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

A. [Reserved]

The following consolidated statement of operations dataB. Capitalization and Indebtedness

Not applicable.

C. Reasons for the years ended December 31, 2017, 2016,Offer and 2015, and the consolidated balance sheet data asUse of December 31, 2017 and 2016, 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, 2014 and 2013 and the consolidated balance sheet data as of December 31, 2015, 2014, and 2013 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 Data

Proceeds

The following table sets forth 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 Israel on the last day of each month during the periods presented.

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.

D. Risk Factors

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.

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 auditorsStarting 2019, we made material changes to our business strategy. 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, and consummated a securities exchange agreement in relation to ScoutCam Ltd. and diversified our investments into new markets and industries. In addition to the medical field, we have entered the electric vehicle field. We have also invested into different internet-related markets, specifically e-commerce and online advertising. 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, drone technology and online event management. We cannot guarantee that these strategic decisions will derive the anticipated value to our shareholders, or any value at all.

We have a history of operating losses, we may incur additional losses in the future and our ability to continue as a going concern, which may hinder our ability to obtain further financing.grow sales and achieve profitability are unpredictable.

Our audited consolidated financial statements forAs of December 31, 2022, we had an accumulated deficit of $85.6 million and incurred total operating loss of approximately $13.8 million in the year ended on December 31, 2022, and total operating losses of approximately $9.8 million in the year ended December 31, 2017, were prepared under the assumption2021. 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 decline in our share price or cause us to cease operations.

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

There can be no assurance that we would continuewill be able to successfully implement our operations as a going concern. Our independent registered public accounting firm has included a “going concern” explanatory paragraph in its report onbusiness plan, meet our consolidated financial statements for the year ended December 31, 2017, indicating thatwe have suffered recurring losses from operationschallenges and have a net capital deficiency that raises substantial doubt about our ability to continue as a going concern. Uncertainty concerning our ability to continue as a going concern may hinder our ability to obtain future financing. Continued operations and our ability to continue as a going concern are dependent on our ability to obtain additional fundingbecome profitable in the near future and thereafter, and there are no assurances that such funding will be available 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 continue operations. If we cannot continue as a viable entity, our shareholders would likely lose most or all of their investment in us.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, 2022, the Group incurred loss of $10.2 million mainly due to operating loss from our consolidated financial reports of approximately $13.8 million and a negative cash flow from operating activities of approximately $5.6 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 of $85.6 million as of December 31, 2022.

As of December 31, 2017, and March 15, 2018,2022, we had a total cash and cash equivalents balance and short term deposits balance of approximately $6.3 million and $5.2 million, respectively. Based on$21 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 projected cash flows andinvestments in other entities in order to fund our cash balances as of the date of this annual report on Form 20-F, ouroperating needs. Our management is of the opinion that without further fund raisingbased on our current 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. However, we will not have sufficient resources to enable usanticipate that we are likely to continue advancing our activities and as a result, thereto incur significant 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.

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.

Global economic and macroeconomic conditions may adversely affect our operating results in a material manner.

Our operating businesses are subject to normal economic cycles affecting the general economy or the specific industries in which they operate. Negative conditions in the general economy, including significant inflation, rising interest rates, financial and credit market fluctuations, international trade relations, political turmoil, geopolitical conflicts such as the military conflict between Russia and Ukraine, natural catastrophes, regional or global outbreaks of contagious diseases, such as the COVID-19 pandemic, warfare and terrorist attacks, could cause a decrease in business investments and could produce a material adverse effect on one or more of our subsidiaries. Extreme volatility in financial markets, has adversely impacted and may continue to adversely impact our share price and our ability to access capital markets. To the extent that access to the capital markets is restricted or the cost of funding increases, our operations could be adversely affected.

Our ability to freely operate our business is limited as a result of certain covenants included in our Series C Warrants.

The Series 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.

Certain of our subsidiaries 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 certain of our subsidiaries depends largely on the continued employment of their senior management and key personnel who can effectively operate its business and its ability to attract and retain skilled employees. Competition for highly skilled management, technical, research and development, and other employees is intense, and our subsidiaries may not be able to attract or retain highly qualified personnel in the future. If any of the key employees of these subsidiaries 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 these subsidiaries could be adversely affected.

SinceWe, 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 third quarterprotection of 2016 we have been implementing a cost reduction programconfidentiality 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 unsuccessfulinconsistent among jurisdictions or conflict with other legal and regulatory requirements. We are also subject to certain contractual obligations to third parties related to privacy, data protection and data security. We strive to comply with our applicable policies and applicable laws, regulations, contractual obligations, and other legal obligations relating to privacy, data protection, and data security to the extent possible. However, the regulatory framework for privacy, data protection and data security worldwide is, and is likely to remain for the foreseeable future, uncertain and complex, and it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that we do not anticipate or that is inconsistent from one jurisdiction to another and may conflict with other legal obligations or our practices. Further, any significant change to applicable laws, regulations or industry practices regarding the collection, use, retention, security or disclosure of data, or their interpretation, or any changes regarding the manner in which the consent of users or other data subjects for the collection, use, retention or disclosure of such data must be obtained, could increase our costs and require us to modify our services and features, possibly in a material manner, which we may be unable to complete, and may limit our ability to store and process user data or develop new services and features.

If our subsidiaries or we were found in violation of any applicable laws or regulations relating to privacy, data protection, or security, our business may be materially and adversely affected, and we would likely have to change our business practices and potentially the services and features available through our platform. In addition, these laws and regulations could impose significant costs on us and could constrain our ability to use and process data in manners that may be commercially desirable. In addition, if a breach of data security were to occur or to be alleged to have occurred, if any violation of laws and regulations relating to privacy, data protection or data security were to be alleged, or if we had any actual or alleged defect in our safeguards or practices relating to privacy, data protection, or data security, our solutions may be perceived as less desirable, and our business, prospects, financial condition, and results of operations could be materially and adversely affected.

We also expect that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions. For example, the data protection landscape in the European Union (“EU”) is currently evolving, resulting in possible significant operational costs for internal compliance and risks to our business. The EU adopted the General Data Protection Regulation or GDPR, which became effective in May 2018, and contains numerous requirements and changes from previously existing EU laws, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies. Among other requirements, the GDPR regulates the transfer of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States. Failure to comply with the GDPR could result in penalties for noncompliance (including possible fines of up to the greater of €20 million and 4% of our global annual turnover for the preceding financial year for the most serious violations, as well as the right to compensation for financial or non-financial damages claimed by individuals under Article 82 of the GDPR).

In addition to the GDPR, the European Commission has another draft regulation in the approval process that focuses on a person’s right to conduct a private life. The proposed legislation, known as the Regulation of Privacy and Electronic Communications, or ePrivacy Regulation, would replace the current ePrivacy Directive. Originally planned to be adopted and implemented at the same time as the GDPR, the ePrivacy Regulation is still being negotiated.

