CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information included or incorporated by reference in this annual report on Form 20-F may be deemed to be “forward-looking statements”. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified.

These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, statements relating to the research, development and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20-F, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

In addition, the section of this annual report on Form 20-F entitled “Item 4. Information on the Company” contains 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. Any forward-looking statements in this annual report are made as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Summary Risk Factors

The risk factors described below are a summary of the principal risk factors associated with an investment in us. These are not the only risks we face. You should carefully consider these risk factors, together with the risk factors set forth in Item 3D. of this Report and the other reports and documents filed by us with the SEC.

Business

ScoutCam’s, ScoutCam™ Business

Pro and Purex Business

Business of Eventer

Gix’s Business and Industry

MUSE™ Technology Business

Intellectual Property

Regulatory Compliance

Operations in Israel

Investment in the Securities

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

The following consolidated statementstatements of operations dataloss and other comprehensive loss for the years ended December 31, 2017, 2016,2020, 2019, and 2015,2018, and the consolidated balance sheet data as of December 31, 20172020, 2019 and 2016,2018, is derived from our audited consolidated financial statements included elsewhere in this annual report on Form 20-F. These audited financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as set forth by the International Accounting Standard Board. The consolidated statement of operations data for the years ended December 31, 20142017 and 20132016 and the consolidated balance sheet data as of December 31, 2015, 2014,2017 and 20132016 is derived from other consolidated financial statements not included in this Form 20-F. The selected consolidated financial data set forth below should be read in conjunction with and are qualified by reference to “Item 5. Operating and Financial Review and Prospects” and the consolidated financial statements and notes thereto and other financial information included elsewhere in this annual report on Form 20-F.

Until December 31, 2015, our consolidated financial statements were recorded in NIS, which was the Company’s functional and presentation currency as of such date. Effective January 1, 2016, the Company changed its functional currency to U.S. Dollar. The December 31, 2015, 2014, and 2013, financial data presented in this annual report on Form 20-F was translated from NIS to USD as follows: (1) all assets and liabilities of the Company were translated using the dollar exchange rate as of December 31 of each year, as applicable; (2) equity items were translated using historical exchange rates at the relevant transaction dates; (3) the statement of comprehensive loss items has been translated at the average exchange rates for the respective year; and (4) the resulting translation differences have been reported as “currency translation differences” within other comprehensive loss.

Consolidated Statements of Operations DataLoss and Other Comprehensive Loss

The following table sets forthFor more information regarding the exchange rates of U.S. dollars per NIS for the periods indicated. Average rates are calculated by using the daily representative rates as reported by the Bank of Israelsee “Item 4. Information on the last dayCompany A. History and Development of each month during the periods presented.Company.”

NIS per U.S. dollars

The following table sets forth the high and low daily representative rates for the NIS as reported by the Bank of Israel for each of the prior six months.

Not applicable.

Not applicable.

You should carefully consider the risks described below, together with all of the other information in this annual report on Form 20-F. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer, and the price of our shares could decline.

Risks Related to Our Business

Our auditorsWe made material changes to our business strategy during 2019, which we continued to implement in 2020. We cannot guarantee that any of these changes will result in any value to our shareholders.

Since 2019, we have expressedmaterially 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 doubt aboutstakes in a number of ventures, including but not limited to online business activities such as ad-tech, e-commerce and online event management. We cannot guarantee that these strategic decisions will derive the anticipated value to our ability to continue as a going concern, which may hinder our ability to obtain further financing.shareholders, or any value at all. 

Our audited consolidated financial statements for the year ended December 31, 2017, were prepared under the assumption that we would continue our operations as a going concern. Our independent registered public accounting firm has included a “going concern” explanatory paragraph in its report on our consolidated financial statements for the year ended December 31, 2017, indicating thatwe have suffered recurring losses from operations andWe have a net capital deficiency that raises substantial doubt about our abilityhistory of operating losses, we expect to continue as a going concern. Uncertainty concerning our ability to continue as a going concern may hinder our ability to obtainincur additional losses in the future financing. Continued operations and our ability to grow sales and achieve profitability are unpredictable.

We have incurred losses since our incorporation and we are likely to continue to incur significant net losses for at least the next several years as a going concern are dependentwe continue to pursue our strategy. As of December 31, 2020, we had an accumulated deficit of $81 million and incurred total comprehensive losses of approximately $6.8 million, 14.2 million and $6.6 million in the years ended December 31, 2020 and 2019 and 2018, respectively. Our losses have had, and will continue to have, an adverse effect on our abilityshareholders’ equity and working capital. Any failure to obtain additional fundingachieve and maintain profitability would continue to have an adverse effect on our shareholders’ equity and working capital and could result in the near future and thereafter, and there are no assurances that such funding will be availablea decline in our share price or cause us to us at all or will be available in sufficient amounts or on reasonable terms. Our consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. Without additional funds from private or public offerings of debt or equity securities, sales of assets, sales or out-licenses of intellectual property or technologies, or other transactions, we will exhaust our resources and will be unable to continuecease operations. If we cannot continue as a viable entity, our shareholders would likely lose most or all of their investment in us.

Our ability to reach profitability depends on many factors, which include:

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.

We will need additional funding. If we are unable to raise capital, we will be forced to reduce or eliminate our operations.

During the year ended December 31, 2020, the Group incurred a total comprehensive loss of approximately $6.8 million and a negative cash flows from operating activities of approximately $5 million. Furthermore, in the recent years, the Group has suffered recurring losses from operations, negative cash flows from operating activities and has an accumulated deficit as of December 31, 2020.

As of December 31, 2017, and March 15, 2018,2020, we had a total cash and depositscash equivalents balance of approximately $6.3 million and $5.2 million, respectively. Based$22 million. Our management expects that we will continue to generate operating losses. Our management plans to continue to fund its operations primarily through utilization of its financial resources. In addition, we may raise additional capital or realize some of our investments in other entities in order to fund our operating needs. Our management is of the opinion that based on our projected cash flows and our cash balances as ofcurrent operating plan it will be able to carry out its plan for more than a year after the issuance date of this annual report on Form 20-F, our management is of the opinion20-F. However, we anticipate that without further fund raising we will not have sufficient resources to enable usare likely to continue advancing our activities and as a result, thereto incur significant net losses for at least the next year. There is substantial doubt about our ability to continue as a going concern. At our current burn rate, and without taking into account additional fund raising, our current cash balance will be sufficient until approximately December 2018, taking into account shut down costs. If we are unable to obtain additional sufficient financing, we will be forced to reduce the scope of, or eliminate our operations. We will also have to reduce marketing, customer service or other resources devoted to our products. Any of these factors will materially harm our business and results of operations.

Our management’s plans include the continued commercialization of our products, taking cost reduction steps and securing sufficient financing through the sale of additional equity securities, debt or capital inflows from strategic partnerships. There are no assurancesassurance however, that we will be successful in obtaining the level of financing needed for our operations. If we are unable to obtain additional sufficient financing our business and results of operations will be materially harmed.

On March 22, 2021, ScoutCam, as part of a private placement, undertook to issue units to certain investors for an aggregate purchase price of $20 million. There are no assurances however, that ScoutCam will be successful in obtaining the further financing needed for its operations. If ScoutCam is unsuccessful in commercializing its products and securing sufficient financing, it may need to reduce activities, curtail or even cease operations.

Even if we are able to continue to finance our business, the sale of additional equity or debt securities could result in dilution to our current shareholders and could require us to grant a security interest in our assets. If we raise additional funds through the issuance of debt securities, these securities may have rights senior to those of our ordinary sharesOrdinary Shares and could contain covenants that could restrict our operations. In addition, we may require additional capital beyond our currently forecasted amounts to achieve profitability. Any such required additional capital may not be available on reasonable terms, or at all.

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.

Since

The COVID-19 pandemic, including the third quarter of 2016 weefforts to combat it, has had and may continue to have been implementing a cost reduction program which may be unsuccessful in its execution, and, even if successful, may lead to undesirable outcomes.

Since the third quarter of 2016 we have been implementing a cost reduction program that has affected the structure and operation ofwidespread effect on our business. Such plan reflects assumptionsIn response to the pandemic, public health authorities and analyses basedlocal 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 annual report, 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 experiencefuture business operations, liquidity, financial condition and perceptionresults of historical trends, current market conditions and expected future developments as well as other factors that we consider appropriate under the circumstances. Whether our cost reduction program will prove successful depends on a number of factors, including but not limited to (i)operations. For example, travel restrictions have adversely affected our ability to substantially raise additional fundingtimely achieve certain milestones included in our Golden Grand Agreement and to obtain adequate liquidity; (ii)has delayed the recognition revenues deriving therefrom. These travel restrictions have also impacted our ability to maintain suppliers’, hospitals’, medical facilities’sales and practitioners’ confidence; (iii) our ability to efficiently reduce our operational expenditures, while retaining key employees;marketing efforts and (iv) the overall successthose of our business.subsidiaries. In addition, as long as these cost reduction measurements last, and for a substantial time afterwards, our employees may face considerable distraction and uncertainty and we may experience increased levels of employee attrition. A loss of key personnel could have a material adverse effect on our ability to meet operational and financial expectations. The pursuit of additional funding and the application of the cost reduction program has occupied and will continue to occupy a substantial portion of Eventer’s business relates to leisure event management, the timescope of which was greatly reduced as a result of governmental policies and attentionmeasures tailored to address to spread of COVID-19. To the extent that these measures remain in place, Eventer’s business and result of operations could be harmed.

The extent of the impact of the pandemic on our managementbusiness 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 howon 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 annual report.

Our ability to freely operate our business is conducted.

We havelimited as a historyresult of operating losses and expect to incur additional losses in the future.

We have sustained losses in recent years, which as of December 31, 2017, accumulated to $55.9 million, including an operating net loss of $6.1 million and $9.1 million for the year ended December 31, 2017 and 2016, respectively. We anticipate that we are likely to continue to incur significant net losses for at least the next several years as we continue the development of the MUSE™ system and potentially other products, expand our sales and marketing capabilities in the endoscopy-based products market, continue our commercialization of our MUSE™ system, expand our adoption and clinical implementation, and continue to develop the corporate infrastructure required to sell and market our products. Our losses have had, and will continue to have, an adverse effect on our shareholders’ equity and working capital. Any failure to achieve and maintain profitability would continue to have an adverse effect on our shareholders’ equity and working capital and could result in a declinecertain covenants included in our share price or cause us to cease operations.Series C Warrants.

