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0.89</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">6,292,416</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1.92</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,785,543</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0.62</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">227,251</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0.79</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Forfeited</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(121,684</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1.59</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(723,489</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1.68</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(340,876</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0.65</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(158,264</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0.85</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Exercised</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(1,000,000</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">1.5</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(458,723</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Outstanding
    -end of period</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">9,284,331</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">1.32</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">8,071,024</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">1.4</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">3,502,097</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.69</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">2,057,430</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.65</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Exercisable
    at the end of the period</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">3,616,433</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.88</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">2,868,463</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.71</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">2,204,536</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.74</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">1,034,129</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.3</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">* Including 40,000 and 1,450,000
options with performance conditions in the period ended June 30, 2012 and the year ended December 31, 2011, respectively. See Note
2m.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">The following table summarizes information
about warrants and share options to non-employees:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: justify; text-indent: -21.3pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">6
    month period ended</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="22" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Year
    Ended December 31,</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">June
    30, 2012</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">2010</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">2009</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number<BR>
    of<BR> warrants<BR> and<BR> options</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Weighted<BR>
    average<BR> exercise price</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number<BR>
    of<BR> warrants<BR> and<BR> options</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Weighted<BR>
    average<BR> exercise price</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number<BR>
    of<BR> warrants<BR> and<BR> options</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Weighted<BR>
    average<BR> exercise<BR> price</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number
    of <BR>
    warrants<BR> and options</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Weighted<BR>
    average<BR> exercise<BR> price</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 28%; text-align: left; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Outstanding
    - beginning of period</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">8,402,024</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0.98</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">4,697,606</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0.39</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">3,739,908</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0.2</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">3,382,142</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0.1</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Granted*</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">531,446</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1.24</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,963,322</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1.48</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,079,440</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1.21</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">357,766</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1.07</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Forfeited</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(437,706</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0.59</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(258,904</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0.62</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(121,742</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Exercised</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Outstanding
    - end of period</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">8,495,764</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.95</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">8,402,024</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.98</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">4,697,606</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.39</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">3,739,908</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.2</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Exercisable
    at the end of the period</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">8,226,841</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.94</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">8,199,858</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.96</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">4,635,583</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.4</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">3,439,944</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">0.12</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">* Including 77,915 and 97,394
options with performance conditions in the period ended June 30, 2012 and the year ended December 31, 2011, respectively. See Note
2m.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">The following table provides additional
information about all warrants and options outstanding and exercisable:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Outstanding&nbsp;as&nbsp;of&nbsp;June&nbsp;30,&nbsp;2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Exercise<BR>
    price</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Warrants&nbsp;and<BR> options<BR>
    outstanding</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted<BR> average<BR>
    remaining<BR> contractual<BR> life (years)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Warrants<BR>
    and&nbsp;options<BR> exercisable</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 23%; text-align: right">0-0.001</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 22%; text-align: right">3,906,137</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 22%; text-align: right">4.72</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 22%; text-align: right">3,703,236</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.183</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">205,012</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.41</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">205,012</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.188</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">334,545</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.73</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">334,545</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.73</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">505,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.92</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.79</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">390,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.97</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">300,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.99</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">584,357</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.76</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">584,357</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.23</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,450,326</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.59</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,950,722</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,139,232</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.79</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,719,357</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.725</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,608</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,608</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.75</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">81,161</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.92</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,054</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">752,717</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">752,717</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.93</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">215,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.94</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">66,666</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.95</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,347,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.38</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">483,333</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.18</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">500,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.04</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">2.6</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3.98</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,667</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">17,780,095</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5.85</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,843,274</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The weighted average of the remaining
contractual life of total vested and exercisable warrants and options as of June 30, 2012 is 4.46 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The aggregate intrinsic value
of the total exercisable warrants and options as of June 30, 2012 is $4,440 thousand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The total intrinsic value of options
exercised was $800 thousand for the year ended December 31, 2011. No options were exercised during the six month period ended June
30, 2012, and the years ended December 31, 2010 and December 31, 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: left; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The weighted average fair value of
warrants and options granted was approximately $0.59 for the six month period ended June 30, 2012, and $0.89, $0.82 and $0.96 for
the years ended December 31, 2011, 2010 and 2009, respectively. The weighted average fair value of warrants and options granted
was estimated using the Black-Scholes option-pricing model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: left; background-color: white">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in">9.</TD><TD>The following table sets forth the assumptions that were used in determining the fair value of options granted to employees
for the six month period ended June 30, 2012, as well as the years ended December&nbsp;31, 2011, 2010 and 2009:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;months&nbsp;ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 1.75pt">Expected life</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.5-6.5 years</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.17-6.5 years</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.25-6 years</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.54-6 years</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 1.75pt">Risk-free interest rates</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.7%-1.3</TD><TD STYLE="text-align: left">%&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.03%-2.79</TD><TD STYLE="text-align: left">%&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.7%-2.69</TD><TD STYLE="text-align: left">%&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.7%-2.49</TD><TD STYLE="text-align: left">%&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 1.75pt">Volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">58%-66</TD><TD STYLE="text-align: left">%&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">55%-79</TD><TD STYLE="text-align: left">%&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">79%-80</TD><TD STYLE="text-align: left">%&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75%-79</TD><TD STYLE="text-align: left">%&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 28%; text-align: left; padding-left: 1.75pt">Dividend yield</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">0</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">0</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">0</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">0</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The following table sets forth the
assumptions that were used in determining the fair value of warrants and options granted to non-employees for the six month period
ended June 30, 2012, as well as the years ended December&nbsp;31, 2011, 2010 and 2009:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;month&nbsp;period&nbsp;ended</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Expected&nbsp;life</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2-10&nbsp;years</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1-10&nbsp;years</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.7-10&nbsp;years</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9-10&nbsp;years</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -6.4pt; padding-left: 8.15pt">Risk-free interest rates</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.3%-1.47</TD><TD STYLE="text-align: left">%&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.02%-3.39</TD><TD STYLE="text-align: left">%&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.65%-3.01</TD><TD STYLE="text-align: left">%&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.4%-3.59</TD><TD STYLE="text-align: left">%&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 28%; text-align: left; padding-left: 1.75pt">Volatility</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">47%-65</TD><TD STYLE="width: 1%; text-align: left">%&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">53%-62</TD><TD STYLE="width: 1%; text-align: left">%&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">87</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">86%-91</TD><TD STYLE="width: 1%; text-align: left">%&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 1.75pt">Dividend yield</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The Company does not have sufficient
historical exercise data to provide a reasonable basis upon which to estimate expected term. Accordingly, as to plain vanilla options
granted, the expected term was determined using the simplified method, which takes into consideration the option&rsquo;s contractual
life and the vesting periods (for non-employees, the expected term is equal to the option&rsquo;s contractual life).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The Company estimates its forfeiture
rate based on its employment termination history, and will continue to evaluate the adequacy of the forfeiture rate based on analysis
of employee turnover behavior and other factors (for non-employees the forfeiture rate is nil). The annual risk-free rates are
based on the yield rates of zero coupon non-index linked U.S. Federal Reserve treasury bonds as both the exercise price and the
share price are in dollar terms. &nbsp;The Company&rsquo;s expected volatility is derived from a blended volatility, based on its
historical data and that of a peer group of public companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in">10.</TD><TD>As of June 30, 2012, the total unrecognized compensation cost on employee and non-employee stock options, related to unvested
stock-based compensation, amounted to approximately $2,745 thousand. This cost is expected to be recognized over a weighted-average
period of approximately 1.96 years. This expected cost does not include the impact of any future stock-based compensation awards.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 69.05pt"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The following table summarizes the
allocation of total share-based compensation expense in the Consolidated Statements of Operations:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;months&nbsp;ended</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($ in thousands)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; text-align: left">Revenue</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">68</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 1.7pt">Cost of revenues</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">35</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">350</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">160</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">49</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 1.7pt">Research and development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">206</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">267</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">536</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">356</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 1.7pt">Sales and marketing</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">181</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">431</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">55</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">92</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 1.7pt">General and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,454</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,542</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">869</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">65</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 1.75pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,944</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,590</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,620</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">562</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 98.95pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The Company recorded $62 thousand
of share-based compensation as part of Property, Plant and Equipment in the year ended December 31, 2011<B> </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 99pt; text-align: justify; text-indent: -27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>d.</B></TD><TD><B>Acquisition and cancellation of shares</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Following a settlement agreement
signed on June 5, 2011, the Company issued 18,785 shares of common stock. The Company issued a stock certificate in the name of
the plaintiff for such shares for the Company to hold in trust pending consummation of the settlement terms under the settlement
agreement. On June 10, 2012, both parties agreed to amend the settlement agreement to provide that the Company would pay $24 thousand
rather than issue the shares. Whereas the shares were never released to the plaintiff, and both parties agreed to cancel the share
certificate evidencing the shares, the Company cancelled the shares and recorded $21 thousand as a deduction from equity. The difference
was recorded as &ldquo;General and administrative&rdquo; based on the cash amount paid net of the fair value of the cancelled shares
as of the cancellation date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 49.65pt"></TD><TD STYLE="width: 0.3in"><B>e.</B></TD><TD>On April 5, 2012, the Company issued the 2012 Convertible Debenture and 2012 Warrants to purchase an aggregate of 3,343,465
shares of its common stock at an exercise price of $1.80 per share in a private placement transaction. See Note 6.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>NOTE 11 - TAXES</B> <B>ON</B> <B>INCOME
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><B>a.</B></TD><TD STYLE="text-align: justify"><B>Tax laws applicable to the Company and its subsidiaries</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in"><B>Taxation in the United States</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">InspireMD, Inc. is taxed under U.S.
tax laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in"><B>Taxation in Israel</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">InspireMD Ltd. is taxed under the
Israeli Income Tax Ordinance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">On December 6, 2011, the &quot;Tax
Burden Distribution Law&quot; Legislation Amendment (2011) was published in the Official Gazette. Under this law, the previously
approved gradual decrease in the corporate tax rate was cancelled. The Corporate tax rate will increase to 25% beginning 2012.<BR STYLE="mso-special-character: line-break">
<BR STYLE="mso-special-character: line-break">
</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in"><B>Taxation in Germany</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-align: justify; text-indent: 0in">InspireMD GmbH
is taxed according to the tax laws in Germany. Accordingly, the applicable tax rates are corporate tax rate of 15.825% and trade
tax rate of 12.075%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;<B>&nbsp;</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0in"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><B>b.</B></TD><TD><B>Tax benefits under the Law for the Encouragement
                                                                       of Capital Investments, 1959 (the &quot;Law&quot;):</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in">1.</TD><TD>InspireMD Ltd. has been granted a &ldquo;Beneficiary Enterprises&rdquo;
                                                                status under the Investment Law including Amendment No. 60 thereof,
                                                                which became effective in April 2005.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The tax benefits derived from
any such Beneficiary Enterprise relate only to taxable profits attributable to the specific program of investment to which the
status was granted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The main benefit, to
which InspireMD Ltd. is entitled, conditional upon the fulfilling of certain conditions stipulated by the above law, is a
two-year exemption and five to eight years of reduced tax rate of 10% to 25% from tax on income derived from their production
facilities in Israel. The tax benefit period is twelve years from the years of implementation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The tax-exempt income attributable
to the &ldquo;Beneficiary Enterprises&rdquo; can be distributed to shareholders without imposing
tax liability on the Company only upon the complete liquidation of the Company. In the event of a distribution of such tax-exempt
income as a cash dividend in a manner other than in the complete liquidation of the Company, the Company will be required to pay
tax at the rate of 10% to 25% on the amount distributed. In addition, these dividends will be subject to 15% withholding tax.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Should InspireMD Ltd. derive
income from sources other than the &ldquo;Beneficiary Enterprises&rdquo; during the period of benefits, such income shall be taxable
at the regular corporate tax rate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in">2.</TD><TD>Conditions for entitlement to the benefits</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The entitlement to the above
benefits is conditional upon InspireMD Ltd. fulfilling the conditions stipulated by the law, regulations published thereunder
and the instruments of approval for the specific investments in approved assets. In the event of failure to comply with these
conditions, the benefits may be cancelled InspireMD Ltd. may be required to refund the amount of the benefits, in whole or in
part, with the addition of interest.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in; text-align: left">3.</TD><TD STYLE="text-align: justify">Amendment
                                                                                         of the Law for the Encouragement of Capital
                                                                                         Investments, 1959</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Israeli Law for Encouragement
of Capital Investments, 1959 was amended as part of the Economic Policy Law for the years 2011-2012, which was passed in the Knesset
(the Israeli parliament) on December 29, 2010. The amendment became effective as of January 1, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The amendment set alternative benefit
tracks to the ones then in place, as follows: (i) an investment grants track designed for enterprises located in national development
zone A and (ii) two new tax benefits tracks (for preferred enterprises and for special preferred enterprises), which provide for
application of a unified tax rate to all preferred income of the company, as defined in the amendment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The tax rates at company level, under
the law, were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Years</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Development<BR>
Zone&nbsp;A</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Other&nbsp;Areas&nbsp;in<BR>
Israel</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&ldquo;Preferred enterprise&rdquo;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%">2011-2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; text-align: right">10</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; text-align: right">15</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>2013-2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12.5</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">2015 and thereafter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">&ldquo;Special Preferred Enterprise&rdquo; commencing 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 92.15pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The benefits granted to the preferred
enterprises were to be unlimited in time, unlike the benefits granted to special preferred enterprises, which were to be limited
for a period of 10 years. The benefits were to be granted to companies that qualified under criteria set in the amendment; for
the most part, those criteria were similar to the criteria that were set in the law prior to its amendment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Under the transitional provisions
of the amendment, an Israeli company was allowed to continue to enjoy the tax benefits available under the law prior to its amendment
until the end of the period of benefits, as defined in the law. The company was allowed to set the &ldquo;year of election&rdquo;
no later than tax year 2012, provided that the minimum qualifying investment commenced not later than the end of 2010. On each
year during the period of benefits, the company would have been able to opt for application of the amendment, thereby making available
to itself the tax rates above. Company&rsquo;s opting for application of the amendment was irrecoverable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><B>c.</B></TD><TD STYLE="text-align: justify"><B>Carry forward</B> <B>tax</B> <B>losses</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">As of June 30, 2012, InspireMD
Ltd. had a net carry forward tax loss of approximately $18 million. Under Israeli tax laws, the carry forward tax losses
can be utilized indefinitely. InspireMD, Inc. had a net carry forward tax loss of approximately $10 million. Under U.S. tax
laws, InspireMD, Inc.&rsquo;s tax losses can be utilized two years back and twenty years forward. InspireMD, Inc.'s carry forward
tax losses will begin to expire on June 30, 2031.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><B>d.</B></TD><TD STYLE="text-align: justify"><B>Tax</B> <B>assessments</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: -19.85pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company and its subsidiaries
have not been assessed for tax purposes since incorporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><B>e.</B></TD><TD STYLE="text-align: justify"><B>Loss before income taxes</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The components of loss before income
taxes are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;month&nbsp;period&nbsp;ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($ in thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Profit (loss)&nbsp; before taxes on income:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 43%; text-align: left; text-indent: 14.75pt">InspireMD, Inc.</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">(2,226</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(7,029</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 14.75pt">InspireMD Ltd.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,814</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,636</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,115</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,624</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 14.75pt">InspireMD GmbH</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(258</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(53</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(7,049</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(14,663</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,373</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2,677</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify"><B>Current taxes on income</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt">Tax expenses in the amount of $32 thousand for the
six month period ended June 30, 2012, and $2, $47 thousand and $47 thousand thousand for the years ended December 31, 2011, 2010
and 2009, respectively, are related to non-U.S. operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Following is a reconciliation of
the theoretical tax expense, assuming all income were taxed at the regular tax rates applicable to the Company in the U.S. (see
c above), and the actual tax expense:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;month&nbsp;period&nbsp;ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 43%; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Loss before taxes on income, as reported
    in the statements of operations</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">7,049</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">14,663</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">3,373</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,677</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Theoretical tax benefit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,397</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,985</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,147</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(910</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -10.1pt; padding-left: 10.1pt">Increase in tax benefit resulting from permanent&nbsp;
    differences</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">863</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">601</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">431</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">92</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10.1pt; padding-left: 10.1pt">Increase (decrease) in taxes on income resulting
    from the computation of deferred taxes at a rate which is different from the theoretical rate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(116</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">62</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -10.1pt; padding-left: 10.1pt">Increase (decrease) in uncertain tax positions
    - net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right; text-indent: 0in">&nbsp;</P><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right; text-indent: 0in">&nbsp;</P></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(60</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10.1pt; padding-left: 10.1pt">Decrease in theoretical tax benefit resulting
    from subsidiaries different tax rate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">434</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,385</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">304</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">214</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Change in corporate tax rates, see c above</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(545</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">481</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Change in valuation allowance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,132</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,722</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">367</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">116</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">32</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">47</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">47</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">As of June 30, 2012, as well as December
31, 2011, 2010 and 2009, the Company determined that it was more likely than not that the benefit of the operating losses would
not be realized and consequently, management concluded that full valuation allowances should be established regarding the Company&rsquo;s
deferred tax assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The changes in the valuation allowance
for the six month period ended June 30, 2012 and years ended December 31, 2011 and 2010 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.5pt; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 82%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;month&nbsp;period<BR>
    ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; text-align: justify; text-indent: 0in">Balance&nbsp;at&nbsp;the&nbsp;beginning&nbsp;of&nbsp;the
    year</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">6,918</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">3,196</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,829</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,713</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; text-indent: 0in">Changes during the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,132</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,722</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">367</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">116</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Balance at the end of the year</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,050</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,918</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,196</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,829</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 67.5pt; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><B>f.</B></TD><TD STYLE="text-align: justify"><B>Accounting for Uncertain Tax position</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: -70.9pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">Following is a reconciliation of
the total amounts of the Company&rsquo;s unrecognized tax benefits during the six month period ended June 30, 2012, as well as
the years ended December&nbsp;31, 2011 and 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;month<BR> period
    ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; text-align: left">Balance at beginning of period</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">60</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">30</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">0</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Increase in unrecognized tax benefits as a result of tax positions taken during the year</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Decrease in unrecognized tax benefits as a result of tax positions taken
    during a prior year</TD><TD STYLE="font-size: 1pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(60</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="font-size: 1pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 1pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Balance at end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">60</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">30</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">All of the above amounts of unrecognized
tax benefits would affect the effective tax rate if recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">A summary of open tax years by major
jurisdiction is presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 50%; font: 10pt Times New Roman, Times, Serif; margin-left: 1.3in">
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; font-weight: bold; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; border-bottom: Black 0.5pt solid; margin-bottom: 0pt; text-align: center"><B>Jurisdiction</B></P></TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 47%; font-weight: bold; text-align: right"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; border-bottom: Black 0.5pt solid"><B>Years</B></P></TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">U.S.</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2008-2011</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Israel</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2006-2011</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Germany</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2008-2011</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 56.7pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The Company and its subsidiaries
applied for a change of fiscal year for its tax filings to end in June 30, 2012 in the different territories.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 56.7pt"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 56.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 56.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><B>g.</B></TD><TD STYLE="text-align: justify"><B>Deferred income tax:</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;month period&nbsp;ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Short-term:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 56%; text-align: left; text-indent: -7.35pt; padding-left: 15.9pt">Allowance for doubtful accounts</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">54</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">37</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">36</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -7.35pt; padding-left: 15.9pt">Provision for vacation and
    recreation pay</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">70</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">69</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">38</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">124</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">106</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">74</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Long-term:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -7.35pt; padding-left: 15.9pt">R&amp;D expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">746</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">522</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">531</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -7.35pt; padding-left: 15.9pt">Convertible debenture</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,251</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -7.35pt; padding-left: 15.9pt">Non cash issuance costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">89</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -7.35pt; padding-left: 15.9pt">Share-based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">693</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">276</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -7.35pt; padding-left: 15.9pt">Carry forward tax losses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,631</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,582</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -7.35pt; padding-left: 15.9pt">Accrued severance pay, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">18</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">14</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,926</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,812</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,122</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less-valuation allowance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,050</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(6,918</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,196</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>NOTE 12 - SUPPLEMENTARY</B> <B>FINANCIAL</B>
<B>STATEMENT</B> <B>INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: -19.85pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt"><B>Balance</B> <B>sheets:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 20.25pt"><B>a.</B></TD><TD><B>Accounts receivable: </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December&nbsp;31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -5.2pt; padding-left: 8.05pt">1) Trade:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 61%; text-align: left; text-indent: -14.6pt; padding-left: 35.45pt">Open accounts</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,039</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,426</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">998</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -14.6pt; padding-left: 35.45pt">Allowance for doubtful accounts</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(215</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(142</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(146</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -19.55pt; padding-left: 35.45pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,824</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,284</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">852</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -5.2pt; padding-left: 8.05pt">2)&nbsp; Other:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -14.6pt; padding-left: 35.45pt">Due from government institutions</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">124</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">68</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">56</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -14.6pt; padding-left: 35.45pt">Advance payments to suppliers</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">118</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -14.6pt; padding-left: 35.45pt">Fund in respect of employee right upon
    retirement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -14.6pt; padding-left: 35.45pt">Miscellaneous</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">22</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">18</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 33.9pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">264</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">118</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">75</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 56.7pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: 0in">The changes in &ldquo;Allowance
for doubtful accounts&rdquo; during the six month period ended June 30, 2012 and the years ended December&nbsp;31, 2011 and 2010
are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 83%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;month&nbsp;period<BR> ended</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; text-align: left; padding-left: 8.05pt">Balance at beginning of period</TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 10%; font-weight: normal; text-align: right">142</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 10%; font-weight: normal; text-align: right">146</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 10%; font-weight: normal; text-align: right">6</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 10%; font-weight: normal; text-align: right">6</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 8.05pt">Additions during the period</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">78</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">140</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 8.05pt">Exchange rate differences</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="font-size: 1pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 1pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 8.05pt">Balance at end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">215</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">142</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">146</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 56.7pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 20.25pt; text-align: left"><B>b.</B></TD><TD STYLE="text-align: justify"><B>Inventories:</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 56.7pt; text-indent: 0in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; text-align: left; text-indent: -35.45pt; padding-left: 35.45pt">Finished goods</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">479</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">741</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">957</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -35.45pt; padding-left: 35.45pt">Work in process</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,115</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,044</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">573</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -35.45pt; padding-left: 35.45pt">Raw materials and supplies</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">150</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">276</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">174</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -35.45pt; padding-left: 35.45pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,744</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,061</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,704</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">As of June 30, 2012, the Company
recorded a provision for slow moving inventory in the amount of $443 thousand.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 20.25pt; text-align: left"><B>c.</B></TD><TD STYLE="text-align: justify"><B>Inventory on consignment</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; background-color: white"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">The changes in inventory on consignment
during the six months ended June 30, 2012, as well as the years ended December&nbsp;31, 2011 and 2010, are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;month&nbsp;period<BR> ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($ in thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP STYLE="font-weight: normal; text-indent: -7.05pt; padding-left: 8.75pt">Balance at beginning of period</TD><TD NOWRAP STYLE="font-weight: normal">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: normal; text-align: left">$</TD><TD NOWRAP STYLE="font-weight: normal; text-align: right">110</TD><TD NOWRAP STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: normal">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: normal; text-align: left">$</TD><TD NOWRAP STYLE="font-weight: normal; text-align: right">371</TD><TD NOWRAP STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: normal">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: normal; text-align: left">$</TD><TD NOWRAP STYLE="font-weight: normal; text-align: right">1,093</TD><TD NOWRAP STYLE="font-weight: normal; text-align: left"></TD><TD NOWRAP STYLE="font-weight: normal">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: normal; text-align: left">$</TD><TD NOWRAP STYLE="font-weight: normal; text-align: right">1,423</TD><TD NOWRAP STYLE="font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; text-align: left; text-indent: -7.05pt; padding-left: 8.75pt">Costs of revenues deferred during the period</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">20</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">110</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">326</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">421</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal; text-align: left; padding-bottom: 1pt; text-indent: -7.05pt; padding-left: 8.75pt">Costs of revenues recognized during the period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(67</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(371</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,048</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(751</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; padding-bottom: 2.5pt; text-indent: -7.05pt; padding-left: 8.75pt">Balance at end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">63</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">110</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">371</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,093</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">As of June 30, 2012, December 31,
2011 and 2010, Inventory on consignment included an amount of $63 thousand, $110 thousand and $371 thousand, respectively, related
to products sales for which product returns could not be reliably estimated, with the remainder relating to products sales for
which returns were reliably estimated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70pt; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 20.25pt; text-align: left"><B>d.</B></TD><TD STYLE="text-align: justify"><B>Accounts payable and accruals-other:</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 56.7pt; text-indent: 0in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December&nbsp;31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal; padding-bottom: 2.5pt; text-indent: -7.05pt; padding-left: 8.75pt; width: 61%">Employees and employee institutions</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">438</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">376</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">375</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; padding-bottom: 2.5pt; text-indent: -7.05pt; padding-left: 8.75pt">Accrued vacation and recreation pay</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">272</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">271</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">147</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal; padding-bottom: 2.5pt; text-indent: -7.05pt; padding-left: 8.75pt">Accrued clinical trials expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">607</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">124</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">35</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; padding-bottom: 2.5pt; text-indent: -7.05pt; padding-left: 8.75pt">Provision for sales commissions</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">194</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">213</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal; padding-bottom: 2.5pt; text-indent: -7.05pt; padding-left: 8.75pt">Accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,197</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">930</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">561</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; padding-bottom: 2.5pt; text-indent: -7.05pt; padding-left: 8.75pt">Due to government institutions</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal; padding-bottom: 2.5pt; text-indent: -7.05pt; padding-left: 8.75pt">Liability for employees rights upon retirement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; padding-bottom: 2.5pt; text-indent: -7.05pt; padding-left: 8.75pt">Provision for returns</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">139</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">231</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">150</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal; padding-bottom: 2.5pt; text-indent: -7.05pt; padding-left: 8.75pt">Taxes payable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">56</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">69</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">98</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -19.55pt; padding-left: 35.45pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,925</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,217</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,509</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 5.65pt"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 20.25pt; text-align: left"><B>e.</B></TD><TD STYLE="text-align: justify"><B>Deferred revenues</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; background-color: white"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: 0in">The changes in deferred revenues
during the six month period ending June 30, 2012, and the years ended December&nbsp;31, 2011 and 2010 are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;month&nbsp;period<BR> ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; text-align: left">Balance at beginning of period</TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 10%; font-weight: normal; text-align: right">-</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 10%; font-weight: normal; text-align: right">398</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 10%; font-weight: normal; text-align: right">1,975</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left"></TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 10%; font-weight: normal; text-align: right">2,482</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Revenue deferred during the period</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">25</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">320</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">616</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Revenue recognized during the period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(398</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,897</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,123</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Balance at end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">398</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,975</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 5.65pt"><B>Statements of Operation:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left; text-indent: -1in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 51.05pt"></TD><TD STYLE="width: 20.25pt; text-align: left"><B>f.</B></TD><TD STYLE="text-align: justify"><B>Financial expenses (income), net:</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 5.65pt"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 1in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">6&nbsp;month&nbsp;period<BR>
ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; text-align: left">Bank&nbsp;commissions</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">30</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">63</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">83</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">18</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(36</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Exchange rate differences</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(40</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">177</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(33</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.12in; padding-left: 0.12in">Interest expense (including debt issuance costs)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,232</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">730</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">105</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">221</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.12in; padding-left: 0.12in">Change in fair value of warrants and embedded derivatives</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,322</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.12in; padding-left: 0.12in">Redemption of beneficial conversion feature of convertible loan</TD><TD STYLE="font-size: 1pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 1pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 1pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(308</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -19.55pt; padding-left: 35.45pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(109</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">934</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">154</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(40</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left; text-indent: -1in"><B>NOTE 13 - ENTITY
WIDE DISCLOSURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 56.7pt; text-indent: 0in">The Company operates in one operating
segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 56.7pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 56.7pt; text-indent: 0in">Disaggregated financial data is
provided below as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 56.7pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: 0in">(1) Revenues by geographic area
and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: 0in">(2) Revenues from principal customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 70.9pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 56.7pt; text-indent: 0in">Revenues are attributed to geographic
areas based on the location of the customers. The following is a summary of revenues by geographic areas:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 56.7pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif; margin-left: 1.2in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;month&nbsp;period&nbsp;ended</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($&nbsp;in&nbsp;thousands)&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 43%; font-weight: normal">Russia</TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 15%; font-weight: normal; text-align: right">452</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 10%; font-weight: normal; text-align: right">360</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 10%; font-weight: normal; text-align: right">12</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; text-align: left">$</TD><TD STYLE="width: 10%; font-weight: normal; text-align: right">203</TD><TD STYLE="width: 1%; font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal">Germany</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">285</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">298</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">507</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">191</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal">India</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">120</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">1,083</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">-</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">-</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal">Israel</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">60</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">730</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">119</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">-</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal">Italy</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">179</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">313</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">390</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">668</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal">Cyprus</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">10</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">60</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">7</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">337</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal">Pakistan</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">-</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">5</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">193</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">477</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal">Poland</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">140</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">268</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">1,446</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">-</TD><TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal; padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">825</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,887</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,275</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,535</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,071</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,004</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,949</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,411</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0.5in">By principal
customers:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif; margin-left: 1.2in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">6&nbsp;month&nbsp;period&nbsp;ended</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended&nbsp;December&nbsp;31</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 43%; text-align: left">Customer&nbsp;A</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">22</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">6</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">6</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Customer B</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Customer C</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; text-align: left">Customer D</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">3</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">12</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">2</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">-</TD><TD STYLE="font-weight: normal; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal; text-align: left">Customer E</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">9</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">5</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">8</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">20</TD><TD STYLE="font-weight: normal; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; text-align: left">Customer F</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">-</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">1</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">-</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">10</TD><TD STYLE="font-weight: normal; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal; text-align: left">Customer G</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">-</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">-</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">4</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">14</TD><TD STYLE="font-weight: normal; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; text-align: left">Customer H</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">7</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">4</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">29</TD><TD STYLE="font-weight: normal; text-align: left">%</TD><TD STYLE="font-weight: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; text-align: right">-</TD><TD STYLE="font-weight: normal; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left; text-indent: -1in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1in"></TD><TD STYLE="text-align: left">All tangible long lived assets are located in Israel.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left; text-indent: -1in">&nbsp;</P>

<!-- Field: Page; Sequence: 169; Value: 2 -->
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left; text-indent: -1in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left; text-indent: -1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left; text-indent: -1in"><B>NOTE 14 &ndash;
TRANSITION PERIOD COMPARATIVE DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left; text-indent: -1in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Six&nbsp;month&nbsp;period&nbsp;ended&nbsp;June&nbsp;30,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011<BR> (unaudited)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($ in thousands)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: 1.75pt">Operating Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left; text-indent: 1.75pt">Revenues</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,071</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,726</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 1.75pt">Cost of revenues</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,377</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,539</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 1.75pt">Gross Profit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">694</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,187</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 1.75pt">Operating expenses:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 15.95pt">Research and development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,607</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,093</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 15.95pt">Selling and marketing</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,246</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,045</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -7.6pt; padding-left: 23.55pt">General and administrative (including $1,454 and $99 of share-based compensation for the six month periods ended June 30, 2012 and 2011, respectively)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,999</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,391</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 14.55pt">Total operating expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,852</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,529</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 1.75pt">Loss from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,158</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,342</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 1.75pt">Financial expenses (income), net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(109</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">787</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 1.75pt">Loss before income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,049</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,129</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 1.75pt">Tax expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">32</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">20</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 1.75pt">Net loss</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(7,081</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(4,149</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -7.95pt; padding-left: 9pt">Net loss per share - basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.10</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.07</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -7.95pt; padding-left: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -7.95pt; padding-left: 9pt">Weighted average number of ordinary shares used in computing net loss per share - basic and diluted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">68,176,882</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">57,312,945</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -7.95pt; padding-left: 9pt">Cash Flow Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -7.95pt; padding-left: 9pt">Net cash used by operating activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(4,363</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1,786</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -7.95pt; padding-left: 9pt">Net cash used by investing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(200</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(144</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -7.95pt; padding-left: 9pt">Net cash provided by financing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,753</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,356</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -7.95pt; padding-left: 9pt">Effect of exchange rate changes on cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -7.95pt; padding-left: 9pt">Net increase in cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5,190</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7,434</TD><TD STYLE="text-align: left"></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left; text-indent: -1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: left; text-indent: -1in"><B>NOTE 15 - SUBSEQUENT
EVENTS:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: -1.1pt"><FONT STYLE="text-underline-style: none">On
August 20, 2012, the Company announced that a multi-center randomized trial of its MGuard&trade; embolic protection stent demonstrated
a positive outcome in treating patients suffering heart attacks when compared to commercially-approved bare metal or drug-eluting
stents.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.65pt; text-indent: -1.1pt"><FONT STYLE="text-underline-style: none">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in">On August 1, 2012, the Company&rsquo;s
board of directors issued a consultant options with certain performance conditions to purchase 200,000 shares of common stock
at an exercise price of $1.18 per share, the closing price of the common stock on the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in">On August 27, 2012, the Company&rsquo;s
board of directors issued a member of the immediate family of the CEO options to purchase 243,483 shares of common stock at an
exercise price of $1.45 per share, the closing price of the common stock on the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INSPIREMD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in">On August 27, 2012, the Company's
board of directors approved the extension of 121,740 options previously granted to a member of the immediate family of the CEO.
Following the extension, the options can be exercised until September 30, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51.05pt; text-indent: 0in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 14pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><FONT STYLE="font-size: 14pt"><B>Shares</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 14pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><IMG SRC="image_001.gif" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; color: Red"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 14pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 14pt"><B>Common
Stock</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 14pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 14pt"><B>&nbsp;</B></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 14pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 12pt"><B>Prospectus</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 14pt"><B>&nbsp;</B></FONT></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 1pt; margin-bottom: 1pt"><DIV STYLE="font-size: 1pt; border-top: Black 0.75pt solid; width: 100%"><FONT STYLE="font-size: 14pt">&nbsp;</FONT></DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 14pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 16pt"><B>Cowen
and Company</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 16pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 16pt"><B>JMP Securities</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 14pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 14pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 14pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><FONT STYLE="font-size: 14pt">,
2012</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PART II</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INFORMATION NOT REQUIRED IN PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 13. Other Expenses of Issuance and Distribution.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table provides information
regarding the various actual and anticipated expenses (other than underwriters&rsquo; discounts) payable by us in connection with
the issuance and distribution of the common stock being registered hereby. All amounts shown are estimates except the Securities
and Exchange Commission registration fee, FINRA filing fee and NASDAQ initial listing fee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 83%; padding-right: 0.5pt; padding-left: 0.5pt">SEC registration fee</TD>
    <TD STYLE="width: 3%; padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="width: 2%; padding-right: 0.5pt; padding-left: 0.5pt">$</TD>
    <TD STYLE="width: 12%; padding-right: 0.5pt; padding-left: 0.5pt">5,271.60</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">FINRA filing fee</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">7,400.00</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">NASDAQ initial listing fee</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">50,000.00</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Legal fees and expenses</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Accounting fees and expenses</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Printing and engraving expenses</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">Transfer agent and registrar fees and expenses</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt">*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; padding-bottom: 1pt">Miscellaneous Fees and Expenses</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; border-bottom: Black 1pt solid">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; border-bottom: Black 1pt solid">*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; padding-bottom: 2.5pt">Total</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="padding-right: 0.5pt; padding-left: 0.5pt; border-bottom: Black 2.5pt double">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<HR ALIGN="LEFT" NOSHADE SIZE="1" STYLE="color: Black; width: 15%; margin-top: 0; margin-bottom: 0">
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* To be completed by amendment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 14. Indemnification of Directors and Officers.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Section 145 of the General Corporation Law
of the State of Delaware provides, in general, that a corporation incorporated under the laws of the State of Delaware, as we are,
may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than a derivative action by or in the right of the corporation) by reason of the fact that such person
is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another enterprise, against expenses (including attorneys&rsquo; fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding
if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person&rsquo;s
conduct was unlawful.&nbsp;&nbsp;In the case of a derivative action, a Delaware corporation may indemnify any such person against
expenses (including attorneys&rsquo; fees) actually and reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation, except that no indemnification will be made in respect of any claim, issue or matter
as to which such person will have been adjudged to be liable to the corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or any other court in which such action was brought determines such person is fairly and reasonably
entitled to indemnity for such expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our certificate of incorporation and bylaws
provide that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions
of the General Corporation Law of the State of Delaware, as amended from time to time, subject to any permissible expansion or
limitation of such indemnification, as may be set forth in any stockholders&rsquo; or directors&rsquo; resolution or by contract.&nbsp;&nbsp;Any
repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect
any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are also permitted to apply for insurance
on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the General
Corporation Law of the State of Delaware would permit indemnification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 15. Recent Sales of Unregistered Securities.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, pursuant to a share exchange
agreement, we issued 46,471,907 shares of common stock to certain shareholders of InspireMD Ltd. in exchange for 91.7% of the issued
and outstanding capital stock of InspireMD Ltd. Separately, we issued 4,194,756 shares of common stock to the remaining shareholders
of InspireMD Ltd. in exchange for the remaining 8.3% of the issued and outstanding capital stock of InspireMD Ltd.&nbsp;&nbsp;In
addition, in connection with the share exchange agreement, we (i) assumed three year warrants to purchase up to 125,000 ordinary
shares of InspireMD Ltd. at an exercise price of $10 per share that were converted into newly issued warrants to purchase up to
1,014,500 shares of our common stock at an exercise price of $1.23 per share and (ii) options to purchase up to 937,256 ordinary
shares of InspireMD Ltd. with a weighted average exercise price of $4.35 that were converted into options to purchase up to 7,606,770
shares of our common stock with a weighted average exercise price of $0.54 per share. The securities issued in the above described
transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered
and sold pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by either Regulation
S under the Securities Act of 1933, as amended, or Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as
amended. Each of the shareholders of InspireMD Ltd. who received shares of our common stock in the above described share exchange
transactions were either accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended) or not a &ldquo;U.S.
person&rdquo; (as that term is defined in Rule 902 of Regulation S) at the time of the share exchange transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, we entered into a securities
purchase agreement with 30 accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant
to which we issued 6,454,002 shares of common stock and five-year warrants to purchase up to 3,226,999 shares of common stock at
an exercise price of $1.80 per share for aggregate cash proceeds of $9,013,404 and the cancellation of $667,596 of indebtedness
held by investors. The securities sold in this offering were not registered under the Securities Act of 1933, as amended, or the
securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act
of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, upon the consummation
of the above described private placement, we issued a five-year warrant to purchase up to 373,740 shares of common stock at an
exercise price of $1.80 per share, to Palladium Capital Advisors, LLC, our placement agent in the private placement. The warrant
was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and sold
in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of
1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a
public offering. Palladium Capital Advisors, LLC was an accredited investor (as defined by Rule 501 under the Securities Act of
1933, as amended) at the time of the private placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, for work performed in
connection with the share exchange transactions and as bonus compensation, we issued Craig Shore, our chief financial officer,
secretary and treasurer, a five-year warrant to purchase up to 3,000 shares of common stock at an exercise price of $1.80 per share.
The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered
and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities
Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving
a public offering. Craig Shore was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended)
at the time of the issuance of the warrant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, upon the consummation
of the private placement, we issued a five-year warrant to purchase up to 6,667 shares of common stock at an exercise price of
$1.80 per share, to Hermitage Capital Management, a consultant. The warrant was not registered under the Securities Act of 1933,
as amended, or the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded
by Section 4(2) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt
transactions by an issuer not involving a public offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In consideration for financial consulting
services, we issued to The Benchmark Company, LLC, a consultant, a five-year warrant to purchase up to 50,000 shares of common
stock at an exercise price of $1.50 per share. The warrant was not registered under the Securities Act of 1933, as amended, or
the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded by Section 4(2)
and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws,
which exempt transactions by an issuer not involving a public offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2011, we issued five-year warrants
to purchase up to an aggregate of 2,500,000 shares of common stock at an exercise price of $1.50 per share, to Endicott Management
Partners, LLC, The Corbran LLC and David Stefansky, in consideration for consulting services.&nbsp;&nbsp;Pursuant to an agreement
with us, of the total number of warrants issued, warrants to purchase 832,500 shares of common stock were placed in escrow, with
the release of such warrants subject to the fulfillment or waiver of certain conditions.&nbsp;&nbsp;On November 16, 2011, our board
of directors approved the release of all of the warrants held in escrow.&nbsp;&nbsp;The warrants were not registered under the
Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption
from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding
provisions of state securities laws, which exempt transactions by an issuer not involving a public offering. Each of Endicott Management
Partners, LLC, The Corbran LLC and David Stefansky was an accredited investor (as defined by Rule 501 under the Securities Act
of 1933, as amended) at the time of the issuance of the warrant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 18, 2011, we consummated a private
placement with an investor pursuant to which we sold 666,667 shares of our common stock and a five-year warrant to purchase up
to 333,333 shares of common stock at an exercise price of $1.80 per share for aggregate cash proceeds of $1,000,000. The securities
sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and
were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by
Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended. This investor was an accredited investor
(as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the private placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 18, 2011, we consummated a private
placement with 2 accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant to which
we sold 283,334 shares of our common stock and a five-year warrant to purchase 141,667 shares of our common stock at an exercise
price of $1.80 per share, for aggregate cash proceeds of $425,000. The securities sold in this offering were not registered under
the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption
from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the
Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 18, 2011, upon the consummation
of the above described April 18, 2011 private placements, we issued a five-year warrant to purchase up to 57,000 shares of common
stock at an exercise price of $1.80 per share to Palladium Capital Advisors, LLC, our placement agent in the April 18, 2011 private
placements. The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and
was offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under
the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an
issuer not involving a public offering. Palladium Capital Advisors, LLC was an accredited investor (as defined by Rule 501 under
the Securities Act of 1933, as amended) at the time of the private placement</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 21, 2011, we consummated a private
placement with Mr. Reinder Hogeboom pursuant to which we sold 33,333 shares of our common stock and a five-year warrant to purchase
16,667 shares of our common stock at an exercise price of $1.80 per share, for aggregate cash proceeds of $50,000. The securities
sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and
were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by
Regulation S under the Securities Act of 1933, as amended. Reinder Hogeboom was not a &ldquo;U.S. person&rdquo; (as that term is
defined in Rule 902 of Regulation S) at the time of the private placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On January 4, 2011, we entered into a convertible
loan agreement with our distributer in Israel, in the amount of $100,000. On June 1, 2011, we issued 81,161 shares of common stock
to the lender upon conversion of the note.&nbsp;&nbsp;These securities were not registered under the Securities Act of 1933, as
amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the
Securities Act of 1933, as amended, provided by Regulation S under the Securities Act of 1933, as amended. The lender was not a
&ldquo;U.S. person&rdquo; (as that term is defined in Rule 902 of Regulation S) at the time of the issuance.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 5, 2012, we issued senior secured
convertible debentures in the original aggregate principal amount of $11,702,128 and five-year warrants to purchase an aggregate
of 3,343,465 shares of our common stock at an exercise price of $1.80 per share to certain accredited investors in a private placement
transaction.&nbsp;&nbsp;The securities sold in this offering were not registered under the Securities Act of 1933, as amended,
or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities
Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As consideration for serving as our placement
agents in connection with certain private placements, on April 5, 2012 we issued Palladium Capital Advisors, LLC a five-year warrant
to purchase up to 159,574 shares of common stock at an exercise price of $1.80 per share, Oppenheimer &amp; Co. Inc. a five-year
warrant to purchase up to 113,070 shares of common stock at an exercise price of $1.80 per share and JMP Securities LLC a five-year
warrant to purchase up to 39,666 shares of common stock at an exercise price of $1.80 per share.&nbsp;&nbsp;These warrants were
not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in
reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933,
as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public
offering. Each of Palladium Capital Advisors, LLC, Oppenheimer &amp; Co. Inc. and JMP Securities LLC was an accredited investor
(as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the private placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On August 1, 2012, we issued options to
purchase 200,000 shares of our common stock to Redington, Inc., as consideration for<B> </B>investor relations services. The securities
issued to Redington, Inc. were not registered under the Securities Act of 1933, as amended, or the securities laws of any state,
and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided
by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On September 14, 2012, PI Financial Corp.
exercised warrants to purchase 145,500 shares of our common stock for aggregate consideration if $178,965. On September 17, 2012,
PI Financial Corp. exercised warrants to purchase 24,500 shares of our common stock for aggregate consideration if $30,135. On
September 20, 2012, PI Financial Corp. exercised warrants to purchase 60,000 shares of our common stock for aggregate consideration
if $73,800. These shares of common stock were not registered under the Securities Act of 1933, as amended, or the securities laws
of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended,
provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 16. Exhibits and Financial Statement Schedules.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 11%; font-weight: bold; text-decoration: underline">Exhibit No.</TD>
    <TD STYLE="width: 89%; font-weight: bold; text-decoration: underline">Description</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>1.1+</TD>
    <TD>Form of Underwriting Agreement</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.1</TD>
    <TD>Share Exchange Agreement, dated as of December 29, 2010, by and among InspireMD Ltd., Saguaro Resources, Inc., and the Shareholders of InspireMD Ltd. that are signatory thereto (incorporated by reference to Exhibit 10.1 to Saguaro Resources, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.2</TD>
    <TD>Amendment to Share Exchange Agreement, dated February 24, 2011 (incorporated by reference to Exhibit 2.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.3</TD>
    <TD>Second Amendment to Share Exchange Agreement, dated March 25, 2011 (incorporated by reference to Exhibit 2.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.1</TD>
    <TD>Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.2</TD>
    <TD>Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.1*</TD>
    <TD>Form of Common Stock Certificate.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>5.1*</TD>
    <TD>Form of Opinion of Haynes and Boone, LLP.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.1</TD>
    <TD>Amended and Restated 2011 Umbrella Option Plan&nbsp;&nbsp;(incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on November 4, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 11%">10.2</TD>
    <TD STYLE="width: 89%">Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.3</TD>
    <TD>Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations, dated as of March 31, 2011 (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.4</TD>
    <TD>Stock Purchase Agreement, by and between InspireMD, Inc. and Lynn Briggs, dated as of March 31, 2011 (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.5</TD>
    <TD>Securities Purchase Agreement, dated as of March 31, 2011, by and among InspireMD, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.5 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.6</TD>
    <TD>Form of $1.80 Warrant (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.7</TD>
    <TD>Form of $1.23 Warrant (incorporated by reference to Exhibit 10.7 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.8</TD>
    <TD>$1,250,000 Convertible Debenture, dated July 20, 2010, by and between InspireMD Ltd. and Genesis Asset Opportunity Fund, L.P. (incorporated by reference to Exhibit 10.8 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.9</TD>
    <TD>Unprotected Leasing Agreement, dated February 22, 2007, by and between Block 7093 Parcel 162 Company Ltd. Private Company 510583156 and InspireMD Ltd.&nbsp;&nbsp;(incorporated by reference to Exhibit 10.9 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.10</TD>
    <TD>Securities Purchase Agreement, dated as of July 22, 2010, by and among InspireMD Ltd. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.10 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.11</TD>
    <TD>Manufacturing Agreement, by and between InspireMD Ltd. and QualiMed Innovative Medizinprodukte GmbH, dated as of September 11, 2007 (incorporated by reference to Exhibit 10.11 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.12</TD>
    <TD>Development Agreement, by and between InspireMD Ltd. and QualiMed Innovative Medizinprodukte GmbH, dated as of January 15, 2007 (incorporated by reference to Exhibit 10.12 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.13</TD>
    <TD>License Agreement, by and between Svelte Medical Systems, Inc. and InspireMD Ltd., dated as of March 19, 2010&nbsp;&nbsp;(incorporated by reference to Exhibit 10.5 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.14</TD>
    <TD>Agreement, by and between InspireMD Ltd. and Ofir Paz, dated as of April 1, 2005 (incorporated by reference to Exhibit 10.14 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 11%">10.15</TD>
    <TD STYLE="width: 89%">Amendment to the Employment Agreement, by and between InspireMD Ltd. and Ofir Paz, dated as of October 1, 2008 (incorporated by reference to Exhibit 10.15 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.16</TD>
    <TD>Second Amendment to the Employment Agreement, by and between InspireMD Ltd. and Ofir Paz, dated as of March 28, 2011 (incorporated by reference to Exhibit 10.16 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.17</TD>
    <TD>Personal Employment Agreement, by and between InspireMD Ltd. and Asher Holzer, Ph.D., dated as of April 1, 2005 (incorporated by reference to Exhibit 10.17 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.18</TD>
    <TD>Amendment to the Employment Agreement, by and between InspireMD Ltd. and Asher Holzer, Ph.D., dated as of March 28, 2011 (incorporated by reference to Exhibit 10.18 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.19</TD>
    <TD>Personal Employment Agreement, by and between InspireMD Ltd. and Eli Bar, dated as of June 26, 2005 (incorporated by reference to Exhibit 10.19 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.20</TD>
    <TD>Employment Agreement, by and between InspireMD Ltd. and Bary Oren, dated as of August 25, 2009 (incorporated by reference to Exhibit 10.20 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.21</TD>
    <TD>Employment Agreement, by and between InspireMD Ltd. and Craig Shore, dated as of November 28, 2010 (incorporated by reference to Exhibit 10.21 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.22</TD>
    <TD>Form of Indemnity Agreement between InspireMD, Inc. and each of the directors and executive officers thereof (incorporated by reference to Exhibit 10.22 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.23</TD>
    <TD>Agreement with Bank Mizrahi Tefahot LTD. for a loan to InspireMD Ltd. in the original principal amount of $750,000, dated January 27, 2009 (incorporated by reference to Exhibit 10.23 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.24</TD>
    <TD>Securities Purchase Agreement, dated as of April 18, 2011, by and among InspireMD, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 22, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.25</TD>
    <TD>Form of Warrant (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 22, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.26</TD>
    <TD>Agreement by and between InspireMD Ltd. and MeKo Laser Material Processing, dated as of April 15, 2010 (incorporated by reference to Exhibit 10.26 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.27</TD>
    <TD>Agreement by and between InspireMD Ltd. and Natec Medical Ltd, dated as of September 23, 2009 (incorporated by reference to Exhibit 10.27 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.28</TD>
    <TD>Exclusive Distribution Agreement by and between InspireMD Ltd. and Hand-Prod Sp. Z o.o, dated as of December 10, 2007 (incorporated by reference to Exhibit 10.28 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 11%">10.29</TD>
    <TD STYLE="width: 89%">Factoring Agreement by and between InspireMD Ltd. and Bank Mizrahi Tefahot Ltd., dated as of February 22, 2011 (incorporated by reference to Exhibit 10.29 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.30</TD>
    <TD>$1.50 Nonqualified Stock Option Agreement, dated as of July 11, 2011, by and between InspireMD, Inc. and Sol J. Barer, Ph.D. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.31</TD>
    <TD>Consultancy Agreement, dated as of April 1, 2011, by and between InspireMD Ltd. and Ofir Paz (incorporated by reference to Exhibit 10.34 to Amendment No. 2 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on September 21, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.32</TD>
    <TD>Consultancy Agreement, dated as of April 29, 2011, by and between InspireMD Ltd. and Asher Holzer, Ph.D. (incorporated by reference to Exhibit 10.35 to Amendment No. 2 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on September 21, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.33</TD>
    <TD>Exclusive Distribution Agreement by and between InspireMD GmbH. and IZASA Distribuciones Tecnicas SA, dated as of May 20, 2009 (incorporated by reference to Exhibit 10.36 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.34</TD>
    <TD>Amendment to the Distribution Agreement by and between InspireMD GmbH. and IZASA Distribuciones Tecnicas SA, dated as of February 2011 (incorporated by reference to Exhibit 10.37 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.35</TD>
    <TD>Exclusive Distribution Agreement by and between InspireMD Ltd. and Tzamal-Jacobsohn Ltd., dated as of December 24, 2008 (incorporated by reference to Exhibit 10.38 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.36</TD>
    <TD>Exclusive Distribution Agreement by and between InspireMD Ltd. and Kirloskar Technologies (P) Ltd., dated as of May 13, 2010 (incorporated by reference to Exhibit 10.39 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.37</TD>
    <TD>Consultancy Agreement by and between InspireMD Ltd. and Sara Paz, dated as of May 6, 2008 (incorporated by reference to Exhibit 10.40 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.38</TD>
    <TD>Consultancy Agreement by and between InspireMD Ltd. and Sara Paz Management and Marketing Ltd., dated as of September 1, 2011 (incorporated by reference to Exhibit 10.41 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.39</TD>
    <TD>Clinical Trial Services Agreement, dated as of October 4, 2011, by and between InspireMD Ltd. and Harvard Clinical Research Institute, Inc. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.40</TD>
    <TD>Letter Agreement by and between InspireMD Ltd. and Tzamal-Jacobsohn Ltd., dated as of May 9, 2011 (incorporated by reference to Exhibit 10.43 to Amendment No. 4 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 1, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.41</TD>
    <TD>Stock Award Agreement, dated as of November 16, 2011, by and between InspireMD, Inc. and Sol J. Barer, Ph.D. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on November 18, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;<BR>
</P>

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<P STYLE="margin: 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 11%">10.42</TD>
    <TD STYLE="width: 89%">Nonqualified Stock Option Agreement, dated as of November 16, 2011, by and between InspireMD, Inc. and Sol J. Barer, Ph.D. (Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on November 18, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.43</TD>
    <TD>Amendment No. 1 to Securities Purchase Agreement, dated as of June 21, 2011, by and among InspireMD, Inc. and the purchasers that are signatory thereto (incorporated by reference to Exhibit 10.43 to Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.44</TD>
    <TD>Amendment No. 2 to Securities Purchase Agreement, dated as of November 14, 2011, by and among InspireMD, Inc. and the purchasers that are signatory thereto (incorporated by reference to Exhibit 10.44 to Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.45</TD>
    <TD>Consultancy Agreement, dated March 27, 2012, by and between InspireMD Ltd. and Robert Ratini (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 2, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.46</TD>
    <TD>Securities Purchase Agreement, dated April 5, 2012, by and between InspireMD, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.47</TD>
    <TD>Form of Senior Secured Convertible Note issued April 5, 2012 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.48</TD>
    <TD>Form of April 2012 $1.80 Warrant (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.49</TD>
    <TD>Registration Rights Agreement, dated April 5, 2012, by and between InspireMD, Inc. and the purchasers set forth therein (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.50</TD>
    <TD STYLE="text-align: justify">Security Agreement, dated April 5, 2012, by and between InspireMD, Inc., InspireMD Ltd., Inspire MD GmbH and certain purchasers set forth therein (incorporated by reference to Exhibit 10.5 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.51</TD>
    <TD STYLE="text-align: justify">Intellectual Property Security Agreement, dated April 5, 2012, by and between InspireMD, Inc., InspireMD Ltd., Inspire MD GmbH and certain purchasers set forth therein (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.52</TD>
    <TD STYLE="text-align: justify">Deposit Account Control Agreement, dated April 5, 2012, among InspireMD, Inc., Bank Leumi USA and certain purchasers set forth therein (incorporated by reference to Exhibit 10.7 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.53</TD>
    <TD STYLE="text-align: justify">Subsidiary Guarantee, dated April 5, 2012, by InspireMD Ltd. and Inspire MD GmbH, in favor of certain purchasers set forth therein (incorporated by reference to Exhibit 10.8 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.54</TD>
    <TD STYLE="text-align: justify">Fixed and Floating Charge Debenture, dated April 5, 2012, by and between InspireMD Ltd. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.9 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.55</TD>
    <TD STYLE="text-align: justify">Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.10 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 11%">10.56</TD>
    <TD STYLE="text-align: justify; width: 89%">Consulting Agreement, dated as of June 1, 2012, by and between InspireMD, Inc. and Asher Holzer, Ph.D. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.57</TD>
    <TD STYLE="text-align: justify">Separation Agreement and Release, made as of June 1, 2012, by and between InspireMD Ltd., OSH-IL, the Israeli Society of Occupational Health and Safety Ltd., Company No. 513308247 and Asher Holzer, Ph.D. (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.58</TD>
    <TD STYLE="text-align: justify">Mutual Waiver and Release, dated as of July 22, 2012, by and between InspireMD Ltd. and Hand-Prod Sp. Z o.o. (incorporated by reference to Exhibit 10.58 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.59</TD>
    <TD STYLE="text-align: justify">Exclusive Distribution Agreement, dated as of August 1, 2007, by and between InspireMD Ltd. and Kardia Srl. (incorporated by reference to Exhibit 10.59 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.60</TD>
    <TD STYLE="text-align: justify">Addendum to the Distribution Agreement, dated as of January 18, 2011, by and between InspireMD Ltd. and Kardia Srl. (incorporated by reference to Exhibit 10.60 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.61</TD>
    <TD STYLE="text-align: justify">Exclusive Distribution Agreement, dated as of May 13, 2010, by and between InspireMD Ltd. and Euromed Deutschland GmbH (incorporated by reference to Exhibit 10.61 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.62</TD>
    <TD STYLE="text-align: justify">Exclusive Distribution Agreement, dated as of May 26, 2011, by and between InspireMD Ltd. and Bosti Trading Ltd. (incorporated by reference to Exhibit 10.62 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.63</TD>
    <TD STYLE="text-align: justify">Addendum to the Distribution Agreement, dated as of August 29, 2011, by and between InspireMD Ltd. and Bosti Trading Ltd. (incorporated by reference to Exhibit 10.63 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.64</TD>
    <TD STYLE="text-align: justify">Omnibus Debenture Amendment, dated May 31, 2012, by and between InspireMD, Inc. and the debenture holders set forth therein (incorporated by reference to Exhibit 10.64 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.65</TD>
    <TD STYLE="text-align: justify">Amendment No. 1 to Registration Rights Agreement, dated May 31, 2012, by and between InspireMD, Inc. and the purchasers set forth therein (incorporated by reference to Exhibit 10.65 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.66*</TD>
    <TD STYLE="text-align: justify">Consultancy Agreement, dated March 27, 2012, by and between InspireMD Ltd. and Robert Ratini.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>21.1</TD>
    <TD>List of Subsidiaries (incorporated by reference to Exhibit 21.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.1*</TD>
    <TD>Consent of Kesselman &amp; Kesselman, Certified Public Accountants</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.2*</TD>
    <TD>Consent of Haynes and Boone, LLP (included in Exhibit 5.1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>24.1*</TD>
    <TD>Power of Attorney (included on signature page).</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">_______________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* Filed herewith.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">+ To be filed by amendment.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 17. Undertakings.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The undersigned registrant hereby undertakes
that:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(1)&nbsp;For purposes of determining any
liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule&nbsp;430A and contained in a form of prospectus filed by the registrant pursuant to Rule&nbsp;424(b)(1) or
(4)&nbsp;or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared
effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(2)&nbsp;For the purpose of determining
any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be
a new registration statement relating to the securities offered, and the offering of these securities at that time shall be deemed
to be the initial bona fide offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Tel Aviv, State of Israel on September 24, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 51%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 7%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 42%; font-weight: bold">&nbsp;InspireMD, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD STYLE="border-bottom: black 1.5pt solid">/s/ Ofir Paz</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Name: Ofir Paz</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Title: Chief Executive Officer</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>POWER OF ATTORNEY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">KNOW ALL MEN BY THESE PRESENTS,
that the undersigned officers and directors of InspireMD, Inc., a Delaware corporation that is filing a registration
statement on Form S-1 with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as
amended, hereby constitute and appoint Ofir Paz and Craig Shore their true and lawful attorneys-in-fact and agents, with full
power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments to the registration statement, including a post-effective amendment, and all other additional registration
statements pursuant to Section 462(b) of the Securities Act of 1933, as amended, in connection therewith, with all exhibits
thereto, to be filed with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises,
as fully to all interests and purposes as they might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or either of them, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In accordance with the requirements of the
Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates
indicated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 27%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Signature</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 49%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Title</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 20%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Date</TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border-bottom: black 1pt solid; vertical-align: bottom">/s/ Ofir Paz</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Chief Executive Officer and Director</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: center">September 24, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Ofir Paz</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD>&nbsp;</TD>
    <TD>(principal executive officer)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1pt solid">/s/ Craig Shore</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Financial Officer, Secretary and Treasurer</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">September 24, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Craig Shore</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD>&nbsp;</TD>
    <TD>(principal financial and accounting officer)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1pt solid">/s/ Sol J. Barer</TD>
    <TD>&nbsp;</TD>
    <TD>Chairman of the Board of Directors</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">September 24, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Sol J. Barer</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;/s/ James Barry</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">September 24, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">James Barry</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1pt solid">/s/ Asher Holzer</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">September 24, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Asher Holzer</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1pt solid">/s/ James J. Loughlin</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">September 24, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">James J. Loughlin</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1pt solid">/s/ Paul Stuka</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">September 24, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Paul Stuka</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1pt solid">/s/ Eyal Weinstein</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">September 24, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Eyal Weinstein</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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[{"type": "S-1", "sequence": "1", "filename": "v324251_s1.htm", "description": "FORM S-1", "secsgml_size_bytes": 2056391}]
{"company-data": {"conformed-name": "InspireMD, Inc.", "cik": "0001433607", "assigned-sic": "3841", "irs-number": "262123838", "state-of-incorporation": "DE", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-184066", "film-number": "121107310"}, "business-address": {"street1": "3 MENORAT HAMOR ST.", "city": "TEL AVIV", "state": "L3", "zip": "67448", "phone": "972-3-6917691"}, "mail-address": {"street1": "3 MENORAT HAMOR ST.", "city": "TEL AVIV", "state": "L3", "zip": "67448"}, "former-company": {"former-conformed-name": "Saguaro Resources, Inc.", "date-changed": "20080428"}}
As filed with the Securities and Exchange
Commission on September 24, 2012
File No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
______________________
InspireMD,
    Inc.
(Exact name of registrant as specified in
        its charter)
Delaware
3841
26-2123838
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer Identification No.)
4 Menorat Hamaor St.
Tel Aviv, Israel 67448
972-3-691-7691
(Address, including zip code, and telephone
        number,
including area code, of registrant's
        principal executive offices)
Ofir Paz
Chief Executive Officer
InspireMD, Inc.
4 Menorat Hamaor St.
Tel Aviv, Israel 67448
972-3-691-7691
(Name, address, including zip code, and
        telephone number,
including area code, of agent for
        service)
Copies of all communications,
including communications sent to agent for service, should be sent to:
Rick A. Werner, Esq.
Haynes and Boone, LLP
30 Rockefeller Plaza, 26th Floor
New York, New York 10112
Tel. (212) 659-7300
Fax (212) 884-8234
Yvan-Claude J. Pierre, Esq.
Jodi L. Lashin, Esq.
Reed Smith LLP
599 Lexington Avenue, 22
nd
Floor
New York, New York 10022
Tel. (212) 521-5400
Fax (212) 521-5450
Approximate date of commencement of proposed
sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box.
o
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
o
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2
of the Exchange Act.
Large accelerated filer
o
Accelerated filer
x
Non-accelerated filer
o
Smaller reporting company
o
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
TITLE OF EACH
CLASS OF SECURITIES
TO BE REGISTERED
PROPOSED MAXIMUM
AGGREGATE OFFERING PRICE(1)
AMOUNT OF REGISTRATION FEE
Common Stock, par value $0.0001 per share
$46,000,000(2)
$5,271.60
(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2)
Includes shares of our common stock that the underwriters have the option to purchase to cover overallotments, if any.
The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant
to said section 8(a), may determine.
The information in this prospectus is not complete
and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission
is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
PROSPECTUS (Subject to Completion)
Dated
September 24, 2012
Shares
Common Stock
We are offering      shares of our common stock. Our common stock
is quoted on the OTC Bulletin Board under the symbol "NSPR." On September 21, 2012, the last reported sale price of
our common stock was $2.25 per share. This does not reflect a one-for-      reverse stock split that is expected to occur immediately
prior to the effectiveness of the registration statement of which this prospectus is a part.
We have applied to list our shares of common stock on the
Nasdaq Capital Market under the symbol "NSPR."
Our business and an investment in our common stock
involve significant risks. These risks are described under the caption ''Risk Factors'' beginning on
page  11 of this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
Per Share
Total
Public offering price
$
$
Underwriting discount (1)
$
$
Proceeds, before expenses, to InspireMD, Inc.
$
$
(1)
The underwriters will receive compensation in addition
to the discount. See "Underwriters" for a description of compensation payable to the underwriters.
The underwriters may also purchase up to an additional      shares
from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover
overallotments.
The underwriters expect to deliver the shares against payment
in New York, New York on            , 2012.