Additionally, in June 2018, California passed the California Consumer Privacy Act, or CCPA, which provides new data privacy rights for California consumers and new operational requirements for covered companies. Specifically, the CCPA provides that covered companies must provide new disclosures to California consumers and afford such consumers new data privacy rights that include the right to request a copy from a covered company of the personal information collected about them, the right to request deletion of such personal information, and the right to request to opt-out of certain sales of such personal information. The CCPA became operative on January 1, 2020. The California Attorney General can enforce the CCPA, including seeking an injunction and civil penalties for violations. The CCPA also provides a private right of action for certain data breaches expected to increase data breach litigation. The CCPA may require us to modify our data practices and policies and to incur substantial costs and expenses in order to comply. On November 3, 2020, California voters passed the California Privacy Rights Act (“CPRA”) into law, which took effect in January 2023 and significantly expands the CCPA, including by introducing additional obligations such as data minimization and storage limitations, granting additional rights to consumers. The CCPA and CPRA may increase our compliance costs and potential liability. More generally, some observers have noted the CCPA and CPRA could mark the beginning of a trend toward more stringent United States state and federal privacy legislations, which could increase our potential liability and adversely affect our business.

In addition, failure to comply with the Israeli Privacy Protection Law 5741-1981, and its execution,regulations as well as the guidelines of the Israeli Privacy Protection Authority, may expose us to administrative fines, civil claims (including class actions), and in certain cases, criminal liability. Current pending amendment to the Israeli Privacy Protection Law, 1981 is expected to enhance fines and sanctions for breaching the Israeli Privacy Law and to strengthen the enforcement capacity of the Israeli Privacy Protection Authority. There have also been privacy bills enacted in other countries around the world, such as Brazil, which have introduced new or expanded privacy requirements and we expect that privacy legislation will continue to evolve in the coming years. Therefore, it is difficult to determine whether and how such existing laws and regulations will apply to and impact the internet and our business.

Any failure or perceived failure by our subsidiaries or by us to comply with our posted privacy policies, our privacy-related obligations to users or other third parties, or any other legal obligations or regulatory requirements relating to privacy, data protection, or data security may result in governmental investigations or enforcement actions, litigation, claims, or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our users to lose trust in us, and otherwise materially and adversely affect our reputation and business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, other obligations, and policies that are applicable to the businesses of our users may limit the adoption and use of, and reduce the overall demand for, our platform. Additionally, if third parties we work with violate applicable laws, regulations, or contractual obligations, such violations may put our users’ data at risk, could result in governmental investigations or enforcement actions, fines, litigation, claims, or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our users to lose trust in us, and otherwise materially and adversely affect our reputation and business. Further, public scrutiny of, or complaints about, technology companies or their data handling or data protection practices, even if successful,unrelated to our business, industry, or operations, may lead to undesirable outcomes.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 Gix Internet’s Business and Industry

Gix Internet’s success depends, in part, upon the continued demand of digital advertising as an integral part of corporate marketing and internal communications plans and the continued growth and acceptance of digital content as effective alternatives to traditional offline marketing products and services.

SinceGix Internet provides digital advertising platforms. Its revenues are derived from the third quartersale of 2016 we have been implementing a cost reduction program that has affectedits platforms. If the structure and operation of our business. Such plan reflects assumptions and analyses based on our experience and perception 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 butdemand for digital advertising does not limitedcontinue to (i) our ability to substantially raise additional funding and to obtain adequate liquidity; (ii) our ability to maintain suppliers’, hospitals’, medical facilities’ and practitioners’ confidence; (iii) our ability to efficiently reduce our operational expenditures, while retaining key employees; and (iv) the overall success of our business. 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 personnelgrow or customers do not embrace its platforms, this could have a material adverse effect on ourits business and financial condition.

Gix Internet’s success also depends, in part, on its ability to meet operationalcompete for a share of available advertising/marketing expenditures as more traditional offline and emerging media companies continue to enter the digital advertising market, as well as on the continued growth and acceptance of digital advertising generally. If for any reason digital advertising is not perceived as effective (relative to traditional advertising), web browsers, software programs and/or other applications that limit or prevent advertising from being displayed become commonplace and/or the industry fails to effectively manage click fraud, the market for digital advertising will be negatively impacted. Any lack of growth in the market for digital advertising could adversely affect its business, financial expectations. The pursuitcondition and results of additional fundingoperations.

Online platform updates, including operating systems, search engines, browsers and social media might affect Gix Internet’s ability to generate revenues, temporarily or permanently.

Gix Internet complies with certain guidelines promulgated by online platforms for the applicationuse of the cost reduction program has occupiedrespective brands and will continueservices. Online platforms may unilaterally update their policies and guidelines, which could, in turn, require modifications to, occupy a substantial portionor prohibit and/or render obsolete certain of the timeits advertising solutions, products, services and attention of our management and will impact how our business is conducted.

We have a history of operating losses and expectpractices, which could be costly 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 toaddress or otherwise have an adverse effect on its business, its financial condition and results of operations. Noncompliance with platforms’ guidelines, whether by it or by third parties it works with, if not cured, could result in such online platforms’ suspension of some or all of their services to it, or to the websites of third parties it works with, or the reimbursement of funds paid to it, or the imposition of additional restrictions on our shareholders’ equityadvertising abilities or the termination of certain advertising agreements with its customers.

Should the providers of internet browsers, advertisement platforms and working capital. Any failureSearch Engines further regulate, constrain or limit Gix Internet’s ability to achieveoffer advertising services, or materially change their guidelines, technology or the way they operate, its ability to generate revenue from advertising could be significantly reduced.

As Gix Internet provides its services through the internet, it’s reliant on its ability to work with the different internet browsers, search engines and maintain profitabilityadvertisement platforms. If Microsoft, Google, Apple, Meta or other companies that provide internet browsers, advertisement platforms and search engines, effectively further restrict, discourage or otherwise hamper companies, like Gix Internet, from offering or advertising services, this would continue to cause a material adverse effect on its revenue and its financial results.

Large and established internet and technology companies, such as Google and Meta, play a substantial role in the digital advertising market and may significantly impair Gix Internet’s ability to operate in this industry.

Google and Meta 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 Internet 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 Internet 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 use of third-party software solutions for the purpose of blocking ads and / or alerts may cause Gix Internet’s business to suffer.

Digital advertising may be blocked by third-party providers. As a result, Gix Internet may lose both existing and potential new customers and its ability to generate revenue will be negatively impacted.

Gix Internet depends on supply sources to provide it with advertising inventory in order for it to deliver advertising campaigns in a cost-effective manner.

Gix Internet relies on a diverse set of publishers including direct publishers, advertising exchange platforms, social networks and other platforms, that aggregate advertising inventory, to provide it with high-quality digital advertising inventory on which it delivers ads, collectively referred to as “supply sources”. The future growth of Gix Internet’s advertising business will depend, in part, on its ability to maintain, expand and further develop successful business relationships in order to increase the network of its supply sources.

