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
ADSs
offered by us
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|
3,258,438 ADSs
representing 65,168,760 ordinary shares.
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Public
offering price
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$2.60
per ADS
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Ordinary
shares to be outstanding after this offering
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465,785,398
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 488,765
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 $7.66 million (approximately $8.83 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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|
|
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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
|
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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|
●
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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.
|
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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●
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successfully
implementing our business strategy;
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●
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increasing
revenues; and
|
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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●
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fluctuations
in the share price of our publicly traded subsidiaries;
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●
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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.
|
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 $2.60 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
$39.9 million, or approximately $1.71 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 $0.89 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 3,258,438 ADSs representing 65,168,760 ordinary shares, or approximately 16.27%, of our outstanding
ordinary shares as of February 25, 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 25, 2021, we had 400,616,638 ordinary shares
issued and outstanding, and 97,988,240 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:
|
●
|
recent
material changes in our strategy;
|
|
●
|
our
ability to sell or license our MUSE™ technology;
|
|
●
|
ScoutCam’s
commercial success in commercializing the ScoutCam™ system;
|
|
●
|
projected
capital expenditures and liquidity;
|
|
●
|
the
overall global economic environment as well as the direct impact of the coronavirus strain COVID-19 on us;
|
|
●
|
the
impact of competition and new technologies;
|
|
●
|
general
market, political, reimbursement and economic conditions in the countries in which we operate;
|
|
●
|
government
regulations and approvals;
|
|
●
|
litigation
and regulatory proceedings; and
|
|
●
|
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 $7.66 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:
|
●
|
on
an actual basis as of June 30, 2020;
|
|
●
|
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
|
|
|
|
|
●
|
on
a pro forma as adjusted basis to give further effect to this offering based on a public offering price of $2.60 per ADS, after
deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
|
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.
|
|
As of June 30, 2020
|
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
Pro Forma,
As Adjusted
|
|
|
|
(U.S. Dollars, in thousands)
|
|
Cash and cash equivalents
|
|
|
10,172
|
|
|
|
32,171
|
|
|
|
39,829
|
|
Total Liabilities
|
|
|
4,461
|
|
|
|
4,461
|
|
|
|
4,461
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
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); 465,785,398 ordinary shares outstanding (pro forma as adjusted)
|
|
|
36,014
|
|
|
|
-
|
|
|
|
-
|
|
Share premium
|
|
|
38,210
|
|
|
|
96,223
|
|
|
|
102,881
|
|
Other capital reserves
|
|
|
13,430
|
|
|
|
13,430
|
|
|
|
13,430
|
|
Warrants
|
|
|
1,802
|
|
|
|
1,802
|
|
|
|
1,802
|
|
Accumulated deficit
|
|
|
(79,210
|
)
|
|
|
(79,210
|
)
|
|
|
(79,210
|
)
|
Equity attributable to owners of Medigus Ltd.
|
|
|
10,246
|
|
|
|
32,245
|
|
|
|
39,903
|
|
Non-controlling interests
|
|
|
3,191
|
|
|
|
3,191
|
|
|
|
3,191
|
|
Total equity
|
|
|
13,437
|
|
|
|
35,436
|
|
|
|
44,364
|
|
Total capitalization and indebtedness
|
|
|
17,898
|
|
|
|
39,897
|
|
|
|
48,825
|
|
(1)
|
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.
|
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 $1.61 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 $2.60 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 $39.9 million or approximately $1.71 per ADS. This represents an immediate increase in pro forma
as adjusted net tangible book value of $0.1 per ADS to existing shareholders and immediate dilution of $0.89 per ADS to new
investors.
The
following table illustrates this dilution per ordinary share:
Public offering price per ADS
|
|
|
|
|
|
$
|
2.60
|
|
|
|
|
|
|
|
|
|
|
Pro forma Net tangible book value per ADS
|
|
$
|
1.61
|
|
|
|
|
|
Increase in pro forma net tangible book value per ADS attributable to the offering
|
|
$
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma as-adjusted net tangible book value per ADS after giving effect to the offering
|
|
|
|
|
|
$
|
1.71
|
|
|
|
|
|
|
|
|
|
|
Dilution in net tangible book value per ADS to new investors
|
|
|
|
|
|
$
|
0.89
|
|
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 $41.08 million, or $1.73 per ADS, which amount represents an immediate increase in pro
forma net tangible book value of $0.12 per ADS to existing stockholders and a dilution to new investors of $0.87 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 25, 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.
|
|
|
3,258,438
|
|
|
|
|
|
|
Total
|
|
|
3,258,438
|
|
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 488,765 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 $0.08 per ADS. 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
|
|
$
|
2.60
|
|
|
$
|
8,471,938.80
|
|
|
$
|
9,742,727.80
|
|
Underwriting discounts and commissions (6.5%)
|
|
$
|
0.169
|
|
|
$
|
550,676.02
|
|
|
$
|
633,277.31
|
|
Non-accountable expense allowance (1%)
|
|
$
|
0.026
|
|
|
$
|
84,719.39
|
|
|
$
|
97,427.28
|
|
Proceeds, before expenses, to us
|
|
$
|
2.405
|
|
|
$
|
7,836,543.39
|
|
|
$
|
9,012,023.22
|
|
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 $263,169.
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:
|
●
|
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
|
|
●
|
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:
(1)
|
Our
annual report on Form 20-F for the year ended December 31, 2019, filed with the SEC on April 21, 2020;
|
(2)
|
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.
|
(3)
|
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.
|
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:
Legal fees and expenses
|
|
$
|
60,000
|
|
Depositary fees
|
|
$
|
65,169
|
|
Accounting fees and expenses
|
|
$
|
78,000
|
|
Miscellaneous
|
|
$
|
10,000
|
|
|
|
|
|
|
Total
|
|
$
|
213,169
|
|
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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|
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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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|
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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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|
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47,873
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Other capital reserves
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12,492
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|
Warrants
|
|
|
197
|
|
Accumulated deficit
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|
|
(76,657
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)
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Equity attributable to owners of Medigus Ltd.
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|
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6,707
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Non-controlling interests
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|
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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
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
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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●
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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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●
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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.
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
25, 2021
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