ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement
and the accompanying prospectus are part of a “shelf” registration statement on Form F-3 (File No. 333-238162) utilizing
a shelf registration process relating to the securities described in this prospectus supplement that was initially filed with
the Securities and Exchange Commission, or the SEC, on May 11, 2020, and that was declared effective by the SEC on May 15, 2020.
Other than ADSs being sold pursuant to this offering, we have sold an aggregate of 6,993,069 ADSs, including ADSs issuable upon
the exercise of pre-funded warrants, at a total of approximately $8.30 million, under that shelf registration statement. This
document comprises two parts. The first part is this prospectus supplement, which describes the specific terms of this offering
and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference
herein. The second part, the accompanying prospectus, provides more general information, some of which may not apply to this offering.
Generally, when we refer to this prospectus, we are referring to both parts of this document combined. To the extent there is
a conflict between the information contained in this prospectus supplement and the accompanying prospectus, you should rely on
the information in this supplement.
This prospectus supplement
and the accompanying prospectus relate to the offering of our ADSs. Before buying any of the ADSs offered hereby, we urge you to
read carefully this prospectus supplement and the accompanying prospectus, together with the information incorporated herein by
reference as described below under the heading “Incorporation by Reference.” This prospectus supplement contains information
about the ADSs offered hereby and may add to, update or change information in the accompanying prospectus.
In this prospectus
supplement, as permitted by law, we “incorporate by reference” information from other documents that we file with the
SEC. This means that we can disclose important information to you by referring to those documents. The information incorporated
by reference is considered to be a part of this prospectus supplement and the accompanying prospectus, and should be read with
the same care. When we make future filings with the SEC to update the information contained in documents that have been incorporated
by reference, the information included or incorporated by reference in this prospectus supplement is considered to be automatically
updated and superseded. If the description of the offering varies between this prospectus supplement and the accompanying prospectus,
you should rely on the information contained in this prospectus supplement. However, if any statement in this prospectus supplement
or the accompanying prospectus is inconsistent with a statement in another document having a later date (including a document incorporated
by reference in the accompanying prospectus), the statement in the document having the later date modifies or supersedes the earlier
statement.
Neither we nor the
underwriter have authorized anyone to provide you with information different from that contained in this prospectus supplement,
the accompanying prospectus or any free writing prospectus we have authorized for use in connection with this offering. We and
the underwriter take no responsibility for, and can provide no assurance as to the reliability of, any other information that others
may give you. The information contained in, or incorporated by reference into, this prospectus supplement, the accompanying prospectus,
and any free writing prospectus we have authorized for use in connection with this offering is accurate only as of the date of
each such document. Our business, financial condition, results of operations and prospects may have changed since those dates.
You should read this prospectus supplement, the accompanying prospectus, the documents incorporated by reference in this prospectus
supplement, the accompanying prospectus and any free writing prospectus that we have authorized for use in connection with this
offering in their entirety before making an investment decision. You should also read and consider the information in the documents
to which we have referred you in the sections of the accompanying prospectus entitled “Where You Can Find More Information”
and “Incorporation of Certain Documents by Reference.” These documents contain important information that you should
consider when making your investment decision.
We are not making offers
to sell or solicitations to buy our ADSs in any jurisdiction in which an offer or solicitation is not authorized or in which the
person making that offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make an offer or solicitation.
You should assume that the information in this prospectus supplement and the accompanying prospectus is accurate only as of the
date on the front of the respective document and that any information that we have incorporated by reference is accurate only as
of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus supplement or the
accompanying prospectus or the time of any sale of a security.
Throughout this prospectus,
unless otherwise designated, the terms “we”, “us”, “our”, “Medigus”, “the
Company” and “our Company” refer to Medigus Ltd. and its consolidated subsidiaries. References to “ordinary
shares”, “ADSs”, and “share capital” refer to the ordinary shares, ADSs and share capital, respectively,
of Medigus.
This prospectus supplement
and the accompanying prospectus contain summaries of certain provisions contained in some of the documents described herein, but
reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the
actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated herein
by reference as exhibits to the registration statement, and you may obtain copies of those documents as described below under the
section entitled “Where You Can Find More Information.”
Market data and certain
industry data and forecasts used throughout this prospectus supplement were obtained from sources we believe to be reliable, including
market research databases, publicly available information, reports of governmental agencies and industry publications and surveys.
We have relied on certain data from third-party sources, including internal surveys, industry forecasts and market research, which
we believe to be reliable based on our management’s knowledge of the industry. Forecasts are particularly likely to be inaccurate,
especially over long periods of time. In addition, we do not necessarily know what assumptions regarding general economic growth
were used in preparing the third-party forecasts we cite. Statements as to our market position are based on the most currently
available data. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates
involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading
“Risk Factors” in this prospectus. Our financial statements are prepared and presented in accordance with International
Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our historical results
do not necessarily indicate our expected results for any future periods.
Certain figures included
in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be
an arithmetic aggregation of the figures that precede them.
Unless derived from
our financial statements or otherwise noted, the terms “shekels,” “Israeli shekels” and “NIS”
refer to New Israeli Shekels, the lawful currency of the State of Israel, and the terms “dollar,” “U.S. dollar,”
“US$,” “USD” or “$” refer to U.S. dollars, the lawful currency of the United States.
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights
selected information about us, this offering and information contained in greater detail elsewhere in this prospectus supplement,
the accompanying prospectus, and in the documents incorporated by reference. This summary is not complete and does not contain
all of the information that you should consider before investing in our securities. You should carefully read and consider this
entire prospectus supplement, the accompanying prospectus and the documents, including financial statements and related notes,
and information incorporated by reference into this prospectus supplement, including the financial statements and “Risk
Factors” starting on pages S-8 of this prospectus supplement, before making an investment decision. If you invest in our
securities, you are assuming a high degree of risk.
Business Overview
The activities carried out by us, and our subsidiaries are focused
on medical-related devices and products and on internet and other online-related technologies. Our medical-related activities include
miniaturized imaging equipment through Scoutcam Inc. (formerly known as Intellisense Solutions Inc.), or Scoutcam, our 46.03% held
subsidiary, innovative surgical devices with direct visualization capabilities for the treatment of Gastroesophageal Reflux Disease,
or GERD, by the Company using Medigus Ultrasonic Surgical Endostapler, or MUSE, and biological gels to protect patients against
biological threats and prevent intrusion of allergens and viruses through the upper airways and eye cavities through our stake
and licensing arrangement with Polyrizon Ltd., or Polyrizon. Our internet-related activities include ad-tech operations through
our stake in Gix Internet Ltd., f/k/a Algomizer Ltd., or Gix, and its subsidiary, Linkury Ltd., or Linkury. Eventer Technologies
Ltd., or Eventer, an online event management and ticketing platform and Smart Repair Pro Inc. and Purex Corp, e-Commerce companies
which operate online stores for the sale of various consumer products on the Amazon online marketplace, utilizing the fulfillment
by Amazon, or FBA model, and Charging Robotics Ltd., or Charging Robotics, our recently incorporated wholly owned subsidiary, which
will focus on our electric vehicle and wireless charging activities.
The diversification
of our core activity and our entry into the internet and online-related operations are in accordance with a change to our business
model, which we initiated in 2019. Following an analysis of our previous efforts to commercialize the MUSETM system
and the ScoutCamTM portfolio, we decided to broaden our activities to include operations in fields with a shorter go-to-market
pathway and increased growth potential. In accordance with this strategy, we abandoned the efforts to commercialize the MUSETM
system, transferred the ScoutCamTM activity to our Israel subsidiary, ScoutCam Ltd., and consummated a securities exchange
agreement relating to ScoutCam Ltd. Since implementing these steps, we have pursued investments that have granted us substantial
and controlling interests in other ventures, which we believe will provide a greater return to our shareholders.
Medical Activity Overview
ScoutCam – Miniaturized Imaging Equipment
We previously engaged
in the development, production and marketing of innovative miniaturized imaging equipment known as the micro ScoutCam™ portfolio
for use in medical procedures as well as various industrial applications, through ScoutCam Ltd. ScoutCam Ltd. was incorporated
as part of a reorganization of the Company intended to distinguish the Company’s micro ScoutCam™ portfolio from the
other operations of the Company and to enable the Company to form a separate business unit with dedicated resources, focused on
the promotion of our miniaturized imaging technology. After we completed the transfer of all of the Company’s assets and
intellectual property related to the Company’s miniature video cameras business into ScoutCam Ltd., we consummated a securities
exchange agreement with ScoutCam (formerly known as Intellisense Solutions Inc.), under which we received 60% of the issued and
outstanding stock of ScoutCam in consideration for 100% of our holdings in ScoutCam Ltd. Following the aforementioned transactions,
Intellisense Solutions Inc. changed its name to ScoutCam Inc. Since the securities exchange agreement, the commercialization efforts
relating to the ScoutCam™ portfolio are carried out exclusively by ScoutCam. Commercially, ScoutCam has received purchase
orders for its products from a Fortune 500 company in the healthcare sector and has been added to the Approved Supplier List of
a leading healthcare company. ScoutCam is examining and pursuing additional applications for the micro ScoutCam™ portfolio
outside of the medical device industry, including, among others, the defense, aerospace, automotive, and industrial non-destructing-testing
industries, and plans to further expand the activity in these non-medical spaces.
Since the reorganization
and spinoff of the ScoutCam activity, ScoutCam has made headway in its field both in the form of achieving commercial milestones
and raising additional capital to fund its operations.
On March 3, 2020, ScoutCam
consummated a securities purchase agreement with certain investors in connection with the sale and issuance of $948,400 worth of
units, or the Units. Each Unit consisted of (i) two shares of ScoutCam’s common stock, par value $0.001 per share, or the
ScoutCam Common Stock; and (ii) (a) one warrant to purchase one share of ScoutCam Common Stock with an exercise price of $0.595,
or the A Warrant, and (b) two warrants to purchase one share of ScoutCam Common Stock each with an exercise price of $0.893, or
the B Warrant, at a purchase price of $0.968 per Unit. In connection with the agreement, ScoutCam issued 1,959,504 shares of ScoutCam
Common Stock, 979,754 A Warrants, and 1,959,504 B Warrants to purchase shares of ScoutCam Common Stock. In addition, on May 19,
2020, we announced that ScoutCam entered into and consummated a securities purchase agreement with M. Arkin (1999) Ltd. in connection
with an investment of $2,000,000. Since September 14, 2020, ScoutCam’s common stock is quoted on the OTCQB Venture Market.
On June 23, 2020, we
entered into and consummated a side letter agreement with ScoutCam, whereby the parties agreed to convert, at a conversion price
of $0.484 per share, an outstanding line of credit previously extended by us to ScoutCam, which as of the date thereof was $381,136,
into (i) 787,471 shares of ScoutCam Common Stock, (ii) warrants to purchase 393,736 shares of ScoutCam Common Stock with an exercise
price of $0.595 with a term of twelve months from the date of issuance, and (iii) warrants to purchase 787,471 shares of ScoutCam
Common Stock with an exercise price of $0.893 with a term of eighteen months from the date of issuance.
Our MUSE™ System
In addition, we have
been engaged in the development, production and marketing of innovative surgical devices with direct visualization capabilities
for the treatment of GERD, a common ailment, which is predominantly treated by medical therapy (e.g. proton pump inhibitors) or
in chronic cases, conventional open or laparoscopic surgery. Our U.S. Food and Drug Administration, or FDA, cleared and CE-marked
endosurgical system, known as the Medigus Ultrasonic Surgical Endostapler, or MUSE™ (Medigus Ultrasonic Surgical Endostapler)
system, enables minimally-invasive and incisionless procedures for the treatment of GERD by reconstruction of the esophageal valve
via the mouth and esophagus, eliminating the need for surgery in eligible patients. We believe that this procedure offers a safe,
effective and economical alternative to the current modes of GERD treatment for certain GERD patients, and has the ability to provide
results that are equivalent to those of standard surgical procedures while reducing pain and trauma, minimizing hospital stays,
and delivering economic value to hospitals and payors.
Prevalence of GERD
GERD is a worldwide
disorder, with evidence suggesting an increase in GERD disease prevalence since 1995. Treatment of GERD involves a stepwise approach.
The goals are to control symptoms, to heal esophagitis and to prevent recurrent esophagitis. The most common operation for GERD
is called a surgical fundoplication, a procedure that prevents reflux by wrapping or attaching the upper part of the stomach around
the lower esophagus and securing it with sutures. Due to the presence of the wrap or attachment, increasing pressure in the stomach
compresses the portion of the esophagus, which is wrapped or attached by the stomach, and prevents acidic gastric content from
flowing up into the esophagus. Today, the operation is usually performed laparoscopically: instead of a single large incision into
the chest or abdomen, four or five smaller incisions are made in the abdomen, and the operator uses a number of specially designed
tools to operate under video control.
Our product, the MUSE™
system for transoral fundoplication is a single use innovative device for the treatment of GERD. The MUSE™ technology is
based on our proprietary platform technology, experience and know-how. Transoral means that the procedure is performed through
the mouth, rather than through incisions in the abdomen. The MUSE™ system is used to perform a procedure as an alternative
to a surgical fundoplication. The MUSE™ system offers an endoscopic, incisionless alternative to surgery. A single surgeon
or gastroenterologist can perform the MUSE™ procedure in a transoral way, unlike in a laparoscopic fundoplication, which
requires incisions.
The clearance by the
FDA, or ‘Indications for Use,’ of the MUSE™ system is “for endoscopic placement of surgical staples in
the soft tissue of the esophagus and stomach in order to create anterior partial fundoplication for treatment of symptomatic chronic
Gastro-Esophageal Reflux Disease in patients who require and respond to pharmacological therapy”. As such, the FDA clearance
covers the use by an operator of the MUSE™ endostapler as described in the above paragraph. In addition, in the pivotal study
presented to the FDA to gain clearance, only patients who were currently taking GERD medications (i.e. pharmacological therapy)
were allowed in the study. In addition, all patients had to have a significant decrease in their symptoms when they were taking
medication compared to when they were off the medication. The FDA clearance indicated that the MUSE™ system is intended for
patients who require and respond to pharmacological therapy. The MUSE™ system indication does not restrict its use with respect
to GERD severity from a regulatory point of view. However, clinicians typically only consider interventional treatment options
for moderate to severe GERD. Therefore, it is reasonable to expect the MUSE™ system would be primarily used to treat moderate
and severe GERD in practice. The system has received 510(k) marketing clearance from the FDA in the United States, as well as a
CE mark in Europe.
On
June 3, 2019, we entered into a Licensing and Sale Agreement with Shanghai Golden Grand-Medical Instruments Ltd. (Golden Grand)
for the know-how licensing and sale of goods relating to the MUSE™ system in China, Hong Kong, Taiwan and Macao. Under the
agreement, we committed to providing a license, training services and goods to Golden Grand in consideration for $3,000,000 to
be paid to us in four milestone-based installments. To date, some of these milestones have been achieved and the Company has received
$1,800,000. The final milestones will be completed, and the final installment paid upon completion of a MUSE™ assembly line
in China. Due to COVID-19, the implementation of certain actions required to be achieved under the milestones has been delayed,
specifically due to travel restrictions. In recent months, efforts have been renewed to achieve the next milestones.
Polyrizon – Protective Biological
Gels
Polyrizon is a private
company engaged in developing biological gels designed to protect patients against biological threats and reduce the intrusion
of allergens and viruses through the upper airways and eye cavities.
In July 2020, we entered
into an ordinary share purchase agreement with Polyrizon, pursuant to which we purchased 19.9% of Polyrizon’s issued and
outstanding capital stock on a fully diluted basis for aggregate gross proceeds of $10,000. We also agreed to loan Polyrizon $94,000.
The loan does not bear any interest and is repayable only upon a deemed liquidation event, as defined in that share purchase agreement.
In addition, we have an option, or the Option, to invest an additional amount of up to $1,000,000 in consideration for shares of
Polyrizon such that following the additional investment, we will own 51% of Polyrizon’s capital stock on a fully diluted
basis, excluding outstanding deferred shares, as defined in the share purchase agreement. The Option is exercisable until the earlier
of (i) April 23, 2023, or (ii) the consummation by Polyrizon of equity financing of at least $500,000 based on a pre-money valuation
of at least $10,000,000.
In addition, we entered
into an exclusive reseller agreement with Polyrizon. As part of the reseller agreement, we received an exclusive global license
to promote, market, and resell the Polyrizon products, focusing on a unique Biogel to protect from the COVID-19 virus. The term
of the license is for four years, commencing upon receipt of sufficient FDA approvals for the lawful marketing and sale of the
products globally. We also have the right to purchase the Polyrizon products on a cost-plus 15% basis for the purpose of reselling
the products worldwide. In consideration of the license, Polyrizon will be entitled to receive annual royalty payments equal to
10% of our annualized operating profit arising from selling the products. To date, Poyrizon’s products have not received
the requisite FDA approvals, and therefore manufacturing and commercialization efforts have not yet commenced.
On November 9, 2020,
we entered into a term sheet, with Polyrizon and Mr. Raul Srugo for an additional investment of up to a total of $250,000 in Polyrizon.
Following an investment of $100,000, we will hold approximately 33% of Polyrizon shares on a fully diluted basis, subject to adjustments
upon the consummation of a deferred closing. According to the term sheet, we, and other shareholders, also have the option to invest
an additional aggregate amount of up to $50,000 for a period of 60 days after the initial closing. The initial closing of this
transaction is expected to occur in the upcoming weeks.
Internet Activity Overview
Gix – Ad-Tech and Online Advertising
We currently own a
minority stake in Gix and its subsidiary, Linkury. Linkury operates in the field of software development, marketing, and distribution
to internet users. Gix recently announced its intention to focus its efforts on Linkury, which is the primary source of Gix’s
revenues and operations, with a goal of expanding its product portfolio in the field of technological solutions for advertising
and media. In the coming year, Linkury plans to launch new products in the sector of advertising technologies and mobile. Furthermore,
Gix continues its efforts to seek opportunities for engaging in acquisitions of companies with significant revenues and commercial
potential. Gix operates through two major arms: Gix Apps, which is distributed free of charge (as browser add-ons and desktop apps)
to end-users and drives revenues from the placement of advertisements, and Gix Content, a solution platform for publishers, personalized
content ads and banners per users’ preferences, based on Gix’s proprietary technologies.
Our stake in Gix was acquired pursuant to a securities purchase
agreement dated June 19, 2019, or the Agreement. Pursuant to the Agreement, we are entitled, for a period of three years following
the closing of the investment, to convert any and all of our Linkury shares into Gix shares with a 20% discount over the average
share price of Gix on the Tel Aviv Stock Exchange Ltd., or TASE within the 60 trading days preceding the conversion. On October
14, 2020, we notified Gix of our election to convert the 793,448 ordinary shares of Linkury that we currently own into Gix’s
ordinary shares in accordance with the Agreement. As a result of the conversion, we will be entitled to receive additional 9,858,698
ordinary shares of Gix, which, together with our current holdings, will constitute approximately 33% of Gix’s issued and
outstanding share capital following the conversion. In addition, pursuant to the Agreement, we are entitled to an issuance of additional
ordinary shares of Gix and an adjustment to our outstanding warrant to purchase Gix ordinary shares, in the event that Gix issues
shares at a price per share lower than the price paid by us under the Agreement. On November 10, 2020, Gix announced an offering
of its ordinary shares at a price per share of NIS 1.33, resulting in our entitlement to receive an additional 4,598,243 ordinary
shares. As a result of the aforementioned conversion and adjustment we will hold approximately 40.26% of Gix outstanding share
capital on a fully diluted basis. Pursuant to the provisions of the Companies Law, the issuance of shares representing 25% or more
of the voting rights in a public company is subject to prior shareholder approval. We have requested that Gix convene a shareholder
meeting as soon as practicably possible in order to obtain the requisite approval and affect the conversion. The shareholder meeting
of Gix has not yet been called.
Eventer – Online Event Management
Eventer is a technology
company engaged in the development of unique tools for automatic creation, management, promotion, and billing of events and ticketing
sales. Eventer seeks to tap the growing demand for enterprise and private online communication over the last year. As such, Eventer’s
systems offer and enable advanced, user-friendly solutions for online events such as online concerts, enterprise events and online
conferences, in addition to management and ticket sales for events carried out in offline venues. In addition, Eventer’s
platform provides individuals with the ability to create and sell tickets to custom small-scale private or public events. Eventer’s
revenues are derived from commissions from sales of tickets for online and offline events planned and managed through its platform.
On October 14, 2020,
we signed a share purchase agreement and a revolving loan agreement with Eventer. The Eventer transaction closed on October 26,
2020. Pursuant to the share purchase agreement, we invested $750,000 and were issued an aggregate of 325,270 ordinary shares of
Eventer, representing 50.01% of Eventer’s issued and outstanding share capital on a fully diluted basis. The share purchase
agreement provides that we will invest an additional $250,000 in a second tranche, subject to Eventer achieving certain post-closing
EBITDA based milestones during the fiscal years 2020 through 2023, or the Milestones. In the event that Eventer partially achieves
the Milestones, the $250,000 investment will be reduced in proportion to the Milestones that were achieved.
In addition, we entered
into a revolving loan agreement with Eventer, or the Loan Agreement, under which we committed to lending up to $1,250,000 to Eventer
through advances of funds upon Eventer’s request and subject to our approval. We extended an initial advance of $250,000
upon closing the Loan Agreement, or the Initial Advance. Advances extended under the Loan Agreement may be repaid and borrowed
in part or in full from time to time. The Initial Advance will be repaid in twenty-four equal monthly installments, commencing
on the first anniversary of the Loan Agreement. Other advances extended under the Loan Agreement will be repaid immediately following,
and in no event later than thirty days following the completion of the project or purpose for which they were made. Outstanding
principal balances on the advances will bear interest at a rate equal to the higher of (i) 4% per year, or (ii) the interest rate
determined by the Israeli Income Tax Ordinance [New Version] 5721-1961 and the rules and regulation promulgated thereunder. Interest
payments will be made on a monthly basis.
On October 14, 2020,
we entered into a share exchange agreement with Eventer’s shareholders, or the Exchange Agreement, pursuant to which, during
the period commencing on the second anniversary of the Exchange Agreement and ending fifty-four (54) months following the date
of the Exchange Agreement, Eventer’s shareholders may elect to exchange all of their Eventer shares for ordinary shares of
our company. The number of ordinary shares of the Company to which Eventer’s shareholders would be entitled pursuant to an
exchange will be calculated by dividing the fair market value of each Eventer’s ordinary share, as mutually determined by
our company and the shareholders, by the average closing price of an ordinary share of our company on the principal market on which
its ordinary shares or ADSs are traded during the sixty days prior to the exchange date rounded down to the nearest whole number.