Gix Internet’s supply sources typically make their advertising inventory available to it on a non-exclusive basis and are not required to provide any minimum amounts of advertising inventory to it or to provide it with a consistent supply of advertising inventory, at any predetermined price or through real time bidding. Supply sources often maintain relationships with various sources of demand that compete with Gix Internet, and it is easy for supply sources to quickly shift their advertising inventory among these demand sources, or to shift inventory to new demand sources, without notice or accountability. Supply sources may also seek to change the terms at which they offer inventory to Gix Internet, or they may allocate their advertising inventory to its competitors who offer more favorable economic terms, better solutions and advanced technology. Supply sources may also elect to sell all, or a portion, of their advertising inventory directly to advertisers and agencies, or they may develop their own competitive offerings, which could diminish the demand for Gix Internet’s solutions. In addition, significant supply sources within the industry may enter into exclusivity arrangements with Gix Internet’s competitors, which could limit its access to a meaningful supply of inventory. As a result of all of these factors, Gix Internet’s supply sources may not supply it with sufficient amounts of high-quality digital advertising inventory in order for it to fulfill the demands of its advertising customers.

Because of these factors, Gix Internet seeks to expand and diversify its supply sources; nonetheless, if its supply sources terminate or reduce its access to their advertising inventory, increase the price of inventory or place significant restrictions on the sale of their advertising inventory, or if platforms or exchanges terminate its access to them and it is unsuccessful in establishing or maintaining its relationships with supply sources on commercially reasonable terms, it may not be able to replace this with inventory from other supply sources that satisfy its requirements in a timely and cost-effective manner. If any of these happens, Gix Internet’s revenue could decline or its cost of acquiring inventory could increase, which, in turn, could lower its operating margins and materially adversely affect its advertising business.

Reliance upon Gix Internet’s top customers may adversely affect its revenue and operating results.

Gix Internet’s top ten customers represented approximately 68% and 88% of its consolidated revenue for the years ended December 31, 2022, and 2021, respectively on a pro forma basis. It is likely that Gix Internet will depend on a relatively small number of customers for a significant portion of its revenue in the future. If a top customer fails to pay Gix Internet, cash flow from operations would be impacted and its operating results and financial condition could be harmed. Additionally, if Gix Internet were to lose a material customer, it may not be able to offer its services at similar utilization or pricing levels and such loss could have an adverse effect on our shareholders’ equity and working capital and could result in a decline in our share priceits business until the services are offered at similar utilization or cause us to cease operations.

pricing levels.

The future successGix Internet’s search platform depends heavily upon revenue generated from a material agreement with one Major Customer (the “Major Customer”), and any adverse change in that agreement could adversely affect its business, financial condition and results of ouroperations.

Gix Internet is highly dependent on the material agreement with its Major Customer. If this material agreement is terminated or substantially amended (not on favorable terms), Gix Internet would experience a material decrease in its revenue or the profits it generates and would be forced to seek alternative customers, at less competitive terms or accelerate the business dependsit has with the other customers. There are few companies in the market that provide internet search and search advertising services with whom Gix Internet can directly engage with in the same manner which we are engaged with its Major Customer. Such companies are substantially the only participants in western markets, and competitors do not offer as much coverage through sponsored links or searches. Gix Internet may divert its operations and user traffic to other third-party partners which provide search feed to search engines, however Gix Internet cannot guarantee that it will be successful. If Gix Internet fails to quickly locate, negotiate and finalize alternative arrangements or otherwise expedite current operations it has with such alternative search providers, or if it does, but the alternatives do not provide for terms that are as favorable as those currently provided and utilized, it would experience a material reduction in its revenue and, in turn, its business, financial condition and results of operations would be adversely affected.

Reliance upon material suppliers may adversely affect Gix Internet’s revenue and operating results.

Gix Internet is dependent on ourcertain material suppliers and service providers for some of the services it renders. In certain cases, Gix Internet relies on single supplier and/or service provider for the services it offers its customers. In most cases Gix Internet does not have long term contracts with these suppliers, and even in the cases where it does, the contracts include significant qualifications that would make it extremely difficult for it to force the supplier or service provider to provide it with their services, should they choose not to do so. Gix Internet is therefore subject to the risk that these third-parties it works with will not be able or willing to continue to provide it with services that meet its specifications, quality standards and delivery schedules. Factors that could impact these third parties’ willingness and ability to continue to developprovide Gix Internet with the required services include disruption at or affecting their facilities, such as work stoppages or natural disasters, adverse weather or other conditions that affect their supply, their financial conditions and obtain regulatory clearances/ or approvalsdeterioration in its relationships with these third parties. In addition, Gix Internet cannot be sure that it will be able procure¹ the services its needs on satisfactory terms. Any increase in costs could reduce Gix Internet’s revenues and harm its gross margins. In addition, any loss of a material supplier and / or service provider may permanently cause a change in one or more of Gix Internet’s services that may not be accepted by its customers or cause it to eliminate that product altogether.

Gix Internet may not be able to generate enough cash flow to meet its debt obligations or fund its other liquidity needs.

Gix Internet’s ability to satisfy its liabilities will depend upon future performance and its ability to repay or refinance its debt as it becomes due. Gix Internet’s future operating performance and ability to refinance will be affected by economic and capital market conditions, results of operations and other factors, many of which are beyond its control. Its ability to meet its debt obligations also may be impacted by changes in prevailing interest rates, as borrowings under our loans bear interest at floating rates.

Risks Related to 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 innovativeevents.

To satisfy both clients seeking to manage online and commerciallyoffline events through Eventer’s platform, Eventer needs to continue to improve the user experience and innovate and introduce features and services that both event managers and ticket purchasers find useful cause them to use Eventer’s platform more frequently. In addition, Eventer needs to adapt, expand and improve its platform and user interfaces to keep up with changing user preferences. Eventer invests substantial resources in researching and developing new features and enhancing its platform by incorporating these new features, improving the functionality, and adding other improvements to meet users’ evolving demands. The success of any enhancements or improvements to Eventer’s platform or any new features depends on several factors, including timely completion, adequate quality testing, integration with technologies on the platform and overall market acceptance. Because further development of Eventer’s platform is complex, challenging, and dependent upon an array of factors, the timetable for the release of new features and enhancements to Eventer’s platform is difficult to predict, and it may not offer new features as rapidly as users of its platform require or expect.

It is difficult to predict the problems Eventer may encounter in introducing new features to its platform. Eventer may need to devote significant resources to creating, supporting, and maintaining these features. Eventer provides no assurance that its initiatives to improve the user experience will be successful. Eventer also cannot predict whether users will well receive any new features or whether improving its platform will be successful products in our field, which weor 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 doanticipate or respond to consumer preferences changes, which may result in a timely manner, ordecreased 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 all. Our success andlive 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 be profitable also dependsincrease its current revenue due to such competition. Online and offline leisure events compete with other entertainment forms for consumers’ discretionary spending and within this industry, Eventer faces competition from other promoters and venue operators. Eventer’s competitors compete for relationships with popular music artists and other service providers who have a history of being able to book artists for concerts and events. These competitors may engage in more extensive development efforts, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to existing and potential artists. Due to increasing artist influence and competition to attract and maintain artist clients for events managed on Eventer’s platform, it may enter into agreements on terms that are less favorable to it, which could negatively impact the number of commissions collected from ticket sales which may adversely affect its financial results. Eventer’s competitors may develop services and advertising options equivalent to or superior to those they provide or achieve greater market acceptance and brand recognition than it achieves. Across the live music and entertainment industry, it is possible that new competitors may emerge and rapidly acquire significant market share.