Cowen
and Company
JMP
Securities
, 2012
TABLE OF CONTENTS
Page
Page
Prospectus Summary
1
Quantitative and Qualitative Disclosures
Risk Factors
11
About Market Risk
49
Special Note Regarding Forward Looking
Business
50
Statements
29
Management
73
Use of Proceeds
30
Executive Compensation
79
Market for Our Common Stock
31
Principal Stockholders
101
Dividend Policy
31
Certain Relationships and Related Party
Capitalization
32
Transactions
103
Dilution
33
Description of Capital Stock
104
Selected Financial Information and Other
Material U.S. Federal Income and Estate Tax
Data
35
Considerations for Non-U.S. Holders
111
Selected Quarterly Financial Data
36
Underwriting
115
Management's Discussion and Analysis of
Legal Matters
118
Financial Condition and Results of
Experts
118
Operations
37
Where You Can Find Additional Information
118
Index to Consolidated Financial Statements
F-1
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information.
If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters
are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business,
financial condition, results of operations and prospects may have changed since that date.
Information contained on our website is not part of this
prospectus.
PROSPECTUS SUMMARY
This summary provides an overview
of selected information contained elsewhere in this prospectus and does not contain all of the information you should
consider before investing in our common stock. You should carefully read the prospectus and the registration statement of
which this prospectus is a part in their entirety before investing in our common stock, including the information discussed
under "Risk Factors" beginning on page 11 and our financial statements and notes thereto that appear elsewhere in
this prospectus. As used in this prospectus, unless the context otherwise indicates, the terms "we,"
"our," "us," or "the Company" for periods prior to the closing of our share exchange
transactions on March 31, 2011 refer to InspireMD Ltd., a private company incorporated under the laws of the State of Israel
that is now our wholly-owned subsidiary, and its subsidiary, taken as a whole, and the terms "we,"
"our," "us," or "the Company" for periods subsequent to the closing of the share exchange
transactions refer to InspireMD, Inc., a Delaware corporation, and its subsidiaries, including InspireMD Ltd., taken as a
whole.
The Company
Overview
We are a medical device company focusing
on the development and commercialization of our proprietary stent platform technology, MGuard
TM
.  MGuard provides
embolic protection in stenting procedures by placing a micron mesh sleeve over a stent. Our initial products are marketed for use
mainly in patients with acute coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary
interventions (bypass surgery). According to the TYPHOON STEMI trial (New England Journal of Medicine, 2006) and the SOS SVG Trial
(Journal of the American College of Cardiology, 2009), of patients with acute myocardial infarction and saphenous vein graft coronary
interventions, 7.5% to 44% experience major adverse cardiac events, including cardiac death, heart attack and restenting of the
artery. When performing stenting procedures in patients with acute coronary symptoms, interventional cardiologists face a difficult
dilemma in choosing between bare-metal stents, which have a high rate of restenosis (formation of new blockages), and drug-eluting
(drug-coated) stents, which have a high rate of late thrombosis (formation of clots months or years after implantation), require
administration of anti-platelet drugs for at least one year post procedure, are more costly than bare-metal stents and have additional
side effects.  We believe that MGuard is a simple and seamless solution for these patients.
We also intend to apply our technology to
develop additional products used for other vascular procedures, specifically carotid (the arteries that supply blood to the brain)
and peripheral (other arteries) procedures.
In October 2007, our first generation product,
the MGuard Coronary, received CE Mark approval for treatment of coronary arterial disease in the European Union. CE Mark is a mandatory
conformance mark on many products marketed in the European Economic Area and certifies that a product has met European Union consumer
safety, health or environmental requirements. 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.
Our initial MGuard Coronary products incorporated
a stainless steel stent. We subsequently replaced this stainless steel platform with a more advanced cobalt-chromium based platform,
which we refer to as the MGuard Prime
TM
version of our MGuard Coronary. We believe the new platform will prove to be
superior because cobalt-chromium stents are generally known in the industry to provide better deliverability and possibly even
a reduction in major adverse cardiac events.
The MGuard Prime version of the MGuard Coronary
received CE Mark approval in the European Union in October 2010 for improving luminal diameter and providing embolic protection.
We believe we can use and leverage the clinical trial results of our original stainless steel based MGuard Coronary to market our
new cobalt-chromium based MGuard Prime version of the MGuard Coronary.
Unless otherwise indicated, in this prospectus,
references to MGuard Coronary are to both our initial stainless steel based MGuard Coronary and our more current cobalt-chromium
based MGuard Prime version of the MGuard Coronary, as applicable.
1
For the six months ended June 30, 2012,
our total revenue was approximately $2.1 million and our net loss was approximately $7.1 million. For the year ended December 31,
2011, our total revenue was approximately $6.0 million and our net loss was approximately $14.7 million.
Recent Events
On June 1, 2012, our board of directors
approved a change in our fiscal year-end from December 31 to June 30, effective June 30, 2012. This prospectus includes our financial
results and other information for the six month period from January 1, 2012 through June 30, 2012, which we refer to as the "transition
period." Following the transition period, we will file annual reports for each twelve month period ended June 30 of each
year beginning with the twelve month period ended June 30, 2013.
We anticipate that in the near term, Ofir
Paz will resign from his position as our chief executive officer. Mr. Paz intends to remain in his position while we conduct a
thorough search for an appropriate replacement. We have retained a search firm to assist in this process. Mr. Paz's resignation
reflects our transition from a private medical device start-up company with a promising new technology to a publicly traded company
with a successfully tested, commercialized, CE Mark approved product. After his resignation, we anticipate that Mr. Paz will remain
one of our directors and maintain his involvement with us, as necessary, on a consulting basis.
On October 31, 2011, our stockholders authorized
our board of directors to amend our amended and restated certificate of incorporation to effect a reverse stock split of our common
stock at a ratio of one-for-two to one-for-four, at any time prior to our 2012 annual stockholders' meeting, the exact ratio
of the reverse stock split to be determined by the board. As of the date of this prospectus, we have not effected the reverse stock
split. We intend to effectuate a one-for-       reverse stock split, in order to comply with the listing requirements of the Nasdaq Capital
Market. The reverse stock split is expected to occur the day immediately following the effectiveness of the registration statement
of which this prospectus is a part. Such reverse stock split would immediately increase our stock price. In addition, such reverse
stock split would reduce the number of shares of common stock outstanding and may affect the liquidity of our common stock.
Our Industry
According to Fact Sheet No. 310/June 2011
of the World Health Organization, approximately 7.3 million people worldwide died of coronary heart disease in 2008. Physicians
and patients may select from among 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. A stent is an expandable "scaffold-like" device, usually constructed
of a stainless steel material, that is inserted into an artery to expand the inside passage and improve blood flow.
According to the January 3, 2011 2011 MEDTECH
OUTLOOK produced by the Bank of Montreal Investment Banking Group, known as BMO Capital Markets, after registering a compounded
annual growth rate from 2002 to 2009 of approximately 13%, revenues from the global coronary stent market is predicted to remain
relatively constant, although in volume of stents the market is predicted to continue to grow. The growth in volume is due to the
appeal for less invasive percutaneous coronary intervention procedures and advances in technology coupled with the increase in
the elderly population, obesity rates and advances in technology.
Coronary artery disease is one of the leading
causes of death worldwide. The treatment of coronary artery disease includes alternative treatment methodologies, that is, coronary
artery bypass grafting or angioplasty (percutaneous coronary intervention) with or without stenting. According to the January 3,
2011 2011 MEDTECH OUTLOOK produced by the BMO Capital Markets, the percutaneous coronary intervention procedures involving stents
are increasingly being used to treat coronary artery diseases with an 88.3% penetration rate in 2009.
Our Products and Applications
Below is a summary of our current products
and products under development, and their intended applications.
2
MGuard– Coronary Applications
Our MGuard Coronary with a bio-stable mesh
and our planned MGuard Coronary with a drug-eluting mesh are aimed at the treatment of coronary arterial disease.
MGuard Coronary with a bio-stable
mesh.
Our first MGuard product, the MGuard Coronary with a
bio-stable mesh, is comprised of our mesh sleeve wrapped around a stainless steel bare-metal stent. The
current MGuard Prime version of our MGuard Coronary with a bio-stable mesh is comprised of our mesh sleeve wrapped
around a cobalt-chromium bare-metal stent.  In comparison to a conventional bare-metal stent, we believe the MGuard
Coronary with a bio-stable mesh provides protection from embolic showers. Results of clinical trials on the MGuard Coronary
stent, including the MAGICAL, PISCIONE and MGuard international registry (iMOS) clinical trials described below (see
"Business – Comparison of Clinical Trial Results to Date with Results Achieved Using Bare Metal or Drug-Eluting
Stents in the STEMI population" below), indicate positive outcomes and safety measures. The results of these clinical
trials for the MGuard Coronary stent suggest higher levels of reperfusion (blood flow through the microcirculatory system,
those blood vessels which are the only visible with a microscope), and lower rates of 30 day and 1 year major adverse cardiac
events and high levels of complete ST resolution (an indication that heart muscle activity has returned to normal), as
compared to the levels and rates of other bare-metal and drug-eluting stents.
MGuard Coronary with a drug eluting bio-absorbable
mesh.
Based upon the clinical profile of MGuard Coronary, we anticipate that the MGuard Coronary with a drug-eluting
bio-absorbable mesh will offer both the comparable myocardial blush grade 3 levels and 30-day and 1-year major adverse cardiac
event rates as the MGuard Coronary with a bio-stable mesh, as described above, and a comparative restenosis rate, which is the
rate at which patients experience formation of new blockages in their arteries, when compared to existing drug-eluting stents.  This
product is currently planned, but not yet under development. The bio-absorbability of MGuard Coronary with a drug eluting bio-absorbable
mesh is intended to improve upon the bio-absorbability of other drug-eluting stents, in light of the large surface area of the
mesh and the small diameter of the fiber. We intend to study whether the protective sleeve on the MGuard Coronary with a drug-eluting
bio-absorbable mesh can improve uniform distribution of the applied drug to the vessel wall for improved drug therapy management
compared to other drug-eluting stents, where the drug is distributed on the struts only. If this intended result is achieved with
respect to the improved and uniform distribution of the applied drug to the vessel wall, the total dosage of the medication potentially
could be reduced while increasing its efficacy.  MGuard Coronary with a drug-eluting bio-absorbable mesh is expected
to promote smooth and stable endothelial cell growth and subsequent attachment to the lumen of the vessel wall, which is essential
for rapid healing and recovery.  In addition, we believe bio-absorbable drug-eluting mesh may enable the use of more
effective drug therapies that presently cannot be effectively coated on a metal-based stent due to their poor diffusion capabilities.  Because
the drug-eluting bio-absorbable mesh will be bio-absorbable, we anticipate that the mesh will completely dissolve after four months,
which we expect will result in fewer of the chronic long term side effects that are associated with the presence of the drug.
MGuard – Carotid Applications
We intend to market our mesh sleeve coupled
with a self-expandable stent (a stent that expands without balloon dilation pressure or need of an inflation balloon) for use in
carotid-applications. This product is currently under development.
We believe that our MGuard design will provide
substantial advantages over existing therapies in treating carotid artery stenosis (blockage or narrowing of the carotid arteries),
like conventional carotid stenting and endarterectomy (surgery to remove blockage), given the superior embolic protection characteristics
witnessed in coronary arterial disease applications. We intend that the embolic protection will result from the mesh sleeve, as
it traps emboli at their source.  In addition, we believe that MGuard Carotid will provide post-procedure protection
against embolic dislodgement, which can occur immediately after a carotid stenting procedure and is often a 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 also shown that the majority of the incidents of embolic showers associated with carotid
stenting occur immediately post-procedure.
3
MGuard – Peripheral Applications
We intend to market our mesh sleeve coupled
with a self-expandable stent (a stent that expands without balloon dilation pressure or need of an inflation balloon) for use in
peripheral applications.  This product is currently under development.  Peripheral Artery Disease, also known as peripheral
vascular disease, is usually characterized by the accumulation of plaque in arteries in the legs, need for amputation of affected
joints or even death, when untreated.  Peripheral Artery Disease 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 covered stents, at the risk of blocking branching vessels, to ensure
that emboli does not fall into the bloodstream.  We believe that our MGuard design will provide substantial advantages
over existing therapies in treating peripheral artery stenosis (blockage or narrowing of the peripheral arteries).
Product Development and Critical Milestones
Below is a list of the products described
above and our projected critical milestones with respect to each. As used below, "Q" stands for our fiscal quarter.  While
we currently anticipate seeking approval from the U.S. Food and Drug Administration for all of our products in the future, we have
only outlined a timetable to seek U.S. Food and Drug Administration approval for our MGuard Coronary plus with bio-stable mesh
product in our current business plan.  The use of the term "to be determined" in the table below with regard
to certain milestones indicates that the achievements of such milestones is unable to be accurately predicted as such milestones
are too far in the future.
Product
Indication
Start
Development
CE Mark
European
Union Sales
FDA
Approval
U.S. Sales
MGuard Coronary Plus Bio-Stable Mesh
Bypass/ Coronary
2005
Oct. 2007
Q1-2008
Q4-2015
2016
MGuard Peripheral Plus Bio-Stable Mesh
Peripheral Arteries
Q1-2011
Q4-2012
To be determined
To be determined
To be determined
MGuard Carotid Plus Bio-Stable Mesh
Carotid Arteries
Q1-2011
Q4-2012
To be determined
To be determined
To be determined
MGuard Coronary Plus Bio-Absorbable Drug-Eluting Mesh
Bypass/ Coronary
To be determined
To be determined
To be determined
To be determined
To be determined
With respect to MGuard Carotid with bio-stable
mesh, we have determined that the expected commencement of sales in the European Union cannot be accurately predicted since we
have delayed the development of this product until additional funding for its development is secured.
We anticipate that our MGuard Coronary with
bio-stable mesh will be classified as a Class III medical device by the U.S. Food and Drug Administration.
4
Growth Strategy
Our primary business objective is to utilize
our proprietary technology to become the industry standard for treatment of acute coronary syndromes 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 in order to achieve this objective.
·
Successfully
                                                                                                              commercialize MGuard
                                                                                                              Coronary with bio-stable
                                                                                                              mesh.
We have
                                                                                                              begun commercialization
                                                                                                              of MGuard Coronary
                                                                                                              with a bio-stable
                                                                                                              mesh in Europe,
                                                                                                              Russia, Asia and
                                                                                                              Latin America through
                                                                                                              our distributor
                                                                                                              network and we are
                                                                                                              aggressively pursuing
                                                                                                              additional registrations
                                                                                                              and contracts in
                                                                                                              other countries
                                                                                                              such as, Canada,
                                                                                                              South Korea, Belgium,
                                                                                                              the and certain
                                                                                                              smaller countries
                                                                                                              in Latin America.  By
                                                                                                              the time we begin
                                                                                                              marketing this product
                                                                                                              in the U.S., we
                                                                                                              expect to have introduced
                                                                                                              the MGuard Coronary
                                                                                                              technology to clinics
                                                                                                              and interventional
                                                                                                              cardiologists around
                                                                                                              the world, and to
                                                                                                              have fostered brand
                                                                                                              name recognition
                                                                                                              and widespread adoption
                                                                                                              of MGuard Coronary.  We
                                                                                                              plan to accomplish
                                                                                                              this by participating
                                                                                                              in national and
                                                                                                              international conferences,
                                                                                                              conducting and sponsoring
                                                                                                              clinical trials,
                                                                                                              publishing articles
                                                                                                              in scientific journals,
                                                                                                              holding local training
                                                                                                              sessions and conducting
                                                                                                              electronic media
                                                                                                              campaigns.
·
Successfully
                                                                                                              develop the next
                                                                                                              generation of MGuard
                                                                                                              stents.
While we
                                                                                                              market our MGuard
                                                                                                              Coronary with bio-stable
                                                                                                              mesh, we intend
                                                                                                              to develop the MGuard
                                                                                                              Coronary with a
                                                                                                              drug-eluting mesh.  We
                                                                                                              are also working
                                                                                                              on our MGuard stents
                                                                                                              for peripheral and
                                                                                                              carotid, for which
                                                                                                              we expect to have
                                                                                                              CE Mark approval
                                                                                                              by the first quarter
                                                                                                              of 2013.  In
                                                                                                              addition, we released
                                                                                                              our cobalt-chromium
                                                                                                              version of MGuard
                                                                                                              Coronary, MGuard
                                                                                                              Prime, in 2010,
                                                                                                              which we anticipate
                                                                                                              will replace the
                                                                                                              original stainless
                                                                                                              steel-based version
                                                                                                              of MGuard Coronary
                                                                                                              over the next few
                                                                                                              years.
·
Continue to leverage MGuard 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 technology to address imminent market needs for new product innovations to significantly improve patients' care.  We
have secured intellectual property using our mesh technology in the areas of brain aneurism, treating bifurcated blood vessels
and a new concept of distal protective devices.  We believe these areas have large growth potential given, in our view,
that present solutions are far from satisfactory, and there is a significant demand for better patient care.  We believe
that our patents can be put into practice and that they will drive our growth at a later stage.
·
Work with
                                                                                                              world-renowned physicians
                                                                                                              to build awareness
                                                                                                              and brand recognition
                                                                                                              of MGuard portfolio
                                                                                                              of products.
We intend to work
                                                                                                              closely with leading
                                                                                                              cardiologists to
                                                                                                              evaluate and ensure
                                                                                                              the efficacy and
                                                                                                              safety of our products.  We
                                                                                                              intend that some
                                                                                                              of these prominent
                                                                                                              physicians will
                                                                                                              serve on our Scientific
                                                                                                              Advisory Board,
                                                                                                              which is our advisory
                                                                                                              committee that advises
                                                                                                              our board of directors,
                                                                                                              and run clinical
                                                                                                              trials with the
                                                                                                              MGuard Coronary. We
                                                                                                              believe these individuals,
                                                                                                              once convinced of
                                                                                                              the MGuard Coronary's
                                                                                                              appeal, will be
                                                                                                              invaluable assets
                                                                                                              in facilitating
                                                                                                              the widespread adoption
                                                                                                              of the stent.  In
                                                                                                              addition, we plan
                                                                                                              to look to these
                                                                                                              cardiologists to
                                                                                                              generate and publish
                                                                                                              scientific data
                                                                                                              on the use of our
                                                                                                              products, and to
                                                                                                              present their findings
                                                                                                              at various conferences
                                                                                                              they attend.  Dr.
                                                                                                              Gregg W. Stone,
                                                                                                              director of Cardiovascular
                                                                                                              Research and Education
                                                                                                              at the Center for
                                                                                                              Interventional Vascular
                                                                                                              Therapy of New York
                                                                                                              Presbyterian Hospital/Columbia
                                                                                                              University Medical
                                                                                                              Center and the co-director
                                                                                                              of Medical Research
                                                                                                              and Education at
                                                                                                              The Cardiovascular
                                                                                                              Research Foundation
                                                                                                              is the study chairman
                                                                                                              for the MASTER Trial.  Dr.
                                                                                                              Donald Cutlip, Executive
                                                                                                              Director of Clinical
                                                                                                              Investigation at
                                                                                                              the Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              will provide scientific
                                                                                                              leadership of the
                                                                                                              U.S. Food and Drug
                                                                                                              Administration trials
                                                                                                              and Dr. Stone will
                                                                                                              act as principal
                                                                                                              investigator.  On
                                                                                                              October 4, 2011,
                                                                                                              InspireMD Ltd.,
                                                                                                              our wholly-owned
                                                                                                              subsidiary, entered
                                                                                                              into a clinical
                                                                                                              trial services agreement
                                                                                                              with Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              Inc., pursuant to
                                                                                                              which Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              Inc. will conduct
                                                                                                              a study entitled
                                                                                                              "MASTER II
                                                                                                              - MGuard Stent System
                                                                                                              Clinical Trial in
                                                                                                              Patients with Acute
                                                                                                              Myocardial Infarction"
                                                                                                              on our behalf. We
                                                                                                              will pay Harvard
                                                                                                              Clinical Research
                                                                                                              Institute, Inc,
                                                                                                              Cardio Research
                                                                                                              Foundations (CRF),
                                                                                                              as a core laboratory,
                                                                                                              and MedPass International,
                                                                                                              as our European
                                                                                                              monitoring group,
                                                                                                              an estimated aggregate
                                                                                                              fee of approximately
                                                                                                              $15 million for
                                                                                                              conducting the study,
                                                                                                              subject to adjustment
                                                                                                              dependent upon changes
                                                                                                              in the scope and
                                                                                                              nature of the study,
                                                                                                              as well as other
                                                                                                              costs to be determined
                                                                                                              by the parties.
5
·
Continue to protect and expand our portfolio of patents.
Our patents and their protection are critical to our
success. We have filed nine separate patent applications for our MGuard technology in the U.S. (including one that is still in
the Patent Cooperation Treaty international phase) and corresponding patent applications in Canada, China, Europe, Israel, India,
and South Africa. We believe these patents and patent applications cover all of our existing products, and can be useful for future
technology. We intend to continue patenting new technology as it is developed, and to actively pursue any infringement upon our
patents. To date, we have secured patent protection in each of the United States, South Africa and China for one patent. See "Business
– Intellectual Property – Patents").
Risks Associated with Our Business
Our ability to operate our business and
achieve our goals and strategies is subject to numerous risks as discussed more fully in the section titled "Risk Factors,"
including, without limitation:
·
our history of recurring losses and negative cash flows from operating activities, significant future commitments and the uncertainty
regarding the adequacy of our liquidity to pursue our complete business objectives;
·
our ability to complete clinical trials as anticipated and obtain and maintain regulatory approvals for our products;
·
our ability to adequately protect our intellectual property;
·
our dependence on a single manufacturing facility and our ability to comply with stringent manufacturing quality standards
and to increase production as necessary;
·
the risk that the data collected from our current and planned clinical trials may not be sufficient to demonstrate that the
MGuard technology is an attractive alternative to other procedures and products;
·
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;
·
entry of new competitors and products and potential technological obsolescence of our products;
·
loss of a key customer or supplier;
·
technical problems with our research and products and potential product liability claims;
·
adverse economic conditions;
·
adverse federal, state and local government regulation, in the U.S., Europe or Israel;
·
price increases for supplies and components;
·
inability to carry out research, development and commercialization plans; and
·
loss or retirement of key executives and research scientists.
6
Corporate and Other Information
We were organized in the State of Delaware
on February 29, 2008 as Saguaro Resources, Inc. to engage in the acquisition, exploration and development of natural resource properties.
On March 28, 2011, we changed our name from "Saguaro Resources, Inc." to "InspireMD, Inc."
Our principal executive offices are located
at 4 Menorat Hamaor St., Tel Aviv, Israel 67448.  Our telephone number is 972-3-691-7691.  Our website address
is www.inspire-md.com.  Information accessed through our website is not incorporated into this prospectus and is not
a part of this prospectus.
7
The Offering
Common stock offered by the Company:
Common stock to be outstanding after this offering:
Use of proceeds:
We intend to use the net proceeds of this offering to support the worldwide commercialization of MGuard in acute myocardial infarction and pursue FDA approval in the U.S., to redeem our convertible debentures and for general corporate purposes.  See "Use of Proceeds" beginning on page 30 of this prospectus.
Risk factors:
You should carefully consider the information set forth in this prospectus and, in particular,
    the specific factors set forth in the "Risk Factors" section beginning on page 11 of this prospectus before
    deciding whether or not to invest in shares of our common stock.
OTC Bulletin Board symbol:
NSPR
Proposed symbol and listing:
We have applied for to list our shares of common stock on the Nasdaq Capital Market under the symbol "NSPR."
________________
The number of shares of common stock outstanding
after this offering is based on 68,511,911 shares outstanding on September 21, 2012 and excludes:
·
7,814,849 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.80
per share;
·
2,550,000 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.50
per share;
·
784,510 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.23
per share;
·
6,934,623
shares of common
                                                                                                              stock issuable upon
                                                                                                              the conversion of
                                                                                                              our senior secured
                                                                                                              convertible debentures
                                                                                                              due April 5, 2014.
·
13,637,133
shares of common
                                                                                                              stock issuable upon
                                                                                                              the exercise of
                                                                                                              currently outstanding
                                                                                                              options with exercise
                                                                                                              prices ranging from
                                                                                                              $0.001 to $2.60
                                                                                                              and having a weighted
                                                                                                              average exercise
                                                                                                              price of
$
1.05
                                                                                                              per share; and
·
5,221,450 shares of common stock available for future issuance under our 2011 UMBRELLA Option Plan.
Unless otherwise stated, all information
contained in this prospectus:
·
assumes no exercise of the overallotment
option granted to the underwriters; and
·
is not adjusted for the anticipated one-for
                                                                               -      reverse stock split
                                                                               that is expected to occur the day immediately following
                                                                               the effectiveness of the registration statement
                                                                               of which this prospectus is a part.
8
Summary Consolidated Financial Data
The following summary consolidated financial
data should be read in conjunction with the consolidated financial statements and the related notes thereto and the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus. The balance sheet data at June 30, 2012 and the statement of operations data for the six months ended June 30,
2012 and each of the three years ended December 31, 2011, 2010 and 2009 have been derived from the audited consolidated financial
statements for such years, included in this prospectus.
The discussion below does not give effect
to the anticipated one-for-      reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part.
Summary of Operations Data
Six
    Months Ended
Year
    Ended December 31,
June
    30, 2012
2011
2010
2009
(amounts
    in thousands, except per share and percentage data)
Revenues
$
2,071
$
6,004
$
4,949
$
3,411
Cost
    of revenues
$
1,377
$
3,011
$
2,696
$
2,291
Gross
    profit (loss)
$
694
$
2,993
$
2,253
$
1,120
Gross
    margin
34
%
50
%
46
%
33
%
Total
    operating expenses
$
7,852
$
16,722
$
5,472
$
3,837
Net
    loss
$
(7,081
)
$
(14,665
)
$
(3,420
)
$
(2,724
)
Net
    loss per share – basic and diluted
$
(0.10
)
$
(0.24
)
$
(0.07
)
$
(0.06
)
Weighted
    average number of ordinary shares used in computing net loss per share – basic and diluted
68,176,882
61,439,700
49,234,528
47,658,853
As
    adjusted(1) net loss per share – basic and diluted (Unaudited)
As
    adjusted(1) weighted average number of ordinary shares used computing net loss per share – basic and diluted
(Unaudited)
(1)
The unaudited as adjusted amounts give effect to our
receipt of the net proceeds from the sale by us in this offering, after deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us and the application of the net proceeds we will receive from this offering to
redeem the convertible debentures, as described in "Use of Proceeds."
Balance Sheet Data
June 30, 2012
Actual
As adjusted(1)
Cash and cash equivalents
$
10,284
Restricted cash
$
37
Working capital(2)
$
10,759
Total assets
$
16,014
Long-term liabilities
$
7,078
Equity (capital deficiency)
$
5,386
(1)
The unaudited as adjusted amounts give effect to our
receipt of the net proceeds from the sale by us in this offering, after deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us and the application of the net proceeds we will receive from this offering to
redeem the convertible debentures, as described in "Use of Proceeds."
9
(2)
Working capital is equal to the difference between total current assets and total current liabilities.
10
RISK FACTORS
Investing in our common stock involves
a high degree of risk. You should carefully consider the risks described below and all of the other information set forth in this
prospectus before deciding to invest in shares of our common stock. If any of the events or developments described below occur,
our business, financial condition or results of operations could be negatively affected. In that case, the trading price of our
common stock could decline, and you could lose all or part of your investment in our common stock.
Risks Related to Our Business
The report of our independent registered public
accounting firm contains an explanatory paragraph as to our ability to continue as a going concern, which could prevent us from
obtaining new financing on reasonable terms or at all.
Because we have had recurring losses and
negative cash flows from operating activities and have significant future commitments, substantial doubt exists regarding our ability
to remain in operating at the same level we are currently performing.  Further, the report of Kesselman & Kesselman C.P.A.s
(Isr.), our independent registered public accounting firm, with respect to our financial statements at June 30, 2012, December
31, 2011 and 2010, and for the six month period ended June 30, 2012 contains an explanatory paragraph as to our potential inability
to continue as a going concern. Additionally, this may adversely affect our ability to obtain new financing on reasonable terms
or at all.
We have a history of net losses and may experience
future losses.
To date, we have experienced net losses.
A substantial portion of the expenses associated with our manufacturing facilities are fixed in nature (i.e., depreciation) and
will reduce our operating margin until such time, if ever, as we are able to increase utilization of our capacity through increased
sales of our products. The clinical trials necessary to support our anticipated growth will be expensive and lengthy. In addition,
our strategic plan will require a significant investment in clinical trials, product development and sales and marketing programs,
which may not result in the accelerated revenue growth that we anticipate. Furthermore, we have significant future commitments
with respect to our convertible debentures. Since we expect to continue incurring negative cash flows from operations and in light
of the potential cash expenditures that may be required to satisfy our convertible debentures, there can be no assurance that we
will ever generate sufficient revenues to become profitable.
We expect to derive our revenue from sales
of our MGuard stent products and other products we may develop.  If we fail to generate revenue from this source, 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 MGuard stent products and other products we may develop.  Future sales of these products, if any, will be
subject to the receipt of regulatory approvals and commercial and market uncertainties that may be outside our control.  If
we fail to generate such revenues, our results of operations and the value of our business and securities would be materially and
adversely affected.
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.  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 patents
may not provide us with commercially meaningful protection for our products or 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 in the future may not be valid or enforceable.  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.
11
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 pending patent applications.  For
example, patent applications in the U.S. 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.  In the event that a third party has also filed a U.S.
patent application covering our stents or a similar invention, we may have to participate in an adversarial proceeding, known as
an interference, declared by the U.S. Patent and Trademark Office to determine priority of invention in the U.S.  It
is possible that we may be unsuccessful in the interference, resulting in a loss of some portion or all of our position in the
U.S.  The laws of some foreign jurisdictions do not protect intellectual property rights to the same degree as in the
U.S., and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions.  If
we encounter such difficulties or are otherwise precluded from effectively protecting our intellectual property rights in foreign
jurisdictions, our business prospects could be substantially harmed.
We may initiate litigation to enforce our
patent rights on any patents issued on pending patent applications, which may prompt adversaries in such litigation to challenge
the validity, scope or enforceability of our patents.  If a court decides that such patents are not valid, not enforceable
or of a limited scope, we may not have the right to stop others from using our inventions.  Also, even if our patents
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 provide us with freedom to operate unimpeded by
the patent rights of others.
We also rely on trade secret protection
to protect our interests in proprietary know-how and for processes for which patents are difficult to obtain or enforce.  We
may not be able to protect our trade secrets adequately.  In addition, 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 any 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 have limited manufacturing capabilities
and manufacturing personnel, and 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 MGuard stent
at our facilities in Tel Aviv, Israel, and we have contracted with QualiMed Innovative Medizinprodukte GmbH, a German manufacturer,
to assist in production.  If there were a disruption to our existing manufacturing facility, we would have no other means
of manufacturing our MGuard stent 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 MGuard stent 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.
We currently have limited resources, facilities
and experience to commercially manufacture our product candidates.  In order to produce our MGuard stent in the quantities
that we anticipate will be required to meet anticipated market demand, we will need to increase, or "scale up," the
production process by a significant factor over the current level of production.  There are technical challenges to scaling-up
manufacturing capacity, and developing commercial-scale manufacturing facilities will require the investment of substantial funds
and hiring and retaining additional management and technical personnel who have the necessary manufacturing experience.  We
may not successfully complete any required scale-up in a timely manner or at all.  If unable to do so, we may not be
able to produce our MGuard stent in sufficient quantities to meet the requirements for the launch of the product or to meet future
demand, if at all.  If we develop and obtain regulatory approval for our MGuard stent and are unable to manufacture a
sufficient supply of our MGuard stent, our revenues, business and financial prospects would be adversely affected and we may suffer
reputational harm, which could further adversely affect our revenues, business and financial prospects.  In addition,
if the scaled-up production process is not efficient or produces stents that do not meet quality and other standards, our future
gross margins may decline.  Also, our current and planned personnel, systems, procedures and controls may not be adequate
to support our anticipated growth.  If we are unable to manage our growth effectively, our business could be harmed.
12
Additionally, any damage to or destruction
of our Tel Aviv facilities or its equipment, prolonged power outage or contamination at our facility would significantly impair
our ability to produce MGuard stents.
Finally, the production of our MGuard stent
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.
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 U.S. Food and Drug Administration for our MGuard 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.  Clinical trials supporting a pre-market approval applications for the
Cypher stent developed by Johnson & Johnson and the Taxus Express2 stent developed by Boston Scientific Corporation, which
were approved by the U.S. Food and Drug Administration and are currently marketed, involved patient populations of approximately
1,000 and 1,300, respectively, and a 12-month follow up period.  In some trials, a greater number of patients and a longer
follow up period may be required. The U.S. Food and Drug Administration may require us to submit data on a greater number of patients
or for a longer follow-up period than those for pre-market approval applications for the Cypher stent and the Taxus Express2 stent.  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.
13
Physicians may not widely adopt the MGuard
stent unless they determine, based on experience, long-term clinical data and published peer reviewed journal articles, that the
use of the MGuard stent provides a safe and effective alternative to other existing treatments for coronary artery disease.
We believe that physicians will not widely
adopt the MGuard stent unless they determine, based on experience, long-term clinical data and published peer reviewed journal
articles, that the use of our MGuard stent provides a safe and effective alternative to other existing treatments for coronary
artery disease, including coronary artery bypass grafting balloon angioplasty, bare-metal stents and other drug-eluting stents,
provided by Johnson & Johnson, Boston Scientific Corporation, Medtronic Inc., Abbott Laboratories and others.
We cannot provide any assurance that the
data collected from our current and planned clinical trials will be sufficient to demonstrate that the MGuard stents are an attractive
alternative to other procedures.  If we fail to demonstrate safety and efficacy that is at least comparable to other
drug-eluting stents or bare-metal stents that have received regulatory approval and that are available on the market, our ability
to successfully market the MGuard stent 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 MGuard stent will vary.  Clinical
trials conducted with the MGuard Coronary stent have involved procedures performed by physicians who are technically proficient
and are high-volume stent users.  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 per-reviewed journal articles and recommendations and support by influential
physicians regarding our MGuard Coronary stent 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.
In addition, currently, physicians consider
drug-eluting stents to be the industry standard for treatment of coronary artery disease.  While we believe that the
MGuard Coronary stent is a safe and effective alternative, it is not a drug-eluting stent, which may further hinder its support
and adoption by physicians.
Our products are based on a new technology,
and 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 our products are new and long-term
success measures have not been completely validated, regulatory agencies, including the U.S. Food and Drug Administration, may
take a significant amount of time in evaluating product approval applications.  For example, there are currently several
methods of measuring restenosis and we do not know which of these metrics, or combination of these metrics, will be considered
appropriate by the U.S. Food and Drug Administration for evaluating the clinical efficacy of stents.  Treatments may
exhibit a favorable measure using one of these metrics and an unfavorable measure using another metric.  Any change in
the 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 9 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 U.S., 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.
14
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 product for which we obtain marketing
approval in the U.S., along with the manufacturing processes, post-approval clinical data and promotional activities for such product,
will be subject to continual review and periodic inspections by the U.S. Food and Drug Administration and other regulatory bodies.  In
particular, we and our suppliers will be required to comply with the U.S. Food and Drug Administration's Quality System Regulation
for the manufacture of our MGuard stent, which covers the methods and documentation of the design, testing, production, control,
quality assurance, labeling, packaging, storage and shipping of any product for which we obtain marketing approval in the U.S.  The
U.S. Food and Drug Administration enforces the Quality System Regulation through unannounced inspections.  We and our
third-party manufacturers and suppliers have not yet been inspected by the U.S. Food and Drug Administration and will have to successfully
complete such inspections before we receive U.S. regulatory approval for our products.  Failure by us or one of our suppliers
to comply with statutes and regulations administered by the U.S. Food and Drug Administration and other regulatory bodies, or failure
to take adequate response to any observations, could result in, among other things, any of the following enforcement actions:
·
warning letters or untitled letters;
·
fines and civil penalties;
·
unanticipated expenditures;
·
delays in approving, or refusal to approve, our products;
·
withdrawal or suspension of approval by the U.S. Food and Drug Administration or other regulatory bodies;
·
product recall or seizure;
·
orders for physician notification or device repair, replacement or refund;
·
interruption of production;
·
operating restrictions;
·
injunctions; and
·
criminal prosecution.
If any of these actions were to occur, it
could harm our reputation and could cause our product sales and profitability to suffer.  Furthermore, key component
suppliers may not currently be or may not continue to be in compliance with applicable regulatory requirements.
Even if regulatory approval of a product
is granted in the U.S., the approval may be subject to limitations on the indicated uses for which the product may be marketed.  If
the U.S. Food and Drug Administration determines that our promotional materials, training or other activities constitutes promotion
of an unapproved use, it could request that we cease or modify our training or promotional materials or subject us to regulatory
enforcement actions.  It is also possible that other federal, state or foreign enforcement authorities might take action
if they consider our training or other promotional materials to constitute promotion of an unapproved use, which could result in
significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.
15
Moreover, any modification to a device that
has received U.S. Food and Drug Administration approval that could significantly affect its safety or effectiveness, or that would
constitute a major change in its intended use, design or manufacture, requires a new approval from the U.S. Food and Drug Administration.  If
the U.S. Food and Drug Administration disagrees with any determination by us that new approval is not required, we may be required
to cease marketing or to recall the modified product until approval is obtained.  In addition, we could also be subject
to significant regulatory fines or penalties.
Additionally, we may be required to conduct
costly post-market testing and surveillance to monitor the safety or efficacy of our products, and we will be required to report
adverse events and malfunctions related to our products.  Later discovery of previously unknown problems with our products,
including unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure
to comply with regulatory requirements, such as Quality System Regulation, may result in restrictions on such products or manufacturing
processes, withdrawal of the products from the market, voluntary or mandatory recalls, fines, suspension of regulatory approvals,
product seizures, injunctions or the imposition of civil or criminal penalties.
Further, healthcare laws and regulations
may change significantly in the future.  Any new healthcare laws or regulations may adversely affect our business.  A
review of our business by courts or regulatory authorities may result in a determination that could adversely affect our operations.  In
addition, the healthcare regulatory environment may change in a way that restricts our operations.
Failure to obtain regulatory approval in foreign
jurisdictions will prevent us from marketing our products in such jurisdictions.
We intend to market our products in international
markets.  In order to market our products in other foreign jurisdictions, we must obtain separate regulatory approvals
from those obtained in the U.S. and Europe.  The approval procedure varies among countries and can involve additional
testing, and the time required to obtain approval may differ from that required to obtain CE Mark or U.S. Food and Drug Administration
approval.  Foreign regulatory approval processes may include all of the risks associated with obtaining CE Mark or U.S.
Food and Drug Administration approval in addition to other risks.  We may not obtain foreign regulatory approvals on
a timely basis, if at all.  CE Mark 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 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 service companies in the U.S. and internationally in connection with our current product and products
under development.  We face competition from numerous pharmaceutical and biotechnology companies in the therapeutics
area, as well as competition from academic institutions, government agencies and research institutions.  When we commercialize
our products, we expect to face intense competition from Cordis Corporation, a subsidiary of Johnson & Johnson, Boston Scientific
Corporation, Guidant, Medtronic, Inc., Abbott Vascular Devices, Terumo and others.  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.
16
We may become subject to claims by much larger
and better capitalized competitors seeking to invalidate our right to our intellectual property.
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 MGuard stent based on
one or more of these patents.  It is also possible that a lawsuit asserting patent infringement and related claims may
have already been filed against us of which we are not aware.  A number of these patents are owned by very large and
well-capitalized companies that are active participants in the stent market.  As the number of competitors in the stent
market grows, the possibility of patent infringement by us, or a patent infringement claim against us, increases.
These companies have maintained their position
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 of the major companies in the stent
and related markets, including Boston Scientific Corporation, Johnson & Johnson and Medtronic, Inc., have been repeatedly involved
in patent litigation relating to stents since at least 1997.  The stent 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 the stent and related markets.  Accordingly,
many of these companies will have a strong incentive to take steps, through patent litigation or otherwise, to prevent us from
commercializing our products.
If we fail to maintain or establish satisfactory
agreements with 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.  We depend on QualiMed Innovative Medizinprodukte
GmbH, which manufactures the body of the stent, 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 U.S. Food and Drug Administration 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 MGuard stent 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 U.S. Food and Drug Administration 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.
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 clinical trials.  We may
also be exposed to product liability claims based on the sale of any such products 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.  We also have liability insurance for an ongoing clinical trial in Europe.  Insurance
coverage is becoming increasingly expensive and we may not be able to maintain current coverages, or expand our insurance coverage
to include future clinical trials or the sale of products incorporating our licensed technology if marketing approval is obtained
for such products, 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.
17
We may implement a product recall or voluntary
market withdrawal due to product defects or product enhancements and modifications, which would significantly increase our costs.
The manufacturing and marketing of our MGuard
stent products involves an inherent risk that our products may prove to be defective. In that event, we may voluntarily implement
a recall or market withdrawal or may be required to do so by a regulatory authority. A recall of one of our products, or a similar
product manufactured by another manufacturer, could impair sales of the products we market as a result of confusion concerning
the scope of the recall or as a result of the damage to our reputation for quality and safety.
The successful management of operations depends
on our ability to attract and retain talented personnel.
We depend on the expertise of our senior
management and research personnel, which would be difficult to replace.  The loss of the services of any of our senior
management could compromise our ability to achieve our objectives.  Furthermore, recruiting and retaining qualified personnel
will be crucial to future success.  There can be no assurance that we will be able to attract and retain necessary personnel
on acceptable terms given the 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, our operations may be jeopardized 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 manufacture
products in our research and manufacturing facilities in multiple countries.  Consequently, we face complex legal and
regulatory requirements in multiple jurisdictions, which may expose us to certain financial and other risks.  International
sales and operations are subject to a variety of risks, including:
·
foreign currency exchange rate fluctuations;
·
greater difficulty in staffing and managing foreign operations;
·
greater risk of uncollectible accounts;
·
longer collection cycles;
·
logistical and communications challenges;
·
potential adverse changes in laws and regulatory practices, including export license requirements, trade barriers, tariffs
and tax laws;
·
changes in labor conditions;
·
burdens and costs of compliance with a variety of foreign laws;
·
political and economic instability;
·
increases in duties and taxation;
·
foreign tax laws and potential increased costs associated with overlapping tax structures;
·
greater difficulty in protecting intellectual property; and
·
general economic and political conditions in these foreign markets.
18
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.
If we fail to obtain an adequate level of reimbursement
for our products by third party payors, there may be no commercially viable markets for our product candidates 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 product candidates.  The efficacy, safety, performance
and cost-effectiveness of our product candidates and of any competing products will determine 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 health care 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 currently
under development and limit our ability to sell our product candidates 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 U.S., our business could be significantly
and adversely affected by recent healthcare reform legislation and other administration and legislative proposals.
The Patient Protection and Affordable Care
Act and Health Care and Educational Reconciliation Act in the U.S. were enacted into law in March 2010. Certain provisions of these
acts will not be effective for a number of years and there are many programs and requirements for which the details have not yet
been fully established or consequences not fully understood, and it is unclear what the full impacts will be from the legislation.  The
legislation does levy a 2.3% excise tax on all U.S. medical device sales beginning in 2013. If we commence sales of our MGuard
Coronary stent in the U.S., this new tax may materially and adversely affect our business and results of operations.  The
legislation also focuses on a number of Medicare provisions aimed at improving quality and decreasing costs.  It is uncertain
at this point what negative unintended consequences these provisions will have on patient access to new technologies.  The
Medicare provisions include 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 starting in 2011 and the establishment of an independent payment advisory
board to recommend ways of reducing the rate of growth in Medicare spending.  We cannot predict what healthcare programs
and regulations will be ultimately implemented at the federal or state level in the U.S., or the effect of any future legislation
or regulation.  However, any changes that lower reimbursements for our products or reduce medical procedure volumes could
adversely affect our business plan to introduce our products in the U.S.
19
Our strategic business plan may not produce
the intended growth in revenue and operating income.
Our strategies include making significant
investments in sales and marketing programs to achieve revenue growth and margin improvement targets.  If we do not achieve
the expected benefits from these investments or otherwise fail to execute on our strategic initiatives, we may not achieve the
growth improvement we are targeting and our results of operations may be adversely affected.
In addition, as part of our strategy for
growth, we may make acquisitions and enter into strategic alliances such as joint ventures and joint development agreements.  However,
we may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully, and
our strategic alliances may not prove to be successful.  In this regard, acquisitions involve numerous risks, including
difficulties in the integration of the operations, technologies, services and products of the acquired companies and the diversion
of management's attention from other business concerns.  Although our management will endeavor to evaluate the
risks inherent in any particular transaction, there can be no assurance that we will properly ascertain all such risks.  In
addition, acquisitions could result in the incurrence of substantial additional indebtedness and other expenses or in potentially
dilutive issuances of equity securities.  There can be no assurance that difficulties encountered with acquisitions will
not have a material adverse effect on our business, financial condition and results of operations.
We may have violated Israeli securities law.
We may have violated section 15 of the Israeli
Securities Law of 1968.  Section 15 of the Israeli Securities Law of 1968 requires the filing of a prospectus with the
Israel Securities Authority and the delivery thereof to purchasers in connection with an offer or sale of securities to more than
35 parties during any 12 month period.  We allegedly issued securities to more than 35 investors during certain 12-month
periods, ending in October 2008.  Our wholly-owned subsidiary, InspireMD Ltd., a private company incorporated under the
laws of the State of Israel, applied for a no-action determination from the Israel Security Authority on February 14, 2011 in connection
with the foregoing.  To date, the Israel Securities Authority has not responded to InspireMD Ltd.'s application
for no-action determination and we are unable to predict when a response will be received.  The maximum penalties for
violating section 15 of the Israeli Securities Law of 1968 are as follows: imprisonment of 5 years; a fine of up to approximately
$317,000 to be paid by management of the violating company; and a fine of up to approximately $1,590,000 to be paid by the violating
company, any of which penalties could result in a material adverse effect on our operations. We believe that it is not likely that
we will be subject to fines or other penalties on an individual or company level.
Following the completion of this offering,
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 stockholders' ownership interests.
In order to fully realize all of our business
objectives, we will need to raise additional capital following the completion of this offering, which may not be available on
reasonable terms or at all.   For instance, we will need to raise additional funds to accomplish the following:
·
developing MGuard Carotid, MGuard Peripheral, MGuard Coronary with a drug eluting bio-absorbable mesh and any additional products;
·
pursuing growth opportunities, including more rapid expansion;
·
acquiring complementary businesses;
·
making capital improvements to improve our infrastructure;
20
·
hiring qualified management and key employees;
·
developing new services, programming or products;
·
responding to competitive pressures;
·
complying with regulatory requirements such as licensing and registration; and
·
maintaining compliance with applicable laws.
Any additional capital raised through the
sale of equity or equity backed securities may dilute 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.
Furthermore, any additional debt or equity
financing that we may need may not be available on terms favorable to us, or at all.  If we are unable to obtain such
additional financing on a timely basis, we may have to curtail our development activities and growth plans and/or be forced to
sell assets, perhaps on unfavorable terms, which would have a material adverse effect on our business, financial condition and
results of operations, and ultimately could be forced to discontinue our operations and liquidate, in which event it is unlikely
that stockholders would receive any distribution on their shares.  Further, we may not be able to continue operating
if we do not generate sufficient revenues from operations needed to stay in business.
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.
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.
21
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
principal executive offices and 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, 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. Recent political uprisings and social
unrest in various countries in the Middle East and north Africa are affecting the political stability of those countries.
This instability may lead to deterioration of the political relationships that exist between Israel and these countries, 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.
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 executive officers and key 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 military rank), unless exempt, are obligated to perform up to an
average of 18 to 28 days of 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 officers or key
employees due to military service. Any such disruption could have a material adverse effect on our business, results of operations,
prospectus and financial condition.
We may not be able to enforce covenants not-to-compete
under current Israeli law.
We have non-competition agreements with
all of our employees, all of which are governed by Israeli law. These agreements generally prohibit our employees from competing
with us or working for our competitors for a period of five years 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.
22
It may be difficult for investors in the U.S.
to enforce any judgments obtained against us or any of our directors or officers.
All of our assets are located outside the
U.S. and we do not currently maintain a permanent place of business within the U.S. In addition, three of our directors and all
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 U.S. any judgments obtained
against us or any of our non-U.S. directors or 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 United States. 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.
Risks Related to Our Organization, Our Common Stock and This
Offering
Purchasers in
this offering will experience immediate and substantial dilution in the book value of their investment.
The public offering price of our common
stock will be substantially higher than the net tangible book value per share of our common stock immediately after this offering.
Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of $      (or      %) in net tangible
book value per share from the price you paid, based on an assumed public offering price of $      per share (which is not adjusted
for the anticipated one-for-      reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part
)
, the midpoint of the range set forth on
the cover page of this prospectus.
The exercise of outstanding warrants and options may result in further dilution of your
investment, but only if the public offering price is greater than the per share exercise price of such warrants and options. In
addition, if we raise funds by issuing additional shares or convertible securities in the future, the newly issued shares may
further dilute your ownership interest.
We may apply the proceeds of this offering
to uses that ultimately do not improve our operating results or increase the value of your investment.
We intend to use the net proceeds of this
offering to support the worldwide commercialization of MGuard in acute myocardial infarction and pursue FDA approval in the U.S.,
to redeem our convertible debentures and for general corporate purposes. Depending on several factors, including the availability
of alternate sources of capital and the possibility that the execution or timing of our business plans may change, management may
use these proceeds in a manner different than originally intended. These proceeds could be applied in ways that do not improve
our operating results or otherwise increase the value of your investment.
23
We are subject to financial reporting and other
requirements that place significant demands on our resources.
On March 31, 2011, we became 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 and to obtain a report by our independent auditors addressing these assessments. 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 of 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 U.S. 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, cause downgrades in our future debt ratings leading to higher
borrowing costs and affect how our stock trades. This could in turn negatively affect our ability to access public debt or equity
markets for capital.
Our stock price has been and may continue to
be volatile, which could result in substantial losses for investors.
The market price of our common stock has
been and is 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:
·
technological innovations or new products and services by us or our competitors;
·
additions or departures of key personnel;
·
sales of our common stock, particularly under any registration statement for the purposes of selling any other securities,
including management shares;
·
limited availability of freely-tradable "unrestricted" shares of our common stock to satisfy purchase orders and
demand;
·
our ability to execute our business plan;
·
operating results that fall below expectations;
·
loss of any strategic relationship;
24
·
industry developments;
·
economic and other external factors; and
·
period-to-period fluctuations in our financial results.
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 price of our common stock.
There has been a limited market for our common
stock and we cannot ensure investors that an active market for our common stock will be sustained.
There has been limited trading in
our common stock and there can be no assurance that an active trading market in our common stock will be maintained. Due to the
illiquidity, the market price may not accurately reflect our relative value.  If our common stock is thinly traded, a
large block of shares traded can lead to a dramatic fluctuation in the share price and investors may not be able to liquidate their
investment in us at all or at a price that reflects the value of the business.
In addition, our common stock currently
trades on the OTC Bulletin Board, which generally lacks the liquidity, research coverage and institutional investor following of
a national securities exchange like the NYSE MKT, the New York Stock Exchange or the Nasdaq Capital Market. While we have applied
to list our common stock on the Nasdaq Capital Market, there can be no assurance that trading of our common stock on such market
will be sustained or desirable.
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.
Offers or availability for sale of a substantial
number of shares of our common stock may cause the price of our common stock to decline.
Sales of a significant number of shares
of our common stock in the public market could harm the market price of our common stock and make it more difficult for us to
raise funds through future offerings of common stock. As of September 21, 2012, there were 18,083,982
shares of our common
stock issuable upon the conversion of our outstanding convertible debentures and the exercise of our outstanding warrants, all
of which are currently registered for resale. In addition, there are 68,390,169
shares of our common stock currently saleable
under Rule 144. The availability of these shares of our common stock for resale in the public market has the potential to cause
the supply of our common stock to exceed investor demand, thereby decreasing the price of our common stock.
In addition, the fact that our stockholders,
warrant holders and debenture holders can sell substantial amounts of our common stock in the public market, whether or not sales
have occurred or are occurring, could make it more difficult for us to raise additional financing through the sale of equity or
equity-related securities in the future at a time and price that we deem reasonable or appropriate.
25
We do not expect to pay dividends in the future.
As a result, any return on investment may be limited to the value of our common stock.
We do not anticipate paying cash dividends
on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on our earnings, financial
condition and other business and economic factors as our board of directors may consider relevant. If we do not pay dividends,
our common stock may be less valuable because a return on an investment in our common stock will only occur if our stock price
appreciates.
Risks Related to our Convertible Debentures
Our obligations to the holders of our convertible
debentures are secured by all of our assets, so if we default on those obligations, the convertible debenture holders could foreclose
on our assets.
The holders of our convertible debentures
have a security interest in all of our assets and those of our subsidiaries. As a result, if we default under our obligations to
the convertible debenture holders, the convertible debenture holders could foreclose on their security interests and liquidate
some or all of these assets, which would harm our business, financial condition and results of operations.
Our convertible debentures and the associated
securities purchase agreement contain covenants that could limit our financing options and liquidity position, which would limit
our ability to grow our business.
The terms of our convertible debentures
could have negative consequences to us, such as:
·
we may be unable to obtain additional financing to fund working capital, operating losses, capital expenditures or acquisitions
on terms acceptable to us, or at all;
·
we may be unable to refinance our indebtedness on terms acceptable to us, or at all; and
·
we may be more vulnerable to economic downturns and limit our ability to withstand competitive pressures.
Additionally, covenants in our convertible
debentures and the associated securities purchase agreement impose operating and financial restrictions on us. These restrictions
prohibit or limit our ability, and the ability of our subsidiaries, to, among other things:
·
pay cash dividends to our stockholders;
·
redeem, repurchase or otherwise acquire more than a de minimis number of shares of our common stock or common stock equivalents;
·
incur additional indebtedness;
·
permit liens on assets or conduct sales of assets;
·
effectuate stock splits until April 5, 2013, except in connection with an initial listing on a national securities exchange
or to meet the continued listing requirements of such exchange;
·
cease making public filings under the Securities Exchange Act of 1934, as amended;
·
engage in transactions with affiliates; and
·
amend our charter documents in a way that would materially and adversely affect any holder of our convertible debentures.
These restrictions may limit our ability
to obtain additional financing, withstand downturns in our business or take advantage of business opportunities. Moreover, additional
debt financing we may seek may contain terms that include more restrictive covenants, may require repayment on an accelerated schedule
or may impose other obligations that limit our ability to grow our business, acquire needed assets, or take other actions we might
otherwise consider appropriate or desirable.
26
The
conversion of our convertible debentures and the exercise of the warrants issued to the purchasers of our convertible debentures
would have a dilutive impact on our existing stockholders.
As of September 21, 2012, there were
6,934,623 shares of common stock underlying our convertible debentures and 3,655,775 shares of common stock underlying
warrants that were issued to purchasers and placement agents in connection with the issuance of the convertible debentures,
for a total of 10,587,466 shares of common stock (not adjusted for the anticipated one-for-
     reverse stock split of our common stock that is expected to occur the day immediately following
the effectiveness of the registration statement of which this prospectus is a part
)
. If and when issued, these
additional      shares of common stock will equal approximately      % of
our then outstanding shares of common stock (assuming that this offering is completed using the midpoint of the price range
set forth on the cover page of this prospectus), and would immediately dilute our current stockholders in terms of ownership
percentage and voting power. The terms of the convertible debentures and related warrants contain provisions that restrict
the amount of shares a holder can receive upon conversion or exercise to 4.99% of the then outstanding number of shares of
our common stock. However, these restrictions do not prevent the holders from selling some of their holdings and
then receiving additional shares. In this way, the holders could sell more than these limits while never holding more than
the limits. As a result, even with the restrictions, the holders of these convertible debentures and warrants could
ultimately convert and exercise, and then sell, the full amount issuable upon conversion and exercise of the convertible
debentures and warrants, respectively, in which case our current stockholders would suffer the full amount of dilution.
The
holders of our convertible debentures might be able to exert substantial influence over us in the event that Sol J.
Barer, Ph.D. ceases to remain our chairman.
Under the terms of the securities purchase
agreement pursuant to which our convertible debentures were sold, if Sol J. Barer, Ph.D. ceases to serve as our chairman due to
Dr. Barer's resignation following a material adverse change to the condition of Dr. Barer or any member of Dr. Barer's
immediate family or the vote or written consent of independent stockholders, we would be required to appoint two persons to our
board of directors designated by Genesis Capital Advisors LLC, the investment advisor to our lead investors in the convertible
debenture offering, and support the election of such persons until the convertible debentures are either repaid or converted in
full. In addition, in the event that Dr. Barer ceases to serve as our chairman for any other reason while the convertible debentures
are outstanding, it would be an event of default under the convertible debentures, which could result in the acceleration of our
convertible debentures at the election of the holders of 60% of the outstanding principal of the convertible debentures, an amount
that Genesis Capital Advisors LLC presently controls. As a result, Genesis Capital Advisors LLC, or its assigns, have the potential
to exert substantial influence over our management and governance in the event Dr. Barer ceases to serve as our chairman and they
may exert such influence in a manner that is not consistent with the best interests of our common stockholders.
We
may default upon our obligations under our convertible debentures.
The holders of our convertible debentures
may require us to redeem our convertible debentures after October 5, 2013 or upon the occurrence of an event of a default under
our convertible debentures for 112% of the then outstanding principal amount, plus all accrued interest. In the event that we are
required to redeem some or all of our convertible debentures, we may not have sufficient resources to do so and we may have to
seek additional debt or equity financing to cover the costs of redeeming our convertible debentures. Any additional debt or equity
financing that we may need may not be available on terms favorable to us, or at all. Because our obligations under our convertible
debentures are secured by a security interest in substantially all of our assets and properties, if we cannot repay our obligations
under our convertible debentures, the holders of our convertible debentures may have claims against, and ultimately may foreclose
upon and take possession of, substantially all of our assets and properties. In such an event, the holders of our convertible debentures
would have control of us.
27
Risks Related to Our Intended Reverse Stock Split
There can be no assurance that we will be able
to meet all of the requirements for listing our common stock on any national securities exchange or to meet the continued listing
standards of any national securities exchange after a reverse stock split.
Each national securities exchange has numerous
initial listing requirements applicable to the listing of our common stock and its continued listing thereafter. We cannot assure
you that our common stock will be accepted for listing on the Nasdaq Capital Market or any other national securities exchange following
the reverse stock split or that we will maintain compliance with all of the requirements for our common stock to remain listed.
Moreover, there can be no assurance that the market price of our common stock after the reverse stock split will adjust to reflect
the decrease in common stock outstanding or that the market price following a reverse stock split will either exceed or remain
in excess of the current market price.
If the reverse stock split is implemented,
the resulting per-share price may not attract institutional investors, investment funds or brokers and may not satisfy the investing
guidelines of these investors or brokers, and consequently, the trading liquidity of common stock may not improve.
While we believe that a higher share price
may help generate investor and broker interest in our common stock, the reverse stock split may not result in a share price that
will attract institutional investors or investment funds or satisfy the investing guidelines of institutional investors, investment
funds or brokers. A decline in the market price of our common stock after the reverse stock split may result in a greater percentage
decline than would occur in the absence of the reverse stock split. If the reverse stock split is implemented and the market price
of our common stock declines, the percentage decline may be greater than would occur in the absence of the reverse stock split.
The market price of our common stock is also based on our performance and other factors, which are unrelated to the number of shares
of common stock outstanding.
28
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains "forward-looking
statements," which include information relating to future events, future financial performance, strategies, expectations,
competitive environment and regulation. Words such as "may," "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:
·
our history of recurring losses and negative cash flows from operating activities, significant future commitments and the uncertainty
regarding the adequacy of our liquidity to pursue our complete business objectives;
·
our ability to complete clinical trials as anticipated and obtain and maintain regulatory approvals for our products;
·
our ability to adequately protect our intellectual property;
·
our dependence on a single manufacturing facility and our ability to comply with stringent manufacturing quality standards
and to increase production as necessary;
·
the risk that the data collected from our current and planned clinical trials may not be sufficient to demonstrate that the
MGuard technology is an attractive alternative to other procedures and products;
·
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;
·
entry of new competitors and products and potential technological obsolescence of our products;
·
loss of a key customer or supplier;
·
technical problems with our research and products and potential product liability claims;
·
adverse economic conditions;
·
adverse federal, state and local government regulation, in the U.S., Europe or Israel;
·
price increases for supplies and components;
·
inability to carry out research, development and commercialization plans; and
·
loss or retirement of key executives and research scientists.
You should review carefully the section
entitled "Risk Factors" beginning on page 11 of this prospectus 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 prospectus 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.
29
USE OF PROCEEDS
We estimate that the net proceeds from the
sale of the shares of common stock we are offering will be approximately $40 million. If the underwriters fully exercise the overallotment
option, the total net proceeds of the shares we sell will be approximately $46 million. "Net proceeds" is what we expect
to receive after paying the underwriting discount and other expenses of the offering.
We intend to use the net proceeds as follows:
·
We expect to use approximately $24.1 million to support the worldwide commercialization of MGuard Coronary in acute myocardial
infarction. This is expected to include expanding our manufacturing capability, building our sales and marketing capacity, completing
clinical trials and obtaining necessary government approvals, including FDA approval in the U.S.
·
We expect to use approximately $13.1 million to redeem our convertible debentures due April 5, 2014, which bear interest at
an annual rate of 8% and may be redeemed commencing October 5, 2012 for a price equal to 112% of the amount of principal to be
redeemed plus all accrued but unpaid interest and other amounts due thereunder. The proceeds from the convertible debentures were
used to support the commercialization of MGuard Coronary, including sales and marketing efforts, our MASTER Trial and FDA trial
and as working capital.
·
Any balance of the net proceeds will be used for general corporate purposes, including the development of future products.
Investors are cautioned, however, that
expenditures may vary substantially from these estimates. Investors will be relying on the judgment of our management, who will
have broad discretion regarding the application of the proceeds of this offering. The amounts and timing of our actual expenditures
will depend upon numerous factors, including the amount of cash generated by our operations, the amount of competition and other
operational factors. We may find it necessary or advisable to use portions of the proceeds from this offering for other purposes.
From time to time, we evaluate these and
other factors and we anticipate continuing to make such evaluations to determine if the existing allocation of resources, including
the proceeds of this offering, is being optimized. Circumstances that may give rise to a change in the use of proceeds include:
·
a change in development plan or strategy;
·
the addition of new products or applications;
·
technical delays;
·
delays or difficulties with our clinical trials;
·
negative results from our clinical trials;
·
failure to achieve sales as anticipated; and
·
the availability of other sources of cash including cash flow from operations and new bank debt financing arrangements, if
any.
Until we use the net proceeds of this offering,
we will invest the funds in short-term, investment grade, interest-bearing securities.
30
MARKET FOR OUR COMMON STOCK
Our common stock has been quoted on the
OTC Bulletin Board since April 11, 2011 under the symbol NSPR.  Prior to that date, there was no active market for our
common stock.  The following table sets forth the high and low bid prices for our common stock for the periods indicated,
as reported by the OTC Bulletin Board.  The quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission, and may not represent actual transactions. The quotations are not adjusted for the anticipated one-for-     reverse
stock split of our common stock that is expected to occur the day immediately following the effectiveness of the registration statement
of which this prospectus is a part.
Fiscal Year Ending June 30, 2013
High
Low
First Quarter (through September 21, 2012)
$
2.50
$
0.96
Transition Period Ended June 30, 2012
High
Low
First Quarter
$
2.15
$
1.10
Second Quarter
$
1.85
$
0.60
Fiscal Year Ended December 31, 2011
High
Low
Second Quarter
$
2.89
$
1.75
Third Quarter
$
2.74
$
1.80
Fourth Quarter
$
2.59
$
1.60
The last reported sales price of our common
stock on the OTC Bulletin Board on September 21, 2012, was $2.25 per share. As of September 21, 2012, there were approximately
183 holders of record of our common stock.
We intend to effectuate a one-for-      reverse
stock split, in order to comply with the listing requirements of the Nasdaq Capital Market that is expected to occur the day immediately
following the effectiveness of the registration statement of which this prospectus is a part. Such reverse stock split would immediately
increase our stock price. In addition, such reverse stock split would reduce the number of shares of common stock outstanding and
may affect the liquidity of our common stock.
DIVIDEND POLICY
In the past, we have not declared or paid
cash dividends on our common stock, and we do not intend to pay any cash dividends on our common stock. Rather, we intend to retain
future earnings, if any, to fund the operation and expansion of our business and for general corporate purposes.
31
CAPITALIZATION
The following table summarizes
our cash and cash equivalents, certain other items from our historical consolidated balance sheet, and capitalization as of
June 30, 2012:
·
on an actual basis; and
·
on an unaudited as adjusted basis, giving effect to our receipt of the net proceeds from the sale by us in this
                                                                                                              offering, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds we will receive from this offering to redeem the convertible debentures, as described
                                                                                                              in "Use of Proceeds."
The table below does not give effect to
the anticipated one-for-      reverse stock split of our common stock that is expected to occur the day immediately following the effectiveness
of the registration statement of which this prospectus is a part.