Our board of directors may defer exchange’s implementation in the event it determines in good faith that doing so would be
materially detrimental to the Company and its shareholders. In addition, the exchange may not be effected for so long as $600,000
or greater remains outstanding under the Loan Agreement, or if an event of default under the Loan Agreement has occurred.
On February 23, 2021, Eventer announced that it entered the virtual
conference market by signing an exclusive licensing agreement to adopt Screenz Cross Media Ltd.’s, or Screenz, technology
for virtual conferences. As part of the license agreement, Screenz will provide and adapt its technology to Eventer to host and
broadcast virtual conferences, including an interactive player with capabilities of broadcasting, recording and interactive layers
on video. In consideration for granting the license to use the technology for virtual conferences and developing the necessary
adaptions, Eventer shall pay Screenz a total sum of $1,500,000. In the first five months Eventer shall pay Screenz a monthly sum
of $40,000, with such period being considered a grace period for Eventer’s planning and establishment of the operation. Following
the grace period, Eventer shall pay Screenz the remaining sum of $1,300,000 in three equal payments. The adaptation of the Screenz
technology is expected to be completed in the second half of 2021. Screenz shall be entitled to 8% of the revenue received from
any use of the product.
Smart Repair Pro, Inc. and Purex Corp
– Investment and Secondary
Smart Repair Pro, Inc., or Pro, and Purex, Corp., or Purex,
are both California corporations in the e-Commerce field, which operate online stores for the sale of various consumer products
on the Amazon online marketplace, utilizing the FBA model. Pro and Purex utilize artificial intelligence and machine learning technologies
to analyze sales data and patterns on the Amazon marketplace in order to identify existing stores, niches and products that have
the potential for development and growth as well as maximize sales of its existing proprietary products. Pro and Purex together
manage two online stores through which three distinct product brands are marketed and sold to consumers in the United States. Pro
and Purex’s strategy is to achieve organic growth and profitability by expanding to new geographies, increasing sales of
its existing products through marketing and advertising efforts, development of new products and brands, supply chain optimization
and inventory management. Pro has completed processes with Amazon, which will allow for it to open its stores for sale to consumers
in the United Kingdom, German, France, Spain, Italy and Australia.
On October 8, 2020,
we entered into a common stock purchase agreement with Pro, Purex, and their respective stockholders, or the Purex Purchase Agreement.
Pursuant to the Purex Purchase Agreement, we agreed to acquire 50.01% of each of Pro and Purex issued and outstanding share capital
on a fully diluted basis, was acquired through a combination of cash investments in the companies and acquisition of additional
shares from the current shareholders of the two companies in consideration for our restricted ADSs and a cash component. We agreed
to invest an aggregate amount of $1,250,000 in Pro and Purex, pay $150,000 in cash consideration to the current stockholders,
and issue $500,000 worth of restricted ADSs to the current stockholders of such companies, with the value of restricted ADSs to
be subject to downward adjustment based on the 2020 results of the two companies. In addition, the companies’ current shareholders
are entitled to additional milestone issuances of up to an aggregate $750,000 in restricted ADSs subject to the achievement by
Pro and Purex of certain milestones throughout 2021. The transactions contemplated in the definitive agreements closed on January
4, 2021.
Subsequently according
to the terms of the Purex Purchase Agreement, we entered into a loan and pledge agreement, effective January 5, 2021 with our majority
owned subsidiaries Pro and Purex. Pursuant to this loan and pledge agreement, we extended a $250,000 loan, with an annual interest
of 4%, to be repaid on the second anniversary of the effective date.
Other Activities
Matomy Media Group Ltd.
We hold
approximately 24.92% of the outstanding share capital of Matomy Media Group Ltd.’s, or Matomy, a public company listed
on the TASE.
On September 29, 2020,
Matomy announced that it has entered into a memorandum of understanding, or the Automax MOU, with Global Automax Ltd., or Automax,
an Israeli private company that imports various leading car brands to Israel and Automax’s shareholders. The Automax MOU
provides for a proposed merger in which the shareholders of Automax would exchange 100% of their shares in Automax for shares of
Matomy, or the Proposed Merger. Under the Automax MOU, Automax and Matomy have agreed on an exclusivity period of 60 days. Save
for the exclusivity period, the Automax MOU is non-binding.
On November 9, 2020,
Matomy signed a binding agreement for the Proposed Merger. Matomy expects that, upon completion of the Proposed Merger, Automax
shareholders would hold approximately 53% of the outstanding share capital of Matomy and potentially up to a maximum of 73%, due
to additional share issuances which are subject to achievement of certain revenue and profit milestones by Matomy, or if the value
of the Matomy’s shares reach specific values after the Proposed Merger. There can be no guarantee that the Proposed Merger
will be completed.
On October 20, 2020,
Matomy held an extraordinary general meeting of shareholders and approved the cancellation of the admission of Matomy’s ordinary
shares for trading on the High Growth Segment of the London Stock Exchange.
Recent Developments
Underwritten Public Offerings
On May 22, 2020, we closed an underwritten public offering of
(i) 575,001 ADSs at a public offering price of $1.50 per ADS, and (ii) 2,758,333 pre-funded warrants to purchase one ADS at a public
offering price of $1.499 per ADS. The gross proceeds from this offering were approximately $5,000,000 before deducting underwriting
discounts, commissions and other offering expenses. The pre-funded warrants, which were exercisable at any time after the date
of issuance upon payment of the exercise price of $0.001 per ADS, have been exercised in full.
On December 3, 2020
we closed an underwritten public offering of 7,098,491 ADSs at a public offering price of $1.83 per ADS. On December 16, 2020,
the underwriter exercised, in full, their option to purchase an additional 1,064,774 ADSs at a price of $1.83 per ADS. Total gross
proceeds to the Company from the offering, including the funds received from the prior closing and exercise of this option, were
approximately $14.9 million, before deducting underwriting discounts, commissions and other offering expenses payable by the Company.
On January 13, 2021, we closed an underwritten public offering
of 3,659,735 ADSs at a public offering price of $2.30 per ADS. On January 19, 2021, the underwriter exercised in full their option
to purchase an additional 548,960 ADSs at a price of $2.30 per ADS. Total gross proceeds to the Company from the offering, including
the funds received from the prior closing and exercise of this option, were approximately $9.6 million, before deducting underwriting
discounts, commissions and other offering expenses payable by the Company.
GERD Patent Infringement Litigation
On July 13, 2020, our
subsidiary, GERD IP, Inc., or GERD IP, a Delaware corporation, filed a complaint in the United States District Court for the District
of Delaware, or the Court, alleging infringement of two of its proprietary patents issued by the United States Patent and Trademark
Office by EndoGastric Solutions, Inc. or the Defendant. On August 27, 2020, GERD IP filed an amended complaint and on September
9, 2020 the Defendant filed an answer. Pursuant to the Court’s November 6, 2020 scheduling order, on November 9, 2020, and
on November 12, 2020, GERD IP and Defendant, respectively, provided their initial disclosures. In addition, with the consent of
the parties, the case was referred to a mediation process scheduled for April 8, 2021.
Delisting from the Tel Aviv Stock Exchange
Ltd.
On October 22, 2020,
our board of directors resolved to take steps to voluntarily delist our ordinary shares from trading on the TASE. We delisted our
ordinary shares from TASE in order to be subject to one set of listing regulations instead of two, to allow greater flexibility
to execute our business and financing strategy and to reduce administrative costs, in order to maximize shareholder value in the
medium and long term.
Following the delisting
in Israel, our ADSs continue to trade on the Nasdaq Stock Market. Holders of our ordinary shares were urged to convert their shares
into ADSs through their banks and brokers. Every twenty (20) ordinary shares are convertible into one (1) ADS.
Under applicable Israeli law, including Section 35BB of the
Israeli Securities Law, the delisting of our ordinary shares from trading on the TASE took place three months after the date of
our announcement. The last trading day of our ordinary shares on the TASE was January 21, 2021, and on January 25, 2021, our ordinary
shares were delisted from the TASE. Following the delisting, the Company continues to file public reports and make public disclosures
in accordance with the rules and regulations of the SEC and Nasdaq.
Medigus New Joint Venture
On February 19, 2021,
we entered into the Joint Venture Agreement, or Joint Venture Agreement, with Amir Zaid and Weijian Zhou and our wholly-owned subsidiary
Charging Robotics, pursuant to which have entered into a new joint venture agreement for the purpose of developing and commercializing
three modular electric vehicle (EV) micro mobility vehicles for urban individual use and “last mile” cargo delivery.
Pursuant to the terms of the Joint Venture Agreement, we will own initially 19.99% of the
issued and outstanding share capital of the joint venture and upon the consummation of an investment in a milestone financing
of $1,350,000 in the aggregate, we will be entitled to own 50.01% of the issued and outstanding share capital of the joint venture.
We will initially invest $250,000 upon the closing of the Joint Venture Agreement. An additional $400,000
will be invested based on predefined milestones which include the finalization of a design model within two months following the
initial financing and formation of new entity, finalization of the development of an operational model of the “PORTO”
modular delivery vehicle, within six months, and the execution of two material commercial agreements or long form engagements,
for pilot projects, with at least two global shipping companies for product evaluation and purchase within eight months following
the initial financing.
ScoutCam’s Projects with the Israeli
Air Force
On December 14, 2020,
ScoutCam embarked on three different development projects in cooperation with the
Israeli Air Force. ScoutCam is developing products that leverage its high resilient micro-cameras (as recently demonstrated by
NASA’s Robotic Refueling Mission 3) and its unique wired and wireless transmission capabilities to improve maintenance as
well as flight safety of both helicopters and unmanned aerial vehicles, or UAV, in the service of the Israeli Air Force. These
products, once tried and approved for use by the Israeli Air Force, may lead to these products being sold to other air forces around
the world as well as to helicopter and UAV manufacturers globally.
Collaboration Agreement and Patent and
Intellectual Property Assignment Agreement
On January 7, 2021, the Company entered an agreement to purchase
a provisional patent filed with the United States Patent and Trademark Office and know-how relating to wireless vehicle battery
charging technology in consideration for $75,000. Furthermore, the Company entered a collaboration agreement with the seller, whereby
the Company committed to invest $150,000 in a newly incorporated wholly owned subsidiary of the Company, Charging Robotics, which
was incorporated on February 1, 2021, which will focus on our new electric vehicle and wireless charging activities. Pursuant to
the collaboration agreement, seller is entitled to a monthly consultant fee as well as options to purchase 15% of Charging Robotics’
fully diluted share capital as of its incorporation date based on a valuation of $1,000,000.
Appointment of New Chief Financial Officer
On November 27, 2020,
the Company announced Ms. Tatiana Yosef resignation from her position as the Company’s Chief Financial Officer. On November
30, 2020, the board of directors of the Company appointed Mr. Oz Adler to replace Ms. Tatiana Yosef and to serve as the Company’s
Chief Financial Officer commencing on January 15, 2021. Mr. Adler’s employment with the Company commenced on December 1,
2020.
Pro Loan and Pledge Agreement
On February 2, 2021,
we entered into a loan and pledge agreement, effective February 2, 2021, and amended on February 5, 2021, or the Pro Loan and Pledge
Agreement, with our majority owned subsidiary Pro and its other stockholder, to finance Pro’s additional purchases of three
new brands on the Amazon online marketplace. Pursuant to the Pro Loan and Pledge Agreement, we extended a $3.76 million loan, with
an annual interest of 4%, to be repaid on the fifth anniversary of the effective date. In order to secure the repayment of the
loan and interest amounts, Pro pledged a first priority interest in Pro’s share capital, its interests in its online stores
and a floating charge of Pro cash and cash equivalents.
Elimination of Par Value
On February 12, 2021,
following the approval of an extraordinary general meeting of our shareholders held on February 12, 2021, the Company amended its
articles of association to eliminate the par value of its ordinary shares, such that the authorized share capital of the Company
following the amendment consists of 1,000,000,000 ordinary shares of no par value.
Corporate Information
We were incorporated in the State of Israel on December 9, 1999,
as a private company pursuant to the Israeli Companies Ordinance (New Version), 1983. In February 2006, we completed our initial
public offering in Israel, and until January 25, 2021, our ordinary shares were traded on TASE, under the symbol “MDGS”.
In May 2015, we listed the ADSs on Nasdaq, and since August 2015 the ADSs have been traded on Nasdaq under the symbol “MDGS”.
Our Series C Warrants have been trading on Nasdaq under the symbol “MDGSW” since July 2018. Each Series C Warrant is
exercisable into one ADS for an exercise price of $3.50 and will expire in July 2023. Each ADS represents 20 ordinary shares.
We are a public limited
liability company and operate under the provisions of Israel’s Companies Law, 5759-1999, as amended, or the Companies Law.
Our registered office and principal place of business are located at Omer Industrial Park, No. 7A, P.O. Box 3030, Omer 8496500,
Israel and our telephone number in Israel is +972-73-370-4691. Our website address is www.medigus.com. The information contained
on our website or available through our website is not incorporated by reference into and should not be considered a part of this
prospectus. Our registered agent in the United States is Puglisi & Associates. The address of Puglisi & Associates is 850
Library Avenue, Suite 204, Newark, DE, 19711, USA.
THE OFFERING
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ADSs offered by us
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ADSs representing ordinary shares.
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Public offering price
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$ per ADS
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Ordinary shares to be outstanding after this offering
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ordinary shares.
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The ADSs
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Each ADS represents 20 ordinary shares.
The ADSs will be evidenced by American Depositary Receipts, or ADRs, executed and delivered by The Bank of New York Mellon, as
Depositary.
The Depositary, as depositary, will be
the holder of the ordinary shares underlying your ADSs and you will have rights as provided in the Deposit Agreement, among us,
The Bank of New York Mellon, as Depositary, and all owners and holders from time to time of ADSs issued thereunder, or the Deposit
Agreement, a form of which has been filed as Exhibit 1 to the Registration Statement on Form F-6 filed by The Bank of New York
Mellon with the SEC on May 7, 2015.
Subject to compliance with the relevant
requirements set out in the prospectus, you may turn in your ADSs to the Depositary in exchange for ordinary shares underlying
your ADSs.
The Depositary will charge you fees for
such exchanges pursuant to the Deposit Agreement.
You should carefully read the “Description
of American Depositary Shares” section of the accompanying prospectus and the Deposit Agreement to better understand the
terms of the ADSs.
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Over-allotment option
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We have granted the underwriter an option, exercisable until 45
days following the date of this prospectus (but not to close after March 31, 2021, unless we have filed our Annual Report on Form
20-F by that day), to acquire purchase up to additional ADSs solely to cover over-allotments,
if any.
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Use of proceeds
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We estimate the net proceeds from this offering will be approximately
$ million (approximately $ million if the underwriter exercises its over-allotment
option in full), after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We currently
intend to use the net proceeds from this offering for working capital and general corporate purposes. See “Use of Proceeds”
on page S-22 of this prospectus supplement.
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Risk factors
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Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page S-8 of this prospectus supplement, on page 4 of the accompanying prospectus and in our Annual Report on Form 20-F filed with the SEC, on April 21, 2020, for a discussion of certain factors you should consider before investing in our securities.
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Listings
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The ADSs are traded on Nasdaq under
the symbol “MDGS”.
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Depositary
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The Bank of New York Mellon
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Unless otherwise indicated, the number of ordinary shares outstanding
prior to and after this offering is based on 400,616,638 ordinary shares issued and outstanding as of February 24, 2021,
and excludes:
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6,963,630 ordinary shares issuable upon the exercise of outstanding options at a weighted average exercise price of NIS 0.68 per share or $0.21 per share (based on the exchange rate reported by the Bank of Israel on such date), equivalent to 348,182 ADSs at a weighted average exercise price of $4.26 per ADS; and
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85,988,240 ordinary shares issuable upon the exercise of warrants to purchase up to an aggregate of 4,299,412 ADSs at a weighted average exercise price of $5.26 per ADS.
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Unless otherwise indicated,
all information in this prospectus supplement assumes no exercise of the outstanding options or warrants described above, and assumes
no exercise of the underwriter’s over-allotment option.
RISK FACTORS
An investment in
our securities involves significant risks. Before making an investment in our securities, you should carefully read all of the
information contained in this prospectus supplement, the accompanying prospectus and in the documents incorporated by reference
herein, including the risk factors contained in our Annual Report on Form 20-F for the year ended December 31, 2019 filed with
the SEC on April 21, 2020. For a discussion of risk factors that you should carefully consider before deciding to purchase any
of our securities, please review the additional risk factors disclosed below and the information under the heading “Risk
Factors” in the accompanying prospectus. In addition, please read “About this Prospectus Supplement” and “Cautionary
Note Regarding Forward-Looking Statements” in this prospectus supplement, where we describe additional uncertainties associated
with our business and the forward-looking statements included or incorporated by reference in this prospectus supplement and the
accompanying prospectus. The risks and uncertainties described below are not the only risks facing us. Please note that additional
risks not currently known to us or that we currently deem immaterial also may adversely affect our business, results of operations,
financial condition and prospects. Our business, financial condition, results of operations and prospects could be materially and
adversely affected by these risks, and you may lose all or part of your original investment.
Risks Related to Our Business and the
Business of our Subsidiaries
We made material changes to our business
strategy during 2019 and 2020, which we continued to implement in 2021. We cannot guarantee that any of these changes will result
in any value to our shareholders.
Since 2019, we have
materially changed our business model, adjusted our exclusive focus on the medical device industry to include other industries,
abandoned our strategy to commercialize the MUSE™ system, transferred our ScoutCam™ activity
into our subsidiary, ScoutCam Ltd., and consummated a securities exchange agreement in relation to ScoutCam Ltd. As a result of
these changes, we have acquired substantial stakes in a number of ventures, including but not limited to online business activities
such as ad-tech and online event management. We cannot guarantee that these strategic decisions will derive the anticipated value
to our shareholders, or any value at all and us.
We have had a history of losses and our ability to grow
sales and achieve profitability are unpredictable.
We have incurred losses
since our incorporation. As of June 30, 2020, we had an accumulated deficit of $79.2 million and incurred total comprehensive losses
of approximately $14.2 million, $6.6 million and $3.6 million in the years ended December 31, 2019 and 2018 and the six months
ended June 30, 2020, respectively. Our ability to reach profitability depends on many factors, which include:
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increasing revenues; and
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There can be no assurance
that we will be able to successfully implement our business plan, meet our challenges and become profitable in the future.
Changes in laws and regulations related
to the Internet or changes in the Internet infrastructure itself may diminish the demand for our products and services and could
harm our business.
The future success
of the online businesses of our subsidiaries depends upon the continued use of the internet as a primary medium for commerce, communication,
and business applications. Federal, state, or foreign government bodies or agencies have in the past adopted, and may in the future
adopt, laws or regulations affecting the use of the Internet as a commercial medium. The adoption of any laws or regulations that
could reduce the growth, popularity, or use of the Internet, including laws or practices limiting Internet neutrality, could decrease
the demand for, or the usage of, services provided by Eventer and Gix increase the cost of doing business and harm our results
of operations. Changes in these laws or regulations could require our subsidiaries and us to modify our offerings, or certain aspects
of them, in order to comply with these changes. In addition, government agencies or private organizations have imposed and may
impose additional taxes, fees, or other charges for accessing the Internet or commerce conducted via the Internet. These laws or
charges could limit the growth of Internet-related commerce or communications generally, or result in reductions in the demand
for Internet-based products such as those of our subsidiaries. In addition, the use of the Internet as a business tool could be
harmed due to delays in the development or adoption of new standards and protocols to handle increased demands of Internet activity,
security, reliability, cost, ease-of-use, accessibility, and quality of service. Further, the applicability and demand for services
and products offered by our subsidiaries and us depend on the quality of our users’ access to the Internet. Certain features
of our offerings, and specifically those of Eventer, may require significant bandwidth and fidelity to work effectively. Internet
access is frequently provided by companies that have significant market power that could take actions that degrade, disrupt, or
increase the cost of access to our services, which would negatively impact our results. The Internet’s performance and its acceptance
as a business and commerce tool have been harmed by “viruses,” “worms” and similar malicious programs,
and the Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure.
If the Internet’s use is adversely affected by these issues, demand for the services provided by our subsidiaries and us
could decline.
The global outbreak
of COVID-19 (coronavirus) may negatively impact the global economy in a significant manner for an extended period of time, and
also adversely affect our operating results in a material manner.
The COVID-19 pandemic,
including the efforts to combat it, has had and may continue to have a widespread effect on our business. In response to the pandemic,
public health authorities and local and national governments have implemented measures that have and may continue to impact our
business, including voluntary or mandatory quarantines, restrictions on travel and orders to limit the activities of non-essential
workforce personnel. As of the date of this registration statement, the COVID-19 (coronavirus) pandemic had made a significant
impact on global economic activity, with governments around the world, including Israel, having closed office spaces, public transportation
and schools, and restricting travel. These closures and restrictions, if continued for a sustained period, could trigger a global
recession that could negatively impact our business in a material manner. We are actively monitoring the pandemic and we are taking
any necessary measures to respond to the situation in cooperation with the various stakeholders.
In light of the evolving
nature of the pandemic and the uncertainty it has produced around the world, we do not believe it is possible to predict with precision
the pandemic’s cumulative and ultimate impact on our future business operations, liquidity, financial condition and results
of operations. For example, travel restrictions have adversely affected our ability to timely achieve certain milestones included
in our Golden Grand Agreement and has delayed the recognition revenues deriving therefrom. These travel restrictions have also
impacted our sales and marketing efforts and those of our subsidiaries.
The extent of the impact
of the pandemic on our business and financial results will depend largely on future developments, including the duration of the
spread of the outbreak and any future “waves” of the outbreak, globally and specifically within Israel and the United
States. In addition, the extent of the impact on capital and financial markets, foreign currencies exchange and governmental or
regulatory orders that impact our business are highly uncertain and cannot be predicted. If economic conditions generally or in
the industries in which we operate specifically, worsen from present levels, our results of operations could be adversely affected
and our financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new
government actions or restrictions, new information that may emerge concerning the severity, longevity and impact of the COVID-19
pandemic on economic activity.
Additionally, concerns
over the economic impact of the pandemic have caused extreme volatility in financial markets, which has adversely impacted and
may continue to adversely impact our share price and our ability to access capital markets. To the extent the pandemic or any worsening
of the global business and economic environment as a result adversely affects our business and financial results, it may also have
the effect of heightening many of the other risks described in this “Risk Factors” section and the risk factors in
our Annual Report on Form 20-F for the year ended December 31, 2019.
Unfavorable conditions in the industry
of our subsidiaries and the global economy in general could limit their ability to grow their business and negatively affect their
operations results.
The results of operations
of our subsidiaries may vary based on the impact of changes in the industry or the global economy on their customers or the subsidiaries.