The futureSeries C Warrant Agreement, or the Series C Warrant, contains a number of covenants that limit our operating activities, and may prevent our acquisition by a third party, including a provision setting forth that in the event of a fundamental transaction (other than a fundamental transaction not approved by the our board of directors), we or any successor entity may at the Series C Warrant holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the fundamental transaction, purchase the Series C Warrants from the holder by paying to the Series C Warrant holder an amount of cash equal to the Black Scholes value of the remaining unexercised portion of the Series C Warrants on the date of the consummation of such fundamental transaction. These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.

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 ourGix, Pro, Purex and Eventer depends largely on the continued employment of their senior management and key personnel who can effectively operate its business depends on ourand its ability to continueattract and retain skilled employees. Competition for highly skilled management, technical, research and development, and other employees is intense, and Gix, Pro, Purex and Eventer may not be able to developattract or retain highly qualified personnel in the future. If any of the key employees of Gix, Pro, Purex and obtainEventer 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, Pro, Purex 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 clearancesrequirements. 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 approvalsother 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 innovativethe collection, use, retention or disclosure of such data must be obtained, could increase our costs and commercially successful productsrequire us to modify our services and features, possibly in our field,a material manner, which we may be unable to do in a timely manner, or at all. Our successcomplete, and ability to generate revenue or be profitable also depends onmay limit our ability to establish our salesstore and marketing force, generate product salesprocess user data or develop new services and control costs, all of which we may be unable to do.

The commercial success of the MUSE™ system or any future product, if approved, depends upon the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community.features.

The commercial successIf our subsidiaries or we were found in violation of the MUSE™ system and any future product, if approved, depends in part on the medical community, patients, and third-party payors accepting our products as medically useful, cost-effective, and safe. Any product that we bringapplicable laws or regulations relating to the market mayprivacy, data protection, or may not gain market acceptance by physicians, patients, third-party payors, and others in the medical community. In addition, since the MUSE^TM system is a therapeutic device being used for a quality of life, benign disease, market penetration may be more difficult. To date, we have experienced slower than expected market penetration. If the MUSE™ system or any future product, if approved, does not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of these products, if approved for commercial sale, will depend on a number of factors, including:

Even if the MUSE™ system and any future product, if approved, displays a favorable safety and efficacy profile in clinical trials, market acceptance of the product will not be known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of the products may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by conventional technologies.

Insufficient coverage or reimbursement from medical insurers to users of our products could harm our ability to market and commercialize our current and future products.

Our ability to successfully commercialize our products, mainly the MUSE™ system, depends significantly on the availability of coverage and reimbursement for endoscopic procedures from third-party insurers, including governmental programs, as well as private insurance and private health plans. Reimbursement is a significant factor considered by hospitals, medical facilities and practitioners in determining whether to acquire and utilize new capital equipment or to implement new procedures such as our technology.

In January 2018, the American Medical Association’s, or the AMA’s Current Procedural Terminology, or CPT, published an updated payment for the Category I CPT Code for transoral esophagogastric fundoplasty procedures, which describes procedures conducted with the MUSE™ system. In the U.S., the CPT Editorial Panel assigns specific billing codes for physician services and outpatient hospital procedures, which are used by providers, who are our customers, to bill for procedures. Once a CPT code is established, the Centers for Medicare and Medicaid Services, or CMS, in turn establishes payment levels and coverage rules under Medicare, and private payors establish rates and coverage rules. Notwithstanding the issuance of a CPT to report the MUSE procedure and the establishment of payment rates for the code, we cannot guarantee that the MUSE™ system is or will be covered and, if covered, that reimbursement will be sufficient, and furthermore, we cannot guarantee that the MUSE™ system or any future product will be approved for coverage or reimbursement by Medicare, Medicaid or any third-party payor. Reimbursement decisions in the European Union and in other jurisdictions outside of the United States vary by country and region and there can be no assurance that we will be successful in obtaining adequate reimbursement.

We depend on the success of a limited portfolio of products for our revenue, which could impair our ability to achieve profitability.

Though we have plans for the development of additional natural orifice surgical products based on our technology, including miniature cameras, flexible stapling and ultrasound, and although we currently derive most of our revenue from the sale of miniature cameras and related imaging equipment, we plan to derive most of our future revenue from product sales of our imaging equipment and our flagship MUSE™ system and its future applications, as well as recurring sales of associated products required to use the MUSE™ system. Our future growth and success is dependent on the successful commercialization of the MUSE™ system. If we are unable to achieve increased commercial acceptance of the MUSE™ system, obtain regulatory clearances or approvals for future products, or experience a decrease in the utilization of our product line or procedure volume, our revenue would be adversely affected. 

We may encounter manufacturing issues during the assembly process of our flagship product.

Due to the characteristics of the technologies on which the main parts of the MUSE™ system are manufactured, which include plastic and metal injection, sheet metals, laser welding and rubber vulcanization, using production tools such as molds, templates and jigs, in the event that parts are found which are inaccurate and/or which have been rendered defective and/or which have failed preliminary tests, we will be forced to repair the manufacturing tools and re-manufacture and/or re-order the parts, a process which will delay the production timetable. Furthermore, in the event that certain parts are not suitable, due to a situation whereby the manufacturing tools have not produced the part in the appropriate manner, it may be necessary to redesign and re-manufacture the manufacturing tool and to manufacture the parts rapidly and at additional cost.

Furthermore, if we are unable to satisfy commercial demand for our MUSE™ system due to our inability to assemble, test and deliver the system in compliance with applicable regulations,security, our business and financial results, including our ability to generate revenue, would be impaired, market acceptance of our products couldmay be materially and adversely affected and customerswe 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 instead purchasebe commercially desirable. In addition, if a breach of data security were to occur or use competing products.

Weto 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 encounter failure in the operation of our products, which may adversely harm patients operated by using our products.

Users of our products may encounter failures in mechanical components, which could result in difficulties in operation or opening or releasing the products, leading to the need for surgical procedures to correct the mechanical failure, in which case, a patients’ medical condition may worsen.

Additionally, in the event that users of our products do not follow the instructions for use or the available product training instructions (which appear on the screen during the performance of the procedure) the foregoing may cause injury and in certain cases, could even cause death. A result of this kind could reduce the rate of progress of, or even prevent, the marketing for the MUSE™ productbe perceived as less desirable, and our other products.

Furthermore, users of our products may encounter failure in electronic components of our products used in the system software, which could lead to incorrect interpretation by the users or to failure in the operation of the endoscope and to injury to the patient’s critical internal organs. 

We have only limited clinical data to support the value of the MUSE™ system, as well as our other products, which may make patients, physicians and hospitals reluctant to accept or purchase our products.

Physicians, hospitals and patients will only accept or purchase our products if they believe them to be safe and effective, with advantages over competing products or procedures. To date, we have collected only limited clinical data with which to assess our products’ (mainly the MUSE™ system) clinical and economic value. The collection of clinical and economic data and the process of generating peer review publications in support of our products and procedures is an ongoing focus for us.

If future publications of clinical studies indicate that medical procedures using the MUSE™ system are less safe or less effective than competing products or procedures, the patients may choose not to undergo our procedure, and physicians or hospitals may choose not to purchase or use our system. Furthermore, unsatisfactory patient outcomes or patient injury could cause negative publicity for our products, particularly in the early phases of product introduction.

Current Hospital economic conditions could delay or prevent our customers from obtaining budgetary approval to purchase a MUSE™ system or other products, which would adversely affect our business, prospects, financial condition, and results of operations. operations could be materially and adversely affected.

As a result of hospital economic concerns relatingWe also expect that there will continue to business or financial situations or related to ongoing healthcare reimbursement changes, customersbe new laws, regulations, and distributors may be delayedindustry standards concerning privacy, data protection, and information security proposed and enacted in obtaining, or may not be able to obtain, budgetary approval or financingvarious jurisdictions. For example, the data protection landscape in the European Union (“EU”) is currently evolving, resulting in possible significant operational costs for their purchases or leases of medical equipment including our products. These delays may in some instances leadinternal compliance and risks to our customersbusiness. The EU adopted the General Data Protection Regulation or distributors postponingGDPR, 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 shipmentGDPR 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 use4% of previously ordered systems and products, cancelling their orders,our global annual turnover for the preceding financial year for the most serious violations, as well as the right to compensation for financial or cancelling their agreements with us. An increase in delays and order cancellationsnon-financial damages claimed by individuals under Article 82 of this nature could adversely affect our products sales and revenues and, therefore, harm our business and results of operations.the GDPR).

In addition worldwide economic conditionsto 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 market instabilityePrivacy 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 make it increasingly difficult forrequire us to modify our customers, our distributorsdata practices and our supplierspolicies and to accurately forecast future product demand trends,incur substantial costs and expenses in order to comply. On November 3, 2020, California voters passed the California Privacy Rights Act (“CPRA”) into law, which will take effect in January 2023 and will 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 and CPRA could mark the beginning of a trend toward more stringent United States federal privacy legislation, which could causeincrease our potential liability and adversely affect our business.

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 order or produce excess products that can increase our inventory carrying costsadministrative fines, civil claims (including class actions), and in certain cases, criminal liability. Current pending legislation may result in obsolete inventory. Alternatively, this forecasting difficulty could cause a shortage of products,change in the current enforcement measures and sanctions.

Any failure or materials usedperceived 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 our products, thatgovernmental investigations or enforcement actions, litigation, claims, or public statements against us by consumer advocacy groups or others and could result in an inabilitysignificant liability, cause our users to satisfylose 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 productsplatform. 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 a material losscould 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, potential revenue.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.

Risks Related to Our Subsidiary, ScoutCam’s, ScoutCam^™ Business

OurScoutCam’s reliance on third-party suppliers for most of the components of ourScoutCam products could harm ourScoutCam’s ability to meet demand for ourScoutCam products in a timely and cost effectivecost-effective manner.

Though we attemptScoutCam attempts to ensure the availability of more than one supplier for each important component in our products,any product that ScoutCam commissions, the number of suppliers engaged in the provision of miniature video sensors which are suitable for ourScoutCam’s Complementary Metal Oxide Semiconductor, or CMOS, technology products is very limited, and therefore in some cases we engageScoutCam engages with a single supplier, which may result in ScoutCam dependency on such supplier. This is the case regarding sensors for the CMOS type technology that is produced by a single supplier in the United States. As we doScoutCam does not have a contract in place with this supplier, there is no contractual commitment on the part of such supplier for any set quantity of such sensors. The loss of ourScoutCam sole supplier in providing usScoutCam with miniature sensors for ourScoutCam’s CMOS technology products, and ourScoutCam inability or delay in finding a suitable replacement supplier, could significantly affect ourScoutCam’s business, financial condition, results of operations and reputation.