June 30, 2012
Actual
As Adjusted
Cash and cash equivalents
10,284
Convertible loan
5,018
Deferred
    debt issuance costs
961
Equity (capital deficiency):
Common stock, par value $0.0001 per share; 125,000,000 shares authorized; 68,160,161 and           shares issued and outstanding at June 30, 2012, actual and as adjusted, respectively
7
Additional paid-in capital
49,101
Accumulated deficit
(43,722)
Total equity (capital deficiency)
5,386
32
DILUTION
The discussion below does not give effect
to the anticipated one-for-      reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part.
Our net tangible book value on June 30,
2012 was approximately $5.4 million, or $0.08 per share. "Net tangible book value" is total assets minus the sum
of liabilities and intangible assets. "Net tangible book value per share" is net tangible book value divided by the
total number of shares outstanding.
After giving effect to adjustments relating
to the offering, our pro forma net tangible book value on June 30, 2012, would have been $        ,
or $      per share. The adjustments made to determine pro forma net tangible book value per share are
the following:
·
An increase in total assets to reflect the net proceeds of the offering as described under "Use of Proceeds."
·
The addition of the number of shares offered by this prospectus to the number of shares outstanding.
The following table illustrates the pro
forma increase in net tangible book value of $ per share and the dilution (the difference between the offering price per share
and net tangible book value per share) to new investors:
Public offering price per share
$
Net tangible book value per share as of June 30, 2012
$
0.08
Increase in net tangible book value per share attributable to the offering
$
Pro forma net tangible book value per share as of June 30, 2012 after giving effect to the offering
$
Dilution per share to new investors in the offering
$
The following table shows the difference
between existing stockholders and new investors with respect to the number of shares purchased from us, the total consideration
paid and the average price paid per share.
Shares Purchased
Total Consideration
Average Price Per Share
Number
Percent
Amount
Percent
Existing stockholders
%
$
%
$
New investors
%
$
%
$
Total
%
$
%
$
The foregoing tables and calculations are
based on the number of shares of our common stock outstanding as of June 30, 2012 and exclude:
·
7,814,849 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.80
per share;
·
2,550,000 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.50
per share;
·
1,014,510 shares of common stock issuable upon the exercise of currently outstanding warrants with an exercise price of $1.23
per share;
·
6,812,975 shares of common stock issuable upon the conversion of our senior secured convertible debentures due April 5, 2014.
33
·
13,451,717 shares of common stock issuable upon the exercise of currently outstanding options with exercise prices ranging
from $0.001 to $2.60 and having a weighted average exercise price of $1.03 per share; and
·
5,331,867 shares of common stock available for future issuance under our 2011 UMBRELLA Option Plan.
34
SELECTED FINANCIAL INFORMATION AND OTHER
DATA
The following selected consolidated financial
data should be read in conjunction with the consolidated financial statements and the related notes thereto and the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus. The balance sheet data at June 30, 2012 and December 31, 2011 and 2010 and the statement of operations data for
the six months ended June 30, 2012 and each of the three years ended December 31, 2011, 2010 and 2009 have been derived from the
audited consolidated financial statements for such years, included in this prospectus. The balance sheet data at December 31, 2009
has been derived from audited consolidated financial statements not included in this prospectus. The balance sheet data at December
31, 2008 and 2007, and the statement of operations data for each of the two years ended December 31, 2008 and 2007, have been derived
from our books and records.
The discussion below does not give effect
to the anticipated one-for-      reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part.
Summary of Operations Data
Six Months
Year Ended December 31,
Ended June 30, 2012
2011
2010
2009
2008
2007
(in thousands, except per share and percentage data)
Revenues
$
2,071
$
6,004
$
4,949
$
3,411
-
-
Cost of revenues
$
1,377
$
3,011
$
2,696
$
2,291
$
404
$
328
Gross profit (loss)
$
694
$
2,993
$
2,253
$
1,120
$
(404
)
$
(328
)
Gross margin
34
%
50
%
46
%
33
%
0
0
Total operating expenses
$
7,852
$
16,722
$
5,472
$
3,837
$
5,627
$
5,903
Net loss
$
(7,081
)
$
(14,665
)
$
(3,420
)
$
(2,724
)
$
(6,495
)
$
(6,138
)
Net loss per share - basic and diluted
$
(0.10
)
$
(0.24
)
$
(0.07
)
$
(0.06
)
$
(0.14
)
$
(0.14
)
Weighted average number of ordinary shares used in computing net loss per share – basic and diluted
68,176,882
61,439,700
49,234,528
47,658,853
46,364,731
42,647,151
Balance Sheet Data
June 30,
December 31,
2012
2011
2010
2009
2008
2007
(in thousands)
Cash and cash equivalents
$
10,284
$
5,094
$
636
$
376
$
1,571
$
2,717
Restricted cash
$
37
$
91
$
250
$
302
$
30
$
34
Working capital(1)
$
10,759
$
6,389
$
(53
)
$
(1,289
)
$
589
$
2,625
Total assets
$
16,014
$
10,465
$
4,355
$
4,509
$
4,448
$
3,923
Long-term liabilities
$
7,078
$
270
$
1,325
$
484
$
898
$
87
Equity (capital deficiency)
$
5,386
$
6,754
$
(914
)
$
(1,339
)
$
134
$
2,949
(1) Working capital is equal to the difference between total
current assets and total current liabilities.
35
SELECTED QUARTERLY FINANCIAL DATA
The following selected quarterly consolidated
unaudited financial data should be read in conjunction with the consolidated financial statements and the related notes thereto
and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The following table sets forth selected financial information for the dates and periods
indicated.  Our results for any of these periods are not necessarily indicative of the results to be expected for the
year ending June 30, 2013 or for any other future period.
The discussion below does not give effect
to the anticipated one-for-      reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part.
Six Months Ended June 30, 2012
Quarter Ended March 31, 2012
Quarter Ended June 30, 2012
(unaudited)
(in thousands, except per share and percentage data)
Revenues
$
1,138
$
933
Cost of revenues
$
574
$
803
Gross profit (loss)
$
564
$
130
Gross margin
50
%
14
%
Total operating expenses
$
3,690
$
4,162
Net loss
$
(3,140
)
$
(3,941
)
Basic and diluted loss per common share
$
(0.05
)
$
(0.06
)
Basic and diluted common shares outstanding
68,178,946
68,174,817
Fiscal Year Ended December 31, 2011
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
(unaudited)
(in thousands, except per share and percentage data)
Revenues
$
1,686
$
1,040
$
1,986
$
1,292
Cost of revenues
$
899
$
640
$
801
$
671
Gross profit (loss)
$
787
$
400
$
1,185
$
621
Gross margin
47
%
38
%
60
%
48
%
Total operating expenses
$
1,957
$
2,572
$
3,335
$
8,858
Net loss
$
(1,895
)
$
(2,254
)
$
(2,283
)
$
(8,233
)
Basic and diluted loss per common share
$
(0.037
)
$
(0.04
)
$
(0.04
)
$
(0.12
)
Basic and diluted common shares outstanding
50,798,900
63,934,260
64,300,685
66,697,424
Fiscal Year Ended December 31, 2010
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
(unaudited)
(in thousands, except per share and percentage data)
Revenues
$
2,097
$
908
$
1,223
$
721
Cost of revenues
$
1,337
$
479
$
561
$
319
Gross profit (loss)
$
760
$
429
$
662
$
402
Gross margin
36
%
47
%
54
%
56
%
Total operating expenses
$
1,404
$
1,118
$
1,379
$
1,571
Net loss
$
(729
)
$
(663
)
$
(847
)
$
(1,181
)
Basic and diluted loss per common share
$
(0.015
)
$
(0.01
)
$
(0.02
)
$
(0.02
)
Basic and diluted common shares outstanding
48,595,241
49,113,463
49,490,460
49,680,214
36
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion
and analysis of financial condition and results of operations in conjunction with the "Selected Financial Information and
Other Data," "Selected Quarterly Financial Data" and our consolidated financial statements and the related notes
included elsewhere in this prospectus. In addition to historical information, the following discussion and analysis includes forward-looking
information that involves risks, uncertainties and assumptions. Our actual results and the timing of events could differ materially
from those anticipated by these forward-looking statements as a result of many factors, including those discussed under "Risk
Factors" and elsewhere in this prospectus. See "Special Note Regarding Forward-Looking Statements" included elsewhere
in this prospectus.
Overview
We are a medical device company focusing
on the development and commercialization of our proprietary stent platform technology, MGuard. MGuard provides embolic protection
in stenting procedures by placing a micron mesh sleeve over a stent. Our initial products are marketed for use mainly in patients
with acute coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions
(bypass surgery).
On March 31, 2011, we completed a series
of share exchange transactions pursuant to which we acquired all of the capital stock of InspireMD Ltd., a company formed under
the laws of the State of Israel, in exchange for an aggregate of 50,666,663 shares of our common stock. As a result of these share
exchange transactions, InspireMD Ltd. became our wholly-owned subsidiary, we discontinued our former business and succeeded to
the business of InspireMD Ltd. as our sole line of business.
The share exchange transactions were accounted
for as a recapitalization. InspireMD Ltd. is the acquirer for accounting purposes and we are the acquired company. Accordingly,
the historical financial statements presented and the discussion of financial condition and results of operations herein are those
of InspireMD Ltd., retroactively restated for, and giving effect to, the number of shares received in the share exchange transactions,
and do not include the historical financial results of our former business. The accumulated earnings of InspireMD Ltd. were also
carried forward after the share exchange transactions and earnings per share have been retroactively restated to give effect to
the recapitalization for all periods presented. Operations reported for periods prior to the share exchange transactions are those
of InspireMD Ltd.
On October 31, 2011, our stockholders authorized
our board of directors to amend our amended and restated certificate of incorporation to effect a reverse stock split of our common
stock at a ratio of one-for-two to one-for-four, at any time prior to our 2012 annual stockholders' meeting, the exact ratio
of the reverse stock split to be determined by the board. We intend to effectuate a one-for- reverse stock split, in order to comply
with the listing requirements of Nasdaq Capital Market. Such reverse stock split would immediately increase our stock price. In
addition, such reverse stock split would reduce the number of shares of common stock outstanding and may affect the liquidity of
our common stock. The reverse stock split is expected to occur the day immediately following the effectiveness of the registration
statement of which this prospectus is a part.
Critical Accounting Policies
Use of estimates
The preparation of financial statements
in conformity with generally accepted accounting principles in the U.S. requires management to make estimates using assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of sales and expenses during the reporting periods. Actual results could differ
from those estimates.
As applicable to these consolidated financial
statements, the most significant estimates and assumptions relate to inventory write-off, provisions for returns, legal contingencies,
estimation of the fair value of share-based compensation and estimation of the fair value of warrants.
37
Functional currency
The currency of the primary economic environment
in which our operations are conducted is the U.S. dollar ("$" or "dollar"). Accordingly, the functional
currency of us and of our subsidiaries is the dollar.
The dollar figures are determined as follows:
transactions and balances originally denominated in dollars are presented in their original amounts. Balances in foreign currencies
are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. The
resulting translation gains or losses are recorded as financial income or expense, as appropriate. For transactions reflected in
the statements of operations in foreign currencies, the exchange rates at transaction dates are used. Depreciation and changes
in inventories and other changes deriving from non-monetary items are based on historical exchange rates.
Fair value measurement
Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date.
In determining fair value, we use various
valuation approaches, including market, income and/or cost approaches. Hierarchy for inputs is used in measuring fair value that
maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs
be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed
based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about
the assumptions market participants would use in pricing the asset or liability developed based on the best information available
in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs.
Concentration of credit risk and allowance
for doubtful accounts
Financial instruments that may potentially
subject us to a concentration of credit risk consist of cash, cash equivalents and restricted cash, which are deposited in major
financial institutions in the U.S., Israel and Germany, and trade accounts receivable. Our trade accounts receivable are derived
from revenues earned from customers from various countries. We perform ongoing credit evaluations of our customers' financial
condition and, generally, require no collateral from our customers. We also have a credit insurance policy for some of our customers.
We maintain an allowance for doubtful accounts receivable based upon the expected ability to collect the accounts receivable. We
review our allowance for doubtful accounts quarterly by assessing individual accounts receivable and all other balances based on
historical collection experience and an economic risk assessment. If we determine that a specific customer is unable to meet its
financial obligations to us, we provide an allowance for credit losses to reduce the receivable to the amount our management reasonably
believes will be collected. To mitigate risks, we deposit cash and cash equivalents with high credit quality financial institutions.
Provisions for doubtful debts are netted against "Accounts receivable-trade."
Inventory
Inventories include finished goods, work
in process and raw materials. Inventories are stated at the lower of cost (cost is determined on a "first-in, first-out"
basis) or market value. Our inventories generally have a limited shelf life and are subject to impairment as they approach their
expiration dates. We regularly evaluate the carrying value of our inventories and when, in our opinion, factors indicate that impairment
has occurred, we establish a reserve against the inventories' carrying value. Our determination that a valuation reserve
might be required, in addition to the quantification of such reserve, requires us to utilize significant judgment. Although we
make every effort to ensure the accuracy of forecasts of future product demand, any significant unanticipated decreases in demand
could have a material impact on the carrying value of our inventories and reported operating results. With respect to inventory
on consignment, see "Revenue recognition" below.
38
Revenue recognition
Revenue is recognized when delivery has
occurred, evidence of an arrangement exists, title and risks and rewards for the products are transferred to the customer, collection
is reasonably assured and product returns can be reliably estimated. When product returns can be reliably estimated a provision
is recorded, based on historical experience, and deducted from revenues. The provision for sales returns and related costs are
included in "Accounts payable and accruals - Other" under "Current liabilities" and "Inventory on
consignment," respectively.
When returns cannot be reliably estimated,
both related revenues and costs are deferred, and presented under "Deferred revenues" and "Inventory on consignment,"
respectively.
As of June 30, 2012, there are no deferred
revenues related to sales for which the rate of return cannot be reliably estimated.
Our revenue arrangements may contain delivery
of free products upon the achievement of sales targets. Each period, we estimate the amount of free products to which these distributors
will be entitled based upon the expected achievement of sales targets and defer a portion of revenues accordingly.
We recognize revenue net of value added
tax.
Research and development costs
Research and development costs are charged
to the statement of operations as incurred.
Share-based compensation
Employee option awards are classified as
equity awards and accounted for using the grant-date fair value method. The fair value of share-based awards is estimated using
the Black-Scholes valuation model, which is expensed over the requisite service period, net of estimated forfeitures. We estimate
forfeitures based on historical experience and anticipated future conditions.
We elected to recognize compensation expense
for awards with only service conditions that have graded vesting schedules using the accelerated multiple option approach.
We account for equity instruments issued
to third party service providers (non-employees) by recording the fair value of the options granted using an option pricing model,
at each reporting period, until rewards are vested in full. The expense is recognized over the vesting period using the accelerated
multiple option approach. The expense relates to options granted to third party service providers with respect to successful investor
introductions that are recorded at their fair value in equity, as issuance costs.
In addition, certain of our share-based
awards are performance based, i.e., the vesting of these awards depends upon achieving certain goals. We estimate the expected
pre-vesting award probability, i.e., the expected likelihood that the performance conditions will be achieved, and only recognize
expense for those shares expected to vest.
Uncertain tax and value added tax positions
We follow a two-step approach to recognizing
and measuring uncertain tax and value added tax positions. The first step is to evaluate the tax and value added tax position for
recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will
be sustained on audit. The second step is to measure the tax and value added tax benefit as the largest amount that is more than
50% and 75%, respectively, likely of being realized upon ultimate settlement. Such liabilities are classified as long-term, unless
the liability is expected to be resolved within twelve months from the balance sheet date. Our policy is to include interest and
penalties related to unrecognized tax benefits within financial expenses.
39
Results of Operations
Six Month Period Ended June 30, 2012
Compared to the Six Month Period Ended June 30, 2011
Revenue.
For the six month
period ended June 30, 2012, total revenue decreased approximately $0.6 million, or 24.0%, to approximately $2.1 million from approximately
$2.7 million during the same period in 2011. The $0.6 million decrease was attributable to a decrease in sales volume, as described
more fully below. The following is an explanation of the approximately $0.6 million decrease in revenue broken down by its main
two components, a decrease in gross revenues of approximately $0.5 million and a net decrease in deferred revenues recognized of
approximately $0.1 million.
For the six month period ended June 30,
2012, total gross revenue decreased by approximately $0.5 million, or 19.6%, to approximately $2.0 million from approximately $2.5
million during the same period in 2011.  This decrease in total gross revenue is predominantly sales volume based, with
decreased sales volume accounting for approximately $340,000, or approximately 13.0%, and price decreases to our repeat distributors
accounting for the remaining approximately $150,000, or approximately 6.0%.  With respect to individual markets, this
decrease in gross revenue was mainly attributable to the fact that we did not have any sales to our distributor in India during
the six month period ended June 30 2012, compared to sales of approximately $1.2 million to this distributor during the same period
in 2011, a decrease of approximately $0.2 million of gross revenue from our distributor in Spain, a decrease of approximately $0.1
million of gross revenue from our distributor in Argentina, a decrease of approximately $0.1 million of gross revenue from our
distributor in France and a decrease of approximately $0.1 million of gross revenue from our distributor in Israel. These decreases
were partially offset by an increase of approximately $0.5 million of gross revenues from our distributor in Russia, an increase
of approximately $0.2 million of gross revenue from our distributor in Italy, an increase of approximately $0.2 million of gross
revenue from our distributor in Germany, an increase of approximately $0.1 million of gross revenue from our distributor in Poland,
and an increase of approximately $0.1 million of gross revenue from our distributor in Mexico, and an increase of approximately
$0.1 million from our remaining distributors, all due to higher sales volumes to these distributors.
For the six month period ended June 30,
2012, net deferred revenue recognized decreased by approximately $0.1 million, or 66.8%, to approximately $0.1 million from approximately
$0.2 million during the same period in 2011. This decrease was almost entirely sales volume based, partially offset by approximately
$0.1 million in price increases to our repeat distributors. The deferred revenue recognized during the six month period ended June
30, 2012 was comprised primarily of approximately $0.1 million of revenue that we deferred from a shipment to India in the first
six months of 2011. Our net deferred revenue for the six month period ended June 30, 2011 consisted of approximately $0.1 million
of deferred revenue from our distributor in India, offset by recognized revenue of approximately $0.1 million from our distributors
in Israel, approximately $0.1 million from our distributor in Brazil, and approximately $0.1 million from other distributors.
Gross Profit.
For the
six month period ended June 30, 2012, gross profit (revenue less cost of revenues) decreased 41.5%, or approximately $0.5 million,
to approximately $0.7 million from approximately $1.2 million during the same period in 2011. Gross margin decreased from 43.5%
in the six month period ended June 30, 2011 to 33.5% in the six month period ended June 30, 2012. In addition to our decrease in
sales, the primary reason for the decrease in gross profit was a write-off of approximately $0.4 million of slow moving inventory,
which accounted for approximately 89.7% of the decrease mentioned above. We were able to partially offset these decreases with
reduced production cost per stent driven by economies of scale. For the six month period ended June 30, 2012, our average selling
price per stent recognized in revenue was $584, and we recognized the sale of 3,548 stents, compared to an average price of $541
per stent and 5,040 stents recognized in revenue for the same period in 2011.  Our cost of goods sold per stent increased
from an average of $305 per stent recognized in revenue for the six month period ended June 30, 2011 to an average of $388 per
stent for the same period in 2012.
Research and Development Expense.
For
the six month period ended June 30, 2012, research and development expense increased 138.5% or approximately $1.5 million, to approximately
$2.6 million, from approximately $1.1 million during the same period in 2011. The increase in cost resulted primarily from higher
clinical trial expenses of approximately $1.2 million, attributable mainly to the MGuard for Acute ST Elevation Reperfusion Trial
(MASTER Trial) (approximately $0.7 million), the U.S. Food and Drug Administration clinical trial (approximately $0.3 million)
and the MGuard Carotid clinical trial (approximately $0.2 million), an increase of approximately $0.1 million in salaries, approximately
$0.1 million in share-based compensation and approximately $0.1 million in miscellaneous expenses. Research and development expense
as a percentage of revenue increased to 125.9% for the six month period ended June 30, 2012 from 40.1% in the same period in 2011.
40
Selling and Marketing Expense.
For
the six month period ended June 30, 2012, selling and marketing expense increased 19.2%, or approximately $0.2 million, to approximately
$1.2 million, from approximately $1.0 million during the same period in 2011.  The increase in selling and marketing
expense resulted primarily from approximately $0.2 million of additional salaries and approximately $0.1 million of additional
share-based compensation principally for newly hired sales personnel in connection with the expansion of our sales activities worldwide,
and approximately $0.2 million in advertising expenses. This increase was partially offset by a decrease of approximately $0.1
million of commissions pertaining mainly to our first time shipment of approximately $1.2 million to our distributor in India during
the six month period ended June 30, 2011 (no such sale occurred in the same period of 2012), approximately $0.1 million in share-based
compensation to consultants and approximately $0.1 million in miscellaneous expenses. Selling and marketing expense as a percentage
of revenue increased to 60.2% for the six month period ended June 30, 2012 from 38.3% in the same period in 2011.
General and Administrative Expense.
For
the six month period ended June 30, 2012, general and administrative expense increased 67.3%, or approximately $1.6 million, to
approximately $4.0 million from $2.4 million during the same period in 2011. The increase resulted primarily from an increase in
share-based compensation of $1.2 million, predominately related to directors' compensation, an increase of approximately
$0.2 million in rent expense related to our move to a new location to support our expanding sales activities, an increase of approximately
$0.1 million in audit fees to accommodate and comply with the reporting requirements of the Securities and Exchange Commission,
approximately $0.1 million in legal fees, related primarily to compliance with the reporting requirements of the Securities and
Exchange Commission, approximately $0.1 million of fees paid to consultants that was also related primarily to compliance with
the reporting requirements of the Securities and Exchange Commission, and approximately $0.3 million in miscellaneous expenses.
This increase was partially offset by a decrease of approximately $0.4 million in litigation expenses. General and administrative
expense as a percentage of revenue increased to 193.1% for the six month period ended June 30, 2012 from 87.7% in the same period
in 2011.
Financial Expenses (Income).
For
the six month period ended June 30, 2012, financial expense decreased 113.9%, or approximately $0.9 million, to approximately $0.1
million of financial income from $0.8 million of financial expense during the same period in 2011. The decrease in expense resulted
primarily from approximately $1.3 million of financial income from the revaluation of warrants pertaining to our convertible debentures,
partially offset by approximately $1.2 million of amortization expense pertaining to the same convertible debentures and their
related issuance costs in the six month period ended June 30, 2012, as compared to a one-time financial expense recording of approximately
$0.6 million in the first six month period of 2011 pertaining to the revaluation of an outstanding convertible loan at fair value
prior to redemption and approximately $0.2 million for the favorable impact of exchange rate differences for the six month period
ended June 30, 2011. Financial expense as a percentage of revenue was 28.9% for the six month period ended June 30, 2011, compared
to 5.3% of financial income for the same period in 2012.
Tax Expenses.
Tax expense
remained relatively flat at $32,000 for the six month period ended June 30, 2012, as compared to $20,000 during the same period
in 2011.
Net Loss.
Our net loss
increased by approximately $2.9 million, or 70.7%, to $7.1 million for the six month period ended June 30, 2012, from $4.2 million
during the same period in 2011. The increase in net loss resulted primarily from an increase in operating expenses of approximately
$3.3 million (see above for explanation) and a decrease of approximately $0.5 million in gross profit (see above for explanation).
This increase was partially offset by a decrease in financial expenses (income) of approximately $0.9 million (see above for explanation).
41
Twelve Months Ended December 31, 2011 Compared
to Twelve Months Ended December 31, 2010
Revenue.
For the twelve
months ended December 31, 2011, total revenue increased approximately $1.1 million, or 21.3%, to approximately $6.0 million from
approximately $4.9 million during the same period in 2010. The $1.1 million increase was attributable primarily to an increase
in sales volume, as described more fully below. The following is an explanation of the approximately $1.1 million increase in revenue
broken down by its main two components, an increase in gross revenues of approximately $2.5 million offset by a net decrease in
deferred revenues of approximately $1.4 million.
For the twelve months ended December 31,
2011, total gross revenue increased by approximately $2.5 million, or 77.6%, to approximately $5.7 million from approximately $3.2
million during the same period in 2010.  This increase in total gross revenue was predominantly sales volume based, with
increased sales volume accounting for approximately $2.3 million, or approximately 72.5%, and price increases accounting for the
remaining approximately $0.2 million, or approximately 5.1%.  In general, we focused on opening new markets, such as
India, and also increasing sales in existing markets by presenting clinical data at conferences and individual presentations to
doctors about the merits of MGuard Coronary.  With respect to individual markets, this increase in gross revenue is mainly
attributable to the first time shipment of approximately $1.2 million to our distributor in India during the twelve months ended
December 31, 2011, an increase of approximately $0.4 million of gross revenue from our new distributor in Russia, an increase of
approximately $0.4 million of gross revenue from our distributor in Israel, an increase of approximately $0.3 million of gross
revenue from our distributor in Brazil, an increase of approximately $0.2 million of gross revenue from our distributor in Spain,
an increase of approximately $0.2 million of gross revenue from our distributor in Argentina, an increase of approximately $0.1
million of gross revenue from our distributor in South Africa, an increase of approximately $0.1 million of gross revenue from
our new distributor in Ukraine, an increase of approximately $0.1 million of gross revenue from our new distributor in the Netherlands
and an increase of approximately $0.1 million of gross revenue from our distributor in Mexico.  This increase was partially
offset by a decrease of approximately $0.2 million in gross revenue from our distributor in Germany, a decrease of approximately
$0.2 million in gross revenue from our distributor in Pakistan, a decrease of approximately $0.2 million from our distributor in
Poland, a decrease of approximately $0.1 million in gross revenue from our distributor in Italy, and a decrease of approximately
$0.1 million in gross revenue to our distributor in France, all due to lower sales volume to these distributors. We also shipped
and recognized gross revenue for approximately $0.2 million more from our remaining distributors during the twelve months ended
December 31, 2011, as compared to the same period in 2010.
For the twelve months ended December 31,
2011, net deferred revenue recognized decreased by approximately $1.4 million, or 83.8%, to approximately $0.3 million from approximately
$1.7 million during the same period in 2010. The key driver of this decrease was a decrease in the volume of revenue deferred to
2011 compared to the volume of revenue deferred to 2010, accounting for approximately $1.3 million or approximately 74.5%, with
the remaining approximately $0.1 million, or 9.3%, being driven by price decreases in the revenue deferred to 2011 compared to
the revenue deferred to 2010. Revenue recognition out of deferred income had less of an impact in 2011 as compared to 2010 due
to the fact that we deferred mainly shipments in 2008 and 2009 that were recognized in 2010. In 2010, only a small set of customers
had a large portion of their revenues deferred until 2011.
For the twelve months ended December 31,
2011, our net deferred revenue consisted of approximately $0.2 million attributable to our distributor in Israel, approximately
$0.1 million to our distributor in Brazil, and approximately $0.1 million to our distributor in Poland, offset by approximately
$0.1 million deferred for a shipment to our distributor in India. Our distributor in Israel had a contractual right to return all
purchases to us within 18 months of the purchase date. Due to our inability to accurately estimate the amount of future returns,
all sales to this distributor were deferred until this 18 month return period elapsed.  On May 9, 2011, our distributor
in Israel agreed to revoke its previous rights to return purchases, resulting in all future sales being final. The deferred revenue
of approximately $0.2 million recognized during the twelve months period ended December 31, 2011 accounted for all previous purchases
by the distributor that the distributor no longer had a contractual right to return and were not yet recognized as revenues. Our
distributor in Brazil has a contractual right to return all purchases for up to six months from the delivery date. Due to our inability
to accurately estimate the amount of future returns by our distributor in Brazil, all sales made to it were also deferred until
the six month return period elapsed. The deferred revenue of approximately $0.1 million recognized during the twelve months period
ended December 31, 2011 accounted for purchases made in December 2010 that were not returned by the Brazilian distributor and were
not yet recognized as revenues. In 2011, it was decided that due to lack of actual returns from the Brazilian distributor, despite
the clause in its contract, we will no longer defer revenue pertaining to current shipments. Our distributor in India made its
first purchase in 2011. Because of our inexperience with this distributor, management decided to defer a portion of the shipment
to 2012, when it could better determine if a portion of it would be returned.
42
For the twelve months ended December 31,
2010, net deferred revenue recognized of approximately $1.7 million was comprised mainly of shipments from 2008 and 2009 to our
distributor in Poland of approximately $1.3 million, to our distributor in Brazil of approximately $0.3 million, and to our distributor
in Sri Lanka of approximately $0.1 million. For the twelve months ended December 31, 2010, our distributor in Poland, subject to
our sole discretion, had the right to return our products.  Because we were unable to develop estimates for the level
of returns, the $1.3 million worth of shipments made to the distributor in Poland that we recorded as deferred revenues were only
recognized during the twelve months ended December 31, 2010 as revenues. As noted above, our distributor in Brazil has a contractual
right to return all purchases for up to six months from the delivery date. As also noted above, due to our inability to accurately
estimate the rate of return by this distributor, all sales made to it were also deferred until the six month return period elapsed.
The deferred revenue of approximately $0.3 million recognized during the twelve months period ended December 31, 2010 accounted
for purchases made in December 2009 that were not returned and were not yet recognized as revenues.
Gross Profit.
For the
twelve months ended December 31, 2011, gross profit increased 32.8%, or approximately $0.7 million, to approximately $3.0 million
from approximately $2.3 million during the same period in 2010.  Gross margin increased from 45.5% in the twelve months
ended December 31, 2010 to 49.9% in the twelve months ended December 31, 2011.  In addition to an increase in sales,
we were able to improve our gross profit because of reduced production cost per stent driven by reduction in price per unit from
our subcontractor and economies of scale. For the twelve months ended December 31, 2011, our average selling price per stent recognized
in revenue was $571, and we recognized the sale of 10,523 stents, compared to an average price of $606 per stent and 8,171 stents
recognized in revenue for the same period in 2010.  Our cost of goods sold per stent decreased from an average of $330
per stent recognized in revenue for the twelve months ended December 31, 2010 to an average of $286 per stent for the same period
in 2011.  The higher price per stent for the twelve months ended December 31, 2010 was effected by the price of stents
sold in 2008 and 2009 to one of our European distributors in Euros when the Euro was much stronger than the U.S. dollar, at an
average price of $997 when translated to U.S. dollars.
Research and Development Expense.
For
the twelve months ended December 31, 2011, research and development expense increased 84.9%, or approximately $1.2 million, to
approximately $2.5 million from approximately $1.3 million during the same period in 2010. The increase in cost resulted primarily
from higher clinical trial expenses of approximately $1.2 million, attributable mainly to the U.S. Food and Drug Administration
clinical trial (approximately $0.9 million) and the MGuard for Acute ST Elevation Reperfusion Trial (MASTER Trial) (approximately
$0.3 million), and an increase of approximately $0.3 million in salaries, offset by an approximately $0.2 million reduction in
miscellaneous expenses and an approximately $0.1 million reduction in share-based compensation. Research and development expense
as a percentage of revenue increased to 41.2% for the twelve months ended December 31, 2011 from 27.0% in the same period of 2010.
Selling and Marketing Expense.
For
the twelve months ended December 31, 2011, selling and marketing expense increased 59.6%, or approximately $0.7 million, to approximately
$2.0 million, from approximately $1.3 million during the same period in 2010.  The increase in selling and marketing
expense resulted primarily from approximately $0.3 million of additional salaries and approximately $0.4 of share-based compensation
principally for newly hired sales personnel in connection with the expansion of our sales activities worldwide, and approximately
$0.1 million of commissions pertaining mainly to our first time shipment of approximately $1.2 million to our distributor in India.
This increase was partially offset by a decrease of approximately $0.1 million in advertising expenses. Selling and marketing expense
as a percentage of revenue increased to 32.9% in 2011 from 25.0% in 2010.
General and Administrative Expense.
For
the twelve months ended December 31, 2011, general and administrative expense increased 323.6%, or approximately $9.4 million,
to approximately $12.3 million from $2.9 million during the same period in 2010. The increase resulted primarily from an increase
in share-based compensation of $7.5 million, which predominately pertains to directors' compensation, an increase of approximately
$0.5 million in salary expenses (due to an increase in employee infrastructure to accommodate and comply with the reporting requirements
of the Securities and Exchange Commission), an increase in investor related activities of approximately $0.5 million (due to us
having been a publicly reporting company during the twelve months ended December 31, 2011, but not during the same period in 2010),
an increase of approximately $0.5 million in litigation expenses (primarily due to a provision for our potential loss related to
a threatened lawsuit from a finder claiming a future success fee and commissions for assistance in finding our distributor in Brazil),
approximately $0.3 million in legal fees (also related primarily to compliance with the reporting requirements of the Securities
and Exchange Commission), and approximately $0.2 million in audit fees to accommodate and comply with the reporting requirements
of the Securities and Exchange Commission. This increase was partially offset by a decrease of approximately $0.1 million in miscellaneous
expenses. General and administrative expense as a percentage of revenue increased to 204.4% in 2011 from 58.6% in 2010.
43
Financial Expenses (Income).
For
the twelve months ended December 31, 2011, financial expense increased 506.5%, or approximately $0.8 million, to approximately
$1.0 million from $0.2 million during the same period in 2010. The increase in expense resulted primarily from a one-time financial
expense recording of approximately $0.6 million in the first quarter of 2011 pertaining to the revaluation of an outstanding convertible
loan at fair value prior to redemption and approximately $0.2 million for the favorable impact of exchange rate differences for
the twelve months ended December 31, 2010 that did not occur during the twelve months ended December 31, 2011. Financial expense
as a percentage of revenue increased from 3.1% in 2010, to 15.6% in 2011.
Tax Expenses.
Tax expense
remained relatively flat at $2,000 for the twelve months ended December 31, 2011, as compared to $47,000 during the same period
in 2010.
Net Loss.
Our net loss
increased by approximately $11.3 million, or 328.8%, to $14.7 million for the twelve months ended December 31, 2011 from $3.4 million
during the same period in 2010. The increase in net loss resulted primarily from an increase in operating expenses of approximately
$11.2 million (see above for explanation) and an increase of approximately $0.8 million in financial expenses (income) (see above
for explanation). This increase was partially offset by an increase in gross profit of approximately $0.7 million (see above for
explanation).
Twelve Months Ended December 31, 2010 Compared
to Twelve Months Ended December 31, 2009
Revenues.
For the twelve months ended
December 31, 2010, total revenue increased approximately $1.5 million, or 45.1%, to approximately $4.9 million from approximately
$3.4 million in 2009. The $1.5 million increase in revenue was primarily attributable to an increase in the amount of net deferred
revenues recognized during 2010.
For a description of the revenue deferred
to 2010, see "Twelve months ended December 31, 2011 compared to twelve months ended December 31, 2010" above.
For the twelve months ended December 31,
2009, net deferred revenue of approximately $0.1 million was comprised mainly of shipments made in 2009 but deferred and recognized
in 2010 to our distributor in Brazil in the amount of approximately $0.4 million, to our distributor in Poland in the amount of
$0.2 million and to our distributor in Israel in the amount of $0.2 million, offset by shipments made in 2008 but deferred and
recognized in revenue in 2009 from our distributor in Italy in the amount of $0.5 million, and from our distributor in Cyprus in
the amount of $0.2 million. Because 2008 was our first year of sales and we were unable to accurately estimate the amount of future
returns of our products, all revenues from shipments made in 2008 were deferred and recognized in 2009. The deferred revenue for
each distributor recognized during the twelve month period ended December 31, 2009 accounted for the purchases made in the twelve
month period ended December 31, 2008 that were not returned by either distributor and were not yet recognized as revenues. See
also "Twelve months ended December 31, 2011 compared to twelve months ended December 31, 2010" above for the reasons
why such revenue was deferred and/or recognized for certain of the distributors listed above.
Total gross revenue for the twelve months
ended December 31, 2010 remained relatively flat in comparison to the twelve months ended December 31, 2009, increasing by approximately
$46,000. This increase was predominantly sales volume based, with increased sales volume accounting for approximately $263,000,
offset by price decreases in the amount of $217,000. The increase in sales volume was evenly distributed among our distributors.
The decrease in prices were due to our penetration of newly opened markets, namely Brazil, Slovakia and Cyprus in 2010, which required
reduced prices as compared to 2009.
44
Gross Profit.
For the twelve months
ended December 31, 2010, gross profit (revenue less cost of revenues) increased 101.2%, or approximately $1.1 million, to approximately
$2.2 million from approximately $1.1 million during the same period in 2010. Our gross margin percentage for the twelve months
ended December 31, 2010 increased to 45.5% of revenues, compared to 32.8% during the same period in 2009. In addition to an increase
in sales, we were able to improve our gross profit because of reduced production cost per stent driven by reduction in price per
unit from our subcontractor and economies of scale. For the twelve months ended December 31, 2010, our average selling price per
stent recognized in revenue was $606, and we recognized the sale of 8,171 stents, compared to an average price of $577 per stent
and 5,910 stents recognized in revenue for the same period in 2009. Our cost of goods sold per stent decreased from an average
of $380 per stent recognized in revenue for the twelve months ended December 31, 2009 to an average of $330 per stent for the same
period in 2010. The higher price per stent for the twelve months ended December 31, 2010 was affected by the price of stents sold
in 2008 and 2009 to one of our Europeans distributors in Euros when the Euro was much stronger than the U.S. dollar, at an average
price of $997 when translated to U.S. dollars.
Research and Development Expense.
For the twelve months ended December 31, 2010, research and development expense remained relatively flat at approximately $1.3
million as compared to the same period in 2009. Research and development expense as a percentage of revenue decreased to 27.0%
in 2010 from 39.0% in 2009.
Selling and Marketing Expense.
For
the twelve months ended December 31, 2010, selling and marketing expense increased by approximately $0.2 million, or 18.8%, to
approximately $1.2 million from approximately $1.0 million during the same period in 2009. The increase in cost resulted primarily
from an increase of approximately $0.2 million in advertising expenses. Selling and marketing expense as a percentage of revenue
decreased to 25.0% in 2010 from 30.5% in 2009.
General and Administrative Expense.
For the twelve months ended December 31, 2010, general and administrative expense increased approximately $1.4 million, or 97.5%,
to approximately $2.9 million from approximately $1.5 million during the same period in 2009. The increase resulted primarily from
an increase in share-based compensation of approximately $0.7 million (of which approximately $0.5 million related to employees
and $0.2 million related to directors), an increase of approximately $0.2 million in audit fees (as we prepared for the transition
from generally accepted accounting principles in Israel to the U.S.), an increase of $0.1 million in salary expenses, and an increase
of approximately $0.4 million in other expenses (due to our overall expansion). General and administrative expense as a percentage
of revenue increased to 58.6% in 2010 from 43.0% in 2009.
Financial Expenses (Income).
For
the twelve months ended December 31, 2010, financial expense increased to approximately $0.2 million from income of $4,000 for
the same period in 2009. The increase in expense resulted primarily from a one-time financial income recording of $0.3 million
in 2009 pertaining to the cancellation of the conversion feature of a convertible loan that was repaid in the same year. Financial
expense as a percentage of revenue increased to 3.1% in 2010, compared to financial income as a percent of revenue of 1.2% in 2009.
Tax Expenses.
Tax expense remained
flat at $47,000 for the twelve months ended December 31, 2010 and 2009. Our expenses for income taxes reflect primarily the tax
liability due to potential tax exposure.
Net Loss.
Our net loss increased
by approximately $0.7 million, or 25.6%, to approximately $3.4 million in 2010 from approximately $2.7 million during the same
period in 2009. The increase in net loss resulted primarily from an increase in operating expenses of approximately $1.6 million
(see above for explanation) and an increase of approximately $0.2 million in financial expenses (see above for explanation). This
increase was partially offset by an increase in gross profit of approximately $1.1 million (see above for explanation).
45
Liquidity and Capital Resources
Six Month Period Ended June 30, 2012 Compared
to the Six Month Period Ended June 30, 2011
Since our formation, we have had recurring
losses and negative cash flows from operating activities and have significant future commitments. For the six months ended June
30, 2012, we had losses of approximately $7.1 million and negative cash flows from operating activities of approximately $4.4 million.
We believe that our working capital as of June 30, 2012 of approximately $10.8 million should enable us to continue funding the
negative cash flows from operating activities until October 2013, when our convertible debentures are subject to a non-contingent
redemption option that could require us to make a payment of approximately $13.3 million, including accrued interest. Since we
expect to continue incurring negative cash flows from operations and in light of the potential cash requirement in connection with
our convertible debentures, there is substantial doubt about our ability to continue operating as a going concern.
Based on our financial position as of June
30, 2012, we will need to raise further capital at some future point in time, through the sale of additional equity securities
or debt. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability
to successfully commercialize our MGuard products, our development of future products and competing technological and market developments.
However, we may be unable to raise sufficient additional capital when we require it or upon terms favorable to us. In addition,
the terms of any securities we issue in future financings 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. If we are unable to obtain adequate funds on reasonable terms, we will
need to curtail operations significantly, including possibly postponing or halting our U.S. Food and Drug Administration clinical
trials or entering into financing agreements with unattractive terms.
General.
At June 30, 2012, we had
cash and cash equivalents of approximately $10.3 million, as compared to $8.0 million at June 30, 2011. The increase is attributable
primarily to the issuance of senior secured convertible debentures and warrants on April 5, 2012. We have historically met our
cash needs through a combination of issuance of new shares, borrowing activities and sales. Our cash requirements are generally
for product development, clinical trials, marketing and sales activities, finance and administrative cost, capital expenditures
and general working capital.
Cash used in our operating activities was
approximately $4.4 million for the six month period ended June 30, 2012, and approximately $1.8 million for the same period in
2011. The principal reasons for the usage of cash in our operating activities for the six month period ended June 30, 2012 included
a net loss of approximately $7.1 million and approximately $1.3 million in non-cash financial income related to the revaluation
of warrants pertaining to our convertible debentures, offset by approximately $1.9 million in non-cash share-based compensation,
approximately $1.0 million in non-cash financial expense related to our convertible debentures, a decrease in working capital of
approximately $0.9 million (driven primarily from a decrease in our accounts receivable of approximately $0.5 million due to our
decrease in sales and an increase of approximately $0.5 million in other payables due to accruals recorded pertaining to the MGuard
for Acute ST Elevation Reperfusion Trial (MASTER Trial) and the U.S. Food and Drug Administration clinical trial) and approximately
$0.2 million of all other adjustments.
Cash used by our investing activities was
approximately $0.2 million during the six month period ended June 30, 2012, compared to approximately $0.1 million during the same
period in 2011. The principal reason for the increase in cash used in investing activities during 2012 was the purchase of approximately
$0.2 million of new equipment.
Cash flow generated from financing activities
was approximately $9.8 million for the six month period ended June 30, 2012, and $9.4 million for the same period in 2011. The
principal source of cash flow from financing activities during 2012 was the proceeds from our convertible debentures and warrants
issued on April 5, 2012 of approximately $9.9 million, offset by the repayment of a long-term loan in the amount of approximately
$0.1 million. The principal source of cash flow from financing activities during the six month period ended June 30, 2011 was the
private placement conducted in conjunction with the share exchange transactions on March 31, 2011 and other private equity issuances
prior to and after the share exchange transactions in the aggregate amount of approximately $10.6 million, offset by the repayment
of a convertible loan in the amount of approximately $1.0 million and the partial repayment of a long-term loan in the amount of
approximately $0.2 million.
As of June 30, 2012, our current assets
exceeded current liabilities by a multiple of 4.1. Current assets increased approximately $4.5 million during the six month period
ended June 30, 2012, mainly due to cash raised from the convertible debenture and warrant offering on April 5, 2012, and current
liabilities increased by approximately $0.1 million during the same period. As a result, our working capital surplus increased
by approximately $4.4 million to approximately $10.8 million during the six month period ended June 30, 2012.
46
Long-Term Loan.
Prior to June 30,
2012, we had a long-term loan in the amount of approximately $0.1 million bearing interest at the three month U.S. Dollar LIBOR
rate plus 4% per annum. The loan was payable in eight quarterly installments during a period of three years that began in April
2010. According to the loan agreement, in case of an "exit transaction" (defined as certain merger or sale transactions,
or an initial public offering), we were required to pay to the bank an additional $0.25 million if the sum received in the transaction
was higher than $100 million. The loan was repaid in January 2012.
Sales of Stock/Issuance of Debt and Securities.
For the six month period ended June 30, 2012, we issued senior secured convertible debentures due April 5, 2014 in the original
aggregate principal amount of $11,702,128 and five-year warrants to purchase an aggregate of 3,343,465 shares of our common stock
at an exercise price of $1.80 per share in exchange for aggregate gross proceeds of $11.0 million, with corresponding net proceeds
of approximately $9.9 million. The convertible debentures were issued with a 6% original issuance discount, bear interest at an
annual rate of 8% and are convertible at any time into shares of common stock at an initial conversion price of $1.75 per share.
Upon conversion of the convertible debentures, investors will receive a conversion premium equal to 8% per annum, with a limit
of 12% for the term of the convertible debentures, of the principal amount being converted. In addition, the investors may require
us to redeem the convertible debentures at any time after October 5, 2013 (18 months after the date of issuance) for 112% of the
then outstanding principal amount, plus all accrued interest, and we may prepay the convertible debentures after six months for
112% of the then outstanding principal amount, plus all accrued interest. In connection with this financing, we paid placement
agent fees of $848,750 and issued placement agents warrants to purchase 312,310 shares of common stock, with terms identical to
the warrants issued to the investors.
Twelve Months Ended December 31, 2011 Compared
to Twelve Months Ended December 31, 2010
General.
At December 31, 2011, we
had cash and cash equivalents of approximately $5.1 million, as compared to $0.6 million at December 31, 2010. The increase was
primarily attributable to the private placement conducted in conjunction with the share exchange transactions on March 31, 2011
and other private equity issuances prior to and after the share exchange transactions.
Cash used in our operating activities was
approximately $6.0 million for the twelve months ended December 31, 2011, and approximately $2.7 million for the same period in
2010. The principal reasons for the usage of cash in our operating activities for the twelve months ended December 31, 2011 included
a net loss of approximately $14.7 million and a decrease in working capital of approximately $2.0 million, offset by approximately
$9.6 million in non-cash share-based compensation, an approximately $0.9 million in non-cash financial expenses related to the
revaluation of a convertible loan and approximately $0.2 million of all other adjustments.
Cash provided by our investing activities
was approximately $13,000 during the twelve months ended December 31, 2011, compared to approximately $46,000 of cash used by investing
activities during the same period in 2010. The principal reason for the decrease in cash flow from investing activities during
2011 was a decrease in restricted cash of approximately $160,000, offset by the purchase of approximately $140,000 of new manufacturing
equipment.
Cash flow generated from financing activities
was approximately $10.7 million for the twelve months ended December 31, 2011, and $3.0 million for the same period in 2010. The
principal reason for the increase in cash flow from financing activities during 2011 was the private placement conducted in conjunction
with the share exchange transactions on March 31, 2011 and other private equity issuances and exercise of options prior to and
after the share exchange transactions in the aggregate amount of approximately $12.1 million, offset by the repayment of a convertible
loan in the amount of approximately $1.0 million and the partial repayment of a long-term loan in the amount of approximately $0.4
million.
As of December 31, 2011, our current assets
exceeded current liabilities by a multiple of 2.8. Current assets increased approximately $5.9 million during 2011, mainly due
to cash raised from the private placements in 2011, while current liabilities decreased approximately $0.5 million during the same
period. As a result, our working capital surplus increased by approximately $6.4 million to approximately $6.3 million during the
twelve months ended December 31, 2011.
47
Long-Term Loan.
As of December 31,
2011, we had a long-term loan outstanding in the amount of approximately $0.1 million bearing interest at the three month U.S.
Dollar LIBOR rate plus 4% per annum. See "Six month period ended June 30, 2012 compared to six month period ended June 30,
2011 — Long-Term Loan."
Convertible Loans.
Prior to December
31, 2011, we had convertible loans outstanding with an aggregate principal amount outstanding of approximately $1.58 million that
bore interest at the rate of 8% per annum. Following the share exchange transactions on March 31, 2011, $580,000 plus accrued interest
converted into shares of our common stock and warrants to purchase shares of our common stock. The remaining principal in the amount
of $1.0 million, plus all accrued interest, was repaid on May 15, 2011.
Sales of Stock.
For the twelve months
ended December 31, 2011, we issued an aggregate of 12,315,145 shares of common stock and warrants to purchase 6,709,073 shares
of common stock for gross proceeds of approximately $13.7 million and corresponding net proceeds of approximately $12.1 million.
Twelve Months Ended December 31, 2010 Compared
to Twelve Months Ended December 31, 2009
General.
At December 31, 2010, we
had cash and cash equivalents of approximately $0.6 million, as compared to $0.4 million at December 31, 2009.
Cash used in our operating activities was
approximately $2.7 million for the twelve months ended December 31, 2010, and approximately $1.5 million for the same period in
2009. The principal reasons for the increase in cash used in operations in 2010 included a net loss of approximately $3.4 million,
a decrease of approximately $1.6 million in deferred revenues offset by approximately $1.6 million of non-cash share-based compensation
expense, an increase of approximately $0.4 million in other working capital and $0.3 million of other non-cash adjustments.
Cash used in investing activities was approximately
$46,000 for the twelve months ended December 31, 2010 and approximately $0.3 million for the same period in 2009. The principal
reasons for the decrease in cash flow from investing activities included approximately $81,000 for plant and equipment purchases
offset by a decrease of approximately $52,000 in restricted cash.
Cash flow generated from financing activities
was approximately $3.0 million for the twelve months ended December 31, 2010, and approximately $0.7 million for the same period
in 2009. The principal reasons for the increase in cash flow from financing activities during 2010 were the issuance of approximately
$1.8 million in new shares and the issuance of convertible loans of approximately $1.5 million, offset by the repayment of a long-term
loan in the amount of approximately $0.3 million.
As of December 31, 2010, current assets
were approximately equal with our current liabilities. Current assets decreased approximately $0.2 million during the twelve months
ended December 31, 2010 while current liabilities decreased by approximately $1.5 million during the same period. As a result,
our working capital deficiency decreased by approximately $1.2 million to approximately $53,000 during the twelve months ended
December 31, 2010.
Newly Adopted Accounting Guidance
In May 2011, the Financial Accounting Standards
Board issued Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs ("ASU 2011-04"). ASU 2011-04 changes certain fair value
measurement principles and clarifies the application of existing fair value measurement guidance. These amendments include, among
others, (1) the application of the highest and best use and valuation premise concepts, (2) measuring the fair value of an instrument
classified in a reporting entity's shareholders' equity and (3) disclosing quantitative information about the unobservable
inputs used within the Level 3 hierarchy. Effective January 1, 2012, we adopted ASU 2011-04. The adoption of this accounting standards
update did not have a material impact on our consolidated financial statements.
48
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.
Tabular Disclosure of Contractual Obligations
The following table summarizes our outstanding
contractual obligations as of June 30, 2012:
Payments Due By Period
(in thousands)
More
than
Contractual Obligations
Total
Less than
1 year
1 – 3
years
3 – 5
years
5
years
Convertible loan
(1)
$
14,745
$
703
$
14,043
0
0
Operating lease obligations
(2)
$
913
$
403
$
510
0
0
Accounts Payable
$
1,983
$
1,983
$
0
0
0
Total
$
17,641
$
3,089
$
14,553
$
—
$
—
(1)
Our convertible loan obligations as of June 30, 2012 consisted of senior secured convertible debentures issued to certain investors
on April 5, 2012 in the aggregate amount of $11.7 million. Our convertible debentures bear interest at the rate of 8% per annum
and are convertible at any time into shares of common stock at an initial conversion price of $1.75 per share. The holders of our
convertible debentures may require us to redeem our convertible debentures at any point 18 months after the date of issuance for
112% of the outstanding principal amount.
(2)
Our operating lease obligations consist of the lease for our offices and manufacturing facilities in Tel Aviv, Israel and the
leases for the majority of our company cars.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
We are exposed to market risk related to
fluctuations in interest rates and in foreign currency exchange rates.
Interest Rate Exposure
Our exposure to market risk relates primarily
to short-term investments, including funds classified as cash equivalents. As of June 30, 2012, all excess funds were invested
in time deposits and other highly liquid investments, therefore our interest rate exposure is not considered to be material.
Foreign Currency Exchange Rate Exposure
Our foreign currency exchange rate exposure
continues to evolve as we grow internationally. Our exposure to foreign currency transaction gains and losses is the result of
certain revenues and expenses being denominated in currencies other than the U.S. dollar, primarily the Euro and the New Israeli
Shekel. We do not currently engage in hedging or similar transactions to reduce these risks. Fluctuations in currency exchange
rates could impact our results of operations, financial position, and cash flows.
49
BUSINESS
History
We were organized in the State of Delaware
on February 29, 2008 as Saguaro Resources, Inc. to engage in the acquisition, exploration and development of natural resource properties.
On March 28, 2011, we changed our name from "Saguaro Resources, Inc." to "InspireMD, Inc."
On March 31, 2011, we completed a series
of share exchange transactions pursuant to which we issued the shareholders of InspireMD Ltd. 50,666,663 shares of common stock
in exchange for all of InspireMD Ltd.'s issued and outstanding ordinary shares, resulting in the former shareholders of InspireMD
Ltd. holding a controlling interest in us and InspireMD Ltd. becoming our wholly-owned subsidiary. In addition, all options, warrants
or other securities convertible into or exercisable for ordinary shares of InspireMD Ltd. were exchanged for options, warrants
or other securities convertible into or exercisable for shares of our common stock.
Immediately following the share exchange
transactions, we transferred all of our pre-share exchange operating assets and liabilities to our wholly-owned subsidiary, Saguaro
Holdings, Inc., a Delaware corporation, and transferred all of Saguaro Holdings, Inc.'s outstanding capital stock to Lynn
Briggs, our then-majority stockholder and our former president, chief executive officer, chief financial officer, secretary-treasurer
and sole director, in exchange for the cancellation of 7,500,000 shares of our common stock held by Ms. Briggs.
After the share exchange transactions and
the divestiture of our pre-share exchange operating assets and liabilities, we succeeded to the business of InspireMD Ltd. as our
sole line of business, and all of our then-current officers and directors resigned and were replaced by some of the officers and
directors of InspireMD Ltd.
On June 1, 2012, our board of directors
approved a change in our fiscal year-end from December 31 to June 30, effective June 30, 2012.
Overview
We are a medical device
company focusing on the development and commercialization of our proprietary stent platform technology,
MGuard.  MGuard provides embolic protection in stenting procedures by placing a micronet mesh sleeve over a stent
(see photograph below of an MGuard stent). Our initial products are marketed for use mainly in patients with acute coronary
syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions (bypass
surgery). According to the TYPHOON STEMI trial (New England Journal of Medicine, 2006) and the SOS SVG Trial (Journal of the
American College of Cardiology, 2009), of patients with acute myocardial infarction and saphenous vein graft coronary
interventions, 7.5% to 44% experience major adverse cardiac events, including cardiac death, heart attack and restenting of
the artery. When performing stenting procedures in patients with acute coronary symptoms, interventional cardiologists face a
difficult dilemma in choosing, with the aim of ensuring adequate protection from distal embolization (the dislodgement of
particles from the artery wall that results in blood clot), between bare-metal stents, which have a high rate of restenosis
(formation of new blockages), and drug-eluting (drug-coated) stents, which have a high rate of late thrombosis (formation of
clots months or years after implantation), require administration of anti-platelet drugs for at least one year post
procedure, are more costly than bare-metal stents and have additional side effects.  We believe that MGuard is a
simple and seamless solution for these patients.  For the six months ended June 30, 2012, our total revenue was
approximately $2.1 million and our net loss was approximately $7.1 million. For the year ended December 31, 2011, our total
revenue was approximately $6.0 million and our net loss was approximately $14.7 million.
50
MGuard Sleeve – Microscopic View
We intend to study our MGuard technology
for use in a broad range of coronary related situations in which complex lesions are required and intend to seek to make it an
industry standard for treatment of acute coronary syndromes. We believe that patients will benefit from a cost-effective alternative
which we believe will prove to have a superior clinical efficacy and safety profile than other stent technologies. We believe that
with our MGuard technology, we are well positioned to emerge as a key player in the global stent market.
We also intend to apply our technology to
develop additional products used for other vascular procedures, specifically carotid (the arteries that supply blood to the brain)
and peripheral (other arteries) procedures.
In October 2007, our first generation product,
the MGuard Coronary, received CE Mark approval for treatment of coronary arterial disease in the European Union. CE Mark is a mandatory
conformance mark on many products marketed in the European Economic Area and certifies that a product has met European Union consumer
safety, health or environmental requirements. 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.
Our initial MGuard Coronary product incorporated
a stainless steel stent. We replaced this stainless steel platform with a more advanced cobalt-chromium based platform, which we
refer to as the MGuard Prime version of the MGuard Coronary. We believe the new platform will prove to be superior because cobalt-chromium
stents are generally known in the industry to provide better deliverability and possibly even a reduction in major adverse cardiac
events. In particular, according to Jabara, et al. ("A Third Generation Ultra-thin Strut Cobalt Chromium Stent: Histopathological
Evaluation in Porcine Coronary Arteries," EuroIntervention, November 2009), due to its greater density, cobalt-chromium enables
the construction of stents that have both thinner struts and similar radial strength as stainless steel, with its thicker struts.
In turn, Jabara, et al. found that the reduced thickness of the struts provides more flexibility and lower crossing profiles, thereby
reducing the inflammatory response and neointimal thickening, potentially lowering restenosis and target vessel revascularization
rates.
The MGuard Prime version of the MGuard Coronary
received CE Mark approval in the European Union in October 2010 for improving luminal diameter and providing embolic protection.
We believe we can use and leverage the clinical trial results of our original stainless steel based MGuard Coronary to market our
new cobalt-chromium based MGuard Prime version of the MGuard Coronary.
However, we face a number of challenges
to the further growth of our MGuard Coronary and other planned MGuard products. For example, we face 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 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. In addition, none of our products is currently approved by the U.S. Food and Drug Administration.
Clinical trials necessary to support a pre-market approval application to the U.S. Food and Drug Administration for our MGuard
products 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. Furthermore,
our rights to our intellectual property with respect to our products could be challenged. 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 MGuard products based
on one or more of these patents. Additionally, there is a strong preference to use drug-eluting stents in some countries. Over
the last decade, there has been an increasing tendency to use drug-eluting stents in percutaneous coronary intervention (PCI),
commonly known as angioplasty (a therapeutic procedure to treat narrowed coronary arteries of the heart found in patients with
heart disease), with a usage rate of drug-eluting stents in PCI approaching 70-80% in some countries, even though drug-eluting
stents do not address thrombus management in acute myocardial infarction. Also, the use of other bare-metal stents is preferred
over the use of MGuard products in certain circumstances, such as when placing the stent at the entrance to large side branches,
known as "jailing large side branches."
51
Unless otherwise indicated, in this prospectus,
references to MGuard Coronary are to both our initial stainless steel based MGuard Coronary and our more current cobalt-chromium
based MGuard Prime version of the MGuard Coronary, as applicable.
Business Segment and Geographic Areas
For financial information about our one
operating and reportable segment and geographic areas, refer to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 13. "Entity Wide Disclosures" to our consolidated financial
statements included elsewhere in this prospectus.
Our Industry
According to Fact Sheet No. 310/June 2011
of the World Health Organization, approximately 7.3 million people worldwide died of coronary heart disease in 2008. Physicians
and patients may select from among 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. A stent is an expandable "scaffold-like" device, usually constructed
of a stainless steel material, that is inserted into an artery to expand the inside passage and improve blood flow.
According to the January 3, 2011 2011 MEDTECH
OUTLOOK produced by BMO Capital Markets, after registering a compounded annual growth rate from 2002 to 2009 of approximately 13%,
revenues from the global coronary stent market is predicted to remain relatively constant, although in volume of stents the market
is predicted to continue to grow. The growth in volume is due to the appeal for less invasive percutaneous coronary intervention
procedures and advances in technology coupled with the increase in the elderly population, obesity rates and advances in technology.
Coronary artery disease is one of the leading
causes of death worldwide. The treatment of coronary artery disease includes alternative treatment methodologies, that is, coronary
artery bypass grafting or angioplasty (percutaneous coronary intervention) with or without stenting. According to the January 3,
2011 2011 MEDTECH OUTLOOK produced by the BMO Capital Markets, the percutaneous coronary intervention procedures involving stents
are increasingly being used to treat coronary artery diseases with an 88.3% penetration rate in 2009.
Our Products
The MGuard stent is an embolic protection
device based on a protective sleeve, which is constructed out of an ultra-thin polymer mesh and wrapped around the stent. The protective
sleeve is comprised of a micron level fiber-knitted mesh, engineered in an optimal geometric configuration and designed for utmost
flexibility while retaining strength characteristics of the fiber material (see illustration below). The sleeve expands seamlessly
when the stent is deployed, without affecting the structural integrity of the stent, and can be securely mounted on any type of
stent.
52
MGuard Deployed in Artery
The protective sleeve is designed to provide
several clinical benefits:
·
the mesh diffuses the pressure and the impact of deployment exerted by the stent on the arterial wall and reduces the injury
to the vessel;
·
the protective sleeve reduces plaque dislodgement and blocks debris from entering the bloodstream during and post procedure
(called embolic showers);
·
in future products, when drug coated, the mesh is expected to deliver better coverage and uniform drug distribution on the
arterial wall and therefore potentially reduce the dosage of the active ingredient when compared to approved drug-eluting stents
on the market; and
·
the protective sleeve maintains the standards of a conventional stent and therefore should require little to no additional
training by physicians.
MGuard – Coronary Applications
Our MGuard Coronary with a bio-stable mesh
and our planned MGuard Coronary with a drug-eluting mesh are aimed at the treatment of coronary arterial disease.
MGuard Coronary with a bio-stable mesh.
Our first MGuard product, the MGuard
Coronary with a bio-stable mesh, is comprised of our mesh sleeve wrapped around a stainless steel bare-metal stent. The
current MGuard Prime version of our MGuard Coronary with a bio-stable mesh is comprised of our mesh sleeve wrapped around a
cobalt-chromium bare-metal stent. In comparison to a conventional bare-metal stent, we believe the MGuard Coronary with a
bio-stable mesh provides protection from embolic showers. Results of clinical trials on the MGuard Coronary stent, including
the MAGICAL, PISCIONE and MGuard international registry (iMOS) clinical trials described below (see "Business –
Comparison of Clinical Trial Results to Date with Results Achieved Using Bare Metal or Drug-Eluting Stents in the STEMI
population" below), indicate positive outcomes and safety measures. The results of these clinical trials for the MGuard
Coronary stent suggest higher levels of reperfusion, lower rates of 30 day and 1 year major adverse cardiac events, and high
levels of complete ST resolution, as compared to the levels and rates of other bare-metal and drug-eluting stents. MGuard
Coronary demonstrated high levels of complete ST resolution (occurrence in 61% of patients in the MAGICAL study and 90% of
patients in the PISCIONE study for the MGuard Coronary stent) and lower rates of 30 day and 1 year major adverse cardiac
events (2.4% and 5.9%, respectively, for the MGuard Coronary stent), as compared to the levels and rates of other bare-metal
and drug-eluting stents, as reported by Svilaas, et. al. ("Thrombus Aspiration during Primary Percutaneous Coronary
Intervention," New England Journal of Medicine , Volume 358, 2008). As reported in the study by Svilaas, et. al.,
complete ST resolution occurred in 44.2% of patients with a bare-metal stent and 56.6% of patients with a bare-metal stent
preceded by an aspiration procedure, and the 30 day and 1 year major adverse cardiac event rates were 9.4% and 20.3%,
respectively, for patients with a bare-metal stent and 6.8% and 16.6%, respectively, for patients with a bare-metal stent
preceded by an aspiration procedure. Furthermore, results from a recent HORIZONS-AMI trial demonstrated that 1 year
major adverse cardiac event rates were 10.9% for patients with drug eluting stents. Complete ST resolution is the evidence of
a quick and adequate disappearance of the pathologic ST elevation in the patient's electrocardiogram, which is the
clear marker of STEMI. The faster and more complete the resolution is, the better recovery of the myocardium and the better
prognosis for the patient. Vlaar et. al. (Cardiac death and reinfarction after 1 year in the Thrombus Aspiration during
Percutaneous coronary intervention in Acute myocardial infarction Study (TAPAS): a 1-year follow-up study, Lancet 2008; 371:
1915–20) reported that a higher completeST resolution correlates with lower mortality and/or reinfarction rates among
affected patients (cardiac mortality was 1.4% for patients with complete ST resolution compared to 15.3% for patients with no
ST resolution).
53
MGuard Coronary with a drug eluting bio-absorbable
mesh.