Our subsidiaries’ businesses revenue growth and potential profitability and our subsidiaries depend on the demand for our
services and products, including the demand online and offline events and advertising. Current or future economic uncertainties
or downturns could adversely affect our business and results of operations. Negative conditions in the global economy or individual
markets, including changes in gross domestic product growth, financial and credit market fluctuations, political turmoil, natural
catastrophes, warfare and terrorist attacks in Israel, the United States or elsewhere, could cause a decrease in business investments,
leisure related spending, event organization and organization spend on marketing and advertising which could negatively affect
our business.
Pro, Purex, Gix and Eventer each
rely on key employees and highly skilled personnel, and, if they are unable to attract, retain or motivate qualified personnel,
they may not be able to operate its business effectively.
The success of Gix
and Eventer depends largely on the continued employment of their senior management and key personnel who can effectively operate
its business and its ability to attract and retain skilled employees. Competition for highly skilled management, technical, research
and development, and other employees is intense, and Gix and Eventer may not be able to attract or retain highly qualified personnel
in the future. If any of the key employees of Gix and Eventer leave or are terminated, and such companies fail to manage a transition
to new personnel effectively, or if they fail to attract and retain qualified and experienced professionals on acceptable terms,
the business, financial condition and results of operations of Gix and Eventer could be adversely affected.
We, and our subsidiaries, are subject
to stringent and changing laws, regulations, standards, and contractual obligations related to privacy, data protection, and data
security. The actual or perceived failure to comply with such obligations could harm our business.
Our subsidiaries and
we receive, collect, store, process, transfer, and use personal information and other data relating to users of our products, our
employees and contractors, and other persons. We have legal and contractual obligations regarding the protection of confidentiality
and appropriate use of certain data, including personal information. We are subject to numerous federal, state, local, and international
laws, directives, and regulations regarding privacy, data protection, and data security and the collection, storing, sharing, use,
processing, transfer, disclosure, and protection of personal information and other data, the scope of which are changing, subject
to differing interpretations, and may be inconsistent among jurisdictions or conflict with other legal and regulatory requirements.
We are also subject to certain contractual obligations to third parties related to privacy, data protection and data security.
We strive to comply with our applicable policies and applicable laws, regulations, contractual obligations, and other legal obligations
relating to privacy, data protection, and data security to the extent possible. However, the regulatory framework for privacy,
data protection and data security worldwide is, and is likely to remain for the foreseeable future, uncertain and complex, and
it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that we do not anticipate
or that is inconsistent from one jurisdiction to another and may conflict with other legal obligations or our practices. Further,
any significant change to applicable laws, regulations or industry practices regarding the collection, use, retention, security
or disclosure of data, or their interpretation, or any changes regarding the manner in which the consent of users or other data
subjects for the collection, use, retention or disclosure of such data must be obtained, could increase our costs and require us
to modify our services and features, possibly in a material manner, which we may be unable to complete, and may limit our ability
to store and process user data or develop new services and features.
If our subsidiaries
or we were found in violation of any applicable laws or regulations relating to privacy, data protection, or security, our business
may be materially and adversely affected and we would likely have to change our business practices and potentially the services
and features available through our platform. In addition, these laws and regulations could impose significant costs on us and could
constrain our ability to use and process data in manners that may be commercially desirable. In addition, if a breach of data security
were to occur or to be alleged to have occurred, if any violation of laws and regulations relating to privacy, data protection
or data security were to be alleged, or if we had any actual or alleged defect in our safeguards or practices relating to privacy,
data protection, or data security, our solutions may be perceived as less desirable, and our business, prospects, financial condition,
and results of operations could be materially and adversely affected.
We also expect that
there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security
proposed and enacted in various jurisdictions. For example, the data protection landscape in the European Union (“EU”)
is currently evolving, resulting in possible significant operational costs for internal compliance and risks to our business. The
EU adopted the General Data Protection Regulation or GDPR, which became effective in May 2018, and contains numerous requirements
and changes from previously existing EU laws, including more robust obligations on data processors and heavier documentation requirements
for data protection compliance programs by companies. Among other requirements, the GDPR regulates the transfer of personal data
subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including
the United States. Failure to comply with the GDPR could result in penalties for noncompliance (including possible fines of up
to the greater of €20 million and 4% of our global annual turnover for the preceding financial year for the most serious
violations, as well as the right to compensation for financial or non-financial damages claimed by individuals under
Article 82 of the GDPR).
In addition to the
GDPR, the European Commission has another draft regulation in the approval process that focuses on a person’s right to conduct
a private life. The proposed legislation, known as the Regulation of Privacy and Electronic Communications, or ePrivacy Regulation,
would replace the current ePrivacy Directive. Originally planned to be adopted and implemented at the same time as the GDPR, the
ePrivacy Regulation is still being negotiated.
Additionally, in June
2018, California passed the California Consumer Privacy Act, or CCPA, which provides new data privacy rights for California consumers
and new operational requirements for covered companies. Specifically, the CCPA provides that covered companies must provide new
disclosures to California consumers and afford such consumers new data privacy rights that include the right to request a copy
from a covered company of the personal information collected about them, the right to request deletion of such personal information,
and the right to request to opt-out of certain sales of such personal information. The CCPA became operative on January 1,
2020. The California Attorney General can enforce the CCPA, including seeking an injunction and civil penalties for violations.
The CCPA also provides a private right of action for certain data breaches expected to increase data breach litigation. The CCPA
may require us to modify our data practices and policies and to incur substantial costs and expenses in order to comply. A new
privacy law, the California Privacy Rights Act, or CPRA, was recently certified by the California Secretary of State to appear
on the ballot for the November 3, 2020 election. If this initiative is approved by California voters, the CPRA would significantly
modify the CCPA, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort
to comply. More generally, some observers have noted the CCPA could mark the beginning of a trend toward more stringent privacy
legislation in the United States, which could increase our potential liability and adversely affect our business. Further, in March
2017, the United Kingdom (“U.K.”) formally notified the European Council of its intention to leave the EU pursuant
to Article 50 of the Treaty on European Union (“Brexit”). The U.K. ceased to be an EU Member State on January 31,
2020, but enacted a Data Protection Act substantially implementing the GDPR, effective in May 2018, which was further amended to
align more substantially with the GDPR following Brexit. It is unclear how U.K. data protection laws or regulations will develop
in the medium to longer-term and how data transfers to and from the U.K. will be regulated. Some countries also are considering
or have enacted legislation requiring local storage and processing of data that could increase the cost and complexity of delivering
our services.
In addition, failure
to comply with the Israeli Privacy Protection Law 5741-1981, and its regulations as well as the guidelines of the Israeli Privacy
Protection Authority, may expose us to administrative fines, civil claims (including class actions), and in certain cases, criminal
liability. Current pending legislation may result in a change in the current enforcement measures and sanctions.
Any failure or perceived
failure by our subsidiaries or by us to comply with our posted privacy policies, our privacy-related obligations to users or other
third parties, or any other legal obligations or regulatory requirements relating to privacy, data protection, or data security
may result in governmental investigations or enforcement actions, litigation, claims, or public statements against us by consumer
advocacy groups or others and could result in significant liability, cause our users to lose trust in us, and otherwise materially
and adversely affect our reputation and business. Furthermore, the costs of compliance with, and other burdens imposed by, the
laws, regulations, other obligations, and policies that are applicable to the businesses of our users may limit the adoption and
use of, and reduce the overall demand for, our platform. Additionally, if third parties we work with violate applicable laws, regulations,
or contractual obligations, such violations may put our users’ data at risk, could result in governmental investigations
or enforcement actions, fines, litigation, claims, or public statements against us by consumer advocacy groups or others and could
result in significant liability, cause our users to lose trust in us, and otherwise materially and adversely affect our reputation
and business. Further, public scrutiny of, or complaints about, technology companies or their data handling or data protection
practices, even if unrelated to our business, industry, or operations, may lead to increased scrutiny of technology companies,
including us, and may cause government agencies to enact additional regulatory requirements, or to modify their enforcement or
investigation activities, which may increase our costs and risks.
We have signed the Joint Venture
Agreement to commercialize three modular EV micro mobility vehicles but we have not yet dedicated significant time or resources
to this joint venture and, to date, it is not a material part of our business.
On February 19, 2021,
we entered into the Joint Venture Agreement, with Amir Zaid and Weijian Zhou and our wholly-owned subsidiary Charging Robotics,
pursuant to which we will enter into a new joint venture agreement for the purpose of developing and commercializing three modular
electric vehicle (EV) micro mobility vehicles for urban individual use and “last mile” cargo delivery. We shall invest
$250,000 upon the closing of the Joint Venture Agreement and may invest future sums based on the meeting of milestones.
As of the date hereof,
we have not yet dedicated significant time or resources to the joint venture, and we do not consider the joint venture a material
part of our business. There is no guarantee that the joint venture will meet the milestones necessary for us to commit additional
funds to the project, nor is there a guarantee that, even if such milestones are met, that we will be able to commercialize any
EV or micro mobility vehicles that are profitable, if at all.
Risks Related to Our Subsidiaries, Pro
and Purex, Business
Our e-commerce operations are reliant
on the Amazon marketplace and fulfillment by Amazon and changes to the marketplace, Amazon services and their terms of use may
harm Pro and Purex business.
Pro and Purex products
are sold predominantly on the Amazon marketplace, with the fulfillment aspect of the operations carried out entirely by Amazon
utilizing the fulfilled by Amazon, or FBA, model. In order to continue to utilize the Amazon Marketplace and FBA, Pro and Purex
must comply with the applicable policies and terms of use relating to these services. Such policies and terms of use may be altered
or amended at Amazon’s sole discretion, including changes regarding the cost of securing these services, and changes that
increase the burden of compliance and requirements, may cause Pro and Purex to alter their business model in order to comply, cause
us to incur additional costs, and the results of Pro and Purex business can be negatively impacted. Non-compliance with applicable
terms of use and policies can result in the removal of one or more products from the market place and suspension of fulfillment
services which would have an adverse effect on Pro and Purex results of operations. Although Pro and Purex exert efforts in order
to ensure ongoing compliance and no notices of non-compliance have been received to date, we cannot assure that events of this
kind will occur in the future.
Certain aspects of Pro and Purex
business is reliant on foreign manufacturing and international sales which expose us to risks that could impeded plans of expansion
and growth.
The manufacturers
or the products sold on Pro and Purex online stores are located in China. As such, Pro and Purex business is
affected by inter-country trade agreements and tariffs. Based on recent U.S. administrative policy there are, and may be additional,
changes to existing trade agreements, greater restrictions on free trade and significant increases in tariffs on goods imported
into the United States, particularly those manufactured in China, Mexico and Canada. Future actions of the U.S. administration
and that of foreign governments, including China, with respect to tariffs or international trade agreements and policies remains
currently unclear. The escalation of a trade war, tariffs, retaliatory tariffs or other trade restrictions on products and materials
imported by Pro and Purex from China may impede their supply chain and ability to provide products which could adversely affect
their business, financial condition, operating results and cash flows.
Potential growth of Pro and Purex
is based on international expansion, making us susceptible to risks associated with international sales and operations.
Pro and Purex currently
sell products exclusively in the U.S. and they intend to expand their operations to reach new markets and localities. For example,
Pro has completed the requisite processes in order to offer its products through the Amazon marketplace to the United Kingdom,
major European countries and Australia. Conducting international operations subjects us to certain risks which include localization
of solutions and products and adapting them to local practices and regulatory requirements, exchange rate fluctuations and unexpected
changes in tax, trade laws, tariffs, governmental controls and other trade restriction. To the extent that Pro and Purex do not
succeed in expanding their operations internationally and managing the associated legal and operational risks, their results of
operations may be adversely affected.
Pro and Purex operating results are
subject to seasonal fluctuations.
The
e-commerce business is seasonal in nature and the fourth quarter is a significant period for Pro and Purex operating results due
to the holiday season. As a result, revenue and income (loss) from operations generally decline (increase) in the first quarter
sequentially from the fourth quarter of the previous year. Any disruption in Pro and Purex ability to process and fulfill customer
orders during the fourth quarter could have a negative effect on their quarterly and annual operating results. For example, if
a large number of customers purchase Pro and Purex products in a short period of time due to increased holiday demand, inefficient
management of Pro and Purex inventory may prevent them from efficiently fulfilling orders, which may reduce sales and harm their
brands.
Risks Related to the Business of Eventer
Eventer’s business is highly
sensitive to public tastes. It is dependent on its ability to secure popular artists and other live music events. Eventer’s
ticketing clients may be unable to anticipate or respond to consumer preferences changes, which may result in decreased demand
for its services.
Eventer’s business
is highly sensitive to rapidly changing public tastes and is dependent on the availability of popular artists and events. Eventer’s
live entertainment business depends on its ability to anticipate the tastes of consumers and offer events that appeal to them.
Since Eventer relies on unrelated parties to create and perform at live music events as well as online events, any lack of availability
of popular artists could limit its ability to generate revenue. If artists do not choose to perform, or if Eventer cannot secure
performances and events to be managed and ticketed through its platform, Eventer’s business would be adversely affected.
Furthermore, Eventer’s business could be adversely affected if artists utilizing its platform do not tour or perform as frequently
as anticipated, or if such tours or performances are not as widely attended by fans as anticipated due to changing tastes, general
economic conditions or otherwise.
Eventer
faces intense competition in the online and offline event and ticketing industries. It may not be able to maintain or increase
its current revenue, which could adversely affect its business, financial condition, and operations results.
Eventer is active in
highly competitive industries, and it may not be able to maintain or increase its current revenue due to such competition. Online
and offline leisure events compete with other entertainment forms for consumers’ discretionary spending and within this industry,
Eventer faces competition from other promoters and venue operators. Eventer’s competitors compete for relationships with
popular music artists and other service providers who have a history of being able to book artists for concerts and events. These
competitors may engage in more extensive development efforts, undertake more far-reaching marketing campaigns, adopt more aggressive
pricing policies and make more attractive offers to existing and potential artists. Due to increasing artist influence and competition
to attract and maintain artist clients for events managed on Eventer’s platform, it may enter into agreements on terms that
are less favorable to it, which could negatively impact the number of commissions collected from ticket sales which may adversely
affect its financial results. Eventer’s competitors may develop services and advertising options equivalent to or superior
to those they provide or achieve greater market acceptance and brand recognition than it achieves. Across the live music and entertainment
industry, it is possible that new competitors may emerge and rapidly acquire significant market share.
Eventer’s business
faces significant competition from other ticketing service providers to continuously secure new and retain existing clients. Additionally,
it faces significant and increasing challenges from companies that sell self-ticketing systems and clients who choose to self-ticket
by integrating such systems into their existing operations or the acquisition of primary ticket services providers. The advent
of new technology, particularly as it relates to online ticketing, has amplified this competition. The intense competition that
Eventer faces in the ticketing industry could cause the volume of ticketing services to decline.
The success
of Eventer’s event management and ticketing solutions and other operations depends, in part, on the integrity of its systems
and infrastructure, as well as affiliate and third-party computer systems, Wi-Fi, and other communication systems. System interruption
and the lack of integration and redundancy in these systems and infrastructure may have an adverse impact on its business, financial
condition, and operations results.
System interruption
and the lack of integration and redundancy in the information systems and infrastructure, utilized for Eventer’s platform
as well as other computer systems and third-party software, Wi-Fi and other communications systems service providers on which Eventer
relies, may adversely affect its ability to operate the platform, process and fulfill transactions, respond to customer inquiries
and generally maintain cost-efficient operations. Such interruptions could occur by virtue of natural disasters, malicious actions
such as hacking or acts of terrorism or war, or human error. In addition, the loss of some or all of certain key personnel could
require Eventer to expend additional resources to continue to maintain its software and systems and could subject it to systems
interruptions. The infrastructure required to operate Eventer’s platform requires an ongoing investment of time, money, and
effort to maintain or refresh hardware and software and ensure it remains at a level capable of servicing the demand and volume
of business it receives. Failure to do so may result in system instability, degradation in performance, or unfixable security vulnerabilities
that could adversely impact both the business and the consumers utilizing Eventer’s services.
While Eventer has backup
systems for certain aspects of its operations, disaster recovery planning by its nature cannot be sufficient for all eventualities.
In addition, Eventer may not have adequate insurance coverage to compensate for losses from a major interruption. If any of these
adverse events were to occur, it could adversely affect Eventer’s business, financial condition, and operations results.
Eventer’s
success depends, in significant part, on entertainment and leisure events and economic and other factors adversely affecting such
events could have a material adverse effect on its business, financial condition and results of operations.
A decline in attendance
at or reduction in the number of entertainment and leisure events may have an adverse effect on Eventer’s revenue and operating
income. In addition, during periods of economic slowdown and recession, many consumers have historically reduced their discretionary
spending and advertisers have reduced their advertising expenditures. The impact of economic slowdowns on Eventer’s business
is difficult to predict, but they may result in reductions in ticket sales and the ability to generate revenue. The risks associated
with Eventer’s businesses may become more acute in periods of a slowing economy or recession, which may be accompanied by
a decrease in attendance at entertainment and leisure events. Many of the factors affecting the number and availability of entertainment
and leisure events are beyond Eventer’s control. For example, COVID-19 has led to lockdowns and governmental restrictions
on live entertainment and leisure events as well as restrictions regarding the attendance of such events. Although Eventer’s
platform supports the management and ticketing of online events, there is no assurance that online events will generate demand
on par with live events, which could adversely affect Eventer’s operations results.
Eventer’s
business depends on discretionary consumer and enterprise spending. Many factors related to corporate spending and discretionary
consumer spending, including economic conditions affecting disposable consumer income such as unemployment levels, fuel prices,
interest rates, changes in tax rates and tax laws that impact companies or individuals, and inflation can significantly impact
Eventer’s operating results. Business conditions, as well as various industry conditions, including corporate marketing and
promotional spending and interest levels, can also significantly impact Eventer’s operating results. These factors can affect
attendance at online and offline events, advertising, and spending, as well as the financial results of venues, events, and the
industry. Negative factors such as challenging economic conditions and public concerns over terrorism and security incidents, particularly
when combined, can impact corporate and consumer spending and one negative factor can result in more than another. There can be
no assurance that consumer and corporate spending will not be adversely impacted by current economic conditions or by any future
deterioration in economic conditions, thereby possibly impacting Eventer’s operating results and growth.
If Eventer
fails to maintain and improve the quality of its platform, it may not be able to attract clients seeking to manage their online
and offline events or facilitate ticket sales for events.
To satisfy both clients
seeking to manage online and offline events through Eventer’s platform, Eventer needs to continue to improve the user experience
and innovate and introduce features and services that both event managers and ticket purchasers find useful cause them to use Eventer’s
platform more frequently. In addition, Eventer needs to adapt, expand and improve its platform and user interfaces to keep up with
changing user preferences. Eventer invests substantial resources in researching and developing new features and enhancing its platform
by incorporating these new features, improving the functionality, and adding other improvements to meet users’ evolving demands.
The success of any enhancements or improvements to Eventer’s platform or any new features depends on several factors, including
timely completion, adequate quality testing, integration with technologies on the platform and overall market acceptance. Because
further development of Eventer’s platform is complex, challenging, and dependent upon an array of factors, the timetable
for the release of new features and enhancements to Eventer’s platform is difficult to predict, and it may not offer new
features as rapidly as users of its platform require or expect.
It is difficult to
predict the problems Eventer may encounter in introducing new features to its platform. Eventer may need to devote significant
resources to creating, supporting, and maintaining these features. Eventer provides no assurance that its initiatives to improve
the user experience will be successful. Eventer also cannot predict whether users will well receive any new features or whether
improving its platform will be successful or sufficient to offset the costs incurred to offer these new features. If Eventer is
unable to improve or maintain its platform’s quality, its business, prospects, financial condition, and results of operations could
be materially and adversely affected.
If our Eventer subsidiary fails to
offer high-quality customer service, their brand and reputation could suffer.
Eventer’s
clients rely on the platform to plan and manage online and offline events and expect a high level of user experience and customer
service relating to both the event management functions of the platform as well as ticket sales. Providing such quality service
is imperative for ensuring customer success, sustaining sales growth, and developing Eventer’s business. To the extent that
Eventer cannot provide real-time support for users of its platforms, the platform may become less attractive to potential users,
and its results of operations may be harmed.
Errors,
defects, or disruptions in Eventer’s platform could diminish its brand, subject it to liability, and materially and adversely
affect its business, prospects, financial condition, and operations results.
Any errors, defects,
or disruptions in Eventer’s platform or other performance problems with its platform could harm its brand and may damage
the businesses of artists and clients that manage events on its platform. Eventer’s online systems, including its website
and mobile apps, could contain undetected errors, or “bugs,” that could adversely affect their performance. Additionally,
Eventer regularly updates and enhances its website, platform, and other online systems and introduces new versions of its software
products and apps. These updates may contain undetected errors when first introduced or released, which may cause disruptions in
its services and may, as a result, cause Eventer to lose market share, and its brand, business, prospects, financial condition
and results of operations could be materially and adversely affected.
Eventer
is subject to escrow, payment services, and money transmitter regulations that may materially and adversely affect its business.
Eventer relies on third-party
to collect funds from ticket purchasers, remit payments to clients that manage events on its platform, and hold funds in connection
with ticket purchases. Although Eventer believes that by working with third parties, its operations comply with existing applicable
laws and regulatory requirements related to escrow, money transmission, handling or moving of money, existing laws or regulations
may change, and interpretations of existing laws regulations may also change.
As a result, Eventer
could be required to be licensed as an escrow agent or a money transmitter (or other similar licensees) in jurisdictions in which
it is active or may choose to obtain such a license even if not required. As a result, Eventer may be required to register as a
money services business under applicable laws and regulations. It is also possible that Eventer could become subject to regulatory
enforcement or other proceedings in those jurisdictions with escrow, money transmission, or other similar statutes or regulatory
requirements related to the handling or moving of money, which could, in turn, have a significant impact on its business, even
if we were to ultimately prevail in such proceedings. Any developments in the laws or regulations related to escrow, money transmission,
or the handling or moving of money or increased scrutiny of its business may lead to additional compliance costs and administrative
overhead.
Eventer faces payment and fraud
risks that could materially and adversely affect its business.
Requirements applicable
to Eventer’s platform relating to user authentication and fraud detection are complex. If Eventer’s security measures
do not succeed, Eventer’s business may be adversely affected. In addition, bad actors worldwide use increasingly sophisticated
methods to engage in illegal activities involving personal data, such as unauthorized use of another’s identity or payment
information, unauthorized acquisition or use of credit or debit card details, and other fraudulent use of another’s identity
or information. This could result in any of the following, each of which could adversely affect Eventer’s business:
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Eventer may be held liable for the unauthorized use of a credit card or bank account number by ticket purchasers and be required by card issuers or banks to pay a chargeback or return fee, and if chargeback or return rate becomes excessive, credit card networks may also require Eventer to pay fines or other fees;
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Eventer may be subject to additional risk and liability exposure, including negligence, fraud or other claims, if employees or third-party service providers misappropriate user information for their own gain or facilitate the fraudulent use of such information;
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Eventer may suffer reputational damage as a result of the occurrence of any of the above.