ModificationsBecause of its limited operating history, ScoutCam may not be able to our current regulator-cleared productssuccessfully operate its business or the introduction of new products may require new regulatory clearances or approvals or require us to recall or cease marketing our current products until clearances or approvals are obtained.execute its business plan.

Our MUSE™ system hasIn 2019, we transferred our ScoutCam^™ activity, which had limited operation activity, into a wholly-owned subsidiary, ScoutCam Ltd. On December 26, 2019, we consummated a securities exchange agreement with Intellisense Solutions Inc., under which we received marketing clearance from60% of the U.S. Foodissued and Drug Administration, or FDA,outstanding stock of Intellisense Solutions Inc. in consideration for 100% of our holdings in ScoutCam Ltd. Simultaneously with the securities exchange agreement, Intellisense Solutions Inc. raised $3.3 million dollars (gross) based on several 510(k) applications, bearsa post money valuation of $13.3 million dollars. Following the CE Mark (a mark assignedaforementioned transactions, Intellisense Solutions Inc. changed its name to a product certifying its fulfillment ofScoutCam Inc. Given the Medical Devices Directive of the European Union), as required in orderlimited operating history, it is hard to market the system in European Union countriesevaluate ScoutCam’s proposed business and has obtained the necessary licenseprospects. ScoutCam’s proposed business operations is subject to market the product in Canada, Turkeynumerous risks, uncertainties, expenses and Israel.

Ongoing modifications to our products may require new regulatory approvals, asdifficulties associated with prior 510k clearances, or require us to recall or cease marketing the modified products until these clearances or approvalsearly-stage enterprises. Such risks include, but are obtained. Any modification to one of our cleared products that would constitute a major change in its intended use, or any change that could significantly affect the safety or effectiveness of the product would require us to obtain a new 510(k) marketing clearance and may even, in some circumstances, require the submission of a premarket approval, or PMA, track application if the change raises complex or novel scientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k) submission in the first instance, but the FDA may review any manufacturer’s decision. We may make modifications in the futurenot limited to, the MUSE™ system without seeking additional clearances or approvals if we believe such clearances or approvals are not necessary. However, it is possible that the FDA could change existing policy and practices regarding the assessment of whether a new 510(k) clearance is required for changes or modifications to existing devices. Under these changed circumstances, the FDA may disagree with our past or future decisions not to seek a new 510(k) for changes or modifications to existing devices and require new clearances or approvals. In that case, we may be required to recall and stop marketing our products as modified, which could require us to redesign our products, conduct clinical trials to support any modifications, and pay significant regulatory fines or penalties. In addition, the FDA may not approve or clear our products for the indications that are necessary or desirable for successful commercialization or could require additional clinical trials to support any modifications.following:

Significant changes that could be reasonably expected to affect the safety or effectiveness of one of our devices may require us to obtain a license amendment or possibly a new license from Health Canada, Turkey, or Israel. In addition, we have started the process for receiving a regulatory clearance in China by the China Food and Drug Administration, or CFDA, which could be significantly affected by such changes. Substantial changes to the quality system or changes to the CE marked device which could affect compliance with the essential requirements of the device or its intended use must be reported to the Notified Body (an independent and neutral institution appointed to conduct conformity assessment). This may result in a decision that an existing certificate is in valid, an addendum to the certificate is needed or a new certificate must be obtained. Any failure to maintain our existing clearances or approvals, or delay or failure in obtaining required clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth. Any of these actions would harm our operating results. Further, we may also be required to seek regulatory clearance in additional countries as we expand our marketing efforts.

Moreover, clearances and approvals by the applicable regulator are subject to continual review, and the later discovery of previously unknown problems can result in product labeling restrictions or withdrawal of the product from the market. The loss of previously received approvals or clearances, or the failure to comply with existing or future regulatory requirements could reduce our sales, profitability and future growth prospects.

We are currently required by the FDA to refrain from using certain terms to label and market our products, which could harm our ability to market and commercialize our current or future products.

The FDA’s 510(k) clearances include a specification of a product’s indication for use, and also authorize specific labeling and marketing claims and language in promotional materials for the U.S. market. Failure to conform with the specific cleared labeling of our products or corporate promotional material would be considered mislabeling or off-label promotion which might lead to:

Furthermore, ScoutCam has a history of losses, and may not be able to generate sufficient revenues to achieve and sustain profitability, and as a result, there is substantial doubt about its ability to continue as a going concern following the fiscal year ended December 31, 2020.

Because ScoutCam is subject to these risks, evaluating its business may be difficult, its business strategy may be unsuccessful and it may be unable to address such risks in a cost-effective manner, if at all. If ScoutCam is unable to successfully address these risks, its business and any proceeds derived from it by the Company could be harmed.

The commercial success of the ScoutCam^™or any future product, depends upon the degree of market acceptance by the medical community as well as by other prospect markets and industries.

Any product that ScoutCam commissions or brings to the market may or may not gain market acceptance by prospective customers.

The commercial success of ScoutCam’s technologies commissioned products, and any future product that it may develop depends in part on the medical community as well as other industries for various use cases, depending on the acceptance by such industries of its commissioned products as a useful and cost-effective solution compared to current technologies. To date, ScoutCam has not yet commenced proactive market penetration in other industries, with the exception of the biomedical sector. If ScoutCam’s technology or any future product that may be developed does not achieve an adequate level of acceptance, or does not garner significant commercial appeal, ScoutCam may not generate significant revenue and may not become profitable. The degree of market acceptance will depend on a number of factors, including:

ScoutCam’s efforts to penetrate industries and educate the marketplace on the benefits of its technology, and reasons to seek the commissioning of products based on its technology, may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by conventional technologies.

ScoutCam expects to face significant competition. If it cannot successfully compete with new or existing products, its marketing and sales will suffer and may never be profitable.

ScoutCam expects to compete against existing technologies and proven products in different industries. In addition, some of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than ScoutCam does, and have substantially greater financial resources than it does, as well as significantly greater experience in obtaining applicable regulatory approvals applicable to the commercialization of ScoutCam’s technologies and future products.

If ScoutCam is unable to establish sales, marketing and distribution capabilities or enter into successful relationships with third parties to perform these services, it may not be successful in commercializing our ScoutCam^™.

ScoutCam is currently a B2B company, and its business is reliant on its ability to successfully attract potential business targets. Furthermore, ScoutCam has a limited sales and marketing infrastructure and has limited experience in the sale, marketing or distribution of its technologies beyond the B2B model. To achieve commercial success for its technologies or any future developed product, it will need to establish a sales and marketing infrastructure or to out-license such future products.

In the future, ScoutCam may consider building a focused sales and marketing infrastructure to market any future developed products and potentially other product in the United States or elsewhere in the world. Similarly, ScoutCam may consider evolving its business model in the future and adopting a business-to-consumer approach, or B2C. There are risks involved with establishing its own sales, marketing and distribution capabilities. For example, recruiting and training a sales force could be expensive and time consuming and could delay any product launch. This may be costly, and ScoutCam’s investment would be lost if it cannot retain or reposition its sales and marketing personnel.

Factors that may inhibit ScoutCam’s efforts to commercialize its products on its own include:

Any of these sanctions could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and financial condition.

If we or our third-party manufacturers or suppliers fail to comply with the FDA’s Quality System Regulation or other regulatory authorities, our manufacturing operations could be interrupted and our product sales and operating results could suffer.

We and some of our third-party manufacturers and suppliers are required to comply with the FDA’s Quality System Regulation, or QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products. We and our manufacturers and suppliers are also subject to the regulations of foreign jurisdictions regarding the manufacturing process if we or our distributors market our products abroad. We monitor our quality management in order to improve our overall level of compliance. Our facilities are subject to periodic and unannounced inspection by U.S. and foreign regulatory agencies, including notified bodies, to audit compliance with the QSR and comparable foreign regulations. If our facilities or those of our third-party manufacturers or suppliers are found to be in violation of applicable laws and regulations, or if we or our manufacturers or suppliers fail to take satisfactory corrective action in response to an adverse inspection, the regulatory authority could take enforcement action, including any of the following sanctions:

Any ofIf ScoutCam is unable to establish its own sales, marketing and distribution capabilities or enter into successful arrangements with third parties to perform these sanctions could impair our abilityservices, its revenues and its profitability may be materially adversely affected.

In addition, ScoutCam may not be successful in entering into arrangements with third parties to produce our products in a cost-effective and timely manner in order to meet our customers’ demands, and could have a material adverse effect on our reputation, business, results of operations and financial condition. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and our ability to generate profits.

We face possible competition from the pharmaceutical sector, which could harm our ability tosell, market and commercialize our current and future products.

The development of more powerful drug treatments to assist in the suppression of GERD distribute its ScoutCam^™ or other medical problems which compete with our products may reduce the sizeinside or outside of our target markets and may reduce the need for the use of our systems and products, either available now, or which will be developed in the future, thus adversely affecting our ability to market and commercialize our current and future products. While we are unaware of any current pharmaceutical product that could directly compete with the MUSE™ system at this time, there may be new pharmaceutical entrants in the future.

There can be no assurance that we will be able to compete successfully against current or future competitors or that competition will not have a material adverse effect on our future revenues and, consequently, on our business, operating results and financial condition.

We face competition from medical device companies that develop and market similar related products and systems, or may launch products in the future, as well as new techniques and devices for treatments performed by our products.

Several medical device companies have commercial products which compete with the MUSE™ system for the treatment of GERD using an endoscopic method. While we believe that the MUSE™ system has several advantages over competing devices, such as the requirement of one operator, inclusion of visualization and ultrasound apparatuses, use of standard titanium staples, and reduced risk of harm to adjacent organs, there can be no assurance that we will be able to compete successfully against current or future competitors or that competition will not have a material adverse effect on our future revenues and, consequently, on our business, operating results and financial condition.

Reporting requirements on payments to physicians in the United States or may deter doctorsbe unable to do so on terms that are favorable to it. ScoutCam likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market its products effectively. If ScoutCam does not establish sales, marketing and distribution capabilities successfully, either on its own or in collaboration with third parties, it will not be successful in commercializing its technologies or any future products ScoutCam may develop.

ScoutCam depends on the success of micro ScoutCam^™ for ScoutCam’s revenue, which could impair ScoutCam’s ability to achieve profitability.

ScoutCam plans to derive most of its future revenue from providing advice to the Company.