Eventer’s business faces significant competition from other ticketing service providers to continuously secure new and retain existing clients. Additionally, it faces significant and increasing challenges from companies that sell self-ticketing systems and clients who choose to self-ticket by integrating such systems into their existing operations or the acquisition of primary ticket services providers. The advent of new technology, particularly as it relates to online ticketing, has amplified this competition. The intense competition that Eventer faces in the ticketing industry could cause the volume of ticketing services to decline.

If our abilityEventer subsidiary fails to establish ouroffer 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 marketing force, generate product salesdeveloping 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 control costs, allits results of which weoperations may be unable to do.harmed.

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,Eventer’s event management and others in the medical community.

The commercial success of the MUSE™ systemticketing solutions and any future product, if approved,other operations depends, in part, on the medical community, patients,integrity of its systems and infrastructure, as well as affiliate and third-party payors acceptingcomputer systems, Wi-Fi, and other communication systems. System interruption and the lack of integration and redundancy in these systems and infrastructure may have an adverse impact on its business, financial condition, and operations results.

System interruption and the lack of integration and redundancy in the information systems and infrastructure, utilized for Eventer’s platform as well as other computer systems and third-party software, Wi-Fi and other communications systems service providers on which Eventer relies, may adversely affect its ability to operate the platform, process and fulfill transactions, respond to customer inquiries and generally maintain cost-efficient operations. Such interruptions could occur by virtue of natural disasters, malicious actions such as hacking or acts of terrorism or war, or human error. In addition, the loss of some or all of certain key personnel could require Eventer to expend additional resources to continue to maintain its software and systems and could subject it to systems interruptions. The infrastructure required to operate Eventer’s platform requires an ongoing investment of time, money, and effort to maintain or refresh hardware and software and ensure it remains at a level capable of servicing the demand and volume of business it receives. Failure to do so may result in system instability, degradation in performance, or unfixable security vulnerabilities that could adversely impact both the business and the consumers utilizing Eventer’s services. 

While Eventer has backup systems for certain aspects of its operations, disaster recovery planning by its nature cannot be sufficient for all eventualities. In addition, Eventer may not have adequate insurance coverage to compensate for losses from a major interruption. If any of these adverse events were to occur, it could adversely affect Eventer’s business, financial condition, and operations results.

Eventer’s success depends, in significant part, on entertainment and leisure events and economic and other factors adversely affecting such events could have a material adverse effect on its business, financial condition and results of operations.

A decline in attendance at or reduction in the number of entertainment and leisure events may have an adverse effect on Eventer’s revenue and operating income. In addition, during periods of economic slowdown and recession, many consumers have historically reduced their discretionary spending and advertisers have reduced their advertising expenditures. The impact of economic slowdowns on Eventer’s business is difficult to predict, but they may result in reductions in ticket sales and the ability to generate revenue. The risks associated with Eventer’s businesses may become more acute in periods of a slowing economy or recession, which may be accompanied by a decrease in attendance at entertainment and leisure events. Many of the factors affecting the number and availability of entertainment and leisure events are beyond Eventer’s control. For example, COVID-19 has led to lockdowns and governmental restrictions on live entertainment and leisure events as well as restrictions regarding the attendance of such events. Although Eventer’s platform supports the management and ticketing of online events, there is no assurance that online events will generate demand on par with live events, which could adversely affect Eventer’s operations results.

Eventer’s business depends on discretionary consumer and enterprise spending. Many factors related to corporate spending and discretionary consumer spending, including economic conditions affecting disposable consumer income such as unemployment levels, fuel prices, interest rates, changes in tax rates and tax laws that impact companies or individuals, and inflation can significantly impact Eventer’s operating results. Business conditions, as well as various industry conditions, including corporate marketing and promotional spending and interest levels, can also significantly impact Eventer’s operating results. These factors can affect attendance at online and offline events, advertising, and spending, as well as the financial results of venues, events, and the industry. Negative factors such as challenging economic conditions and public concerns over terrorism and security incidents, particularly when combined, can impact corporate and consumer spending and one negative factor can result in more than another. There can be no assurance that consumer and corporate spending will not be adversely impacted by current economic conditions or by any future deterioration in economic conditions, thereby possibly impacting Eventer’s operating results and growth.

Errors, defects, or disruptions in Eventer’s platform could diminish its brand, subject it to liability, and materially and adversely affect its business, prospects, financial condition, and operations results.

Any errors, defects, or disruptions in Eventer’s platform or other performance problems with its platform could harm its brand and may damage the businesses of artists and clients that manage events on its platform. Eventer’s online systems, including its website and mobile apps, could contain undetected errors, or “bugs,” that could adversely affect their performance. Additionally, Eventer regularly updates and enhances its website, platform, and other online systems and introduces new versions of its software products and apps. These updates may contain undetected errors when first introduced or released, which may cause disruptions in its services and may, as a result, cause Eventer to lose market share, and its brand, business, prospects, financial condition and results of operations could be materially and adversely affected. 

Eventer is subject to escrow, payment services, and money transmitter regulations that may materially and adversely affect its business.

Eventer relies on third-party to collect funds from ticket purchasers, remit payments to clients that manage events on its platform, and hold funds in connection with ticket purchases. Although Eventer believes that by working with third parties, its operations comply with existing applicable laws and regulatory requirements related to escrow, money transmission, handling or moving of money, existing laws or regulations may change, and interpretations of existing laws regulations may also change.

As a result, Eventer could be required to be licensed as an escrow agent or a money transmitter (or other similar licensees) in jurisdictions in which it is active or may choose to obtain such a license even if not required. As a result, Eventer may be required to register as a money services business under applicable laws and regulations. It is also possible that Eventer could become subject to regulatory enforcement or other proceedings in those jurisdictions with escrow, money transmission, or other similar statutes or regulatory requirements related to the handling or moving of money, which could, in turn, have a significant impact on its business, even if we were to ultimately prevail in such proceedings. Any developments in the laws or regulations related to escrow, money transmission, or the handling or moving of money or increased scrutiny of its business may lead to additional compliance costs and administrative overhead.

Eventer faces payment and fraud risks that could materially and adversely affect its business.

Requirements applicable to Eventer’s platform relating to user authentication and fraud detection are complex. If Eventer’s security measures do not succeed, Eventer’s business may be adversely affected. In addition, bad actors worldwide use increasingly sophisticated methods to engage in illegal activities involving personal data, such as unauthorized use of another’s identity or payment information, unauthorized acquisition or use of credit or debit card details, and other fraudulent use of another’s identity or information. This could result in any of the following, each of which could adversely affect Eventer’s business:

Despite measures taken by Eventer to detect and reduce the risk of this kind of conduct, it cannot ensure that any of its measures will stop illegal or improper uses of its platform. Eventer may receive complaints from users and other third parties concerning misuse of its platform in the future. Even if these claims do not result in litigation or are resolved in Eventer’s favor, these claims, and the time and resources necessary to resolve them, could divert the resources of Eventer’s management and materially and adversely affect its business, prospects, financial condition and results of operations.

