NOTE 9 - COMMITMENT AND CONTINGENT LIABILITIES:

Commitment

In March 2010, the Company entered into a license agreement to use a stent design ("MGuard Prime^TM"). Pursuant to the agreement, the licensor is entitled to receive royalty payments of 7% of net sales outside the United States and, for sales within the United States, royalty payments as follows: 7% of net sales for the first $10,000,000 of net sales and 10% of net sales for net sales exceeding $10,000,000.

On October 22, 2012, the Company, InspireMD Ltd. and the licensor entered into the First Amendment to License Agreement, which amended the license agreement described above. Pursuant to the amendment, amongst other things, the licensor agreed to reduce the royalty owed with respect to sales of MGuard Prime^TM to 2.9% of all net sales both inside and outside the U.S. in exchange for (i) InspireMD Ltd. waiving $85,000 in regulatory fees for the CE Mark that are owed by the licensor to InspireMD Ltd., (ii) InspireMD Ltd. making full payment of royalties in the amount of $205,587 due to the licensor as of September 30, 2012 and (iii) 860,000 shares of the Company's common stock, that were valued at the closing price of the common stock on October 19, 2012 at $2.05 per share. The consideration of the transaction is to be recorded as intangible asset and In process research and development expenses based on the MGuard Prime^TM registration status in the various territories.

Litigation

In February 2011, representatives of a third party indicated that they intend 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 $250,000 in cash and 250,000 shares of the Company's common stock. To date, no lawsuit has been filed and the Company has not accrued an expense 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 February 2011, a service provider submitted a claim against the Company in the amount of $327,000 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 $327,000 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 $29,000.

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 $118,000 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, of which, 81,161 options were not disputed by the Company. On October 21, 2012, the former senior employee exercised 81,161 options. After considering the views of its legal counsel as well as other factors, the Company's management 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 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 then 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 $7,000 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. After considering the views of its legal counsel as well as other factors, the Company's management 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 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. After considering the views of its legal counsel as well as other factors, the Company's management is of the opinion that a loss to the Company is neither expected nor in an amount or range of loss that is estimable.

Liens and pledges

As of September 30, 2012, the Company had fixed liens aggregating $37,000 to bank Mizrahi and bank Leumi in connection with the Company's credit cards.

The Company's obligations under the 2012 Convertible Debentures 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.