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Despite measures taken
by Eventer to detect and reduce the risk of this kind of conduct, it cannot ensure that any of its measures will stop illegal or
improper uses of its platform. Eventer may receive complaints from users and other third parties concerning misuse of its platform
in the future. Even if these claims do not result in litigation or are resolved in Eventer’s favor, these claims, and the
time and resources necessary to resolve them, could divert the resources of Eventer’s management and materially and adversely
affect its business, prospects, financial condition and results of operations.
Eventer uses open source software,
which could negatively affect its ability to offer its platform and subject it to litigation or other actions.
Eventer uses substantial
amounts of open source software in its platform and may use more open source software in the future. From time to time, there have
been claims challenging both the ownership of open source software against companies that incorporate open source software into
their products and whether such incorporation is permissible under various open source licenses. U.S. and Israeli courts have not
interpreted the terms of many open source licenses, and there is a risk that these licenses could be construed in a way that could
impose unanticipated conditions or restrictions on its ability to commercialize its platform. As a result, Eventer could be subject
to lawsuits by parties claiming ownership of what we believe to be open source software, or breach of open source licenses. Litigation
could be costly for Eventer to defend, have a negative effect on its results of operations and financial condition, or require
it to devote additional research and development resources to change its platform. In addition, if Eventer were to combine its
proprietary source code or software with open source software in a certain manner, it could, under certain of the open source licenses,
be required to release the source code of its proprietary software to the public. This would allow its competitors to create similar
products with less development effort and time. If Eventer inappropriately uses open source software or the license terms for open
source software that its uses change, Eventer may be required to re-engineer its platform, or certain aspects of it, incur additional
costs, discontinue the availability of certain features, or take other remedial actions.
In addition to risks
related to license requirements, open source software usage can lead to greater risks than use of third-party commercial software,
as open source licensors generally do not provide warranties or assurance of title or controls on origin of the software. In addition,
many of the risks associated with usage of open source software, such as the lack of warranties or assurances of title, cannot
be eliminated and could, if not properly addressed, negatively affect Eventer’s business. Eventer has established processes
to help alleviate these risks, but it cannot be sure that all of its use of open source software is in a manner that is consistent
with its current policies and procedures or will not subject Eventer to liability.
To the extent Eventer’s security
measures are compromised, its platform may be perceived as not being secure. This may result in customers curtailing or ceasing
their use of Eventer’s platform, its reputation being harmed, Eventer incurring significant liabilities, and adverse effects
on its results of operations and growth prospects.
Eventer’s operations
involve the storage and transmission of artist and ticket purchaser data or information. Cyberattacks and other malicious internet-based
activity continue to increase, and cloud-based platform providers of services are expected to continue to be targeted. Threats
include traditional computer “hackers,” malicious code (such as viruses and worms), employee theft or misuse and denial-of-service
attacks. Sophisticated nation-states and nation-state supported actors now engage in such attacks, including advanced persistent
threat intrusions. The ticket sales solution included in Eventer’s platform stores credit card data and other customer personal
information. Hackers and malicious actors may target Eventer in order to obtain credit card information. Despite significant efforts
to create security barriers to such threats, it is virtually impossible for Eventer to entirely mitigate these risks. If Eventer’s
security measures are compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently
obtained log-in credentials, or otherwise, Eventer’s reputation could be damaged, its business may be harmed, and it could
incur significant liability. Eventer may be unable to anticipate or prevent techniques used to obtain unauthorized access or to
compromise its systems because they change frequently and are generally not detected until after an incident has occurred. As Eventer
relies on third-party and public-cloud infrastructure, it will depend in part on third-party security measures to protect against
unauthorized access, cyberattacks, and the mishandling of customer data. A cybersecurity event could have significant costs, including
regulatory enforcement actions, litigation, litigation indemnity obligations, remediation costs, network downtime, increases in
insurance premiums, and reputational damage. Many companies that provide cloud-based services have reported a significant increase
in cyberattack activity since the beginning of the COVID-19 pandemic.
Risks Related to Gix’s Business
and Industry
Gix’s advertising customers
may reduce or terminate their business relationship with Gix at any time. If customers representing a significant portion of Gix’s
revenue reduce or terminate their relationship with Gix, it could have a material adverse effect on Gix’s business, its results
of operations and financial condition.
Gix generally does
not enter into long-term contracts with its advertising customers, and such customers do business with Gix on a non-exclusive basis.
In most cases, Gix’s customers may terminate or reduce the scope of their agreements with little or no penalty or notice.
Accordingly, Gix’s business is highly vulnerable to adverse economic conditions, market evolution, development of new or
more compelling offerings by Gix’s competitors and development by Gix’s advertising customers of in-house replacement
services. Any reduction in spending by, or loss of, existing or potential advertisers by Gix would negatively impact Gix’s
revenue and operating results.
Due to rapid changes in the Internet
and the nature of services, it is difficult to accurately predict Gix’s future performance and may be difficult to increase
revenue or profitability.
As the digital advertising
ecosystem is dynamic, seasonal and challenging, it is hard to predict Gix’s future performance and make predictions, particularly
regarding the effect of Gix’s efforts to aggressively increase the distribution and profitability of its services and products.
If Gix is unable to continuously improve its systems and processes, adapt to the changing and dynamic needs of its customers and
align its expenses with the revenue level, it will impair Gix’s ability to structure its offerings to be compelling and profitable.
Increased availability of advertisement-blocking
technologies could limit or block the delivery or display of advertisements by Gix solutions, which could undermine Gix’s
business’s viability.
Advertisement-blocking
technologies, such as mobile apps, anti-virus software or browser extensions that limit or block the delivery or display of advertisements,
are currently available for desktop and mobile users. Furthermore, new browsers and operating systems, or updates to current browsers
or operating systems, offer native advertisement-blocking technologies to their users. The more such technologies become widespread,
Gix’s ability to serve advertisements to users may be impeded, and its business financial condition and results of operations
may be adversely affected.
Large and
established internet and technology companies, such as Google and Facebook, play a substantial role in the digital advertising
market and may significantly impair Gix’s ability to operate in this industry.
Google
and Facebook are substantial players in the digital advertising market and account for a large portion of the digital advertising
budgets, along with other smaller players. Such high concentration subjects Gix to unilateral changes with respect to advertising
on their respective platforms, which may be more lucrative than alternative methods of advertising or partnerships with other publishers
that are not subject to such changes. Furthermore, Gix could have limited ability to respond to, and adjust for, changes implemented
by such players.
These
companies, along with other large and established Internet and technology companies, may also leverage their power to make changes
to their web browsers, operating systems, platforms, networks or other products or services in a way that impacts the entire digital
advertising marketplace.
The consolidation
among participants within the digital advertising market could have a material adverse impact on Gix and accordingly, its business
and results of operations.
The
digital advertising industry has experienced substantial evolution and consolidation in recent years and Gix expects this trend
to continue, increasing the capabilities and competitive posture of larger companies, particularly those that are already dominant
in various ways, and enabling new or stronger competitors to emerge. This consolidation could adversely affect Gix’s business
in a number of ways, including: (i) Gix’s customers or partners could acquire or be acquired by Gix’s competitors causing
them to terminate their relationship with Gix; (ii) Gix’s competitors could improve their competitive position or broaden
their offerings through strategic acquisitions or mergers.
The advertising
industry is highly competitive. If Gix cannot compete effectively in this market, Gix’s revenues are likely to decline.
Gix
faces intense competition in the marketplace. Gix operates in a dynamic market that is subject to rapid development and introduction
of new technologies, products and solutions, changing branding objectives, evolving customer demands and industry guidelines, all
of which affect Gix’s ability to remain competitive. There are a large number of digital media companies and advertising
technology companies that offer products or services similar to Gix’s and that compete with Gix for finite advertising budgets
and for limited inventory from publishers. There is also a large number of niche companies that are competitive with Gix, as they
provide a subset of the services that Gix provides. Some of Gix’s existing and potential competitors may be better established,
benefit from greater name recognition may offer solutions and technologies that Gix does not offer or that are more evolved than
Gix, and may have significantly more financial, technical, sales, and marketing resources than Gix does. In addition, some competitors,
particularly those with a larger and more diversified revenue base and a broader offering, may have greater flexibility than Gix
does to compete aggressively on the basis of price and other contract terms as well as respond to market changes. Additionally,
companies that do not currently compete with Gix in this space may change their services to be competitive if there is a revenue
opportunity, and new or stronger competitors may emerge through consolidations or acquisitions. If Gix’s digital advertising
platform and solutions are not perceived as competitively differentiated or Gix fails to develop adequately to meet market evolution,
Gix could lose customers and market share or be compelled to reduce Gix’s prices and harm Gix’s operational results.
If the demand
for digital advertising does not continue to grow or customers do not embrace Gix’s solutions, this could have a material
adverse effect on Gix’s business and financial condition.
If
customers do not embrace Gix’s solutions, or if Gix’s integration with advertising networks is not successful, or if
there is a reduction in general demand for digital advertising, in spend for certain channels or solutions, or the demand for Gix’s
specific solutions and offerings is decreased, Gix’s revenues could decline or otherwise, Gix’s business may be adversely
affected.
Gix’s
business is susceptible to seasonality, unexpected changes in campaign size, and prolonged cycle time, which could affect its business,
results of operations and ability to repay indebtedness when due.
The
revenue of Gix’s advertising business is affected by a number of factors, and, as a result, Gix’s profit from these
operations is seasonal, including:
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Product and service revenues are influenced by political advertising, which generally occurs every two years;
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In any single period, product and service revenues and delivery costs are subject to significant variation based on changes in the volume and mix of deliveries performed during such period;
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Revenues are subject to the changes in brand marketing trends, including when and where brands choose to spend their money in a given year;
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Advertising customers generally retain the right to supplement, extend, or cancel existing advertising orders at any time prior to their completion, and Gix has no control over the timing or magnitude of these revenue changes; and
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Relative complexity of individual advertising formats, and the length of the creative design process.
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Gix’s
advertising business depends on Gix’s ability to collect and use data, and any limitation on the collection and use of this
data could significantly diminish the value of Gix’s solutions and cause Gix to lose customers, revenue and profit.
In
most cases, when Gix delivers an advertisement, Gix is often able to collect certain information about the content and placement
of the ad, the relevancy of such ad to a user, and the interaction of the user with the ad, such as whether the user viewed or
clicked on the ad or watched a video. As Gix collects and aggregates data provided by billions of ad impressions and third-party
providers, Gix analyzes the data in order to measure and optimize the placement and delivery of Gix’s advertising inventory
and provide cross-channel advertising capabilities.
Gix
publishers or advertisers might decide not to allow Gix to collect some or all of this data or might limit Gix’s use of this
data. Gix’s ability to either collect or use data could be restricted by new laws or regulations, including the General Data
Protection Regulation (the “GDPR”), in the European Union, which entered into effect in May 2018, and presumably broaden
the definition of personal data to include location data and online identifiers, which are commonly used and collected parameters
in digital advertising, and impose more stringent user consent requirements, changes in technology, operating system restrictions,
requests to discontinue using certain data, restrictions imposed by advertisers and publishers, industry standards or consumer
choice.
If
this happens, Gix may not be able to optimize ad placement for the benefit of Gix’s advertisers and publishers, which could
render Gix’s solutions less valuable and potentially result in loss of clients and a decline in revenues. For more information
on privacy regulation and compliance, see also – “We are subject to stringent and changing laws, regulations, standards,
and contractual obligations related to privacy, data protection, and data security. Our or our subsidiaries’ actual or perceived
failure to comply with such obligations could harm our business”.
Risks Related to our Operations in Israel
Our headquarters, manufacturing facilities,
and administrative offices are located in Israel and, therefore, our results may be adversely affected by military instability
in Israel.
Many of our employees,
including certain management members operate from our offices that are located in Omer, Israel. In addition, a number of our officers
and directors are residents of Israel. Accordingly, political, economic, and military conditions in Israel and the surrounding
region may directly affect our business and operations. In recent years, Israel has been engaged in sporadic armed conflicts with
Hamas, an Islamist terrorist group that controls the Gaza Strip, with Hezbollah, an Islamist terrorist group that controls large
portions of southern Lebanon, and with Iranian-backed military forces in Syria. In addition, Iran has threatened to attack Israel
and may be developing nuclear weapons. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip against
civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and
negatively affected business conditions in Israel. Any hostilities involving Israel or the interruption or curtailment of trade
between Israel and its trading partners could adversely affect our operations and results of operations.
Our commercial insurance
does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently
covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that
this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred
by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely
negatively affect business conditions and could harm our results of operations. Further, in the past, the State of Israel and Israeli
companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with
Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition
or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could
also adversely impact our business.
In addition, many Israeli
citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach
the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military
conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant
call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations
could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially
adversely affect our business, prospects, financial condition and results of operations
There is currently
a level of unprecedented political instability on Israel's domestic front. The Israeli government has been in a transitionary phase
since December 2018 when the Israeli Parliament, or the Knesset, first resolved to dissolve itself and call for new general elections.
Israel held general elections twice in 2019 and once again in 2020. Currently, a fourth election within a two year period is scheduled
for March 23, 2021. The Knesset, for reasons related to this extended political turmoil, failed to pass a budget for the year 2020,
and certain government ministries, certain of which are critical to the operation of our business, operated without necessary resources
and, assuming the current political stalemate persists, may not receive sufficient funding moving forward. This political reality
is further compounded by a budget deficit of NIS 160.3 billion ($50.4 billion) for the year 2020, which is roughly three times
larger than in 2019 and the highest on record since Israel's founding. Given the likelihood that the current situation will not
be resolved during the next calendar year, our ability to conduct our business effectively may be adversely materially affected.
Risks
Related to an Investment in Our Securities and this Offering
The market
price of our ADSs has been, and may continue to be, highly volatile, and such volatility could cause the market price of our ADSs
to decrease and could cause you to lose some or all of your investment in our ADSs.
The stock market in general and the market prices of the ADSs
on Nasdaq, in particular, are or will be subject to fluctuation, and changes in these prices may be unrelated to our operating
performance. During the first quarter of 2021, the market price of our ADSs fluctuated from a high of $3.69 per ADS to a low of
$1.97 per ADS, and the price of our ADSs continues to fluctuate. We anticipate that the market prices of our securities will continue to
be subject to wide fluctuations. The market price of our securities is, and will be, subject to a number of factors, including:
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announcements of technological innovations or new products by us or others;
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announcements by us of significant acquisitions, strategic partnerships, in-licensing, out-licensing, joint ventures or capital commitments;
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the developments of the businesses and projects of our various subsidiaries;
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expiration or terminations of licenses, research contracts or other collaboration agreements;
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public concern as to the safety of the equipment we sell;
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the volatility of market prices for shares of medical devices companies generally;
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developments concerning intellectual property rights or regulatory approvals;
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variations in our and our competitors’ results of operations;
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changes in revenues, gross profits and earnings announced by the company;
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changes in estimates or recommendations by securities analysts,
if the ADSs are covered by analysts;
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fluctuations in the share price of our publicly traded subsidiaries;
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changes in government regulations or patent decisions; and
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general market conditions and other factors, including factors unrelated to our operating performance.
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These factors may materially and
adversely affect the market price of our securities s and result in substantial losses by our investors.
We will have broad discretion in
the use of the net proceeds of this offering and may not use them effectively.
We intend to use the
net proceeds from this offering for general corporate purposes and working capital. As a result, our management will retain broad
discretion in the allocation and use of the net proceeds of this offering, and investors will be relying on the judgment of our
management with regard to the use of these net proceed, and could spend the proceeds in ways that do not improve our results of
operations or enhance the value of our ADSs. The failure by management to apply these funds effectively could result in financial
losses that could have a material adverse effect on our business, cause the price of our ADS to decline and delay the development
of our Company.
We will
need additional capital in the future. If additional capital is not available, we may not be able to continue to operate our business
pursuant to our business plan or we may have to discontinue our operations entirely.
Regardless of the success
of this offering, we will require additional capital in the future. We have incurred losses in each year since our inception. If
we continue to use cash at our historical rates of use we will need significant additional financing, which we may seek through
a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest
will be diluted, and the terms of any such offerings may include liquidation or other preferences that may adversely affect the
then existing shareholders rights. Debt financing, if available, would result in increased fixed payment obligations and may involve
agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt or making
capital expenditures. If we raise additional funds through collaboration, strategic alliance or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant
licenses on terms that are not favorable to us.
You may experience immediate dilution in book value of
any ADSs you purchase.
Because the price per ADS being offered is substantially higher
than our net tangible book value per ADS, you may suffer substantial dilution in the net tangible book value of any ADSs you purchase
in this offering. After giving effect to the sale by us of ADSs in this offering, based on an aggregate public offering price of
$ per ADS and after deducting the estimated underwriting discounts and commissions and offering expenses payable
by us, our pro forma as adjusted net tangible book value of our ADSs would be approximately $ million, or approximately
$ per ADS, as of June 30, 2020. If you purchase ADSs in this offering, you may suffer immediate and substantial
dilution of our as adjusted net tangible book value of approximately $ per ADS. To the extent outstanding options or warrants are
exercised, you will incur further dilution. See “Dilution” on page S-24 for a more detailed discussion of the
dilution you may incur in connection with this offering.
ADSs representing a substantial percentage of our outstanding
shares may be sold in this offering, which could cause the price of our ADSs and ordinary shares to decline.
Pursuant to this offering, we may sell up to
ADSs representing ordinary shares,
or approximately %, of our outstanding ordinary shares as of ,
2021. This sale and any future sales of a substantial number of ADSs in the public market, or the perception that such sales may
occur, could materially adversely affect the price of our ADSs and ordinary shares. We cannot predict the effect, if any, that
market sales of those ADSs or the availability of those ADSs for sale will have on the market price of our ADSs and Ordinary Shares.
Raising additional capital by issuing
securities may cause dilution to existing shareholders.
We are currently
authorized to issue 1,000,000,000 ordinary shares. As of February , 2021, we had
ordinary shares
issued and outstanding, and
ordinary shares
reserved for future issuance under outstanding options and warrants and under our 2013 Share Option and Incentive Plan.
We may seek additional
capital through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing
arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership
interest will be diluted, and the terms of any such offerings may include liquidation or other preferences that may adversely
affect the then existing shareholders rights. Debt financing, if available, would result in increased fixed payment obligations
and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring
debt or making capital expenditures. If we raise additional funds through collaboration, strategic alliance or licensing arrangements
with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates,
or grant licenses on terms that are not favorable to us.
Future sales
of our ADSs could reduce the market price of the ADSs.
Substantial
sales of our ADSs may cause the market price of our ADSs to decline. Sales by us or our security holders of substantial amounts
of our ADSs, or the perception that these sales may occur in the future, could cause a reduction in the market price of our ADSs.
The issuance of any additional ordinary shares, any additional
ADSs, or any securities that are exercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on
the market price of the ADSs and will have a dilutive effect on our existing shareholders and holders of ADSs.
We do not know whether a market for
the ADSs will be sustained or what the trading price of the ADSs will be and as a result it may be difficult for you to sell your
ADSs.
Although
our ADSs trade on Nasdaq, an active trading market for the ADSs may not be sustained. It may be difficult for you to sell your
ADSs without depressing the market price for the ADSs. As a result of these and other factors, you may not be able to sell your
ADSs. Further, an inactive market may also impair our ability to raise capital by selling ADSs may impair our ability to enter
into strategic partnerships or acquire companies or products by using our ordinary shares as consideration.
We have no plans
to pay dividends on our ordinary shares, and you may not receive funds without selling the ADSs or ordinary shares.
We have not declared
or paid any cash dividends on our ordinary shares, nor do we expect to pay any cash dividends on our ordinary shares for the foreseeable
future. We currently intend to retain any additional future earnings to finance our operations and growth and, therefore, we have
no plans to pay cash dividends on our ordinary shares at this time. Any future determination to pay cash dividends on our ordinary
shares will be at the discretion of our board of directors and will be dependent on our earnings, financial condition, operating
results, capital requirements, any contractual restrictions, and other factors that our board of directors deems relevant. Accordingly,
you may have to sell some or all of the ADSs or ordinary shares in order to generate cash from your investment. You may not receive
a gain on your investment when you sell the ADSs or ordinary shares and may lose the entire amount of your investment.
As a foreign
private issuer, we are permitted to follow certain home country corporate governance practices instead of applicable SEC and Nasdaq
requirements, which may result in less protection than is accorded to investors under rules applicable to domestic issuers.
As
a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise
required under the rules of the Nasdaq Stock Market for domestic issuers. Following our home country governance practices as opposed
to the requirements that would otherwise apply to a U.S. company listed on the Nasdaq Stock Market, may provide less protection
than is accorded to investors under the rules of the Nasdaq Stock Market applicable to domestic issuers. For more information,
see “Item 16G. Corporate Governance - Nasdaq Stock Market Listing Rules and Home Country Practices” in our Annual Report
on Form 20-F for the year ended December 31, 2019.
In addition, as a foreign
private issuer, we are exempt from the rules and regulations under the Securities Exchange Act of 1934, as amended, or the Exchange
Act, related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders
are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition,
we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC
as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act.
Holders of ADSs may not receive the same distributions
or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you may not receive dividends
or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make
them available to you.
The Depositary for
the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or
other deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions in
proportion to the number of ordinary shares your ADSs represent. However, the Depositary is not responsible if it decides that
it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make
a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act of 1933, as
amended, or the Securities Act, but that are not properly registered or distributed under an applicable exemption from registration.
In addition, conversion into U.S. dollars from foreign currency that was part of a dividend made in respect of deposited ordinary
shares may require the approval or license of, or a filing with, any government or agency thereof, which may be unobtainable. In
these cases, the Depositary may determine not to distribute such property and hold it as “deposited securities” or
may seek to effect a substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the Depositary
deems an equitable and practicable substitute. We have no obligation to register under U.S. securities laws any ADSs, ordinary
shares, rights or other securities received through such distributions. We also have no obligation to take any other action to
permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the Depositary may withhold
from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the
Depositary believes it is required to make such withholding. This means that you may not receive the same distributions or dividends
as those we make to the holders of our ordinary shares, and, in some limited circumstances, you may not receive any value for such
distributions or dividends if it is illegal or impractical for us to make them available to you. These restrictions may cause a
material decline in the value of the ADSs.
Holders of ADSs must act through
the Depositary to exercise their rights as shareholders of our company.