The implementationdevelopment services of its imaging equipment and its flagship micro ScoutCam^™ and through the engagement with target businesses that are interested in the commissioning of certain products using ScoutCam’s technology. ScoutCam’s future growth and success is largely dependent on the successful commercialization of the reporting and disclosure obligationsmicro ScoutCam^™ technology. If ScoutCam is unable to achieve increased commercial acceptance of the Physician Payment Sunshine Act, which is partmicro ScoutCam^™ technology, or experience a decrease in the utilization of the Affordable Care Act of 2010,its product line or the Sunshine Act, couldprocedure volume, ScoutCam’s revenue would be adversely affect our business.affected.

The Sunshine Act has imposed new reporting and disclosure requirements for drug and device manufacturers with regard to payments or other transfers of value made to certain practitioners (including physicians, dentists and teaching hospitals), and for such manufacturers and for group purchasing organizations with regard to certain ownership interests held by physicians in the reporting entity. On February 1, 2013, the CMS, released the final rule to implement the Sunshine Act. Under this rule, data collection activities began on August 1, 2013, and first disclosure reports were due by March 31, 2014, for the period August 1, 2013, through December 31, 2013. As required under the Sunshine Act, CMS publishes information from these reports on a publicly available website, including amounts transferred and physician, dentist and teaching hospital identities.

The final rule implementing the Sunshine Act is complex, ambiguous, and broad in scope. Accordingly, we are required to collect and report detailed information regarding certain financial relationships we have with U.S. licensed physicians, dentists (if any) and teaching hospitals in the United States. It is difficult to predict how the new requirements may impact existing relationships among manufacturers, distributors, physicians, dentists and teaching hospitals. The Sunshine Act preempts similar state reporting laws, although we, or our subsidiaries, may be required to continue to report under certain of such state laws. While we expect to have substantially compliant programs and controls in place to comply with the Sunshine Act requirements, and we have completed our initial registration with CMS and our 2015 report with respect to Sunshine Act reporting, our continued compliance with the Sunshine Act imposes continuing additional costs on us.

Medical device development is costly and involves continual technological change which may render our current or future products obsolete.

Innovation is rapid and continuous in the medical device industry, and our competitors in the medical device industry make significant investments in research and development. If new products or technologies emerge that provide the same or superior benefits as our products at equal or lower cost, they could render our products obsolete or unmarketable. We must anticipate changes in the marketplace and the direction of technological innovation and customer demands. In addition, we face increasing competition from well-financed medical device companies to develop new technologies and may face competition should we attempt to acquire new technologies, products and businesses. As a result, we cannot be certain that our products will be competitive with current or future products and technologies.

WeScoutCam may be subject to product liability claims, product actions, including product recalls, and other field or regulatory actions that could be expensive, divert management’s attention and harm ourScoutCam’s. business.

OurScoutCam’s business exposes usit to potential liability risks, product actions and other field or regulatory actions that are inherent in the manufacturing, marketing and sale of medical device products. Weproducts that it may have commissioned for a target business. ScoutCam may be held liable if ourits products cause injury or death or is found otherwise unsuitable or defective during usage. The MUSE™ system incorporatesScoutCam’s products incorporate mechanical and electrical parts, complex computer software and other sophisticated components, any of which can contain errors or failures. Complex computer software is particularly vulnerable to errors and failures, especially when first introduced. In addition, new products or enhancements to ourScoutCam’s existing products may contain undetected errors or performance problems that, despite testing, are discovered only after installation.

If any of ourScoutCam’s commissioned products are defective, whether due to design or manufacturing defects, improper use of the product, or other reasons, weit may voluntarily or involuntarily undertake an action to remove, repair, or replace the product at ourits own expense. In some circumstances, weScoutCam will be required to notify regulatory authorities of an action pursuant to a product failure.

ScoutCam may require substantial additional funding, which may not be available to ScoutCam on acceptable terms, or at all.

ScoutCam’s cash balance as of December 31, 2020 was $3.4 million. ScoutCam may require additional funding to fund and grow our operations and to develop certain products. There can be no assurance that financing will be available in amounts or on terms acceptable to ScoutCam, if at all. In the event ScoutCam required additional capital, the inability to obtain additional capital will restrict its ability to grow and may reduce its ability to continue to conduct business operations. If ScoutCam’s require and is unable to obtain additional financing, ScoutCam’s will likely be required to curtail its development plans. In that event, current stockholders, including Medigus, would likely experience a loss of most or all of their investment. Additional funding that we do obtain may be dilutive to the interests of existing stockholders, including Medigus.

ScoutCam’s failure to effectively manage growth could impair ScoutCam’s business.

ScoutCam’s business strategy contemplates a period of rapid growth which may put a strain on ScoutCam’s administrative and operational resources, and its funding requirements. ScoutCam’s ability to effectively manage growth will require ScoutCam to successfully expand the capabilities of its operational and management systems, and to attract, train, manage, and retain qualified personnel. There can be no assurance that we will be able to do so, particularly if losses continue and ScoutCam is unable to obtain sufficient financing. If ScoutCam is unable to appropriately manage growth, ScoutCam’s business, prospects, financial condition, and results of operations could be adversely affected.

ScoutCam may not be able to manage its strategic partners effectively.

ScoutCam’s growth strategy may include strategic partners. The medical device industryprocess to bring on, train and assist strategic partners is time-consuming and costly. ScoutCam expects to expend significant resources to undertake business, financial and legal due diligence on both existing and potential partners, and there is no guarantee that these will be successful in ultimately increasing ScoutCam’s business.

Failure to manage ScoutCam’s partners effectively may affect its success in executing its business plan and may adversely affect its business, financial condition and results of operation. ScoutCam may not realize the anticipated benefits of any or all partnerships, or may not realize them in the time frame expected.

ScoutCam may not have sufficient manufacturing capabilities to satisfy any growing demand for ScoutCam’s commissioned products. ScoutCam may be unable to control the availability or cost of producing such products.

ScoutCam’s current manufacturing capabilities may not reach the required production levels necessary in order to meet growing demands for any products ScoutCam may commission or future products it may develop. While ScoutCam do intend to purchase a manufacturing facility in Israel in the future, such an engagement has historically beennot yet materialized and it is not clear at what point ScoutCam will execute such an acquisition. In the interim, and prior to the purchase of a manufacturing facility by ScoutCam, there can be no assurance that ScoutCam’s commissioned products can be manufactured at its desired commercial quantities, in compliance with its requirements and at an acceptable cost. Any such failure could delay or prevent ScoutCam from shipping said products and marketing its technologies in accordance with its target growth strategies.

Testing of ScoutCam’s technologies potential applications for its products will be required and there is no assurance of regulatory approval.

The effect of government regulation and the need for approval may delay marketing of ScoutCam’s technologies and future potentially developed products for a considerable period of time, impose costly procedures upon ScoutCam’s activities and provide an advantage to larger companies that compete with ScoutCam. There can be no assurance that regulatory approval for any products developed by ScoutCam will be granted on a timely basis or at all. Any such delay in obtaining, or failure to obtain, such approvals would materially and adversely affect the marketing of any contemplated products and the ability to earn product revenue. Further, regulation of manufacturing facilities by state, local, and other authorities is subject to extensive litigation over product liability claims. We anticipatechange. Any additional regulation could result in limitations or restrictions on ScoutCam’s ability to utilize any of its technologies, thereby adversely affecting ScoutCam’s operations. Various federal and foreign statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of food products. The process of obtaining these approvals and the subsequent compliance with appropriate U.S. and foreign statutes and regulations are time-consuming and require the expenditure of substantial resources. In addition, these requirements and processes vary widely from country to country.

ScoutCam’s suppliers may not be able to always supply components or products to us on a timely basis and on favorable terms, and as a result, ScoutCam’s dependency on third party suppliers can adversely affect ScoutCam’s revenue.

ScoutCam will rely on ScoutCam’s third-party suppliers for components and depend on obtaining adequate supplies of quality components on a timely basis with favorable terms to manufacture ScoutCam’s commissioned products. Some of those components that as partScoutCam sell are provided by a limited number of our ordinary course of business wesuppliers. ScoutCam’s will be subject to disruptions in its operations if its sole or limited supply contract manufacturers decrease or stop production of components or do not produce components and products of sufficient quantity. Alternative sources for ScoutCam’s components will not always be available. Many of ScoutCam’s components are manufactured overseas, so they have long lead times, and events such as local disruptions, natural disasters or political conflict may cause unexpected interruptions to the supply of our products or components.

It is ScoutCam’s intention, as mentioned in its use of proceeds, to allocate financial resources to improve ScoutCam’s inventory management, including establishing an inventory buffer of components appropriate to ScoutCam’s business. However, ScoutCam cannot assure that its attempt will be successful or that product liability claims alleging defectsor component shortages will not occur in the design, manufacturefuture. If ScoutCam cannot supply commissioned products or labelingfuture potentially developed products due to a lack of our products. A product liability claim, regardless of its meritcomponents, or eventual outcome,are unable to utilize other components in a timely manner, ScoutCam’s business will be significantly harmed. If inventory shortages continue, they could result in significant legal defense costsbe expected to have a material and high punitive damage payments. Although we maintain product liability insurance, the coverageadverse effect on ScoutCam’s future revenues and ability to effectively project future sales and operating results.

ScoutCam relies on highly skilled personnel, and, if ScoutCam is unable to attract, retain or motivate qualified personnel, it may not be adequateable to cover future claims. Additionally, weoperate its business effectively.

ScoutCam’s success depends in large part on continued employment of senior management and key personnel who can effectively operate its business, as well as its ability to attract and retain skilled employees. Competition for highly skilled management, technical, research and development and other employees is intense and ScoutCam may not be able to attract or retain highly qualified personnel in the future. In making employment decisions, particularly in the job candidates often consider the value of the equity awards they would receive in connection with their employment. ScoutCam’s long-term incentive programs may not be attractive enough or perform sufficiently to attract or retain qualified personnel.

If any of ScoutCam’s employees leaves ScoutCam, and ScoutCam fails to effectively manage a transition to new personnel, or if ScoutCam fails to attract and retain qualified and experienced professionals on acceptable terms, ScoutCam business, financial condition and results of operations could be adversely affected.

ScoutCam’s success also depends on having highly trained financial, technical, recruiting, sales and marketing personnel. ScoutCam will need to continue to hire additional personnel as ScoutCam’s business grows. A shortage in the number of people with these skills or ScoutCam’s failure to attract them could impede ScoutCam’s ability to increase revenues from its existing technology and services, ensure full compliance with international and federal regulations, or launch new product offerings and would have an adverse effect on ScoutCam’s business and financial results.

ScouCam may have difficulty in entering into and maintaining strategic alliances with third parties.