Eventer uses open source software, which could negatively affect its ability to offer its platform and subject it to litigation or other actions.

Eventer uses substantial amounts of open source software in its platform and may use more open source software in the future. From time to time, there have been claims challenging both the ownership of open source software against companies that incorporate open source software into their products and whether such incorporation is permissible under various open source licenses. U.S. and Israeli courts have not interpreted the terms of many open source licenses, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on its ability to commercialize its platform. As a result, Eventer could be subject to lawsuits by parties claiming ownership of what we believe to be open source software, or breach of open source licenses. Litigation could be costly for Eventer to defend, have a negative effect on its results of operations and financial condition, or require it to devote additional research and development resources to change its platform. In addition, if Eventer were to combine its proprietary source code or software with open source software in a certain manner, it could, under certain of the open source licenses, be required to release the source code of its proprietary software to the public. This would allow its competitors to create similar products with less development effort and time. If Eventer inappropriately uses open source software or the license terms for open source software that its uses change, Eventer may be required to re-engineer its platform, or certain aspects of it, incur additional costs, discontinue the availability of certain features, or take other remedial actions. 

In addition to risks related to license requirements, open source software usage can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or assurance of title or controls on origin of the software. In addition, many of the risks associated with usage of open source software, such as the lack of warranties or assurances of title, cannot be eliminated and could, if not properly addressed, negatively affect Eventer’s business. Eventer has established processes to help alleviate these risks, but it cannot be sure that all of its use of open source software is in a manner that is consistent with its current policies and procedures or will not subject Eventer to liability.

To the extent Eventer’s security measures are compromised, its platform may be perceived as not being secure. This may result in customers curtailing or ceasing their use of Eventer’s platform, its reputation being harmed, Eventer incurring significant liabilities, and adverse effects on its results of operations and growth prospects.

Eventer’s operations involve the storage and transmission of artist and ticket purchaser data or information. Cyberattacks and other malicious internet-based activity continue to increase, and cloud-based platform providers of services are expected to continue to be targeted. Threats include traditional computer “hackers,” malicious code (such as viruses and worms), employee theft or misuse and denial-of-service attacks. Sophisticated nation-states and nation-state supported actors now engage in such attacks, including advanced persistent threat intrusions. The ticket sales solution included in Eventer’s platform stores credit card data and other customer personal information. Hackers and malicious actors may target Eventer in order to obtain credit card information. Despite significant efforts to create security barriers to such threats, it is virtually impossible for Eventer to entirely mitigate these risks. If Eventer’s security measures are compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials, or otherwise, Eventer’s reputation could be damaged, its business may be harmed, and it could incur significant liability. Eventer may be unable to anticipate or prevent techniques used to obtain unauthorized access or to compromise its systems because they change frequently and are generally not detected until after an incident has occurred. As Eventer relies on third-party and public-cloud infrastructure, it will depend in part on third-party security measures to protect against unauthorized access, cyberattacks, and the mishandling of customer data. A cybersecurity event could have significant costs, including regulatory enforcement actions, litigation, litigation indemnity obligations, remediation costs, network downtime, increases in insurance premiums, and reputational damage. Many companies that provide cloud-based services have reported a significant increase in cyberattack activity since the beginning of the COVID-19 pandemic.

Risks Related to Jeffs’ Brands Business

Jeffs’ Brands have a short operating history in an evolving industry and, as a result, Jeffs’ Brands past results may not be indicative of future operating performance.

Jeffs’ Brands has a short operating history in a rapidly evolving industry that may not develop in a manner favorable to our business. Jeffs’ Brands relatively short operating history makes it difficult to assess future performance. 

Jeffs’ Brands future success depends in large part upon the ability to, among other things:

Jeffs’ Brands may not be able to manage growth effectively, and such rapid growth may adversely affect Jeffs’ Brands corporate culture.

Jeffs’ Brands expect to rapidly and significantly expand their operations and anticipate expanding further as Jeffs’ Brands pursue growth strategies. Such expansion increases the complexity of Jeffs’ Brands business and places a significant strain on Jeffs’ Brands management, operations, technical systems, financial resources and internal control over financial reporting functions. Jeffs’ Brands current and planned personnel, systems, procedures and controls may not be adequate to support and effectively manage Jeffs’ Brands future operations, especially as Jeffs’ Brands employ personnel in several geographic locations.

Jeffs’ Brands is currently in the process of transitioning certain of Jeffs’ Brands business and financial systems to systems on a scale reflecting the increased size, scope and complexity of their operations, and the process of migrating the legacy systems could disrupt our ability to timely and accurately process information, which could adversely affect results of operations and cause harm to Jeffs’ Brands reputation. As a result, Jeffs’ Brands may not be able to manage Jeffs’ Brands expansion effectively.

We believe that Jeffs’ Brands entrepreneurial and collaborative culture has been a major contributor to its success. Jeffs’ Brands may have difficulties maintaining such culture or adapting it sufficiently to meet the needs of Jeffs’ Brands future and evolving operations as it’s continue to grow, in particular as Jeffs’ Brands grows internationally.

In addition, Jeffs’ Brands expect to experience some challenges in developing and maintaining Jeffs’ Brands culture as a public company, with the attendant changes in policies, practices, and corporate governance and management requirements. Failure to successfully develop or maintain such a culture could have a material adverse effect on Jeffs’ Brands business, results of operations, financial condition and prospects.

Jeffs’ Brands e-commerce operations are reliant on the Amazon marketplace and fulfillment by Amazon and changes to the marketplace, Amazon services and their terms of use may harm Jeffs’ Brands business.

Jeffs’ Brands products are sold predominantly on the Amazon marketplace and orders are fulfilled entirely by Amazon utilizing the fulfilled by Amazon, or FBA, model. In order to continue to utilize the Amazon marketplace and FBA, Jeffs’ Brands must comply with the applicable policies and terms of use relating to these services. Such policies and terms of use may be altered or amended at Amazon’s sole discretion, including changes regarding the cost of securing these services, and changes that increase the burden of compliance with its requirements, may cause Jeffs Brands to significantly alter Jeffs’ Brands business model or incur additional costs in order to comply, which could negatively impact Jeffs’ Brands results of operations. Non-compliance with applicable terms of use and policies can result in the removal of one or more products from the marketplace and suspension of fulfillment services either of which could have a material adverse effect on Jeffs’ Brands business and results of Jeffs’ Brands operations. Although Jeffs’ Brands exert efforts in order to ensure ongoing compliance and no notices of non-compliance have been received to date, we cannot assure you that events of this kind will not occur in the future. 

Jeffs’ Brands relies on data provided by third parties, the loss of which could limit the functionality of its platforms, cause it to invest in the wrong product or disrupt its business.