Holders of our ADSs
do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinary
shares in accordance with the provisions of the Deposit Agreement. Under Israeli law and our articles of association, the minimum
notice period required to convene a shareholders meeting is no less than 21 or 35 calendar days, depending on the proposals on
the agenda for the shareholders meeting. When a shareholder meeting is convened, holders of ADSs may not receive sufficient notice
of a shareholders’ meeting to permit them to withdraw their ordinary shares to allow them to cast their vote with respect
to any specific matter. In addition, the Depositary and its agents may not be able to send voting instructions to holders of ADSs
or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the Depositary to extend
voting rights to holders of the ADSs in a timely manner, but we cannot assure holders that they will receive the voting materials
in time to ensure that they can instruct the Depositary to vote their ordinary shares underlying the ADSs. Furthermore, the Depositary
and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote
is cast or for the effect of any such vote. As a result, holders of our ADSs may not be able to exercise their right to vote and
they may lack recourse if their ordinary shares underlying the ADSs are not voted as they requested. In addition, in the capacity
as a holder of ADSs, they will not be able to call a shareholders’ meeting.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement
and the information incorporated by reference herein may include forward looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some
cases, you can identify forward-looking statements by terms including “anticipates,” “believes,” “could,”
“estimates,” “expects,” “intends,” “may,” “plans,” “potential,”
“predicts,” “projects,” “should,” “will,” “would,” and similar expressions
intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events
and are based on assumptions and subject to risks and uncertainties. In addition, certain sections of this prospectus and the information
incorporated by reference herein contain information obtained from independent industry and other sources that we have not independently
verified. You should not put undue reliance on any forward-looking statements. Unless we are required to do so under U.S. federal
securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.
Our ability to predict
our operating results or the effects of various events on our operating results is inherently uncertain. Therefore, we caution
you to consider carefully the matters described under the caption “Risk Factors” above, and certain other matters discussed
in this prospectus and the information incorporated by reference herein, and other publicly available sources. Such factors and
many other factors beyond our control could cause our actual results, performance or achievements to be materially different from
any future results, performance or achievements that may be expressed or implied by the forward-looking statements.
Factors that could
cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are
not limited to:
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recent material changes in our strategy;
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our ability to sell or license our MUSE™ technology;
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ScoutCam’s commercial success in commercializing the ScoutCam™ system;
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projected capital expenditures and liquidity;
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the overall global economic environment as well as the direct impact of the coronavirus strain COVID-19 on us;
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the impact of competition and new technologies;
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general market, political, reimbursement and economic conditions in the countries in which we operate;
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government regulations and approvals;
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litigation and regulatory proceedings; and
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●
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those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects”, in our Annual Report on Form 20-F for the year ended December 31, 2019, which is incorporated by reference in this prospectus supplement.
|
We caution you to
carefully consider these risks and not to place undue reliance on our forward-looking statements. Except as required by law, we
assume no responsibility for updating any forward-looking statements.
USE OF PROCEEDS
We estimate the net
proceeds from this offering will be approximately $ million, after deducting underwriter
commissions and discounts, and estimated offering expenses payable by us.
We currently intend
to use the net proceeds from this offering for working capital and general corporate purposes. As a result, our management will
retain broad discretion in the allocation and use of the net proceeds of this offering, and investors will be relying on the judgment
of our management with regard to the use of these net proceeds. Pending application of the net proceeds for the purposes as described
above, we expect to invest the net proceeds in short-term, interest-bearing securities, investment grade securities, certificates
of deposit or direct or guaranteed obligations of the U.S. government.
CAPITALIZATION
The following
table sets forth our capitalization:
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|
●
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on an actual basis as of June 30, 2020;
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|
|
●
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on a pro forma basis to give effect to (a) the issuance of (i) 7,098,491 ADSs representing 141,969,820 ordinary shares on December 3,2020, at a public offering price of $1.83 per ADS, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, (ii) 1,064,774 ADSs representing 21,295,480 ordinary shares on December 16, 2020 as a result of exercising of an underwriting option and a price of $1.83 per ADS; (iii) the issuance of 3,659,735 ADSs representing 73,194,700 Ordinary Shares on January 13, 2021, at a public offering price of $2.30 per ADS, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and (iv) the issuance of 548,960 ADSs representing 10,979,200 ordinary shares on January 19, 2021 as a result of exercising of an underwriting option and a price of $2.30 per ADS); and (b) the elimination of the par value of our ordinary shares approved by the Company’s shareholders on February 12, 2021; and
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on a pro forma as adjusted basis to give further effect to this offering based on a public offering price of $ per ADS, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
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The information set
forth in the following table should be read in conjunction with, and is qualified in its entirety by, reference to our audited
and unaudited financial statements and the notes thereto incorporated by reference into this prospectus supplement and the accompanying
prospectus.
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|
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As of June 30, 2020
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|
|
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Actual
|
|
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Pro Forma
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|
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Pro Forma,
As Adjusted
|
|
|
|
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(U.S. Dollars, in thousands)
|
|
|
Cash and cash equivalents
|
|
|
10,172
|
|
|
|
32,171
|
|
|
|
|
|
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Total Liabilities
|
|
|
4,461
|
|
|
|
4,461
|
|
|
|
|
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Equity:
|
|
|
|
|
|
|
|
|
|
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Ordinary shares, of no par value: 1,000,000,000 ordinary shares authorized (actual and as adjusted)(1); 128,818,758 ordinary shares issued and outstanding (actual); 400,616,638 ordinary shares outstanding (pro forma); ordinary shares outstanding (pro forma as adjusted)
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|
|
36,014
|
|
|
|
-
|
|
|
|
|
|
|
Share premium
|
|
|
38,210
|
|
|
|
96,223
|
|
|
|
|
|
|
Other capital reserves
|
|
|
13,430
|
|
|
|
13,430
|
|
|
|
|
|
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Warrants
|
|
|
1,802
|
|
|
|
1,802
|
|
|
|
|
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Accumulated deficit
|
|
|
(79,210
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)
|
|
|
(79,210
|
)
|
|
|
|
|
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Equity attributable to owners of Medigus Ltd.
|
|
|
10,246
|
|
|
|
32,245
|
|
|
|
|
|
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Non-controlling interests
|
|
|
3,191
|
|
|
|
3,191
|
|
|
|
|
|
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Total equity
|
|
|
13,437
|
|
|
|
35,436
|
|
|
|
|
|
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Total capitalization and indebtedness
|
|
|
17,898
|
|
|
|
39,897
|
|
|
|
|
|
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(1)
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Giving effect to: (i) an increase in the Company’s authorized
share capital to 1,000,000,000 ordinary shares , approved by the Company’s shareholders on July 9, 2020, and (ii) the elimination
of the par value of the Company’s ordinary shares approved by the Company’s shareholders on February 12, 2021.
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The preceding table
excludes as of June 30, 2020: (i) 6,193,880 ordinary shares issuable upon the exercise of outstanding options at a weighted average
exercise price of NIS 0.79 per share or $0.23 per share (based on the exchange rate reported by the Bank of Israel on such date),
equivalent to 309,694 ADSs at a weighted average exercise price of $4.56 per ADS; and (ii) 110,361,780 ordinary shares issuable
upon the exercise of warrants to purchase up to an aggregate of 5,518,089 ADSs at a weighted average exercise price of $4.10 per
ADS.
DILUTION
If you invest in
our ADSs, your interest will be diluted immediately to the extent of the difference between the public offering price per ADS and
the as adjusted net tangible book value per ADS after this offering. As of June 30, 2020, we had a historical net tangible book
value of $10.2 million, or $1.59 per ADS. Our net tangible book value per ADS represents the amount of our total tangible assets
less total liabilities divided by the total number of our ordinary shares outstanding on June 30, 2020, and multiplying such amount
by 20 (one ADS represents 20 ordinary shares).
As of June 30, 2020,
our pro forma net tangible book value was $32.2 million, or $1.14 per ADS. Our pro forma net tangible book value per ADS represents
the amount of our total tangible assets less total liabilities divided by the total number of our ordinary shares outstanding on
June 30, 2020, after giving effect to the issuance and sale in December, 2020 of 8,163,265 ADSs at a price per ADS of $1.83 and
multiplying such amount of ADSs by 20 (one ADS represents 20 ordinary shares) and the issuance and sale, in January 2021, of 4,208,695
ADSs at a price per ADS of $2.30 and multiplying such amount of ADSs by 20 (one ADS represents 20 ordinary shares).
After giving effect
to the sale of our ADSs in this offering at the public offering price of $ per ADS, and
after deducting the underwriting discount and estimated offering expenses payable by us, our pro forma as adjusted net tangible
book value at June 30, 2020 would have been $ or approximately $
per ADS. This represents an immediate increase in pro forma as adjusted net tangible book value of $
per ADS to existing shareholders and immediate dilution of $ per ADS to new investors.
The following table
illustrates this dilution per ordinary share:
|
Public offering price per ADS
|
|
|
|
|
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$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma Net tangible book value per ADS
|
|
$
|
1.14
|
|
|
|
|
|
|
Increase in pro forma net tangible book value per ADS attributable to the offering
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Pro forma as-adjusted net tangible book value per ADS after giving effect to the offering
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilution in net tangible book value per ADS to new investors
|
|
|
|
|
|
$
|
|
|
The preceding table excludes as of June
30, 2020: (i) 6,193,880 ordinary shares issuable upon the exercise of outstanding options at a weighted average exercise price
of NIS 0.79 per share or $0.23 per share (based on the exchange rate reported by the Bank of Israel on such date), equivalent to
309,694 ADSs at a weighted average exercise price of $4.56 per ADS; and (ii) 110,361,780 ordinary shares issuable upon the exercise
of warrants to purchase up to an aggregate of 5,518,089 ADSs at a weighted average exercise price of $4.10 per ADS.
The above illustration
of dilution per share to investors participating in this offering assumes no exercise of outstanding options to purchase our ordinary
shares or outstanding warrants to purchase our ADSs or ordinary shares. To the extent outstanding options or warrants are exercised,
you may incur further dilution.
If the underwriter
exercises in full its over-allotment option, our pro forma net tangible book value per ADS after giving effect to this offering
would be approximately $ million, or $ per
ADS, which amount represents an immediate increase in pro forma net tangible book value of $
per ADS to existing stockholders and a dilution to new investors of $ per ADS.
UNDERWRITING
Aegis Capital Corp.,
or Aegis, is acting as the representative of the underwriters of the offering. We have entered into an underwriting agreement dated
February , 2021 with the representative. Subject to the terms and conditions of the underwriting
agreement, we have agreed to sell to each underwriter named below, and each underwriter named below has severally agreed to purchase,
at the public offering price less the underwriting discount set forth on the cover page of this prospectus supplement, the number
of ADSs listed next to its name in the following table:
|
Underwriter
|
|
|
Number of
ADSs
|
|
|
Aegis Capital Corp.
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
The underwriters are
committed to purchase all the ADSs offered by the Company, other than those covered by the over-allotment option to purchase additional
ADSs described below. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in
the underwriting agreement. Furthermore, the underwriting agreement provides that the obligations of the underwriters to pay for
and accept delivery of the ADSs offered by us in this prospectus supplement are subject to various representations and warranties
and other customary conditions specified in the underwriting agreement, such as receipt by the underwriters of officers’
certificates and legal opinions.
We have agreed to indemnify
the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the
underwriters may be required to make in respect thereof.
The underwriters are
offering the ADSs 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.
We have granted the
underwriters an over-allotment option. This option, which is exercisable for 45 days from the date of this prospectus (but not
to close after March 31, 2021, unless we have filed our Annual Report on Form 20-F by that day), permits the underwriters to purchase
up to an aggregate of additional ADSs at the public offering price per share,
less underwriting discounts and commissions, solely to cover over-allotments, if any. If the underwriters exercise this option
in whole or in part, then the underwriters will be severally committed, subject to the conditions described in the underwriting
agreement, to purchase the additional ADSs in proportion to their respective commitments set forth in the prior table.
Discounts, Commissions and Reimbursement
The representative
has advised us that the underwriters propose to offer the ADSs to the public at the initial public offering price per share set
forth on the cover page of this prospectus. The underwriters may offer ADSs to securities dealers at that price less a concession
of not more than $ per ADS of which up to $
per ADS may be reallowed to other dealers. After the initial offering to the public, the public offering price and other selling
terms may be changed by the representative.
The following table
summarizes the underwriting discounts and commissions and proceeds, before expenses, to us assuming both no exercise and full exercise
by the underwriters of their over-allotment option:
|
|
|
|
|
|
Total
|
|
|
|
|
Per ADS
|
|
|
Without
Option
|
|
|
With
Option
|
|
|
Public offering price
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Underwriting discounts and commissions (6.5%)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Non-accountable expense allowance(1) (1%)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Proceeds, before expenses, to us
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
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In addition, we have
also agreed to pay all expenses in connection with the offering, including the following expenses: (a) all filing fees and expenses
relating to the registration of the Securities with the Commission; (b) all FINRA public offering filing fees; (c) all fees and
expenses relating to the listing of the Company’s equity or equity-linked securities on an Exchange; (d) all fees, expenses
and disbursements relating to the registration or qualification of the Securities under the “blue sky” securities laws
of such states and other jurisdictions as Aegis may reasonably designate (including, without limitation, all filing and registration
fees, and the reasonable fees and disbursements of the Company’s “blue sky” counsel, which will be Aegis’s
counsel) unless such filings are not required in connection with the Company’s proposed Exchange listing; (e) all fees, expenses
and disbursements relating to the registration, qualification or exemption of the Securities under the securities laws of such
foreign jurisdictions as Aegis may reasonably designate; (f) the costs of all mailing and printing of the Offering documents; (g)
transfer and/or stamp taxes, if any, payable upon the transfer of Securities from the Company to Aegis; and (h) the fees and expenses
of the Company’s accountants; and (i) a maximum of $50,000 for fees and expenses including “road show”, diligence,
and reasonable legal fees and disbursements for Aegis’s counsel.
We estimate the expenses
of this offering payable by us, not including underwriting discounts and commissions and non-accountable expense allowance, including
amounts for which we agreed to reimburse the underwriters for certain of their expenses, will be approximately $
.
Lock-Up Agreements
The Company and each
of its directors and executive officers have agreed for a period of 30 days after the date of this prospectus supplement, subject
to certain exceptions, without the prior written consent of the representative, not to directly or indirectly:
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●
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issue (in the case of us), offer, sell, or otherwise transfer or dispose of, directly or indirectly, ordinary shares or other capital stock or any securities convertible into or exercisable or exchangeable for our ordinary shares or other capital stock; and
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●
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in the case of us, file or cause the filing of any registration statement under the Securities Act with respect to any ADSs, ordinary shares or other capital stock or any securities convertible into or exercisable or exchangeable for our ordinary shares or other capital stock except for (i) the adoption of an equity incentive plan and the grant of awards or equity pursuant to any equity incentive plan, and the filing of a registration statement on Form S-8; provided, however, that any sales by parties to the lockups shall be subject to the lock-up agreements and (ii) the issuance of shares in connection with an acquisition or a strategic relationship which may include the sale of equity securities; provided, that none of such shares shall be saleable in the public market until the expiration of the 30 day period described above.
|
Right of First Refusal
Pursuant to the terms
of the underwriting agreement, if, for the period ending six (6) months from the closing of this offering, the we or any of our
subsidiaries (a) decide to finance or refinance any indebtedness, Aegis (or any affiliate designated by Aegis) shall have the right
to act as sole book-runner, sole manager, sole placement agent or sole agent with respect to such financing or refinancing; or
(b) decide to raise funds by means of a public offering (including an at-the-market facility) or a private placement or any other
capital raising financing of equity, equity-linked or debt securities, Aegis (or any affiliate designated by Aegis) shall have
the right to act as sole book-running manager, sole underwriter or sole placement agent for such financing.
Electronic Offer, Sale and Distribution
of Securities
A prospectus in electronic
format may be made available on the websites maintained by one or more of the underwriters or selling group members. The representative
may agree to allocate a number of securities to underwriters and selling group members for sale to its 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, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part,
has not been approved or endorsed by us, and should not be relied upon by investors.
Stabilization
In connection with
this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate-covering transactions,
penalty bids and purchases to cover positions created by short sales.
Stabilizing transactions
permit bids to purchase ADSs 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 ADSs while the offering is in progress.
Over-allotment transactions
involve sales by the underwriters of ADSs in excess of the number of ADSs 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 ADSs over-allotted by the underwriters is not greater than the number of ADSs that they may purchase in the over-allotment
option. In a naked short position, the number of ADSs involved is greater than the number of ADSs in the over-allotment option.
The underwriters may close out any short position by exercising their over-allotment option and/or purchasing ADSs in the open
market.
Syndicate covering
transactions involve purchases of ADSs in the open market after the distribution has been completed in order to cover syndicate
short positions. In determining the source of ADSs to close out the short position, the underwriters will consider, among other
things, the price of ADSs available for purchase in the open market as compared with the price at which they may purchase ADSs
through exercise of the over-allotment option. If the underwriters sell more shares than could be covered by exercise of the over-allotment
option and, therefore, have a naked short position, the position can be closed out only by buying ADSs 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 ADSs in the open market that could adversely affect investors who purchase in the offering.
Penalty bids permit
the representative to reclaim a selling concession from a syndicate member when the ADSs originally sold by that syndicate member
are 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 ADSs or
preventing or retarding a decline in the market price of our ADSs. As a result, the price of our ADSs 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 ADSs. These transactions may
be effected in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
Other Relationships
Certain of the underwriters
and their affiliates may in the future provide various investment banking, commercial banking and other financial services for
us and our affiliates for which they may in the future receive customary fees.
Offer restrictions outside the United
States
Other than in the United
States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this
prospectus supplement in any jurisdiction where action for that purpose is required. The securities offered by this prospectus
supplement and the accompanying prospectus may not be offered or sold, directly or indirectly, nor may this prospectus supplement
or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or
published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations
of that jurisdiction. Persons into whose possession this prospectus supplement comes are advised to inform themselves about and
to observe any restrictions relating to the offering and the distribution of this prospectus supplement. This prospectus supplement
does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus supplement
in any jurisdiction in which such an offer or a solicitation is unlawful.
EXPERTS
The financial statements
incorporated in this prospectus by reference to the Annual Report on Form 20-F for the year ended December 31, 2019, except as
they relate to Algomizer Ltd. (currently named Gix Internet Ltd.), have been audited by Kesselman & Kesselman, Certified Public
Accountants (Isr.), a member firm of PricewaterhouseCoopers International Limited, an independent registered public accounting
firm. Such financial statements, except as they relate to Algomizer Ltd. (currently named Gix Internet Ltd.) have been
incorporated in reliance on the report (which contains an explanatory paragraph relating to the Company’s ability to continue
as a going concern as described in Note 1(b) to the financial statements) of such independent registered public accounting
firm given on the authority of said firm as experts in auditing and accounting.
The audited financial
statements of Gix, an 8% equity investment of the Company, as of and for the period from September 4, 2019 through December
31, 2019, which are reflected in the consolidated financial statements of the Company for that period, which are not separately
presented in this Prospectus, have been audited by Brightman Almagor Zohar & Co., a firm in the Deloitte Global Network,
an independent registered public accounting firm, whose report thereon is incorporated in this prospectus by reference. The audited
financial statements of the Company, to the extent they relate to Gix have been incorporated in reliance on the report
of such independent registered public accounting firm by reference, given on the authority of said firm as experts in auditing
and accounting.
CHANGE
IN REGISTRANT’S CERTIFYING ACCOUNTANT
On May 17, 2020, following
discussion and recommendation of the Company’s audit committee and board of directors, the Company notified Kesselman &
Kesselman of its dismissal from its position as independent auditor of the Company.
On July 9, 2020, following
the approval of the Company’s board of directors and audit committee, the Company’s shareholders approved the appointment
of Brightman Almagor Zohar & Co., a firm in the Deloitte Global Network, as the Company’s independent auditors of the
Company for the year ending December 31, 2020 and to serve until the annual general meeting of shareholders to be held in 2021.
Kesselman & Kesselman’s
report on the financial statements of the Company for the two years ended December 31, 2018 and 2019 did not contain an adverse
opinion or a disclaimer of opinion nor was it qualified or modified as to uncertainty, audit scope, or accounting principles, except
for, an explanatory paragraph regarding substantial doubt as to the Company’s ability to continue as a going concern in the
year ended December 31, 2019.
During the two years
ended December 31, 2018 and 2019 and in the subsequent interim period through May 17, 2020, there were (i) no “disagreements”
(as such term is defined in Item 16F of Form 20-F) between Kesselman & Kesselman and the Company on any matters of accounting
principles or practices, financial statement disclosure or auditing scope or procedures, any of which, if not resolved to Kesselman
& Kesselman’s satisfaction, would have caused Kesselman & Kesselman to make reference thereto in their reports and
(ii) no “reportable events” (as such term is defined in Item 16F of Form 20-F), except for the material weakness in
our internal control over financial reporting related to complex accounting matters, including for the reverse recapitalization
transaction conducted with regard to ScoutCam Ltd. which was accounted for in our consolidated financial statements as a transaction
with non-controlling interest as of December 31, 2019.
LEGAL
MATTERS
Certain legal matters
with respect to Israeli law and with respect to the validity of the offered securities under Israeli law will be passed upon for
us Meitar | Law Offices, Ramat Gan, Israel. Certain legal matters with respect to U.S. federal securities law will be passed upon
for us by Sullivan & Worcester LLP, New York, New York. Certain legal matters in connection with this offering have been
passed upon for the underwriter by Sichenzia Ross Ference, LLP, New York, New York.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with
the SEC a registration statement on Form F-3 and relevant exhibits and schedules, under the Securities Act of 1933, as amended,
covering the ordinary shares represented by ADSs to be sold in this offering. This prospectus supplement, which constitutes a part
of the registration statement, summarizes material provisions of contracts and other documents that we refer to in the prospectus
supplement. Since this prospectus supplement does not contain all of the information contained in the registration statement, you
should read the registration statement and its exhibits and schedules for further information with respect to us and our ordinary
shares and the ADSs. The registration statement is available at the SEC’s website at www.sec.gov.
We are subject to the
information reporting requirements of the Exchange Act that are applicable to foreign private issuers, and under those requirements
we file reports with the SEC. Those other reports or other information are available at the SEC’s website noted above. As
a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements,
and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions
contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly
and current reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities
are registered under the Exchange Act. However, we file with the SEC, within four months after the end of each fiscal year, or
such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent
registered public accounting firm, and submit to the SEC, on Form 6-K, unaudited financial information for the first 6 months of
each fiscal year within 60 days after the end of each such 6 month period, or such applicable time as required by the SEC.