Based upon the clinical profile of MGuard Coronary, we anticipate that the MGuard Coronary with a drug-eluting
bio-absorbable mesh will offer both the comparable reperfusion levels and 30-day and 1-year major adverse cardiac
event rates as the MGuard Coronary with a bio-stable mesh, as described above, and a comparative restenosis rate, which is the
rate at which patients experience formation of new blockages in their arteries, when compared to existing drug-eluting stents.  This
product is currently planned, but not yet under development. The bio-absorbability of MGuard Coronary with a drug eluting bio-absorbable
mesh is intended to improve upon the bio-absorbability of other drug-eluting stents, in light of the large surface area of the
mesh and the small diameter of the fiber. We intend to study whether the protective sleeve on the MGuard Coronary with a drug-eluting
bio-absorbable mesh can improve uniform distribution of the applied drug to the vessel wall for improved drug therapy management
compared to other drug-eluting stents, where the drug is distributed on the struts only. If this intended result is achieved with
respect to the improved and uniform distribution of the applied drug to the vessel wall, the total dosage of the medication potentially
could be reduced while increasing its efficacy. MGuard Coronary with a drug-eluting bio-absorbable mesh is expected to promote
smooth and stable endothelial cell growth and subsequent attachment to the lumen of the vessel wall, which is essential for rapid
healing and recovery. In addition, we believe bio-absorbable drug-eluting mesh may enable the use of more effective drug therapies
that presently cannot be effectively coated on a metal-based stent due to their poor diffusion capabilities.  Because
the drug-eluting bio-absorbable mesh will be bio-absorbable, we anticipate that the mesh will completely dissolve after four months,
which we expect will result in fewer of the chronic long term side effects that are associated with the presence of the drug.
MGuard – Carotid Applications
We intend to market our mesh
sleeve coupled with a self-expandable stent (a stent that expands without balloon dilation pressure or need of an inflation
balloon) for use in carotid-applications. This product is currently under development.
We believe that our
MGuard design will provide substantial advantages over existing therapies in treating carotid artery stenosis (blockage or
narrowing of the carotid arteries), like conventional carotid stenting and endarterectomy (surgery to remove blockage), given
the superior embolic protection characteristics witnessed in coronary arterial disease applications in high risk patient
populations. We intend that the embolic protection will result from the mesh sleeve, as it traps emboli at their
source. In addition, we believe that MGuard Carotid will provide post-procedure protection against embolic dislodgement,
which can occur immediately after a carotid stenting procedure and is often a 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 also shown that the majority of the incidents of embolic showers
associated with carotid stenting occur immediately post-procedure.
MGuard – Peripheral Applications
We intend to market our mesh sleeve coupled
with a self-expandable stent (a stent that expands without balloon dilation pressure or need of an inflation balloon) for use in
peripheral applications.  This product is currently under development.
Peripheral Artery Disease, also known
as peripheral vascular disease, is usually characterized by the accumulation of plaque in arteries in the legs, need for amputation
of affected joints or even death, when untreated.  Peripheral Artery Disease 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 covered stents, at the risk of blocking branching vessels, to ensure
that emboli does not fall into the bloodstream.  We believe that our MGuard design will provide substantial advantages
over existing therapies in treating peripheral artery stenosis (blockage or narrowing of the peripheral arteries).
54
Product Development and Critical Milestones
Below is a list of the products described
above and our projected critical milestones with respect to each.  As used below, "Q" stands for our fiscal
quarter.  While we currently anticipate seeking approval from the U.S. Food and Drug Administration for all of our products
in the future, we have only outlined a timetable to seek U.S. Food and Drug Administration approval for our MGuard Coronary plus
with bio-stable mesh product in our current business plan.  The use of the term "to be determined" in the
table below with regard to certain milestones indicates that the achievements of such milestones is unable to be accurately predicted
as such milestones are too far in the future.
Product
Indication
Start
Development
CE Mark
European
Union Sales
FDA
Approval
U.S. Sales
MGuard Coronary Plus Bio-Stable Mesh
Bypass/ Coronary
2005
Oct. 2007
Q1-2008
Q4-2015
2016
MGuard Peripheral Plus Bio-Stable Mesh
Peripheral Arteries
Q1-2011
Q4-2012
To be determined
To be determined
To be determined
MGuard Carotid Plus Bio-Stable Mesh
Carotid Arteries
Q1-2011
Q4-2012
To be determined
To be determined
To be determined
MGuard Coronary Plus Bio-Absorbable Drug-Eluting Mesh
Bypass/ Coronary
To be determined
To be determined
To be determined
To be determined
To be determined
With respect to MGuard Carotid with bio-stable
mesh, we have determined that the expected commencement of sales in the European Union cannot be accurately predicted since we
have delayed the development of this product until additional funding for its development is secured.
We anticipate that our MGuard Coronary with
bio-stable mesh will be classified as a Class III medical device by the U.S. Food and Drug Administration.
Pre-Clinical Studies
We performed laboratory and animal testing
prior to submitting an application for CE Mark approval for our MGuard Coronary with bio-stable mesh.  We also performed
all CE Mark-required mechanical testing of the stent.  We conducted pre-clinical animal trials at Harvard and MIT Biomedical
Engineering Center BSET lab in July 2006 and August 2007.  In these animal trials, on average, the performance of the
MGuard Coronary with bio-stable mesh was comparable with the performance of control bare-metal stents.  Analysis also
indicated that in these animal trials, the mesh produced levels of inflammation comparable with those levels produced by standard
bare-metal stents.  No human trials were conducted as part of these pre-clinical trials.
55
The table below describes our completed
and planned pre-clinical trials. The use of the term "To be determined" in the table below with regard to milestone
dates in our pre-clinical studies indicates that we have not yet decided when to schedule such milestones.
Product
Stent
Platform
Approval Requirement
Start of Study
End  of Study
MGuard Coronary
Bare-Metal Stent Plus Bio-Stable
Mesh
CE Mark (European Union + Rest of World)
Q4-2006
Q3-2007
Drug-Eluting Mesh (Bare-Metal Stent Plus Drug-Eluting Mesh)
CE Mark (European Union + Rest of World)
To be determined
To be determined
FDA (U.S.)
To be determined
To be determined
Cobalt-Chromium Stent Plus Bio-
Stable Mesh
FDA
Q2-2011
Q2-2012
MGuard Peripheral/Carotid
Self-Expanding System Plus Mesh
CE Mark (European Union + Rest of World)
Q3 2012
Q1 2013
With respect to the preclinical studies
for MGuard Coronary with a drug eluting bio-absorbable mesh, the trials have been indefinitely suspended due to our determination
to focus our time and resources on other trials at this time.
With respect to the preclinical studies
for MGuard Peripheral/Carotid, the start of study of the Self Expending System Plus Mesh trial has been delayed from our previously
announced target due to a delay in our receipt of anticipated funding.
56
Clinical Trials
The table below describes our completed
and planned clinical trials.  The use of the term "To be determined" in the table below with regard to milestone
dates in our clinical trials indicates that we have not yet decided when to schedule such milestones.  All milestone
dates set forth in the table below are our best estimates based upon the current status of each clinical trial.
Product
Stent
Platform
Clinical
Trial Sites
Follow-up Requirement
Objective
Study Status
No. of Patients
Start Enrollment
End
Enrollment
End of Study
MGuard Coronary
Bare-Metal Stent Plus Bio-Stable
Mesh
Germany – two sites
12 months
Study to
evaluate safety and
performance of MGuard system
41
Q4-2006
Q4- 2007
Q2-2008
Brazil – one site
12 months
30
Q4-2007
Q1-2008
Q2-2009
Poland – four sites
3 years
60
Q2-2008
Q3-2008
Q2-2009
International MGuard Observational Study - worldwide - 50 sites
12 months
Up to 1,000
Q1-2008
Q4-2013
Q4-2013
Israeli MGuard Observational Study - Israel - 8 sites
6 months
Up to 100
Q2-2008
Q3-2011
Q3-2012
Master randomized control trial -
9 countries, 50 centers in South America, Europe and Israel
12 months
433
Q2-2011
Q2-2012
Q2-2013
Brazil Observational Study – 25 sites
12 months
Up to 500
Q3-2010
To be determined
To be determined
FDA Study - 70 sites, U.S. and out of U.S.
12 months
Pilot study to
evaluate safety and
performance of
MGuard system for FDA approval
1,100
Q1-2013
Q2-2014
Q3-2015
Drug-Eluting Stent (Bare-Metal Stent + Drug Eluting Mesh)
South America
and Europe – 10 sites
12 months
Pilot study to
evaluate safety and
performance of
MGuard system for FDA and CE Mark approval
500
To be determined
To be determined
To be determined
U.S. – 50 sites
12 months
2,000
To be determined
To be determined
To be determined
Rest of World as an Observational Study
12 months to 3 years
Evaluation of safety
and efficacy  for specific indications
400
To be determined
To be determined
To be determined
Study Status
Product
Stent
Platform
Clinical
Trial Sites
Follow-up Requirement
Objective
No. of Patients
Start Enrollment
End
Enrollment
End of Study
MGuard   Peripheral
Self-Expanding System + Mesh
South America and Europe – four sites
12 months
Pilot study to
evaluate safety and
performance of MGuard system for CE Mark approval
50
To be determined
To be determined
To be determined
MGuard Carotid
Self-Expanding System + Mesh
Rest of World as a registry study
9 months
Evaluation of safety and efficacy for specific indications post-marketing
150
To be determined
To be determined
To be determined
57
Each of the patient numbers and study dates
set forth in the tables above are management's best estimate of the timing and scope of each referenced trial.  Actual
dates and patient numbers may vary depending on a number of factors, including, without limitation, feedback from reviewing regulatory
authorities, unanticipated delays by us, regulatory authorities or third party contractors, actual funding for the trials at the
time of trial initiation and initial trial results.
The MGuard Coronary clinical trials for
the drug-eluting stent have been delayed from our previously announced target due to a delay in our receipt of anticipated funding.
With respect to the MGuard Peripheral clinical
trial for the self-expanding system plus mesh, the start date has been delayed from our previously announced start date due to
a delay in our receipt of anticipated funding.
With respect to the MGuard Carotid clinical
trial for the self-expanding system plus mesh, the number of patients has been decreased due to feedback from the clinical trial
leaders that a smaller patient population would be sufficient for this clinical trial.
Completed Clinical Trials for MGuard
Coronary Bare-Metal Stent Plus Bio-Stable Mesh
As shown in the table above, we have completed
three clinical trials with respect to our MGuard Coronary with bio-stable mesh.  Our first study, conducted at two centers
in Germany, included 41 patients with either saphenous vein graft coronary interventions or native coronary lesions treatable by
a stenting procedure (blockages where no bypass procedure was performed).  The MGuard Coronary rate of device success,
meaning the stent was successfully deployed in the target lesion, was 100% and the rate of procedural success, meaning there were
no major adverse cardiac events prior to hospital discharge, was 95.1%.  At six months, only one patient (2.5% of participants)
had major myocardial infarction (QWMI) and 19.5% of participants had target vessel revascularization (an invasive procedure required
due to a stenosis in the same vessel treated in the study).  This data supports MGuard Coronary's safety in the
treatment of vein grafts and native coronary legions.
Our 2007 study in Brazil included 30 patients
who were candidates for a percutaneous coronary intervention (angioplasty) due to narrowing of a native coronary artery or a bypass
graft. In all patients, the stent was successfully deployed with perfect blood flow parameters (the blood flow parameter is a measurement
of how fast the blood flows in the arteries and the micro circulation system in the heart). There were no major cardiac events
at the time of the follow-up 30 days after the deployment of the stents.
The MAGICAL study, which was conduct in
Poland, included 60 patients with acute ST-segment elevation myocardial infarction (the most severe form of a heart attack, referred
to as "STEMI").  The purpose of the study was to evaluate the clinical performance of MGuard Coronary with
bio-stable mesh when used in STEMI patients where percutaneous coronary intervention is the primary line of therapy.  Perfect
blood flow in the artery was achieved in 90% of patients, perfect blood flow into the heart muscle was achieved in 73% of patients
and complete restoration of electrocardiogram normality was achieved in 61% of patients. The total major adverse cardiac events
rate during the six-month period following the deployment of the stents was 0% and after a three-year period was 10.5%.
Ongoing Clinical Trials for MGuard
Coronary Bare-Metal Stent Plus Bio-Stable Mesh
Our ongoing observation study in
Europe is an open registry launched in the first fiscal quarter of 2009.  This registry is expected to enroll up to
1,000 patients and is aimed at evaluating the performance of MGuard Coronary with bio-stable mesh in a "real
world" population. To date, the primary countries to join are Austria, Czech Republic and Hungary. The primary endpoint
that this registry will evaluate is the occurrence of major adverse cardiac events at six months following deployment of the
stent, and the clinical follow-up will continue for a period of up to one year per patient. As of September 1, 2012, 548
patients of the prospective 1,000 have been enrolled in 19 sites.
Our ongoing observational study in Israel
is an open registry launched in the fourth fiscal quarter of 2009.  This registry is expected to enroll up to 100 patients.  The
purpose of this study is to support local Israeli regulatory approval. The primary endpoint that this registry will evaluate is
the occurrence of major adverse cardiac events at 30 days following deployment of the stent, and the clinical follow-up will be
conducted at six months following deployment of the stent. As September 1, 2012, 86 patients of the prospective 100 have been enrolled.
58
In the third fiscal quarter of 2010, we
launched a Brazilian registry to run in 25 Brazilian sites and enroll 500 patients. The primary endpoint that this registry will
evaluate is the occurrence of major adverse cardiac events at six months following the deployment of the stent, and the clinical
follow-up will continue for a period of up to one year per patient.  As of September 1, 2012, 24 patients of the prospective
500 have been enrolled.
In the second quarter of 2011, we began
the MGuard for Acute ST Elevation Reperfusion Trial (MASTER Trial), a prospective, randomized study in Europe, South America and
Israel to compare the MGuard Coronary stent with commercially-approved bare-metal and drug-eluting stents in achieving better myocardial
reperfusion (the restoration of blood flow) in primary angioplasty for the treatment of acute STEMI. The MASTER Trial enrolled
433 subjects, 50% of whom were treated with an MGuard Coronary stent and 50% of whom were treated with a commercially-approved
bare-metal or drug-eluting stent. The study was designed to evaluate the MGuard Coronary embolic protection stent compared to commercially-approved
bare metal or drug-eluting stents in heart attack patients undergoing primary percutaneous coronary intervention. On August 17,
2012, we were advised that the MASTER Trial demonstrated a positive outcome for the MGuard Coronary in treating acute STEMI when
compared to commercially-approved bare metal or drug-eluting stents. We expect detailed results of the study will be released in
October 2012.
Comparison of Clinical Trial Results to Date with Results
Achieved Using Bare Metal or Drug-Eluting Stents in the STEMI Population From Non-Comparative Study and Pooled Data.
We conducted a meta-analysis of data from
four clinical trials in which MGuard Coronary was used:
·
The  MAGICAL study, a single arm study in which 60 acute ST-segment elevation myocardial infarction (the most severe
form of a heart attack, referred to as STEMI) patients with less than 12 hours symptom onset were enrolled, as reported in "Mesh
Covered Stent in ST-segment Elevation Myocardial Infarction" in
EuroIntervention
, 2010;
·
the PISCIONE study, a single arm study in which 100 STEMI patients were enrolled, as reported in "Multicentre Experience
with MGuard Net Protective Stent in ST-elevation Myocardial Infarction: Safety, Feasibility, and Impact on Myocardial Reperfusion"
in
Catheter Cardiovasc Interv
, 2009;
·
the iMOS study, a Registry on MGuard Coronary use in the "real-world" population, from a study whose data was not
published; and
·
the Jain study, which looks at a small group of 51 STEMI patients, as reported in "Prevention of Thrombus Embolization
during Primary Percutaneous Intervention Using a Novel Mesh Covered Stent" in
Catheter Cardiovasc Interv
, 2009.
Our meta-analysis included data from the
following trials:
·
The CADILLAC (Controlled Abciximab and Device Investigation to Lower Late Angioplasty Complications) study, which found that
primary stent implantation is a preferred strategy for the treatment of acute myocardial infarction, as reported in "A Prospective,
Multicenter, International Randomized Trial Comparing Four Reperfusion Strategies in Acute Myocardial Infarction: Principal Report
of the Controlled Abciximab and Device Investigation to Lower Late Angioplasty Complications (CADILLAC)" Trial in
Journal
of American College of Cardiology
, 2001;
·
The EXPORT trial which was a randomized open-label study whose primary endpoint was to evaluate flow improvement in AMI patients
using either conventional stenting or aspiration followed by stenting, as reported in "Systematic Primary Aspiration in Acute
Myocardial Percutaneous Intervention: A Multicentre Randomised Controlled Trial of the Export Aspiration Catheter" in
EuroIntervention
,
2008;
·
The EXPIRA trial which was a single-center study aimed to explore pre-treatment with manual thrombectomy as compared to conventional
stenting, as reported in "Thrombus Aspiration During Primary Percutaneous Coronary Intervention Improves Myocardial Reperfusion
and Reduces Infarct Size: The EXPIRA (Thrombectomy with Export Catheter in Infarct-related Artery During Primary Percutaneous Coronary
Intervention) Prospective, Randomized Trial" in
Journal of American College of Cardiology
, 2009;
59
·
The REMEDIA trial, whose objective was to assess the safety and efficacy of the EXPORT catheter for thrombus aspiration in
STEMI patients, as reported in "Manual Thrombus-Aspiration Improves Myocardial Reperfusion: The Randomized Evaluation of
the Effect of Mechanical Reduction of Distal Embolization by Thrombus-Aspiration in Primary and Rescue Angioplasty (REMEDIA) Trial"
in
Journal of American College of Cardiology
, 2005;
·
The Horizons-AMI (Harmonizing Outcomes with RevascularIZatiON and Stents in Acute MI), which is the largest randomized trial
which compared DES to BMS in MI patients, as reported in "Paclitaxel-Eluting Stents Versus Bare-Metal Stents in Acute Myocardial
Infarction" in
New England Journal of Medicine
, 2009;
and
·
The TAPAS Trial which showed that thrombus aspiration before stenting benefits MI patients, as reported in "Thrombus
Aspiration During Primary Percutaneous Coronary Intervention" in
New England Journal of Medicine
, 2009.
The non-randomized, pooled data analysis
of MGuard Coronary outcomes in STEMI population show comparable rates of thrombolysis in myocardial infarction (TIMI) 3 flow with
no significant difference of the historical control as compared to MGuard Coronary (88.5% and 91.7%, respectively), while the rates
of myocardial blush grade score 3 (37.3% for the historical control and 81.6% for MGuard Coronary) and ST segment resolution>70%
(53.6% for the historical control and 79.1% for MGuard Coronary) are significantly better with the MGuard Coronary. MGuard Coronary
also appears consistently superior at the 30 days major adverse cardiac event (8.4% for the historical control and 2.4% for MGuard
Coronary) and 1 year major adverse cardiac event (13.3% for the historical control and 5.9% for MGuard Coronary) endpoints. The
data appears in the following tables.
NAME OF STUDY
MAGICAL
PISCIONE
iMOS
Jain
Average
Number of Patients
60
100
203
51
414 (Total)
Thrombolysis in myocardial infarction 0-1,%
0
0
1.2
0
0.6
Thrombolysis in myocardial infarction 3,%
90
85
93.5
100
91.7
Myocardial blush grade 0-1,%
3.3
0
—
—
1.2
Myocardial blush grade 3,%
73
90
80
—
81.6
ST segment resolution>70%,%
61
90
—
—
79.1
ST segment resolution>50%,%
88
—
85.4
96
87.6
30 day major adverse cardiac event,%
0
2.2
3.2
—
2.4
6 month major adverse cardiac events,%
0
4.5
6.0
—
4.6
1 year major adverse cardiac events,%
—
5.6
6.0
6.0
5.9
1 year target vessel revascularization
—
2.3
2.3
6.0
2.8
Acute Binary Resteonosis 6M,%
—
—
19.0*
—
19.0
THREE YEAR FOLLOW UP STUDIES
NAME OF STUDY
MAGICAL
PISCIONE
iMOS
Jain
Average
Number of Patients
57 out of 60
89
—
—
—
Cardiac death at 3Y
7%
2.2%
—
—
—
Non Cardiac death at 3Y
1.8%
6.8%
—
—
—
Re-MI at 3Y
0%
7.9%
—
—
—
TLR at 3Y
1.8%
Not Reported
—
—
—
TVR at 3Y Include TLR
3.6%
4.5%
—
—
—
Stroke
1.8%
Not Reported
—
—
—
Stent thrombosis Definite / Probable
0%
2.2%
—
—
—
MACE  (Cardiac death, RE-MI, TLR)
8.8%
10.1%
—
—
—
MACCE  (All death, target vessel MI, TVR, Stroke)
10.5%
Not Reported
—
—
—
60
Trial
CADILLAC
Horizons-
AMI
Horizons-
AMI
TAPAS
TAPAS
EXPORT
EXPORT
EXPIRA
EXPIRA
REMEDIA
REMEDIA
Historical
comparison
MGuard
Level of
Significance
Group
Stent + Abciximab
BMS
DES
Thrombus aspiration
control
control
TA
control
Thrombus aspiration
Thrombus aspiration
control
Average
Average
Number of Patients
524
749
2257
535
536
129
120
87
88
50
49
5124 (total)
414 (total)
Thrombolysis in myocardial infarction 0-1,%
—
—
—
—
—
3.9
2.4
1.1
0
—
—
2.1
0.6
Thrombolysis in myocardial infarction 3,%
96.9
87.6
89.8
86
82.5
76.9
82
—
—
—
—
88.5
91.7
Myocardial blush grade 0-1,%
48.7
—
—
17.1
26.3
31.6
27.6
40.2
11.4
32
55.1
35.2
1.2
*
Myocardial blush grade 3,%
17.4
—
—
45.7
32.2
25.4
35.8
—
—
—
—
37.3
81.6
**
ST segment resolution>70%,%
62
—
—
56.6
44.2
—
—
39.1
63.6
58
36.7
53.6
79.1
ST segment resolution>50%,%
—
—
—
—
—
71.9
85
—
—
—
—
78.2
87.6
30 day major adverse cardiac event,%
4.4
—
—
6.8
9.4
—
—
—
—
10
10.2
8.4
2.4
**
6 month major adverse cardiac events,%
10.2
—
—
—
—
—
—
—
—
—
—
10.2
4.6
1 year major adverse cardiac events,%
—
13.1
10.9
16.6
20.3
—
—
—
—
—
—
13.3
5.9
*
Acute Binary Resteonosis 6 month,%
20.8
—
—
—
—
—
—
—
—
—
—
20.8
19.0
1 year target vessel revascularization
—
7.4
4.6
12.9
11.2
—
—
—
—
—
—
—
—
Acute Binary Resteonosis 1 year,%
—
21
8.3
—
—
—
—
—
—
—
—
11.5
—
Future Clinical Trials for MGuard Coronary
We anticipate that additional studies will
be conducted to meet registration requirements in key countries, particularly the U.S.  We have currently budgeted about
$15 million for the U.S. Food and Drug Administration trial, which amount may change based on the final design of the study that
is approved by the U.S. Food and Drug Administration.  We expect that post-marketing trials will be conducted to further
evaluate the safety and efficacy of the MGuard Coronary with bio-stable mesh in specific indications.  These trials will
be designed to facilitate market acceptance and expand the use of the product.
We also plan to conduct a
large clinical study for U.S. Food and Drug Administration approval in the U.S. We expect that this study will be a
prospective, multicenter, randomized clinical trial. Its primary objective will be to compare the safety and the
effectiveness of the MGuard Coronary stent in the treatment of de novo stenotic lesions in coronary arteries in patients
undergoing primary revascularization (a surgical procedure for the provision of a new, additional, or augmented blood supply
to the heart) due to acute myocardial infarction with currently approved bare metal stents and drug eluting stents. We expect
total enrollment of approximately 1,100 subjects, at up to 70 sites throughout the U.S. and Europe. The combined primary
endpoint of this study is intended to demonstrate the MGuard Coronary stent's superiority in the occurrence of
myocardial reperfusion, which is measured by restoration of ST segment resolution of greater than 70%, and its
non-inferiority in the occurrence of target vessel failure (a composite endpoint of cardiac death, reoccurrence of a heart
attack and the need for a future invasive procedure to correct narrowing of the coronary artery), as compared to other
stents. This study is expected to start in the first quarter of 2013, and the enrollment phase is expected to last 18 months.
We expect that subjects will be followed for 12 months with assessments at 30 days, 6 months and 12 months, with angiographic
subgroup analysis occurring after the 13
th
month. This plan is tentative, and is subject to change to conform with
U.S. Food and Drug Administration regulations and requirements.
61
In other countries outside of the U.S.,
we believe that we generally will be able to rely upon the CE Mark approval of the product, as well as the results of the U.S.
Food and Drug Administration trial and MASTER Trial in order to obtain local approvals.
Growth Strategy
Our primary business objective is to utilize our proprietary
technology to become the industry standard for treatment of acute coronary syndromes 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 in order to achieve this objective.
·
Successfully
                                                                                                              commercialize MGuard
                                                                                                              Coronary with bio-stable
                                                                                                              mesh.
We have
                                                                                                              begun commercialization
                                                                                                              of MGuard Coronary
                                                                                                              with a bio-stable
                                                                                                              mesh in Europe,
                                                                                                              Russia, Asia and Latin America through
                                                                                                              our distributor
                                                                                                              network and we are
                                                                                                              aggressively pursuing
                                                                                                              additional registrations
                                                                                                              and contracts in
                                                                                                              other countries
                                                                                                              such as Canada,
                                                                                                              South Korea, Belgium,
                                                                                                              and certain smaller
                                                                                                              countries in Latin
                                                                                                              America.  By
                                                                                                              the time we begin
                                                                                                              marketing this product
                                                                                                              in the U.S., we
                                                                                                              expect to have introduced
                                                                                                              the MGuard Coronary
                                                                                                              technology to clinics
                                                                                                              and interventional
                                                                                                              cardiologists around
                                                                                                              the world, and to
                                                                                                              have fostered brand
                                                                                                              name recognition
                                                                                                              and widespread adoption
                                                                                                              of MGuard Coronary. We
                                                                                                              plan to accomplish
                                                                                                              this by participating
                                                                                                              in national and
                                                                                                              international conferences,
                                                                                                              conducting and sponsoring
                                                                                                              clinical trials,
                                                                                                              publishing articles
                                                                                                              in scientific journals,
                                                                                                              holding local training
                                                                                                              sessions and conducting
                                                                                                              electronic media
                                                                                                              campaigns.
·
Successfully
                                                                                                              develop the next
                                                                                                              generation of MGuard
                                                                                                              stents.
While we
                                                                                                              market our MGuard
                                                                                                              Coronary with bio-stable
                                                                                                              mesh, we intend
                                                                                                              to develop the MGuard
                                                                                                              Coronary with a
                                                                                                              drug-eluting mesh.  We
                                                                                                              are also working
                                                                                                              on our MGuard stents
                                                                                                              for peripheral and
                                                                                                              carotid, for which
                                                                                                              we expect to have
                                                                                                              CE Mark approval
                                                                                                              by the first quarter
                                                                                                              of 2013.  In
                                                                                                              addition, we released
                                                                                                              our cobalt-chromium
                                                                                                              version of MGuard
                                                                                                              Coronary, MGuard
                                                                                                              Prime, in 2010,
                                                                                                              which we anticipate
                                                                                                              will replace the
                                                                                                              original stainless
                                                                                                              steel based version
                                                                                                              of MGuard Coronary
                                                                                                              over the next few
                                                                                                              years.
·
Continue to leverage MGuard 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 technology to address imminent market needs for new product innovations to significantly improve patients' care.  We
have secured intellectual property using our mesh technology in the areas of brain aneurism, treating bifurcated blood vessels
and a new concept of distal protective devices.  We believe these areas have large growth potential given, in our view,
that present solutions are far from satisfactory, and there is a significant demand for better patient care.  We believe
that our patents can be put into practice and that they will drive our growth at a later stage.
62
·
Work with
                                                                                                              world-renowned physicians
                                                                                                              to build awareness
                                                                                                              and brand recognition
                                                                                                              of MGuard portfolio
                                                                                                              of products.
We intend to work
                                                                                                              closely with leading
                                                                                                              cardiologists to
                                                                                                              evaluate and ensure
                                                                                                              the efficacy and
                                                                                                              safety of our products.  We
                                                                                                              intend that some
                                                                                                              of these prominent
                                                                                                              physicians will
                                                                                                              serve on our Scientific
                                                                                                              Advisory Board,
                                                                                                              which is our advisory
                                                                                                              committee that advises
                                                                                                              our board of directors,
                                                                                                              and run clinical
                                                                                                              trials with the
                                                                                                              MGuard Coronary
                                                                                                              stent.  We
                                                                                                              believe these individuals,
                                                                                                              once convinced of
                                                                                                              the MGuard Coronary
                                                                                                              stent's appeal,
                                                                                                              will be invaluable
                                                                                                              assets in facilitating
                                                                                                              the widespread adoption
                                                                                                              of the stent.  In
                                                                                                              addition, we plan
                                                                                                              to look to these
                                                                                                              cardiologists to
                                                                                                              generate and publish
                                                                                                              scientific data
                                                                                                              on the use of our
                                                                                                              products, and to
                                                                                                              present their findings
                                                                                                              at various conferences
                                                                                                              they attend.  Dr.
                                                                                                              Gregg W. Stone,
                                                                                                              director of Cardiovascular
                                                                                                              Research and Education
                                                                                                              at the Center for
                                                                                                              Interventional Vascular
                                                                                                              Therapy of New York
                                                                                                              Presbyterian Hospital/Columbia
                                                                                                              University Medical
                                                                                                              Center and the co-director
                                                                                                              of Medical Research
                                                                                                              and Education at
                                                                                                              The Cardiovascular
                                                                                                              Research Foundation
                                                                                                              is the study chairman
                                                                                                              for the MASTER Trial.  Dr.
                                                                                                              Donald Cutlip, Executive
                                                                                                              Director of Clinical
                                                                                                              Investigation at
                                                                                                              the Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              will provide scientific
                                                                                                              leadership of the
                                                                                                              U.S. Food and Drug
                                                                                                              Administration trials
                                                                                                              and Dr. Stone will
                                                                                                              act as principal
                                                                                                              investigator.  On
                                                                                                              October 4, 2011,
                                                                                                              InspireMD Ltd.,
                                                                                                              our wholly-owned
                                                                                                              subsidiary, entered
                                                                                                              into a clinical
                                                                                                              trial services agreement
                                                                                                              with Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              Inc., pursuant to
                                                                                                              which Harvard Clinical
                                                                                                              Research Institute,
                                                                                                              Inc. will conduct
                                                                                                              a study entitled
                                                                                                              "MASTER II
                                                                                                              - MGuard Stent System
                                                                                                              Clinical Trial in
                                                                                                              Patients with Acute
                                                                                                              Myocardial Infarction"
                                                                                                              on our behalf. We
                                                                                                              will pay Harvard
                                                                                                              Clinical Research
                                                                                                              Institute, Inc.,
                                                                                                              Cardio Research
                                                                                                              Foundations (CRF),
                                                                                                              as a core laboratory,
                                                                                                              and MedPass International,
                                                                                                              as our European
                                                                                                              monitoring group,
                                                                                                              an estimated aggregate
                                                                                                              fee of approximately
                                                                                                              $15 million for
                                                                                                              conducting the study,
                                                                                                              subject to adjustment
                                                                                                              dependent upon changes
                                                                                                              in the scope and
                                                                                                              nature of the study,
                                                                                                              as well as other
                                                                                                              costs to be determined
                                                                                                              by the parties.
·
Continue to protect and expand our portfolio of patents.
Our patents and their protection are critical to our
success.  We have filed nine separate patents for our MGuard technology in Canada, China, Europe, Israel, India, South
Africa and the U.S.  We believe these patents cover all of our existing products, and can be useful for future technology.  We
intend to continue patenting new technology as it is developed, and to actively pursue any infringement upon our patents.  To
date, we have secured patent protection in each of the U.S., South Africa and China for one patent. See "Business –
Intellectual Property – Patents").
As noted above, we previously filed patents
for our MGuard technology in China, as part of our intended growth strategy.  However, upon further consideration of
the cost and resources required to achieve patent protection in China, we elected to prioritize our pursuit of growth opportunities
in other countries and, as such, have ceased our growth efforts in China for the current time period.  We intend to reevaluate
our strategy towards commercialization of our MGuard technology in China in the future.
Competition
The stent industry is highly competitive.  The
bare-metal stent and the drug-eluting stent markets in the U.S. and Europe are dominated by Abbott Laboratories, Boston Scientific
Corporation, Johnson & Johnson and Medtronic, Inc. Due to ongoing consolidation in the industry, there are high barriers to
entry for small manufacturers in both the European and the U.S. markets.  However, we believe that the European market
is somewhat more fragmented, and small competitors appear able to gain market share with greater ease.
In the future, we believe that physicians
will look to next-generation stent technology to compete with existing therapies.  These new technologies will likely
include bio-absorbable stents, stents that are customizable for different lesion lengths, stents that focus on treating bifurcated
lesions, and stents with superior polymer and drug coatings.  Some of the companies developing new stents are The Sorin
Group, Xtent, Inc., Cinvention AG, OrbusNeich, Biotronik SE & Co. KG, Svelte Medical Systems, Inc., Reva Inc. and Stentys SA,
among others.  To address current issues with drug-eluting stents, The Sorin Group and Cinvention AG have developed stents
that do not require a polymer coating for drug delivery, thereby expanding the types of drugs that can be used on their respective
stents.  OrbusNeich has addressed the problem differently, developing a stent coated with an antibody designed to eliminate
the need for any drug at all.  Xtent, Inc. has been concentrating on a stent that can be customized to fit different
sized lesions, so as to eliminate the need for multiple stents in a single procedure.  Biotronik SE & Co. KG is currently
developing bio-absorbable stent technologies, and Abbott Laboratories is currently developing a bio-absorbable drug-eluting stent.  These
are just a few of the many companies working to improve stenting procedures in the future as the portfolio of available stent technologies
rapidly increases.  As the market moves towards next-generation stenting technologies, minimally invasive procedures
should become more effective, driving the growth of the market in the future.  We plan to continue our research and development
efforts in order to be at the forefront of the acute myocardial infarction solutions.
63
According to the January 3, 2011 2011 MEDTECH
OUTLOOK produced by the BMO Capital Markets, the worldwide stent market is dominated by four major players, with a combined total
market share of approximately 96%. Within the bare metal stent market and drug-eluting stent market, the top four companies have
approximately 92% and 98% of the market share, respectively. These four companies are Abbott Laboratories, Boston Scientific Corporation,
Johnson & Johnson and Medtronic, Inc.  To date, our sales are not significant enough to register in market share.  As
such, one of the challenges we face to the further growth of MGuard 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.
In addition to the challenges from our competitors,
we face challenges related specifically to our products.   None of our products is currently approved by the U.S.
Food and Drug Administration.  Clinical trials necessary to support a pre-market approval application to the U.S. Food
and Drug Administration for our MGuard products 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.  Furthermore, our rights to our intellectual property with respect to our products could be
challenged.  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 MGuard products based on one or more of these patents.
We note that an additional challenge facing
our products comes from drug-eluting stents. Over the last decade, there has been an increasing tendency to use drug-eluting stents
in percutaneous coronary intervention (PCI), with a usage rate of drug-eluting stents in PCI approaching 70-80% in some countries,
even though drug-eluting stents do not address thrombus management in acute myocardial infarction. A recent HORIZONS-AMI trial
that compared drug-eluting stents to bare-metal stents in STEMI patients failed to show any benefit of drug-eluting stents as compared
to bare-metal stents with regard to safety (death, re-infarction, stroke, or stent thrombosis), but showed the 1 year target vessel
revascularization (TLR) rate for drug-eluting stent patients was only 4.6%, as compared to 7.4% for patients with bare-metal stents.
However, based on data from over 350 patients across three clinical trials, the TLR rate for MGuard Coronary was 2.8%. (This data
is comprised of: (i) a TLR rate of 2.3% for a 100-patient study, as reported in "Multicentre Experience with MGuard Net Protective
Stent in ST-elevation Myocardial Infarction: Safety, Feasibility, and Impact on Myocardial Reperfusion" in
Catheter Cardiovasc
Interv
, 2009; (ii) a TLR rate of 2.3% for a sub-group of 203 STEMI patients from the International MGuard Observational Study;
and (iii) a TLR rate of 6.0% for a group of 51 heart attack patients, as reported in "Prevention of Thrombus Embolization
during Primary Percutaneous Intervention Using a Novel Mesh Covered Stent" in
Catheter Cardiovasc Interv
, 2009).
Another challenge facing the MGuard products
is that placing the stent at the entrance to large side branches, known as jailing large side branches, is not recommended with
the MGuard Coronary stent, because there is a risk of thrombosis. Jailing requires the need to cross the stent with guidewire and
to create an opening with the balloon to allow proper flow, which can be achieved with lower risk by using other bare-metal stents.
Research and Development Expenses
During each of the six months ended June
30, 2012 and the twelve months ended December 31, 2011, 2010 and 2009, we spent approximately $2.6 million, $2.5 million, $1.3
million and $1.3 million, respectively, on research and development.
Sales and Marketing
Sales and Marketing
In October 2007, MGuard Coronary with a
bio-stable mesh received CE Mark approval in the European Union, and shortly thereafter was commercially launched in Europe through
local distributors.  We are also in negotiations with additional distributors in Europe, Asia and Latin America and are
currently selling our MGuard Coronary with a bio-stable mesh in more than 30 countries.
64
Until U.S. Food and Drug Administration
approval of our MGuard Coronary with a bio-stable mesh, which we are targeting for 2015, we plan to focus our marketing efforts
primarily on Europe, Asia and Latin America.  Within Europe, we have focused on markets with established healthcare reimbursement
from local governments such as Russia, Italy, Germany, France, Greece, Austria, Hungary, Poland, Slovenia, Czech Republic and Slovakia.
In addition to utilizing local and regional
distributor networks, we are using international trade shows and industry conferences to gain market exposure and brand recognition.  We
plan to work with leading physicians to enhance our marketing efforts.  As sales volume increases, we may engage in direct
sales in certain geographic markets.
Product Positioning
The MGuard Coronary has initially penetrated
the market by entering market segments with indications that present high risks of embolic dislodgement, notably acute myocardial
infarction and saphenous vein graft coronary interventions. The market penetration of the MGuard Coronary in 2011 was minimal,
with total sales in the twelve months ended December 31, 2011 of approximately $6 million representing less than 1% of the total
sales of the acute myocardial infarction solutions market and the market penetration for the six months ended June 30, 2012 was
also minimal, with total sales in the six months ended June 30, 2012 of approximately $2.1 million representing less than 1% of
the total sales of the acute myocardial infarction solutions market.
When performing stenting procedures in patients
with acute coronary symptoms, interventional cardiologists face a difficult dilemma in choosing between bare-metal stents, which
have a high rate of restenosis, and drug-eluting stents, which have a high rate of late stent thrombosis, require administration
of anti-platelet drugs for at least one year post procedure and are more costly than bare-metal stents.  We are marketing
our platform technology, MGuard Coronary, as a superior and cost effective solution to these currently unmet needs of interventional
cardiologists.  We believe our MGuard Coronary technology is clinically superior to bare-metal stents because it provides
embolic protection during and post-procedure.  We believe our MGuard Coronary technology is clinically superior to drug-eluting
stents, due to its lower stent thrombosis rate and protection from embolic showers during and post-procedure.
In addition to the advantages of the MGuard
Coronary technology that we believe to exist, the MGuard Coronary technology maintains the deliverability, crossing profile, and
dilatation pressure of a conventional stent, and interventional cardiologists do not have to undergo any training before utilizing
the product.
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, the vast majority of payors have similarly established policies.  All of the MGuard products
sold to date have been designed and labeled in such a way as to facilitate the utilization of existing reimbursement codes, and
we intend to continue to design and label our 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 reimbursement
for the MGuard products or in order to obtain a higher reimbursement price.  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.
In the U.S., once the MGuard Coronary with
bio-stable mesh is approved by the U.S. Food and Drug Administration, it will be eligible for reimbursement from the Centers for
Medicare and Medicaid Services, which serve as a benchmark for all reimbursement codes.  While there is no guarantee
these codes will not change over time, we believe that the MGuard Coronary will be eligible for reimbursement through both governmental
healthcare agencies and most private insurance agencies in the U.S. once it is approved by the U.S. Food and Drug Administration.
65
Intellectual Property
Patents
We have filed nine patent applications
in the U.S. (including one that is still in the Patent Cooperation Treaty international phase) covering aspects of our MGuard
technology. We have filed corresponding patent applications in Canada, China, Europe, Israel, India and South Africa, for an aggregate
total of 35 patents and pending applications. These patents cover percutaneous therapy, knitted stent jackets, stent and filter
assemblies, in vivo filter assembly, optimized stent jackets, stent apparatuses for treatment via body lumens and methods of use,
stent apparatuses for treatment via body lumens and methods of manufacture and use, and stent apparatuses for treatment of body
lumens, among others. In lay terms, these patents generally cover three parts of our products: the mesh sleeve, with and without
a drug, the product and the delivery mechanism of the stent.  On October 27, 2010, our patent application pertaining
to "stent apparatus for treatment via body lumens and method of use", South Africa patent application 2007/10751,
was issued as South Africa patent 2007/10751. On October 25, 2011, our patent application pertaining to "in vivo filter
assembly", U.S. patent application 11/582,354, was issued as U.S. Patent 8,043,323.  On June 13, 2012, our patent
application pertaining to "filter assemblies", China patent application ZL200780046659.9, was issued as China patent
ZL200780046659.9. None of the other patents has been granted to date.  We believe these patents, once issued, will cover
all of our existing products and be useful for future technology.  We also believe that the patents we have filed, in
particular those covering the use of a knitted micron-level mesh sleeve over a stent for various indications, would create a significant
barrier for another company seeking to use similar technology.
To date, we are not aware of other companies
that have patent rights to a micron fiber, releasable knitted fiber sleeve over a stent.  However, larger, better funded
competitors own patents relating to the use of drugs to treat restenosis, stent architecture, catheters to deliver stents, and
stent manufacturing and coating processes as well as general delivery mechanism patents like rapid exchange. Stent manufacturers
have historically engaged in significant litigation, and we could be subject to claims of infringement of intellectual property
from one or more competitors. Although we believe that any such claims would be un-founded, such litigation would divert attention
and resources away from the development of MGuard stents.  Other manufacturers may also challenge the intellectual property
that we own, or may own in the future. We may be forced into litigation to uphold the validity of the claims in our patent portfolio,
an uncertain and costly process.
Trademarks
We use the InspireMD and MGuard trademarks.
We have registered these trademarks in Europe. The trademarks are renewable indefinitely, so long as we continue to use the mark
in Europe and make the appropriate filings when required.
Government Regulation
The manufacture and sale of our products
are subject to regulation by numerous governmental authorities, principally the European Union CE Mark, the U.S. Food and Drug
Administration and other corresponding foreign agencies.
Sales of medical devices outside the U.S.
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 clearance 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
U.S. Food and Drug Administration market authorization. These differences may affect the efficiency and timeliness of international
market introduction of our products. For countries in the European Union, medical devices must display a CE Mark before they may
be imported or sold.  In order to obtain and maintain the CE Mark, we must comply with the Medical Device Directive 93/42/EEC
and pass an initial and annual facilities audit inspections to ISO 13485 standards by an European Union inspection agency. 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 annual facilities audit inspections conducted by European
Union inspectors.
66
As noted below, we currently have distribution
agreements for our products with distributors in the following countries: Italy, Germany, Austria, Czech Republic, Slovakia, France,
Slovenia, Greece, Cyprus, Portugal, Spain, Poland, Hungary, Estonia, Lithuania, Ukraine, United Kingdom, Holland, Russia, Latvia,
Brazil, Chile, Costa Rica, Mexico, Argentina, Colombia, India, Sri Lanka, South Africa, Pakistan, Israel, Uruguay, Venezuela, Ireland,
Belarus and Egypt. We are subject to governmental regulation in each of these countries and we are not permitted to sell all of
our products in each of these countries. 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 each of the above-listed countries that is not a member of the European Union
accepts the CE Mark as its primary requirement for marketing approval, each such country requires additional regulatory requirements
for final marketing approval of the MGuard Prime version of the MGuard Coronary. Additionally, in Canada, we are required to pass
annual facilities audit inspections performed by Canadian inspectors. Furthermore, we are currently targeting additional countries
in Europe, Asia, and Latin America. We believe that each country that we are targeting also accepts the CE Mark as its primary
requirement for marketing approval. We intend that the results of the MASTER Trial will satisfy any additional governmental regulatory
requirements in each of the countries where we currently distribute our products and in any countries that we are currently targeting
for expansion. 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, 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.
The MGuard Prime version of the MGuard Coronary
received CE Mark approval in the European Union in October 2010 and marketing approval in Israel in September 2011. We are currently
seeking marketing approval for the MGuard Prime version of the MGuard Coronary in Brazil, Malaysia, Mexico, Russia, Serbia, Singapore,
Argentina, India, Sri Lanka, Pakistan, South Korea, Ukraine, Belarus and Canada. We are focused on seeking marketing approval in
these countries because we believe that these countries represent the strongest opportunities for us to grow with respect to our
sales. We have determined that other countries with better organized and capitalized healthcare systems may not present us the
same opportunities for growth due to the lack of use of stents in treatment of cardiac episodes and less advantageous healthcare
reimbursement policies, among other reasons. While each of the countries in which we are seeking marketing approval for the MGuard
Prime version of the MGuard Coronary accepts the CE Mark as its primary requirement for marketing approval and does not require
any additional tests, each country does require some additional regulatory requirements for marketing approval. More specifically,
for the approval process in Malaysia, we need to submit an application for regulatory approval, which we anticipate will be granted
in three months. For the approval process in Mexico, we need to submit an application for regulatory approval, which we anticipate
will be granted in twelve months. For the approval process in Serbia, we need to submit an application for regulatory approval,
which we anticipate will be granted in four months. For the approval process in Singapore, we need to submit an application for
regulatory approval, which we anticipate will be granted in ten months. For the approval process in Argentina, we need to submit
an application for regulatory approval, which we anticipate will be granted in approximately twelve months. For the approval process
in India, we need to submit an application for regulatory approval, which we anticipate will be granted in November or December
2012. For the approval process in Sri Lanka, we need to submit an application for regulatory approval, which we anticipate will
be granted in six to twelve months. For the approval process in Pakistan, we need to submit an application for regulatory approval,
which we anticipate will be granted in six to twelve months. For the approval process in South Korea, we need to submit an application
for regulatory approval, which we anticipate will be granted in two years. For the approval process in Ukraine, we need to submit
an application for regulatory approval, which we anticipate will be granted in six months. For the approval process in Belarus,
we need to submit an application for regulatory approval, which we anticipate will be granted in six months. For the approval process
in Canada, we need to submit an application for regulatory approval, which we anticipate will be granted in twelve months. In Israel,
where we received marketing approval in September 2011, we will be subject to annual renewal of our marketing approval. Regulators
in Israel may request additional documentation or other materials and results of studies from medical device manufacturers such
as us as part of the renewal process. Generally, however, the annual renewal of marketing approval is given automatically, barring
a material change in circumstances or results. In Russia, we received market approval in February 2012. In Chile, we received market
approval for our previous distributor in December 2010. We have terminated our relationship with our previous distributor in Chile
and once we enter into a relationship with a new distributor, we will be required to submit a new application for regulatory approval
in Chile, which we anticipate will be granted twelve months after our submission for approval.
67
For the approval process in Brazil, we must
comply with Brazilian Good Manufacturing Practice, or GMP, quality system requirements.  ANVISA, Brazil's regulatory
agency, must conduct an inspection of the manufacturing of the MGuard Prime version of the MGuard Coronary to determine compliance
with Brazil GMP regulations.  Upon successful completion of an audit, ANVISA will then issue the GMP certificate necessary
to register a medical device in Brazil.  Once we receive the necessary GMP certificate, we can apply for regulatory approval.  We
anticipate that the approval process in Brazil will take between one and two years.
Please refer to the table below setting
forth the approvals and sales for original stainless steel based MGuard Coronary and the cobalt-chromium based MGuard Prime version
of the MGuard Coronary on a country-by-country basis.
Approvals and Sales of the Original MGuard Coronary and the MGuard Prime version of the MGuard Coronary on a Country-by-Country Basis
Countries
Original
MGuard
Approval
Original MGuard
Sales
MGuard Prime
Approval
MGuard Prime Sales
Countries
Original MGuard
Approval
Original MGuard
Sales
MGuard
Prime
Approval
MGuard Prime Sales
Argentina
Y
Y
N
N
Italy
Y
Y
Y
Y
Austria
Y
Y
Y
Y
Latvia
Y
Y
Y
Y
Brazil
Y
Y
N
N
Lithuania
Y
Y
Y
N
Chile
N(1)
Y
N
N
Malaysia
N
N
N
N
Colombia
Y
Y
N
N
Mexico
Y
Y
N
N
Costa Rica
Y
Y
N
N
Pakistan
Y
Y
N
N
Cyprus
Y
Y
Y
N
Poland
Y
Y
Y
Y
Czech Rep
Y
Y
Y
N
Portugal
Y
Y
Y
N
UK
Y
N
Y
N
Russia
Y
Y
Y
Y
Estonia
Y
Y
Y
Y
Serbia
N
N
N
N
France
Y
Y
Y
Y
Singapore
N
Y(2)
N
N
Germany
Y
Y
Y
Y
Slovakia
Y
Y
Y
N
Greece
Y
Y
Y
Y
Slovenia
Y
Y
Y
Y
Holland (Netherlands)
Y
Y
Y
Y
South Africa
Y
Y
N
N
Hungary
Y
Y
Y
Y
Spain
Y
Y
Y
Y
India
Y
Y
N
N
Sri Lanka
Y
Y
N
N
Israel
Y
Y
Y
Y
Ukraine
Y
Y
N
N
__________
(1)
We terminated our relationship with our previous distributor in Chile and we will be required to obtain regulatory approval
upon our selection of a new distributor in Chile.
(2)
At time the sales were made, we satisfied the regulatory requirements in Singapore. The regulatory requirements in Singapore
were subsequently changed and we no longer meet these requirements.
In the U.S., the medical devices that will
be manufactured and sold by us will be subject to laws and regulations administered by the U.S. Food and Drug Administration, including
regulations concerning the prerequisites to commercial marketing, the conduct of clinical investigations, compliance with the Quality
System Regulation and labeling.  We anticipate that our MGuard Coronary with bio-stable mesh product will be classified
as a Class III medical device by the U.S. Food and Drug Administration.
68
A manufacturer may seek market authorization
for a new medical device through the rigorous Premarket Approval application process, which requires the U.S. Food and Drug Administration
to determine that the device is safe and effective for the purposes intended.
We will also be required to register with
the U.S. Food and Drug Administration as a medical device manufacturer. As such, our manufacturing facilities will be subject to
U.S. Food and Drug Administration inspections for compliance with 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 U.S. Food and Drug Administration
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. U.S. Food and Drug Administration
regulations also govern product labeling and prohibit a manufacturer from marketing a medical device for unapproved applications.
If the U.S. Food and Drug Administration believes that a manufacturer is not in compliance with the law, it can institute enforcement
proceedings to detain or seize products, issue a recall, enjoin future violations and assess civil and criminal penalties against
the manufacturer, its officers and employees.
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. For the six months ended June 30, 2012, 75% of our revenue was generated in Europe, 8% of
our revenue was generated in Central America, 6% of our revenue was generated in South America, 6% of our revenue was generated
in Asia with the remaining 5% of our revenue generated in the rest of the world.
Our major customers in the six months ended
June 30, 2012 were Bosti Trading Ltd., a distributor in the Russian Federation that accounted for 22% of our revenues, Euromed
Deutschland GmbH, a distributor in Germany that accounted for 14% of our revenues, and Kardia Srl, a distributor in Italy that
accounted for 9% of our revenues. Our agreement with Bosti Trading Ltd. grants Bosti Trading Ltd. the right to be the exclusive
distributor of MGuard products in the Russian Federation until May 2014, subject to the achievement of certain order minimums.
Under our agreement with Bosti Trading Ltd., Bosti Trading Ltd. is required to purchase 3,500 stents from us in 2012, 6,000 stents
in 2013 and 4,000 stents in the first six months of 2014, at a price per stent of 560 Euros, for total minimum order values of
1,960,000 Euros, 3,360,000 Euros and 2,240,000 Euros, respectively. Our agreement with Euromed Deutschland GmbH grants Euromed
Deutschland GmbH the right to be the exclusive distributor of MGuard products in Germany until May 2013, with no order minimums
currently in place. Our agreement with Kardia Srl grants Kardia Srl the right to be the exclusive distributor of MGuard products
in Italy until August 2013, with no order minimums currently in place.
Our major customers in the twelve months
ended December 31, 2011 were Kirloskar Technologies (P) Ltd., a distributor in India that accounted for 18% of our revenues, Tzamal
Jacobsohn Ltd., a distributor in Israel that accounted for 12% of our revenues, and Izasa Distribuciones Tecnicas SA, a distributor
in Spain that accounted for 9% of our revenues.  Our agreement with Kirloskar Technologies (P) Ltd. grants Kirloskar
Technologies (P) Ltd. the right to be the exclusive distributor of MGuard products in India until May 2013, subject to achievement
of certain order minimums.  Under our agreement with Kirloskar Technologies (P) Ltd., Kirloskar Technologies (P) Ltd.
was required to purchase 15,000 stents from us in 2011 and is required to purchase 20,000 stents from us in 2012, at a price per
stent of $600, for total minimum order values of $9,000,000 in 2011 and $12,000,000 in 2012, respectively.  Kirloskar
Technologies (P) Ltd. will also be eligible to receive free stents representing 15% or 20% of the total value of stents purchased,
depending upon the annual volume of the purchases of our stents.  Although Kirloskar Technologies (P) Ltd. did not achieve
its order minimum for 2011, we did not terminate either our agreement with Kirloskar Technologies (P) Ltd. or Kirloskar Technologies
(P) Ltd.'s right to be the exclusive distributor of MGuard products in India.  Our agreement with Tzamal Jacobsohn
Ltd. grants Tzamal Jacobsohn Ltd. the right to be the exclusive distributor MGuard products in Israel until December 2012, subject
to achievement of certain order minimums.  Under our agreement with Tzamal Jacobsohn Ltd., Tzamal Jacobsohn Ltd. must
achieve at least 85% of the following order minimums: 1,400 stents during the twelve months ending March 31, 2012 and 1,600 stents
during the twelve months ending March 31, 2013, at a price per stent, per an oral agreement, of 400 Euros, for total minimum order
values of 560,000 Euros and 640,000 Euros, respectively.  Tzamal Jacobsohn Ltd. will be granted options to purchase 8,116
shares of our common stock for each $100,000 in sales upon achievement of the order minimums. Tzamal Jacobsohn Ltd. did not meet
its order minimum for the twelve months ended March 31, 2012 and, accordingly, no options were granted to Tzamal Jacobsohn Ltd.
under this agreement, however, we did not terminate either our agreement with Tzamal Jacobsohn Ltd. or Tzamal Jacobsohn Ltd.'s
right to be the exclusive distributor of MGuard products in Israel.  Our agreement with Izasa Distribuciones Tecnicas SA grants
Izasa Distribuciones Tecnicas SA the right to be the exclusive distributor of MGuard products in Spain until May 2012, subject
to achievement of certain order minimums.  Under our agreement with Izasa Distribuciones Tecnicas SA, Izasa Distribuciones
Tecnicas SA was required to purchase 4,000 stents from us in 2011, at a price per stent of 700 Euros, for a total minimum order
value of 2,800,000 Euros in 2011.
Izasa Distribuciones Tecnicas SA did not achieve its order minimum for 2011,
however, we did not terminate either our agreement with Izasa Distribuciones Tecnicas SA or Izasa Distribuciones Tecnicas SA's
right to be the exclusive distributor of MGuard products in Spain.  In addition, pursuant to an amendment to our agreement
with Izasa Distribuciones Tecnicas SA, Izasa Distribuciones Tecnicas SA, through its subsidiaries, was required to purchase 500
MGuard Prime stents from us at a price per stent of 700 Euros in February 2011.  Izasa Distribuciones Tecnicas SA met
its purchase requirement in February 2011 and received a bonus of 100 free stents.  Izasa Distribuciones Tecnicas SA
also agreed to partner with us in a study to be conducted in Spain entitled MGuard Prime Implementation in STEMI (acute myocardial
infarction with ST elevation).  In addition, other current significant customers are in Germany, Argentina, and Brazil.
69
Our major customer in 2010 was Hand-Prod
Sp. Z o.o, a Polish distributor, that accounted for 29% of our revenues.  We have an agreement with Hand-Prod Sp. Z o.o
that grants Hand-Prod Sp. Z o.o the right to be the exclusive distributor of MGuard products in Poland until December 2012, subject
to achievement of certain order minimums.  Under our agreement with Hand-Prod Sp. Z o.o, Hand-Prod Sp. Z o.o was required
to purchase 1,250 stents from us in 2010, 1,500 stents from us in 2011 and 2,500 stents from us in 2012, at a price per stent of
400 Euro, for total minimum order values of 500,000 Euro in 2010, 600,000 Euro in 2011 and 1,000,000 Euro in 2012, respectively.  Hand-Prodwill
Sp. Z o.o was eligible to receive 278 free stents in 2010, 300 free stents in 2011 and 500 free stents in 2012 upon achievement
of the respective purchase minimums described above. Hand-Prod Sp. Z o.o did not achieve its order minimum for 2010, however, we
agreed to provide them with a pro-rata amount of free stents, based on the amount of stents they purchased. Hand-Prod Sp. Z o.o
did not achieve its order minimum for 2011 and therefore did not receive any free stents in 2011, but will be eligible to receive
500 free stents in 2012 if it achieves the minimum order values for that year.  Although Hand-Prod Sp. Z o.o did not
achieve its order minimum for 2010 or 2011, we did not terminate either our agreement with Hand-Prod Sp. Z o.o or Hand-Prod Sp.
Z o.o's right to be the exclusive distributor of MGuard products in Poland.  In addition, in 2011, we granted Hand-Prod
Sp. Z o.o an option to purchase 48,697 shares of our common stock as consideration for its assistance in promoting our business
in Poland. In May 2012, Hand-Prod Sp. Z o.o sent us a termination notice, effective December 2012, that notified us that it would
not be renewing its exclusive distribution agreement due to an organizational restructuring.
Manufacturing and Suppliers
We manufacture our stainless steel MGuard
stent through a combination of outsourcing and assembly at our own facility. Third parties in Germany manufacture the base stent
and catheter materials, and we add our proprietary mesh sleeve to the stent. Our current exclusive product supplier is QualiMed
Innovative Medizinprodukte GmbH. QualiMed Innovative Medizinprodukte GmbH is a specialized German stent manufacturer that electro
polishes and crimps the stent onto a balloon catheter that creates the base for our stainless steel MGuard stents. QualiMed Innovative
Medizinprodukte GmbH has agreed to take responsibility for verifying and validating the entire stent system by performing the necessary
bench test and biocompatibility testing. During the production process, QualiMed Innovative Medizinprodukte GmbH is responsible
for integrating the mesh covered stent with the delivery system, sterilization, packaging and labeling. Our manufacturing agreement
with QualiMed Innovative Medizinprodukte GmbH expires in September 2017, unless earlier terminated by either party in the event
of breach of material terms of the agreement, liquidation of the other party, our failure to receive requested products for more
than 60 days, a substantiated intellectual property claim is brought against the other party or the development agreement between
the parties is terminated.  The manufacturing agreement provides for a rebate program that rewards us for increases in
sales of our products. Our proprietary mesh sleeve 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 MGuard stents.  Our agreement with Natec Medical Ltd., which may be terminated by either party upon six months'
notice, calls for non-binding minimum orders and discounted catheters upon reaching certain purchasing thresholds.
70
Our MGuard Prime cobalt-chromium stent
was designed by Svelte Medical Systems Inc.  We have an agreement with Svelte Medical Systems Inc. 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 stents.  We will pay a royalty of 7% for all product sales outside of the U.S. and,
for products sales within the U.S., a rate of 7% for the first $10 million of sales and a rate of 10% for all sales exceeding $10
million.  We will also share with Svelte Medical Systems Inc. in the cost of obtaining the CE Mark approval, with their
costs not to exceed $85,000, and the U.S. Food and Drug Administration approval, with their costs not to exceed $200,000. We have
mutual indemnification obligations with Svelte Medical Systems Inc. for any damages suffered as a result of third party actions
based upon breaches of representations and warranties or the failure to perform certain covenants in the license agreement, and
Svelte Medical Systems Inc. will also indemnify us for any damages suffered as a result of third party actions based upon intellectual
property or design claims against the MGuard Prime cobalt-chromium stent.
Our MGuard Prime cobalt-chromium stent
is 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 is priced on a per-stent basis, subject to the quantity
of stents ordered.  The complete assembly process for MGuard Prime, including knitting and securing the sleeve to the
stent and the crimping of the sleeve stent on to a balloon catheter, is done at our Israel manufacturing site.  Once
MGuard Prime has been assembled, it is sent for sterilization in Germany and then back to Israel for final packaging.
Each MGuard stent is manufactured from two
main components, the stent and the mesh polymer. The stent is made out of stainless steel or cobalt chromium.  Both of
these materials are readily available and we acquire them in the open market. The mesh is made from polyethylene terephthalate
(PET).  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.
Distributors
We currently have exclusive distribution
agreements for our CE Mark-approved MGuard Coronary with bio stable mesh with medical product distributors based in Italy, Germany,
Austria, Czech Republic, Slovakia, France, Slovenia, Greece, Cyprus, Portugal, Spain, Poland, Hungary, Estonia, Lithuania, Ukraine,
United Kingdom, Holland, Russia, Latvia, Brazil, Chile, Costa Rica, Mexico, Argentina, Colombia, India, Sri Lanka, South Africa,
Pakistan, Belarus, Croatia, Ireland and Israel.  We are currently in discussions with multiple distribution companies
in Europe, Asia, and Latin America.
Current and future agreements with distributors
stipulate that while we are responsible for training, providing marketing guidance, marketing materials, and technical guidance,
distributors will be responsible for carrying out local registration, marketing activities and sales.  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 for a term
of approximately three years and automatically renew for an additional three years unless modified by either party.
71
Employees
As of September 21, 2012, we had 66 full-time
employees.  Our employees are not party to any collective bargaining agreements.  We consider our relations
with our employees to be good. We believe that our future success will depend, in part, on our continued ability to attract, hire
and retain qualified personnel.
Properties
Our headquarters are located in Tel Aviv,
Israel, where we currently have a 1,000 square meter office facility and a 420 square meter manufacturing facility that employs
26 manufacturing personnel and has the capacity to manufacture and assemble 5,000 stents per month, should we hire more employees.
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. As of the date of this filing, we are not a party to any material
litigation nor are we aware of any such threatened or pending litigation.
There are no material proceedings in which
any of our directors, officers or affiliates or any registered or beneficial shareholder of more than 5% of our common stock is
an adverse party or has a material interest adverse to our interest.
72
MANAGEMENT
The following table sets forth information
regarding our executive officers and the members of our board of directors.
Name
Age
Position(s)
Ofir Paz
46
Chief Executive Officer and Director
Craig Shore
51
Chief Financial Officer, Secretary and Treasurer
Eli Bar
47
Senior Vice President of Research and Development and Chief Technical Officer of InspireMD Ltd.
Robert Ratini
50
Vice President of Sales and Marketing of InspireMD Ltd.
Sol J. Barer, Ph.D
65
Chairman of the Board of Directors
James Barry, Ph.D
53
Director
Asher Holzer, Ph.D
62
Director
James J. Loughlin
69
Director
Paul Stuka
57
Director
Eyal Weinstein
57
Director
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.  Sol J. Barer, Ph.D. and Paul Stuka are our class 1 directors, with their terms of office to expire
at our 2012 annual meeting of stockholders.  Asher Holzer, Ph.D. and Eyal Weinstein are our class 2 directors, with their
terms of office to expire at our 2013 annual meeting of stockholders.  Ofir Paz, James Barry, Ph.D. and James J. Loughlin
are our class 3 directors, with their terms of office to expire at our 2014 annual meeting of stockholders.  At each
annual meeting of stockholders, commencing with the 2012 annual meeting, 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.
Executive Officers and Directors
Ofir Paz
has served as our chief
executive officer and a director since March 31, 2011. In addition, Mr. Paz has served as the chief executive officer and a director
of InspireMD Ltd. since May 2005. From April 2000 through July 2002, Mr. Paz headed the Microsoft TV Platform Group in Israel.