Jeffs’ Brands uses third party software to determine market trends and what markets to enter into. Its ability to successfully use this software depends on its ability to analyze and utilize data, including search engine results, provided by unaffiliated third parties, primarily, Google and Amazon. Some of this data is provided to it pursuant to third-party data sharing policies and terms of use, under data sharing agreements by third-party providers or by customer consent. The majority of this data is sourced for free or for de minimis amounts. These sources of data allow Jeffs’ Brands, along with AI tools, to determine trends, performance and consumer sentiment on products and searches within e-commerce platforms. This functionality allows it to help determine which products to market, in some cases manufacture through contract manufacturers, import and sell on e-commerce marketplaces. The connection to multiple e-commerce platforms through application programming interfaces, or APIs, allows Jeffs’ Brands to develop the automation of the purchase of marketing and automate the change of pricing of product listings on those e-commerce platforms.

In the future, any of these third parties could change its data sharing policies, including making them more restrictive, charging fees or altering its algorithms that determine the placement, display and accessibility of search results and social media updates, any of which could result in the loss of, or significant impairment to, Jeffs’ Brands ability to collect useful data. These third parties could also interpret its, or its service providers’, data collection policies or practices as medically useful, cost-effective,being inconsistent with their policies, which could result in the loss of its ability to collect this data. Privacy concerns may cause end users to resist providing the personal data necessary to allow Jeffs’ Brands to determine market trends as well as our ability to effectively retain existing customers. Privacy advocacy groups and safe.the technology and other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on Jeffs’ Brands. Any such changes could impair its ability to use data and could adversely impact select functionality of our proprietary software, impairing our ability to use this data to anticipate customer demand and market trends, as well as adversely affecting Jeffs’ Brands business and its ability to generate revenue.

Jeffs’ Brands business depends on its ability to build and maintain strong product listings on e-commerce platforms. It may not be able to maintain and enhance its product listings if it receives a substantial number of customer complaints, negative publicity or otherwise fails to live up to customers’ expectations, any of which could materially adversely affect its business, results of operations and growth prospects.

Maintaining and enhancing Jeffs’ Brands product listings is critical in expanding and growing its business. However, a significant portion of its perceived performance to the customer depends on third parties outside of its control, including suppliers and logistics providers such as FedEx, UPS, postal services and other third-party delivery agents and online retailers, mainly Amazon. Because Jeffs’ Brands agreements with its online retail partners are generally terminable at will, it may be unable to maintain these relationships, and its results of operations could fluctuate significantly from period to period. Because it relies on third party logistics companies, like FedEx, to deliver its products, it is subject to shipping delays or disruptions caused by inclement weather, natural disasters, labor activism, health epidemics or bioterrorism. In addition, because Jeffs’ Brands relies on national, regional and local transportation companies for the delivery of some of its other products, it is also subject to risks of breakage or other damage during delivery by any of these third parties. If these third parties do not meet its or its customers’ expectations, its brands may suffer irreparable damage. In addition, maintaining and enhancing Jeffs’ Brands current and future brands may require it to make substantial investments, and these investments may not be yield sufficient returns. If it fails to promote and maintain its brands, or if it incurs excessive expenses in this effort, its business, operating results and financial condition may be materially adversely affected. We anticipate that, as its market becomes increasingly competitive, maintaining and enhancing its brands may become increasingly difficult and expensive. Maintaining and enhancing its brands will depend largely on its ability to anticipate market trends and customer demand and to provide high quality products to its customers and a reliable, trustworthy and profitable sales channel to its suppliers, which it may not be able to do successfully.

A substantial number of customer complaints or negative publicity about Jeffs’ Brands sites, products, delivery times, customer data handling and security practices or customer support, especially on blogs, social media websites or its sites, could rapidly and severely diminish consumer views of its products and result in harm to its brands. Customers may also make safety-related claims regarding products sold through its online retail partners, such as Amazon, which may result in an online retail partner removing the product from its marketplace. Such removal may materially impact its financial results depending on the product that is removed and length of time that it is removed. Jeffs’ Brands also uses and relies on other services from third parties, such as its telecommunications services, and those services may be subject to outages and interruptions that are not within its control.

Risks related to our MUSE^™ Technology Business

We are currently proposing our MUSE^™ system business for sale or grant of license. If we bringare unable to the market maysell or may not gain market acceptance by physicians, patients, third-party payors, and otherslicense 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 medical community. In addition, since theMUSE^™ system, which will adversely affect our business.

We are currently proposing our MUSE^TM™ system is a therapeutic device being usedbusiness for a quality of life, benign disease, market penetrationsale 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 be more difficult. To date, we have experienced slower than expected market penetration. If the MUSE™ delay or prevent us from selling or granting license to our 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:business:

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.

ThoughFurther, 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, our business and financial results, including our ability to generate revenue, would be impaired, market acceptance of our products could be materially, and adversely affected and customers may instead purchase or use competing products.

We 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™ product 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™ MUSE^™ system, as well as our other products, which may make patients, physicians and hospitals reluctant to accept or purchase our products.

Physicians, hospitalsproducts, and patients will only accept oras such a potential purchaser may be reluctant to purchase our products if they believe them toMUSE^™ business or such lack of data will 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’ (mainlyreflected in 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.

purchase price.

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, financial condition and results of operations. 

As a result of hospital economic concerns relating to business or financial situations or related to ongoing healthcare reimbursement changes, customers and distributors may be delayed in obtaining, or may not be able to obtain, budgetary approval or financing for their purchases or leases of medical equipment including our products. These delays may in some instances leadMoreover, various modifications to our customers or distributors postponing the shipment and use of previously ordered systems and products, cancelling their orders, or cancelling their agreements with us. An increase in delays and order cancellations of this nature could adversely affect our products sales and revenues and, therefore, harm our business and results of operations.

In addition, worldwide economic conditions or market instability may make it increasingly difficult for us, our customers, our distributors and our suppliers to accurately forecast future product demand trends, which could cause us to order or produce excess products that can increase our inventory carrying costs and result in obsolete inventory. Alternatively, this forecasting difficulty could cause a shortage of products, or materials used in our products, that could result in an inability to satisfy demand for our products and a material loss of potential revenue.

Our reliance on third-party suppliers for most of the components of our products could harm our ability to meet demand for our products in a timely and cost effective manner. 

Though we attempt to ensure the availability of more than one supplier for each important component in our products, the number of suppliers engaged in the provision of miniature video sensors which are suitable for our CMOS technology products is very limited, and therefore in some cases we engage with a single supplier, which may result in 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 do 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 our sole supplier in providing us with miniature sensors for our CMOS technology products, and our inability or delay in finding a suitable replacement supplier, could significantly affect our business, financial condition, results of operations and reputation.

Modifications to our currentMUSE^™ system regulator-cleared products or the introduction of new products may require new regulatory clearances or approvals or require us toa recall or cease marketing our current productsof the MUSE^™ system until clearances or approvals are obtained.