INCORPORATION BY REFERENCE
We are allowed to incorporate
by reference the information we file with the SEC, which means that we can disclose important information to you by referring to
those documents. The information incorporated by reference is considered to be part of this prospectus supplement. We incorporate
by reference in this prospectus the documents listed below, and any future Annual Reports on Form 20-F or Reports on Form 6-K (to
that extent that such Form 6-K indicates that it is intended to be incorporated by reference herein) filed with the SEC pursuant
to the Exchange Act prior to the termination of the offering. The documents we incorporate by reference are:
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(1)
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Our
annual report on Form
20-F for the year ended December 31, 2019,
filed with the SEC on April 21, 2020;
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(2)
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Our reports on Form
6-K, furnished to the SEC on May
20, 2020, May
22, 2020, June
4, 2020, July
9, 2020, August
31, 2020 (including the financial
statement exhibits filed as Exhibits 99.1 and 99.2 therein), October
26, 2020, October
26, 2020 (both with respect to the
Company’s delisting from TASE), November
10, 2020, November
18, 2020, November
27, 2020, November
30, 2020, December
2, 2020, December
4, 2020, December
16, 2020, January
13, 2021, January
14, 2021; January 19,
2021, January 26,
2021, January 28,
2021, February 9,
2021, February 11,
2021, February 12,
2021, February 16,
2021, February 19, 2021 and February 23, 2021.
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(3)
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the description of our ordinary
shares, of no par value, and the American Depositary Shares representing the ordinary shares,
contained in our Registration Statement on Form
20-F filed with the SEC on May 7, 2015, including any
subsequent amendment or any report filed for the purpose of updating such description.
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As you read the above
documents, you may find inconsistencies in information from one document to another. If you find inconsistencies between the documents
and this prospectus supplement, you should rely on the statements made in the most recent document. All information appearing in
this prospectus supplement is qualified in its entirety by the information and financial statements, including the notes thereto,
contained in the documents incorporated by reference herein.
We will provide to
each person, free of charge, including any beneficial owner, to whom this prospectus supplement is delivered, a copy of these filings,
at no cost, upon written or oral request to us at the following address:
Omer Industrial Park, No. 7A, P.O. Box 3030
Omer 8496500, Israel
Tel: +972-73-370-4691
Attention: Oz Adler, Chief Financial
Officer
You should rely only
on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus and any free
writing prospectus we have authorized for use in connection with this offering. We 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 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 supplement is accurate only as of the date on the front cover of this prospectus
supplement, or such earlier date, that is indicated in this prospectus supplement. Our business, financial condition, results of
operations and prospects may have changed since that date.
EXPENSES
The following table sets forth costs and expenses, other than
any underwriter commissions and discounts, non-accountable expense allowance and reasonable out-of-pocket expenses, we expect to
incur in connection with the offering:
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Legal fees and expenses
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$
|
|
|
|
Depositary fees
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|
$
|
|
|
|
Printing expenses
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|
$
|
|
|
|
Miscellaneous
|
|
$
|
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|
|
|
|
|
|
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Total
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$
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PROSPECTUS
$50,000,000
American Depositary Shares representing
Ordinary Shares,
Ordinary Shares,
Warrants to Purchase American Depositary
Shares,
Subscription Rights and/or Units
MEDIGUS LTD.
We may offer to the
public from time to time in one or more series or offerings American Depositary Shares, or ADSs, ordinary shares, warrants, subscription
rights and/or units consisting of two or more of these classes or series of securities. Each ADS represents twenty (20) ordinary
shares, par value NIS 1.00 per share.
We refer to the ADSs,
ordinary shares, warrants, subscription rights and units collectively as “securities” in this prospectus.
Each time we sell
securities pursuant to this prospectus, we will provide a supplement to this prospectus that contains specific information about
the offering and the specific terms of the securities offered. This prospectus may not be used to consummate a sale of securities
by us unless accompanied by the applicable prospectus supplement. You should read this prospectus and the applicable prospectus
supplement carefully before you invest in our securities.
We may, from time
to time, offer to sell the securities, through public or private transactions, directly or through underwriters, agents or dealers,
on or off the Nasdaq Capital Market or Tel Aviv Stock Exchange Ltd., or the TASE, as applicable, at prevailing market prices or
at privately negotiated prices. If any underwriters, agents or dealers are involved in the sale of any of these securities, the
applicable prospectus supplement will set forth the names of the underwriter, agent or dealer and any applicable fees, commissions
or discounts.
Our ordinary shares
are traded on the TASE, and our ADSs are traded on the Nasdaq Capital Market under the symbol “MDGS”. Our Series C
Warrants have been listed on the Nasdaq Capital Market since July 2018, under the symbol “MDGSW”. Each Series C Warrant
will expire in July 2023. The last reported sale price for our ADSs on May 12, 2020 as quoted on the Nasdaq Capital Market was
$3.90 per ADS, and the last reported sale price for our ordinary shares on May 12, 2020, as quoted on the TASE was NIS 0.609 per
ordinary share, or $0.173 per ordinary share (based on the exchange rate reported by the Bank of Israel for May 12, 2020). The
last reported sale price of our Series C Warrants on the Nasdaq Capital Market on May 12, 2020 was $0.4899 per Series C Warrant.
On May 13, 2020, the
aggregate market value of our ordinary shares held by non-affiliates was approximately $15,146,712, based on 84,538,738 ordinary
shares outstanding and a per ordinary share price of $0.195 based on the closing sale price of our ADSs on May 12, 2020. We have
not offered any securities pursuant to General Instruction I.B.5 on Form F-3 during the prior 12 calendar month period that ends
on and includes the date of this prospectus.
We are an “emerging
growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and will be subject
to reduced public company reporting requirements.
Investing in these
securities involves a high degree of risk. Please carefully consider the risks discussed in this prospectus under “Risk Factors”
beginning on page 4 and the “Risk Factors” in “Item 3: Key Information- D. Risk Factors” of our most recent
Annual Report on Form 20-F incorporated by reference in this prospectus and in any applicable prospectus supplement for a discussion
of the factors you should consider carefully before deciding to purchase these securities.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of the securities being offered by this
prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is January 11,
2020
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is
part of a registration statement that we filed with the Securities and Exchange Commission, or SEC, utilizing a “shelf”
registration process. Under this process, we may offer and sell our securities under this prospectus.
Under this shelf registration
process, we may sell the securities described in this prospectus in one or more offerings up to a total price to the public of
$50,000,000. The offer and sale of securities under this prospectus may be made from time to time, in one or more offerings, in
any manner described under the section in this prospectus entitled “Plan of Distribution.”
This prospectus provides
you with a general description of the securities we may offer. Each time we sell securities we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change
information contained in this prospectus, and may also contain information about any material federal income tax considerations
relating to the securities covered by the prospectus supplement. You should read both this prospectus and any prospectus supplement
together with additional information under the headings “Where You Can Find More Information” and “Incorporation
of Certain Documents by Reference.”
This summary may not
contain all of the information that may be important to you. You should read this entire prospectus, including the financial statements
and related notes and other financial data incorporated by reference in this prospectus, before making an investment decision.
This summary contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might cause or contribute to such differences include
those discussed in “Risk Factors” and “Forward-Looking Statements.”
Unless otherwise indicated
or the context otherwise requires, all references in this prospectus to “we,” “our,” “us,”
“ourselves,” “Medigus,” “our Company” or the “Company” refer to Medigus Ltd., an
Israeli company, and its consolidated subsidiaries. The terms “shekels,” “Israeli shekels” and “NIS”
refer to New Israeli Shekels, the lawful currency of the State of Israel, the terms “dollar,” “US$” or
“$” refer to U.S. dollars, the lawful currency of the United States and the terms “EURO,” “EUR,”
or “€” refer to Euros, the lawful currency of the member states of the European Union.
PROSPECTUS
SUMMARY
This summary highlights selected information
about us, this offering and information contained in greater detail elsewhere in this prospectus and in the documents incorporated
by reference herein. This summary is not complete and does not contain all of the information that you should consider before investing
in our securities. You should carefully read and consider this entire prospectus and the documents, including financial statements
and related notes, and information incorporated by reference into this prospectus, including the financial statements and “Risk
Factors” starting on page 4 of this prospectus, before making an investment decision. If you invest in our securities, you
are assuming a high degree of risk.
Business Overview
We previously engaged
in the development, production and marketing of innovative miniaturized imaging equipment known as the micro ScoutCam™ portfolio
for use in medical procedures as well as various industrial applications, through our Israeli subsidiary, ScoutCam Ltd. ScoutCam
Ltd. was incorporated as part of a reorganization of the Company intended to distinguish the Company’s micro ScoutCam™
portfolio from the other operations of the Company and to enable the Company to form a separate business unit with dedicated resources,
focused on the promotion of our miniaturized imaging technology. After we completed the transfer of all of the Company’s
assets and intellectual property related to the Company’s miniature video cameras business into ScoutCam Ltd., we consummated
a securities exchange agreement with Intellisense Solutions Inc., under which we received 60% of the issued and outstanding stock
of Intellisense Solutions Inc. in consideration for 100% of our holdings in ScoutCam Ltd. Following the aforementioned transactions,
Intellisense Solutions Inc. changed its name to ScoutCam Inc. Since the securities exchange agreement, the commercialization efforts
relating to the ScoutCam™ portfolio are carried out exclusively by ScoutCam Inc.
ScoutCam Inc. is examining
and pursuing additional applications for the micro ScoutCam™ portfolio outside of the medical device industry, among others,
the defense, aerospace, automotive, and industrial non-destructing-testing industries, and plans to further expand the activity
in these non-medical spaces.
In addition, we have
been engaged in the development, production and marketing of innovative surgical devices with direct visualization capabilities
for the treatment of Gastroesophageal Reflux Disease, or GERD, a common ailment, which is predominantly treated by medical therapy
(e.g. proton pump inhibitors) or in chronic cases, conventional open or laparoscopic surgery. Our FDA-cleared and CE-marked endosurgical
system, known as the Medigus Ultrasonic Surgical Endostapler, or MUSE™ (Medigus Ultrasonic Surgical Endostapler) system,
enables minimally-invasive and incisionless procedures for the treatment of GERD by reconstruction of the esophageal valve via
the mouth and esophagus, eliminating the need for surgery in eligible patients. We believe that this procedure offers a safe, effective
and economical alternative to the current modes of GERD treatment for certain GERD patients, and has the ability to provide results
which are equivalent to those of standard surgical procedures while reducing pain and trauma, minimizing hospital stays, and delivering
economic value to hospitals and payers. The key elements of the MUSE™ system include a single-use endostapler containing
several sophisticated innovative technologies such as flexible stapling technology, a miniature camera and ultrasound transducer,
as well as a control console offering a video image transmitted from the tip of the endostapler. Our board of directors has determined
to examine potential opportunities to sell our MUSE™ technology, or alternatively grant a license or licenses for the use
of the MUSE™ technology.
Our MUSE™ System
Prevalence of GERD
GERD, is a worldwide
disorder, with evidence suggesting an increase in GERD disease prevalence since 1995. The sample size weighted mean for the GERD
population in the United States and Europe is 19.8% and 15.2% respectively. In the United States alone, over 49 million adults
are affected by GERD, with over 29 million adults suffering daily from GERD symptoms. Proton pump inhibitors, or PPIs, are a class
of effective and generally safe medication to treat GERD, but not everyone who experiences heartburn needs a PPI. Several PPIs
have been widely advertised to consumers and heavily promoted by physicians. This has led to an overuse of the drug. PPIs are the
third highest selling class of drugs in the U.S. and Nexium has the second highest retail sales among all drugs at $4.8 billion
in 2008. This figure does not include sales of other brands of PPIs.
Treatment of GERD
Treatment of GERD involves
a stepwise approach. The goals are to control symptoms, to heal esophagitis and to prevent recurrent esophagitis. The treatment
is based on lifestyle modification and control of gastric acid through medical treatment (antacids, PPI’s, H2 blockers or
other reflux inhibitors) or antireflux surgery.
Drug Treatment - Proton pump inhibitors
(PPI)
For moderate to severe
GERD, physicians usually prescribe PPIs. This class of drugs reduces acid production by the stomach, and thereby relieves the patients
of their symptoms. Drugs of this class are among the most commonly prescribed medications in the world. There are several brands
on the market, best known are Prilosec (omeprazole), Prevacid (lansoprazole) and Nexium (esomeprazole). Certain PPI drugs are available
over the counter in the United States and in other countries, but the over the counter dosage may be inadequate to control GERD
symptoms, except in mild cases.
Interventional Treatment
The most common operation
for GERD is called a surgical fundoplication, a procedure that prevents reflux by wrapping or attaching the upper part of the stomach
around the lower esophagus and securing it with sutures. Due to the presence of the wrap or attachment, increasing pressure in
the stomach compresses the portion of the esophagus which is wrapped or attached by the stomach, and prevents acidic gastric content
from flowing up into the esophagus. Today, the operation is usually performed laparoscopically: instead of a single large incision
into the chest or abdomen, four or five smaller incisions are made in the abdomen, and the operator uses a number of specially
designed tools to operate under video control.
MUSE™ Solution
Our product, the MUSE™
system for transoral fundoplication is a single use innovate device for the treatment of GERD. The MUSE™ technology is based
on our proprietary platform technology, experience and know-how. Transoral means that procedure is perform through the mouth, rather
than through incisions in the abdomen. The MUSE™ system is used to perform a procedure as an alternative to a surgical fundoplication.
The MUSE™ system offers an endoscopic, incisionless alternative to surgery. A single surgeon or gastroenterologist can perform
the MUSE™ procedure in a transoral way, unlike in a laparoscopic fundoplication which requires incisions.
The MUSE™ system
consists of the MUSE™ console controller, the MUSE™ endostapler and several accessories, including an overtube, irrigation
bottle, tubing supplies and staple cartridges. The MUSE™ endostapler incorporates a video camera, a flexible surgical stapler
and an ultrasonic guidance system that is used to measure the distance between the anvil and the cartridge of the stapler, to ensure
their proper alignment and tissue thickness. The device also contains an alignment pin, which is used for initial positioning of
the anvil against the cartridge, two anvil screws, which are used to reduce the thickness of the tissue that needs to be stapled
and to fix the position of the anvil and the MUSE™ endostapler during stapling. The system allows the operator to staple
the fundus of the stomach to the esophagus, in two or more locations, typically around the circumference, thereby creating a fundoplication,
without any incisions.
Endoscopic procedures
generally involve less recovery time and patient discomfort than conventional open or laparoscopic surgery. These procedures are
also typically performed in the outpatient hospital setting as opposed to an inpatient setting. Typically, outpatient procedures
cost the hospital or the insurer less money since there is no overnight stay in the hospital.
The clearance by the
FDA, or ‘Indications for Use’, of the MUSE™ system is “for endoscopic placement of surgical staples in
the soft tissue of the esophagus and stomach in order to create anterior partial fundoplication for treatment of symptomatic chronic
Gastro-Esophageal Reflux Disease in patients who require and respond to pharmacological therapy”. As such, the FDA clearance
covers the use by an operator of the MUSE™ endostapler as described in the above paragraph. In addition, in the pivotal study
that was presented to the FDA in order to gain clearance, only patients who were currently taking GERD medications (i.e. pharmacological
therapy) were allowed in the study. In addition, all patients had to have a significant decrease in their symptoms when they were
taking medication compared to when they were off the medication. As such, the FDA clearance included the indication that MUSE™
system is intended for patients who require and respond to pharmacological therapy. The MUSE™ system indication does
not restrict its use with respect to GERD severity from a regulatory point of view. However, clinicians typically only consider
interventional treatment options for moderate to severe GERD. Therefore, it is reasonable to expect the MUSE™ system would
be primarily used to treat moderate and severe GERD in practice. The system has received 510(k) marketing clearance from the FDA
in the United States, as well as a CE mark in Europe.
On June 3, 2019, we
entered into a Licensing and Sale Agreement with Shanghai Golden Grand-Medical Instruments Ltd. (Golden Grand) for the know-how
licensing and sale of good relating to the Medigus Ultrasonic Surgical Endostapler (MUSE™) system in China, Hong Kong, Taiwan
and Macao. Under the agreement, we committed to provide a license, training services and goods to Golden Grand in consideration
for $3,000,000 to be paid to us in four milestone based installments. To date, some of these milestones have been achieved and
the Company has received $1,800,000. The final milestone shall be completed and the final installment paid upon completion of a
MUSE™ assembly line in China.
Other Activities
Algomizer Ltd.
We currently own a
minority stake in Algomizer and Linkury, which operates in the field of software development, marketing and distribution to internet
users. Algomizer recently announced its intention to focus its efforts on Linkury Ltd., its subsidiary, which is the main source
of Algomizer’s revenues and operations, with a goal of expanding its product portfolio in the field of technological solutions
for advertising and media. In the coming year, Linkury plans to launch new products in the sector of advertising technologies and
mobile. Furthermore, Algomizer continues its efforts to seek opportunities of engaging in acquisitions of companies with significant
revenues and commercial potential.
Matomy Media Group
Ltd.
In addition, we hold
approximately 24.99% of Matomy Media Group Ltd.’s, or Matomy, outstanding share capital. Matomy is dually listed on the London
and Tel Aviv Stock Exchanges.
Corporate Information
We were incorporated
in the State of Israel on December 9, 1999, as a private company pursuant to the Israeli Companies Ordinance (New Version), 1983.
In February 2006, we completed our initial public offering in Israel, and our ordinary shares have since traded on TASE, under
the symbol “MDGS”. In May 2015, we listed the ADSs on the Nasdaq Capital Market, and since August 2015 the ADSs have
been traded on the Nasdaq Capital Market under the symbol “MDGS”. Our Series C Warrants have been trading on the Nasdaq
Capital Market under the symbol “MDGSW” since July 2018. Each Series C Warrant is exercisable into one ADS for an exercise
price of $3.50 and will expire in July 2023. Each ADS represents 20 ordinary shares.
We are a public limited
liability company and operate under the provisions of Israel’s Companies Law, 5759-1999, as amended, or the Companies Law.
Our registered office and principal place of business are located at Omer Industrial Park, No. 7A, P.O. Box 3030, Omer 8496500,
Israel and our telephone number in Israel is +972-72-260-2200. Our website address is www.medigus.com. The information contained
on our website or available through our website is not incorporated by reference into and should not be considered a part of this
prospectus.
RISK FACTORS
An investment in our
securities involves certain risks. Before investing in our securities, you should carefully consider the risk factors in our most
recent Annual Report on Form 20-F, or any updates in our Reports on Form 6-K, together with all of the other information appearing
in this prospectus or incorporated by reference into this prospectus, before making your investment decision. The risks and uncertainties
we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently
deem immaterial may also affect our operations. Past financial performance may not be a reliable indicator of future performance,
and historical trends should not be used to anticipate results or trends in future periods. If any of these risks actually occurs,
our business, business prospects, financial condition or results of operations could be seriously harmed. This could cause the
trading price of our securities to decline, resulting in a loss of all or part of your investment. Please also read carefully the
section below entitled “Forward-Looking Statements.”
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and
the information incorporated by reference herein may include forward looking statements. These statements involve known and unknown
risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you
can identify forward-looking statements by terms including “anticipates,” “believes,” “could,”
“estimates,” “expects,” “intends,” “may,” “plans,” “potential,”
“predicts,” “projects,” “should,” “will,” “would,” and similar expressions
intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events
and are based on assumptions and subject to risks and uncertainties. In addition, certain sections of this prospectus and the information
incorporated by reference herein contain information obtained from independent industry and other sources that we have not independently
verified. You should not put undue reliance on any forward-looking statements. Unless we are required to do so under U.S. federal
securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.
Our ability to predict
our operating results or the effects of various events on our operating results is inherently uncertain. Therefore, we caution
you to consider carefully the matters described under the caption “Risk Factors” above, and certain other matters discussed
in this prospectus and the information incorporated by reference herein, and other publicly available sources. Such factors and
many other factors beyond our control could cause our actual results, performance or achievements to be materially different from
any future results, performance or achievements that may be expressed or implied by the forward-looking statements.
Factors that could
cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are
not limited to:
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recent material changes in our strategy;
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our ability to sell or license our MUSE™ technology;
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ScoutCam Inc.’s commercial success in commercializing the ScoutCam™ system;
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projected capital expenditures and liquidity;
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the overall global economic environment as well as the direct impact of the coronavirus strain COVID-19 on us;
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the impact of competition and new technologies;
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general market, political, reimbursement and economic conditions in the countries in which we operate;
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government regulations and approvals;
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litigation and regulatory proceedings; and
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those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects”, in our Annual Report on Form 20-F for the year ended December 31, 2019, which is incorporated by reference in this prospectus.
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We caution you to
carefully consider these risks and not to place undue reliance on our forward-looking statements. Except as required by law, we
assume no responsibility for updating any forward-looking statements.
CAPITALIZATION
The following table
sets forth our consolidated capitalization as of December 31, 2019. The information in the following table should be read in conjunction
with and is qualified in its entirety by reference to the financial statements and notes thereto included in our most recent Annual
Report on Form 20-F and the other financial information incorporated by reference into this prospectus.
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As of
December 31,
2019
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Actual
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(U.S. Dollars, in thousands)
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Cash and cash equivalents
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$
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7,036
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Total liabilities
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5,203
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Equity:
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Ordinary shares, par value NIS 1.00 per share: 250,000,000 ordinary shares authorized; 82,598,738 ordinary shares outstanding
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22,802
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Share premium
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47,873
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Other capital reserves
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12,492
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Warrants
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197
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Accumulated deficit
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(76,657
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Equity attributable to owners of Medigus Ltd.
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6,707
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Non-controlling interests
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1,424
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Total equity
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8,131
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Total capitalization and indebtedness
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$
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13,334
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The preceding table
excludes as of December 31, 2019: (i) 4,276,380 ordinary shares issuable upon the exercise of outstanding options at a weighted
average exercise price of NIS 0.88 per share or $0.26 per share (based on the exchange rate reported by the Bank of Israel on such
date), equivalent to 213,819 ADSs at a weighted average exercise price of $5.12 per ADS and (ii) 89,928,240 ordinary shares issuable
upon the exercise of warrants to purchase up to an aggregate of 4,496,412 ADSs at a weighted average exercise price of $4.97 per
ADS.
USE OF PROCEEDS
Unless otherwise indicated
in an accompanying prospectus supplement, the net proceeds from the sale of securities will be used for general corporate purposes,
including research and development related purposes and for potential acquisitions. Our management will have significant flexibility
in applying the net proceeds of this offering. In addition, while we have not entered into any binding agreements or commitments
relating to any significant transaction as of the date of this prospectus, we may use a portion of the net proceeds to pursue acquisitions,
joint ventures and other strategic transactions.
DESCRIPTION OF ORDINARY SHARES
General
The following is a
summary description of our ordinary shares under our articles of association, as amended, or the Amended Articles, and does not
purport to be complete. Our authorized share capital consists of 250,000,000 ordinary shares. The par value of our ordinary shares
is NIS 1.00 per share, and all issued and outstanding ordinary shares are fully paid and non-assessable. Holders of paid-up ordinary
shares are entitled to participate equally in the payment of dividends and other distributions and, in the event of liquidation,
in all distributions after the discharge of liabilities to creditors.