In this capacity, Mr. Paz managed the overall activities of Microsoft TV Access Channel Server, a server-based solution for delivering
interactive services and Microsoft Windows-based content to digital cable set-top boxes.  Mr. Paz joined Microsoft in
April 2000 when it acquired Peach Networks, which he founded and served as its chief executive officer. Mr. Paz was responsible
for designing Peach Networks' original system architecture, taking it from product design to product viability, and then
managing and leading the company up to and after its acquisition, which was valued at approximately $100 million at the time of
such acquisition. Mr. Paz currently serves on the board of directors of A. S. Paz Investment and Management Ltd., S.P. Market
Windows Israel Ltd. and
Cell Buddy Network Ltd.
Mr.
Paz received a B.Sc. in Electrical Engineering, graduating cum laude, and a M.Sc. from Tel Aviv University. Mr. Paz's qualifications
to serve on the board include his prior experience in successfully establishing and leading technology companies in Israel.  In
addition, as chief executive officer, Mr. Paz's position on the board ensures a unity of vision between the broader goals
our company and our day-to-day operations.
Craig Shore
has served as our chief
financial officer, secretary and treasurer since March 31, 2011. In addition, since November 10, 2010, Mr. Shore has served as
InspireMD Ltd.'s vice president of business development. From February 2008 through June 2009, Mr. Shore served as chief
financial officer of World Group Capital Ltd. and Nepco Star Ltd., both publicly traded companies on the Tel Aviv Stock Exchange,
based in Tel Aviv, Israel. From March 2006 until February 2008, Mr. Shore served as the chief financial officer of Cellnets Solutions
Ltd., a provider of advanced cellular public telephony solutions for low to middle income populations of developing countries based
in Azur, Israel. Mr. Shore has over 25 years of experience in financial management in the U.S., Europe and Israel. 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.
73
Eli Bar
has served as InspireMD Ltd.'s
senior vice president of research and development and chief technical officer since February 2011.  Prior to that, he
served as InspireMD Ltd.'s vice president of research and development since October 2006 and engineering manager since June
2005.  Mr. Bar has over 15 years' experience in medical device product development. Mr. Bar has vast experience
building a complete research and development structure, managing teams from the idea stage to an advanced marketable product. He
has been involved with many medical device projects over the years and has developed a synthetic vascular graft for femoral and
coronary artery replacement, a covered stent and a fully implantable ventricular assist device. Mr. Bar has more than nine filed
device and method patents and he has initiated two medical device projects. Mr. Bar is also a director of Blue Surgical Ltd., a
medical device company based in Israel. Mr. Bar graduated from New Haven University in Connecticut with a B.Sc. in Mechanical Engineering.
Robert Ratini
has served as InspireMD
Ltd.'s vice president of sales and marketing in a full-time capacity since June 1, 2012 and served in a part-time capacity
from March 27, 2012 until May 31, 2012. From April 2011 through March 26, 2012, Mr. Ratini served as a business consultant and
the vice president of business development for Easy Med Services, Inc. in Geneva, Switzerland, which focuses on telemedicine software
products, Stentys SA in Paris, France, which focuses on self-expanding coronary stents, and Parvulus SA in Lonay, Switzerland,
which concentrates on intra annular heart valve repair rings.  From October 2009 through March 2011, Mr. Ratini served
as the director of marketing for Orbusneich Medical, which produces and sells interventional cardiology products, and from October
2006 through September 2009, Mr. Ratini served as vice president global marketing and EMEA sales for Biosensors International,
Switzerland, where he established a global sales and marketing department and led the launch of the Bio Matrix drug eluting stent. 
Mr. Ratini has extensive cardiology and vascular experience and has worked in the medical information technology industry since
1989.  Mr. Ratini graduated from the University of Applied Sciences in Bienne, Switzerland with a Master of Computer
Science.
Sol J. Barer, Ph.D.,
has served as
a director since July 11, 2011 and has served as our chairman since November 16, 2011. Dr. Barer has over 30 years of experience
with publicly traded biotechnology companies. In 1980, when Dr. Barer was with Celanese Research Company, he formed the biotechnology
group that was subsequently spun out to form Celgene Corporation. Dr. Barer spent 18 years leading Celgene Corporation as president,
chief operating officer and chief executive officer, culminating with his tenure as Celgene Corporation's executive chairman
and chairman beginning in May 2006 until his retirement in June 2011. Dr. Barer is also a director of Cerecor, Inc., Edge Therapeutics,
Inc., Medgenics, Inc., ContraFect Corporation, Amicus Therapeutics, Inc. and Aegerion Pharmaceuticals, Inc. and serves as a senior
advisor to a number of other biotechnology companies. Dr. Barer received a Ph.D. in organic chemistry from Rutgers University.  Dr.
Barer brings to the board significant scientific and executive leadership experience in the U.S. biotechnology industry and prior
service on the board of directors of other publicly-held biopharmaceutical companies, as well as a unique perspective on the best
methods of growth for a biotechnology company.
James Barry, Ph.D.,
has served as
a director since January 30, 2012.  Dr. Barry has served as executive vice president and chief operating officer at Arsenal
Medical Inc., a medical device company focused on local therapy, since September 2011.  Dr. Barry also heads his own
consulting firm, Convergent Biomedical Group LLC, advising medtech companies on product development, strategy, regulatory challenges
and fund raising.  Until June 2010, he was senior vice president, corporate technology development at Boston Scientific
Corporation, where he was in charge of the corporate research and development and pre-clinical sciences functions. Dr. Barry joined
Boston Scientific in 1992 and oversaw its efforts in the identification and development of drug, device and biological systems
for applications with implantable and catheter-based delivery systems. He currently serves on a number of advisory boards including
the College of Biomedical Engineering at Yale University, the College of Sciences at University of Massachusetts-Lowell, and the
Massachusetts Life Science Center. Dr. Barry received his Ph.D. in Biochemistry from the University of Massachusetts-Lowell and
holds a B.A. degree in Chemistry from Saint Anselm College.  Dr. Barry brings to the board over 20 years of experience
in leadership roles in the medical device industry and significant medical technology experience, in particular with respect to
interventional cardiology products.
74
Asher Holzer, PhD.,
has
served as our director since March 31, 2011. Dr. Holzer served as our president from March 31, 2011 until June 1, 2012 and
served as our chairman from March 31, 2011 until November 16, 2011. In addition, Dr. Holzer served as the president and
chairman of the board of InspireMD Ltd. from April 2007 until June 1, 2012. Previously, Dr. Holzer founded Adar Medical Ltd.,
an investment firm specializing in medical device startups, and served as its chief executive officer from 2002 through 2004.
Dr. Holzer currently serves on the board of directors of Adar Medical Ltd., O.S.H.-IL The Israeli Society of Occupational
Safety and Health Ltd., Theracoat Ltd. (where he serves as chairman of the board), 2to3D Ltd., and S.P. Market Windows
Cyprus.  Dr. Holzer earned his PhD in Applied Physics from the Hebrew University.  Dr. Holzer is also an
inventor and holder of numerous patents.  Dr. Holzer brings to the board his more than 25 years of experience in
advanced medical devices, as well as expertise covering a wide range of activities, including product development, clinical
studies, regulatory affairs, market introduction and the financial aspects of the stent business.
James J. Loughlin
has served as our
director since September 19, 2012. Mr. Loughlin served as the National Director of the Pharmaceuticals Practice at KPMG LLP,
and a five-year term as member of the board of directors of KPMG LLP. Additionally, Mr. Loughlin served as Chairman of the
Pension and Investment Committee of the KPMG LLP board from 1995 through 2001. He also served as Partner in charge of Human Resources,
Chairman of the Personnel and Professional Development Committee, Secretary and Trustee of the Peat Marwick Foundation and a member
of the Pension, Operating and Strategic Planning Committees. In addition, Mr. Loughlin has served as a member of the board
of directors of Celgene Corporation, a global biopharmaceutical company focused on novel therapies for the treatment of cancer
and inflammatory diseases, since 2006, including as chairman of the audit committee since June 2008 and a member of the compensation
committee since June 2008. Mr. Loughlin served as a member of the board of directors of Alfacell Corporation, a biopharmaceutical
company primarily focused on therapeutic drugs for the treatment of cancer and other pathological conditions, until 2008 and
Datascope Corp., a medical device company engaged in the interventional cardiology and radiology, cardiovascular and vascular surgery,
and critical care fields, until January 2009. Mr. Loughlin brings to the board his valuable experiences as National Director
of the Pharmaceuticals Practice at KPMG LLP, an extensive background in accounting and financial reporting, qualifying him as an
audit committee financial expert, and prior service on the board of directors of other publicly-held biopharmaceutical companies.
Paul Stuka
has served as a director
since August 8, 2011.  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 30 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 U.S. for the five-year period
ending December 31, 1985. 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.
Eyal Weinstein
has served as a
director since August 8, 2011.  Mr. Weinstein is the chief executive officer of LEOREX Ltd., a company developing
and marketing Dermo Cosmetic products. From 2001 to 2007, Mr. Weinstein worked as manager-partner of C.I.G., an economic and
accounting consultancy, consulting for leading Israeli banks, including Bank Leumi, Bank Hapoalim, Israeli Discount Bank and
Bank Hamizrachi. From 2000 to 2001, he was manager-partner of Exseed, a venture capital fund that invested in early-stage
companies. Beginning in 1996, Mr. Weinstein was a partner and founder in the establishment of three high-tech companies that
were ultimately sold, two to Microsoft Corporation. Mr. Weinstein currently serves on the board of directors of cell Buddy
Network Ltd.  Mr. Weinstein brings to the board his considerable management and business experience as an executive of several
companies and investment funds in Israel.
Family Relationships
We have no family relationships amongst
our directors and executive officers.
75
Transition Plan
We anticipate that in the near term, Ofir
Paz will resign from his position as our chief executive officer. Mr. Paz intends to remain in his position while we conduct a
thorough search for an appropriate replacement. We have retained a search firm to assist in this process. Mr. Paz's resignation
reflects our transition from a private medical device start-up company with a promising new technology to a publicly traded company
with a successfully tested, commercialized, CE Mark approved product. After his resignation, we anticipate that Mr. Paz will remain
one of our directors and maintain his involvement with us, as necessary, on a consulting basis.
Agreements with Executive Officers
Ofir Paz
On April 1, 2005, InspireMD Ltd. entered
into an employment agreement with Ofir Paz to serve as InspireMD Ltd.'s chief executive officer. Such employment agreement
was subsequently amended on October 1, 2008 and March 28, 2011. Pursuant to this employment agreement, as amended, Mr. Paz was
entitled to a monthly gross salary of $15,367. Mr. Paz was also entitled to certain social and fringe benefits as set forth in
the employment agreement, which totaled 25% of his gross salary, as well as a company car. Mr. Paz was also entitled to a minimum
bonus equivalent to three monthly gross salary payments based on achievement of objectives and the approval of the board of directors.
Mr. Paz was eligible to receive stock options pursuant to this agreement following its six month anniversary, subject to board
approval. If Mr. Paz's employment was terminated with or without cause, he was entitled to at least six months' prior
notice and would have been paid his salary and all social and fringe benefits in full during such notice period.
On April 1, 2011, in order to obtain more
favorable tax treatment in Israel, the employment agreement with Mr. Paz was terminated and InspireMD Ltd. entered into a consultancy
agreement with A.S. Paz Management and Investment Ltd., an entity wholly-owned by Mr. Paz, through which Mr. Paz was retained to
serve as InspireMD Ltd.'s chief executive officer. Pursuant to this consultancy agreement, Mr. Paz was entitled to a monthly
consultancy fee of $21,563. Mr. Paz was also entitled to a minimum bonus equivalent to three monthly gross salary payments based
on achievement of objectives and the approval of the board of directors. The consultancy agreement also contains certain confidentiality,
non-competition and non-solicitation requirements for Mr. Paz. If Mr. Paz's employment was terminated without cause, he was
entitled to at least six months' prior notice and would have been paid his consultancy fee during such notice period.
At the request of the compensation committee,
Mr. Paz agreed, effective as of December 1, 2011, to be compensated as an employee, rather than as a consultant, on substantially
the same terms as the consultancy agreement.  Since December 1, 2011, Mr. Paz has been treated as an employee of ours
and has received the same level of compensation (
i.e.
, base salary and benefits) as was mandated under his consultancy
agreement. We have otherwise complied with the terms of the consulting agreement.
For a description of certain severance and
pension payments to which Mr. Paz was and will be entitled under his agreements, see "Executive Compensation—Potential
Payments Upon Termination or Change of Control."
Craig Shore
On November 28, 2010, InspireMD Ltd. entered
into an employment agreement with Craig Shore to serve as InspireMD Ltd.'s vice president of business development. Pursuant
to the employment agreement, Mr. Shore was entitled to a monthly gross salary of $8,750, which amount increased to $10,200 upon
consummation of our share exchange transactions on March 31, 2011 and which further increased to $10,620 as of July 1, 2011. Mr.
Shore is also entitled to certain social and fringe benefits as set forth in the employment agreement. The employment agreement
also contains certain confidentiality, non-competition and non-solicitation requirements for Mr. Shore. Mr. Shore is also entitled
to, and received, a grant of options to purchase 45,000 restricted ordinary shares of InspireMD Ltd. which were converted into
options to purchase 365,223 shares of our common stock following the consummation of our share exchange transactions on March 31,
2011; such options shall fully vest if Mr. Shore's employment is terminated in connection with a change of control. If Mr.
Shore's employment is terminated without cause, Mr. Shore shall be entitled to at least 30 days' prior notice and shall
be paid his salary in full and all social and fringe benefits during such notice period. If a major change of control of InspireMD
Ltd. occurs, Mr. Shore will be entitled to at least 180 days' prior written notice and shall be paid his salary in full and
all social and fringe benefits during such notice period. If Mr. Shore is terminated for cause, he is not entitled to any notice.
76
For a description of certain severance and
pension payments to which Mr. Shore is entitled under his employment agreement, see "Executive Compensation—Potential
Payments Upon Termination or Change of Control."
Eli Bar
On June 26, 2005, InspireMD Ltd. entered
into an employment agreement with Eli Bar to serve as InspireMD Ltd.'s engineering manager.  Pursuant to this employment
agreement, Mr. Bar is entitled to a monthly gross salary of $8,750, which amount increased to $10,620 as of July 1, 2011.  Mr.
Bar is also entitled to certain social and fringe benefits as set forth in the employment agreement including a company car.  The
employment agreement also contains certain confidentiality, non-competition and non-solicitation requirements for Mr. Bar. If Mr.
Bar's employment is terminated, with or without cause, he is entitled to at least 60 days' prior notice and shall be
paid his salary in full and all social and fringe benefits during such notice period.
For a description of certain severance and
pension payments to which Mr. Bar is entitled under his employment agreement, see "Executive Compensation—Potential
Payments Upon Termination or Change of Control."
Robert Ratini
On March 27, 2012, InspireMD Ltd. entered
into a consultancy agreement with Robert Ratini to serve as InspireMD Ltd.'s vice-president of sales and marketing.  Until
May 31, 2012, Mr. Ratini provided services on a part-time basis and, beginning on June 1, 2012, he has served as the full-time
vice-president of sales and marketing.  Mr. Ratini is entitled to receive $20,000 per month in consideration for his
services, which was paid on a pro-rata basis for the hours he worked until May 31, 2012, and is also entitled to receive a monthly
phase-in payment of $7,000 from June 1, 2012 to December 31, 2012.  Mr. Ratini is eligible to receive various performance-based
commissions, which are dependent upon the levels of revenue generated by his sales activity.  The consultancy agreement
also contains certain confidentiality, non-competition and non-solicitation requirements for Mr. Ratini. The consultancy agreement
has no termination date, but may be terminated without cause by InspireMD Ltd. (i) upon 30 day prior written notice if such notice
is submitted between June 1, 2012 and August 31, 2012; or (ii) upon 90 day prior written notice if such notice is submitted after
September 1, 2012. If Mr. Ratini is terminated for cause, he is not entitled to any notice.
Asher Holzer
On April 1, 2005, InspireMD Ltd. entered
into an employment agreement with Asher Holzer, Ph.D. to serve as InspireMD Ltd.'s president. Such employment agreement was
subsequently amended on March 28, 2011. Pursuant to this employment agreement, as amended, Dr. Holzer was entitled to a monthly
gross salary of $15,367. Dr. Holzer was also entitled to certain social and fringe benefits as set forth in the employment agreement,
which totaled 25% of his gross salary, as well as a company car. Dr. Holzer was also entitled to a minimum bonus equivalent to
three monthly gross salary payments based on achievement of objectives and the approval of the board of directors. Dr. Holzer was
eligible to receive stock options pursuant to this agreement following its six month anniversary, subject to board approval. If
Dr. Holzer's employment was terminated with or without cause, he was entitled to at least six months' prior notice
and would have been paid his salary and all social and fringe benefits in full during such notice period.
On April 29, 2011, effective April 1, 2011,
in order to obtain more favorable tax treatment in Israel, the employment agreement with Dr. Holzer was terminated and InspireMD
Ltd. entered into a consultancy agreement with OSH-IL, the Israeli Society Ltd., an entity wholly-owned by Dr. Holzer, through
which Dr. Holzer was retained to serve as InspireMD Ltd.'s president. Pursuant to this consultancy agreement, Dr. Holzer
was entitled to a monthly consultancy fee of $21,563. Dr. Holzer was also entitled to a minimum bonus equivalent to three monthly
gross salary payments based on achievement of objectives and the approval of the board of directors. The consultancy agreement
also contained certain confidentiality, non-competition and non-solicitation requirements for Dr. Holzer. If Dr. Holzer's
employment was terminated without cause, he was entitled to at least six months' prior notice and would have been paid his
consultancy fee during such notice period.
77
At the request of the compensation committee,
effective as of December 1, 2011, Dr. Holzer agreed to be treated as an employee for purposes of paying Dr. Holzer's salary
and benefits rather than as a consultant under Dr. Holzer's consultancy agreement.
On June 1, 2012, Dr. Holzer, OSH-IL, the
Israeli Society of Occupational Health and Safety Ltd. and InspireMD Ltd. entered into a separation agreement and release, pursuant
to which, among other things, the consultancy agreement, dated as of April 29, 2011, by and between InspireMD Ltd. and OSH-IL the
Israeli Society Ltd. was terminated and Dr. Holzer resigned as president and director of InspireMD Ltd. and president of InspireMD,
Inc. As part of the separation agreement, Dr. Holzer agreed to release us, InspireMD Ltd., and Inspire MD GmbH from any and all
claims, rights or demands arising from or related to the previous agreement, the relations between the parties or the termination
thereof.
On June 1, 2012, we entered into a consulting
agreement with Dr. Holzer, which terminates on November 30, 2012, pursuant to which Dr. Holzer will provide us with consulting
services in exchange for monthly payments of $20,337. As part of the consulting agreement, Dr. Holzer released us and our affiliates
from any and all claims other than those related to Dr. Holzer's position as a shareholder. Under this consulting agreement,
Dr. Holzer is not entitled to any additional benefits, other than benefit plans or programs that we provide to our directors so
long as Dr. Holzer remains on our board of directors.
For a description of certain severance and
pension payments to which Dr. Holzer was and will be entitled under his agreements, see "Executive Compensation—Potential
Payments Upon Termination or Change of Control."
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The Compensation Discussion and Analysis
discusses the principles underlying our executive compensation policies and decisions for our named executive officers. It provides
qualitative information regarding the manner in which compensation is earned by our named executive officers and places in context
the data presented in the tables that follow. In addition, we address the compensation paid or awarded during the six months ended
June 30, 2012 and the fiscal year ended December 31, 2011 to our named executive officers: Ofir Paz, our chief executive officer
(principal executive officer), Craig Shore, our chief financial officer, secretary and treasurer (principal financial and accounting
officer), Asher Holzer, Ph.D., our former president, Eli Bar, the senior vice president of research and development and chief technical
officer of InspireMD Ltd., and Sara Paz, the former vice president of sales of InspireMD Ltd.
We formed a compensation committee on September
21, 2011. Prior to that date, all compensation decisions for Mr. Paz and Dr. Holzer were made by our board of directors. Mr. Paz
was responsible for the executive compensation packages of Messrs. Shore and Bar and Ms. Paz. Because of the potential conflict
of interest, Dr. Holzer and Mr. Shore also reviewed and approved Mr. Paz's decision with respect to Ms. Paz's compensation
before it was implemented. The current compensation package of Mr. Paz and the compensation package of Dr. Holzer until his retirement
were determined before our share exchange transactions on March 31, 2011, when InspireMD Ltd. was a private Israeli company. In
accordance with Israeli law, their compensation was submitted to and approved by the stockholders of InspireMD Ltd. on February
28, 2011. Our board of directors also reviewed and approved Mr. Shore's compensation package after the share exchange transactions.
Going forward, the compensation committee
of our board of directors will review at least annually and determine the executive compensation packages for Mr. Paz, including
approving any grants of stock options. Mr. Paz will remain responsible for making recommendations to our compensation committee
with respect to the executive compensation packages for Messrs. Shore and Bar, including any grants of stock options. The compensation
committee performed its annual review of named executive officer compensation in February 2012.
In considering compensation for our named
executive officers prior to 2012, the board of directors relied upon the officer's performance and contribution to our development
and achievements. We did not engage in any formal benchmarking or conduct or obtain any formal surveys of executive compensation
at peer companies. We also considered general compensation trends.
During the compensation committee's
review of named executive officer compensation for 2012, the compensation committee retained the services of a compensation consultant.
The consultant provided a report that included formal benchmarking of our named executive officers' compensation against
that at companies selected by the consultant and approved by our compensation committee. The peer group was comprised of 16 U.S.-based
public medical devices companies and four Israel-based public medical device and biopharmaceutical companies that were determined
to have a comparable business and financial profile to us, in terms of revenue, employee size and/or market value:
Antares Pharma
Atricure
Bacterin International Holdings
BioLase Technology
Cardica
Cerus
Conceptus
Cutera
Cytori Therapeutics
D Medical Industries
Palomar Medical Technologies
Pluristem Therapeutics
PROLOR Biotech
Protalix BioTherapeutics
SEQUENOM
STAAR Surgical
Stereotaxis
SurModics
Uroplasty
Vision-Sciences
The compensation consultant's report
and recommendations primarily called for increases in named executive officer compensation. However, in light of our current financial
position, our long-term and short-term goals, the fact that many of our named executive officers received salary increases in 2011
and the significant equity ownership of many of our named executive officers, the compensation committee determined to take only
two actions with respect to increases in named executive officer compensation in 2012, in the form of a stock option grant to Mr.
Shore, on the terms and for the reasons described under "Named Executive Officer Compensation – Compensation of Chief
Financial Officer, Secretary and Treasurer" below and a cash bonus to Mr. Bar, in the amount and for the reason described
under "Named Executive Officer Compensation – Compensation of Senior Vice President of Research and Development and
Chief Technical Officer of InspireMD Ltd." below. The compensation committee did not determine to target our overall compensation
packages, or elements of our compensation packages, to fall within a certain percentile of the comparator group above, although
the compensation committee may determine to do so in the future.
79
We have entered into agreements with all
of our named executive officers. These agreements are summarized under "Executive Officers and Directors – Agreements
with Executive Officers." Mr. Paz and Dr. Holzer were compensated pursuant to consultancy agreements beginning on April 1,
2011. However, at the request of the compensation committee, Mr. Paz and Dr. Holzer agreed, effective as of December 1, 2011, to
be compensated as employees rather than consultants. Since December 1, 2011, Mr. Paz has been, and from December 1, 2011 until
his resignation, Dr. Holzer was, treated as an employee of ours and received the same level of compensation (
i.e.
, base
salary and benefits) as each would have been entitled to under his consultancy agreement. We have otherwise complied with the terms
of the consultancy agreements.
Philosophy of Compensation
The goals of our compensation policy are
to ensure that executive compensation rewards management for helping us achieve our financial goals (increased sales, profitability,
etc.) and meet our clinical trial milestones and aligns management's overall goals and objectives with those of our stockholders.
To achieve these goals, our compensation committee and board of directors aims to:
·
provide a competitive compensation package that enables us to attract and retain superior management personnel;
·
relate compensation to our overall performance, the individual officer's performance and our assessment of the officer's
future potential;
·
reward our officers fairly for their role in our achievements; and
·
align executives' objectives with the objectives of stockholders by granting equity awards to encourage executive stock
ownership.
We have determined that in order to best
meet these objectives, our executive compensation program should balance fixed and bonus compensation, as well as cash and equity
compensation, as discussed below. Historically, there has been no pre-established policy or target for the allocation between either
cash and non-cash or short-term and long-term incentive compensation for our executive officers. We intend in the future to solicit
recommendations from our compensation consultants with respect to the balance of fixed and bonus compensation for our executive
officers.
Components of Compensation
The principal components of compensation
for our named executive officers are base salary/consulting fees, equity based grants, personal benefits and perquisites and, potentially
in the future, cash bonuses.
Base Salary/Consulting Fees.
The primary
component of compensation for our named executive officers is base salary (or consulting fees for our named executive officers
who are employed pursuant to consultancy agreements). Base salary levels for our named executive officers have historically been
determined based upon an evaluation of a number of factors, including the individual officer's level of responsibility, length
and depth of experience and our assessment of the officer's future potential with our company, performance and, to the extent
available, general compensation levels of similarly situated executives and general compensation trends. Although our employment
and consultancy agreements with our named executive officers set forth a fixed base salary, salaries have been reviewed periodically
and changed, when deemed appropriate, by oral or written amendment to the applicable officer's agreement. For 2011, we generally
increased the base salaries of our executive officers, in part as a reflection of us becoming a publicly traded company in the
U.S. and the accompanying increased responsibilities for our executive officers. Prior to April 1, 2011, Ms. Paz was compensated
on an hourly basis, based on a fixed hourly consulting fee. In 2012, the compensation committee determined not to make any changes
to the base salaries of our named executive officers.
80
In the future, the compensation committee
intends to review each named executive officer's base salary/consulting fee on an annual basis. In addition to the factors
described above, in setting base salary, the compensation committee intends to consider the recommendations of our compensation
consultants and more formal data regarding the compensation levels of similarly situated executives.
Equity Based Grants.
An additional
principal component of our compensation policy for named executive officers consists of grants under the InspireMD, Inc. 2011 UMBRELLA
Option Plan. Under this plan, among other awards, executive officers may be granted stock options. Since its formation, the compensation
committee of the board of directors has administered the grants of awards under the InspireMD, Inc. 2011 UMBRELLA Option Plan,
and prior to its formation, the board of directors administered such awards. We believe that equity ownership of our company by
our named executive officers will further align the interests of our executive officers with those of our stockholders.
Prior to 2012, all equity incentive awards
were made either (i) in accordance with negotiated terms set forth in our employment or consultancy agreements, at levels deemed
necessary to attract or retain the executive at the time of such negotiations and determined taking into account the recipient's
overall compensation package and the goal of aligning such executive's interest with that of our stockholders, or (ii) at
the discretion of the board of directors or the compensation committee without reference to any formal targets or objectives, when
deemed appropriate in connection with extraordinary efforts or results or necessary in order to retain the executive in light of
the executive's overall compensation package.
During its 2012 compensation review, the
compensation committee determined to make only one equity incentive award, to Mr. Shore, on the terms and for the reasons described
under "Named Executive Officer Compensation – Compensation of Chief Financial Officer, Secretary and Treasurer"
below.
Our compensation committee intends to consider
during our annual compensation review whether to grant equity incentive awards to our named executive officers, and the terms of
any such awards, including whether to set any performance targets or other objective or subjective criteria related to the final
grant or vesting of such awards. The compensation committee will also retain the flexibility to make additional grants throughout
the year if deemed necessary or appropriate in order to retain our named executive officers or reward extraordinary efforts or
achievements.
Personal Benefits and Perquisites.
Certain of our named executive officers are entitled to additional personal benefits in accordance with what we believe to be customary
practice and law in Israel, including contributions towards pension and vocational studies funds, annual recreational allowances,
a company car, a daily food allowance and a company phone. We believe these benefits are commonly provided to executives in Israel,
and we therefore believe that it is necessary for us to provide these benefits in order to attract and retain superior management
personnel.
Cash Bonus.
Until 2012, we had never
paid cash bonuses to our executives; however, our consultancy agreements with Mr. Paz and Dr. Holzer provided for cash bonuses
to be paid at the discretion of our board of directors in an amount not less than three months' salary. We believe that cash
bonus payments are an appropriate means to reward significant achievement and contribution to us by an executive officer, especially
for officers that already hold significant equity positions in our company. Therefore, going forward, cash bonuses may become a
more significant component of our compensation policy for executive officers.
During its 2012 compensation review, the
compensation committee determined to make a cash bonus award, to Mr. Bar, in the amount and for the reason described under "Named
Executive Officer Compensation – Compensation of Senior Vice President of Research and Development and Chief Technical Officer
of InspireMD Ltd." below.
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We intend to consider the amount of cash
bonus that each of our named executive officers should be entitled to receive in connection with our annual compensation review,
taking into account each executive's total compensation package, the recommendations of our compensation consultant, and
any more formal data we obtain regarding the compensation levels of similarly situated executives. We will also consider in connection
with such review whether to designate certain financial or operational metrics or other objective or subjective criteria in determining
the final amounts of such awards.
Compensation of Named Executive Officers
Compensation of Chief Executive Officer.
During the six months ended June 30, 2012, Mr. Paz's total compensation was $153,597. In 2011, Mr. Paz's total compensation
was $247,039, as compared to $219,160 in total compensation in 2010. Mr. Paz's total compensation was comprised of (i) salary
payments from December 1, 2011 through June 30, 2012, (ii) consulting fees paid pursuant to the consultancy agreement InspireMD
Ltd. entered into with A.S. Paz Management and Investment Ltd., an entity wholly-owned by Mr. Paz, through which Mr. Paz was retained
to serve as InspireMD Ltd.'s chief executive officer from April 1, 2011 through November 30, 2011, (iii) salary payments
from January 1, 2011 through March 31, 2011, and (iv) benefits and perquisites, as more fully discussed below. For the six months
ended June 30, 2012, Mr. Paz's salary compensation was $121,327. In 2011, Mr. Paz's salary compensation was $42,425
under his employment agreement, $122,970 under the consultancy agreement with A.S. Paz Management and Investment Ltd. and $15,371
as an employee in December 2011, for a total of $180,766, as compared to $89,197 under his employment agreement and $78,491 under
a consultancy agreement that was in effect prior to his employment agreement, for a total of $167,688, in 2010. In determining
the compensation for Mr. Paz in 2011, our board of directors evaluated our corporate and organizational accomplishments in 2010,
as well as Mr. Paz's individual accomplishments. Mr. Paz's 2011 compensation was also increased in anticipation of
us becoming a publicly traded company in the U.S. and the additional obligations that would entail for our chief executive officer.
Mr. Paz's compensation package for 2011 was determined before our share exchange transactions on March 31, 2011, when InspireMD
Ltd. was a private Israeli company. In accordance with Israeli law, his compensation was submitted to and approved by the stockholders
of InspireMD Ltd. on February 28, 2011. The compensation committee determined that no changes were needed to Mr. Paz's compensation
package during 2012.
Mr. Paz also received various benefits as
both a salaried employee and a consultant, many of which either are required by Israeli law or we believe are customarily provided
to Israeli executives. These benefits included contributions to his pension and vocational studies funds, an annual recreation
payment, a company car, a cell-phone and a daily food allowance. For the six months ended June 30, 2012, Mr. Paz's benefits
compensation was $32,270. In 2011, Mr. Paz's benefits compensation through payments made to him as an employee and through
payments made to A.S. Paz Management and Investment Ltd. was $66,273, as compared to $51,472 in 2010. Our board of directors and
compensation committee determined that equity based compensation would be inappropriate for Mr. Paz in 2011 and 2012, in light
of his current equity holdings in our company.
Compensation of Chief Financial Officer,
Secretary and Treasurer.
Mr. Shore was initially hired as InspireMD Ltd.'s vice president of business development and
became our chief financial officer, secretary and treasurer on March 31, 2011. During the six months ended June 30, 2012, Mr. Shore's
total compensation was $234,396. In 2011, Mr. Shore's total compensation was $419,433, as compared to $13,162 in total compensation
in 2010, which represented compensation paid from the commencement of Mr. Shore's employment on November 24, 2010. Mr. Shore's
total compensation was comprised of salary payments under his employment agreement with us, option grants under the InspireMD,
Inc. 2011 UMBRELLA Option Plan, as more fully discussed below, and benefits and perquisites, as more fully discussed below. For
the six months ended June 30, 2012, Mr. Shore's salary compensation was $76,717. In 2011, Mr. Shore's annual salary
was $118,333, as compared to $9,912 in 2010. Pursuant to his employment agreement with us, Mr. Shore's monthly salary was
automatically increased during 2011, upon the consummation of our share exchange transactions. Upon Mr. Paz's recommendation,
Mr. Shore's salary was further increased as of July 1, 2011 by an additional $838 per month on July 1, 2011. In determining
to make such additional increase, Mr. Paz considered the corporate and organizational accomplishments of our company since Mr.
Shore joined us, his role in such accomplishments, his general performance, his increased responsibilities as chief financial officer,
the desire to ensure that his compensation is high enough to retain his services and the desire to make his compensation consistent
with what we pay to our other senior executives. Mr. Paz recommended, and the compensation committee agreed, that no changes were
needed to Mr. Shore's compensation package during 2012 other than the option grant described below.
82
Mr. Shore also received various benefits,
many of which either are required by Israeli law or we believe are customarily provided to Israeli executives, including contributions
to his pension and vocational studies funds, an annual recreation payment, a company car, a company cell phone, and a daily food
allowance. For the six months ended June 30, 2012, Mr. Shore's benefits compensation was $18,180. In 2011, Mr. Shore's
benefits compensation was $35,280, as compared to $3,250 in 2010.
On February 27, 2011, Mr. Shore was granted
options that currently represent the right to acquire up to 365,223 shares of our common stock at an exercise price of $1.23 per
share. This award was part of the initial package negotiated with Mr. Shore in connection with his hiring in November 2010. The
number of shares for which such award was exercisable and the exercise price were originally set forth in Mr. Shore's employment
agreement and related to shares of InspireMD Ltd. The per share price was determined based on the price at which InspireMD Ltd.
had most recently raised capital. The option was converted into an option to acquire the current number of shares at the current
exercise price through the share exchange transactions. The options vest on an annual basis over three years. The options had a
fair market value of $260,554 as of February 27, 2011. In determining to grant Mr. Shore a significant portion of his compensation
in the form of options, our board of directors believed that it was important to give Mr. Shore an equity interest in us. Providing
Mr. Shore with an equity stake was viewed by our board as important, as Mr. Shore previously did not hold any such stake in us,
as opposed to Mr. Paz and Dr. Holzer. In determining the number of shares to award to Mr. Shore, Mr. Paz and our board of directors
considered the need to provide Mr. Shore with a compensation package that was sufficient to attract him to accept employment with
us, given that his base salary was believed to be relatively low for his position, and the desire to provide Mr. Shore with an
equity position in our company that was significant enough to align his objectives with those of our stockholders and allow Mr.
Shore to share in our future on financial growth and the benefits of the share exchange and us becoming a U.S. public company.
On May 20, 2011, Mr. Shore was awarded a
warrant to purchase 3,000 shares of our common stock at an exercise price of $1.80 per share as a bonus payment for his work performed
in connection with our share exchange transactions. The warrant had a fair market value of $5,266 and vested immediately. The award
was given in recognition of Mr. Shore's extraordinary efforts related to our private placement transaction on March 31, 2011.
On May 25, 2012, Mr. Shore was granted options
to acquire up to 300,000 shares of our common stock at an exercise price of $0.80 per share. The options vest on an annual basis
over three years. The options had a fair market value of $139,499 as of May 25, 2012. The award was given in recognition of Mr.
Shore's past contributions, to increase Mr. Shore's equity stake in us in order to further align Mr. Shore's
objectives with those of our stockholders and allow him to share in our future financial growth and to compensate for Mr. Shore's
relatively low salary for his position.
Compensation of Senior Vice President
of Research and Development and Chief Technical Officer of InspireMD Ltd.
During the six months ended June 30, 2012, Mr. Bar's
total compensation was $112,432. In 2011, Mr. Bar's total compensation was $350,394, as compared to $942,689 in total compensation
in 2010. Mr. Bar's total compensation was comprised of salary payments under his employment agreement with us, a cash bonus
awarded in 2012, as more fully discussed below, option grants under the InspireMD, Inc. 2011 UMBRELLA Option Plan, as more fully
discussed below, and benefits and perquisites, as more fully discussed below. For the six months ended June 30, 2012, Mr. Bar's
salary compensation was $77,100. In 2011, Mr. Bar's annual salary was $122,760, as compared to $91,684 in 2010. In determining
the compensation for Mr. Bar in 2011, Mr. Paz evaluated the corporate and organizational accomplishments of our company in 2010,
particularly with respect to the development of our products, as well as Mr. Bar's individual achievements and contributions
to such accomplishments. Mr. Bar's increase in salary during 2011 reflected his significant contributions to our success
in 2010, and our desire to retain him going forward. His 2011 salary was increased to the level it had been in August 2008, prior
to salary reductions throughout the company. Mr. Paz recommended, and the compensation committee agreed, that no changes were needed
to Mr. Bar's compensation package during 2012 other than the cash bonus described below.
83
Mr. Bar received a cash bonus of $12,850
in recognition for his efforts in achieving the successful completion of enrollment of our MASTER Trial during the six months ended
June 30, 2012. The amount of the bonus was equal to an additional month of salary plus social benefits for Mr. Bar.
Mr. Bar also received various benefits,
many of which either are required by Israeli law or we believe are customarily provided to Israeli executives, including contributions
to his pension and vocational studies funds, an annual recreation payment, a company car, a company cell phone, and a daily food
allowance. During the six months ended June 30, 2012, Mr. Bar's benefits compensation was $22,482. In 2011, Mr. Bar's
benefits compensation was $42,459, as compared to $32,496, in 2010.
On June 1, 2011, Mr. Bar was awarded options
to acquire up to 200,000 shares of common stock at an exercise price of $2.75 per share as a bonus payment for his significant
contributions to our company. In determining to make such award, Mr. Paz considered Mr. Bar's continued exemplary performance
and contributions to the clinical development of our product and the desire to continue to retain his services and keep his compensation
consistent with what we pay to our other senior executives. We determined that granting Mr. Bar more of an equity interest would
further increase his opportunity to share in our future financial success and align his objectives with those of our stockholders.
The options vest on an annual basis over a three year period. The options had a fair market value of $268,381 as of June 1, 2011.
The exercise price was the fair market value of our common stock on the date of grant. On August 31, 2011, we cancelled these options
and reissued an option to purchase 200,000 shares of common stock at an exercise price of $1.93 because our board of directors
determined that the $2.75 exercise price was too far out of the money to achieve the compensatory and incentive purposes of the
options. The exercise price of the new option was the fair market value of our common stock on the date of grant. The fair value
of the 200,000 options as of August 31, 2011 was $185,175.
Mr. Bar also received two option awards
in July 2010. The first award currently represents the right to acquire up to 608,707 shares of our common stock at an exercise
price of $0.001 per share. The number of shares for which such award was exercisable and the exercise price originally related
to shares of InspireMD Ltd. The per share price was set at $0.01 per share. The option was converted into an option to acquire
the current number of shares at the current exercise price through the share exchange transactions. The second award currently
represents the right to acquire up to 81,161 shares of our common stock at an exercise price of $1.23 per share. The number of
shares for which such award was exercisable and the exercise price also originally related to shares of InspireMD Ltd. The per
share price was determined based on the price at which InspireMD Ltd. had most recently raised capital. The option was converted
into an option to acquire the current number of shares at the current exercise price through the share exchange transactions. Both
awards were made in recognition of Mr. Bar's contributions to our corporate and organizational achievements. The first award
was related to Mr. Bar's performance over the long-term of his tenure with us and to our desire to grant Mr. Bar an equity
stake that would not be at risk. In particular, in determining to make this award, the board of directors took into account the
fact that, from September 2008 to April 2009, Mr. Bar accepted several salary reductions, which resulted in his monthly salary
being reduced from approximately $10,133 to approximately $7,387. Mr. Bar's salary remained approximately $7,387 per month
until August 2010, at which time his monthly salary was increased to $8,000. Furthermore, our board of directors decided that recognizing
Mr. Bar's efforts and sacrifices through an equity award was the most appropriate form of compensation, as it would also
serve to give Mr. Bar an additional equity interest in us. Providing Mr. Bar with an increased equity stake was viewed by our board
as important, as Mr. Bar's existing options were deemed a very small stake in comparison to that held by Mr. Paz and Dr.
Holzer. The second award was intended as a more traditional annual incentive award and related primarily to Mr. Bar's performance
in 2010 and our desire to grant Mr. Bar traditional options whose value would fluctuate depending on the performance of our common
stock. Both option awards vest one-twelfth quarterly commencing with the quarter in which they were granted. The first award had
a fair market value of $750,000 as of July 25, 2010. The second award had a fair market value of $68,509 as of July 31, 2010.
84
Compensation of Former President.
During the six months ended June 30, 2012, Dr. Holzer's total compensation was $189,290. In 2011, Dr. Holzer's
total compensation was $245,406, as compared to $209,592 in total compensation in 2010. Dr. Holzer's total compensation was
comprised of (i) consulting fees paid pursuant to the consultancy agreement InspireMD Ltd. entered into with OSHIL, The Israeli
Society Ltd., an entity wholly-owned by Dr. Holzer, through which Dr. Holzer was retained to serve as InspireMD Ltd.'s president
from June 1, 2012 through June 30, 2012, (ii) salary payments from December 1, 2011 through May 31, 2012, (iii) consulting fees
paid pursuant to the consultancy agreement InspireMD Ltd. entered into with OSHIL, The Israeli Society Ltd. from April 1, 2011
through November 30, 2011, (iv) salary payments from January 1, 2011 through March 31, 2011, and (v) benefits and perquisites,
as more fully discussed below. For the six months ended June 30, 2012, Dr. Holzer's salary compensation was $139,654 as an
employee, which includes a payout of his unused vacation days of $36,010, and $14,474 under the consultancy agreement with OSHIL,
The Israeli Society Ltd., for a total of $154,128. In 2011, Dr. Holzer's salary compensation was $42,425 under his employment
agreement, $122,970 under the consultancy agreement with OSHIL, The Israeli Society Ltd., and $15,371 as an employee in December
2011, for a total of $180,766, as compared to $89,197 under his employment agreement and $74,791 under a consultancy agreement
that was in effect prior to his employment agreement, for a total of $163,988, in 2010. In determining the compensation for Dr.
Holzer in 2011, our board of directors evaluated our corporate and organizational accomplishments in 2010, as well as Dr. Holzer's
individual accomplishments and contributions to our accomplishments. Our board of directors determined that an increase in compensation
for Dr. Holzer was appropriate in 2011, in part, in anticipation of us becoming a U.S. publicly traded company in 2011 and the
increased responsibilities that would result for our president. Dr. Holzer's compensation package for 2011 was determined
before the share exchange transactions, when InspireMD Ltd. was a private Israeli company. In accordance with Israeli law, his
compensation was submitted to and approved by the stockholders of InspireMD Ltd. on February 28, 2011. The compensation committee
determined that no changes were needed to Dr. Holzer's compensation package during its 2012 compensation review.
Dr. Holzer also received various benefits
as both a salaried employee and a consultant, many of which either are required by Israeli law or we believe are customarily provided
to Israeli executives. These benefits included contributions to his pension and vocational studies funds, an annual recreation
payment, a company car and cell phone, and a daily food allowance. For the six months ended June 30, 2012, Dr. Holzer's benefits
compensation through payments made to him as an employee and through payments made to OSHIL, The Israeli Society Ltd. was $35,163.
In 2011, Dr. Holzer's benefits compensation through payments made to him as an employee and through payments made to OSHIL,
The Israeli Society Ltd. was $64,640, as compared to $45,604 in 2010. Our board of directors and compensation committee determined
that equity based compensation would be inappropriate for Dr. Holzer in 2011 and 2012, in light of his current equity holdings
in our company.
Compensation of Former Vice President
of Sales of InspireMD Ltd.
During the six months ended June 30, 2012, Ms. Paz's total compensation was $83,569. In 2011,
Ms. Paz's total compensation was $782,016, as compared to $77,603 in total compensation in 2010. Ms. Paz's total compensation
was comprised of (i) payments for consulting fees under a consultancy agreement InspireMD Ltd. entered into with Ms. Paz which
terminated on March 31, 2011 and provided for the payment of a fixed hourly consulting fee of $45 for services provided in Israel
and a fixed daily consulting fee of $400 for services provided outside of Israel, and (ii) payments for consulting fees under a
consultancy agreement InspireMD Ltd. entered into with Sara Paz Management and Marketing Ltd, an entity wholly-owned by Ms. Paz,
through which Ms. Paz was retained to serve as InspireMD Ltd.'s vice president of sales from April 1, 2011 until its termination
on June 30, 2012, (iii) an option grant under the InspireMD, Inc. 2011 UMBRELLA Option Plan, as more fully discussed below, and
(iv) benefits and perquisites, as more fully discussed below. Ms. Paz's payments under her consultancy agreements were $89,819
during the six months ended June 30, 2012. Ms. Paz's payments under her consultancy agreements were $112,136 in 2011, as
compared to $77,603 in 2010. In determining the compensation for Ms. Paz in 2011, Mr. Paz evaluated our corporate and organizational
achievements in 2010, with a particular emphasis on our sales growth, to which Ms. Paz's work contributed, her contributions
and perceived future potential on a full-time basis and the compensation paid to similarly situated executives within our company.
Dr. Holzer and Mr. Shore approved Mr. Paz's determination with respect to Ms. Paz's compensation. Mr. Paz recommended,
and the compensation committee agreed, that no changes were needed to Ms. Paz's compensation package during 2012.
In conjunction with InspireMD Ltd. entering
into the consultancy agreement with Sara Paz Management and Marketing Ltd, we commenced paying Ms. Paz the benefits required by
Israeli law and comparable benefits to our other executives. As such, pursuant to the consultancy agreement, in 2011 and 2012,
Ms. Paz received various benefits, including contributions to her pension and vocational studies funds, an annual recreation payment,
a company car, a company cell phone, and a daily food allowance. During the six months ended June 30, 2012, Ms. Paz's benefits
compensation was $24,750. In 2011, Ms. Paz's benefits compensation was $30,473.
85
In addition, in recognition of Ms. Paz's
contributions to our corporate and organizational achievements in 2010, particularly with respect to the increased sales of our
products, in June 2011, our board of directors awarded Ms. Paz options to acquire up to 365,225 shares of common stock at an exercise
price of $1.50 per share. The options vest on a monthly basis over a three year period. The options had a fair market value of
$639,407 as of June 1, 2011. The amount was determined with reference to the award made to Mr. Shore during 2011, for an approximately
equal number of shares. The exercise price was the fair market value of our common stock on the date of grant. We did not consider
the Black-Scholes valuation of the grant prior to making it. We did take into account the desire to provide Ms. Paz with an equity
position in our company, separate from that of her husband, that would further align her objectives with those of our stockholders
and allow her to share in our future financial growth.
Impact of Tax Laws
Deductibility of Executive Compensation.
Generally, under U.S. law, a company may not deduct compensation of more than $1,000,000 that is paid to an individual employed
by the company who, on the last day of the taxable year, either is the company's principal executive officer or an individual
who is among the three highest compensated officers for the taxable year (other than the principal executive officer or the principal
financial officer). The $1,000,000 limitation on deductions does not apply to certain types of compensation, including qualified
performance-based compensation, and only applies to compensation paid by a publicly-traded corporation (and not compensation paid
by non-corporate entities). Because the compensation deducted in the U.S. for each individual to whom this rule applies has historically
been less than $1,000,000 per year, we do not believe that the $1,000,000 limitation will affect us in the near future. If the
deductibility of executive compensation becomes a significant issue, our compensation plans and policies may be modified to maximize
deductibility if our compensation committee and we determine that such action is in our best interests.
Impact of Israeli Tax Law.
The awards
granted to employees pursuant to Section 102 of the Tax Ordinance under the InspireMD, Inc. 2011 UMBRELLA Option Plan may be designated
by us as approved options under the capital gains alternative, or as approved options under the ordinary income tax alternative.
To qualify for the capital gains alternative,
certain requirements must be met, including registration of the options in the name of a trustee. Each option, and any shares of
common stock acquired upon the exercise of the option, must be held by the trustee for a period commencing on the date of grant
and deposit into trust with the trustee and ending 24 months thereafter.
Under the terms of the capital gains alternative,
we may not deduct expenses pertaining to the options for tax purposes.
Under the InspireMD, Inc. 2011 UMBRELLA
Option Plan, we may also grant to employees options pursuant to Section 102(b)(3) of the Israeli Tax Ordinance that are not required
to be held in trust by a trustee. This alternative, while facilitating immediate exercise of vested options and sale of the underlying
shares, will subject the optionee to the marginal income tax rate of up to 45% as well as payments to the National Insurance Institute
and health tax on the date of the sale of the shares or options. Under the InspireMD, Inc. 2011 UMBRELLA Option Plan, we may also
grant to non-employees options pursuant to Section 3(I) of the Israeli Tax Ordinance. Under that section, the income tax on the
benefit arising to the optionee upon the exercise of options and the issuance of common stock is generally due at the time of exercise
of the options.
Allotment of these options may be subject
to terms of the tax ruling that has been obtained by InspireMD Ltd. from the Israeli tax authorities according to Section 103 of
the Israeli tax ordinance, with regard to the share exchange transactions. According to the tax pre-ruling, the exchange of shares
and options of InspireMD Ltd. for shares and options of our company pursuant to the share exchange transactions will not result
in an immediate tax event for InspireMD Ltd.'s former shareholders, but a deferred tax event, subject to certain conditions
as stipulated in the tax pre-ruling. The main condition of the tax pre-ruling is a restriction on the exchanged shares for two
years from December 31, 2010 for shareholders holding over of 5% of our outstanding shares of common stock.
86
Termination Payments
Our agreements with Messrs. Paz, Bar and
Shore and Israeli law provide, and our agreements with Dr. Holzer and Ms. Paz provided, for payments and other compensation in
the event of termination under certain circumstances, as more fully described under "Executive Compensation – Potential
Payments Upon Termination or Change of Control." These provisions are comprised of (i) notice periods of varying length prior
to a termination without cause (180 days for Mr. Paz and Dr. Holzer, 30 days in general and 180 days following certain change in
control events for Mr. Shore, 60 days for Mr. Bar and 30 days for Ms. Paz), (ii) severance payments as required by Israeli law,
(iii) vesting of Mr. Shore's, options upon his termination in connection with a change of control and (iv) vesting of Mr.
Shore's, Mr. Bar's and Ms. Paz's options automatically upon a change of control if such stock options are not
assumed or substituted by the surviving company. We believe that having these provisions in our agreements with our officers enables
our officers to focus solely on the performance of their jobs by providing them with security in the event of certain terminations
of employment. With respect to the notice provisions, we believe that these provide us with a mechanism to ensure a successful
transition if we have to replace one of our named executive officers. In addition, we have provided these benefits to our officers
because we believe it is necessary for retention purposes, to attract well qualified and talented executives and, in the case of
severance payments, to comply with Israeli law. In exchange for these protections, our officers have agreed to be bound by certain
restrictive covenants, including confidentiality, non-competition and non-solicitation provisions.
Risk Considerations in our Compensation Programs
Our compensation committee believes that
risks arising from our policies and practices for compensating employees are not reasonably likely to have a material adverse effect
on us and do not encourage risk taking that is reasonably likely to have a material adverse effect on us. Our compensation committee
believes that the structure of our executive compensation program mitigates risks by avoiding any named executive officer placing
undue emphasis on any particular performance metric at the expense of other aspects of our business.
Summary Compensation Table
The table below sets forth, for the transition
period ended June 30, 2012 and the fiscal years ended December 31, 2011, 2010 and 2009, the compensation earned by Ofir Paz, our
chief executive officer, Craig Shore, our chief financial officer, secretary and treasurer, Eli Bar, InspireMD Ltd.'s senior
vice president of research and development and chief technical officer, Asher Holzer, Ph.D., our former president, and Sara Paz,
InspireMD Ltd.'s former vice president of sales.
Name and Principal Position
Year(*)
Salary
($)(1)
Bonus
($)(1)
Option
Awards($)(2)
All Other
Compensation
($)(1)
Total
($)(1)
Ofir Paz(3)
Chief Executive Officer
2012
121,327
-
-
32,270
(4)
153,597
2011
57,796
-
-
189,243
(4)
247,039
2010
89,197
-
-
129,963
(4)
219,160
2009
76,524
-
-
129,909
(4)
206,433
Craig Shore
Chief Financial Officer, Secretary and Treasurer
2012
76,717
-
139,499
18,180
(5)
234,396
2011
118,333
-
260,554
40,546
(5)
419,433
2010
9,912
-
-
3,250
(5)
13,162
(6)
Eli Bar
Senior Vice President, Research and Development and Chief Technical Officer of InspireMD Ltd.
2012
77,100
12,850
-
22,482
(8)
112,432
2011
122,760
-
185,175
(7)
42,459
(8)
350,394
2010
91,684
-
818,509
32,496
(8)
942,689
2009
86,971
-
-
38,585
(8)
125,556
Asher Holzer, Ph.D.(3)
Former President
2012
139,654
-
-
49,637
(9)
189,291
2011
57,796
-
-
187,610
(9)
245,406
2010
89,197
-
-
120,395
(9)
209,592
2009
73,526
-
-
109,054
(9)
182,580
Sara Paz
Former Vice President of Sales of InspireMD Ltd.
2012
-
-
-
83,569
(10)
83,569
2011
-
-
639,407
142,609
(10)
782,016
2010
-
-
-
77,603
(10)
77,603
2009
-
-
-
59,197
(10)
59,197
87
___________________
(*)
2012 refers to our transition period from January 1 through June 30, 2012. Years 2009 to 2011 refer to our annual reporting
periods for those years.
(1)
Compensation amounts received in non-U.S. currency have been converted into U.S. dollars using the average exchange rate for
the applicable year.  The average exchange rate for 2012 was 3.80 NIS per dollar, the average exchange rate for 2011
was 3.5781 NIS per dollar, the average exchange rate for 2010 was 3.7330 NIS per dollar and the average exchange rate for 2009
was 3.9326 NIS per dollar.
(2)
The amounts in this column reflect the dollar amounts recognized for financial statement reporting purposes with respect to
the six months ended June 30, 2012 and the years ended December 31, 2009, 2010 and 2011, 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. For additional discussion of the valuation assumptions used in determining stock-based compensation and the grant date fair
value for stock options, see "Management's Discussion and Analysis of Financial Condition and Results of Operation
— Critical Accounting Policies—Share-Based Compensation" and Note 2—"Significant Accounting Policies"
and Note 10—"Equity (Capital Deficiency)" of the Notes to the Consolidated Financial Statements for the Six Months
Ended June 30, 2012 included herein.
(3)
Both Mr. Paz and Dr. Holzer are directors but do not receive any additional compensation for their services as directors.
(4)
Mr. Paz's other compensation consisted of $57,612 in consulting salary and $72,297 in benefits in 2009, $78,491 in consulting
salary and $51,472 in benefits in 2010 and $122,970 in consulting salary and $66,273 in benefits in 2011 and consisted solely of
benefits in 2012. In each of 2009, 2010, 2011 and 2012, Mr. Paz's benefits included our contributions to his severance, pension,
vocational studies and disability funds, an annual recreation payment, a company car and cell phone, and a daily food allowance.
In 2012, the car-related benefits for Mr. Paz were valued at $12,549.
(5)
Mr. Shore's other compensation consisted solely of benefits in 2010 and 2012 and consisted of a warrant award valued
at $5,266 and $35,280 in benefits in 2011. In each of 2010, 2011 and 2012, Mr. Shore's benefits included our contributions
to his severance, pension, vocational studies and disability funds, an annual recreation payment, a company car and cell phone,
and a daily food allowance.
(6)
Mr. Shore's total compensation in 2010 represented amounts paid beginning on November 24, 2010, the date of the commencement
of Mr. Shore's employment with us.
(7)
On June 1, 2011, Mr. Bar was awarded options to acquire up to 200,000 shares of common stock at an exercise price of $2.75
per share as a bonus payment for his contributions to our company in 2010.  The options had a fair market value of $268,381.
In August 2011, we cancelled the option to purchase 200,000 shares of common stock that were awarded to Mr. Bar in June 2011 and
reissued an option to purchase 200,000 shares of common stock at an exercise price of $1.93 because our board of directors determined
that the $2.75 exercise price was too far out of the money to achieve the compensatory and incentive purposes of the options.  
The new options had a fair market value of $185,175.
88
(8)
Mr. Bar's other compensation in 2009, 2010, 2011 and 2012 consisted solely of benefits, including our contributions to
his severance, pension, vocational studies and disability funds, an annual recreation payment, a company car and cell phone, and
a daily food allowance.
(9)
Dr. Holzer's other compensation consisted of $55,040 in consulting salary and $54,014 in benefits in 2009, $74,791 in
consulting salary and $45,604 in benefits in 2010, $122,970 in consulting salary and $64,640 in benefits in 2011 and $14,474 in
consulting salary and $35,163 in benefits in 2012. In each of 2009, 2010, 2011 and 2012, Dr. Holzer's benefits included our
contributions to his severance, pension, vocational studies and disability funds, an annual recreation payment, a company car and
cell phone, and a daily food allowance.
(10)
Ms. Paz's other compensation consisted of $59,197 in consulting salary in 2009, $77,603 in consulting salary in 2010,
$112,136 in consulting salary and $30,473 in benefits in 2011 and $60,000 in consulting salary and $23,569 in benefits in 2012.
In each of 2011 and 2012, Ms. Paz's benefits included our contributions to her severance, pension, vocational studies and
disability funds, an annual recreation payment, a company car and cell phone, and a daily food allowance.
2012 and 2011 Grants of Plan-Based Awards
The following table sets forth information
regarding grants of plan-based awards to our named executive officers in the six months ended June 30, 2012:
Name
Grant
Date
Option
Awards:
Number of
Securities
Underlying
(#)
Exercise or
Base Price of
Option
Awards Options
($/Sh)
Grant Date
Fair Value
of
Option
Awards ($)
Ofir Paz
Chief Executive Officer
-
-
-
-
Craig Shore
Chief Financial Officer, Secretary and Treasurer
5/25/2012
300,000
(1)
0.80
139,499
Eli Bar (2)
Senior Vice President, Research and Development and Chief Technical Officer of InspireMD Ltd.
-
-
-
-
Asher Holzer, Ph.D.
Former President
-
-
-
-
Sara Paz
Vice President of Sales of InspireMD Ltd.
-
-
-
-
___________________
(1)
On May 25, 2012, Mr. Shore was granted options to acquire up to 300,000 shares of our common stock at an exercise price of
$0.80 per share. The options vest on an annual basis over three years. The options had a fair market value of $139,499 as of May
25, 2012.  The award was given in recognition of Mr. Shore's past contributions, to increase Mr. Shore's equity
stake in us in order to further align Mr. Shore's objectives with those of our stockholders and allow him to share in our
future financial growth and to compensate for Mr. Shore's relatively low salary for his position.
89
The following table sets forth information
regarding grants of plan-based awards to our named executive officers in the fiscal year ended December 31, 2011:
Name
Grant
Date
Option
Awards:
Number of
Securities
Underlying
(#)
Exercise or
Base Price of
Option
Awards Options
($/Sh)
Grant Date
Fair Value
of
Option
Awards ($)
Ofir Paz
Chief Executive Officer
-
-
-
-
Craig Shore
2/27/2012
365,223
1.23
260,544
Chief Financial Officer, Secretary and Treasurer
5/20/2011
3,000
(1)
1.80
5,266
Eli Bar(2)
6/1/2011
200,000
2.75
268,381
Senior Vice President, Research and Development and Chief Technical Officer of InspireMD Ltd.
8/31/2011
200,000
1.93
185,175
Asher Holzer, Ph.D.
Former President
-
-
-
-
Sara Paz(3)
Vice President of Sales of InspireMD Ltd.
6/1/2011
365,225
1.50
639,407
___________________
(1)
On May 20, 2011, Mr. Shore was awarded a warrant to purchase 3,000 shares of our common stock at an exercise price of $1.80
per share as a bonus payment for his work performed in connection with our share exchange transactions. The warrant had a fair
market value of $5,266 and vested immediately. The award was given in recognition of Mr. Shore's extraordinary efforts related
to our private placement transaction on March 31, 2011.
(2)
On June 1, 2011, Mr. Bar was awarded options to acquire up to 200,000 shares of common stock at an exercise price of $2.75
per share as a bonus payment for his contributions to our company in 2010. The options had a fair market value of $268,381. In
August 2011, we cancelled the option to purchase 200,000 shares of common stock that were awarded to Mr. Bar in June 2011 and reissued
an option to purchase 200,000 shares of common stock at an exercise price of $1.93 because our board of directors determined that
the $2.75 exercise price was too far out of the money to achieve the compensatory and incentive purposes of the options. This resulted
in a change in fair market value to $185,175.
(3)
On March 27, 2012, Ms. Paz ceased to be an executive officer upon the appointment of Robert Ratini as our new head of sales
and marketing, but has temporarily retained her title as vice president of sales.
90
Outstanding Equity Awards at June 30, 2012
The following table shows information concerning
unexercised options outstanding as of June 30, 2012 for each of our named executive officers.   There are no outstanding
stock awards with our named executive officers.
Name
Number of securities
underlying
unexercised options
(#) exercisable
Number of securities
underlying
unexercised options
(#) unexercisable
Option exercise price
($)
Option expiration
date
Ofir Paz
-
-
-
-
Craig Shore
121,741
243,482
(1)
1.23
2/27/2021
-
300,000
(2)
0.80
5/25/2022
Eli Bar
243,481
-
0.001
10/28/2016
365,224
-
0.001
12/29/2016
405,804
202,903
(3)
0.001
7/22/2020
54,107
27,054
(3)
1.23
7/28/2020
66,667
133,333
(4)
1.93
5/23/2016
Asher Holzer, Ph.D.
-
-
-
-
Sara Paz
121,742
243,483
(5)
1.50
6/1/2016
___________________
(1)
These options were granted in February 2011 and vest annually, with 1/3 vesting on November 23, 2011, November 23, 2012 and
November 23, 2013.
(2)
These options were granted on May 25, 2012 and vest annually, with 1/3 vesting on May 25, 2013, May 25, 2014 and May 25, 2015.
(3)
These options were granted in July 2010 and vest quarterly over three years, commencing with the quarter in which they were
granted.
(4)
These options were granted in August 2011 and vest annually, with 1/3 vesting on May 23, 2012, May 23, 2013 and May 23, 2014.
(5)
These options were granted in June 2011 and vest annually, with 1/3 vesting on April 8, 2012, April 8, 2013 and April 8, 2014.
Option Exercises and Stock Vested
There were no stock options exercised by
our named executive officers during the six months ended June 30, 2012 or the fiscal year ended December 31, 2011.
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.  Under the InspireMD, Inc. 2011 UMBRELLA Option Plan, we have reserved 15,000,000 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.
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.
91
Potential Payments Upon Termination or Change of Control
Our agreements with Messrs. Paz, Bar and
Shore, Dr. Holzer and Ms. Paz as well as Israeli law provide for payments and other compensation in the event of their termination
or a change of control of us under certain circumstances, as described below.
Chief Executive Officer.
Pursuant
to Mr. Paz's consultancy agreement, we possess the right to terminate his employment without "cause" (as such
term is defined in the agreement) upon at least 180 days prior notice to Mr. Paz. During such notice period, we will continue to
compensate Mr. Paz according to his agreement and Mr. Paz will be obligated to continue to discharge and perform all of his duties
and obligations under the agreement, and to cooperate with us and use his best efforts to assist with the integration of any persons
that we have delegated to assume Mr. Paz's responsibilities.  We believe that this arrangement will assist us in
achieving a successful transition upon Mr. Paz's departure.  Mr. Paz is entitled to terminate his employment with
us in the event that we do not fulfill our undertakings under our agreement, upon at least 30 days prior notice to us, during which
time we may cure the breach.  During such notice period, we will continue to compensate Mr. Paz according to his agreement
and Mr. Paz will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.
If Mr. Paz's employment is terminated
for any reason other than for cause, as a senior executive under Israeli law, he will also be entitled to severance payments equal
to the total amount that has been contributed to and accumulated in his severance payment fund. The total amount accumulated in
his severance payment fund as of June 30, 2012 was $86,408, as adjusted for conversion from New Israeli Shekels to U.S. Dollars.
We are entitled to terminate Mr. Paz'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. Paz and Mr. Paz will not be entitled to the amount that has been
contributed to and accumulated in his severance payment fund.
Also, upon termination of Mr. Paz's
employment for any reason, we will compensate him for all unused vacation days accrued.
Chief Financial Officer, Secretary and
Treasurer.