Our MUSE™ system has received marketing clearance from the U.S. Food and Drug Administration, or FDA, based on several 510(k) applications, bears the CE Mark (a mark assigned to a product certifying its fulfillment of the Medical Devices Directive of the European Union), as required in order to market the system in European Union countries and has obtained the necessary license to market the product in Canada, Turkey and Israel.

Ongoing modifications to our products may require new regulatory approvals, as with prior 510k clearances, or require us to recall or cease marketing the modified products until these clearances or approvals 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 future 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.

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 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 ourthe potential sales, profitability and future growth prospects.prospects of the MUSE^™.

We are currently required by the FDA to refrain from using certain terms to labelhave entered into a Licensing 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 materialsSale Agreement with Shanghai Golden Grand-Medical Instruments Ltd. (“Golden Grand”) 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:

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 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, 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 to market and commercialize our current and future products.

The development of more powerful drug treatments to assist in the suppression of GERD or other medical problems which compete with our products, may reduce the size 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 may deter doctors from providing advice to the Company.

The implementation of the reporting and disclosure obligations of the Physician Payment Sunshine Act, which is part of the Affordable Care Act of 2010, or the Sunshine Act, could adversely affect our business.

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.

We 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 our business.

Our business exposes us to potential liability risks, product actions and other field or regulatory actions that are inherent in the manufacturing, marketingknow-how licensing and sale of medical device products. We may be held liable if our products cause injury or death or is found otherwise unsuitable or defective during usage. The MUSE™goods relating to the Medigus Ultrasonic Surgical Endostapler (MUSE^™) system incorporates 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 our existing products may contain undetected errors or performance problems that, despite testing, are discovered only after installation.

If any of our products are defective, whether due to design or manufacturing defects, improper usein China with a substantial amount of the product, or other reasons, we may voluntarily or involuntarily undertake an action to remove, repair, or replace the product at our expense. In some circumstances we will be required to notify regulatory authorities of an action pursuant to a product failure.

The medical device industry has historically beenconsideration subject to extensive litigation over product liability claims. We anticipate that as part of our ordinary course of business we will be subject to product liability claims alleging defects in the design, manufacture or labeling of our products. A product liability claim, regardless of its merit or eventual outcome, could result in significant legal defense costs and high punitive damage payments. Although we maintain product liability insurance, the coverage may not be adequate to cover future claims. Additionally, we may be unable to maintain our existing product liability insurance in the future at satisfactory rates or adequate amounts.

milestone achievements.

Broad-based domestic and international government initiatives to reduce spending, particularly those related to healthcare costs, may reduce reimbursement rates for endoscopic procedures, which will reduce the cost-effectiveness of our products.

Healthcare reforms, changes in healthcare policiesWe entered into a Licensing and changes to third-party coverageSale Agreement with Shanghai Golden Grand, or Golden Grand Agreement, for the know-how licensing and reimbursements, including legislation enacted reforming the U.S. healthcare system, and any future changes to such legislation, may affect demand for our products and may have a material adverse effect on our financial condition and resultssale of operations. There can be no assurance that current levels of reimbursement will not be decreased in the future, or that future legislation, regulation, or reimbursement policies of third-parties will not adversely affect the demand for our products or our ability to sell products on a profitable basis. The adoption of significant changesgoods relating to the healthcareMedigus Ultrasonic Surgical Endostapler (MUSE^™) system in China, Hong Kong, Taiwan and Macao. The payment of a substantial amount of the United States, Europe or other jurisdictionsconsideration is contingent on achievement of certain milestones such as establishing a MUSE^™ assembly line in which we may market our products, could limitChina. In the prices we are able to charge for our products or the amounts of reimbursement available for our products, could limit the acceptance and availability of our products, reduce medical procedure volumes and increase operational and other costs. For example, U.S. President Donald Trump has recently publicly indicated an intent to lower healthcare costs through various potential initiatives. In addition, President Trump and other U.S. lawmakers have made statements about potentially repealing or replacing 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 extentevent 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 may result in decreased profits to us, lower reimbursements by third-parties for procedures in which our products are used, and reduced medical procedure volumes, all of which may adversely affect our business, financial condition and results of operations.

We depend on key employees, and if we fail to attract and retain employees with the expertise required for our business and provide for the succession of senior management, we cannot grow or achieve profitability.

We are dependent on the continued service and performance of members of our senior management and other key personnel, for example our Chief Executive Officer, Chris Rowland. We do not maintain key-man life insurance. Our future success will depend in part on our ability to retain our management and scientific teams, to identify, hire and retain additional qualified personnel 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.

The loss of key employees, the failure of any key employee 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.

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 and any other or future products that we may develop and may harm our reputation.

If we or our manufacturers or other third-party contractors fail to comply 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 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 risk of employee fraud or other misconduct. Misconduct by employees could include 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 regulations 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 assertingable to meet such milestones, due to various factors including natural disasters, public health crises, political crises and trade wars which are not under our rights, those actions could have a significant impact oncontrol, 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 expenditures of time and money, and divert attention of our management team from other tasks importantentitlement to the success of our business.

If we fail to withhold our position againstaggregate consideration under the Israeli tax authorities in connection with tax withholding, weagreement may be requiredimpaired. Until December 31, 2022, we recognized revenues of $2.4 million due to pay additional taxes.

Following a tax deduction assessment conducted by the Israeli Tax Authorities, or the ITA, in October 2016, ascompletion of March 15, 2018, we are deemed to be in debt of approximately $0.8 million of additional withholding taxes, including penalties and interest. It is our management’s opinion, based on the assessment of our legal counsel, that the chances80% of the claims of the ITA being dismissed are more likely than not. Therefore, no allowance regarding this assessment was recorded in our financial statements. However, if our position is not accepted in the event this case is litigated, our business can be materially adversely affected.milestones. 

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 Our Intellectual Property

If we are unable to secure and maintain patent or other intellectual property protection for the intellectual property used in our products, our ability to 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 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, particularly in the field of medical products 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 distributersdistributors 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 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 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 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 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 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. 

Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax.  

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.

It may be difficult to enforce a judgment of a U.S. court against us and our officers and directors and the Israeli experts named in this annual report on Form 20-F in Israel or the U.S.,United States, to assert United States securities laws claims in Israel or to serve process on our officers and directors and these experts.

We are incorporated in Israel. Certain of our executive officers and directors reside in Israel and most of our assets and most of the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons in the United States, including one based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not necessarily be enforced by an Israeli court. It may also be difficult to affect service of process on these persons in the United States or to assert United States securities law claims in original actions instituted in Israel.

Even if an Israeli court agrees to hear such claim, it may determine that Israeli law, and not U.S. law is applicable to the claim. Under Israeli law, if U.S. law is found to be applicable to such claim, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process, and certain matters of procedure would also be governed by Israeli law. There is little binding case law in Israel that addresses the matters.

Our amended and restated articles of association provide that unless the Company consents otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for substantially all disputes between the Company and its shareholders under the Companies Law and the Israeli Securities Law, which could limit its shareholders ability to brings claims and proceedings against, as well as obtain favorable judicial forum for disputes with the Company, its directors, officers and other employees.