Transfer of shares
Our fully paid ordinary
shares are issued in registered form and may be freely transferred under our Amended Articles, unless the transfer is restricted
or prohibited by another instrument, applicable law or the rules of a stock exchange on which the shares are listed for trade.
The ownership or voting of our ordinary shares by non-residents of Israel is not restricted in any way by our Amended Articles
or the laws of the State of Israel, except for ownership by nationals of certain countries that are, or have been, in a state of
war with Israel.
Liability to further capital calls
Our board of directors
may make, from time to time, such calls as it may deem fit upon shareholders with respect to any sum unpaid with respect to shares
held by such shareholders which is not payable at a fixed time. Such shareholder has to pay the amount of every call so made upon
him or her.
Election of directors
Under our Amended Articles,
our board of directors must consist of at least three and not more than 12 directors, not including two external directors appointed
as required under the Companies Law. According to our Amended Articles, which were approved in our annual meeting on July 25, 2019,
our board of directors is divided into three classes with staggered three-year terms. At each annual general meeting of our shareholders,
the election or re-election of directors following the expiration of the term of office of the directors of that class of directors
shall be for a term of office that expires on the third annual general meeting following such election or re-election, such that
from the annual general meeting of 2020 and after, each year the term of office of only one class of directors will expire. Because
our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of the voting
power represented at a shareholders meeting have the power to elect all of the directors whose positions are being filled at that
meeting, to the exclusion of the remaining shareholders.
Further, our shareholders
approved an approval mechanism which requires an affirmative vote of the board of directors (by 75% of the members) in addition
to the approval of our shareholders in order to amend such provisions.
In addition, if a director’s
office becomes vacant, the remaining serving directors may continue to act in any manner, provided that the number of the serving
directors shall not be less than three (3). If the number of serving directors is lower than their minimal one, the board of directors
shall not be permitted to act, other than for the purpose of convening a general meeting of the Company’s shareholders for
the purpose of appointing additional directors. For further information on the election and removal of directors see “Item
6. Directors, Senior Management and Employees—C. Board Practices” in our Annual Report on Form 20-F for the year ended
December 31, 2019.
Dividend and liquidation rights
We may declare a dividend
to be paid to the holders of our ordinary shares in proportion to their respective shareholdings. Under the Companies Law, dividend
distributions are determined by the board of directors and do not require the approval of the shareholders of a company unless
the company’s articles of association provide otherwise. Our Amended Articles do not require shareholder approval of a dividend
distribution and provide that dividend distributions may be determined by our board of directors.
Pursuant to the Companies
Law, the distribution amount is limited to the greater of retained earnings or earnings generated over the previous two years,
according to our then last reviewed or audited consolidated financial statements, provided that the date of the financial statements
is not more than six months prior to the date of the distribution, or we may distribute dividends that do not meet such criteria
only with court approval. In each case, we are only permitted to distribute a dividend if our board of directors and the court,
if applicable, determines that there is no reasonable concern that payment of the dividend will prevent us from satisfying our
existing and foreseeable obligations as they become due.
In the event of our
liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares
in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential
dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.
Exchange controls
There are currently
no Israeli currency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the shares
or interest or other payments to non-residents of Israel, except for shareholders who are subjects of certain countries that are,
or have been, in a state of war with Israel.
Shareholder meetings
Under the Companies
Law, we are required to hold an annual general meeting of our shareholders once every calendar year that must be held no later
than 15 months after the date of the previous annual general meeting. All general meetings other than the annual meeting of shareholders
are referred to in our Amended Articles as extraordinary meetings. Our board of directors may call extraordinary meetings whenever
it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law provides
that our board of directors is required to convene a special meeting upon the written request of (i) any two of our directors or
one-quarter of the members of our board of directors or (ii) one or more shareholders holding, in the aggregate, either (a) 5%
or more of our outstanding issued shares and 1% or more of our outstanding voting power or (b) 5% or more of our outstanding voting
power.
Under the Companies
Law, one or more shareholders holding at least 1% of the voting rights at the general meeting may request that the board of directors
include a matter in the agenda of a general meeting to be convened in the future, provided that it is appropriate to discuss such
a matter at the general meeting.
Subject to the provisions
of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings
are the shareholders of record on a date to be decided by the board of directors, which may be between four and 40 days prior to
the date of the meeting. Furthermore, the Companies Law requires that resolutions regarding the following matters must be passed
at a general meeting of our shareholders:
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amendments to our Amended Articles;
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appointment or termination of our auditors;
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appointment of external directors;
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approval of certain related party transactions;
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increases or reductions of our authorized share capital;
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the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management.
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Under our Amended Articles,
we are not required to give notice to our registered shareholders pursuant to the Companies Law, unless otherwise required by law.
The Companies Law requires that a notice of any annual general meeting or extraordinary general meeting be provided to shareholders
at least 21 days prior to the meeting and if the agenda of the meeting includes the appointment or removal of directors, the approval
of transactions with office holders or interested or related parties, or an approval of a merger, or as otherwise required under
applicable law, notice must be provided at least 35 days prior to the meeting.
Voting rights
Voting rights
All our ordinary shares
have identical voting and other rights in all respects.
Quorum requirements
Pursuant to our Amended
Articles, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote before the
shareholders at a general meeting. The quorum required for our general meetings of shareholders consists of at least two shareholders,
present in person or by proxy, holding at least ten percent (10%) of the voting rights of the Company. A meeting adjourned for
lack of a quorum will be adjourned to the same day of the following week at the same time and place, or to such other day, time
or place if such is stated in the notice of the meeting. At the reconvened meeting, if a quorum is not present within an half an
hour, any number of shareholders present in person or by proxy will constitute a lawful quorum.
Vote requirements
Our Amended Articles
provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by the Companies Law
or by our Amended Articles. Under the Companies Law, each of (i) the approval of an extraordinary transaction with a controlling
shareholder and (ii) the terms of employment or other engagement of the controlling shareholder of the company or such controlling
shareholder’s relative (even if not extraordinary) requires the approval described under “Item 6. Directors, Senior
Management and Employees—C. Board Practices—Fiduciary duties and approval of specified related party transactions and
compensation under Israeli law—Disclosure of personal interests of a controlling shareholder and approval of transactions”
in our Annual Report on Form 20-F for the year ended December 31, 2019. Certain transactions with respect to remuneration of our
office holders and directors require further approvals described under “Item 6. Directors, Senior Management and Employees—C.
Board Practices—Fiduciary duties and approval of specified related party transactions and compensation under Israeli law—Approval
of compensation of directors and executive officers” in our Annual Report on Form 20-F for the year ended December 31, 2019.
Another exception to the simple majority vote requirement is a resolution for the voluntary winding up, or an approval of a scheme
of arrangement or reorganization, of the company pursuant to Section 350 of the Companies Law, which requires the approval of the
majority of the shareholders voting their shares, other than abstainees, holding at least 75% of the voting rights represented
at the meeting, in person, by proxy or by voting deed and voting on the resolution. Under our Amended Articles, the removal of
an acting director by a vote of the Company’s shareholders requires at least 50% of the voting power of the Company. In addition,
certain provisions of our Amended Articles may be amended by a majority resolution adopted by the general meeting of the Company’s
shareholders, provided that such amendment was approved prior to the general meeting by a 75% majority of the Company’s board
of directors then in office. The amendment of the following articles is subject to the aforementioned approval requirement: the
articles stipulating the aforementioned approval requirement, the articles determining that the declaration of the chairman of
a general meeting of the shareholders shall serve as prima facie evidence of the result of a resolution voted on in the general
meeting, the determination of the number of members of the board of directors by the general meeting of the Company’s shareholders
or board of directors which shall be no less than three and no more than twelve directors, separation of the Company’s board
of directors into three classes of directors, the occurrences under which a presiding director may be removed from his position
and the board of directors authority to appoint additional members up to the maximum amount allowed under the articles of association.
Access to corporate records
Under the Companies
Law, shareholders are provided access to minutes of our general meetings, our shareholders register and principal shareholders
register, our Amended Articles and financial statements and any document that we are required by law to file publicly with the
Israeli Companies Registrar or the Israel Securities Authority. In addition, shareholders may request to be provided with any document
related to an action or transaction requiring shareholder approval under the related party transaction provisions of the Companies
Law. We may deny this request if we believe it has not been made in good faith or if such denial is necessary to protect our interest
or protect a trade secret or patent.
Modification of class rights
Under the Companies
Law and our Amended Articles, the rights attached to any class of shares, such as voting, liquidation and dividend rights, may
be amended by adoption of a resolution by the holders of a majority of the shares of that class present at a separate class meeting,
or otherwise in accordance with the rights attached to such class of shares, as set forth in our Amended Articles.
Acquisitions under Israeli law
Full tender offer
A person wishing to
acquire shares of an Israeli public company and who would as a result hold over 90% of the target company’s issued and outstanding
share capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase
of all of the issued and outstanding shares of the company. A person wishing to acquire shares of a public Israeli company and
who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares is required to make
a tender offer to all of the shareholders who hold shares of the relevant class for the purchase of all of the issued and outstanding
shares of that class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital
of the company or of the applicable class, and more than half of the shareholders who do not have a personal interest in the offer
accept the offer, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law.
However, a tender offer will also be accepted if the shareholders who do not accept the offer hold less than 2% of the issued and
outstanding share capital of the company or of the applicable class of shares.
Upon a successful completion
of such a full tender offer, any shareholder that was an offeree in such tender offer, whether such shareholder accepted the tender
offer or not, may, within six months from the date of acceptance of the tender offer, petition an Israeli court to determine whether
the tender offer was for less than fair value and that the fair value should be paid as determined by the court. However, under
certain conditions, the offeror may include in the terms of the tender offer that an offeree who accepted the offer will not be
entitled to petition the Israeli court as described above.
If a tender offer is
not accepted in accordance with the requirements set forth above, the acquirer may not acquire shares of the company that will
increase its holdings to more than 90% of the company’s issued and outstanding share capital or of the applicable class from
shareholders who accepted the tender offer.
Special tender offer
The Companies Law provides
that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the
acquisition the purchaser would become a holder of 25% or more of the voting rights in the company. This requirement does not apply
if there is already another holder of at least 25% of the voting rights in the company. Alternatively, such an acquisition may
be approved pursuant to a private placement approved by the company’s shareholders with the purpose of approving the acquisition
of 25% or more, or 45% or more of the company’s voting rights. Similarly, the Companies Law provides that an acquisition
of shares in a public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would
become a holder of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds
more than 45% of the voting rights in the company, subject to certain exceptions.
In the event that a
special tender offer is made, a company’s board of directors is required to express its opinion on the advisability of the
offer, or shall abstain from expressing any opinion if it is unable to do so, provided that it gives the reasons for its abstention.
In addition, the board of directors must disclose any personal interest each member of the board of directors has in the offer
or stems therefrom.
A special tender offer
must be extended to all shareholders of a company but the offeror is not required to purchase shares representing more than 5%
of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders.
A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding
shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose
holders objected to the offer (excluding the purchaser and its controlling shareholder, holders of 25% or more of the voting rights
in the company or any person having a personal interest in the acceptance of the tender offer or any other person acting on their
behalf, including relatives and entities under such person’s control). If a special tender offer is accepted, then the purchaser
or any person or entity controlling it or under common control with the purchaser or such controlling person or entity may not
make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target
company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect
such an offer or merger in the initial special tender offer.
Merger
The Companies Law permits
merger transactions if approved by each party’s board of directors and, unless certain requirements described under the Companies
Law are met, by a majority vote of each party’s shares, and, in the case of the target company, a majority vote of each class
of its shares voted on the proposed merger at a shareholders meeting. The board of directors of a merging company is required pursuant
to the Companies Law to discuss and determine whether in its opinion there exists a reasonable concern that as a result of a proposed
merger, the surviving company will not be able to satisfy its obligations towards its creditors, such determination taking into
account the financial status of the merging companies. If the board of directors has determined that such a concern exists, it
may not approve a proposed merger.
For purposes of the
shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the votes of the shares
represented at the shareholders meeting that are held by parties other than the other party to the merger, or by any person (or
group of persons acting in concert) who holds (or hold, as the case may be) 25% or more of the voting rights or the right to appoint
25% or more of the directors of the other party, vote against the merger. If, however, the merger involves a merger with a company’s
own controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead
subject to the same special majority approval that governs all extraordinary transactions with controlling shareholders (as described
under “Item 6. Directors, Senior Management and Employees—C. Board Practices—Fiduciary duties and approval of
specified related party transactions and compensation under Israeli law—Disclosure of personal interests of a controlling
shareholder and approval of transactions” in our Annual Report on Form 20-F for the year ended December 31, 2019).
If the transaction
would have been approved by the shareholders of a merging company but for the separate approval of each class or the exclusion
of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at
least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the
value to the parties to the merger and the consideration offered to the shareholders of the company.
Upon the request of
a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists
a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of the merging
entities, and may further give instructions to secure the rights of creditors.
In addition, a merger
may not be consummated unless at least 50 days have passed from the date on which a proposal for approval of the merger was filed
by each party with the Israeli Registrar of Companies and at least 30 days have passed from the date on which the merger was approved
by the shareholders of each party.
Borrowing powers
Pursuant to the Companies
Law and our Amended Articles, our board of directors may exercise all powers and take all actions that are not required under law
or under our Amended Articles to be exercised or taken by a certain organ of the Company, including the power to borrow money for
company purposes.
Changes in capital
Our Amended Articles
enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law and must
be approved by a resolution duly adopted by our shareholders at a general meeting. In addition, transactions that have the effect
of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings or profits,
require the approval of both our board of directors and an Israeli court.
Transfer agent and registrar
Our transfer agent
and registrar is the Depositary for the ADSs, Bank of New York Mellon, and its address is 101 Barclay Street, 22W New York, NY
10286.
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
General
The following is a
summary description of our ADSs and does not purport to be complete. Each of our ADSs represents twenty ordinary shares (or a right
to receive twenty ordinary shares) deposited with the principal Tel Aviv office of either of Bank Hapoalim or Bank Leumi, as custodian
for the Bank of New York Mellon as the depositary. Each ADS also represents any other securities, cash or other property which
may be held by the depositary. The depositary’s office at which the ADSs will be administered is located at 101 Barclay Street,
New York, New York 10286. The Bank of New York Mellon’s principal executive office is located at One Wall Street, New York,
New York 10286.
You may hold ADSs either
(A) directly (i) by having an American Depositary Receipt, or ADR, which is a certificate evidencing a specific number of ADSs,
registered in your name, or (ii) by having uncertificated ADSs registered in your name, or (B) indirectly by holding a security
entitlement in ADSs through your broker or other financial institution. If you hold ADSs directly, you are a registered ADS holder,
also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely
on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section.
You should consult with your broker or financial institution to find out what those procedures are.
Registered holders
of uncertificated ADSs will receive statements from the depositary confirming their holdings. As an ADS holder, we will not treat
you as one of our shareholders and you will not have shareholder rights. Israeli law governs shareholder rights. The depositary
will be the holder of the shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit
agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder
rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.
The following is a
summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit
agreement and the form of ADR.
Dividends and Other Distributions
How will you receive dividends and other distributions
on the shares?
The depositary has
agreed to pay to ADS holders the cash dividends or other distributions it or the custodian receives on shares or other deposited
securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of shares your
ADSs represent.
Cash. The depositary
will convert any cash dividend or other cash distribution we pay on the shares into U.S. dollars, if it can do so on a reasonable
basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and
cannot be obtained, the deposit agreement allows the depositary to distribute the NIS only to those ADS holders to whom it is possible
to do so. It will hold the NIS it cannot convert for the account of the ADS holders who have not been paid. It will not invest
the NIS and it will not be liable for any interest.
Before making a distribution,
any withholding taxes, or other governmental charges that must be paid will be deducted. For more information see “Item 10.
Additional Information – E. Taxation” in our Annual Report on Form 20-F for the fiscal year ended December 31, 2019,
filed with the SEC on April 21, 2020. The depositary will distribute only whole U.S. dollars and cents and will round fractional
cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the NIS, you
may lose some or all of the value of the distribution.
Shares. The
depositary may distribute additional ADSs representing any shares we distribute as a dividend or free distribution. The depositary
will only distribute whole ADSs. It will sell shares which would require it to deliver a fraction of an ADS (or ADSs representing
those shares) and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional
ADSs, the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed shares sufficient
to pay its fees and expenses in connection with that distribution (or ADSs representing those shares).
Rights to purchase
additional shares. If we offer holders of our securities any rights to subscribe for additional shares or any other rights,
the depositary may make these rights available to ADS holders. If the depositary decides it is not legal and practical to make
the rights available but that it is practical to sell the rights, the depositary will use reasonable efforts to sell the rights
and distribute the proceeds in the same way as it does with cash. The depositary will allow rights that are not distributed or
sold to lapse. In that case, you will receive no value for them.
If the depositary makes
rights available to ADS holders, it will exercise the rights and purchase the shares on your behalf. The depositary will then deposit
the shares and deliver ADSs to the persons entitled to them. It will only exercise rights if you pay it the exercise price and
any other charges the rights require you to pay.
U.S. securities laws
may restrict transfers and cancellation of the ADSs represented by shares purchased upon exercise of rights. For example, you may
not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver restricted depositary shares
that have the same terms as the ADSs described in this section except for changes needed to put the necessary restrictions in place.
Other Distributions.
The depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair
and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we distributed
and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which
case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities
(other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The
depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with
that distribution.
The depositary is not
responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation
to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action
to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the
distributions we make on our shares or any value for them if it is illegal or impractical for us to make them available to you.
Deposit, Withdrawal and Cancellation
How are ADSs issued?
The depositary will
deliver ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian. Upon payment of
its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register
the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons
that made the deposit.
How can ADS holders withdraw the deposited securities?
You may surrender your
ADSs at the depositary’s office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or
stock transfer taxes or fees, the depositary will deliver the shares and any other deposited securities underlying the ADSs to
the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense, the
depositary will deliver the deposited securities at its office, if feasible.
How do ADS holders interchange between certificated ADSs
and uncertificated ADSs?
You may surrender your
ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will
send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Alternatively,
upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange
of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those
ADSs.
Voting Rights
How do you vote?
ADS holders may instruct
the depositary how to vote the number of deposited shares their ADSs represent. The depositary will notify ADS holders of shareholders’
meetings and arrange to deliver our voting materials to them if we ask it to. Those materials will describe the matters to be voted
on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they much reach the depositary
by a date set by the depositary. Otherwise, you won’t be able to exercise your right to vote unless you withdraw the shares.
However, you may not know about the meeting enough in advance to withdraw the shares.
The depositary will
try, as far as practical, subject to the laws of Israel, and of our Amended Articles or similar documents, to vote or to have its
agents vote the shares or other deposited securities as instructed by ADS holders. The depositary will only vote or attempt to
vote as instructed.
We cannot assure you
that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition,
the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out
voting instructions. This means that you may not be able to exercise your right to vote and there may be nothing you can do
if your shares are not voted as you requested.
In order to give you
a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited securities, if we
request the depositary to act, we agree to give the depositary notice of any such meeting and details concerning the matters to
be voted upon at least 30 days in advance of the meeting date.
Fees and Expenses
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Persons depositing or withdrawing shares or ADS holders must pay:
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For:
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$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
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● Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
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● Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
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$.05 (or less) per ADS
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● Any cash distribution to ADS holders
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A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs
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● Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders
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$.05 (or less) per ADS per calendar year
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● Depositary services
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Registration or transfer fees
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● Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares
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Expenses of the depositary
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● Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)
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● converting foreign currency to U.S. dollars
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Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes
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● As necessary
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Any charges incurred by the depositary or its agents for servicing the deposited securities
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● As necessary
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The depositary collects
its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal
or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees
from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its
annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry
system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution
payable to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services
until its fees for those services are paid.
From time to time,
the depositary may make payments to us to reimburse and/or share revenue from the fees collected from ADS holders, or waive fees
and expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance of the
ADS program. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other service providers
that are affiliates of the depositary and that may earn or share fees or commissions.
Payment of Taxes
You will be responsible
for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs.
The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by
your ADSs until such taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented
by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities,
it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders
any property, remaining after it has paid the taxes.
Reclassifications, Recapitalizations
and Mergers
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If we:
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Then:
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● Change
the nominal or par value of our shares
● Reclassify,
split up or consolidate any of the deposited securities
● Distribute
securities on the shares that are not distributed to you
● Recapitalize,
reorganize, merge, liquidate, sell all or substantially all of our assets, or take any similar action
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The cash, shares or other securities received
by the Depositary will become deposited securities. Each ADS will automatically represent its equal share of the new deposited
securities.
The Depositary may distribute new ADSs
representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the
new deposited securities.
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Amendment and Termination
How may the deposit agreement be amended?
We may agree with the
depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees
or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs,
delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding
ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you
are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement
as amended.
How may the deposit agreement be terminated?
The depositary will
terminate the deposit agreement at our direction by mailing notice of termination to the ADS holders then outstanding at least
30 days prior to the date fixed in such notice for such termination. The depositary may also terminate the deposit agreement by
mailing notice of termination to us and the ADS holders if 60 days have passed since the depositary told us it wants to resign
but a successor depositary has not been appointed and accepted its appointment.
After termination,
the depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions on the
deposited securities, sell rights and other property, and deliver shares and other deposited securities upon cancellation of ADSs.
Four months after termination, the depositary may sell any remaining deposited securities by public or private sale. After that,
the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement
for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability
for interest. The depositary’s only obligations will be to account for the money and other cash. After termination our only
obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.
Limitations on Obligations and Liability
Limits on our Obligations and the
Obligations of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement
expressly limits our obligations and the obligations of the Depositary. It also limits our liability and the liability of the Depositary.
We and the Depositary:
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are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
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are not liable if we are or it is prevented or delayed by law or circumstances beyond our or its control from performing our or its obligations under the deposit agreement;
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are not liable if we or it exercises discretion permitted under the deposit agreement;
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are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;
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have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other person;
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are not liable for the acts or omissions of any securities depository, clearing agency or settlement system; and
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may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person.
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In the deposit agreement,
we and the Depositary agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the Depositary
will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the Depositary may require:
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payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities;
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satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and
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compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.
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The Depositary may
refuse to deliver ADSs or register transfers of ADSs when the transfer books of the Depositary or our transfer books are closed
or at any time if the Depositary or we think it advisable to do so.
Right to Receive the Shares Underlying
your ADSs
ADS holders have the
right to cancel their ADSs and withdraw the underlying shares at any time except:
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when temporary delays arise because: (i) the Depositary has closed its transfer books or we have closed our transfer books; (ii) the transfer of shares is blocked to permit voting at a shareholders’ meeting; or (iii) we are paying a dividend on our shares;
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when you owe money to pay fees, taxes and similar charges; or
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when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of shares or other deposited securities.