ScoutCame has entered into, and may continue to enter into, strategic alliances with third parties to gain access to new and innovative technologies and markets. These parties are often large, established companies. Negotiating and performing under these arrangements involves significant time and expense, and ScoutCam may not have sufficient resources to devote to strategic alliances, particularly those with companies that have significantly greater financial and other resources than ScoutCam do. The anticipated benefits of these arrangements may never materialize, and performing under these arrangements may adversely affect ScoutCam’s results of operations.

ScoutCam may not be able to obtain patents or other intellectual property rights necessary to protect its proprietary technology and business.

ScoutCam may seek to patent concepts, components, processes, designs and methods, and other inventions and technologies that it considers to have commercial value or that will likely give it a technological advantage. Despite devoting resources to the research and development of proprietary technology, ScoutCam may not be able to develop technology that is patentable or protectable. Patents may not be issued in connection with pending patent applications, and claims allowed may not be sufficient to allow them to use the inventions that they create exclusively. Furthermore, any patents issued could be challenged, re-examined, held invalid or unenforceable or circumvented and may not provide sufficient protection or a competitive advantage. In addition, despite efforts to protect and maintain patents, competitors and other third parties may be able to design around their patents or develop products similar to ScoutCam work products that are not within the scope of their patents. Finally, patents provide certain statutory protection only for a limited period of time that varies depending on the jurisdiction and type of patent.

Prosecution and protection of the rights sought in patent applications and patents can be costly and uncertain, often involve complex legal and factual issues and consume significant time and resources. In addition, the breadth of claims allowed in its patents, their enforceability and its ability to protect and maintain them cannot be predicted with any certainty. The laws of certain countries may not protect intellectual property rights to the same extent as the laws of the United States. Even if ScoutCam’s patents are held to be valid and enforceable in a certain jurisdiction, any legal proceedings that it may initiate against third parties to enforce such patents will likely be expensive, take significant time and divert management’s attention from other business matters. ScoutCam cannot assure that any of its issued patents or pending patent applications provide any protectable, maintainable or enforceable rights or competitive advantages to it.

In addition to patents, ScoutCam will rely on a combination of copyrights, trademarks, trade secrets and other related laws and confidentiality procedures and contractual provisions to protect, maintain and enforce its proprietary technology and intellectual property rights in the United States and other countries. However, its ability to protect its brands by registering certain trademarks may be limited. In addition, while it will generally enter into confidentiality and nondisclosure agreements with its employees, consultants, contract manufacturers, distributors and resellers and with others to attempt to limit access to and distribution of its proprietary and confidential information, it is possible that:

ScoutCam cannot assure that it will be successful in protecting, maintaining or enforcing its intellectual property rights. If ScoutCam is unsuccessful in protecting, maintaining or enforcing its intellectual property rights, then its business, operating results and financial condition could be materially adversely affected, which could:

If it is determined that ScoutCam has infringed, violated or is infringing or violating a patent or other intellectual property right of any other person or if it is found liable in respect of any other related claim, then, in addition to being liable for potentially substantial damages, ScoutCam may be prohibited from developing, using, distributing, selling or commercializing certain of its technologies unless it obtains a license from the holder of the patent or other intellectual property right. ScoutCam cannot assure that it will be able to obtain any such license on a timely basis or on commercially favorable terms, or that any such licenses will be available, or that workarounds will be feasible and cost-efficient. If ScoutCam do not obtain such a license or find a cost-efficient workaround, its business, operating results and financial condition could be materially adversely affected and it could be required to cease related business operations in some markets and restructure ScoutCam’ business to focus on its continuing operations in other markets.

ScoutCam may be unable to maintain our existing product liability insurancekeep pace with changes in the future at satisfactory rates or adequate amounts.technology as ScoutCam’s business and market strategy evolves.

Broad-based domesticScoutCam will need to respond to technological advances in a cost-effective and international government initiativestimely manner in order to reduce spending, particularly those relatedremain competitive. The need to healthcare costs,respond to technological changes may reduce reimbursement rates for endoscopic procedures, whichrequire ScoutCam to make substantial, unanticipated expenditures. There can be no assurance that ScoutCam will reduce the cost-effectiveness of our products.be able to respond successfully to technological change.

Risks Related to Pro and Purex’s Business

Healthcare reforms, changes in healthcare policiesOur e-commerce operations are reliant on the Amazon marketplace and fulfillment by Amazon and changes to third-party coveragethe marketplace, Amazon services and reimbursements,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 legislation enacted reformingchanges 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 not 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 impede 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. There 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. healthcare system,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, Singapore 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 of Eventer’s Business

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 futureenhancements 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.

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 legislation,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.

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.

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 our productscertain 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 mayoperations 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 ourits 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 current levels of reimbursementconsumer and corporate spending will not be decreasedadversely impacted by current economic conditions or by any future deterioration in the future,economic conditions, thereby possibly impacting Eventer’s operating results and growth.

Errors, defects, or that future legislation, regulation, or reimbursement policies of third-parties will notdisruptions in Eventer’s platform could diminish its brand, subject it to liability, and materially and adversely affect the demand for our productsits business, prospects, financial condition, and operations results.

Any errors, defects, or our ability to sell products on a profitable basis. The adoption of significant changes to the healthcare systemdisruptions in the United States, EuropeEventer’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 may market our products, could limitwere to ultimately prevail in such proceedings. Any developments in the prices we are ablelaws or regulations related to charge for our productsescrow, money transmission, or the amountshandling or moving of reimbursement available for our products,money or increased scrutiny of its business may lead to additional compliance costs and administrative overhead.

Eventer faces payment and fraud risks that could limit the acceptancematerially and availabilityadversely 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 our products, reduce medical procedure volumes and increase operationalanother’s identity or payment information, unauthorized acquisition or use of credit or debit card details, and other costs. For example, U.S. President Donald Trump has recently publicly indicated an intentfraudulent use of another’s identity or information. This could result in any of the following, each of which could adversely affect Eventer’s business:

Despite measures taken by Eventer to lower healthcare costs through various potential initiatives. In addition, President Trumpdetect 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 U.S. lawmakers have made statements about potentially repealing or replacingthird parties concerning misuse of its platform in the Affordable Care Act, although specific legislation for such a repeal or replacement is still in its early stages. While we are unable to predict what changes may ultimately be enacted, to the extent that future changes affect how our products are paid for and reimbursed by government and private payers our business could be adversely impacted.

We cannot predict whether future healthcare initiatives will be implemented at the federal or state level or internationally, or the effect that any future legislation or regulation will have on us. The expansion of government’s role in any country’s healthcare industry mayfuture. Even if these claims do not result in decreased profitslitigation or are resolved in Eventer’s favor, these claims, and the time and resources necessary to us, lower reimbursements by third-parties for procedures in which our products are used,resolve them, could divert the resources of Eventer’s management and reduced medical procedure volumes, all of which maymaterially and adversely affect ourits business, prospects, financial condition and results of operations.

We depend on key employees,Eventer uses open source software, which could negatively affect its ability to offer its platform and if we failsubject it to attract and retain employees with the expertise required for our business and provide for the succession of senior management, we cannot growlitigation or achieve profitability.other actions.

WeEventer 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 dependentcompromised, 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 continued servicestorage and performancetransmission of members of our senior managementartist and ticket purchaser data or information. Cyberattacks and other key personnel,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 example our Chief Executive Officer, Chris Rowland. We doEventer 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 maintain key-man life insurance. Our future successdetected 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 as well as exchanges through which ad inventory is sold may reduce or terminate their business relationship with Gix at any time. If customers or exchanges 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:

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 MUSE^™ Technology Business

We are currently proposing our MUSE^™system business for sale or grant of license. If we are unable to sell or license our MUSE^™ business or unable to sell or license it in terms acceptable to us, we will have to write off our investment in the MUSE^™ system, which will adversely affect our business.

We are currently proposing our MUSE^™ system business for sale or license. If we are unable to sell or license our MUSE™ business or unable to sell or license it in terms acceptable to us, we could not derive any value from the sale and will lose significant cash flow, which, in turn, will adversely affect our financial results.

Several factors may delay or prevent us from selling or granting license to our MUSE^™ system business:

Further, we have only limited clinical data to support the value of the MUSE^™ system, which may make patients, physicians and hospitals reluctant to accept or purchase our products, and as such a potential purchaser may be reluctant to purchase our MUSE^™ business or such lack of data will be reflected in the purchase price.

Moreover, various modifications to our MUSE^™ system regulator-cleared products may require new regulatory clearances or approvals or require a recall or cease marketing of the MUSE^™ system until clearances or approvals are obtained. Clearances and approvals by the applicable regulator are subject to continual review, and the later discovery of previously unknown problems can result in product labeling restrictions or withdrawal of the product from the market. The potential loss of previously received approvals or clearances, or the failure to comply with existing or future regulatory requirements could reduce the potential sales, profitability and future growth prospects of the MUSE^™.

We have 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 Medigus Ultrasonic Surgical Endostapler (MUSE^™) system in China with a substantial amount of the consideration subject to milestone achievements.

We entered into a Licensing and Sale Agreement with Shanghai Golden Grand-Medical Instruments Ltd., or Golden Grand, for the know-how licensing and sale of goods relating to the Medigus Ultrasonic Surgical Endostapler (MUSE^™) system in China, Hong Kong, Taiwan and Macao. The payment of a substantial amount of the consideration is contingent on achievement of certain milestones such as establishing a MUSE^™ assembly line in China. In the event that we are not able to meet such milestones, due to various factors including natural disasters, public health crises, political crises and trade wars which are not under our control, our entitlement to the aggregate consideration under the agreement may be impaired.

Due to COVID-19, our personnel’s access to China, our ability to retaintransport the materials and equipment required in order to set up our management and scientific teams, to identify, hire and retain additional qualified personnelMUSE^™ assembly line is severely limited. To the extent the coronavirus outbreak persists, it may have an adverse impact on our revenues associated with expertise in research and development and sales and marketing, and to effectively provide for the succession of senior management. Competition for qualified personnel in the medical device industry is intense. We may be unable to replace key persons if they leave or to fill new positions requiring key persons with appropriate experience.MUSE^™.

The loss of key employees, the failure of any key employeeRisks Related to perform or our inability to attract and retain skilled employees, as needed, or an inability to effectively plan for and implement a succession plan for key employees could harm our business.Our Intellectual Property

If we are unable to secure and maintain patent or other intellectual property protection for the intellectual property used in our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which could affectproducts, our ability to develop, market and sell our products and any other or future products that we may develop and may harm our reputation.compete will be harmed.