Subject to certain conditions, either party to our employment agreement with Mr. Shore may terminate
the employment agreement without "cause" (as such term is defined in Mr. Shore's employment agreement with us)
upon at least 30 days prior notice to the other party or, in the event of a major change of control in terms of the ownership of
shares of our common stock or our intellectual property, upon at least 180 days prior notice.  During such notice period,
we will continue to compensate Mr. Shore according to his employment agreement and Mr. Shore will be obligated to continue to discharge
and perform all of his duties and obligations under his employment agreement, and to cooperate with us and use his best efforts
to assist with the integration of any persons that we have delegated to assume Mr. Shore's responsibilities.  We
believe that this arrangement with Mr. Shore will assist us in achieving a successful transition upon Mr. Shore's departure.  In
addition, upon termination without "cause," we have the right to pay Mr. Shore a lump payment representing his compensation
for the notice period and terminate Mr. Shore's employment immediately.
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 June 30, 2012 was $14,165 as adjusted for the 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 June 30, 2012,
Mr. Shore would have been entitled to receive $15,498 in severance under Israeli law, thereby requiring us to pay Mr. Shore $1,333
, in addition to releasing the $14,165 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.
92
In addition, pursuant to Mr. Shore's
employment agreement, in the event of a change of control of our company, the majority of shares of our common stock or our intellectual
property that results in the termination of Mr. Shore's employment within one year of such change of control, the stock options
granted to Mr. Shore in accordance with the terms of his employment agreement that were unvested will vest immediately upon such
termination.  Furthermore, pursuant to terms contained in Mr. Shore's stock option award agreement, in the event
of a change of control of our company, the stock options granted to Mr. Shore that were unvested will vest immediately upon such
change of control if such stock options are not assumed or substituted by the surviving company.
Also, upon termination of Mr. Shore's
employment for any reason, we will compensate him for all unused vacation days accrued.
Senior Vice President of Research and
Development and Chief Technical Officer of InspireMD Ltd.
Subject to certain conditions, either party to our employment
agreement with Mr. Bar may terminate the employment agreement without "cause" (as such term is defined in Mr. Bar's
employment agreement with us) upon at least 60 days prior written notice to the other party.  During such notice period,
we will continue to compensate Mr. Bar according to his employment agreement and Mr. Bar will be obligated to continue to discharge
and perform all of his duties and obligations under his employment agreement, and to cooperate with us and use his best efforts
to assist with the integration of any persons that we have delegated to assume Mr. Bar's responsibilities.  We
believe that our severance arrangement with Mr. Bar will assist us in achieving a successful transition upon Mr. Bar's departure.  In
addition, upon termination without "cause," we have the right to pay Mr. Bar a lump payment representing his compensation
for the notice period and terminate Mr. Bar's employment immediately.
If Mr. Bar's employment is terminated
without cause, Mr. Bar will also be entitled under Israeli law to severance payments equal to his last month's salary multiplied
by the number of years Mr. Bar has been employed with us.  In order to finance this obligation, we make monthly contributions
equal to 8.33% of Mr. Bar's salary each month to a severance payment fund.  The total amount accumulated in his
severance payment fund as of June 30, 2012 was $63,450, as adjusted for conversion from New Israeli Shekels to U.S. dollars.  However,
if Mr. Bar's employment was terminated without cause, on account of a disability or upon his death, as of June 30, 2012,
Mr. Bar would be entitled to receive $68,397 in severance under Israeli law, thereby requiring us to pay Mr. Bar $4,947, in addition
to releasing the $63,450 in his severance payment fund.  In addition, Mr. Bar 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. Bar'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. Bar.
In addition, pursuant to terms contained
in Mr. Bar's stock option award agreement, in the event of a change of control of our company, the stock options granted
to Mr. Bar that were unvested will vest immediately upon such change of control if such stock options are not assumed or substituted
by the surviving company.  Also, upon termination of Mr. Bar's employment for any reason, we will compensate him
for all unused vacation days accrued.
Former President.
Pursuant to Dr.
Holzer's consultancy agreement with us dated June 1, 2012, both Dr. Holzer and we possess the right to terminate the consultancy
agreement for any reason or for no reason upon at least 15 days prior notice to other party. During such notice period, we will
continue to compensate Dr. Holzer his consulting fees according to his agreement and Dr. Holzer will be obligated to continue to
discharge and perform all of his duties and obligations under the agreement. In the event we terminate the consulting agreement
without "cause" (as such term is defined in the agreement), we shall pay Dr. Holzer his consulting fees for the entire
term of the consulting agreement, which terminates November 30, 2012. Upon termination of the consulting agreement, we believe
that we will have no further obligation to compensate Dr. Holzer and Dr. Holzer will not be entitled to any additional compensation,
other than as set forth above.
93
Former Vice President of Sales of InspireMD
Ltd.
Subject to certain conditions, either party to our consultancy agreement with Ms. Paz may terminate the agreement without
"cause" (as such term is defined in her consultancy agreement) upon at least 30 days prior written notice to the other
party.  During such notice period, we will continue to compensate Ms. Paz according to her consultancy agreement and
Ms. Paz will be obligated to continue to discharge and perform all of her duties and obligations under her consultancy agreement,
and to cooperate with us and use her best efforts to assist with the integration of any persons that we have delegated to assume
Ms. Paz's responsibilities.  We believe that our severance arrangement with Ms. Paz will assist us in achieving
a successful transition upon Ms. Paz's departure.  Ms. Paz is entitled to terminate her employment with us in the
event that we do not fulfill our undertakings under our agreement, upon at least 30 days prior notice to us, during which time
we may cure the breach.  During such notice period, we will continue to compensate Ms. Paz according to her agreement
and Ms. Paz will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.
In addition, pursuant to terms contained
in Ms. Paz's stock option award agreement, in the event of a change of control of our company, the stock options granted
to Ms. Paz that were unvested will vest immediately upon such change of control if such stock options are not assumed or substituted
by the surviving company.
We are entitled to terminate Ms. Paz's
employment immediately at any time for any reason, upon which we believe we will have no further obligation to compensate Ms. Paz
under her consultancy agreement or Israeli law, except as provided above.
The following table shows, as of June 30,
2012, potential payments to our named executive officers for various scenarios involving a resignation, termination, change of
control, retirement, death or disability, using, where applicable, the closing price of our common stock of $1.06 (as reported
on the OTC Bulletin Board as of June 29, 2012).  Compensation amounts to be paid in non-U.S. currency have been converted
into U.S. dollars using 3.923 NIS per dollar, which was the exchange rate as of June 30, 2012.
Type of Event
Voluntary
Resignation
Upon
Breach By
Us
Voluntary
Resignation
Termination
for Cause
Termination
Not for
Cause
Death
Disability
Termination
Not for
Cause in
Connection
with a
Change of
Control
Change of
Control (No
Termination)
Ofir
    Paz
Employment agreement
    payments
$
19,873
(1)
$
19,873
(1)
—
$
119,238
(2)
—
—
$
119,238
(2)
—
Severance payments(3)
$
86,408
$
86,408
—
$
86,408
$
86,408
$
86,408
$
86,408
—
Accrued vacation payments(4)
$
61,527
$
61,527
$
61,527
$
61,527
$
61,527
$
61,527
$
61,527
—
Value of accelerated options
—
—
—
—
—
—
—
—
Craig
    Shore
Employment agreement payments
$
12,369
(5)
$
12,369
(5)
—
$
12,369
(5)
—
—
$
74,215
(2)
—
Severance payments
$
14,165
(6)
$
14,165
(6)
—
$
15,498
(7)
$
15,498
(7)
$
15,498
(7)
$
15,498
(7)
—
Accrued vacation payments(4)
$
12,242
$
12,242
$
12,242
$
12,242
$
12,242
$
12,242
$
12,242
—
Value of accelerated options
—
—
—
—
—
$
78,000
(8)
$
78,000
(9)
Eli
    Bar
Employment agreement payments
$
24,942
(10)
$
24,942
(10)
—
$
24,942
(10)
—
—
$
24,942
(10)
—
Severance payments
—
—
—
$
68,397
(7)
$
68,397
(7)
$
68,397
(7)
$
68,397
(7)
—
Accrued vacation payments(4)
$
40,591
$
40,591
$
40,591
$
40,591
$
40,591
$
40,591
$
40,591
—
Value of accelerated options
—
—
—
—
—
$
214,874
(11)
$
214,874
(11)
Asher
    Holzer
Employment agreement payments
$
10,169
(12)
$
10,169
(12)
$
10,169
(12)
$
101,685
(13)
—
—
$
101,685
(13)
—
Severance payments(3)
—
—
—
—
—
—
—
—
Accrued vacation payments(4)
—
—
—
—
—
—
—
—
Value of accelerated options
—
—
—
—
—
—
—
Sara Paz
Consultancy agreement payments
$
13,491
(5)
$
13,491
(5)
$
—
$
13,491
(5)
—
—
$
13,491
(5)
—
Severance payments
—
—
—
—
—
—
—
—
Accrued vacation payments
—
—
—
—
—
—
—
—
Value of accelerated options
—
—
—
—
—
—
—
—
94
___________________
(1)
Represents total compensation for 30 days, during which time we will continue to compensate the officer according to his agreement
and the officer will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.  In
the event of material breach by us, we are permitted to cure our breach of the agreement during the 30 day notice period.
(2)
Represents total compensation for 180 days, during which time we will continue to compensate the officer according to his agreement
and the officer will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.
(3)
Represents the total amount that has been contributed to and accumulated in his severance payment fund.
(4)
Pursuant to Israeli law, the value of a vacation day is equal to gross salary divided by 22 working days per month.
(5)
Represents total compensation for 30 days, during which time we will continue to compensate the officer according to his or
her agreement and the officer will be obligated to continue to discharge and perform all of his or her duties and obligations under
the agreement.
(6)
Represents the total amount that has been contributed to and accumulated in his severance payment fund, to be paid pursuant
to his employment agreement.
(7)
Represents the total amount to be paid under Israeli law in the event of termination not for cause, calculated based upon the
officer's monthly salary as of June 30, 2012, multiplied by his years of employment with us.
(8)
Represents the vesting of options to purchase 300,000 shares of our common stock, multiplied by the difference between the
exercise price of $0.81 and the closing price of our common stock of $1.06 (as reported on the OTC Bulletin Board as of June 29,
2012), which shall occur upon termination of Mr. Shore's employment within one year of a change of control.
(9)
Assumes that such stock options are not assumed or substituted by the surviving company and represents the vesting of options
to purchase 300,000 shares of our common stock, multiplied by the difference between the exercise price of $0.81 and the closing
price of our common stock of $1.06 (as reported on the OTC Bulletin Board as of June 29, 2012).
(10)
Represents total compensation for 60 days, during which time we will continue to compensate the officer according to his agreement
and the officer will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.
(11)
Assumes that such stock options are not assumed or substituted by the surviving company and represents the sum of the vesting
of options to purchase 202,902 shares of our common stock, multiplied by the difference between the exercise price of $0.001 and
the closing price of our common stock of $1.06 (as reported on the OTC Bulletin Board as of June 29, 2012).
(12)
Represents total compensation for 15 days, during which time we will continue to compensate the officer according to his agreement
and the officer will be obligated to continue to discharge and perform all of his duties and obligations under the agreement.
(13)
Represents total compensation for the remainder of the term of Dr. Holzer's consulting agreement, which terminates November
30, 2012.
95
Director Compensation
The following table shows information concerning
our directors other than Mr. Paz and Dr. Holzer, during the six months ended June 30, 2012.
Name
Fees Earned or
Paid in Cash
($)
Stock Awards
($)
Option Awards(1)
($)
All Other
Compensation
($)
Total
($)
Sol J. Barer, Ph.D.
-
-
215,044
(2)
-
215,044
James Barry, Ph.D.
-
-
129,695
-
129,695
Paul Stuka
-
-
23,323
-
23,323
Eyal Weinstein
-
-
23,323
-
23,323
___________________
(1)
The amounts in this column reflect the dollar amounts recognized for financial statement reporting purposes with respect to
the six months ended June 30, 2012, 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. For additional discussion of the valuation assumptions
used in determining stock-based compensation and the grant date fair value for stock options, see "Management's Discussion
and Analysis of Financial Condition and Results of Operation — Critical Accounting Policies—Share-Based Compensation"
and Note 2—"Significant Accounting Policies" and Note 10—"Equity (Capital Deficiency)" of the
Notes to the Consolidated Financial Statements for the Six Months Ended June 30, 2012 included herein.
(2)
This includes the fair market value of Mr. Barer's option described in the table below as well as $191,721 recognized
as a result of a change in a performance condition to the vesting of options to purchase 1,450,000 shares of our common stock.
An option to purchase 750,000 shares was originally scheduled to vest upon the date we become listed on a registered national securities
exchange (such as the New York Stock Exchange, NASDAQ Stock Market, or the NYSE Amex), provided that such listing occurs on or
before June 30, 2013, and provided further that Dr. Barer is still providing services to us in some capacity as of such vesting
date. An option to purchase 750,000 shares was originally scheduled to vest upon the date that we receive research coverage from
at least two investment banks that ranked in the top 20 investment banks in terms of underwritings as of their most recently completed
fiscal year, and/or leading analysts, as ranked by either the Wall Street Journal, the Financial Times, Zacks Investment Research
or Institutional Investor, provided that we receive such coverage on or before June 30, 2013, and, provided further that Dr. Barer
is still providing services to us in some capacity as of such vesting date. On June 18, 2012, the compensation committee extended
these December 31, 2012 deadlines to June 30, 2013.
We do not currently provide cash compensation
to our directors for acting as such, although we may do so in the future. We reimburse our directors for reasonable expenses incurred
in connection with their service as directors.  In addition, during the six months ended June 30, 2012, we made the following
option grants to the following directors.  Each grant was made under the InspireMD, Inc. 2011 UMBRELLA Option Plan, unless
otherwise noted.
96
Name
Shares
    Subject to Options
Grant
    Date
Exercise
    Price
Vesting
    Schedule
Expiration
Fair
    Market Value on Grant Date
Sol J. Barer,
    Ph.D.
50,000
(1)
June 18, 2012
$
0.79
One-third annually
    in 2013, 2014 and 2015 on the anniversary of the date of grant, provided that Dr. Barer is providing services to us or our
    subsidiaries or affiliates on the applicable vesting date.
June
                                                                        18, 2022
$
23,323
James Barry, Ph.D.
100,000
(2)
January 30, 2012
$
1.95
One-third annually in 2013,
    2014 and 2015 on the anniversary of the date of grant, provided that if Dr. Barry is (i) not reelected as a director at our
    2014 annual meeting of stockholders, or (ii) not nominated for reelection as a director at our 2014 annual meeting of stockholders,
    the option vests and becomes exercisable on the date of such failure to be reelected or nominated.
January
                                                             30, 2022
$
106,372
50,000
(1)
June 18, 2012
$
0.79
One-third annually in 2013,
    2014 and 2015 on the anniversary of the date of grant, provided that Dr. Barry is providing services to us or our subsidiaries
    or affiliates on the applicable vesting date.
June
                                                             18, 2022
$
23,323
Paul Stuka
50,000
(1)
June 18, 2012
$
0.79
One-third annually in 2013,
    2014 and 2015 on the anniversary of the date of grant, provided that Mr. Stuka is providing services to us or our subsidiaries
    or affiliates on the applicable vesting date.
June
                                                             18, 2022
$
23,323
Eyal Weinstein
50,000
(1)
June 18, 2012
$
0.79
One-third annually in 2013,
    2014 and 2015 on the anniversary of the date of grant, provided that Mr. Weinstein is providing services to us or our subsidiaries
    or affiliates on the applicable vesting date.
June
                                                             18, 2022
$
23,323
___________________
(1)
This option was granted as the director's 2012 annual director compensation.
(2)
This option was granted in connection with the appointment of this person to our board of directors.
In connection with the appointment of James
J. Loughlin to our board of directors effective September 21, 2012, Mr. Loughlin was granted an option to purchase 100,000 shares
of our common stock at an exercise price of $2.25 per share, the closing price of our common stock on September 21, 2012, the date
of grant, subject to the terms and conditions of the 2011 UMBRELLA Option Plan. The option vests and becomes exercisable in three
equal annual installments beginning on the one-year anniversary of the date of grant, provided that in the event that Mr. Loughlin
is either (i) not reelected as a director at our 2014 annual meeting of stockholders, or (ii) not nominated for reelection as a
director at our 2014 annual meeting of stockholders, the option vests and becomes exercisable on the date of Mr. Loughlin's
failure to be reelected or nominated. The option has a term of 10 years from the date of grant.
The following table shows information concerning
our directors other than Mr. Paz and Dr. Holzer, during the fiscal year ended December 31, 2011.
Name
Fees Earned or
Paid in Cash
($)
Stock Awards
($)
Option Awards(1)
($)
All Other
Compensation
($)
Total
($)
Sol J. Barer, Ph.D.
-
5,655,000 (2)
4,783,659
-
10,438,659
Paul Stuka
-
-
111,344
-
111,344
Eyal Weinstein
-
-
27,836
-
27,836
97
___________________
(1)
The amounts in this column reflect the dollar amounts recognized for financial statement reporting purposes with respect to
the year ended December 31, 2011, 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. For additional discussion of the valuation assumptions
used in determining stock-based compensation and the grant date fair value for stock options, see "Management's Discussion
and Analysis of Financial Condition and Results of Operation—Critical Accounting Policies—Share-based compensation"
and Note 2—"Significant Accounting Policies" and Note 10—"Equity (Capital Deficiency)—Share
Based Compensation" of the Notes to the Consolidated Financial Statements included herein.
(2)
On November 16, 2011, in connection with his appointment as chairman of our board of directors, we issued Dr. Barer 2,900,000
shares of our common stock, all of which were immediately vested. The fair market value was $1.95 per share.
During 2011, we made the following option
grants to the following directors.  Each grant was made under the InspireMD, Inc. 2011 UMBRELLA Option Plan, unless otherwise
noted.
Name
Shares Subject to Options
Grant Date
Exercise
    Price
Vesting Schedule
Expiration
Fair Market Value on Grant Date
Sol J. Barer, Ph.D.
1,000,000
(1)(2)
July 11, 2011
$
1.50
Fully vested upon grant.
September 30, 2011
(3)
$
1,000,255
500,000
(2)
July 11, 2011
$
2.50
One-half annually in 2012 and 2013 on the anniversary of the date of grant, provided that if Dr. Barer is (i) not reelected as a director at our 2012 annual meeting of stockholders, or (ii) not nominated for reelection as a director at our 2012 annual meeting of stockholders, the option vests and becomes exercisable on the date of such failure to be reelected or nominated.
July 11, 2021
$
709,997
1,450,000
(1)(4)
November 16, 2011
$
1.95
In substantially equal monthly installments (with any fractional shares vesting on the last vesting date) on the last business day of each calendar month over a two year period from the date of grant, with the first installment vesting on November 30, 2011, provided that Dr. Barer is still providing services to us in some capacity as of each such vesting date.
November 16, 2021
$
1,536,703
725,000
(1)(4)
November 16, 2011
$
1.95
Upon the date we become listed on a registered national securities exchange (such as the New York Stock Exchange, NASDAQ Stock Market, or the NYSE Amex), provided that such listing occurs on or before June 30, 2013, and provided further that Dr. Barer is still providing services to us in some capacity as of such vesting date.(5)
November 16, 2021
$
768,352
725,000
(1)(4)
November 16, 2011
$
1.95
Upon the date that we receive research coverage from at least two investment banks that ranked in the top 20 investment banks in terms of underwritings as of their most recently completed fiscal year, and/or leading analysts, as ranked by either the Wall Street Journal, the Financial Times, Zacks Investment Research or Institutional Investor, provided that we receive such coverage on or before June 30, 2013, and, provided further that Dr. Barer is still providing services to us in some capacity as of such vesting date.(15)
November 16, 2021
$
768,352
Paul Stuka
100,000
(2)
August 8, 2011
$
1.95
One-third annually in 2012, 2013 and 2014 on the anniversary of the date of grant, provided that if Mr. Stuka is (i) not reelected as a director at our 2012 annual meeting of stockholders, or (ii) not nominated for reelection as a director at our 2012 annual meeting of stockholders, the option vests and becomes exercisable on the date of such failure to be reelected or nominated.
August 8, 2021
$
111,344
Eyal Weinstein
25,000
(2)
August 8, 2011
$
1.95
One-third annually in 2012, 2013 and 2014 on the anniversary of the date of grant, provided that if Mr. Weinstein is required to resign from the board due to medical reasons, the option vests and becomes exercisable on the date of Mr. Weinstein's resignation for medical reasons.
August 8, 2021
$
27,836
98
___________________
(1)
This option was issued outside the InspireMD, Inc. 2011 UMBRELLA Option Plan.
(2)
This option was granted in connection with the appointment of this person to our board of directors.
(3)
This option was exercised in full by Dr. Barer on September 28, 2011.
(4)
This option was granted to Dr. Barer in connection with his appointment as chairman of our board of directors on November 16,
2011.
(5)
Pursuant to the terms of the initial grant, these milestones were required to be achieved by December 31, 2012. On June 18,
2012, the compensation committee extended this deadline to June 30, 2013.
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.
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 and principal accounting
officer, which is posted on our website at www.inspire-md.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 five business
days following the date of such amendment or waiver.
99
Director Independence
The board of directors has determined that
Drs. Barer and Barry and Messrs. Loughlin, Stuka and Weinstein satisfy the requirement for independence set out in Section 5605(a)(2)
of the Nasdaq Stock Market 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 Nasdaq rule referenced above.
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. Loughlin, Stuka and Weinstein and Dr. Barer, each of whom our board has determined to be financially
literate and qualify as an independent director under Section 5605(a)(2) of the rules of the Nasdaq Stock Market. Mr. Loughlin
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.
Nominating and Corporate Governance Committee.
Our
nominating and corporate governance committee is currently comprised of Messrs. Stuka and Weinstein and Dr. Barer, each of whom
qualify as an independent director under Section 5605(a)(2) of the rules of the Nasdaq Stock Market.  Mr. Stuka 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.
Compensation Committee.
Our compensation
committee is currently comprised of Messrs. Stuka and Weinstein and Dr. Barer, each of whom qualify as an independent director
under Section 5605(a)(2) of the rules of the Nasdaq Stock Market. 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.
Compensation Committee Interlocks and Insider Participation
During the transition period ended June
30, 2012 and the fiscal year ended December 31, 2011, Messrs. Stuka and Weinstein and Dr. Barer served on our compensation committee.  We
established our compensation committee during the fiscal year ended December 31, 2011. Prior to that, we did not have a compensation
committee and during such period, Ofir Paz, our chief executive officer, and Asher Holzer, our president and former chairman, participated
in deliberations of the board of directors concerning executive officer compensation. None of our executive officers currently
serves, or during the transition period ended June 30, 2012 or the fiscal year ended December 31, 2011 served, as a member of the
board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors
or compensation committee.
100
PRINCIPAL STOCKHOLDERS
The following table sets forth information
with respect to the beneficial ownership of our common stock as of September 21, 2012 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 governing the determination of beneficial
ownership of securities. Under the rules of the Securities and Exchange Commission, 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 67448. As of September 21, 2012, we had 68,511,911 shares outstanding.
Name of Beneficial Owner
Number of
Shares
Beneficially
Owned(1)
Percentage
Beneficially
Owned(1)
5% Owners
Yuli Ofer (2)
4,518,301
6.6
%
Genesis Capital Advisors LLC(3)
7,795,403
(4)
10.2
%
Ayer Capital Management, LP(5)
6,738,012
(6)
9.4
%
Officers and Directors
Ofir Paz
10,415,927
(7)
15.2
%
Asher Holzer, Ph.D.
10,300,437
(8)
15.0
%
Eli Bar
1,126,105
(9)
1.6
%
Craig Shore
124,741
(9)
*
Sara Paz
10,415,927
(7)
15.2
%
Sol J. Barer, Ph.D.
4,625,000
(10)
6.7
%
James Barry, Ph.D.
0
-
James J. Loughlin
0
-
Paul Stuka(11)
2,033,333
(12)
2.9
%
Eyal Weinstein(13)
8,333
(14)
*
All directors and executive officers as a group (10 persons)
28,633,876
40.1
%
___________________
(*)
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 September 21, 2012. Shares issuable pursuant to the exercise of stock options,
warrants and other securities exercisable within 60 days are deemed outstanding and held by the holder of such options, warrants
or other securities 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.
101
(2)
Mr. Ofer's address is 36 Hamesila Street, Herzeliya, Israel.
(3)
Genesis Capital Advisors LLC's address is 1212 Avenue of the Americas, 19th Floor, New York, New York 10036.
(4)
Comprised of (i) 395,137 shares of common stock issuable
upon the exercise of a warrant held by HUG Funding LLC, (ii) 819,546 shares of common stock issuable upon the conversion of a
convertible debenture held by HUG Funding LLC, (iii) 1,276,596 shares of common stock issuable upon the exercise of a warrant
held by Genesis Opportunity Fund L.P., (iv) 2,647,765 shares of common stock issuable upon the conversion of a convertible debenture
held by Genesis Opportunity Fund L.P., (v) 1,115,518 shares of common stock issuable upon the exercise of warrants held by Genesis
Asset Opportunity Fund L.P., (vi) 1,260,841 shares of common stock issuable upon the conversion of a convertible debenture held
by Genesis Asset Opportunity Fund L.P., (vii) 100,000 shares of common stock held directly by Genesis Asset Opportunity Fund L.P.
and (viii) 180,000 shares of common stock held directly by Genesis Life Science Fund LP. Genesis Capital Advisors LLC is the investment
adviser to Genesis Opportunity Fund L.P., Genesis Asset Opportunity Fund L.P. and Genesis Life Science Fund LP, and, as such,
may be deemed to beneficially own securities owned by each of Genesis Opportunity Fund L.P., Genesis Asset Opportunity Fund L.P.
and Genesis Life Science Fund LP. Each of Genesis Capital Advisors LLC and HUG Funding LLC are controlled by Daniel Saks, Ethan
Benovitz and Jaime Hartman, and, as such, Genesis Capital Advisors LLC may be deemed to beneficially own securities held by HUG
Funding LLC. In addition, each of Daniel Saks, Ethan Benovitz and Jaime Hartman have shared voting and dispositive power over
the securities held by HUG Funding LLC, Genesis Opportunity Fund L.P., Genesis Asset Opportunity Fund L.P. and Genesis Life Science
Fund LP. Each of the convertible debentures and warrants held by HUG Funding LLC, Genesis Opportunity Fund L.P. and Genesis Asset
Opportunity Fund L.P. have contractual provisions limiting conversion and exercise to the extent such conversion or exercise would
cause the holder, together with its affiliates or members of a "group", to beneficially own a number of shares of
common stock that would exceed 4.99% or 9.99% of our then outstanding shares of common stock following such conversion or exercise.
The shares and percentage ownership of our outstanding shares indicated in the table above as beneficially owned by Genesis Capital
Advisors LLC do not give effect to these limitations.
(5)
Ayer Capital Management, LP's address is 230 California Street, Suite 600, San Francisco, CA 94111.
(6)
Comprised of (i) 989,818 shares of common stock issuable upon the exercise of a warrant held by
                                                                                Ayer Capital Partners Master Fund, L.P., (ii) 2,052,964 shares of common stock issuable upon the conversion of a convertible
                                                                                debenture held by Ayer Capital Partners Master Fund, L.P., (iii) 19,605 shares of common stock issuable upon the exercise of
                                                                                a warrant held by Ayer Capital Partners Kestrel Fund, LP, (iv) 40,662 shares of common stock issuable upon the conversion of
                                                                                a convertible debenture held by Ayer Capital Partners Kestrel Fund, LP, (v) 54,407 shares of common stock issuable upon the
                                                                                exercise of warrants held by Epworth-Ayer Capital, (vi) 112,845 shares of common stock issuable upon the conversion of a
                                                                                convertible debenture held by Epworth-Ayer Capital, and (vii) based on a schedule 13G filed with the Securities and Exchange
                                                                                Commission on September 24, 2012 by Ayer Capital Management, LP and its affiliates, 3,467,711 shares of common stock
                                                                                beneficially owned by Ayer Capital Management, LP, ACM Capital Partners, LLC and Jay Venkatesan. The
                                                                                investment advisor for each of Ayer                                                                                 Capital
                                                                                Partners Master Fund, L.P., Ayer                                                                                 Capital
                                                                                Partners Kestrel Fund, LP and                                                                                 Epworth-Ayer
                                                                                Capital is Ayer Capital Management, LP, of which Jay Venkatesan serves as managing member. Jay Venkatesan also serves as
                                                                                managing member of ACM Partners, LLC. Jay
                                                                                Venkatesan                                                                                      may
                                                                                therefore be                                                                                  deemed
                                                                                to beneficially own                                                                                                 the
                                                                                shares of common stock                                                                                 held by Ayer Capital
                                                                                Partners Master Fund, L.P., Ayer
                                                                                Capital Partners Kestrel Fund, LP,  Epworth-Ayer Capital, Ayer Capital Management, LP and ACM Capital Partners, LLC, as he holds
                                                                                or shares                                                                                 voting
                                                                                and                                                                                                         dispositive power
                                                                                over                                                                                 such
                                                                                shares.                                                                                                     Each of the
                                                                                convertible                                                                                     debentures
                                                                                and warrants held by Ayer                                                                                 Capital Partners
                                                                                Master Fund, L.P., Ayer Capital
                                                                                Partners Kestrel Fund, LP and Epworth-Ayer Capital have contractual provisions limiting conversion and exercise to the
                                                                                extent                                                                                 such conversion or exercise would
                                                                                cause the holder, together with its affiliates or members of a "group", to
                                                                                beneficially own a number of shares of common stock that would exceed 4.99% or 9.99% of our then outstanding shares of
                                                                                common                                                                                 stock following such conversion or
                                                                                exercise. The shares and percentage ownership of our outstanding shares indicated in the
                                                                                table above as beneficially owned by Ayer Capital Management, LP do not give effect to these limitations.
(7)
This amount includes options to purchase 121,742 shares of common stock that are held by Sara Paz, Ofir Paz's wife, that
are currently exercisable within 60 days of September 21, 2012.  This amount does not include 372,528 shares of common
stock that Mr. Paz presently holds as trustee for a family trust.  Mr. Paz does not have either voting power or dispositive
power over these shares and disclaims all beneficial ownership therein.  Ofir Paz and Sara Paz, as husband and wife,
share voting and investment power with respect to all shares reported by Mr. Paz or Ms. Paz.  On March 27, 2012, Ms.
Paz ceased to be an executive officer.
102
(8)
This amount does not include 58,923 shares of common stock that Dr. Holzer presently holds as trustee for a family trust.  Dr.
Holzer does not have either voting power or dispositive power over these shares and disclaims all beneficial ownership therein.
(9)
Represents options that are currently exercisable or exercisable within 60 days of September 21, 2012.
(10)
Comprised of (i) 3,900,000 shares of common stock and (ii) options to purchase 725,000 shares of common stock that are currently
exercisable or exercisable within 60 days of September 21, 2012.
(11)
Mr. Stuka's address is c/o Osiris Partners, LLC, 1 Liberty Square, 5th Floor, Boston, MA 02109.
(12)
Mr. Stuka is the principal and managing member of Osiris Investment Partners, L.P., and, as such, has beneficial ownership
of the (i) 1,333,333 shares of common stock and (ii) currently exercisable warrants to purchase 666,667 shares of common stock
held by Osiris Investment Partners, L.P.  In addition, Mr. Stuka individually holds an option to purchase 33,333 shares of
common stock that is currently exercisable or exercisable within 60 days of September 21, 2012.
(13)
Mr. Weinstein's address is c/o Leorlex Ltd., P.O. Box 15067 Matam, Haifa, Israel 3190.
(14)
Represents options that are currently exercisable or exercisable within 60 days of September 21, 2012.
CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
On March 31, 2011, in connection with our
share exchange transactions with the former shareholders of InspireMD Ltd. and succession to InspireMD Ltd.'s business as
our sole line of business, we transferred all of our pre-share exchange operating assets and liabilities to Saguaro Holdings, Inc.,
a Delaware corporation and our wholly owned subsidiary. Immediately after this transfer, we transferred all of Saguaro Holdings,
Inc.'s outstanding capital stock to Lynn Briggs, our then-majority stockholder and our former president, chief executive
officer, chief financial officer, secretary-treasurer and sole director, in exchange for the cancellation of 7,500,000 shares of
our common stock held by Ms. Briggs.
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, which means a transaction,
arrangement or relationship in which we and any related party are participants in which the amount involved exceeds $120,000. 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.
The share exchange transactions were not
approved by our audit committee, because such committee had not yet been formed.
103
DESCRIPTION OF CAPITAL STOCK
The discussion below does not give effect
to the anticipated one-for-      reverse stock split of our common stock that is expected to occur the day immediately following the
effectiveness of the registration statement of which this prospectus is a part.
We have authorized 130,000,000 shares of
capital stock, par value $0.0001 per share, of which 125,000,000 are shares of common stock and 5,000,000 are shares of "blank
check" preferred stock. On September 21, 2012, there were 68,511,911 shares of common stock issued and outstanding and no
shares of preferred stock issued and outstanding.
On October 31, 2011, our stockholders authorized
our board of directors to amend our amended and restated certificate of incorporation to effect a reverse stock split of our common
stock at a ratio of one-for-two to one-for-four, at any time prior to our 2012 annual stockholders' meeting, the exact ratio
of the reverse stock split to be determined by the board. As of the date of this prospectus, we have not effected the reverse stock
split. We intend to effectuate a one-for-       reverse stock split, in order to comply with the listing requirements of Nasdaq Capital
Market. The reverse stock split is expected to occur the day immediately following the effectiveness of the registration statement
of which this prospectus is a part.
Pursuant to the securities purchase agreement
under which the convertible debentures that we issued on April 5, 2012 were sold, until April 5, 2013, we are not permitted to
effectuate any reverse stock splits without the prior written consent of the holders of at least 60% of the outstanding principal
amount of the convertible debentures other than for purposes of qualifying for initial listing on a national securities exchange
or meeting the continued listing requirements of such exchange. The intended reverse stock split described above will not require
the written consent of the convertible debenture holders.
Common Stock
The holders of our common stock are entitled
to one vote per share. Our certificate of incorporation does not provide for cumulative voting. Our directors are divided into
three classes. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire are elected
for a term of office to expire at the third succeeding annual meeting of stockholders after their election. The holders of our
common stock are entitled to receive ratably such dividends, if any, as may be declared by our board of directors out of legally
available funds; however, the current policy of our board of directors is to retain earnings, if any, for operations and growth.
Upon liquidation, dissolution or winding-up, the holders of our common stock are entitled to share ratably in all assets that are
legally available for distribution. The holders of our common stock have no preemptive, subscription, redemption or conversion
rights. The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by,
the rights of the holders of any series of preferred stock, which may be designated solely by action of our board of directors
and issued in the future.
Preferred Stock
The board of directors is authorized, subject
to any limitations prescribed by law, without further vote or action by the stockholders, to issue from time to time shares of
preferred stock in one or more series. Each such series of preferred stock shall have such number of shares, designations, preferences,
voting powers, qualifications, and special or relative rights or privileges as shall be determined by the board of directors, which
may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.
104
Warrants
April 2012 $1.80 Warrants
On April 5, 2012, we issued certain investors
warrants to purchase an aggregate of 3,343,465 shares of our common stock at an exercise price of $1.80 per share. We are prohibited
from effecting the exercise of any such warrant to the extent that as a result of such exercise the holder of the exercised warrant
beneficially owns more than 4.99% in the aggregate of the issued and outstanding shares of our common stock calculated immediately
after giving effect to the issuance of shares of our common stock upon the exercise of the warrant (subject to an increase, upon
at least 61 days' notice by the holder of such warrant to us, of up to 9.99%). The warrants contain provisions that protect
their holders against dilution by adjustment of the purchase price in certain events such as stock dividends, stock splits and
other similar events. If there is no effective registration statement registering, or no current prospectus available for, the
resale of the shares of common stock underlying the warrants within 60 days of the issuance of the warrants, the holders of such
warrants have the right to exercise the warrants by means of a cashless exercise. The warrants are also subject to a "most
favored nation" adjustment pursuant to which, in the event that we issue or are deemed to have issued certain securities
with terms that are superior to those of the holders of the warrants, except with respect to exercise price and warrant coverage,
the terms of such superior issuance shall automatically be incorporated into the warrants. In addition, upon the occurrence of
a transaction involving a change of control that is (i) an all cash transaction, (ii) a "Rule 13e-3 transaction" as
defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended, or (iii) involving a person or entity not traded on
a national securities exchange, the holders of the warrants will have the right, among others, to have the warrants repurchased
for a purchase price in cash equal to the Black-Scholes value (as calculated pursuant to the warrants) of the then unexercised
portion of the warrants. If while the warrants are outstanding, we issue any evidences of indebtedness, assets, rights or warrants
to subscribe for or purchase any security of the company, then any holder of the warrants shall, upon exercise, have the right
to acquire the same securities as if it had exercised the warrants immediately before the date on which a record is taken for such
distribution, or, if no such record is taken, the date as of which the record holders of shares of common stock are to be determined
for the participation in such distribution. The warrants expire on April 5, 2017.
April 2012 Placement Agent Warrants
As consideration for serving as our placement
agents in connection with certain private placements, on April 5, 2012, we issued Palladium Capital Advisors, LLC a five-year warrant
to purchase up to 159,574 shares of common stock at an exercise price of $1.80 per share, Oppenheimer & Co. Inc. a five-year
warrant to purchase up to 113,070 shares of common stock at an exercise price of $1.80 per share and JMP Securities LLC a five-year
warrant to purchase up to 39,666 shares of common stock at an exercise price of $1.80 per share. The terms of these warrants are
identical to the April 2012 $1.80 Warrants described above.
March 2011 $1.80 Warrants
On March 31, 2011 and on April 18, 2011,
we issued certain investors five-year warrants to purchase up to an aggregate of 3,560,332 shares of common stock at an exercise
price of $1.80 per share. We are prohibited from effecting the exercise of any such warrant to the extent that as a result of such
exercise the holder of the exercised warrant beneficially owns more than 4.99% in the aggregate of the issued and outstanding shares
of our common stock calculated immediately after giving effect to the issuance of shares of our common stock upon the exercise
of the warrant. The warrants contain provisions that protect their holders against dilution by adjustment of the purchase price
in certain events such as stock dividends, stock splits and other similar events. If at any time after the one year anniversary
of the original issuance date of such warrants there is no effective registration statement registering, or no current prospectus
available for, the resale of the shares of common stock underlying the warrants, then the holders of such warrants have the right
to exercise the warrants by means of a cashless exercise. In addition, if (i) the volume-weighted average price of our common stock
for 20 consecutive trading days is at least 250% of the exercise price of the warrants; (ii) the 20-day average daily trading volume
of our common stock has been at least 175,000 shares; (iii) a registration statement providing for the resale of the common stock
issuable upon exercise of the warrants is effective and (iv) the common stock is listed for trading on a national securities exchange,
then we may require each holder to exercise all or a portion of its warrant pursuant to the terms described above within seven
business days following the delivery of a notice of acceleration. Any warrant that is not exercised as aforesaid shall expire automatically
at the end of such seven-day period.
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April 2011 $1.80 Warrants
On April 18 and April 21, 2011, we issued
certain investors five-year warrants to purchase up to an aggregate of 158,334 shares of common stock at an exercise price of $1.80
per share. We are prohibited from effecting the exercise of any such warrant to the extent that as a result of such exercise the
holder of the exercised warrant beneficially owns more than 4.99% in the aggregate of the issued and outstanding shares of our
common stock calculated immediately after giving effect to the issuance of shares of our common stock upon the exercise of the
warrant. The warrants contain provisions that protect their holders against dilution by adjustment of the purchase price in certain
events such as stock dividends, stock splits and other similar events. In addition, if (i) the volume-weighted average price of
our common stock for 20 consecutive trading days is at least 250% of the exercise price of the warrants; (ii) the 20-day average
daily trading volume of our common stock has been at least 175,000 shares; and (iii) a registration statement providing for the
resale of the common stock issuable upon exercise of the warrants is effective, then we may require each holder to exercise all
or a portion of its warrant pursuant to the terms described above within three business days following the delivery of a notice
of acceleration. Any warrant that is not exercised as aforesaid shall expire automatically at the end of such three-day period.
March 2011 Placement Agent Warrant
As consideration for serving as our placement
agent in connection with certain private placements, we issued Palladium Capital Advisors, LLC a five-year warrant to purchase
up to 430,740 shares of common stock at an exercise price of $1.80 per share. The terms of this warrant are identical to the March
2011 $1.80 Warrants described above.
Employee Warrants
On March 31, 2011, for work performed in
connection with the share exchange transactions and as bonus compensation, we issued Craig Shore, our chief financial officer,
secretary and treasurer, a five-year warrant to purchase up to 3,000 shares of common stock at an exercise price of $1.80 per share.
The terms of this warrant are identical to the April 2011 $1.80 Warrants described above.
Consultant Warrants
In connection with our March 31, 2011 private
placement, we issued to Hermitage Capital Management, a consultant, a five-year warrant to purchase up to 6,667 shares of common
stock at an exercise price of $1.80 per share, in consideration for consulting services. The terms of this warrant are identical
to the April 2011 $1.80 Warrants described above.
In consideration for financial consulting
services, we issued to The Benchmark Company, LLC, a consultant, a five-year warrant to purchase up to 50,000 shares of common
stock at an exercise price of $1.50 per share. The terms of this warrant are identical to the April 2011 $1.80 Warrants described
above, except that the exercise price for this warrant is $1.50 per share.
On March 31, 2011, we issued certain consultants
five-year warrants to purchase up to an aggregate of 2,500,000 shares of common stock at an exercise price of $1.50 per share.
The terms of these warrants are identical to the March 2011 $1.80 Warrants described above, except that the exercise price for
these warrants is $1.50 per share.
$1.23 Warrants
In connection with our share exchange transactions
on March 31, 2011, we issued certain investors warrants to purchase up to an aggregate of 1,014,500 shares of our common stock
at an exercise price of $1.23 per share. These warrants may be exercised any time on or before July 20, 2013 and were issued in
exchange for warrants to purchase up to 125,000 ordinary shares of InspireMD Ltd. at an exercise price of $10 per share. We are
prohibited from effecting the exercise of any such warrant to the extent that as a result of such exercise the holder of the exercised
warrant beneficially owns more than 9.99% in the aggregate of the issued and outstanding shares of our common stock calculated
immediately after giving effect to the issuance of shares of our common stock upon the exercise of the warrant. The warrants contain
provisions that protect their holders against dilution by adjustment of the purchase price in certain events such as stock dividends,
stock splits and other similar events. If at any time there is no effective registration statement registering, or no current prospectus
available for, the resale of the shares of common stock underlying the warrants, then the holders of such warrants have the right
to exercise the warrants by means of a cashless exercise. In addition, if at any time following the one year anniversary of the
original issuance date of the warrants, (i) our common stock is listed for trading on a national securities exchange, (ii) the
closing sales price of our common stock for 15 consecutive trading days is at least 165% of the exercise price of the warrants;
(iii) the 15 day average daily trading volume of our common stock has been at least 150,000 shares and (iv) a registration statement
providing for the resale of the common stock issuable upon exercise of the warrants is effective, then we may require each investor
to exercise all or a portion of its warrant pursuant to the terms described above at any time upon at least 15 trading days prior
written notice. Any warrant that is not exercised as aforesaid shall expire automatically at the end of the 15-day notice period.
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Convertible Debentures
On April 5, 2012, we issued senior secured
convertible debentures to certain accredited investors in the original aggregate principal amount of $11,702,128 and at an original
issue discount of 6%. The convertible debentures mature on April 5, 2014, or such earlier date as required or permitted by the
convertible debentures, upon which date the entire outstanding principal balance and any outstanding fees or interest will be due
and payable in full. The convertible debentures bear interest at the rate of 8% per annum, payable quarterly beginning on July
1, 2012, which rate is increased to 12% upon and during the occurrence of an event of default. In addition, the convertible debentures
are convertible at the option of the holders into shares of our common stock at an initial conversion price of $1.75 per share,
subject to adjustment for stock splits, fundamental transactions or similar events. Upon conversion of the convertible debentures,
investors will receive a conversion premium equal to 8% per annum, with a limit of 12% for the term of the convertible debentures,
of the principal amount being converted. The convertible debentures provide that no conversion may be made if, after giving effect
to the conversion, the holder thereof would own in excess of 4.99% of our outstanding common stock (subject to an increase, upon
at least 61 days' notice by the holder of such warrant to us, of up to 9.99%). We may also force conversion of the convertible
debentures if, amongst other things, the closing bid price on our common stock equals or exceeds 165% of the conversion price for
twenty consecutive trading days, the minimum daily trading volume for such period is $1,100,000, all of the shares of common stock
underlying the convertible debentures during such period are either registered for resale with the Securities and Exchange Commission
or eligible for sale pursuant to Rule 144 and there is no existing event of default or event which, with the passage of time or
the giving of notice, would constitute an event of default during such period.
Commencing 18 months following the original
issuance date of the convertible debentures, the investors may require us to redeem all or a portion of the convertible debentures,
for a price equal to 112% of the amount of principal to be redeemed plus all accrued but unpaid interest and other amounts due
under the convertible debentures.
Commencing 6 months following the original
issuance date of the convertible debentures, we may redeem all or a portion of the convertible debentures for a price equal to
112% of the amount of principal to be redeemed plus all accrued but unpaid interest and other amounts due under the convertible
debentures.
The convertible debentures are senior indebtedness
and the holders of the convertible debentures have a security interest in all of our assets and those of our subsidiaries.
Registration Rights
On April 5, 2012, in connection with our
private placement of convertible debentures and warrants, we entered into a registration rights agreement with the purchasers pursuant
to which we agreed to provide certain registration rights with respect to the common stock issuable upon conversion of the convertible
debentures and exercise of the warrants. Specifically, we agreed to file a registration statement with the Securities and Exchange
Commission covering the resale of the common stock issuable upon conversion of the convertible debentures and exercise of the warrants
on or before May 21, 2012 and to cause such registration statement to be declared effective by the Securities and Exchange Commission
on or before July 9, 2012 in the event that the registration statement is not reviewed by the Securities and Exchange Commission
and by August 8, 2012 in the event that the registration statement is reviewed by the Securities and Exchange Commission and the
Securities and Exchange Commission issues comments.
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If (i) the registration statement was not
filed by May 21, 2012, (ii) the registration statement was not declared effective by the Securities and Exchange Commission by
July 9, 2012 in the case of a no review, (iii) the registration statement was not declared effective by the Securities and Exchange
Commission by August 8, 2012 in the case of a review by the Securities and Exchange Commission pursuant to which the Securities
and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than
30 consecutive calendar days or more than an aggregate of 60 calendar days during any 12-month period after its first effective
date, then we are subject to liquidated damage payments to the holders of the securities sold in the private placement in an amount
equal to 1% of the aggregate purchase price paid by such purchasers per month of delinquency. Notwithstanding the foregoing, (i)
the maximum aggregate liquidated damages due under the registration rights agreement shall be 6% of the aggregate purchase price
paid by the purchasers, and (ii) if any partial amount of liquidated damages remains unpaid for more than seven days, we shall
pay interest of 18% per annum, accruing daily, on such unpaid amount.
The registration statement required as described
above was filed on May 17, 2012 and declared effective on May 30, 2012. Pursuant to the registration rights agreement, we must
maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered
under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale
restrictions, subject to the our right to suspend or defer the use of the registration statement in certain events.
Lock-up Agreements
On September    , 2012,
in connection with this offering, we, our executive officers, directors and certain of our other stockholders agreed,
subject to certain exceptions, not to offer, sell, contract to sell, announce any intention to sell, pledge or otherwise
dispose of, enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership
of, directly or indirectly,or file with the Securities and Exchange Commission a registration statement under the Securities
Act of 1933, as amended, relating to, any common stock or securities convertible into or exchangeable or exercisable for
any common stock without the prior written consent of Cowen and Company, LLC, for a period of 180 days after the date of
the pricing of the offering. The 180-day restricted period will be automatically extended if (i) during the last 17 days of
the 180-day restricted period we issue an earnings release or material news or a material event relating to us occurs or
(ii) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results or become
aware that material news or a material event will occur during the 16-day period beginning on the last day of the
180-day restricted period, in either of which case the restrictions described above will continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or
material event.
Delaware Anti-Takeover Law and Provisions of our Certificate
of Incorporation and Bylaws
Delaware Anti-Takeover Law
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:
·
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;
·
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 (i) shares owned by persons who are directors
and also officers and (ii) 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
·
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.
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Section 203 defines a business combination
to include:
·
any merger or consolidation involving the corporation and the interested stockholder;
·
any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;
·
subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder; or
·
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any
entity or person affiliated with, or controlling, or controlled by, the entity or person. The term "owner" is broadly
defined to include any person that, individually, with or through that person's affiliates or associates, among other things,
beneficially owns the stock, or has the right to acquire the stock, whether or not the right is immediately exercisable, under
any agreement or understanding or upon the exercise of warrants or options or otherwise or has the right to vote the stock under
any agreement or understanding, or has an agreement or understanding with the beneficial owner of the stock for the purpose of
acquiring, holding, voting or disposing of the stock.
The restrictions in Section 203 do not apply
to corporations that have elected, in the manner provided in Section 203, not to be subject to Section 203 of the Delaware General
Corporation Law or, with certain exceptions, which do not have a class of voting stock that is listed on a national securities
exchange or authorized for quotation on the Nasdaq Stock Market or held of record by more than 2,000 stockholders. Our certificate
of incorporation and bylaws do not opt out of Section 203.
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.
Certificate of Incorporation and
Bylaws
Provisions of our certificate of incorporation
and bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management,
including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders
might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common
stock. Among other things, our certificate of incorporation and bylaws:
·
permit our board of directors to issue up to 5,000,000 shares of preferred stock, without further action by the stockholders,
with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change
in control;
·
provide that the authorized number of directors may be changed only by resolution of the board of directors;
·
provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the
affirmative vote of a majority of directors then in office, even if less than a quorum;
·
divide our board of directors into three classes, with each class serving staggered three-year terms;
·
do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled
to vote in any election of directors to elect all of the directors standing for election, if they should so choose);
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·
provide that special meetings of our stockholders may be called only by our board of directors; and
·
set forth an advance notice procedure with regard to the nomination, other than by or at the direction of our board of directors,
of candidates for election as directors and with regard to business to be brought before a meeting of stockholders.
Transfer Agent and Registrar
The transfer agent and registrar for our
common stock is Action Stock Transfer Corp.
Listing
The shares of our common stock are currently
quoted on the OTC Bulletin Board. We have applied for the listing of our common stock on the Nasdaq Capital Market under the symbol
"NSPR."
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MATERIAL U.S. FEDERAL INCOME AND ESTATE
TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a general discussion
of the material U.S. federal income and estate tax consequences to a non-U.S. holder of the acquisition, ownership and
disposition of our common stock. For purposes of this discussion, a non-U.S. holder is any beneficial owner of our common
stock that is not for U.S. federal income tax purposes any of the following:
·
an individual citizen or resident of the U.S.;
·
a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in the United
States or under the laws of the United States or any state or the District of Columbia;
·
a partnership (or other entity treated as a partnership for U.S. federal income tax purposes);
·
an estate whose income is subject to U.S. federal income tax regardless of its source; or
·
a trust (i) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S.
persons who have the authority to control all substantial decisions of the trust or (ii) which has made a valid election to be treated
as a U.S. person.
If a partnership (or an entity treated as
a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in the partnership will
generally depend on the status of the partner and upon the activities of the partnership. Accordingly, we urge partnerships that
hold our common stock and partners in such partnerships to consult their own tax advisors regarding the tax treatment of acquiring
and holding our common stock.
This discussion assumes that a non-U.S.
holder will hold our common stock issued pursuant to the offering as a capital asset (generally, property held for investment).
This discussion does not address all aspects of U.S. federal income taxation or any aspects of state, local or non-U.S. taxation,
nor does it consider any U.S. federal income tax considerations that may be relevant to non-U.S. holders which may be subject to
special treatment under U.S. federal income tax laws, including, without limitation, U.S. expatriates, controlled foreign corporations,
passive foreign investment companies, insurance companies, tax-exempt or governmental organizations, dealers in securities or currency,
banks or other financial institutions, and investors that hold our common stock as part of a hedge, straddle or conversion transaction.
Furthermore, the following discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
and Treasury Regulations and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all
of which are subject to change, possibly with retroactive effect.
We urge each prospective investor to consult
a tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of acquiring, holding and
disposing of shares of our common stock.
Dividends
If we pay dividends on our common stock,
those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax principles. To the extent those dividends exceed our current and accumulated
earnings and profits, the dividends will constitute a return of capital and will first reduce a holder's adjusted tax basis
in its common stock, but not below zero, and then will be treated as gain from the sale of the common stock (see "—
Gain on Disposition of Common Stock").
Any dividend paid out of earnings and profits
to a non-U.S. holder of our common stock generally will be subject to U.S. withholding tax either at a rate of 30% of the gross
amount of the dividend or such lower rate as may be specified by an applicable tax treaty. To receive the benefit of a reduced
treaty rate, a non-U.S. holder generally must provide us (or another relevant withholding agent) with an Internal Revenue Service
("IRS") Form W-8BEN certifying qualification for the reduced rate.
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A non-U.S. holder eligible for a
reduced rate of U.S. federal withholding tax pursuant to an applicable income tax treaty may obtain a refund of any excess
amounts withheld by timely filing an appropriate claim for refund with the IRS.
Dividends received by a non-U.S. holder
that are effectively connected with a U.S. trade or business conducted by the non-U.S. holder will be exempt from such withholding
tax. To obtain this exemption, the non-U.S. holder must provide us (or another relevant withholding agent) with an IRS Form W-8ECI
properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, generally will
be subject to U.S. federal income tax on a net income basis at the same graduated U.S. tax rates generally applicable to U.S. persons,
net of certain deductions and credits, subject to any applicable tax treaty providing otherwise. In addition to the income tax
described above, dividends received by corporate non-U.S. holders that are effectively connected with a U.S. trade or business
of the corporate non-U.S. holder may be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified
by an applicable tax treaty.
Gain on Disposition of Common Stock
A non-U.S. holder generally will not be
subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:
·
the gain is effectively connected with a U.S. trade or business of the non-U.S. holder and, if required by an applicable tax
treaty, is attributable to a U.S. permanent establishment maintained by such non-U.S. holder;
·
the non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more
during the calendar year in which the sale or disposition occurs and certain other conditions are met; or
·
we are or have been a U.S. real property holding corporation ("USRPHC") for U.S. federal income tax purposes and
the non-U.S. holder holds or has held, directly or indirectly, at any time within the shorter of the five-year period preceding
the disposition or the non-U.S. holder's holding period, more than 5% of our common stock. Generally, a corporation is a
U.S. real property holding corporation if the fair market value of its U.S. real property interests equals or exceeds 50% of the
sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business.
If we are or have been a "USRPHC" at any time during the periods described above and
our common stock is not regularly traded on an established securities market, then the gain recognized on the sale or other disposition
of our common stock by a non-U.S. holder would be subject to U.S. federal income tax regardless of the non-U.S. holder's
ownership percentage.
In the case of a non-U.S. holder described
in the first bullet point immediately above, the gain will be subject to U.S. federal income tax on a net income basis generally
in the same manner as if the non-U.S. holder were a U.S. person as defined under the Code (unless an applicable income tax treaty
provides otherwise), and a non-U.S. holder that is a foreign corporation may be subject to an additional branch profits tax equal
to 30% of its effectively connected earnings and profits attributable to such gain (or at such lower rate as may be specified by
an applicable income tax treaty). In the case of an individual non-U.S. holder described in the second bullet point immediately
above, except as otherwise provided by an applicable income tax treaty, the gain, which may be offset by certain U.S.-source capital
losses, will be subject to a flat 30% tax.
We believe we are not and do not anticipate
becoming a USRPHC for U.S. federal income tax purposes. If, however, we are or become a USRPHC, so long as our common stock is
considered to be regularly traded on an established securities market, only a non-U.S. holder who actually or constructively holds
or held (at any time during the shorter of the five year period ending on the date of disposition or the non-U.S. holder's
holding period) more than 5% of our common stock will be subject to U.S. federal income tax, under the third bullet point immediately
above, on the disposition of our common stock. You should consult your own advisor about the consequences that could result if
we are, or become, a USRPHC.
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Backup Withholding and Information Reporting
Generally, we must report annually to the
IRS the amount of dividends paid to each non-U.S. holder, and the amount, if any, of tax withheld with respect to those dividends.
A similar report is sent to each non-U.S. holder. These information reporting requirements apply even if withholding was not required.
Pursuant to tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient's
country of residence.
Payments of dividends to a non-U.S. holder
may be subject to backup withholding (at a rate of 28% through 2012) unless the non-U.S. holder establishes an exemption, for example,
by properly certifying its non-U.S. status on an IRS Form W-8BEN or another appropriate version of IRS Form W-8. Notwithstanding
the foregoing, backup withholding also may apply if we have actual knowledge, or reason to know, that the beneficial owner is a
U.S. person that is not an exempt recipient.
Payments of the proceeds from sale or other
disposition by a non-U.S. holder of our common stock effected outside the United States by or through a foreign office of a broker
generally will not be subject to information reporting or backup withholding. However, information reporting will apply to those
payments if the broker does not have documentary evidence that the holder is a non-U.S. holder, an exemption is not otherwise established,
and the broker has certain relationships with the United States.
Payments of the proceeds from a sale or
other disposition by a non-U.S. holder of our common stock effected by or through a U.S. office of a broker generally will be subject
to information reporting and backup withholding (at a rate of 28% through 2012) unless the non-U.S. holder establishes an exemption,
for example, by properly certifying its non-U.S. status on an IRS Form W-8BEN or another appropriate version of IRS Form W-8. Notwithstanding
the foregoing, information reporting and backup withholding also may apply if the broker has actual knowledge, or reason to know,
that the holder is a U.S. person that is not an exempt recipient.
Backup withholding is not an additional
tax. Rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished
to the IRS.
Additional Withholding Requirements
Recently enacted legislation would impose
a 30% withholding tax on any dividend payments on our common stock made to a foreign financial institution or non-financial foreign
entity (including, in some cases, when such foreign financial institution or entity is acting as an intermediary), and on the gross
proceeds of the sale or other disposition of our common stock, unless (i) in the case of a foreign financial institution, such
institution enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the
U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity
and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners), (ii) in the
case of a non-financial foreign entity, such entity certifies that it does not have any substantial U.S. owners or provides the
withholding agent with a certification identifying the direct and indirect substantial U.S. owners of the entity, or (iii) the
foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules.
Although this legislation currently applies
to payments made after December 31, 2012, the Treasury and the IRS have issued administrative guidance indicating that they plan
to issue Treasury Regulations providing that withholding will only apply to payments of dividends made on or after January 1, 2014
and to payments of gross proceeds from a sale or other disposition made on or after January 1, 2015. Proposed Treasury Regulations
have been issued which, if finalized, would confirm the extension of the effective dates for withholding. Non-U.S. holders should
consult with their own tax advisors regarding the possible implications of this legislation on an investment in our common stock.
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Estate Tax
Our common stock owned or treated as owned
by an individual who is not a citizen or resident of the U.S. (as specifically defined for U.S. federal estate tax purposes) at
the time of death will be includible in the individual's gross estate for U.S. federal estate tax purposes and may be subject
to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise.
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UNDERWRITING
We and the underwriters for the offering
named below have entered into an underwriting agreement with respect to the common stock being offered. Subject to the terms and
conditions of the underwriting agreement, each underwriter has severally agreed to purchase from us the number of shares of our
common stock set forth opposite its name below. Cowen and Company, LLC and JMP Securities LLC are the representatives of the underwriters.
Underwriter
Number of
Shares
Cowen and Company, LLC
JMP Securities LLC
Total
The underwriting agreement provides that
the obligations of the underwriters are conditional and may be terminated at their discretion based on their assessment of the
state of the financial markets. The obligations of the underwriters may also be terminated upon the occurrence of the events specified
in the underwriting agreement. The underwriters have agreed, severally and not jointly, to purchase all of the shares sold under
the underwriting agreement if any of these shares are purchased, other than those shares covered by the overallotment option described
below. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters
may be increased or the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters
against specified liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments the underwriters
may be required to make in respect thereof.
The underwriters are offering the shares,
subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and
other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers
to the public and to reject orders in whole or in part.
Overallotment Option to Purchase Additional
Shares.
We have granted to the underwriters an option to purchase up to         additional shares of common stock at the public offering
price, less the underwriting discount. This option is exercisable for a period of 30 days. The underwriters may exercise this option
solely for the purpose of covering overallotments, if any, made in connection with the sale of common stock offered hereby. To
the extent that the underwriters exercise this option, the underwriters will purchase additional shares from us in approximately
the same proportion as shown in the table above.
Discounts and Commissions.
The following
table shows the public offering price, underwriting discount and proceeds, before expenses to us. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase additional shares.
We estimate that the total expenses of
the offering, excluding underwriting discount and expense reimbursement, will be approximately
$      and are payable by us. We have also agreed to pay the reasonable out-of-pocket costs of the
underwriters up to $75,000, and the underwriters' outside legal fees and expenses up to $100,000.
Total
Per Share
Without
Over-
Allotment
With
Over-
Allotment
Public offering price
Underwriting discount
Proceeds, before expenses, to InspireMD, Inc.
115
The underwriters propose to offer the shares
of common stock to the public at the public offering price set forth on the cover of this prospectus. The underwriters may offer
the shares of common stock to securities dealers at the public offering price less a concession not in excess of $      per share. The
underwriters may allow, and the dealers may reallow, a discount not in excess of $ per share to other dealers. If all of the shares
are not sold at the public offering price, the underwriters may change the offering price and other selling terms.
Discretionary Accounts
. The underwriters
do not intend to confirm sales of the shares to any accounts over which they have discretionary authority.
We have applied for the quotation of our
common stock on the Nasdaq Capital Market under the symbol ''NSPR''.
Stabilization
. In connection with
this offering, the underwriters may engage in stabilizing transactions, overallotment transactions, syndicate covering transactions,
penalty bids and purchases to cover positions created by short sales.
·
Stabilizing transactions permit bids to purchase shares of common stock so long as the stabilizing bids do not exceed a specified
maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the common stock while
the offering is in progress.
·
Overallotment transactions involve sales by the underwriters of shares of common stock in excess of the number of shares the
underwriters are obligated to purchase. This creates a syndicate short position which may be either a covered short position or
a naked short position. In a covered short position, the number of shares overallotted by the underwriters is not greater than
the number of shares that they may purchase in the overallotment option. In a naked short position, the number of shares involved
is greater than the number of shares in the overallotment option. The underwriters may close out any short position by exercising
their overallotment option and/or purchasing shares in the open market.
·
Syndicate covering transactions involve purchases of common stock in the open market after the distribution has been completed
in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters
will consider, among other things, the price of shares available for purchase in the open market as compared with the price at
which they may purchase shares through exercise of the overallotment option. If the underwriters sell more shares than could be
covered by exercise of the overallotment option and, therefore, have a naked short position, the position can be closed out only
by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that
after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors
who purchase in the offering.
·
Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally
sold by that syndicate member is purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.
These stabilizing transactions, syndicate
covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing
or retarding a decline in the market price of our common stock. As a result, the price of our common stock in the open market may
be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation
or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions
may be effected on the Nasdaq Capital Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued
at any time.
Passive Market Making
. In connection
with this offering, underwriters and selling group members may engage in passive market making transactions in our common stock
on the Nasdaq Capital Market in accordance with Rule 103 of Regulation M under the Securities Exchange Act of 1934, as amended,
during a period before the commencement of offers or sales of common stock and extending through the completion of the distribution.
A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However,
if all independent bids are lowered below the passive market maker's bid, that bid must then be lowered when specified purchase
limits are exceeded.
116
Lock-Up Agreements
.
Pursuant
to certain ''lock-up'' agreements, we, our executive officers, directors and certain of our
other stockholders agreed, subject to certain exceptions, not to offer, sell, contract to sell, announce any intention to
sell, pledge or otherwise dispose of, enter into any swap or other agreement that transfers, in whole or in part, the
economic consequence of ownership of, directly or indirectly, or file with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended, relating to, any common stock or securities convertible
into or exchangeable or exercisable for any common stock without the prior written consent of Cowen and Company, LLC, for a
period of 180 days after the date of the pricing of the offering. The 180-day restricted period will be automatically
extended if (i) during the last 17 days of the 180-day restricted period we issue an earnings release or material news or a
material event relating to us occurs or (ii) prior to the expiration of the 180-day restricted period, we announce that we
will release earnings results or become aware that material news or a material event will occur during the 16-day period
beginning on the last day of the 180-day restricted period, in either of which case the restrictions described above will
continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
This lock-up provision applies to
common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also
applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing
the agreement later acquires the power of disposition. The exceptions permit us, among other things and subject to
restrictions, to: (a) issue common stock or options pursuant to employee benefit plans, (b) issue common stock upon exercise
of outstanding options or warrants, (c) issue securities in connection with acquisitions or similar transactions or (d) file
registration statements on Form S-8. The exceptions permit parties to the ''lock-up'' agreements,
among other things and subject to restrictions, to: (a) participate in tenders involving the acquisition of a majority of our
stock, (b) participate in transfers or exchanges involving common stock or securities convertible into common stock or (c)
make certain gifts. In addition, the lock-up provision will not restrict broker-dealers from engaging in market making and
similar activities conducted in the ordinary course of their business.