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This right of withdrawal
may not be limited by any other provision of the deposit agreement.
Pre-release of
ADSs
The deposit agreement
permits the depositary to deliver ADSs before deposit of the underlying shares. This is called a pre-release of the ADSs. The depositary
may also deliver shares upon cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release transaction
has been closed out). A pre-release is closed out as soon as the underlying shares are delivered to the depositary. The depositary
may receive ADSs instead of shares to close out a pre-release. The depositary may prerelease ADSs only under the following conditions:
(1) before or at the time of the pre-release, the person to whom the pre-release is being made represents to the depositary in
writing that it or its customer owns the shares or ADSs to be deposited; (2) the prerelease is fully collateralized with cash or
other collateral that the depositary considers appropriate; and (3) the depositary must be able to close out the pre-release on
not more than five business days’ notice. In addition, the depositary will limit the number of ADSs that may be outstanding
at any time as a result of pre-release, although the depositary may disregard the limit from time to time if it thinks it is appropriate
to do so.
Direct Registration
System
In the deposit agreement,
all parties to the deposit agreement acknowledge that the Direct Registration System, or DRS, and Profile Modification System,
or Profile, will apply to uncertificated ADSs upon acceptance thereof to DRS by the Depository Trust Company, or DTC. DRS is the
system administered by DTC that facilitates interchange between registered holding of uncertificated ADSs and holding of security
entitlements in ADSs through DTC and a DTC participant. Profile is a required feature of DRS that allows a DTC participant, claiming
to act on behalf of a registered holder of ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee
and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from
the ADS holder to register that transfer.
In connection with
and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand
that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in
requesting registration of transfer and delivery described in the paragraph above has the actual authority to act on behalf of
the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree
that the depositary’s reliance on and compliance with instructions received by the depositary through the DRS/Profile System
and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.
Shareholder communications;
inspection of register of holders of ADSs
The depositary will
make available for your inspection at its office all communications that it receives from us as a holder of deposited securities
that we make generally available to holders of deposited securities. The depositary will send you copies of those communications
if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders
about a matter unrelated to our business or the ADSs.
DESCRIPTION
OF WARRANTS
We may issue warrants
to purchase ADSs and/or ordinary shares. Warrants may be issued independently or together with any other securities and may be
attached to, or separate from, such securities. Each series of warrants will be issued under a separate warrant agreement to be
entered into between us and a warrant agent. The warrant agent will act solely as our agent and will not assume any obligation
or relationship of agency for or with holders or beneficial owners of warrants. The terms of any warrants to be issued and a description
of the material provisions of the applicable warrant agreement will be set forth in the applicable prospectus supplement.
The applicable prospectus
supplement will describe the following terms of any warrants in respect of which this prospectus is being delivered:
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the title of such warrants;
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the aggregate number of such warrants;
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the price or prices at which such warrants will be issued and exercised;
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the currency or currencies in which the price of such warrants will be payable;
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the securities purchasable upon exercise of such warrants;
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the date on which the right to exercise such warrants shall commence and the date on which such right shall expire;
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if applicable, the minimum or maximum amount of such warrants which may be exercised at any one time;
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if applicable, the designation and terms of the securities with which such warrants are issued and the number of such warrants issued with each such security;
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if applicable, the date on and after which such warrants and the related securities will be separately transferable;
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information with respect to book-entry procedures, if any;
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any material Israeli and United States federal income tax consequences;
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the anti-dilution provisions of the warrants, if any; and
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any other terms of such warrants, including terms, procedures and limitations relating to the exchange and exercise of such warrants.
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The description in
the applicable prospectus supplement of any warrants we offer will not necessarily be complete and will be qualified in its entirety
by reference to the applicable warrant agreement, which will be filed with the SEC if we offer warrants. For more information on
how you can obtain copies of the applicable warrant agreement if we offer warrants, see “Where You Can Find More Information;
Incorporation of Information by Reference” beginning on page 24. We urge you to read the applicable warrant agreement and
any applicable prospectus supplement in their entirety.
DESCRIPTION
OF SUBSCRIPTION RIGHTS
We may issue subscription
rights to purchase our ordinary shares and/or our ADSs. These subscription rights may be issued independently or together with
any other security offered hereby and may or may not be transferable by the shareholder receiving the subscription rights in such
offering. In connection with any offering of subscription rights, we may enter into a standby arrangement with one or more underwriters
or other purchasers pursuant to which the underwriters or other purchasers may be required to purchase any securities remaining
unsubscribed for after such offering.
The prospectus supplement
relating to any subscription rights we offer, if any, will, to the extent applicable, include specific terms relating to the offering,
including some or all of the following:
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the price, if any, for the subscription rights;
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the exercise price payable for each ordinary share and/or ADS upon the exercise of the subscription rights;
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the number of subscription rights to be issued to each shareholder;
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the number and terms of the ordinary shares and/or ADSs which may be purchased per each subscription right;
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the extent to which the subscription rights are transferable;
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any other terms of the subscription rights, including the terms, procedures and limitations relating to the exchange and exercise of the subscription rights;
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the date on which the right to exercise the subscription rights shall commence, and the date on which the subscription rights shall expire;
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the extent to which the subscription rights may include an over-subscription privilege with respect to unsubscribed securities; and
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if applicable, the material terms of any standby underwriting or purchase arrangement which may be entered into by us in connection with the offering of subscription rights.
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The description in
the applicable prospectus supplement of any subscription rights we offer will not necessarily be complete and will be qualified
in its entirety by reference to the applicable subscription right agreement, which will be filed with the SEC if we offer subscription
rights. For more information on how you can obtain copies of the applicable subscription right agreement if we offer subscription
rights, see “Where You Can Find More Information; Incorporation of Information by Reference” beginning on page 24.
We urge you to read the applicable subscription right agreement and any applicable prospectus supplement in their entirety.
DESCRIPTION
OF UNITS
We may issue units
comprised of one or more of the other securities that may be offered under this prospectus, in any combination. Each unit will
be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will
have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide
that the securities included in the unit may not be held or transferred separately at any time, or at any time before a specified
date.
The prospectus supplement
relating to any units we offer, if any, will, to the extent applicable, include specific terms relating to the offering, including
some or all of the following:
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the material terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately;
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any material provisions relating to the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units; and
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any material provisions of the governing unit agreement that differ from those described above.
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The description in
the applicable prospectus supplement of any units we offer will not necessarily be complete and will be qualified in its entirety
by reference to the applicable unit agreement, which will be filed with the SEC if we offer units. For more information on how
you can obtain copies of the applicable unit agreement if we offer units, see “Where You Can Find More Information; Incorporation
of Information by Reference” beginning on page 24. We urge you to read the applicable unit agreement and any applicable prospectus
supplement in their entirety.
PLAN OF
DISTRIBUTION
The securities
being offered by this prospectus may be sold:
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to or through one or more underwriters on a firm commitment or agency basis;
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through put or call option transactions relating to the securities;
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through broker-dealers;
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directly to purchasers, through a specific bidding or auction process, on a negotiated basis or otherwise;
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through any other method permitted pursuant to applicable law; or
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through a combination of any such methods of sale.
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At any time a particular
offer of the securities covered by this prospectus is made, a revised prospectus or prospectus supplement, if required, will be
distributed which will set forth the aggregate amount of securities covered by this prospectus being offered and the terms of the
offering, including the name or names of any underwriters, dealers, brokers or agents, any discounts, commissions, concessions
and other items constituting compensation from us and any discounts, commissions or concessions allowed or re-allowed or paid to
dealers. Such prospectus supplement, and, if necessary, a post-effective amendment to the registration statement of which this
prospectus is a part, will be filed with the SEC to reflect the disclosure of additional information with respect to the distribution
of the securities covered by this prospectus. In order to comply with the securities laws of certain states, if applicable, the
securities sold under this prospectus may only be sold through registered or licensed broker-dealers. In addition, in some states
the securities may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from
registration or qualification requirements is available and is complied with.
The distribution of
securities may be effected from time to time in one or more transactions, including block transactions and transactions on the
Nasdaq Capital Market or any other organized market where the securities may be traded. The securities may be sold at a fixed price
or prices, which may be changed, or at market prices prevailing at the time of sale, at prices relating to the prevailing market
prices or at negotiated prices. The consideration may be cash or another form negotiated by the parties. Agents, underwriters or
broker-dealers may be paid compensation for offering and selling the securities. That compensation may be in the form of discounts,
concessions or commissions to be received from us or from the purchasers of the securities. Any dealers and agents participating
in the distribution of the securities may be deemed to be underwriters, and compensation received by them on resale of the securities
may be deemed to be underwriting discounts. If any such dealers or agents were deemed to be underwriters, they may be subject to
statutory liabilities under the Securities Act of 1933, as amended, or the Securities Act.
Agents may from time
to time solicit offers to purchase the securities. If required, we will name in the applicable prospectus supplement any agent
involved in the offer or sale of the securities and set forth any compensation payable to the agent. Unless otherwise indicated
in the prospectus supplement, any agent will be acting on a best efforts basis for the period of its appointment. Any agent selling
the securities covered by this prospectus may be deemed to be an underwriter, as that term is defined in the Securities Act, of
the securities.
If underwriters are
used in a sale, securities will be acquired by the underwriters for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the
time of sale, or under delayed delivery contracts or other contractual commitments. Securities may be offered to the public either
through underwriting syndicates represented by one or more managing underwriters or directly by one or more firms acting as underwriters.
If an underwriter or underwriters are used in the sale of securities, an underwriting agreement will be executed with the underwriter
or underwriters, as well as any other underwriter or underwriters, with respect to a particular underwritten offering of securities,
and will set forth the terms of the transactions, including compensation of the underwriters and dealers and the public offering
price, if applicable. The prospectus and prospectus supplement will be used by the underwriters to resell the securities.
If a dealer is used
in the sale of the securities, we or an underwriter will sell the securities to the dealer, as principal. The dealer may then resell
the securities to the public at varying prices to be determined by the dealer at the time of resale. To the extent required, we
will set forth in the prospectus supplement the name of the dealer and the terms of the transactions.
We may directly
solicit offers to purchase the securities and may make sales of securities directly to institutional investors or others. These
persons may be deemed to be underwriters within the meaning of the Securities Act with respect to any resale of the securities.
To the extent required, the prospectus supplement will describe the terms of any such sales, including the terms of any bidding
or auction process, if used.
Agents, underwriters
and dealers may be entitled under agreements which may be entered into with us to indemnification by us against specified liabilities,
including liabilities incurred under the Securities Act, or to contribution by us to payments they may be required to make in respect
of such liabilities. If required, the prospectus supplement will describe the terms and conditions of the indemnification or contribution.
Some of the agents, underwriters or dealers, or their affiliates may be customers of, engage in transactions with or perform services
for us or our subsidiaries.
Any person participating
in the distribution of securities registered under the registration statement that includes this prospectus will be subject to
applicable provisions of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the applicable SEC rules and
regulations, including, among others, Regulation M, which may limit the timing of purchases and sales of any of our securities
by that person. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of our securities
to engage in market-making activities with respect to our securities. These restrictions may affect the marketability of our securities
and the ability of any person or entity to engage in market-making activities with respect to our securities.
Certain persons participating
in an offering may engage in over-allotment, stabilizing transactions, short-covering transactions, penalty bids and other transactions
that stabilize, maintain or otherwise affect the price of the offered securities. These activities may maintain the price of the
offered securities at levels above those that might otherwise prevail in the open market, including by entering stabilizing bids,
effecting syndicate covering transactions or imposing penalty bids, each of which is described below.
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A stabilizing bid means the placing of any bid, or the effecting of any purchase, for the purpose of pegging, fixing or maintaining the price of a security.
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A syndicate covering transaction means the placing of any bid on behalf of the underwriting syndicate or the effecting of any purchase to reduce a short position created in connection with the offering.
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A penalty bid means an arrangement that permits the managing underwriter to reclaim a selling concession from a syndicate member in connection with the offering when offered securities originally sold by the syndicate member are purchased in syndicate covering transactions.
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These transactions
may be effected on an exchange or automated quotation system, if the securities are listed on that exchange or admitted for trading
on that automated quotation system, or in the over-the-counter market or otherwise.
If so indicated in
the applicable prospectus supplement, we will authorize agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase offered securities from us at the public offering price set forth in such prospectus supplement pursuant
to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject
only to those conditions set forth in the prospectus supplement and the prospectus supplement will set forth the commission payable
for solicitation of such contracts.
In addition, ordinary
shares or ADSs may be issued upon conversion of or in exchange for debt securities or other securities.
Any underwriters to
whom offered securities are sold for public offering and sale may make a market in such offered securities, but such underwriters
will not be obligated to do so and may discontinue any market making at any time without notice. The offered securities may or
may not be listed on a national securities exchange. No assurance can be given that there will be a market for the offered securities.
Any securities that
qualify for sale pursuant to Rule 144 or Regulation S under the Securities Act, may be sold under Rule 144 or Regulation S rather
than pursuant to this prospectus.
To the extent that
we make sales to or through one or more underwriters or agents in at-the-market offerings, we will do so pursuant to the terms
of a distribution agreement between us and the underwriters or agents. If we engage in at-the-market sales pursuant to a distribution
agreement, we will sell our ordinary shares or ADSs to or through one or more underwriters or agents, which may act on an agency
basis or on a principal basis. During the term of any such agreement, we may sell ordinary shares or ADSs on a daily basis in exchange
transactions or otherwise as we agree with the underwriters or agents. The distribution agreement will provide that any ordinary
shares or ADSs sold will be sold at prices related to the then prevailing market prices for our ordinary shares or ADSs. Therefore,
exact figures regarding proceeds that will be raised or commissions to be paid cannot be determined at this time and will be described
in a prospectus supplement. Pursuant to the terms of the distribution agreement, we also may agree to sell, and the relevant underwriters
or agents may agree to solicit offers to purchase, blocks of our ordinary shares, ADSs or warrants. The terms of each such distribution
agreement will be set forth in more detail in a prospectus supplement to this prospectus.
In connection with
offerings made through underwriters or agents, we may enter into agreements with such underwriters or agents pursuant to which
we receive our outstanding securities in consideration for the securities being offered to the public for cash. In connection with
these arrangements, the underwriters or agents may also sell securities covered by this prospectus to hedge their positions in
these outstanding securities, including in short sale transactions. If so, the underwriters or agents may use the securities received
from us under these arrangements to close out any related open borrowings of securities.
We may enter into derivative
transactions with third parties or sell securities not covered by this prospectus to third parties in privately negotiated transactions.
If the applicable prospectus supplement indicates, in connection with those derivatives, such third parties (or affiliates of such
third parties) may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale
transactions. If so, such third parties (or affiliates of such third parties) may use securities pledged by us or borrowed from
us or others to settle those sales or to close out any related open borrowings of shares, and may use securities received from
us in settlement of those derivatives to close out any related open borrowings of shares. The third parties (or affiliates of such
third parties) in such sale transactions will be underwriters and will be identified in the applicable prospectus supplement (or
a post-effective amendment).
We may loan or pledge
securities to a financial institution or other third party that in turn may sell the securities using this prospectus. Such financial
institution or third party may transfer its short position to investors in our securities or in connection with a simultaneous
offering of other securities offered by this prospectus or in connection with a simultaneous offering of other securities offered
by this prospectus.
LEGAL
MATTERS
Certain legal matters
with respect to Israeli law and with respect to the validity of the offered securities under Israeli law will be passed upon for
us Meitar | Law Offices, Ramat Gan, Israel. Certain legal matters with respect to U.S. federal securities law will be passed upon
for us by Sullivan & Worcester LLP, New York, New York.
EXPERTS
The financial statements
incorporated in this Prospectus, except as they relate to Algomizer Ltd., by reference to the Annual Report on Form 20-F for the
year ended December 31, 2019 have been so incorporated in reliance on the report (which contains an explanatory paragraph relating
to the Company’s ability to continue as a going concern as described in Note 1(b) to the financial statements) of Kesselman
& Kesselman, Certified Public Accountants (Isr.), an independent registered public accounting firm and a member firm of PricewaterhouseCoopers
International Limited, given on the authority of said firm as experts in auditing and accounting.
Kesselman & Kesselman,
Certified Public Accountants (Isr.) did not audit the financial statements of Algomizer Ltd., an 8% equity investment of the Company,
as of and for the year ended December 31, 2019, which is reflected in the consolidated financial statements of the Company for
that period. Those statements were audited by Brightman Almagor Zohar & Co., Certified Public Accountant (Isr.), a firm in
the Deloitte Global Network, whose report thereon is incorporated in this Prospectus by reference, given on the authority of said
firm as experts in auditing and accounting.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We
have filed with the SEC a registration statement on Form F-3 under the Securities Act, with respect to the securities offered by
this prospectus. However, as is permitted by the rules and regulations of the SEC, this prospectus, which is part of our registration
statement on Form F-3, omits certain non-material information, exhibits, schedules and undertakings set forth in the registration
statement. For further information about us, and the securities offered by this prospectus, please refer to the registration statement.
We are subject
to the reporting requirements of the Exchange Act that are applicable to a foreign private issuer. In accordance with the Exchange
Act, we file reports, including annual reports on Form 20-F. We also furnish to the SEC under cover of Form 6-K material information
required to be made public in Israel, filed with and made public by any stock exchange or distributed by us to our shareholders.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy
statements to shareholders and our officers, directors and principal shareholders are exempt from the “short-swing profits”
reporting and liability provisions contained in Section 16 of the Exchange Act and related Exchange Act rules.
The SEC maintains
an Internet site that contains reports, proxy and information statements, and other information regarding issuers, such as us,
that file electronically with the SEC (http://www.sec.gov).
We maintain
a corporate website at www.medigus.com. Information contained on, or that can be accessed through, our website does not constitute
a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference. We
will post on our website any materials required to be posted on such website under applicable corporate or securities laws and
regulations, including posting any notices of general meetings of our shareholders.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows
us to incorporate by reference the information we file with or furnish to the SEC, which means that we can disclose important information
to you by referring you to another document filed or furnished separately with the SEC. The information incorporated by reference
is considered to be part of this prospectus. Any information that we file or furnish later with the SEC and that is deemed incorporated
by reference will also be considered to be part of this prospectus and will automatically update and supersede the information
in this prospectus. In all cases, you should rely on the later information over different information included in this prospectus.
This prospectus incorporates by reference the documents listed below, and any future Annual Reports on Form 20-F that we file with
the SEC and certain Reports on Form 6-K that we furnish to the SEC (but only to that extent that such Form 6-K states that it is
incorporated by reference herein), in each case, between the date of the initial registration statement and the effectiveness of
the registration statement and following the effectiveness of the registration statement until the offering of the securities under
the registration statement is terminated.
We incorporate
by reference the following documents or information that we have filed with the SEC:
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the description of our ordinary shares, par value NIS 1.00 per share, and the American Depositary Shares representing the ordinary shares, contained in our Registration Statement on Form 20-F filed with the SEC on May 7, 2015, including any subsequent amendment or any report filed for the purpose of updating such description; and
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our Annual Report on Form 20-F for the fiscal year ended December 31, 2019, filed with the SEC on April 21, 2020;
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The information
relating to us contained in this prospectus does not purport to be comprehensive and should be read together with the information
contained in the documents incorporated or deemed to be incorporated by reference in this prospectus.
As you read
the above documents, you may find inconsistencies in information from one document to another. If you find inconsistencies between
the documents and this prospectus, you should rely on the statements made in the most recent document. All information appearing
in this prospectus is qualified in its entirety by the information and financial statements, including the notes thereto, contained
in the documents incorporated by reference herein.
We will provide,
free of charge, to each person, including any beneficial owner, to whom this prospectus is delivered, a copy of any or all information
that has been incorporated by reference into this prospectus, but which has not been delivered with the prospectus, upon written
or oral request to us at the following address:
Omer Industrial
Park, No. 7A, P.O. Box 3030
Omer 8496500,
Israel
Tel: +972-72-260-2200
Attention:
Tatiana Yosef, Chief Financial Officer
ENFORCEABILITY
OF CIVIL LIABILITIES
We are incorporated
under the laws of the State of Israel. Service of process upon us and upon our directors and officers and the Israeli experts named
in this prospectus, substantially all of whom reside outside the United States, may be difficult to obtain within the United States.
Furthermore, because substantially all of our assets and substantially all of our directors and officers are located outside the
United States, any judgment obtained in the United States against us or any of our directors and officers may not be collectible
within the United States.
It may be
difficult to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim
based on a violation of U.S. securities laws because Israel is not the most appropriate forum to bring such a claim. In addition,
even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim.
If U.S. law is applicable, then it must be proved as a fact which can be a time-consuming and costly process. Certain matters of
procedure will also be governed by Israeli law.
Subject to
specified time limitations and legal procedures, Israeli courts may enforce a United States judgment in a civil matter which, subject
to certain exceptions, is non-appealable, including judgments based upon the civil liability provisions of the Securities Act and
the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that among other things:
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the judgments are obtained after due process before a court of competent jurisdiction, according to the laws of the state in which the judgment is given and the rules of private international law currently prevailing in Israel;
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the prevailing law of the foreign state in which the judgments were rendered allows the enforcement of judgments of Israeli courts (however, the Israeli courts may waive this requirement following a request by the attorney general);
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adequate service of process has been effected and the defendant has had a reasonable opportunity to be heard and to present his or her evidence;
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the judgments are not contrary to public policy, and the enforcement of the civil liabilities set forth in the judgment does not impair the security or sovereignty of the State of Israel;
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the judgments were not obtained by fraud and do not conflict with any other valid judgment in the same matter between the same parties;
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an action between the same parties in the same matter is not pending in any Israeli court at the time the lawsuit is instituted in the foreign court; and
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the obligations under the judgment are enforceable according to the laws of the State of Israel and according to the law of the foreign state in which the relief was granted.
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If a foreign
judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli
currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli
currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in
force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount
of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus
interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk
of unfavorable exchange rates.
OFFERING
EXPENSES
The following is a
statement of expenses in connection with the distribution of the securities registered. All amounts shown are estimates except
the SEC registration fee. The estimates do not include expenses related to offerings of particular securities. Each prospectus
supplement describing an offering of securities will reflect the estimated expenses related to the offering of securities under
that prospectus supplement.
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SEC registration fees
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$
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6,490
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Legal fees and expenses
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$
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*
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Accountant’s fees and expenses
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$
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10,000
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Miscellaneous
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Total
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$
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*
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*
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These
fees and expenses depend on the number of securities offered and the number of offerings by us under this prospectus, and accordingly
cannot be estimated at this time.
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American
Depositary Shares
Medigus Ltd.
PROSPECTUS
SUPPLEMENT
Aegis Capital Corp.
February , 2021
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