Our commercial success depends, in part, on obtaining and maintaining patent and other intellectual property protection for the technologies used in our products. The patent positions of medical device companies, including ours, can be highly uncertain and involve complex and evolving legal and factual questions. Furthermore, we might in the future opt to license intellectual property from other parties. If we, or our manufacturersthe other parties from whom we may license intellectual property, fail to obtain and maintain adequate patent or other third-party contractors failintellectual property protection for intellectual property used in our products, or if any protection is reduced or eliminated, others could use the intellectual property used in our products, resulting in harm to complyour competitive business position. In addition, patent and other intellectual property protection may not provide us with applicable federal, statea competitive advantage against competitors that devise ways of making competitive products without infringing any patents that we own or foreign laws or regulations, including with respect to healthcarehave rights to.

U.S. patents and data privacy, we couldpatent applications may be subject to regulatory actions, whichinterference proceedings, and U.S. patents may be subject to re-examination proceedings in the U.S. Patent and Trademark Office. Foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent offices. Any of these proceedings could affectresult in loss of the patent or denial of the patent application, or loss or reduction in the scope of one or more of the claims of the patent or patent application. Changes in either patent laws or in interpretations of patent laws may also diminish the value of our intellectual property or narrow the scope of our protection. Interference, re-examination and opposition proceedings may be costly and time consuming, and we, or the other parties from whom we might potentially license intellectual property, may be unsuccessful in defending against such proceedings. Thus, any patents that we own or might license may provide limited or no protection against competitors. In addition, our pending patent applications and those we may file in the future may have claims narrowed during prosecution or may not result in patents being issued. Even if any of our pending or future applications are issued, they may not provide us with adequate protection or any competitive advantages. Our ability to develop market and sell our current products or any future products which we may develop in the future and could harm our reputation and lead to reduced demand for or non-acceptance of our proposed products by the market.

additional patentable technology is also uncertain. 

If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our business may experience serious adverse consequences.

We are exposed to the riskNon-payment or delay in payment of employee fraudpatent fees or other misconduct. Misconduct by employees could includeannuities, whether intentional failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state health-care fraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulationsunintentional, may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation.

Our board of directors adopted a Code of Ethics in March 2016. However, it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding our business, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to be brought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of our securities. Such a claim, with or without merit, could also result in substantial expendituresthe loss of time and money, and divert attention of our management team from other taskspatents or patent rights important to the success of our business. Many countries, including certain countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to other parties. In addition, many countries limit the enforceability of patents against other parties, including government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States, particularly in the field of medical products and procedures.

If we failare unable to withholdprevent unauthorized use or disclosure of our position against the Israeli tax authorities in connection with tax withholding, we mayproprietary trade secrets and unpatented know-how, our ability to compete will be required to pay additional taxes.harmed.

FollowingProprietary trade secrets, copyrights, trademarks and unpatented know-how are also very important to our business. We rely on a tax deduction assessment conductedcombination of trade secrets, copyrights, trademarks, confidentiality agreements and other contractual provisions and technical security measures to protect certain aspects of our technology, especially where we do not believe that patent protection is appropriate or obtainable. We require our office holders, employees, consultants and distributers of our products and most third parties (such as contractors or clinical collaborators) to execute confidentiality agreements in connection with their relationships with us. However, these measures may not be adequate to safeguard our proprietary intellectual property and conflicts may, nonetheless, arise regarding ownership of inventions. Such conflicts may lead to the loss or impairment of our intellectual property or to expensive litigation to defend our rights against competitors who may be better funded and have superior resources. Our office holders, employees, consultants and other advisors may unintentionally or willfully disclose our confidential information to competitors. In addition, confidentiality agreements may be unenforceable or may not provide an adequate remedy in the event of unauthorized disclosure. Enforcing a claim that a third party illegally obtained and is using our trade secrets is expensive and time consuming, and the outcome is unpredictable. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our products that we consider proprietary. As a result, other parties may be able to use our proprietary technology or information, and our ability to compete in the market would be harmed.

We could become subject to patent and other intellectual property litigation that could be costly, result in the diversion of management’s attention, require us to pay damages and force us to discontinue selling our products.

Our industry is characterized by competing intellectual property and a substantial amount of litigation over patent and other intellectual property rights. Determining whether a product infringes a patent involves complex legal and factual issues, and the Israeli Tax Authorities,outcome of a patent litigation action is often uncertain. No assurance can be given that patents containing claims covering our products, parts of our products, technology or methods do not exist, have not been filed or could not be filed or issued. Furthermore, our competitors or other parties may assert that our products and the ITA,methods we employ in October 2016, asthe use of March 15, 2018,our products are covered by U.S. or foreign patents held by them. In addition, because patent applications can take many years to issue and because publication schedules for pending applications vary by jurisdiction, there may be applications now pending of which we are deemed to beunaware and which may result in debt of approximately $0.8 million of additional withholding taxes, including penalties and interest. It isissued patents which our management’s opinion, based on the assessment of our legal counsel, that the chances ofcurrent or future products infringe. Also, because the claims of published patent applications can change between publication and patent grant, there may be published patent applications with claims that we infringe. There could also be existing patents that one or more of our products or parts may infringe and of which we are unaware. As the ITA being dismissednumber of competitors in the endoscopic procedure market grows, and as the number of patents issued in this area grows, the possibility of patent infringement claims against us increases.

Infringement actions and other intellectual property claims and proceedings brought against or by us, whether with or without merit, may cause us to incur substantial costs and could place a significant strain on our financial resources, divert the attention of management from our business and harm our reputation. Some of our competitors may be able to sustain the costs of complex patent or intellectual property litigation more effectively than we can because they have substantially greater resources. 

We cannot be certain that we will successfully defend against allegations of infringement of patents and intellectual property rights of others. In the event that we become subject to a patent infringement or other intellectual property lawsuit and if the other party’s patents or other intellectual property were upheld as valid and enforceable and we were found to infringe the other party’s patents or violate the terms of a license to which we are more likely than not. Therefore, no allowance regarding this assessment was recordeda party, we could be required to pay damages. We could also be prevented from selling our products unless we could obtain a license to use technology or processes covered by such patents or will be able to redesign the product to avoid infringement. A license may not be available at all or on commercially reasonable terms or we may not be able to redesign our products to avoid infringement. Modification of our products or development of new products could require us to conduct clinical trials and to revise our filings with the applicable regulatory bodies, which would be time consuming and expensive. In these circumstances, we may be unable to sell our products at competitive prices or at all, our business and operating results could be harmed.

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or, that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Certain of our employees and personnel were previously employed at universities, medical institutions, or other biotechnology or pharmaceutical companies. Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Furthermore, universities or medical institutions who employ some of our key employees and personnel in parallel to their engagement by us may claim that intellectual property developed by such person is owned by the respective academic or medical institution under the respective institution intellectual property policy or applicable law.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We may be subject to claims that former employees, collaborators, or other third parties have an ownership interest in our financial statements. However, if our position is not acceptedpatents or other intellectual property. Ownership disputes may arise in the event this case is litigated,future, for example, from conflicting obligations of consultants or others who are involved in developing our business canproduct candidates. Litigation may be materially adversely affected.necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Disruptions to our information technology systems due to cyber-attacks or our failure to upgrade and adjust our information technology systems, may materially impair our operations, hinder our growth and materially and adversely affect our business and results of operations.

We believe that an appropriate information technology, or IT, infrastructure is important in order to support our daily operations and the growth of our business. If we experience difficulties in implementing new or upgraded information systems or experience significant system failures, or if we are unable to successfully modify our management information systems or respond to changes in our business needs, we may not be able to effectively manage our business, and we may fail to meet our reporting obligations. Additionally, if our current back-up storage arrangements and our disaster recovery plan are not operated as planned, we may not be able to effectively recover our information system in the event of a crisis, which may materially and adversely affect our business and results of operations.

In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological error. High-profile security breaches at other companies and in government agencies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyber-attacks targeting businesses such as ours. Computer hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently induce employees, customers, or others to disclose information or unwittingly provide access to systems or data. We can provide no assurance that our current IT system or any updates or upgrades thereto and the current or future IT systems of our distributors use or may use in the future, are fully protected against third-party intrusions, viruses, hacker attacks, information or data theft or other similar threats. Legislative or regulatory action in these areas is also evolving, and we may be unable to adapt our IT systems or to manage the IT systems of third parties to accommodate these changes. We have experienced and expect to continue to experience actual or attempted cyber-attacks of our IT networks. Although none of these actual or attempted cyber-attacks has had a material adverse impact on our operations or financial condition, we cannot guarantee that any such incidents will not have such an impact in the future.

Risks Related to Regulatory Compliance

If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which could affect our ability to develop, market and sell our products in the medical field and any other or future products that we may develop and may harm our reputation in the medical field.

Risks RelatedIf we or our manufacturers or other third-party contractors fail to Our Intellectual Propertycomply with applicable federal, state or foreign laws or regulations, including with respect to healthcare and data privacy, we could be subject to regulatory actions, which could affect our ability to develop, market and sell our current products or any future products which we may develop in the future and could harm our reputation and lead to reduced demand for or non-acceptance of our proposed products by the market.

If we are unable to secure and maintain patent or other intellectual property protection for the intellectual property used in our products,Regulatory reforms may adversely affect our ability to compete will be harmed.sell our products profitably.

Our commercial success depends,From time to time, legislation is drafted and introduced in part, on obtaining and maintaining patent and other intellectual property protection for the technologies used in our products. The patent positions of medical device companies, including ours, can be highly uncertain and involve complex and evolving legal and factual questions. Furthermore, we might in the future opt to license intellectual property from other parties. If we, or the other parties from whom we may license intellectual property, fail to obtain and maintain adequate patent or other intellectual property protection for intellectual property used in our products, or if any protection is reduced or eliminated, others could use the intellectual property used in our products, resulting in harm to our competitive business position. In addition, patent and other intellectual property protection may not provide us with a competitive advantage against competitors that devise ways of making competitive products without infringing any patents that we own or have rights to. 

U.S. patents and patent applications may be subject to interference proceedings, and U.S. patents may be subject to re-examination proceedings in the U.S. Patent and Trademark Office. Foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent offices. Any of these proceedings could result in loss of the patent or denial of the patent application, or loss or reduction in the scope of one or more of the claims of the patent or patent application. Changes in either patent laws or in interpretations of patent laws may also diminish the value of our intellectual property or narrow the scope of our protection. Interference, re-examination and opposition proceedings may be costly and time consuming, and we, or the other parties from whom we might potentially license intellectual property, may be unsuccessful in defending against such proceedings. Thus, any patents that we own or might license may provide limited or no protection against competitors. In addition, our pending patent applications and those we may file in the future may have claims narrowed during prosecution or may not result in patents being issued. Even if any of our pending or future applications are issued, they may not provide us with adequate protection or any competitive advantages. Our ability to develop additional patentable technology is also uncertain. 