The competent courts of Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Israeli Securities Law. This exclusive forum provisions is intended to apply to claims arising under Israeli Law and would not apply to claims brought pursuant to the Securities Act or the Exchange Act or any other claim for which federal courts would have exclusive jurisdiction. Such exclusive forum provision in our amended and restated articles of association will not relieve the Company of its duties to comply with federal securities laws and the rules and regulations thereunder, and shareholders of the Company will not be deemed to have waived the Company’s compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholders ability to bring a claim in a judicial forum of its choosing for disputes with the Company or its directors or other employees which may discourage lawsuits against the Company, its directors, officers and employees.

The rights and responsibilities of a shareholder will be governed by Israeli law which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.

The rights and responsibilities of the holders of our ordinary sharesOrdinary Shares are governed by our amended and restated articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in typical U.S.-registered corporations. In particular, a shareholder of an Israeli company has certain duties to act in good faith and fairness towards the company and other shareholders, and to refrain from abusing its power in the company. There is limited case law available to assist us in understanding the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary sharesOrdinary Shares that are not typically imposed on shareholders of U.S. corporations.

The ability of any Israeli company to pay dividends is subject to Israeli law and the amount of cash dividends payable may be subject to devaluation in the Israeli currency.

We paid cash dividends in an amount of $1.6 million on December 28, 2022. We do not anticipate that we will pay any cash dividends on our securities in the foreseeable future. The ability of an Israeli company to pay dividends is governed by Israeli law, which provides that cash dividends may be paid only out of retained earnings or earnings derived over the two most recent fiscal years, whichever is higher, as determined for statutory purposes in Israeli currency, provided that there is no reasonable concern that payment of a dividend will prevent a company from satisfying its existing and foreseeable obligations as they become due. In the event of a devaluation of the Israeli currency against the U.S. dollar, the amount in U.S. dollars available for payment of cash dividends out of prior years’ earnings will decrease.

The termination or reduction of tax and other incentives that the Israeli Government provides to domestic companies may increase the costs involved in operating a company in Israel.

The Israeli government currently provides major tax and capital investment incentives to domestic companies, as well as grant and loan programs relating to research and development and marketing and export activities. In recent years, the Israeli Government has reduced the benefits available under these programs and the Israeli Governmental authorities have indicated that the government may in the future further reduce or eliminate the benefits of those programs. We currently take advantage of these programs. There is no assurance that such benefits and programs would continue to be available in the future to us. If such benefits and programs were terminated or further reduced, it could have an adverse effect on our business, operating results and financial condition.

We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.

A significant portion of our intellectual property has been developed by our employees in the course of their employment for us. Under the Israeli Patent Law, 5727-1967, or the Patent Law, inventions conceived by an employee in the course and as a result of or arising from his or her employment with a company are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee, or the Committee, a body constituted under the Patent Law, shallwill determine whether the employee is entitled to remuneration for his inventions. Recent case law clarifies that the right to receive consideration for “service inventions” can be waived by the employee and that in certain circumstances, such waiver does not necessarily have to be explicit. The Committee will examine, on a case-by-case basis, the general contractual framework between the parties, using interpretation rules of the general Israeli contract laws. Further, the Committee has not yet determined one specific formula for calculating this remuneration (but rather uses the criteria specified in the Patent Law). Although we generally enter into assignment-of-invention agreements with our employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of their employment or engagement with us, we may face claims demanding remuneration in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.

Risks Related to an Investment in theOur Securities

We may behave been a passive foreign investment company, or PFIC, for U.S. federal income tax purposes in 2017 or2022 and may be a PFIC in any subsequent year. This may result in adverse U.S. federal income tax consequences for U.S. taxpayers that are holders of our securities.

We will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is “passive income” or (2) on average at least 50% of our assets by value (generally determined on the basis of a quarterly average) produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account. We do not believe we were a PFIC for 2017 or 2016 but thereThere can be no assurance that we were not a PFIC in those years2022 and will not be a PFIC in subsequent years, as our operating results for any such years may cause us to be a PFIC. If we were a PFIC in 2022, or are a PFIC in 2017, or any subsequent year, and a U.S. shareholder does not make an election to treat us as a “qualified electing fund,” or QEF, or make a “mark-to-market” election, then “excess distributions” to a U.S. shareholder, and any gain realized on the sale or other disposition of our securities will be subject to special rules. Under these rules: (1) the excess distribution or gain would be allocated ratably over the U.S. shareholder’s holding period for the securities; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the U.S. Internal Revenue Service, or theIRS, determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. shareholder to make a timely QEF or mark-to-market election. You may make a QEF election with respect to your ordinary shares or ADSs only if we furnish you annually with certain tax information, and we currently do not intend to prepare or provide such information. U.S. shareholders who hold or have held our securities during a period when we were or are a PFIC will generally be subject to the foregoing rules even ifunless we cease to be a PFIC and you make a “deemed sale” election with respect to our ordinary shares. If we are a PFIC in subsequent years,any year, U.S. shareholders may be subject to exceptions for U.S. shareholders who made a timely QEF or mark-to-market election. A U.S. shareholder can make a QEF election by completingadditional IRS filing requirements, including the relevant portionsfiling of and filing IRS Form 8621, in accordance with the instructions thereto. If applicable, upon request, we will annually furnishas a result of directly or indirectly owning stock of a PFIC. U.S. shareholders are urged to consult their own tax advisors regarding the application of the PFIC rules. For more information, see Item 10. “Additional Information — Taxation — Certain Material U.S. Federal Income Tax Consequences.”

If a United States person is treated as owning at least 10% of our Ordinary Shares, such holder may be subject to adverse U.S. federal income tax consequences.

If a United States person is treated as owning (directly, indirectly, or constructively) at least 10% of the value or voting power of our Ordinary Shares, such person may be treated as a “United States shareholder” with information neededrespect to each controlled foreign corporation, or CFC, in order to complete IRS Form 8621 (which form wouldour group (if any). Because our group includes a U.S. subsidiary, certain of our non-U.S. subsidiaries will be treated as CFCs (regardless of whether or not we are treated as a CFC). A United States shareholder of a CFC may be required to report annually and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income,” and investments in U.S. property by CFCs, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a CFC generally would not be filedallowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. Failure to comply with these reporting obligations may subject a United States shareholder to significant monetary penalties and may prevent the IRS on an annual basis bystatute of limitations with respect to such shareholder’s U.S. federal income tax return for the U.S. shareholder) and to make and maintain a valid QEF electionyear for which reporting was due from starting. We cannot provide any yearassurances that we will assist investors in whichdetermining whether we are or any of our non-U.S. subsidiaries areis treated as CFC or whether any investor is treated as a PFIC.United States shareholder with respect to any such CFC or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. The IRS has provided limited guidance on situations in which investors may rely on publicly available information to comply with their reporting and tax paying obligations with respect to foreign-controlled CFCs. A United States investor should consult its advisors regarding the potential application of these rules to an investment in our Ordinary Shares or ADSs.

Changes in U.S. and foreign tax laws could have a material adverse effect on our business, cash flow, results of operations or financial conditions.