Electronic Offer, Sale and Distribution
of Shares
. A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters
or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering
may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling
group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters
and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus
in electronic format, the information on these websites is not part of this prospectus or the registration statement of which this
prospectus forms a part, has not been approved or endorsed by us or any underwriter in its capacity as underwriter, and should
not be relied upon by investors.
Other Relationships
. Certain
of the underwriters and their affiliates have provided, and may in the future provide, various investment banking, commercial
banking and other financial services for us and our affiliates for which they are received, and may in the future receive,
customary fees.
117
LEGAL MATTERS
Haynes and Boone, LLP, New York, New York,
has passed upon the validity of the shares of our common stock offered by us under this prospectus. The underwriters are being
represented by Reed Smith LLP, New York, New York, in connection with the offering.
EXPERTS
The financial statements as of June 30,
2012, December 31, 2011 and 2010 and for each of the six months ended June 30, 2012 and three years in the period ended December
31, 2012  included in this prospectus have been so included in reliance on the report (which contains an explanatory paragraph
relating to our  ability to continue as a going concern as described in Note 1 to the financial statements) of Kesselman
& Kesselman C.P.A.s, a member firm of PricewaterhouseCoopers International Limited, an independent registered public accounting
firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange
Commission a registration statement on Form S-1, together with any amendments and related exhibits, under the Securities Act of
1933, as amended, with respect to our shares of common stock offered by this prospectus. The registration statement contains additional
information about us.
We file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended. Our Securities and Exchange Commission filings are available to the public over the Internet at the Securities and Exchange
Commission's website at http://www.sec.gov. You may also read and copy any document we file at the Securities and Exchange
Commission's public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. In addition,
through our website, http://www.inspire-md.com, you can access electronic copies of documents we file with the Securities and Exchange
Commission. Information on our website is not incorporated by reference in this prospectus. Access to those electronic filings
is available as soon as practicable after filing with the Securities and Exchange Commission. You may also request a copy of those
filings, excluding exhibits, from us at no cost. Any such request should be addressed to us at: 4 Menorat Hamaor St., Tel Aviv,
Israel 67448, Attention: Craig Shore, Chief Financial Officer.
118
INSPIREMD, INC.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets
F-3 - F-4
Consolidated Statements of Operations
F-5
Consolidated Statements of Changes in Equity (Capital Deficiency)
F-6
Consolidated Statements of Cash Flows
F-7
Notes to the Consolidated Financial Statements
F-8 - F-47
F-
1
Report of Independent Registered Public
Accounting Firm
To the shareholders
of
InspireMD,
Inc.
In our opinion, the accompanying consolidated balance sheets
and the related consolidated statements of operations, changes in equity (capital deficiency) and cash flows present fairly, in
all material respects, the financial position of InspireMD, Inc. (the "Company") and its subsidiaries at June 30, 2012,
December 31, 2011 and 2010, and the results of its operations and its cash flows for the six month period ended June 30, 2012 and
for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements,
the Company has had recurring losses, negative cash flows from operating activities and has significant future commitments that
raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Tel Aviv, Israel
/s/ Kesselman & Kesselman
September 11, 2012
Certified Public Accountants (Isr.)
A member of PricewaterhouseCoopers International Limited
F-
2
INSPIREMD, INC.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
June 30
December 31
2012
2011
2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
10,284
$
5,094
$
636
Restricted cash
37
91
250
Accounts receivable:
Trade
1,824
2,284
852
Other
264
118
75
Prepaid expenses
93
72
3
Inventory:
On hand
1,744
2,061
1,704
On consignment
63
110
371
Total current assets
14,309
9,830
3,891
PROPERTY, PLANT AND EQUIPMENT
, net
462
420
282
NON-CURRENT ASSETS:
Deferred debt issuance costs
961
15
Fund in respect of employee rights upon retirement
282
215
167
Total non-current assets
1,243
215
182
Total assets
$
16,014
$
10,465
$
4,355
The accompanying notes are an integral
part of the consolidated financial statements.
F-
3
INSPIREMD, INC.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
June 30
December 31
2012
2011
2010
LIABILITIES AND EQUITY (CAPITAL DEFICIENCY)
CURRENT LIABILITIES:
Current maturities of long-term loan
$
94
$
355
Accounts payable and accruals:
Trade
$
441
814
1,103
Other
2,925
2,217
1,509
Advanced payment from customers
174
316
559
Loans from shareholders
20
Deferred revenues
10
398
Total current liabilities
3,550
3,441
3,944
LONG-TERM LIABILITIES:
Long-term loan
75
Liability for employees rights upon retirement
354
270
206
Convertible loans
5,018
1,044
Contingently redeemable warrants
1,706
Total long-term liabilities
7,078
270
1,325
COMMITMENTS AND CONTINGENT LIABILITIES
(Note 9)
Total liabilities
10,628
3,711
5,269
EQUITY (CAPITAL DEFICIENCY)
:
Common stock, par value $0.0001 per share; 125,000,000 shares authorized; 68,160,161, 68,178,946 and 49,863,801 shares issued and outstanding at June 30, 2012 and December 31, 2011 and 2010, respectively
7
7
5
Additional paid-in capital
49,101
43,388
21,057
Accumulated deficit
(43,722
)
(36,641
)
(21,976
)
Total equity (capital deficiency)
5,386
6,754
(914
)
Total liabilities and equity (less capital deficiency)
$
16,014
$
10,465
$
4,355
The accompanying notes are an integral
part of the consolidated financial statements.
F-
4
INSPIREMD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except per share
data)
6 month period ended
Year ended December 31
June 30, 2012
2011
2010
2009
REVENUES
$
2,071
$
6,004
$
4,949
$
3,411
COST OF REVENUES
1,377
3,011
2,696
2,291
GROSS PROFIT
694
2,993
2,253
1,120
OPERATING EXPENSES:
Research and development
2,607
2,474
1,338
1,330
Selling and marketing
1,246
1,973
1,236
1,040
General and administrative (including $1,454, $8,542, $869 and $65 of share-based compensation for the six month period ended June 30, 2012 and the years ended December 31, 2011, 2010 and 2009, respectively)
3,999
12,275
2,898
1,467
Total operating expenses
7,852
16,722
5,472
3,837
LOSS FROM OPERATIONS
(7,158
)
(13,729
)
(3,219
)
(2,717
)
FINANCIAL EXPENSES (INCOME),
net
(109
)
934
154
(40
)
LOSS BEFORE TAX EXPENSES
(7,049
)
(14,663
)
(3,373
)
(2,677
)
TAX EXPENSES
32
2
47
47
NET LOSS
$
(7,081
)
$
(14,665
)
$
(3,420
)
$
(2,724
)
NET LOSS PER SHARE -
basic and diluted
$
(0.10
)
$
(0.24
)
$
(0.07
)
$
(0.06
)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES USED IN COMPUTING NET LOSS PER SHARE -
basic and diluted
68,176,882
61,439,700
49,234,528
47,658,853
The accompanying notes are an integral
part of the consolidated financial statements.
F-
5
INSPIREMD, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY (CAPITAL DEFICIENCY)
Ordinary shares
Number of
shares
Par
value
Additional
paid-in
capital
Accumulated
deficit
Total
equity
(capital
deficiency)
U.S. dollars in thousands
BALANCE AT JANUARY 1, 2009
47,061,936
$
5
$
15,961
$
(15,832
)
$
134
CHANGES DURING 2009:
Net loss
(2,724
)
(2,724
)
Exercise of options by employees
458,722
*
*
*
Employee and non-employee share-based compensation expenses
594
594
Redemption of beneficial conversion feature of convertible loan
(308
)
(308
)
Issuance of ordinary shares, net of $44 issuance cost
817,722
*
965
965
BALANCE AT DECEMBER 31, 2009
48,338,380
5
17,212
(18,556
)
(1,339
)
CHANGES DURING 2010:
Net loss
(3,420
)
(3,420
)
Employee and non-employee share-based compensation expenses
1,640
1,640
Issuance of warrants, net of $23 issuance costs
424
424
Issuance of ordinary shares, net of $97 issuance costs
1,525,421
*
1,781
1,781
BALANCE AT DECEMBER 31, 2010
49,863,801
5
21,057
(21,976
)
(914
)
CHANGES DURING 2011:
Net loss
(14,665
)
(14,665
)
Employee and non-employee share-based compensation expenses
2,993,785
1
11,605
11,606
Issuance of shares and warrants, net of $2,835 issuance costs
12,992,269
1
7,653
7,654
Issuance of ordinary shares, net of $185 issuance costs
802,866
*
805
805
Exercise of options by employee
1,000,000
*
1,500
1,500
Conversion of convertible loans
526,225
*
768
768
BALANCE AT DECEMBER 31, 2011
68,178,946
$
7
$
43,388
$
(36,641
)
$
6,754
CHANGES DURING THE 6 MONTH PERIOD ENDED JUNE 30, 2012:
Net loss
(7,081
)
(7,081
)
Employee and non-employee share-based compensation expenses
1,944
1,944
Acquisition and cancellation of shares
(18,785
)
*
(21
)
(21
)
Beneficial conversion feature of convertible loan
3,790
3,790
BALANCE AT JUNE 30, 2012
68,160,161
$
7
$
49,101
$
(43,722
)
$
5,386
*
Represents an amount less than
$1
The accompanying notes are an integral
part of the consolidated financial statements.
F-
6
INSPIREMD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
6 month period ended
Year ended December 31
June 30, 2012
2011
2010
2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(7,081
)
$
(14,665
)
$
(3,420
)
$
(2,724
)
Adjustments required to reconcile net loss to net cash  used in operating activities:
Depreciation of property, plant and equipment
69
89
91
89
Loss from sale of property, plant and equipment
15
Change in liability for employees right upon retirement
84
58
42
42
Financial expenses (income)
(315
)
897
94
(224
)
Share-based compensation expenses
1,944
9,590
1,620
562
Loss (gains) on amounts funded in respect of employee rights upon retirement, net
(6
)
8
(11
)
(10
)
Changes in operating asset and liability items:
Decrease (increase) in prepaid expenses
(21
)
(69
)
36
(32
)
Decrease (increase) in trade receivables
460
(1,432
)
337
(969
)
Decrease (increase) in other receivables
(146
)
(50
)
9
(27
)
Decrease in inventory on consignment
47
261
722
330
Decrease (increase) in inventory on hand
317
(357
)
(758
)
(241
)
Increase (decrease) in trade payables
(291
)
(371
)
196
612
Increase (decrease) in deferred revenues
10
(398
)
(1,577
)
(507
)
Increase (decrease)  in other payable and advance payment from customers
566
421
(91
)
1,554
Net cash used in operating activities
(4,363
)
(6,003
)
(2,710
)
(1,545
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash
54
159
52
(272
)
Purchase of property, plant and equipment
(193
)
(139
)
(81
)
(34
)
Proceeds from sale of property, plant and equipment
41
4
Amounts funded in respect of employee rights upon retirement, net
(61
)
(48
)
(17
)
(44
)
Net cash provided (used) in investing activities
(200
)
13
(46
)
(346
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible loan and warrants, net of issuance costs of $1,132 in the six month period ended June 30, 2012
9,868
Proceeds from issuance of shares and warrants, net of issuance costs of $1,014, $78 and $11 in the years ended December 31, 2011, 2010 and 2009, respectively
10,564
2,245
976
Exercise of options
1,500
Proceeds from long-term loan, net of $41 issuance costs
419
Proceeds from convertible loan at fair value through
    profit or loss, net of $60 issuance costs
1,073
Repayment of long-term loan
(94
)
(375
)
(281
)
Acquisition and cancellation of shares
(21
)
Repayment of loans from shareholders
(20
)
(20
)
Repayment of convertible loans
(1,000
)
(720
)
Net cash provided by financing activities
9,753
10,669
3,037
655
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
-
(221
)
(21
)
41
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
5,190
4,458
260
(1,195
)
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
5,094
636
376
1,571
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
10,284
$
5,094
$
636
$
376
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Taxes on income  paid
$
37
$
37
$
56
$
-
Interest paid
$
224
$
24
$
30
$
88
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Receivables on account of shares
$
-
$
-
$
-
$
20
Conversion of convertible loan into shares
$
-
$
668
$
-
$
-
Purchasing of property plant and equipment in credit and in consideration of share-based payment
$
-
$
144
$
-
$
-
The accompanying notes are an integral
part of the consolidated financial statements.
F-
7
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION
OF BUSINESS
InspireMD, Inc., formerly Saguaro Resources, Inc.,
(the "Company"), a public company, is a Delaware corporation formed on February 29, 2008. On March 28, 2011, the Company
changed its name to InspireMD, Inc.
On December 29, 2010, the Company entered into a
Share Exchange Agreement (the "Exchange Agreement") by and among the Company and InspireMD Ltd., a limited company
incorporated under the laws of the State of Israel in April 2005. Subsequent to the date of execution of the Exchange Agreement,
shareholders of InspireMD Ltd., holding 91.7% of InspireMD Ltd.'s issued and outstanding ordinary shares, executed a joinder
to the Exchange Agreement and became parties thereto (the "InspireMD Shareholders"). Pursuant to the Exchange Agreement,
on March 31, 2011, the InspireMD Shareholders transferred all of their ordinary shares in InspireMD Ltd. to the Company in exchange
for 46,471,907 newly issued shares of common stock of the Company (the "Initial Share Exchange"). In addition, the
remaining holders of InspireMD Ltd.'s ordinary shares separately transferred all of their ordinary shares of InspireMD Ltd.
to the Company, in exchange for an aggregate of 4,194,756 newly issued shares of common stock of the Company (the "Follow
Up Share Exchange") and, together with the Initial Share Exchange, the "Share Exchange"). As a result of the
Share Exchange, InspireMD Ltd. became a wholly owned subsidiary of the Company.
The Share Exchange was accounted for as a reverse
recapitalization, equivalent to the issuance of stock by InspireMD Ltd. for the net monetary assets of the Company. Accordingly,
the historical financial statements of the Company reflect the historical operations and financial statements of InspireMD Ltd.
The Company, together with its subsidiaries, is
a medical device company focusing on the development and commercialization of its proprietary stent platform technology, MGuard™.
MGuard™ provides embolic protection in stenting procedures by placing a micron mesh sleeve over a stent. The Company's
initial products are marketed for use in patients with acute coronary syndromes, notably acute myocardial infarction (heart attack)
and saphenous vein graft coronary interventions (bypass surgery). The Company markets its products through distributors in international
markets, mainly in Europe and Latin America.
In addition, the Company operates in Germany through
its wholly-owned subsidiary, InspireMD GmbH, a German limited liability company incorporated in November 2007, where the Company
subcontracts the manufacturing of its stents.
The Company has had recurring
losses and negative cash flows from operating activities and has significant future commitments. For the six months ended June
30, 2012, the Company had losses of approximately $7.1 million and negative cash flows from operating activities of approximately
$4.4 million. The Company's management believes that its working capital as of June 30, 2012 of approximately $10.8 million
should enable it to continue funding the negative cash flows from operating activities until October 2013, when its 2012 Convertible
Debentures (defined and described in Note 6a) are subject to a noncontingent redemption option that could require the Company
to make a payment of $13.3 million, including accrued interest. Since the Company expects to continue incurring negative cash
flows from operations and in light of the cash requirement in connection with the 2012 Convertible Debentures, there is substantial
doubt about the Company's ability to continue operating as a going concern. These financial statements include no adjustments
of the values of assets and liabilities and the classification thereof, if any, that will apply if the Company is unable to continue
operating as a going concern.
The Company will need to raise
further capital at some future point in time, through the sale of additional equity securities or debt. The Company's future
capital requirements and the adequacy of the Company's available funds will depend on many factors, including the Company's
ability to successfully commercialize the Company's MGuard
TM
products, development of future products, competing
technological and market developments, and the need to enter into collaborations with other companies or acquire other companies
or technologies to enhance or complement the Company's product offerings. However, the Company may be unable to raise sufficient
additional capital when the Company will need it or with favorable terms. The terms of any securities issued by the Company in
future financing 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 the Company's
securities then outstanding. If the Company is unable to obtain adequate funds on reasonable terms, the Company will need to curtail
operations significantly, including possibly postponing or halting the Company's Unites States of America ("U.S.")
Food and Drug Administration clinical trials or entering into financing agreements with unattractive terms.
F-
8
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT
ACCOUNTING
POLICIES
a.
Accounting principles
The consolidated financial statements
are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").
b.
Use of estimates
The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates using assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of sales and expenses during the reporting periods. Actual results could differ from those estimates.
As applicable to these consolidated
financial statements, the most significant estimates and assumptions relate to inventory write-off, provisions for returns, legal
contingencies, estimation of the fair value of share-based compensation and estimation of the fair value of warrants.
c.
Functional currency
The currency of the primary economic
environment in which the operations of the Company and its subsidiaries are conducted is the U.S. dollar ("$" or "dollar").
Accordingly, the functional currency of the Company and of the subsidiaries is the dollar.
The dollar figures are determined
as follows: transactions and balances originally denominated in dollars are presented in their original amounts. Balances in foreign
currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively.
The resulting translation gains or losses are recorded as financial income or expense, as appropriate. For transactions reflected
in the statements of operations in foreign currencies, the exchange rates at transaction dates are used. Depreciation and changes
in inventories and other changes deriving from non-monetary items are based on historical exchange rates.
d.
Principles of consolidation
The consolidated financial statements
include the accounts of the Company and of its subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.
F-
9
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
e.
Cash and cash equivalents
The Company considers all highly
liquid investments, which include short-term bank deposits (up to three months from date of deposit), that are not restricted as
to withdrawal or use, to be cash equivalents.
f.
Restricted cash
The Company maintains certain
cash amounts restricted as to withdrawal or use, related to credit cards. Restricted cash is denominated in dollars and New Israel
Shekel ("NIS"). See also Note 9c(2).
g.
Concentration of credit risk and allowance for doubtful
accounts
Financial instruments that may potentially
subject the Company to a concentration of credit risk consist of cash, cash equivalents and restricted cash, which are deposited
in major financial institutions in the "U.S.", Israel and Germany, and trade accounts receivable. The Company's
trade accounts receivable are derived from revenues earned from customers from various countries. The Company performs ongoing
credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. The Company
also has a credit insurance policy for some of its customers. The Company maintains an allowance for doubtful accounts receivable
based upon the expected ability to collect the accounts receivable. The Company reviews its allowance for doubtful accounts quarterly
by assessing individual accounts receivable and all other balances based on historical collection experience and an economic risk
assessment. If the Company determines that a specific customer is
unable to meet its financial obligations to the Company,
the Company provides an allowance for credit losses to reduce the receivable to the amount management reasonably believes will
be collected. To mitigate risks, the Company deposits cash and cash equivalents with high credit quality financial institutions.
Provisions for doubtful accounts
receivable are netted against "Accounts receivable-Trade."
h.
Inventory
Inventories include finished
goods, work in process and raw materials.  Inventories are stated at the lower of cost (cost is determined on a "first-in,
first-out" basis) or market value. The Company's inventories generally have a limited shelf life and are subject to
impairment as they approach their expiration dates. The Company regularly evaluates the carrying value of the Company's
inventories and when, in the Company's opinion, factors indicate that impairment has occurred, the Company establishes a
reserve against the inventories' carrying value. The Company's determination that a valuation reserve might be required
and the quantification of such reserve require management to utilize significant judgment. With respect to inventory on consignment,
see Note 2k.
i.
Property, plant and equipment
Property, plant and equipment are
stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over
the estimated useful lives of the related assets: over three years for computers and other electronic equipment, five years for
vehicles and seven to fifteen years for office furniture and equipment and machinery and equipment (mainly seven years). Leasehold
improvements are amortized on a straight-line basis over the term of the lease, which is shorter than the estimated life of the
improvements.
j.
Impairment of property,
plant and equipment
The Company reviews its property,
plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets
may not be recoverable. If the sum of the expected future cash flows (undiscounted and without interest charges) of the property,
plant and equipment is less than the carrying amount of such assets, an impairment loss would be recognized, and the assets would
be written down to their estimated fair values.
F-
10
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
To date, the Company has not recorded
any impairment charges relating to its property, plant and equipment.
k.
Revenue recognition
Revenue is recognized
when delivery has occurred, evidence of an arrangement exists, title and risks and rewards for the products are transferred to
the customer, collection is reasonably assured and product returns can be reliably estimated. When product returns can be reliably
estimated a provision is recorded, based on historical experience, and deducted from revenues. The provision for product returns
and related costs are included in "Accounts payable and accruals-other" under "Current liabilities" and
"Inventory-On consignment," respectively.
When returns cannot be reliably estimated,
both related revenues and costs are deferred, and presented under "Deferred revenues" and "Inventory-On consignment,"
respectively.
As of June 30, 2012, there are
no deferred revenues related to sales for which the rate of return cannot be reliably estimated.
The Company's revenue arrangements
may contain delivery of free products upon the achievement of sales targets. Each period, the Company estimates the amount of free
products to which these distributors will be entitled based upon the expected achievement of sales targets and defers a portion
of revenues accordingly.
The Company recognizes revenue net
of value added tax (VAT).
l.
Research and development costs
Research and development costs are
charged to the statement of operations as incurred.
m.
Share-based compensation
Employee option awards are classified
as equity awards and accounted for using the grant-date fair value method. The fair value of share-based awards is estimated using
the Black-Scholes valuation model and expensed over the requisite service period, net of estimated forfeitures. The Company estimates
forfeitures based on historical experience and anticipated future conditions.
The Company
elected to recognize compensation expenses for awards with only service conditions that have graded vesting schedules using the
accelerated multiple option approach.
F-
11
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT
ACCOUNTING
POLICIES
(continued):
The Company
accounts for equity instruments issued to third party service providers (non-employees), by recording the fair value of the options
granted using an option pricing model, at each reporting period, until awards are vested in full. The expense is recognized over
the vesting period using the accelerated multiple option approach.
However,
when the grant relates to options granted to third parties as consideration for introducing investors to the Company, the costs
are recorded as issuance costs, of the various financial instruments issued.
In addition, certain share-based
awards of the Company are performance based and dependent upon achieving certain goals. With respect to these awards, the company
estimates the expected pre-vesting award probability that the performance conditions will be achieved. The Company only recognizes
expense for the shares that are expected to vest.
n.
Uncertain tax positions
The Company follows a two-step approach
to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining
if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit. If
under the first step a tax provision is assessed to be more likely than not of being sustained on audit, the second step is performed,
under which the tax benefit is measured as the largest amount that is more than 50% likely to be realized upon ultimate settlement.
Such liabilities are classified as long-term, unless the liability is expected to be resolved within twelve months from the balance
sheet date. The Company's policy is to include interest and penalties related to unrecognized tax benefits within "Financial
expenses (income)-net".
o.
Deferred income taxes
Deferred taxes are determined utilizing
the "asset and liability" method based on the estimated future tax effects of differences between the financial accounting
and tax bases of assets and liabilities under the applicable tax laws, and on tax rates anticipated to be in effect when the deferred
taxes are expected to be paid or realized. The Company assesses realization of deferred income tax assets and, based on all available
evidence, concludes whether it is more likely than not that the net deferred income tax assets will be realized. A valuation allowance
is provided for the amount of deferred income tax assets not considered to be realizable.
The Company may incur additional
tax liability in the event of intercompany dividend distributions by its subsidiary. Such additional tax liability in respect of
these foreign subsidiaries has not been provided for in these financial statements as it is the Company's policy to permanently
reinvest the subsidiaries' earnings and to consider distributing dividends only when this can be facilitated in connection
with a specific tax opportunity that may arise.
Taxes that would apply in the event
of disposal of investments in the foreign subsidiary have not been taken into account in computing the deferred taxes, as it is
the Company's intention to hold, and not to realize, this investment.
p.
Advertising
Costs related to advertising and
promotion of products are charged to sales and marketing expense as incurred. Advertising expenses were $361 thousand for the six
month period ended June 30, 2012, and $400 thousand, $467 thousand and $275 thousand for the years ended December 31, 2011, 2010
and 2009, respectively.
F-
12
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
q.
Net loss per share
Basic and diluted net loss per share
is computed by dividing the net loss for the year by the weighted average number of ordinary shares outstanding during the year.
The calculation of diluted net loss per share excludes potential ordinary shares as the effect is anti-dilutive. Potential ordinary
shares are comprised of incremental ordinary shares issuable upon the exercise of share options, warrants and convertible loans.
For the six month period ended June
30, 2012, as well as the years ended December 31, 2011, 2010 and 2009, all ordinary shares underlying outstanding options,
warrants and convertible loans have been excluded from the calculation of the diluted loss per share since their effect was anti-dilutive.
The total number of ordinary shares related to outstanding options, warrants and convertible loans excluded from the calculations
of diluted loss per share were 32,470,307 for the six month period ended June 30, 2012, and 21,626,451, 9,502,111 and 5,877,388
for the years ended December 31, 2011, 2010 and 2009, respectively.
r.
Segment reporting
The Company has one operating and
reportable segment.
s.
Factoring of receivables
The Company entered into factoring
agreements amounting to $1,200 thousand and $942 thousand during the years ended December 31, 2011 and 2010, respectively, with
certain banking institutions on a non-recourse basis. The factoring of trade receivables under these agreements were accounted
for as sales. Under the terms of these factoring agreements, the Company transferred ownership of eligible trade receivables without
recourse to the respective banking institutions in exchange for cash. Proceeds on the transfers reflect the face value of the account
less a discount. The discounts, $12 thousand and $37 thousand during the years ended December 31, 2011 and 2010, respectively,
were recorded to "Financial expenses (income)-net" within the Consolidated Statements of Operations.
The receivables sold pursuant to
these factoring agreements are excluded from 'Accounts receivable-Trade" on the Consolidated Balance Sheets and are
reflected as cash provided by operating activities on the Consolidated Statements of Cash Flows. The banking institution had no
recourse to the Company's assets for failure of debtors to pay when due.
The related commissions on the sales
of trade receivables sold under these factoring agreements amounting to $23 thousand and $4 thousand during the years ended December
31, 2011 and 2010, respectively, were recorded to "Financial expenses (income)-net" within the Consolidated Statements
of Operations.
t.
Fair value measurement:
The Company measures fair value and
discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The accounting standard establishes
a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels,
which are described below:
Level 1: Quoted prices (unadjusted)
in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest
priority to Level 1 inputs.
F-
13
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Level 2: Observable prices that are
based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are
used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company
utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
possible and considers counterparty credit risk in its assessment of fair value.
u.
Put warrants
Put warrants that embody an obligation to repurchase the Company's equity shares, or are indexed
to such an obligation, and that require or may require the Company to settle the obligation by transferring assets are within the
scope of Accounting Standards Codification ("ASC") 480-10-25-8, and are recognized as a liability and measured at fair
value at each reporting date, with changes in fair value recorded in earnings. See Note 6a(4)(A).
v.
Beneficial conversion feature ("BCF")
When the
Company issues convertible debt, if the stock price is greater than the effective conversion price (after allocation of the total
proceeds) on the measurement date, the conversion feature is considered "beneficial" to the holder.
If there is no contingency, this difference is treated as issued equity and reduces the carrying value of the host debt;
the discount is accreted as deemed interest on the debt. See Note 6a(4)(B).
w.
Embedded derivatives
Embedded derivatives
in debt contracts that are not clearly and closely related to the host debt are bifurcated and accounted for separately. Those
embedded derivatives are measured at fair value each reporting date, with changes in fair value recorded in earnings.
See
Note 6a(4)(B).
x.
Allocation of issuance proceeds
The Company allocated
proceeds from its issuance of debt that was sold with detachable warrants that are classified as liability as follows: first to
the warrants based on their full fair value; then to any embedded derivatives in the debt that require bifurcation at their fair
values; then the residual amount of the proceeds to the debt. See Note 6a(4)(B).
y.
Newly adopted accounting guidance
Fair value measurement
In May 2011, the FASB issued Accounting
Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs ("ASU 2011-04"). ASU 2011-04 changes certain fair value measurement principles
and clarifies the application of existing fair value measurement guidance. These amendments include, among others, (1) the application
of the highest and best use and valuation premise concepts, (2) measuring the fair value of an instrument classified in a reporting
entity's shareholders' equity and (3) disclosing quantitative information about the unobservable inputs used within
the Level 3 hierarchy.
Effective January 1, 2012, the Company
adopted ASU 2011-04. The adoption of this accounting standards update did not have a material impact on the Company's consolidated
financial statements.
F-
14
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - FAIR VALUE MEASURMENT
Items
Measured at Fair Value on a Recurring Basis
a.
The following table summarizes the balances for those financial liabilities where fair value measurements are estimated utilizing
Level 2 and Level 3 inputs:
June 30
December 31
Level
2012
2011
2010
($ in thousands)
2010 Convertible Debentures
3
$
-
$
-
$
1,044
2012 Warrants at fair value
2
1,706
Embedded derivative
3
49
$
1,755
$
-
$
1,044
b.
The following tables summarize the activity for those financial liabilities where fair value measurements are estimated utilizing
Level 3 inputs:
Embedded Derivative
Convertible Loan
($ in thousands)
($ in thousands)
Balance as of January 1, 2010
$
-
$
-
Issuances
1,133
Total losses (gains) (realized and unrealized)
    - included in earnings - Financial expenses (income), net
(89
)
Balance as of December 31, 2010
-
1,044
Total losses (gains) (realized and unrealized)
    - included in earnings - Financial expenses (income), net
624
Convertion to Company's shares of common stock
(668
)
Redemption
(1,000
)
Balance as of December 31, 2011
-
-
Issuances
8
Total losses (gains) (realized and unrealized)
    - included in earnings - Financial expenses (income), net
41
Balance as of June 30, 2012
$
49
$
-
Level 3 liabilities include an embedded
derivative related to the Company's senior secured convertible debenture due April 5, 2014, as described in Note 6a. The
Company values the Level 3 embedded derivative using an internally developed valuation model, whose inputs include recovery
rates, credit spreads, stock prices, and volatilities, as described below.
F-
15
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In calculating the fair value of embedded derivative,
the Company used the following assumptions: Company's credit spread of 23.1% and 26.5% for the transaction date and for
June 30, 2012, respectively, Company's recovery rate of 49.8% and 49.8% for the transaction date and for June 30, 2012,
respectively, probability of non-financial event of default 5% and 5% for the transaction date and for June 30, 2012, respectively.
The credit spread is the yield to maturity of
risky bonds over risk free bonds and was based on an average of sample comparable companies.
The recovery rate is the estimated amount to be
recovered through
bankruptcy
procedures in event of a
default
,
expressed as a percentage of
face value
.
A non-financial event of default is a contractual
event of default which does not result from a declining financial standing of the Company.
The fair value of the warrants included
in Level 2 is estimated using the Black & Scholes model.
In calculating the fair value
of warrants, the Company used the following assumptions: expected term of 5 and 4.76 years for the transaction date and for June
30, 2012, respectively; expected volatility of 66.1% and 69.6% for the transaction date and for June 30, 2012, respectively; risk-free
interest rate of 1.01% and 0.72% for the transaction date and for June 30, 2012, respectively; and dividend yield of 0%.
The carrying amounts of financial
instruments included in working capital approximate their fair value either because these amounts are presented at fair value or
due to the relatively short-term maturities of such instruments. The carrying amount of the Company's other financial long-term
assets and other financial long-term liabilities (other than the debentures) approximate their fair value. The fair value of the
Company's senior secured convertible debenture due April 5, 2014 approximates the carrying amount (after considering the
BCF, as described in Note 6a).
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
a.
Composition of assets, grouped by major classifications, is as follows:
June 30
December 31
2012
2011
2010
($ in thousands)
Cost:
Vehicles
$
-
$
-
$
44
Computer equipment
142
123
75
Office furniture and equipment
83
56
54
Machinery and equipment
598
597
416
Leasehold improvements
111
47
47
934
823
636
Less - accumulated depreciation and amortization
(472
)
(403
)
(354
)
Net carrying amount
$
462
$
420
$
282
b.
Depreciation and amortization expenses totaled approximately $69 thousand for the six month period ended June 30, 2012, and
$89 thousand, $91 thousand and $89 thousand for the years ended December 31, 2011, 2010 and 2009, respectively.
F-
16
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LIABILITY FOR EMPLOYEES RIGHT
UPON RETIREMENT
Israeli labor
law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other
circumstances.
Pursuant to
section 14 of the Israeli Severance Compensation Act, 1963, some of the Company's employees are entitled to have monthly
deposits, at a rate of 8.33% of their monthly salary, made in their name with insurance companies. Payments in accordance with
section 14 relieve the Company from any future severance payments to these employees.
The
severance pay liability of the Company for the rest of its employees, which reflects the undiscounted amount of the liability,
is based upon the number of years of service and the latest monthly salary. The severance pay liability is partly covered by insurance
policies and by regular deposits with recognized severance payment funds. The Company may only make withdrawals from the amounts
funded for the purpose of paying severance pay. The severance pay expenses were approximately $117 thousand in the six month period
ended June 30, 2012, and $155
thousand
, $114
thousand
and $78 thousand in the years ended December 31, 2011, 2010 and 2009, respectively.
Defined
contribution plan expenses were $96 in the six month period ended June 30 2012, and $197, $90 and $82 in the years ended December
31, 2011, 2010 and 2009, respectively. Gain (loss) on amounts funded with respect to employee rights upon retirement totaled
to approximately $6 thousand for the six month period ended June 30 2012, and $(8)
thousand
,
$11
thousand
and $10 thousand for the years ended December 31, 2011, 2010 and 2009,
respectively.
The Company
expects contribution plan expenses in fiscal year 2013 to be approximately $198 thousand.
NOTE 6 - convertible
LOANS
a.
On April 5, 2012, the Company issued senior secured convertible debentures (the "2012 Convertible
Debentures") due April 5, 2014 in the original aggregate principal amount of $11,702,128 and five-year warrants (the "2012
Warrants") to purchase an aggregate of 3,343,465 shares of its common stock at an exercise price of $1.80 per share in a
private placement transaction in exchange for aggregate gross proceeds of $11,000 thousand. The 2012 Convertible Debentures bear
interest at an annual rate of 8% (payable quarterly beginning on July 1, 2012) and are convertible at any time into shares of common
stock at an initial conversion price of $1.75 per share.
The relevant
features of the 2012 Convertible Debentures and 2012 Warrants are summarized below:
1)
2012 Convertible Debentures
A.
Conversion and contingent conversion
The 2012 Convertible Debentures, including
accrued interest on such 2012 Convertible Debentures, are convertible at any time, in whole or part, at the option of the holders
into shares of common stock at an initial conversion price of $1.75 per share, subject to adjustment for stock splits, fundamental
transactions or similar events and an additional conversion adjustment described below.
The number of conversion shares
issuable upon a conversion shall be determined by the quotient obtained by dividing (x) the sum of (a) the outstanding principal
amount to be converted, (b) at the option of the holder, a portion or all of any accrued and unpaid interest to be converted and
(c) the conversion adjustment amount by (y) the conversion price.
F-
17
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The "conversion adjustment
amount" is calculated by multiplying the principal amount being converted by a fraction, the numerator of which is (a) the
number of days elapsed from the original issue date multiplied by (b) .021917808; and the denominator of which is 100. The maximum
number of days elapsed to be used in calculating the conversion adjustment amount will not be greater than 548 days regardless
of the actual number of days elapsed from the original issue date.
The Company may force conversion of
the 2012 Convertible Debentures if the closing bid price of the Company's common stock equals or exceeds 165% of the conversion
price for twenty consecutive trading days, the minimum daily trading volume for such period is $1,100 thousand, all of the underlying
shares during such period are either registered for resale with the Securities and Exchange Commission or eligible for resale pursuant
to Rule 144 and there is no existing event of default or existing event which, with the passage of time or the giving of notice,
would constitute an event of default during such period.
The 2012 Convertible Debentures contain
certain limitations on conversion. No conversion may be made if, after giving effect to the conversion, any holder would beneifially
own in excess of 4.99% of the Company's outstanding shares of common stock. This percentage may be increased to a percentage
not to exceed 9.99%, at the option of such holder, except any increase will not be effective until the holder has given 61 days'
prior notice to the Company.
The 2012 Convertible Debentures impose
penalties on the Company for any failure to timely deliver any shares of its common stock issuable upon conversion.
B.
Events of default and holder's contingent redemption option
If there is an event of default as
stipulated in the agreement, then by election of the holders holding at least 60% of the 2012 Convertible Debentures, the Company
must redeem all of the 2012 Convertible Debentures in cash for 112% of the outstanding principal, together with all unpaid and
accrued interest, all interest that would have been payable through the maturity date and any other amounts due under the 2012
Convertible Debentures (such amount, the "Mandatory Default Amount"). The Mandatory Default Amount will accrue interest
at a rate of 24% per annum commencing on the fifth calendar date following the relevant event of default.
C.
Holder's noncontingent redemption option
Commencing 18 months following the
original issuance date of the 2012 Convertible Debentures, the holders may require the Company to redeem all or a portion of the
2012 Convertible Debentures, for a price equal to 112% of the amount of principal to be redeemed plus all accrued but unpaid interest
and other amounts due under the 2012 Convertible Debentures.
D.
Company's noncontingent redemption option
Commencing 6 months following the
original issuance date of the 2012 Convertible Debentures, the Company may redeem all or a portion of the 2012 Convertible Debentures
for a price equal to 112% of the amount of principal to be redeemed plus all accrued but unpaid interest and other amounts due
under the 2012 Convertible Debentures.
E.
Covenants
The 2012 Convertible Debentures contain
certain covenants which prohibit or limit the Company's and its subsidiaries ability to, among other things:
1.
pay cash dividends to stockholders;
F-
18
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.
redeem, repurchase or otherwise
                                                               acquire more than a de minimis number of shares of its common stock
                                                               or common stock equivalents;
3.
incur additional indebtedness;
4.
permit liens on assets or conduct sales of assets;
5.
effectuate stock splits until April 5, 2013, except in connection with an initial listing on a national
securities exchange or to meet the continued listing requirements of such exchange;
6.
cease making public filings under
                                                               the Securities Exchange Act of 1934, as amended;
7.
engage in transactions with affiliates;
                                                               and
8.
amend its charter documents in
                                                               a way that would materially and adversely affect any holder of
                                                               the 2012 Convertible Debentures.
F.
Pro rata distributions
If the Company, at any time while
the 2012 Convertible Debentures are outstanding, distributes to all holders of common stock evidences of its indebtedness or assets
(including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the common stock,
then, upon any conversion of the 2012 Convertible Debentures, the holder shall be entitled to receive such distribution to the
same extent that the holder would have if the holder had held the number of conversion shares issued upon such conversion of the
2012 Convertible Debentures immediately before the date on which a record was taken for such distribution, or, if no such record
was taken, the date as of which the record holders of shares of common stock were determined for the participation in such distribution.
2)
2012 Warrants
A.
Exercisability
The 2012 Warrants are immediately
exercisable and, in the aggregate, entitle the holders to purchase up to 3,343,465 shares of common stock. The 2012 Warrants have
an initial exercise price of $1.80 per share payable in cash. " The 2012 Warrants expire on April 5, 2017.
Similar to the 2012 Convertible Debentures,
the 2012 Warrants also contain limitations on exercise that would cause the holder to beneficially own in excess of 4.99% or 9.99%
of the Company's outstanding common stock.
B.
Anti-dilution protection
The exercise price of the 2012
Warrants and the number of shares issuable upon exercise of the 2012 Warrants are subject to adjustments for stock splits, combinations
or similar events.
C.
"Most favored nation"
The 2012 Warrants are also subject
to an adjustment pursuant to which, in the event that the Company issues or is deemed to have issued certain securities with terms
that are superior to those of the 2012 Warrants, except with respect to exercise price and warrant coverage, the superior terms
will automatically be incorporated into the 2012 Warrants.
F-
19
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
D.
Contingent holder redemption
                                                                    option
Upon the occurrence of a transaction
involving a change of control that is (i) an all cash transaction, (ii) a "Rule 13e-3 transaction" as defined in Rule
13e-3 under the Securities Exchange Act of 1934, as amended, or (iii) involving a person or entity not traded on a national securities
exchange, the holders of the 2012 Warrants will have the right, among others, to have the 2012 Warrants repurchased for a purchase
price in cash equal to the Black-Scholes value of the then unexercised portion of the 2012 Warrants.
E.
Pro rata distributions
Similar to the 2012 Convertible
Debentures, the 2012 Warrants allow exercising holders to participate in pro rata distributions.
F.
Public information failure
If the Company fails for any reason
to satisfy the current public information requirement under Rule 144(c) then, in addition to any other remedies available to the
holders, the Company must pay to the holders, in cash, partial liquidated damages as set forth in the agreement.
3)
Transaction costs
In connection with the Transaction,
the Company paid issuance costs, including placement agent and legal fees, of approximately $1,200 thousand, and issued five-year
warrants ("2012 Placement Agents Warrants") to purchase 312,310 shares of the Company's common stock at an exercise
price of $1.80 per share to the placement agent.
4)
Accounting treatment
A.
2012 Warrants
The Company determined, based on
the provisions of ASC 480-10-25-8, that equity classification is precluded because of the redeemable option of the holders in the
event of a change in control (in certain conditions), which is an event that is not within the Company's control. Accordingly,
the 2012 Warrants are classified as a liability in the Consolidated Balance Sheets and measured at fair value at each reporting
period. The fair value of the 2012 Warrants is estimated using the Black-Scholes valuation model. See Note 2u.
In calculating the fair value
of the 2012 Warrants (including the 2012 Placement Agents Warrants), the Company used the following assumptions: expected term
of 5 and 4.76 years for the transaction date and for June 30, 2012, respectively; expected volatility of 66.1% and 69.6% for the
transaction date and for June 30, 2012, respectively; risk-free interest rate of 1.01% and 0.72% for the transaction date and
for June 30, 2012, respectively; and dividend yield of 0%.
B.
2012 Convertible Debentures
In accordance with ASC 470-20,
"Debt with Conversion and Other Options," the Company determined that a BCF existed at the issuance date of the 2012
Convertible Debentures. The BCF amounting to $3,790 thousand was recorded in equity.
In addition, the Company analyzed
the holders' contingent
redemption option
based on the guidance stipulated in Topic 815,
and concluded that
the
holders' contingent
redemption option
is not clearly and closely related to the debt host contract. Thus, the Company bifurcated and accounted for it separately as an
embedded
derivative and classified it, together with the 2012 Convertible Debentures, in its statement of financial position.
This embedded derivative will be measured at fair value at each reporting period. The fair value of the embedded derivative is
estimated using the binominal valuation model.
F-
20
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In addition, the Company analyzed
the holders' noncontingent redemption option and determined that the prepayment options are clearly and closely related to
the debt host contract and should not be bifurcated from the 2012 Convertible Debentures.
The gross proceeds amounting to
$11,000 thousand from the 2012 Convertible Debentures transaction were allocated as follows:
·
2012
Warrants at fair value - $2,807 thousand based on their fair value;
·
embedded
derivative - $8 thousand based on its fair value; and
·
2012 Convertible Debentures - $8,185 thousand based on the residual
amount after the allocation of other components as described above. In addition, an amount of $3,790 thousand was recognized as
a BCF against the 2012 Convertible Debentures.
The 2012 Convertible Debentures
are subsequently measured at amortized cost on the basis of the effective interest method over the loan period until the maturity
date.
C.
Transaction costs
Direct transaction costs of $1,394
thousand, which included the placement agents fees and the 2012 Placement Agents Warrants valued at $262 thousand as of the transaction
date , as well as other issuance costs, were allocated to the various instruments associated with the 2012 Convertible Debentures
pro-rata to the amount such instruments were recorded as of the transaction date. The amounts that were allocated to the 2012 Warrants
at fair value and embedded derivative were recorded in "Financial expenses" and the remainder amounting to $1,037 thousand
was recorded as "Deferred debt issuance costs" in the Consolidated Balance Sheets and will be amortized over the loan
period using the effective interest method until the maturity date.
b.
In July 2010, InspireMD Ltd. entered into a securities purchase agreement, pursuant to which InspireMD
Ltd. issued (i) 8% senior convertible debentures in the principal amount of $1.58 million (the "2010 Convertible Debentures")
and (ii) three year warrants (the "2010 Warrants") to purchase up to 1,014,513 shares of common stock at an exercise
price of $1.23 per share (as adjusted for the Share Exchange) in exchange for aggregate gross proceeds of $1.58 million. The 2010
Convertible Debentures accrued interest at the annual rate of 8% and were payable on the later of (i) two months following receipt
by InspireMD Ltd. of a tax ruling from the Israeli Tax Authority that the issuance of shares of a U.S. "shell company"
in exchange for securities held by shareholders and option holders of InspireMD Ltd. would constitute a deferred tax event for
InspireMD Ltd. and/or its security holders or (ii) the six month anniversary of the issuance of the 2010 Convertible Debentures
(the "Original Maturity Date); provided however, that so long as the Company was not in default under the 2010 Convertible
Debentures, InspireMD Ltd. had the right to extend the maturity date of the 2010 Convertible Debentures to nine months following
the Original Maturity Date (the "Second Maturity Date").
If InspireMD
Ltd. completed a qualified financing in connection with a reverse merger prior to the Original Maturity Date, or the Second Maturity
Date, if applicable, the holders of the 2010 Convertible Debentures had the option to convert the 2010 Convertible Debentures into
shares of common stock of the surviving corporation at $1.50 per share or be repaid in cash.
F-
21
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In addition, provided that there was
not an event of default, if InspireMD Ltd. completed a financing for at least $3 million prior to the Second Maturity Date, the
2010 Convertible Debentures would automatically convert into ordinary shares of InspireMD Ltd. at a 15% discount to the pricing
of the new financing.
Finally, if an event of default had
not occurred, and any 2010 Convertible Debentures were still outstanding, following the Second Maturity Date, such 2010 Convertible
Debentures would automatically convert into ordinary shares of InspireMD Ltd. (i) if InspireMD Ltd. completed a financing for at
least $3 million prior to the one year anniversary of the Second Maturity Date, at a 15% discount to the pricing of the new financing,
or (ii) or if InspireMD Ltd. did not complete a financing for at least $3 million prior to the one year anniversary of the Second
Maturity Date, at $10 per ordinary share.
Upon an event of default under the
2010 Convertible Debentures, the holders had the right to demand payment of all then unpaid principal and accrued but unpaid interest
under the 2010 Convertible Debentures.
The Company elected to apply the
fair value option regarding the 2010 Convertible Debentures in accordance with ASC 825 (i.e. the 2010 Convertible Debentures were
measured at each balance sheet date at fair value and the changes in their fair value were recorded in profit and loss). See Note
3.
The proceeds from the 2010 Convertible
Debenture Transaction were allocated to the 2010 Convertible Debentures at their fair value with the residual proceeds ascribed
to the 2010 Warrants as follows:
·
2010
Debenture at fair value - $1,133 thousand; and
·
2010
Warrants - $447 thousand, net of $23 thousand direct transaction costs.
The issuance of the 2010 Warrants
was recorded in the "Additional paid-in capital", net of $23 thousand direct transaction costs allocated to the 2010
Warrants.
On March 31, 2011, holders of the
2010 Convertible Debentures surrendered $667,596 of outstanding principal and interest due under such debentures in exchange for
shares of common stock and warrants as part of the Company's private placement on such date (the "Debt Conversions")
as described in Note 10b.
As a result of the Debt Conversions,
there was $1 million of unpaid principal outstanding remaining under the 2010 Convertible Debentures on March 31, 2011, which was
repaid by the Company in May 2011, plus all accrued interest thereon.
c.
On January 4, 2011, InspireMD Ltd. entered into a convertible loan agreement with its distributor
in Israel (the "Lender"), in the amount of $100 thousand subject to the following conditions:
·
the convertible loan did not bear annual interest;
·
in the event of a share exchange or similar transaction, the Lender
would have, at its sole discretion, the option to convert the loan into either (i) shares of the Company's common stock at
a price of $1.23 per share ($10 prior to the Share Exchange), or (ii) the Company's product at a price of 400 euro per unit
(which represented the market price for the Lender);
·
in the event that the Company did not close a share exchange or similar
transaction by June 1, 2011, the Lender had the right to extend the loan and its terms for up to an additional 6 months (as noted
in Note 1, the Exchange Agreement was closed on March 31, 2011); and
F-
22
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
·
in
no event was cash required to be repaid by the Company.
On June 1, 2011 the Lender surrendered
the $100 thousand convertible loan in exchange for 81,161 shares of common stock of the Company.
d.
In April 2008 InspireMD Ltd. entered into a convertible loan agreement with certain lenders. Under
this agreement, the lenders were issued convertible notes in the aggregate principal amount of $720 thousand, bearing annual interest
of 10%, in exchange for $720 thousand. While the notes did not have a maturity date, they were repayable on demand upon an event
of default. The notes were convertible, at any time, into ordinary shares of InspireMD Ltd. at the option of the holders.
The notes were automatically convertible
into ordinary shares of InspireMD Ltd. if InspireMD Ltd. completed a financing that resulted in at least $1 million ("qualified
financing"), at the lower conversion price of: (i) $1.48; or (ii) a discount of 30% on the price per share in such qualified
financing.
The notes were
also automatically convertible into ordinary shares of InspireMD Ltd. upon an initial public offering ("IPO") or upon
a consolidation, merger or sale of all assets or shares of InspireMD Ltd. ("exit transaction"), at the lower conversion
price of: (i) $1.48; or (ii) a discount of 20% on the price per share in such exit transaction.
In accordance
with ASC 470-20, "Debt with Conversion and Other Options", the Company determined that a BCF existed at the issuance
date of these notes, totaling $308 thousand. Because these notes did not have a stated redemption date (except on an event of
default), and could be converted by the holder at any time, the BCF was recognized immediately on the issuance date under "Financial
expenses (income)-net" in the Consolidated Statements of Operations.
In March
2009 these convertible notes were fully repaid (principal and accrued interest) due to a breach of the covenants by InspireMD
Ltd. InspireMD Ltd. allocated the proceeds paid between the portion related to the redemption of the beneficial conversion feature
and that related to the convertible loan, based on the guidance in ASC 470-20. The Company measured the portion allocated to the
beneficial conversion feature based on the intrinsic value of the conversion feature at the extinguishment date, which amounted
to $308 thousand (which equals the original BCF since the price of InspireMD Ltd.'s shares on the issuance date and the
redemption date was the same). Accordingly, the difference between the amount allocated to the BCF plus the loan's carrying
amount, and the cash paid, was recognized as financial income in the Consolidated Statements of Operations.
NOTE 7 - LONG-TERM LOAN
In January 2009, InspireMD
Ltd. signed a loan agreement with Mizrahi Tefahot Bank. According to the agreement, InspireMD Ltd. was entitled to receive the
following:
1.
A loan (the "First Loan") amounting to $750 thousand, bearing annual interest (paid quarterly) equal to the London
Interbank Offer Rate plus 4%. The loan was payable in eight quarterly installments beginning in April 2010.
2.
An additional loan (the "Second Loan") amounting to $750 thousand, to be received no
later than August 3, 2009, subject to certain terms. InspireMD Ltd. did not meet the specific terms and therefore was not able
to receive the Second Loan.
3.
A credit line amounting to $500 thousand for the purpose of financing export shipments. The credit
line was not utilized by the Company.
F-
23
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In addition,
InspireMD Ltd. was required to pay an additional $250 thousand in the following events:
1.
A liquidity event of at least $100 million (as stipulated in the agreement); or
2.
An IPO in which the Company's valuation was at least $100 million.
InspireMD Ltd. granted to the
bank a floating lien on all of its assets, as well as a fixed lien on all of its intellectual property and rights of future payments
from the Company's clients. InspireMD Ltd. also committed to maintain in its bank account a minimum of $250 thousand in order
to support an estimated cash burn rate of three months of activity based on average monthly cash flow in the preceding three months.
This amount was recorded in the Consolidated Balance Sheets under "Restricted cash."
On February 2009 InspireMD Ltd.
received the First Loan and in accordance with the loan agreement, issued 234,814 ordinary shares to the bank. Subsequently, InspireMD
Ltd. estimated the fair value of the First Loan, the Second Loan, the credit line and the 234,814 ordinary shares issued to the
bank using the following assumptions:
1.
Discount rate of 25.13% per year calculated by using Altman-Z score model
2.
Probability of realizing the Second Loan - 40%
3.
Probability of realizing the credit line - 80%
The relative
fair value of each component based on the valuation report was as follows:
1.
The First Loan - $540 thousand
2.
The Second Loan option - $20 thousand
3.
The credit line - $59 thousand
4.
The 234,814 ordinary shares issued to the bank - $290 thousand
The First Loan was subsequently
measured at amortized cost on the basis of the effective interest method over the loan period.
The Second Loan option and the
credit line have been recorded in the Consolidated Financial Statements in "Financial expenses" during 2009.
The 234,814 ordinary shares were
recorded as equity according to their fair market value at the time.
Direct transaction costs of $41
thousand were recorded as deferred debt issuance costs in the Consolidated Balance Sheet and were amortized over the First Loan
period.
In November 2010, InspireMD Ltd.
was asked by Mizrahi Tefahot Bank to grant it a fixed lien in the amount of $300 thousand that would replace the $250 thousand
of restricted cash since the actual cash burn rate was higher than the cash amount maintained in the Company's bank account.
The transaction was effectuated in January 2011.
On July 20, 2011, Mizrahi Tefahot
Bank approved the release of a fixed lien in the amount of $300 thousand. Following the approval, $300 thousand of restricted cash
was classified to cash and cash equivalents.
In March 2012, following the complete
repayment of the loan, Mizrahi Tefahot Bank approved the release of the floating lien.
NOTE 8 - RELATED PARTIES TRANSACTIONS
a.
In January 2009, InspireMD Ltd. signed a sub-lease agreement with a company controlled by the Company's shareholders,
for a period of 12.5 months, for a monthly rent payment of $1 thousand. In 2010, the rent period was extended for an additional
year, and the rent payments increased by 10%. In 2011, the rent period was extended for an additional year, through February 2012.
The sub-lease agreement was not renewed.
F-
24
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
b.
On
                                                                       May 6, 2008, InspireMD Ltd. entered into a consultancy
                                                                       agreement (the "2008 Consultancy Agreement")
                                                                       for marketing services with a member of the immediate family
                                                                       of the CEO. Pursuant to the 2008 Consultancy Agreement,
                                                                       InspireMD Ltd. paid a fixed hourly fee of $45 (154 NIS)
                                                                       in Israel and a fixed daily fee of $400 when traveling
                                                                       abroad with respect to the consulting services. On September
                                                                       1, 2011, effective April 1, 2011, the 2008 Consultancy
                                                                       Agreement was terminated and InspireMD Ltd. entered into
                                                                       a new consultancy agreement (the "2011 Consultancy
                                                                       Agreement") pursuant to which the consultant was
                                                                       retained to serve as the Company's vice president
                                                                       of sales. Pursuant to the agreement, she was paid a monthly
                                                                       consultancy fee of $12,500 from April 1, 2011 through June
                                                                       30, 2011 and a monthly consultancy fee of $15,500 thereafter.
                                                                       On July 2, 2012, effective August 1, 2012, the 2011 Consultancy
                                                                       Agreement was termainated and InspireMD Ltd. entered into
                                                                       a new consultancy agreement (the "2012 Consultancy
                                                                       Agreement") pursuant to which the consultant would
                                                                       be retained for sale services. Pursuant to the agreement,
                                                                       she would be entitled to a fixed fee of $625 (2,500 NIS)
                                                                       for each full working day and a bonus fee up to $10,000
                                                                       (40,000 NIS) upon 100% achievement of set objectives. The
                                                                       2012 Consultancy Agreement has a termination date of September
                                                                       30, 2012, but can be terminated without cause by InspireMD
                                                                       Ltd. upon 7 days' notice, and may be terminated with
                                                                       cause by InspireMD Ltd. immediately, upon the occurrence
                                                                       of certain events, such as a breach of fiduciary duties
                                                                       owed to the Company.
c.
During 2007, InspireMD Ltd received a loan of $40 thousand from its controlling shareholders. Half of the loan was paid during
2009, and the second half was paid during 2011.
d.
On April 1, 2005, InspireMD Ltd. entered into employment agreements with the Company's president and the Company's
CEO (both are directors and shareholders). Such employment agreements were subsequently amended on October 1, 2008 (in the case
of the Company's CEO) and March 28, 2011 (in the case of both the president and the CEO). Pursuant to these employment agreements,
as amended on March 28, 2011, each officer was entitled to a monthly gross salary of $15,367. Each officer was also entitled to
certain social and fringe benefits as set forth in the employment agreements, which totaled 25% of their gross salary, as well
as a company car. Each officer was also entitled to a minimum bonus equivalent to three monthly gross salary payments based on
achievement of objectives and board of directors' approval. If such officer's employment was terminated with or without
cause, he was entitled to at least six months' prior notice, and would have been paid his salary and all social and fringe
benefits in full during such notice period.
On April 1, 2011, the employment
agreements with the Company's president and CEO were terminated and the Company entered into consulting agreements with the
Company's president and CEO for a monthly consultancy fee of $21,563 each.
At the request of the compensation
committee, the Company's CEO and president agreed, effective as of December 1, 2011, to be treated as employees for purposes
of paying their salary and benefits, rather than as consultants under their consulting agreements. In addition, the Company's
CEO and president agreed to formally terminate their consulting agreement upon the execution of an employment agreement with the
Company on substantially the same terms as their consultancy agreements. A new employment agreement, however, was never executed
with either party.
On June 1, 2012, the president
of the Company resigned. In connection with his resignation, effective June 1, 2012, he remains on the Company's board of
directors. In connection with the resignation, the Company and the president entered into a consulting agreement, pursuant to which,
among other things, the president agreed to provide the Company with consulting services for a period of six months, terminating
on November 30, 2012, in exchange for payments by the Company of $20 thousand per month.
F-
25
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
e.
During the second half of 2008, InspireMD Ltd. decreased the salaries for most of its employees due to the economic slowdown.
InspireMD Ltd. also decreased the salaries of the former president and the CEO. Their salaries were decreased 25%, and an additional
25% was accrued and recorded in "Accounts payable-trade." The accrued amounts were fully paid as of December 31, 2010.
In September 2009, the 25% decrease
in salaries described above was cancelled.
f.
InspireMD Ltd. entered into a license agreement to use a unique stent design developed by an American
company owned by a former director of InspireMD Ltd. ("MGuard Prime"). See Note 9b.
g.
Certain directors of the Company were granted options to purchase shares of the Company's common
stock. See Note 10.
h
.
Balances with related parties:
June 30
December 31
2012
2011
2010
($ in thousands)
Current liabilities:
Trade payable
$
-
$
2
$
3
Other accounts payable
$
45
$
22
$
121
Loans from shareholders
$
-
$
-
$
20
i
.
Transactions with related parties:
6 month period ended
Year ended December 31
June 30, 2012
2011
2010
2009
($ in thousands)
Expenses:
Share-based compensation
$
1,365
$
8,212
$
236
$
-
Salaries and related expenses
$
261
$
147
$
241
$
152
Consulting fees
$
105
$
445
$
226
$
194
Financial expenses
$
1
Rent income
$
(2
)
$
(16
)
$
(15
)
$
(13
)
NOTE 9 - COMMITMENTS AND CONTINGENT LIABILITIES
a.
Lease commitments:
1)
The Company is a party to two lease agreements for its facilities, which expire in March 2014 and December 2014. The Company
has the option, under both agreements, to extend the agreements for two additional two year periods, for a total of four years
each.
Rent expense included in the Consolidated
Statements of Operations totaled approximately $167 for the six month period ended June 30, 2012, and $119 thousand, $131 thousand
and $126 thousand for the years ended December 31, 2011, 2010 and 2009, respectively.
F-
26
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2012, the aggregate
future minimum lease obligations for office rent under non-cancelable operating lease agreements were as follows:
($ in thousands)
Year Ended June 30:
2013
$
345
2014
320
2015
122
$
787
2)
The Company leases its motor vehicles under non-cancelable operating lease agreements.
As of June 30, 2012, the aggregate
future minimum lease obligations for motor vehicles under non-cancelable operating lease agreements were as follows:
($ in thousands)
Year Ended June 30:
2013
$
58
2014
46
2015
22
$
126
b.
License Agreement:
In March 2010, the Company
entered into a new license agreement to use MGuard Prime, a unique stent design developed by an American company owned by a former
director of InspireMD Ltd. According to the agreement, the licensor is entitled to receive 7% royalties for sales outside the
U.S. and inside the U.S. as follows: 7% royalties for the first $10 million of net sales and 10% royalties for net sales exceeding
the first $10 million. Royalties accrued for these sales are included in "Accounts payable and accruals -Other." Royalties
expenses for the six month period ended June 30, 2012 and the year ended December 31, 2011 amounted to $136 thousand and $39 thousand,
respectively.
c.
Liens and pledges
1)
The Company's obligations under the 2012 Convertible Debentures (Note 6) are secured by a first priority perfected
security interest in all of the assets and properties of the Company and InspireMD Ltd., including the stock of InspireMD Ltd.
and InspireMD GmbH.
2)
As of June 30, 2012, the Company had fixed liens amounting to $37 thousand to Bank Mizrahi in connection with the Company's
credit cards.
d.
Litigation:
The Company is a party to various
claims arising in the ordinary course of its operations in the aggregate amount of $10 thousand. The Company has not recorded an
expense provision related to damages in connection with these matters because management, after considering the views of its legal
counsel as well as other factors, is of the opinion that a loss to the Company is neither probable nor in an amount or range of
loss that is estimable.
F-
27
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In February 2011, representatives
of a third party indicated that they intended to seek damages from the Company in connection with certain finders' fees that
they claim are owed to them. The claimants' demand was for approximately $1 million. The claimants' most recent settlement
demand, conveyed in April 2011, was for a total of $250 thousand in cash and 250,000 shares of the Company common stock. To date,
no lawsuit has been filed and the Company has not accrued a provision in connection with this matter because the Company's
management, after considering the views of its legal counsel as well as other factors, is of the opinion that a loss to the Company
is neither probable nor in an amount or range of loss that is estimable.
In November 2010, a former senior
employee submitted a claim against the Company in the total amount of $430 thousand and options to purchase 2,029,025 shares of
the Company's common stock at an exercise price of $0.001 per share in the Magistrate's Court in Tel Aviv, claiming
unpaid back wages and commissions. The fair value of those options was valued using the Black-Scholes valuation model at $2.5 million
as of the period he claimed to be entitled to the options. In June 2012, the parties reached a settlement agreement for a payment
of $88 thousand by the Company to the plaintiff and following the a mutual petition filed by the parties , on July 6, 2012 the
Labor Court dismissed the claim. As of June 30, 2012, a provision of $88 thousand was included in the Company's Consolidated
Financial Statements.
In November 2010, an alleged founder
and former legal advisor of the Company submitted a claim against the Company for options to purchase 496,056 shares of the Company's
common stock at an exercise price of $0.001 per share in the Magistrate's Court in Tel Aviv. The fair value of those options
was estimated using the Black-Scholes valuation model at $134 thousand as of the grant date. It was during 2005 and 2006 that the
Company first became aware of the events that gave rise to this litigation. Also, during this time, the Company had discussions
with the plaintiffs on an informal basis. The Company's management, after considering the views of its legal counsel as well
as other factors, recorded a share-based compensation expense of $134 thousand in 2006, in respect of services allegedly provided
in 2005 and 2006.
In November 2010, a former legal
advisor of the Company submitted in the Magistrate's Court in Tel Aviv a claim against the Company in the total amount of
$53 thousand due to an alleged breach of employment promise. It was during 2005 and 2006 that the Company first became aware of
the events that gave rise to this litigation. Also during this time, the Company had discussions with the plaintiff on an informal
basis. The Company's management, after considering the views of its legal counsel as well as other factors, recorded a provision
of $53 thousand in 2006.
With respect to the two claims against
the Company submitted by an alleged founder and former legal advisor of the Company in November 2010, described above, following
a mediation held in January 2012, the parties reached the following settlement agreement: (i) the plaintiff shall be the owner
of options to purchase 194,786 shares of common stock of the Company and withdraw their claim for the remaining 301,272 options;
and (ii) the Company would withdraw its counterclaim against the plaintiff. In January 2012, the District Court in Tel Aviv approved
the settlement and a corresponding judgment was given by the court. Following the settlement agreement, as of December 31, 2011,
the provision in the amount of $53 thousand was reversed.