Non-payment or delay in payment of patent fees or annuities, whether intentional or unintentional, may also result in the loss of patents or patent rights important to our business. Many countries, including certain countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to other parties. In addition, many countries limit the enforceability of patents against other parties, including government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States, particularlyEuropean Union or other countries in which we operate, that could significantly change the field of medical productsstatutory provisions governing the clearance or approval, manufacture and procedures.

If we are unable to prevent unauthorized use or disclosure of our proprietary trade secrets and unpatented know-how, our ability to compete will be harmed.

Proprietary trade secrets, copyrights, trademarks and unpatented know-how are also very important to our business. We rely on a combination of trade secrets, copyrights, trademarks, confidentiality agreements and other contractual provisions and technical security measures to protect certain aspects of our technology, especially where we do not believe that patent protection is appropriate or obtainable. We require our office holders, employees, consultants and distributersmarketing of our products, and most third parties (such as contractors or clinical collaborators) to execute confidentiality agreementsincluding in connection with their relationships with us. However, these measures may not be adequate to safeguard our proprietary intellectual property and conflicts may, nonetheless, arise regarding ownership of inventions. Such conflicts may lead to the loss or impairment of our intellectual property or to expensive litigation to defend our rights against competitors who may be better funded and have superior resources. Our office holders, employees, consultants and other advisors may unintentionally or willfully disclose our confidential information to competitors.medical devices industry. In addition, confidentiality agreementsregulations and guidance may often be unenforceablerevised or reinterpreted by the regulatory authorities in ways that may not provide an adequate remedy in the event of unauthorized disclosure. Enforcing a claim that a third party illegally obtained and is using our trade secrets is expensive and time consuming, and the outcome is unpredictable. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our products that we consider proprietary. As a result, other parties may be able to use our proprietary technology or information, and our ability to compete in the market would be harmed.

We could become subject to patent and other intellectual property litigation that could be costly, result in the diversion of management’s attention, require us to pay damages and force us to discontinue selling our products.

Our industry is characterized by competing intellectual property and a substantial amount of litigation over patent and other intellectual property rights. Determining whether a product infringes a patent involves complex legal and factual issues, and the outcome of a patent litigation action is often uncertain. No assurance can be given that patents containing claims covering our products, parts of our products, technology or methods do not exist, have not been filed or could not be filed or issued. Furthermore, our competitors or other parties may assert that our products and the methods we employ in the use of our products are covered by U.S. or foreign patents held by them. In addition, because patent applications can take many years to issue and because publication schedules for pending applications vary by jurisdiction, there may be applications now pending of which we are unaware and which may result in issued patents which our current or future products infringe. Also, because the claims of published patent applications can change between publication and patent grant, there may be published patent applications with claims that we infringe. There could also be existing patents that one or more of our products or parts may infringe and of which we are unaware. As the number of competitors in the endoscopic procedure market grows, and as the number of patents issued in this area grows, the possibility of patent infringement claims against us increases. 

Infringement actions and other intellectual property claims and proceedings brought against or by us, whether with or without merit, may cause us to incur substantial costs and could place a significant strain on our financial resources, divert the attention of management fromsignificantly affect our business and harm our reputation. Some of our competitors may be ableproducts. It is impossible to sustain the costs of complex patent or intellectual property litigation more effectively than we can because they have substantially greater resources. 

We cannot be certain that we will successfully defend against allegations of infringement of patents and intellectual property rights of others. In the event that we become subject to a patent infringement or other intellectual property lawsuit and if the other party’s patents or other intellectual property were upheld as valid and enforceable and we were found to infringe the other party’s patents or violate the terms of a license to which we are a party, we could be required to pay damages. We could also be prevented from selling our products unless we could obtain a license to use technology or processes covered by such patents orpredict whether legislative changes will be able to redesignenacted or interpretations changed, and what the product to avoid infringement. A licenseimpact of such changes, if any, may not be available at all or on commercially reasonable terms or we may not be able to redesign our products to avoid infringement. Modification of our products or development of new products could require us to conduct clinical trials and to revise our filings with the applicable regulatory bodies, which would be time consuming and expensive. In these circumstances, we may be unable to sell our products at competitive prices or at all, our business and operating results could be harmed.

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or, that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Certain of our employees and personnel were previously employed at universities, medical institutions, or other biotechnology or pharmaceutical companies. Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Furthermore, universities or medical institutions who employ some of our key employees and personnel in parallel to their engagement by us may claim that intellectual property developed by such person is owned by the respective academic or medical institution under the respective institution intellectual property policy or applicable law.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We may be subject to claims that former employees, collaborators, or other third parties have an ownership interest in our patents or other intellectual property. Ownership disputes may arise in the future, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Risks Related to Regulatory Compliancebe.

If we fail to comply with the extensive government regulations relating to our business, we may be subject to fines, injunctions and other penalties that could harm our business.

OurThe application of our MUSE^™ system as a medical device products and operations areis subject to extensive regulation by the FDA, pursuant to the Federal Food, Drug, and Cosmetic Act, or FDCA, and various other federal, state and foreign governmental authorities. Government regulations and requirements specific to medical devices are wide ranging and govern, among other things:

For the purpose of receiving FDA clearance through the 510(k) track, the applicant must prove, inter alia, that the device subject to the application is substantially equivalent to one or more products which have already been approved by the FDA (predicate device). Additionally, the applicant is required to provide a detailed description of the device, including specifications and technical information, labeling, instructions for use, and the relevant indications for use of the device which is the subject of the application.

Clinical trials are usually not required under the 510(k) track, unless the FDA suspects the device subject to application contains new technical characteristics requiring clinical results regarding safety and efficacy. Clinical trials whose results are attached to the application for marketing approval are subject to advance approval by the FDA regarding the protocol of the trial of the Investigative Device Exemption (IDE) type.

Approval for marketing of medical devices in the United States can be submitted through a PMA, which is required when the device subject to approval is not substantially equivalent to a previously approved device, particularly high risk life-saving devices.

Though the PMA track consists of more stringent requirements than the 510(k) track and can be expensive and lengthy and entail significant fees, unless exempt. The FDA’s 510(k) marketing clearance process usually takes from three to 12 months, but it can last longer. The process of obtaining PMA approval is more expensive and uncertain than the 510(k) marketing clearance process. It generally takes from one to three years, or even longer, from the time the PMA application is submitted to the FDA, until an approval is obtained. There is no assurance that we will be able to obtain FDA clearance or approval for any new products on a timely basis, or at all.

In addition, weWe are subject to annual regulatory audits in order to maintain our quality system certifications, CE mark permissions, FDA Clearance and Canadian medical device license. We do not know whether we will be able to continue to affix the CE mark for new or modified products or that we will continue to meet the quality and safety standards required to maintain the permissions and license we have already received. If we are unable to maintain our quality system certifications and permission to affix the CE mark to our products, we will no longer be able to sell our products in member countries of the European Union or other areas of the world that require CE’s or FDA’s approval of medical devices. If we are unable to maintain our quality system certifications and Canadian medical device license, we will not be able to sell our products in Canada.

Our medical device products and operations are also subject to regulation by the Medical Devices and Accessories Division in the Israeli Ministry of Health, or AMAR, which is responsible for the registration of medical devices in Israel, issuance of import licenses and monitoring marketing of medical equipment. We have received an AMAR approval in Israel.

Failure to obtain regulatory approval in additional foreign jurisdictions will prevent us from expanding the commercialization of our products.

To be able to market and sell our products in most other countries, we must obtain regulatory approvals and comply with the regulations of those countries. These regulations, including the requirements for approvals and the time required for regulatory review, vary from country to country. Obtaining and maintaining foreign regulatory approvals are expensive and time consuming, and we cannot be certain that we will receive regulatory approvals in the various countries in which we plan to market our products. Failure to obtain or maintain regulatory approval in such countries could have an adverse effect on our financial condition and results of operations.

Our products may be subject to product actions in the future that could harm our reputation, business operations and financial results.

The FDA and similar foreign health or governmental authorities have the authority to require an involuntary recall of commercialized products in the event of material deficiencies or defects in design, or manufacturing or labeling. In the case of the FDA, the authority to require a recall must be based on an FDA finding. In addition, foreign governmental bodies have the authority to require a recall of our products in the event of material deficiencies or defects in design or manufacture. Product actions involving any of our products would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations.

If our products, or malfunction of our products, cause or contribute to adverse medical events such as death or a serious injury, we are required to report to the FDA, and if we fail to do so, we would be subject to sanctions that would materially harm our business.

Our marketed products are subject to Medical Device Reporting, or MDR, obligations, which require that we report to the FDA any incident in which our products may have caused or contributed to a death or serious injury, or in which our products malfunctioned and, if the malfunction were to recur, it could likely cause or contribute to a death or serious injury. The timing of our obligation to report under the MDR regulations is triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events of which we become aware within the prescribed timeframe. We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected.In addition, all manufacturers placing medical devices in the European Union, Israel and Canada markets are legally bound to report any serious or potentially serious incidents involving devices they produce or sell to the relevant authority in whose jurisdiction the incidentoccurred.

If we fail to comply with our reporting obligations, the FDA or other agencies in whose jurisdiction the incident occurred, could take action including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearances, seizure of our products, or delay in clearance of future products. Any correctiveaction, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operatingextensive government regulations relating to our business, we may be subject to fines, injunctions and may materiallyother penalties that could harm our reputation and financial results.business.

We may be subject to fines, penalties or injunctions if we promote the use of our products for unapproved uses, resulting in damage to our reputation and business.

Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of a medical device for a use that has not been cleared or approved by FDA. Use of a device outside its cleared or approved indications is known as “off-label” use. We are not allowed to promote the MUSE^TM system for off label use. If the FDA determines that we promote an off-label use, it could request that we modify our promotional materials or subject us to regulatory or enforcement actions, which could have an adverse impact on our reputation and financial results. Similarly, a CE mark and an AMAR approval is invalidated if any part of the device is modified or used in a manner that is outside of its intended use.

Regulatory reforms may adversely affect our ability to sell our products profitably.

From time to time, legislation is drafted and introduced in the United States, European Union or other countries in which we operate, that could significantly change the statutory provisions governing the clearance or approval, manufacture and marketing of medical devices. In addition, regulations and guidance may often be revised or reinterpreted by the regulatory authorities in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted or interpretations changed, and what the impact of such changes, if any, may be.

On September 24, 2013, the FDA published a final rule establishing a unique device identification system, or the UDI Rule. The UDI Rule mandates new labeling requirements that will impact our medical products. We will be required to meet compliance dates as early as September 24, 2015 for implantable devices (such as staples and cartridges), and additional compliance dates of September 24, 2016 and September 24, 2018 for all other Class II (such as staplers) and reusable components (such as consoles), respectively. Compliance may involve increases costs and require new equipment, quality systems and manufacturing processes. As of the date of this annual report on Form 20-F, we are on schedule with the UDI Rule compliance.

If we fail to comply with federal or state fraud and abuse laws, we could be subject to criminal and civil penalties, loss of licenses and exclusion from Medicare, Medicaid and other federal and state healthcare programs which could have a material adverse effect on our business, financial condition and results of operations.

There are numerous United States federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws, false claims, and physician transparency laws. Section 1128B(b) of the Social Security Act, or the SSA, commonly referred to as the “Anti-Kickback Statute”, prohibits the offer, payment, solicitation or receipt of any form of remuneration in return for referring, ordering, leasing, purchasing or arranging for or recommending the ordering, purchasing or leasing of items or services payable by the Medicare and Medicaid programs or any other federally funded healthcare program. The Anti-Kickback Statute is very broad in scope, and many of its provisions have not been uniformly or definitively interpreted by courts or regulations. We have consulting or fee for services arrangements with physicians, hospitals and other entities, which may be subject to scrutiny. To the extent we are found to not be in compliance, we could face potentially significant fines and penalties in addition to other more significant sanctions and we may be required to restructure our operations.

Another development affecting the healthcare industry is the increased use of the federal Civil False Claims Act and, in particular, actions brought pursuant to the False Claims Act’s “whistleblower” or “qui tam” provisions. The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The qui tam provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery. In recent years, the number of suits brought against healthcare providers by private individuals has increased dramatically. In addition, various states have enacted false claim laws analogous to the Civil False Claims Act.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended, created two new federal crimes: healthcare fraud and false statements relating to healthcare matters. Violations can result in criminal and civil liabilities.

Compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business in international jurisdictions and could expose us or our employees to fines and penalties in the U.S. and abroad. These numerous and sometimes conflicting laws and regulations include the Foreign Corrupt Practices Act. Many foreign countries have enacted similar laws addressing fraud and abuse in the healthcare sector. The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance requirements in multiple jurisdictions increases the possibility that a healthcare company may run afoul of one or more of the requirements.

Violations of any fraud and abuse may result in significant fines, imprisonment and exclusion from the Medicare, Medicaid and other federal or state healthcare programs which could have a material adverse effect on our business, financial condition and results of operations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from federal healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. Dealing with investigations can be time and resource consuming and can divert management’s attention from the business. In addition, settlements with law enforcement agencies have forced healthcare providers to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could have a material adverse effect on our reputation, business and financial condition. See “Item 4. Information on the Company - B. Business Overview - Health Care Laws and Regulations - Fraud and Abuse Laws”.

The new disclosure rules regarding the use of conflict minerals may affect our relationships with suppliers and customers.

The Securities and Exchange Commission adopted disclosure rules in August 2012 for companies that use conflict minerals in their products, with substantial supply chain verification requirements in the event that the materials come from, or could have come from, the Democratic Republic of the Congo or adjoining countries. These new rules and verification requirements may impose additional costs on us and on our suppliers, and limit the sources or increase the prices of materials used in our products. Among other things, this new rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of components that are incorporated into our products. In addition, the number of suppliers who provide conflict-free minerals may be limited, and there may be material costs associated with complying with the disclosure requirements, such as costs related to the process of determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. We may not be able to sufficiently verify the origins of the relevant minerals used in components manufactured by third parties through the procedures that we implement, and we may encounter challenges to satisfy those customers who require that all of the components of our products be certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so. If we are unable to certify that our products are conflict free, we may face challenges with our customers, which could place us at a competitive disadvantage, and our reputation may be harmed.

Risks Related to Our Operations in Israel

Our headquarters, manufacturing facilities, and most of our administrative offices are located in Israel and, therefore, our results may be adversely affected by military instability in Israel.

OurMany of our employees, including certain management members operate from our offices that are located in Omer, Israel. In addition, the majoritya number of our officers and directors are residents of Israel. Accordingly, geopolitical orpolitical, economic, and military conditions in Israel and itsthe surrounding region may directly or indirectly affect our business. Sincebusiness and operations. In recent years, Israel has been engaged in sporadic armed conflicts with Hamas, an Islamist terrorist group that controls the establishmentGaza 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 StateGaza Strip against civilian targets in various parts of Israel, including areas in 1948, a numberwhich our employees and some of armed conflicts have taken place between Israelour consultants are located, and its neighboring countries.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. During July and August 2014, Hamas and Israel were engaged in a military conflict that caused damage and disrupted economic activities in Israel. During November 2012, Hamas and Israel were engaged in an armed conflict and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. These conflicts involved missile strikes against civilian targets in various parts of Israel, including areas in which our employees and consultants are located, and negatively affected business conditions in Israel. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. The conflict situation in Israel could cause situations where medical product certifying or auditing bodies could not be able to visit our manufacturing facilities in order to review our certifications or clearances, thus possibly leading to temporary suspensions or even cancellations of our clearances or manufacturing certifications. The conflict situation in Israel could also result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. Furthermore, several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in the region continue or intensify. Such restrictions may seriously limit our ability to sell our products to customers in those countries.

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government is currently committed to coveringcovers 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 if maintained,that it will be sufficient to compensate us fully for damages incurred.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 generally 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.

Our operations may be disrupted as a result of the obligation of management or key personnel to perform military service.

Many of our male employees in IsraelIn addition, many Israeli citizens are obligated to perform one month,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 reservists withwho 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, and recently some of our employees have been called up in connection with armed conflicts.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 absencecall-up of a significant numbermembers of our employees or of one or more of our key employees.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. A fourth election tool place on March 23, 2021. The Knesset, for reasons related to this extended political turmoil, failed to pass a budget for the year 2021, 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.

Exchange rate fluctuations between foreign currencies and the U.S. Dollar may negatively affect our earnings.

Our reporting and functional currency is the U.S. dollar. Our, ScoutCam, Pro and Purex revenues are currently primarily payable in U.S. dollars and Euros and we expect our future revenues to be denominated primarily in U.S. dollars and Euros.dollars. However, certain amount of our expenses are in NIS and as a result, we are exposed to the currency fluctuation risks relating to the recording of our expenses in U.S. dollars. We may, in the future, decide to enter into currency hedging transactions. These measures, however, may not adequately protect us from material adverse effects.

The government tax benefits that we currently are entitled to receive require us to meet several conditions and may be terminated or reduced in the future.

Some of our operations in Israel may entitle us to certain tax benefits under the Law for the Encouragement of Capital Investments, 5719-1959, or the Investments Law, once we begin to produce revenues.taxable income. From time to time, the government of Israel has considered reducing or eliminating the tax benefits available to Benefitted Enterprise programs such as ours. If we do not meet the requirements for maintaining these benefits, they may be reduced or cancelled and the relevant operations would be subject to Israeli corporate tax at the standard rate, which was set at 24% for 2017(to be reduced to 23% in 2018and thereafter).thereafter. In addition to being subject to the standard corporate tax rate, we could be required to refund any tax benefits that we have already received, plus interest and penalties thereon. Even if we continue to meet the relevant requirements, the tax benefits that our current “Benefitted Enterprise” is entitled to may not be continued in the future at their current levels, or at all. If these tax benefits were reduced or eliminated, the amount of taxes that we would have to pay if we produce revenues would likely increase, as all of our operations would consequently be subject to corporate tax at the standard rate, which could adversely affect our results of operations. Additionally, if we increase our activities outside of Israel, for example, by way of acquisitions, our increased activities may not be eligible for inclusion in Israeli tax benefits programs. See “Item 10. Additional Information - E. Taxation.” 

In the past, we received Israeli government grants for certain of our research and development activities. The terms of those grants may require us, in addition to payment of royalties, to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel,, including increase of the amount of our liabilities in connection with such grants.grants. If we fail to comply with the requirements of the Innovation Law (as defined below), we may be required to pay penalties in addition to repayment of the grants, and may impair our ability to sell our technology outside of Israel.

Some of our research and development efforts were financed in part through royalty-bearing grants, in an amount of $0.2 million that we received from the Israeli Innovation Authority of the Israeli Ministry of Economy and Industry, or IIA. When know-how is developed using IIA grants, the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744-1984 (formerly known as the Law for the Encouragement of Research and Development in Industry 5744-1984), or the Innovation Law and the regulations thereunder, restricts our ability to manufacture products and transfer technology and know-how, developed as a result of IIA funding, outside of Israel.

Under the Innovation Law and the regulations thereunder, a recipient of IIA grants is required to return the grants by the payment of royalties of 3% to 6% on the revenues generated from the sale of products (and related services) developed (in whole or in part) under IIA program up to the total amount of the grants received from IIA, linked to the U.S. dollar and bearing interest at an annual rate of LIBOR applicable to U.S. dollar deposits, as published on the first business day of each calendar year.

The United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate (LIBOR), announced that it will no longer persuade or require banks to submit rates for LIBOR after January 1, 2022. The grants received from the IIA bear an annual interest rate based on the 12-month LIBOR. Accordingly, there is considerable uncertainty regarding the publication of LIBOR beyond 2022. While it is not currently possible to determine precisely whether, or to what extent, the withdrawal and replacement of LIBOR would affect us, the implementation of alternative benchmark rates to LIBOR may increase our financial liabilities to the IIA. To date, IIA has not published a decision regarding an alternative benchmark to be used in the LIBOR’s stead.

Transfer of IIA funded know-how and related intellectual property rights outside of Israel, including by way of license for research and development purpose requires pre-approval by IIA and imposes certain conditions, including, requirement of payment of a redemption fee calculated according to the formula provided in the Innovation Law which takes into account, among others, the consideration for such know-how paid to us in the transaction in which the technology is transferred, research and development expenses, the amount of IIA support, the time of completion of IIA supported research project and other factors, while the redemption fee will not exceed 600% of the grants amount plus interest. No assurance can be given that approval to any such transfer, if requested, will be granted and what will be the amount of the redemption fee payable.

Transfer of IIA funded know-how and related intellectual property rights to an Israeli company requires a pre-approval by IIA and may be granted if the recipient undertakes to fulfil all the liabilities to IIA and undertakes to abide by the provisions of Innovation Law, including the restrictions on the transfer of know-how and the manufacturing rights outside of Israel and the obligation to pay royalties (note that there will be an obligation to pay royalties to IIA from the income received by us in connection with such transfer transaction as part of the royalty payment obligation). No assurance can be given that approval to any such transfer, if requested, will be granted.