In February 2011, a service provider
submitted a claim against the Company in the amount of $327 thousand in the Magistrate's Court in Tel Aviv, claiming a future
success fee and commission for assistance in finding the Company's distributor in Brazil. The Company's management,
after considering the views of its legal counsel as well as other factors, recorded a provision of $327 thousand in the financial
statements in the first quarter of 2011. The related expense has been recorded to "General and administrative" within
the Consolidated Statements of Operations. On October 5, 2011, the Company filed a counter claim against the plaintiff in the amount
of $29 thousand.
F-
28
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In August 2011, a former senior
employee submitted to the Regional Labor Court in Tel Aviv a claim against the Company for (i) compensation of $118
thousand and (ii) a declaratory ruling that he is entitled to exercise 486,966 options to purchase shares of the Company's
common stock at an exercise price of $0.001 per share. After consulting with its legal advisor, the Company is unable to assess
the probable outcome of this claim.
In November 2011, a previous service
provider of InspireMD Ltd. submitted to the Magistrate Court in Tel Aviv a claim against the Company, InspireMD Ltd. and the Company's
President and the Company's CEO for a declaratory ruling that it is entitled to convert options to purchase 13,650 of InspireMD
Ltd.'s ordinary shares at an exercise price of $3.67 per share into options to purchase 110,785 shares of the Company's
common stock at an exercise price of $0.45 per share, and to convert options to purchase 4,816 of InspireMD Ltd.'s ordinary
shares at an exercise price of $10 per share into options to purchase 39,087 shares of the Company's common stock at an exercise
price of $1.23 per share. On July 30, 2012, the parties held a mediation which resulted in a settlement agreement according to
which the Company paid $7 thousand plus value added taxes to the plaintiff and the plaintiff waived all of his claims to any options
and agreed to the irrevocable dismissal of the above mentioned claim. On August 5, 2012, the court approved the settlement and
dismissed the claim.
In December
2011, a statement of claim against the Company was submitted by an alleged finder of the Company, regarding 584,357 options to
purchase the Company's shares. The Company filed its defense in this case on March 11, 2012. The Company and the plaintiff
agreed to refer the case to mediation. A second hearing in this case was set for September 20, 2012. After consulting the views
of its legal counsel as well as other factors, the Company is unable to assess the probable outcome of this claim.
In July 2012, a purported assignee
of options in InspireMD Ltd. submitted a statement of claim against the Company, InspireMD Ltd., and the Company's CEO and
former President for a declaratory and enforcement order that it is entitled to options to purchase 334,546 shares of the Company's
common stock at an exercise price of $0.19 per share. The Company must file its defense to the abovementioned claim by September
30, 2012. After consulting the views of its legal counsel as well as other factors, the Company is unable to assess the probable
outcome of this claim.
NOTE 10 –
EQUITY (CAPITAL DEFICIENCY)
a.
Share capital
As of June 30, 2012, the Company
has authorized 130,000,000 shares of capital stock, par value $0.0001 per share, of which 125,000,000 are shares of common stock
and 5,000,000 are shares of "blank check" preferred stock.
On October 31, 2011, the stockholders
approved the authorization of the board of directors, in its discretion, to amend the Amended and Restated Certificate of Incorporation
of the Company to effect a reverse stock split of the Company's common stock at a ratio of one-for-two to one-for-four, such
ratio to be determined by the board of directors (the "Reverse Stock Split"), which approval will allow the board of
directors to effect the Reverse Stock Split any time prior to the Company's annual meeting of stockholders in 2012.
As of June 30, 2012, the Company
had yet to effect the Reverse Stock Split.
F-
29
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
b.
Share exchange and private placement agreements and share issuance
As noted in Note 1 above, in connection
with the Share Exchange, the Company issued 50,666,663 shares of its common stock in exchange for 6,242,754 ordinary shares of
InspireMD Ltd., which represented all of InspireMD Ltd.'s outstanding shares, resulting in InspireMD Ltd. became a wholly
owned subsidiary of the Company.
In connection with the Share Exchange,
the Company also assumed all of InspireMD Ltd.'s obligations under InspireMD Ltd.'s outstanding stock options. Immediately
prior to the Share Exchange, InspireMD Ltd. had outstanding stock options to purchase an aggregate of 937,256 ordinary shares,
which outstanding options became options to purchase an aggregate of 7,606,770 shares of common stock of the Company after giving
effect to the Share Exchange. In addition, three-year warrants to purchase up to 125,000 ordinary shares of InspireMD Ltd. at an
exercise price of $10 per share were assumed by the Company and converted into warrants to purchase 1,014,500 shares of the Company's
common stock at an exercise price of $1.23 per share.
In connection with the closing
of the Share Exchange, the Company sold 6,454,002 shares of its common stock at a purchase price of $1.50 per share and five-year
warrants to purchase up to 3,226,999 shares of common stock at an exercise price of $1.80 per share in a private placement to accredited
investors (the "Private Placement").
As part of the Private Placement,
certain holders of the 2010 Convertible Debentures surrendered $667,596 of outstanding principal and interest due under the 2010
Convertible Debentures in exchange for 445,064 shares of common stock and warrants to purchase an aggregate of 225,532 shares of
common stock. The number of shares of common stock and warrants issued in connection with the Debt Conversions are included in
the aggregate figures for the Private Placement. As a result, the Company received aggregate cash proceeds of $9,013,404 in the
Private Placement.
In connection
with the Share Exchange, the Company also entered into a stock escrow agreement with certain stockholders, pursuant to which these
stockholders deposited 1,015,622 shares of common stock held by them and warrants to purchase 832,500 shares of common stock into
escrow. These shares and warrants were to be released to the Company for cancellation or surrender to an entity designated by the
Company should the Company have $10 million in consolidated revenue, as certified by the Company's independent auditors,
during the first 12 months following the closing of the Private Placement, yet fail, after a good faith effort, to have the Company's
common stock approved for listing on a national securities exchange. If the Company failed to record at least $10 million in consolidated
revenue during the first 12 months following the closing of the Private Placement or have its common stock listed on a national
securities exchange within 12 months following the closing on the Private Placement, these escrowed shares were to be released
back to the stockholders.
As it appeared unlikely that
the Company would satisfy the revenue threshold set forth above, on November 16, 2011, the Company's board
of directors approved the release of the 1,015,622 shares of common stock and warrants to purchase 832,500 shares of
common stock then held in escrow in order to immediately increase the Company's public float.
In connection with the Share Exchange,
the Company issued certain consultants five-year warrants to purchase up to an aggregate of 2,500,000 shares of common stock at
an exercise price of $1.50 per share in consideration for consulting services related to the Share Exchange, which warrants have
a fair value of $1.5 million. The expenses related to the issuance of the warrants are recorded as share-based compensation and
treated as issuance costs.
F-
30
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In connection with the Private
Placement, the Company paid placement agent fees of approximately $300 thousand and issued five-year warrants to purchase 373,740
shares of the Company's common stock at an exercise price of $1.80 per share to the placement agent. The fair value of the
warrants is $212 thousand.
During the first quarter of 2011
and prior to the Share Exchange, InspireMD Ltd. raised approximately $990 thousand and issued approximately 803,000 ordinary shares
through private placements.
On April 18, 2011, the Company
issued 666,667 shares of its common stock and five-year warrants to purchase 333,333 shares of the Company's common stock
at an exercise price of $1.80 per share, for an aggregate purchase price of $1,000 thousand, in a private placement.
On April 18, 2011, the Company
issued 283,334 shares of its common stock and five-year term warrants to purchase 141,667 shares of the Company's common
stock at an exercise price of $1.80 per share, for an aggregate purchase price of $425 thousand, in a private placement.
In connection with the above-referenced
transactions from April 18, 2011, the Company paid placement agent fees of approximately $471 thousand, which were recorded as
issuance costs, and five-year term warrants to purchase 57,000 shares of the Company common stock at an exercise price of $1.80
per share to the placement agent. The fair value of those warrants, amounting to $67 thousand, is estimated using the Black-Scholes
valuation model.
On April 21, 2011, the Company
issued 33,333 shares of its common stock, and five-year term warrants to purchase 16,667 shares of the Company's common stock
at an exercise price of $1.80 per share, for an aggregate purchase price of $50 thousand, in a private placement.
c.
Share-Based Compensation
1.
On March 28, 2011, the board of directors and stockholders of the Company adopted and approved the InspireMD, Inc. 2011 UMBRELLA
Option Plan (the "Umbrella Plan"). Under the Umbrella Plan, the Company reserved 9,468,100 shares of the Company's
common stock as awards to the employees, consultants, and service providers to the Company and its subsidiaries and affiliates
worldwide. At a special meeting of stockholders of the Company held on October 31, 2011, the stockholders approved an amendment
to the Umbrella Plan to add an additional 5,531,900 shares of common stock for a total of 15,000,000 shares.
The Umbrella Plan currently consists
of three components, the primary plan document that governs all awards granted under the Umbrella Plan, and two appendices: (i)
Appendix A, designated for the purpose of grants of stock options and restricted stock 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 US 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.
The Umbrella Plan is
administered by the compensation committee of the board of directors. Unless terminated earlier by the board of directors,
the Umbrella Plan will expire on March 27, 2021.
U.S. federal income tax consequences
relating to the transactions described under the Umbrella Plan are set forth in Section 409A of the Internal Revenue Code of 1986,
as amended (the "Code") and treasury regulations in 2004 to regulate all types of deferred compensation. If the requirements
of Section 409A of the Code are not satisfied, deferred compensation and earnings thereon will be subject to tax as it vests, plus
an interest charge at the underpayment rate plus 1% and a 20% penalty tax. Certain stock options and certain types of restricted
stock are subject to Section 409A of the Code.
F-
31
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to the current Section
102 of the Ordinance, which came into effect on January 1, 2003, options may be granted through a trustee (i.e., Approved 102 Options)
or not through a trustee (i.e., Unapproved 102 Options).
2.
On July 11, 2011, the board of directors of the Company
appointed Mr. Sol J. Barer as a new director ("Director A"), with a term expiring at the Company's 2012 annual
meeting of stockholders. In connection with his appointment, Director A was granted an option to purchase 1,000,000 shares of
the Company's common stock at an exercise price of $1.50 per share (the "$1.50 Option"). The $1.50 Option was
exercisable immediately until September 30, 2011. In calculating the fair value of the $1.50 Option, the Company used the following
assumptions: dividend yield of 0% and expected term of 0.11 years; expected volatility of 53%; and risk-free interest rate of
0.17%.
In addition, in connection with
his appointment, Director A was granted an option to purchase 500,000 shares of common stock at an exercise price of $2.50 per
share, the closing price of the common stock on the date of grant (the "$2.50 Option"), subject to the terms and conditions
of the 2011 US Equity Incentive Plan under the Umbrella Plan. The $2.50 Option vests and becomes exercisable in three equal annual
installments beginning on the one-year anniversary of the date of grant, provided that in the event that Director A is either (i)
not reelected as a director at the Company's 2012 annual meeting of stockholders, or (ii) not nominated for reelection as
a director at the Company's 2012 annual meeting of stockholders, the option vests and becomes exercisable on the date Director
A fails to be reelected or nominated. The $2.50 Option has a term of 10 years from the date of grant. In calculating the fair value
of the $2.50 Option, the Company used the following assumptions: dividend yield of 0% and expected term of 5.5-6 years; expected
volatility of 62%-63%; and risk-free interest rate of 1.67%-1.85%.
The fair value of the options granted
to Director A, using the Black-Scholes option pricing model, was approximately $1.7 million.
On September 28, 2011, Director
A exercised the $1.50 Option to purchase 1,000,000 shares of common stock, resulting in gross proceeds to the Company of $1,500
thousand.
On November 16, 2011, the Company's
board of directors approved the appointment of Director A as the chairman of the board of directors. In connection with his appointment
as chairman of the board of directors, the Company issued Director A 2,900,000 shares of common stock and an option to purchase
2,900,000 shares of common stock at an exercise price of $1.95 per share, the closing price of the common stock on the date of
grant. The fair value of the granted shares is approximately $5.7 million and was recorded as an expense in the Consolidated Financial
Statements ended December 31, 2011. In calculating the fair value of these options, the Company used the following assumptions:
dividend yield of 0% and expected term of 5.5 years; expected volatility of 61.6%; and risk-free interest rate of 1.07%. The options
have terms of 10 years from the date of grant, and the vesting terms are as follows: tranche A vests and become exercisable in
twenty four equal monthly installments, tranches B and C vest and become exercisable upon meeting certain performance conditions.
The fair value of the options, using the Black-Scholes option-pricing model was approximately $3.1 million.
F-
32
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On June 18, 2012, the Company's
board of directors approved the extension of the date by which the conditions to the vesting of tranches B and C must occur. As
of this date the performance condition of tranche B was deemed probable and the performance condition of tranche C was deemed not
probable. The Company continues to record expense related to tranche B, in accordance with the fair value that was caculated at
the grant date. Tranche C was treated as a new grant, and the Company calculated the fair value of the new grant on the date of
the extension using the following assumptions: dividend yield of 0% and expected term of 5 years; expected volatility of 66%; and
risk-free interest rate of 0.69%. The fair value using the Black-Scholes option-pricing model was approximately $192 thousand.
3.
On August 5, 2011 and effective August 8, 2011, the Board appointed another two new directors ( "Director B" and
"Director C"). Director B was appointed for a term expiring at the Company's 2012 annual meeting of stockholders
and Director C was appointed for a term expiring at the Company's 2013 annual meeting of stockholder. In connection with
their appointment, the directors were each granted an option to purchase shares of common stock at an exercise price of $1.95 per
share, the closing price of the common stock on the date of grant (the "$1.95 Options"). The grant to Director B was
for 100,000 shares and is subject to the terms and conditions of the 2011 US Equity Incentive Plan.
The grant to Director C was for
25,000 shares and is subject to the 2006 Employee Stock Option Plan, a sub-plan of the Company's 2011 Umbrella Option Plan.
The $1.95 Options vests and become exercisable in two equal annual installments beginning on the one-year anniversary of the date
of grant. In the case of Director B's option, in the event that Director B is either (i) not reelected as a director at the
Company's 2012 annual meeting of stockholders, or (ii) not nominated for reelection as a director at the Company's
2012 annual meeting of stockholders, the option vests and becomes exercisable on the date of Director B's failure to be reelected
or nominated. In the case of Director C's option, in the event that Director C is required to resign from the board due to
medical reasons, the option vests and becomes exercisable on the date of Director C's resignation for medical reasons. The
$1.95 Options have terms of 10 years from the date of grant.
In calculating the fair value of
the $1.95 Options, the Company used the following assumptions: dividend yield of 0% and expected term of 3-4 years; expected volatility
of 67%-70%; and risk-free interest rate of 0.45%-0.78%.
The fair value of the options granted
to the above-mentioned new directors, using the Black-Scholes option-pricing model, is approximately $118 thousand.
4.
On August 5, 2011, options to purchase 324,644 shares of common stock were granted to former directors at a cash exercise price
of $1.23 per share replacing options to purchase 324,644 shares of common stock held by former directors that expired during the
second quarter of 2011. The options had terms of five years. In calculating the fair value of the options, the Company used the
following assumptions: dividend yield of 0% and expected term of 3.5 years; expected volatility of 69%; and risk-free interest
rate of 0.62%.
The fair value of the options granted
to the former directors, using the Black-Scholes option-pricing model, is approximately $424,000.
5.
During 2011, the Company entered into investor relations
                                                                consulting agreements with investor relations companies to provide
                                                                investor relations services. Pursuant to the consulting agreements,
                                                                in addition to monthly fees in a range of $3,000 to $16,500, the
                                                                Company issued to the investor relations companies:
F-
33
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
·
a one-year warrant to purchase 81,161 shares of common stock of the
Company at an exercise price of $1.23 per share, valued at $21 thousand;
·
50,000 restricted shares of the Company's common stock, valued
at $62 thousand, and a five-year warrant to purchase 50,000 shares of common stock of the Company at an exercise price of $1.50
per share, valued at $30 thousand; and
·
25,000 shares of the Company's common stock, valued at $68.75
thousand.
The Company recorded share-based
compensation expenses of $181.75 thousand related to these issuances.
6.
On January 30, 2012, the Company appointed a new director ("Director D") to its board of directors. In connection
with his appointment, the Company issued Director D an option to purchase 100,000 shares of its common stock, which will vest one-third
annually in 2013, 2014 and 2015 on the anniversary of the date of grant, provided that if he is (i) not reelected as a director
at our 2014 annual meeting of stockholders, or (ii) not nominated for reelection as a director at our 2014 annual meeting of stockholders,
the option vests and becomes exercisable on the date of such failure to be reelected or nominated.
In calculating the fair value
of these options, the Company used the following assumptions: dividend yield of 0% and expected term of 5.5-6.5 years;
expected volatility of 58-60%; and risk-free interest rate of 1.01-1.26%. The options have terms of 10 years from the date of
grant, and the fair value of the options, using the Black-Scholes option-pricing model, was approximately $106,000.
7.
On June 18, 2012 the Company's board of directors issued Directors A, B, C and D options to purchase 50,000 shares of
common stock at an exercise price of $0.79 per share, the closing price of the common stock on the date of grant. In calculating
the fair value of these options, the Company used the following assumptions: dividend yield of 0% and expected term of 5.5-6.5
years; expected volatility of 65%-66%; and risk-free interest rate of 0.78%-0.97%. The options have terms of 10 years from the
date of grant, and become exercisable in three equal annual installments. The fair value of the options, using the Black-Scholes
option-pricing model, was approximately $23 thousand each.
8.
As of June
                                                                                  30, 2012, the Company had reserved 5,331,867
                                                                                  ordinary shares for issuance under the plans
                                                                                  as described above. The following table summarizes
                                                                                  information about warrants and share options
                                                                                  to employees:
F-
34
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 month period
    ended
Year
    Ended December 31,
June
    30, 2012
2011
2010
2009
Number
of
warrants
and
options
Weighted
average
exercise price
Number
of
warrants
and
options
Weighted
average
exercise
price
Number
of
warrants
and
options
Weighted
average
exercise
price
Number
    of
warrants
and options
Weighted
average
exercise
price
Outstanding -
     beginning of period
8,071,024
$
1.4
3,502,097
$
0.69
2,057,430
$
0.65
2,447,166
$
0.53
Granted*
1,335,000
0.89
6,292,416
1.92
1,785,543
0.62
227,251
0.79
Forfeited
(121,684
)
1.59
(723,489
)
1.68
(340,876
)
0.65
(158,264
)
0.85
Exercised
-
-
(1,000,000
)
1.5
-
-
(458,723
)
-
Outstanding
    -end of period
9,284,331
1.32
8,071,024
$
1.4
3,502,097
$
0.69
2,057,430
$
0.65
Exercisable
    at the end of the period
3,616,433
$
0.88
2,868,463
$
0.71
2,204,536
$
0.74
1,034,129
$
0.3
* Including 40,000 and 1,450,000
options with performance conditions in the period ended June 30, 2012 and the year ended December 31, 2011, respectively. See Note
2m.
The following table summarizes information
about warrants and share options to non-employees:
6
    month period ended
Year
    Ended December 31,
June
    30, 2012
2011
2010
2009
Number
of
warrants
and
options
Weighted
average
exercise price
Number
of
warrants
and
options
Weighted
average
exercise price
Number
of
warrants
and
options
Weighted
average
exercise
price
Number
    of
warrants
and options
Weighted
average
exercise
price
Outstanding
    - beginning of period
8,402,024
$
0.98
4,697,606
$
0.39
3,739,908
$
0.2
3,382,142
$
0.1
Granted*
531,446
1.24
3,963,322
1.48
1,079,440
1.21
357,766
1.07
Forfeited
(437,706
)
0.59
(258,904
)
0.62
(121,742
)
-
-
-
Exercised
-
-
-
-
-
-
-
-
Outstanding
    - end of period
8,495,764
$
0.95
8,402,024
$
0.98
4,697,606
$
0.39
3,739,908
$
0.2
Exercisable
    at the end of the period
8,226,841
$
0.94
8,199,858
$
0.96
4,635,583
$
0.4
3,439,944
$
0.12
* Including 77,915 and 97,394
options with performance conditions in the period ended June 30, 2012 and the year ended December 31, 2011, respectively. See Note
2m.
F-
35
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table provides additional
information about all warrants and options outstanding and exercisable:
Outstanding as of June 30, 2012
Exercise
price
Warrants and
options
outstanding
Weighted
average
remaining
contractual
life (years)
Warrants
and options
exercisable
0-0.001
3,906,137
4.72
3,703,236
0.183
205,012
3.41
205,012
0.188
334,545
3.73
334,545
0.73
505,000
9.92
0.79
390,000
9.97
0.8
300,000
9.9
0.99
584,357
5.76
584,357
1.23
3,450,326
4.59
2,950,722
1.5
3,139,232
3.79
2,719,357
1.725
14,608
6.5
14,608
1.75
81,161
3.92
27,054
1.8
752,717
4.2
752,717
1.93
215,000
3.94
66,666
1.95
3,347,000
9.38
483,333
2.00
40,000
4.18
2.1
10,000
9.5
2.5
500,000
9.04
2.6
5,000
3.98
1,667
17,780,095
5.85
11,843,274
The weighted average of the remaining
contractual life of total vested and exercisable warrants and options as of June 30, 2012 is 4.46 years.
The aggregate intrinsic value
of the total exercisable warrants and options as of June 30, 2012 is $4,440 thousand.
The total intrinsic value of options
exercised was $800 thousand for the year ended December 31, 2011. No options were exercised during the six month period ended June
30, 2012, and the years ended December 31, 2010 and December 31, 2009.
The weighted average fair value of
warrants and options granted was approximately $0.59 for the six month period ended June 30, 2012, and $0.89, $0.82 and $0.96 for
the years ended December 31, 2011, 2010 and 2009, respectively. The weighted average fair value of warrants and options granted
was estimated using the Black-Scholes option-pricing model.
9.
The following table sets forth the assumptions that were used in determining the fair value of options granted to employees
for the six month period ended June 30, 2012, as well as the years ended December 31, 2011, 2010 and 2009:
F-
36
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 months ended
Year ended December 31
June 30, 2012
2011
2010
2009
Expected life
5.5-6.5 years
0.17-6.5 years
5.25-6 years
5.54-6 years
Risk-free interest rates
0.7%-1.3
%
0.03%-2.79
%
1.7%-2.69
%
1.7%-2.49
%
Volatility
58%-66
%
55%-79
%
79%-80
%
75%-79
%
Dividend yield
0
%
0
%
0
%
0
%
The following table sets forth the
assumptions that were used in determining the fair value of warrants and options granted to non-employees for the six month period
ended June 30, 2012, as well as the years ended December 31, 2011, 2010 and 2009:
6 month period ended
Year ended December 31
June 30, 2012
2011
2010
2009
Expected life
2-10 years
1-10 years
9.7-10 years
9-10 years
Risk-free interest rates
0.3%-1.47
%
1.02%-3.39
%
2.65%-3.01
%
3.4%-3.59
%
Volatility
47%-65
%
53%-62
%
87
%
86%-91
%
Dividend yield
0
%
0
%
0
%
0
%
The Company does not have sufficient
historical exercise data to provide a reasonable basis upon which to estimate expected term. Accordingly, as to plain vanilla options
granted, the expected term was determined using the simplified method, which takes into consideration the option's contractual
life and the vesting periods (for non-employees, the expected term is equal to the option's contractual life).
The Company estimates its forfeiture
rate based on its employment termination history, and will continue to evaluate the adequacy of the forfeiture rate based on analysis
of employee turnover behavior and other factors (for non-employees the forfeiture rate is nil). The annual risk-free rates are
based on the yield rates of zero coupon non-index linked U.S. Federal Reserve treasury bonds as both the exercise price and the
share price are in dollar terms.  The Company's expected volatility is derived from a blended volatility, based on its
historical data and that of a peer group of public companies.
10.
As of June 30, 2012, the total unrecognized compensation cost on employee and non-employee stock options, related to unvested
stock-based compensation, amounted to approximately $2,745 thousand. This cost is expected to be recognized over a weighted-average
period of approximately 1.96 years. This expected cost does not include the impact of any future stock-based compensation awards.
The following table summarizes the
allocation of total share-based compensation expense in the Consolidated Statements of Operations:
F-
37
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 months ended
Year ended December 31
June 30, 2012
2011
2010
2009
($ in thousands)
Revenue
$
68
$
-
$
-
$
-
Cost of revenues
35
350
160
49
Research and development
206
267
536
356
Sales and marketing
181
431
55
92
General and administrative
1,454
8,542
869
65
$
1,944
$
9,590
$
1,620
$
562
The Company recorded $62 thousand
of share-based compensation as part of Property, Plant and Equipment in the year ended December 31, 2011
d.
Acquisition and cancellation of shares
Following a settlement agreement
signed on June 5, 2011, the Company issued 18,785 shares of common stock. The Company issued a stock certificate in the name of
the plaintiff for such shares for the Company to hold in trust pending consummation of the settlement terms under the settlement
agreement. On June 10, 2012, both parties agreed to amend the settlement agreement to provide that the Company would pay $24 thousand
rather than issue the shares. Whereas the shares were never released to the plaintiff, and both parties agreed to cancel the share
certificate evidencing the shares, the Company cancelled the shares and recorded $21 thousand as a deduction from equity. The difference
was recorded as "General and administrative" based on the cash amount paid net of the fair value of the cancelled shares
as of the cancellation date.
e.
On April 5, 2012, the Company issued the 2012 Convertible Debenture and 2012 Warrants to purchase an aggregate of 3,343,465
shares of its common stock at an exercise price of $1.80 per share in a private placement transaction. See Note 6.
NOTE 11 - TAXES
ON
INCOME
a.
Tax laws applicable to the Company and its subsidiaries
Taxation in the United States
InspireMD, Inc. is taxed under U.S.
tax laws.
Taxation in Israel
InspireMD Ltd. is taxed under the
Israeli Income Tax Ordinance.
On December 6, 2011, the "Tax
Burden Distribution Law" Legislation Amendment (2011) was published in the Official Gazette. Under this law, the previously
approved gradual decrease in the corporate tax rate was cancelled. The Corporate tax rate will increase to 25% beginning 2012.
Taxation in Germany
InspireMD GmbH
is taxed according to the tax laws in Germany. Accordingly, the applicable tax rates are corporate tax rate of 15.825% and trade
tax rate of 12.075%.
F-
38
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
b.
Tax benefits under the Law for the Encouragement
                                                                       of Capital Investments, 1959 (the "Law"):
1.
InspireMD Ltd. has been granted a "Beneficiary Enterprises"
                                                                status under the Investment Law including Amendment No. 60 thereof,
                                                                which became effective in April 2005.
The tax benefits derived from
any such Beneficiary Enterprise relate only to taxable profits attributable to the specific program of investment to which the
status was granted.
The main benefit, to
which InspireMD Ltd. is entitled, conditional upon the fulfilling of certain conditions stipulated by the above law, is a
two-year exemption and five to eight years of reduced tax rate of 10% to 25% from tax on income derived from their production
facilities in Israel. The tax benefit period is twelve years from the years of implementation.
The tax-exempt income attributable
to the "Beneficiary Enterprises" can be distributed to shareholders without imposing
tax liability on the Company only upon the complete liquidation of the Company. In the event of a distribution of such tax-exempt
income as a cash dividend in a manner other than in the complete liquidation of the Company, the Company will be required to pay
tax at the rate of 10% to 25% on the amount distributed. In addition, these dividends will be subject to 15% withholding tax.
Should InspireMD Ltd. derive
income from sources other than the "Beneficiary Enterprises" during the period of benefits, such income shall be taxable
at the regular corporate tax rate.
2.
Conditions for entitlement to the benefits
The entitlement to the above
benefits is conditional upon InspireMD Ltd. fulfilling the conditions stipulated by the law, regulations published thereunder
and the instruments of approval for the specific investments in approved assets. In the event of failure to comply with these
conditions, the benefits may be cancelled InspireMD Ltd. may be required to refund the amount of the benefits, in whole or in
part, with the addition of interest.
3.
Amendment
                                                                                         of the Law for the Encouragement of Capital
                                                                                         Investments, 1959
The Israeli Law for Encouragement
of Capital Investments, 1959 was amended as part of the Economic Policy Law for the years 2011-2012, which was passed in the Knesset
(the Israeli parliament) on December 29, 2010. The amendment became effective as of January 1, 2011.
The amendment set alternative benefit
tracks to the ones then in place, as follows: (i) an investment grants track designed for enterprises located in national development
zone A and (ii) two new tax benefits tracks (for preferred enterprises and for special preferred enterprises), which provide for
application of a unified tax rate to all preferred income of the company, as defined in the amendment.
The tax rates at company level, under
the law, were as follows:
Years
Development
Zone A
Other Areas in
Israel
"Preferred enterprise"
2011-2012
10
%
15
%
2013-2014
7
%
12.5
%
2015 and thereafter
6
%
12
%
"Special Preferred Enterprise" commencing 2011
5
%
8
%
The benefits granted to the preferred
enterprises were to be unlimited in time, unlike the benefits granted to special preferred enterprises, which were to be limited
for a period of 10 years. The benefits were to be granted to companies that qualified under criteria set in the amendment; for
the most part, those criteria were similar to the criteria that were set in the law prior to its amendment.
Under the transitional provisions
of the amendment, an Israeli company was allowed to continue to enjoy the tax benefits available under the law prior to its amendment
until the end of the period of benefits, as defined in the law. The company was allowed to set the "year of election"
no later than tax year 2012, provided that the minimum qualifying investment commenced not later than the end of 2010. On each
year during the period of benefits, the company would have been able to opt for application of the amendment, thereby making available
to itself the tax rates above. Company's opting for application of the amendment was irrecoverable.
c.
Carry forward
tax
losses
As of June 30, 2012, InspireMD
Ltd. had a net carry forward tax loss of approximately $18 million. Under Israeli tax laws, the carry forward tax losses
can be utilized indefinitely. InspireMD, Inc. had a net carry forward tax loss of approximately $10 million. Under U.S. tax
laws, InspireMD, Inc.'s tax losses can be utilized two years back and twenty years forward. InspireMD, Inc.'s carry forward
tax losses will begin to expire on June 30, 2031.
d.
Tax
assessments
The Company and its subsidiaries
have not been assessed for tax purposes since incorporation.
e.
Loss before income taxes
The components of loss before income
taxes are as follows:
F-
39
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 month period ended
Year ended December 31
June 30, 2012
2011
2010
2009
($ in thousands)
Profit (loss)  before taxes on income:
InspireMD, Inc.
$
(2,226
)
$
(7,029
)
$
-
$
-
InspireMD Ltd.
(4,814
)
(7,636
)
(3,115
)
(2,624
)
InspireMD GmbH
(9
)
2
(258
)
(53
)
$
(7,049
)
$
(14,663
)
$
(3,373
)
$
(2,677
)
Current taxes on income
Tax expenses in the amount of $32 thousand for the
six month period ended June 30, 2012, and $2, $47 thousand and $47 thousand thousand for the years ended December 31, 2011, 2010
and 2009, respectively, are related to non-U.S. operations.
Following is a reconciliation of
the theoretical tax expense, assuming all income were taxed at the regular tax rates applicable to the Company in the U.S. (see
c above), and the actual tax expense:
6 month period ended
Year ended December 31
June 30, 2012
2011
2010
2009
($ in thousands)
Loss before taxes on income, as reported
    in the statements of operations
$
7,049
$
14,663
$
3,373
$
2,677
Theoretical tax benefit
(2,397
)
(4,985
)
(1,147
)
(910
)
Increase in tax benefit resulting from permanent 
    differences
863
601
431
92
Increase (decrease) in taxes on income resulting
    from the computation of deferred taxes at a rate which is different from the theoretical rate
(116
)
62
24
Increase (decrease) in uncertain tax positions
    - net
(60
)
30
30
Decrease in theoretical tax benefit resulting
    from subsidiaries different tax rate
434
1,385
304
214
Change in corporate tax rates, see c above
(545
)
-
481
Change in valuation allowance
1,132
3,722
367
116
$
32
$
2
$
47
$
47
As of June 30, 2012, as well as December
31, 2011, 2010 and 2009, the Company determined that it was more likely than not that the benefit of the operating losses would
not be realized and consequently, management concluded that full valuation allowances should be established regarding the Company's
deferred tax assets.
F-
40
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The changes in the valuation allowance
for the six month period ended June 30, 2012 and years ended December 31, 2011 and 2010 were as follows:
6 month period
ended
Year ended December 31
June 30, 2012
2011
2010
2009
($ in thousands)
Balance at the beginning of the
    year
$
6,918
$
3,196
$
2,829
$
2,713
Changes during the year
1,132
3,722
367
116
Balance at the end of the year
$
8,050
$
6,918
$
3,196
$
2,829
f.
Accounting for Uncertain Tax position
Following is a reconciliation of
the total amounts of the Company's unrecognized tax benefits during the six month period ended June 30, 2012, as well as
the years ended December 31, 2011 and 2010:
6 month
period
    ended
Year ended December 31
June 30, 2012
2011
2010
2009
($ in thousands)
Balance at beginning of period
$
-
$
60
$
30
$
0
Increase in unrecognized tax benefits as a result of tax positions taken during the year
30
30
Decrease in unrecognized tax benefits as a result of tax positions taken
    during a prior year
(60
)
Balance at end of period
$
-
$
-
$
60
$
30
All of the above amounts of unrecognized
tax benefits would affect the effective tax rate if recognized.
A summary of open tax years by major
jurisdiction is presented below:
Jurisdiction
Years
U.S.
2008-2011
Israel
2006-2011
Germany
2008-2011
The Company and its subsidiaries
applied for a change of fiscal year for its tax filings to end in June 30, 2012 in the different territories.
F-
41
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
g.
Deferred income tax:
6 month period ended
Year ended December 31
June 30, 2012
2011
2010
($ in thousands)
Short-term:
Allowance for doubtful accounts
$
54
$
37
$
36
Provision for vacation and
    recreation pay
70
69
38
124
106
74
Long-term:
R&D expenses
746
522
531
Convertible debenture
(1,251
)
Non cash issuance costs
89
Share-based compensation
693
276
Carry forward tax losses
7,631
6,000
2,582
Accrued severance pay, net
18
14
9
7,926
6,812
3,122
Less-valuation allowance
(8,050
)
(6,918
)
(3,196
)
$
-
$
-
$
-
F-
42
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SUPPLEMENTARY
FINANCIAL
STATEMENT
INFORMATION
Balance
sheets:
a.
Accounts receivable:
December 31,
June 30, 2012
2011
2010
($ in thousands)
1) Trade:
Open accounts
$
2,039
$
2,426
$
998
Allowance for doubtful accounts
(215
)
(142
)
(146
)
$
1,824
$
2,284
$
852
2)  Other:
Due from government institutions
$
124
$
68
$
56
Advance payments to suppliers
118
32
Fund in respect of employee right upon
    retirement
8
Miscellaneous
22
18
11
$
264
$
118
$
75
The changes in "Allowance
for doubtful accounts" during the six month period ended June 30, 2012 and the years ended December 31, 2011 and 2010
are as follows:
6 month period
ended
Year ended December 31
June 30, 2012
2011
2010
2009
($ in thousands)
Balance at beginning of period
$
142
$
146
$
6
$
6
Additions during the period
78
140
Exchange rate differences
(5
)
(4
)
Balance at end of period
$
215
$
142
$
146
$
6
b.
Inventories:
December 31,
June 30, 2012
2011
2010
($ in thousands)
Finished goods
$
479
$
741
$
957
Work in process
1,115
1,044
573
Raw materials and supplies
150
276
174
$
1,744
$
2,061
$
1,704
As of June 30, 2012, the Company
recorded a provision for slow moving inventory in the amount of $443 thousand.
c.
Inventory on consignment
The changes in inventory on consignment
during the six months ended June 30, 2012, as well as the years ended December 31, 2011 and 2010, are as follows:
F-
43
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 month period
ended
Year ended December 31,
June 30, 2012
2011
2010
2009
($ in thousands)
Balance at beginning of period
$
110
$
371
$
1,093
$
1,423
Costs of revenues deferred during the period
20
110
326
421
Costs of revenues recognized during the period
(67
)
(371
)
(1,048
)
(751
)
Balance at end of period
$
63
$
110
$
371
$
1,093
As of June 30, 2012, December 31,
2011 and 2010, Inventory on consignment included an amount of $63 thousand, $110 thousand and $371 thousand, respectively, related
to products sales for which product returns could not be reliably estimated, with the remainder relating to products sales for
which returns were reliably estimated.
d.
Accounts payable and accruals-other:
December 31,
June 30, 2012
2011
2010
($ in thousands)
Employees and employee institutions
$
438
$
376
$
375
Accrued vacation and recreation pay
272
271
147
Accrued clinical trials expenses
607
124
35
Provision for sales commissions
194
213
36
Accrued expenses
1,197
930
561
Due to government institutions
22
3
100
Liability for employees rights upon retirement
7
Provision for returns
139
231
150
Taxes payable
56
69
98
$
2,925
$
2,217
$
1,509
e.
Deferred revenues
The changes in deferred revenues
during the six month period ending June 30, 2012, and the years ended December 31, 2011 and 2010 are as follows:
6 month period
ended
Year ended December 31
June 30, 2012
2011
2010
2009
($ in thousands)
Balance at beginning of period
$
-
$
398
$
1,975
$
2,482
Revenue deferred during the period
25
320
616
Revenue recognized during the period
(15
)
(398
)
(1,897
)
(1,123
)
Balance at end of period
$
10
$
-
$
398
$
1,975
F-
44
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Statements of Operation:
f.
Financial expenses (income), net:
6 month period
ended
Year ended December 31
June 30, 2012
2011
2010
2009
($ in thousands)
Bank commissions
$
30
$
63
$
83
$
18
Interest income
(9
)
(36
)
(1
)
(1
)
Exchange rate differences
(40
)
177
(33
)
30
Interest expense (including debt issuance costs)
1,232
730
105
221
Change in fair value of warrants and embedded derivatives
(1,322
)
Redemption of beneficial conversion feature of convertible loan
(308
)
$
(109
)
$
934
$
154
$
(40
)
F-
45
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - ENTITY
WIDE DISCLOSURES
The Company operates in one operating
segment.
Disaggregated financial data is
provided below as follows:
(1) Revenues by geographic area
and
(2) Revenues from principal customers.
Revenues are attributed to geographic
areas based on the location of the customers. The following is a summary of revenues by geographic areas:
6 month period ended
Year ended December 31
June 30, 2012
2011
2010
2009
($ in thousands)
Russia
$
452
$
360
$
12
$
203
Germany
285
298
507
191
India
120
1,083
-
-
Israel
60
730
119
-
Italy
179
313
390
668
Cyprus
10
60
7
337
Pakistan
-
5
193
477
Poland
140
268
1,446
-
Other
825
2,887
2,275
1,535
$
2,071
$
6,004
$
4,949
$
3,411
By principal
customers:
6 month period ended
Year ended December 31
June 30, 2012
2011
2010
2009
Customer A
22
%
6
%
-
%
6
%
Customer B
14
%
5
%
10
%
6
%
Customer C
6
%
18
%
-
%
-
%
Customer D
3
%
12
%
2
%
-
%
Customer E
9
%
5
%
8
%
20
%
Customer F
-
%
1
%
-
%
10
%
Customer G
-
%
-
%
4
%
14
%
Customer H
7
%
4
%
29
%
-
%
All tangible long lived assets are located in Israel.
F-
46
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 –
TRANSITION PERIOD COMPARATIVE DATA
Six month period ended June 30,
2012
2011
(unaudited)
($ in thousands)
Operating Data:
Revenues
$
2,071
$
2,726
Cost of revenues
1,377
1,539
Gross Profit
694
1,187
Operating expenses:
Research and development
2,607
1,093
Selling and marketing
1,246
1,045
General and administrative (including $1,454 and $99 of share-based compensation for the six month periods ended June 30, 2012 and 2011, respectively)
3,999
2,391
Total operating expenses
7,852
4,529
Loss from operations
(7,158
)
(3,342
)
Financial expenses (income), net
(109
)
787
Loss before income taxes
(7,049
)
(4,129
)
Tax expenses
32
20
Net loss
$
(7,081
)
$
(4,149
)
Net loss per share - basic and diluted
$
(0.10
)
$
(0.07
)
Weighted average number of ordinary shares used in computing net loss per share - basic and diluted
68,176,882
57,312,945
Cash Flow Data:
Net cash used by operating activities
$
(4,363
)
$
(1,786
)
Net cash used by investing activities
(200
)
(144
)
Net cash provided by financing activities
9,753
9,356
Effect of exchange rate changes on cash and cash equivalents
8
Net increase in cash and cash equivalents
$
5,190
$
7,434
NOTE 15 - SUBSEQUENT
EVENTS:
On
August 20, 2012, the Company announced that a multi-center randomized trial of its MGuard™ embolic protection stent demonstrated
a positive outcome in treating patients suffering heart attacks when compared to commercially-approved bare metal or drug-eluting
stents.
On August 1, 2012, the Company's
board of directors issued a consultant options with certain performance conditions to purchase 200,000 shares of common stock
at an exercise price of $1.18 per share, the closing price of the common stock on the date of grant.
On August 27, 2012, the Company's
board of directors issued a member of the immediate family of the CEO options to purchase 243,483 shares of common stock at an
exercise price of $1.45 per share, the closing price of the common stock on the date of grant.
F-
47
INSPIREMD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On August 27, 2012, the Company's
board of directors approved the extension of 121,740 options previously granted to a member of the immediate family of the CEO.
Following the extension, the options can be exercised until September 30, 2014.
Shares
Common
Stock
Prospectus
Cowen
and Company
JMP Securities
,
2012
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table provides information
regarding the various actual and anticipated expenses (other than underwriters' discounts) payable by us in connection with
the issuance and distribution of the common stock being registered hereby. All amounts shown are estimates except the Securities
and Exchange Commission registration fee, FINRA filing fee and NASDAQ initial listing fee.
SEC registration fee
$
5,271.60
FINRA filing fee
$
7,400.00
NASDAQ initial listing fee
$
50,000.00
Legal fees and expenses
$
*
Accounting fees and expenses
$
*
Printing and engraving expenses
$
*
Transfer agent and registrar fees and expenses
$
*
Miscellaneous Fees and Expenses
$
*
Total
$
* To be completed by amendment.
Item 14. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law
of the State of Delaware provides, in general, that a corporation incorporated under the laws of the State of Delaware, as we are,
may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than a derivative action by or in the right of the corporation) by reason of the fact that such person
is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding
if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.  In the case of a derivative action, a Delaware corporation may indemnify any such person against
expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation, except that no indemnification will be made in respect of any claim, issue or matter
as to which such person will have been adjudged to be liable to the corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or any other court in which such action was brought determines such person is fairly and reasonably
entitled to indemnity for such expenses.
Our certificate of incorporation and bylaws
provide that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions
of the General Corporation Law of the State of Delaware, as amended from time to time, subject to any permissible expansion or
limitation of such indemnification, as may be set forth in any stockholders' or directors' resolution or by contract.  Any
repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect
any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification.
We are also permitted to apply for insurance
on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the General
Corporation Law of the State of Delaware would permit indemnification.
Part II-
1
Item 15. Recent Sales of Unregistered Securities.
On March 31, 2011, pursuant to a share exchange
agreement, we issued 46,471,907 shares of common stock to certain shareholders of InspireMD Ltd. in exchange for 91.7% of the issued
and outstanding capital stock of InspireMD Ltd. Separately, we issued 4,194,756 shares of common stock to the remaining shareholders
of InspireMD Ltd. in exchange for the remaining 8.3% of the issued and outstanding capital stock of InspireMD Ltd.  In
addition, in connection with the share exchange agreement, we (i) assumed three year warrants to purchase up to 125,000 ordinary
shares of InspireMD Ltd. at an exercise price of $10 per share that were converted into newly issued warrants to purchase up to
1,014,500 shares of our common stock at an exercise price of $1.23 per share and (ii) options to purchase up to 937,256 ordinary
shares of InspireMD Ltd. with a weighted average exercise price of $4.35 that were converted into options to purchase up to 7,606,770
shares of our common stock with a weighted average exercise price of $0.54 per share. The securities issued in the above described
transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered
and sold pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by either Regulation
S under the Securities Act of 1933, as amended, or Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as
amended. Each of the shareholders of InspireMD Ltd. who received shares of our common stock in the above described share exchange
transactions were either accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended) or not a "U.S.
person" (as that term is defined in Rule 902 of Regulation S) at the time of the share exchange transactions.
On March 31, 2011, we entered into a securities
purchase agreement with 30 accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant
to which we issued 6,454,002 shares of common stock and five-year warrants to purchase up to 3,226,999 shares of common stock at
an exercise price of $1.80 per share for aggregate cash proceeds of $9,013,404 and the cancellation of $667,596 of indebtedness
held by investors. The securities sold in this offering were not registered under the Securities Act of 1933, as amended, or the
securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act
of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
On March 31, 2011, upon the consummation
of the above described private placement, we issued a five-year warrant to purchase up to 373,740 shares of common stock at an
exercise price of $1.80 per share, to Palladium Capital Advisors, LLC, our placement agent in the private placement. The warrant
was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered and sold
in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of
1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a
public offering. Palladium Capital Advisors, LLC was an accredited investor (as defined by Rule 501 under the Securities Act of
1933, as amended) at the time of the private placement.
On March 31, 2011, for work performed in
connection with the share exchange transactions and as bonus compensation, we issued Craig Shore, our chief financial officer,
secretary and treasurer, a five-year warrant to purchase up to 3,000 shares of common stock at an exercise price of $1.80 per share.
The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and was offered
and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities
Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving
a public offering. Craig Shore was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended)
at the time of the issuance of the warrant.
On March 31, 2011, upon the consummation
of the private placement, we issued a five-year warrant to purchase up to 6,667 shares of common stock at an exercise price of
$1.80 per share, to Hermitage Capital Management, a consultant. The warrant was not registered under the Securities Act of 1933,
as amended, or the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded
by Section 4(2) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt
transactions by an issuer not involving a public offering.
In consideration for financial consulting
services, we issued to The Benchmark Company, LLC, a consultant, a five-year warrant to purchase up to 50,000 shares of common
stock at an exercise price of $1.50 per share. The warrant was not registered under the Securities Act of 1933, as amended, or
the securities laws of any state, and was offered and sold in reliance on the exemption from registration afforded by Section 4(2)
and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws,
which exempt transactions by an issuer not involving a public offering.
Part II-
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On March 31, 2011, we issued five-year warrants
to purchase up to an aggregate of 2,500,000 shares of common stock at an exercise price of $1.50 per share, to Endicott Management
Partners, LLC, The Corbran LLC and David Stefansky, in consideration for consulting services.  Pursuant to an agreement
with us, of the total number of warrants issued, warrants to purchase 832,500 shares of common stock were placed in escrow, with
the release of such warrants subject to the fulfillment or waiver of certain conditions.  On November 16, 2011, our board
of directors approved the release of all of the warrants held in escrow.  The warrants were not registered under the
Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption
from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding
provisions of state securities laws, which exempt transactions by an issuer not involving a public offering. Each of Endicott Management
Partners, LLC, The Corbran LLC and David Stefansky was an accredited investor (as defined by Rule 501 under the Securities Act
of 1933, as amended) at the time of the issuance of the warrant.
On April 18, 2011, we consummated a private
placement with an investor pursuant to which we sold 666,667 shares of our common stock and a five-year warrant to purchase up
to 333,333 shares of common stock at an exercise price of $1.80 per share for aggregate cash proceeds of $1,000,000. The securities
sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and
were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by
Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended. This investor was an accredited investor
(as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the private placement.
On April 18, 2011, we consummated a private
placement with 2 accredited investors (as defined by Rule 501 under the Securities Act of 1933, as amended), pursuant to which
we sold 283,334 shares of our common stock and a five-year warrant to purchase 141,667 shares of our common stock at an exercise
price of $1.80 per share, for aggregate cash proceeds of $425,000. The securities sold in this offering were not registered under
the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in reliance on the exemption
from registration under the Securities Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the
Securities Act of 1933, as amended.
On April 18, 2011, upon the consummation
of the above described April 18, 2011 private placements, we issued a five-year warrant to purchase up to 57,000 shares of common
stock at an exercise price of $1.80 per share to Palladium Capital Advisors, LLC, our placement agent in the April 18, 2011 private
placements. The warrant was not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and
was offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under
the Securities Act of 1933, as amended, and corresponding provisions of state securities laws, which exempt transactions by an
issuer not involving a public offering. Palladium Capital Advisors, LLC was an accredited investor (as defined by Rule 501 under
the Securities Act of 1933, as amended) at the time of the private placement
On April 21, 2011, we consummated a private
placement with Mr. Reinder Hogeboom pursuant to which we sold 33,333 shares of our common stock and a five-year warrant to purchase
16,667 shares of our common stock at an exercise price of $1.80 per share, for aggregate cash proceeds of $50,000. The securities
sold in this offering were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and
were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by
Regulation S under the Securities Act of 1933, as amended. Reinder Hogeboom was not a "U.S. person" (as that term is
defined in Rule 902 of Regulation S) at the time of the private placement.
On January 4, 2011, we entered into a convertible
loan agreement with our distributer in Israel, in the amount of $100,000. On June 1, 2011, we issued 81,161 shares of common stock
to the lender upon conversion of the note.  These securities were not registered under the Securities Act of 1933, as
amended, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the
Securities Act of 1933, as amended, provided by Regulation S under the Securities Act of 1933, as amended. The lender was not a
"U.S. person" (as that term is defined in Rule 902 of Regulation S) at the time of the issuance.
Part II-
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On April 5, 2012, we issued senior secured
convertible debentures in the original aggregate principal amount of $11,702,128 and five-year warrants to purchase an aggregate
of 3,343,465 shares of our common stock at an exercise price of $1.80 per share to certain accredited investors in a private placement
transaction.  The securities sold in this offering were not registered under the Securities Act of 1933, as amended,
or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities
Act of 1933, as amended, provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
As consideration for serving as our placement
agents in connection with certain private placements, on April 5, 2012 we issued Palladium Capital Advisors, LLC a five-year warrant
to purchase up to 159,574 shares of common stock at an exercise price of $1.80 per share, Oppenheimer & Co. Inc. a five-year
warrant to purchase up to 113,070 shares of common stock at an exercise price of $1.80 per share and JMP Securities LLC a five-year
warrant to purchase up to 39,666 shares of common stock at an exercise price of $1.80 per share.  These warrants were
not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold in
reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933,
as amended, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving a public
offering. Each of Palladium Capital Advisors, LLC, Oppenheimer & Co. Inc. and JMP Securities LLC was an accredited investor
(as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the private placement.
On August 1, 2012, we issued options to
purchase 200,000 shares of our common stock to Redington, Inc., as consideration for
investor relations services. The securities
issued to Redington, Inc. were not registered under the Securities Act of 1933, as amended, or the securities laws of any state,
and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided
by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
On September 14, 2012, PI Financial Corp.
exercised warrants to purchase 145,500 shares of our common stock for aggregate consideration if $178,965. On September 17, 2012,
PI Financial Corp. exercised warrants to purchase 24,500 shares of our common stock for aggregate consideration if $30,135. On
September 20, 2012, PI Financial Corp. exercised warrants to purchase 60,000 shares of our common stock for aggregate consideration
if $73,800. These shares of common stock were not registered under the Securities Act of 1933, as amended, or the securities laws
of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended,
provided by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit No.
Description
1.1+
Form of Underwriting Agreement
2.1
Share Exchange Agreement, dated as of December 29, 2010, by and among InspireMD Ltd., Saguaro Resources, Inc., and the Shareholders of InspireMD Ltd. that are signatory thereto (incorporated by reference to Exhibit 10.1 to Saguaro Resources, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2011)
2.2
Amendment to Share Exchange Agreement, dated February 24, 2011 (incorporated by reference to Exhibit 2.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
2.3
Second Amendment to Share Exchange Agreement, dated March 25, 2011 (incorporated by reference to Exhibit 2.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
3.1
Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011)
3.2
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011)
4.1*
Form of Common Stock Certificate.
5.1*
Form of Opinion of Haynes and Boone, LLP.
10.1
Amended and Restated 2011 Umbrella Option Plan  (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on November 4, 2011)
Part II-
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10.2
Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.3
Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations, dated as of March 31, 2011 (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.4
Stock Purchase Agreement, by and between InspireMD, Inc. and Lynn Briggs, dated as of March 31, 2011 (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.5
Securities Purchase Agreement, dated as of March 31, 2011, by and among InspireMD, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.5 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)
10.6
Form of $1.80 Warrant (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.7
Form of $1.23 Warrant (incorporated by reference to Exhibit 10.7 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.8
$1,250,000 Convertible Debenture, dated July 20, 2010, by and between InspireMD Ltd. and Genesis Asset Opportunity Fund, L.P. (incorporated by reference to Exhibit 10.8 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.9
Unprotected Leasing Agreement, dated February 22, 2007, by and between Block 7093 Parcel 162 Company Ltd. Private Company 510583156 and InspireMD Ltd.  (incorporated by reference to Exhibit 10.9 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.10
Securities Purchase Agreement, dated as of July 22, 2010, by and among InspireMD Ltd. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.10 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)
10.11
Manufacturing Agreement, by and between InspireMD Ltd. and QualiMed Innovative Medizinprodukte GmbH, dated as of September 11, 2007 (incorporated by reference to Exhibit 10.11 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)
10.12
Development Agreement, by and between InspireMD Ltd. and QualiMed Innovative Medizinprodukte GmbH, dated as of January 15, 2007 (incorporated by reference to Exhibit 10.12 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)
10.13
License Agreement, by and between Svelte Medical Systems, Inc. and InspireMD Ltd., dated as of March 19, 2010  (incorporated by reference to Exhibit 10.5 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)
10.14
Agreement, by and between InspireMD Ltd. and Ofir Paz, dated as of April 1, 2005 (incorporated by reference to Exhibit 10.14 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
Part II-
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10.15
Amendment to the Employment Agreement, by and between InspireMD Ltd. and Ofir Paz, dated as of October 1, 2008 (incorporated by reference to Exhibit 10.15 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.16
Second Amendment to the Employment Agreement, by and between InspireMD Ltd. and Ofir Paz, dated as of March 28, 2011 (incorporated by reference to Exhibit 10.16 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.17
Personal Employment Agreement, by and between InspireMD Ltd. and Asher Holzer, Ph.D., dated as of April 1, 2005 (incorporated by reference to Exhibit 10.17 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.18
Amendment to the Employment Agreement, by and between InspireMD Ltd. and Asher Holzer, Ph.D., dated as of March 28, 2011 (incorporated by reference to Exhibit 10.18 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.19
Personal Employment Agreement, by and between InspireMD Ltd. and Eli Bar, dated as of June 26, 2005 (incorporated by reference to Exhibit 10.19 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.20
Employment Agreement, by and between InspireMD Ltd. and Bary Oren, dated as of August 25, 2009 (incorporated by reference to Exhibit 10.20 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.21
Employment Agreement, by and between InspireMD Ltd. and Craig Shore, dated as of November 28, 2010 (incorporated by reference to Exhibit 10.21 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.22
Form of Indemnity Agreement between InspireMD, Inc. and each of the directors and executive officers thereof (incorporated by reference to Exhibit 10.22 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)
10.23
Agreement with Bank Mizrahi Tefahot LTD. for a loan to InspireMD Ltd. in the original principal amount of $750,000, dated January 27, 2009 (incorporated by reference to Exhibit 10.23 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
10.24
Securities Purchase Agreement, dated as of April 18, 2011, by and among InspireMD, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 22, 2011)
10.25
Form of Warrant (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 22, 2011)
10.26
Agreement by and between InspireMD Ltd. and MeKo Laser Material Processing, dated as of April 15, 2010 (incorporated by reference to Exhibit 10.26 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)
10.27
Agreement by and between InspireMD Ltd. and Natec Medical Ltd, dated as of September 23, 2009 (incorporated by reference to Exhibit 10.27 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)
10.28
Exclusive Distribution Agreement by and between InspireMD Ltd. and Hand-Prod Sp. Z o.o, dated as of December 10, 2007 (incorporated by reference to Exhibit 10.28 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)
Part II-
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10.29
Factoring Agreement by and between InspireMD Ltd. and Bank Mizrahi Tefahot Ltd., dated as of February 22, 2011 (incorporated by reference to Exhibit 10.29 to Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 26, 2011)
10.30
$1.50 Nonqualified Stock Option Agreement, dated as of July 11, 2011, by and between InspireMD, Inc. and Sol J. Barer, Ph.D. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2011)
10.31
Consultancy Agreement, dated as of April 1, 2011, by and between InspireMD Ltd. and Ofir Paz (incorporated by reference to Exhibit 10.34 to Amendment No. 2 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on September 21, 2011)
10.32
Consultancy Agreement, dated as of April 29, 2011, by and between InspireMD Ltd. and Asher Holzer, Ph.D. (incorporated by reference to Exhibit 10.35 to Amendment No. 2 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on September 21, 2011)
10.33
Exclusive Distribution Agreement by and between InspireMD GmbH. and IZASA Distribuciones Tecnicas SA, dated as of May 20, 2009 (incorporated by reference to Exhibit 10.36 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)
10.34
Amendment to the Distribution Agreement by and between InspireMD GmbH. and IZASA Distribuciones Tecnicas SA, dated as of February 2011 (incorporated by reference to Exhibit 10.37 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)
10.35
Exclusive Distribution Agreement by and between InspireMD Ltd. and Tzamal-Jacobsohn Ltd., dated as of December 24, 2008 (incorporated by reference to Exhibit 10.38 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)
10.36
Exclusive Distribution Agreement by and between InspireMD Ltd. and Kirloskar Technologies (P) Ltd., dated as of May 13, 2010 (incorporated by reference to Exhibit 10.39 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)
10.37
Consultancy Agreement by and between InspireMD Ltd. and Sara Paz, dated as of May 6, 2008 (incorporated by reference to Exhibit 10.40 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)
10.38
Consultancy Agreement by and between InspireMD Ltd. and Sara Paz Management and Marketing Ltd., dated as of September 1, 2011 (incorporated by reference to Exhibit 10.41 to Amendment No. 3 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 12, 2011)
10.39
Clinical Trial Services Agreement, dated as of October 4, 2011, by and between InspireMD Ltd. and Harvard Clinical Research Institute, Inc. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2011)
10.40
Letter Agreement by and between InspireMD Ltd. and Tzamal-Jacobsohn Ltd., dated as of May 9, 2011 (incorporated by reference to Exhibit 10.43 to Amendment No. 4 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 1, 2011)
10.41
Stock Award Agreement, dated as of November 16, 2011, by and between InspireMD, Inc. and Sol J. Barer, Ph.D. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on November 18, 2011)
Part II-
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10.42
Nonqualified Stock Option Agreement, dated as of November 16, 2011, by and between InspireMD, Inc. and Sol J. Barer, Ph.D. (Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on November 18, 2011)
10.43
Amendment No. 1 to Securities Purchase Agreement, dated as of June 21, 2011, by and among InspireMD, Inc. and the purchasers that are signatory thereto (incorporated by reference to Exhibit 10.43 to Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2012)
10.44
Amendment No. 2 to Securities Purchase Agreement, dated as of November 14, 2011, by and among InspireMD, Inc. and the purchasers that are signatory thereto (incorporated by reference to Exhibit 10.44 to Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2012)
10.45
Consultancy Agreement, dated March 27, 2012, by and between InspireMD Ltd. and Robert Ratini (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 2, 2012)
10.46
Securities Purchase Agreement, dated April 5, 2012, by and between InspireMD, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)
10.47
Form of Senior Secured Convertible Note issued April 5, 2012 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)
10.48
Form of April 2012 $1.80 Warrant (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)
10.49
Registration Rights Agreement, dated April 5, 2012, by and between InspireMD, Inc. and the purchasers set forth therein (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)
10.50
Security Agreement, dated April 5, 2012, by and between InspireMD, Inc., InspireMD Ltd., Inspire MD GmbH and certain purchasers set forth therein (incorporated by reference to Exhibit 10.5 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)
10.51
Intellectual Property Security Agreement, dated April 5, 2012, by and between InspireMD, Inc., InspireMD Ltd., Inspire MD GmbH and certain purchasers set forth therein (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)
10.52
Deposit Account Control Agreement, dated April 5, 2012, among InspireMD, Inc., Bank Leumi USA and certain purchasers set forth therein (incorporated by reference to Exhibit 10.7 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)
10.53
Subsidiary Guarantee, dated April 5, 2012, by InspireMD Ltd. and Inspire MD GmbH, in favor of certain purchasers set forth therein (incorporated by reference to Exhibit 10.8 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)
10.54
Fixed and Floating Charge Debenture, dated April 5, 2012, by and between InspireMD Ltd. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.9 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)
10.55
Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.10 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2012)
Part II-
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10.56
Consulting Agreement, dated as of June 1, 2012, by and between InspireMD, Inc. and Asher Holzer, Ph.D. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2012)
10.57
Separation Agreement and Release, made as of June 1, 2012, by and between InspireMD Ltd., OSH-IL, the Israeli Society of Occupational Health and Safety Ltd., Company No. 513308247 and Asher Holzer, Ph.D. (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2012)
10.58
Mutual Waiver and Release, dated as of July 22, 2012, by and between InspireMD Ltd. and Hand-Prod Sp. Z o.o. (incorporated by reference to Exhibit 10.58 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)
10.59
Exclusive Distribution Agreement, dated as of August 1, 2007, by and between InspireMD Ltd. and Kardia Srl. (incorporated by reference to Exhibit 10.59 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)
10.60
Addendum to the Distribution Agreement, dated as of January 18, 2011, by and between InspireMD Ltd. and Kardia Srl. (incorporated by reference to Exhibit 10.60 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)
10.61
Exclusive Distribution Agreement, dated as of May 13, 2010, by and between InspireMD Ltd. and Euromed Deutschland GmbH (incorporated by reference to Exhibit 10.61 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)
10.62
Exclusive Distribution Agreement, dated as of May 26, 2011, by and between InspireMD Ltd. and Bosti Trading Ltd. (incorporated by reference to Exhibit 10.62 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)
10.63
Addendum to the Distribution Agreement, dated as of August 29, 2011, by and between InspireMD Ltd. and Bosti Trading Ltd. (incorporated by reference to Exhibit 10.63 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)
10.64
Omnibus Debenture Amendment, dated May 31, 2012, by and between InspireMD, Inc. and the debenture holders set forth therein (incorporated by reference to Exhibit 10.64 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)
10.65
Amendment No. 1 to Registration Rights Agreement, dated May 31, 2012, by and between InspireMD, Inc. and the purchasers set forth therein (incorporated by reference to Exhibit 10.65 to Transition Report on Form 10-K/T filed with the Securities and Exchange Commission on September 11, 2012)
10.66*
Consultancy Agreement, dated March 27, 2012, by and between InspireMD Ltd. and Robert Ratini.
21.1
List of Subsidiaries (incorporated by reference to Exhibit 21.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2011)
23.1*
Consent of Kesselman & Kesselman, Certified Public Accountants
23.2*
Consent of Haynes and Boone, LLP (included in Exhibit 5.1)
24.1*
Power of Attorney (included on signature page).
_______________________
* Filed herewith.
+ To be filed by amendment.
Part II-
9
Item 17. Undertakings.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes
that:
(1) For purposes of determining any
liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining
any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be
a new registration statement relating to the securities offered, and the offering of these securities at that time shall be deemed
to be the initial bona fide offering.
Part II-
10
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Tel Aviv, State of Israel on September 24, 2012.
InspireMD, Inc.
By:
/s/ Ofir Paz
Name: Ofir Paz
Title: Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS,
that the undersigned officers and directors of InspireMD, Inc., a Delaware corporation that is filing a registration
statement on Form S-1 with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as
amended, hereby constitute and appoint Ofir Paz and Craig Shore their true and lawful attorneys-in-fact and agents, with full
power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments to the registration statement, including a post-effective amendment, and all other additional registration
statements pursuant to Section 462(b) of the Securities Act of 1933, as amended, in connection therewith, with all exhibits
thereto, to be filed with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises,
as fully to all interests and purposes as they might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or either of them, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
In accordance with the requirements of the
Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates
indicated.
Signature
Title
Date
/s/ Ofir Paz
Chief Executive Officer and Director
September 24, 2012
Ofir Paz
(principal executive officer)
/s/ Craig Shore
Chief Financial Officer, Secretary and Treasurer
September 24, 2012
Craig Shore
(principal financial and accounting officer)
/s/ Sol J. Barer
Chairman of the Board of Directors
September 24, 2012
Sol J. Barer
/s/ James Barry
Director
September 24, 2012
James Barry
/s/ Asher Holzer
Director
September 24, 2012
Asher Holzer
/s/ James J. Loughlin
Director
September 24, 2012
James J. Loughlin
/s/ Paul Stuka
Director
September 24, 2012
Paul Stuka
/s/ Eyal Weinstein
Director
September 24, 2012
Eyal Weinstein
Part II-
11