UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37381

Medigus Ltd.

(Exact name of Registrant as specified in its charter)

Israel

(Jurisdiction of incorporation or organization)

3 HaNechoshet Street, Building B,

6971068, Israel

(Address of principal executive offices)

Tali Dinar

3 HaNechoshet Street, Building B

Tel Aviv, Israel, 6971068 Tel: +972-73-370-4691

Fax: +972 72 260-2249

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of class |  | Trading Symbol(s) |  | Name of each exchange on which registered
American Depositary Shares, each representing twenty (20) Ordinary Shares(1) |  | MDGS |  | Nasdaq Capital Market
Ordinary Shares, of no par value (2) |  |  |  |
Series C Warrants |  | MDGSW |  | Nasdaq Capital Market

(1) | Evidenced by American Depositary Receipts.

(2) | Not for trading, but only in connection with the registration of the American Depositary Shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2021: [316,442,738] Ordinary Shares, of no par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:

Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:

Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “accelerated filer and large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

| Large Accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒
|  |  |  |  | Emerging growth company | ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark the basis of accounting the registrant has used to prepare the financial statements included in this filing:

| ☐ | U.S. GAAP

| ☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board

| ☐ | Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ☐ No ☒

TABLE OF CONTENTS

|  | Page
Introduction | iii
Cautionary Note Regarding Forward-Looking Statements | iv
Summary Risk Factors | v
| Part I |
Item 1. | Identity of Directors, Senior Management and Advisors | 1
Item 2. | Offer Statistics and Expected Timetable | 1
Item 3. | Key Information | 1
A. | Reserved | 1
B. | Capitalization and Indebtedness | 1
C. | Reasons for the Offer and Use of Proceeds | 1
D. | Risk Factors | 1
Item 4. | Information on the Company | 31
A. | History and Development of the Company | 31
B. | Business Overview | 31
C. | Organizational Structure | 44
D. | Property, Plant and Equipment | 44
Item 4a. | Unresolved staff Comments | 44
Item 5. | Operating and Financial Review and Prospects | 44
A. | Operating Results | 46
B. | Liquidity and Capital Resources | 50
C. | Research and Development, Patents and Licenses, etc. | 51
D. | Trend Information | 52
E. | Critical Accounting Estimates | 53
Item 6. | Directors, Senior Management and Employees | 56
A. | Directors and Senior Management | 56
B. | Compensation | 58
C. | Board Practices | 61
D. | Employees | 74
E. | Share Ownership | 75
Item 7. | Major Shareholders and Related Party Transactions | 76
A. | Major Shareholders | 76
B. | Related Party Transactions | 78
C. | Interests of Experts and Counsel | 79
Item 8. | Financial Information | 80
A. | Consolidated Statements and Other Financial Information | 80
B. | Significant Changes | 80
Item 9. | The Offer and Listing | 80
A. | Offer and Listing Details | 81
B. | Plan of Distribution | 81
C | Markets | 81
D | Selling Shareholders | 81
E | Dilution | 81
F | Expenses of the Issue | 81

i

Item 10. | Additional Information | 81
A. | Share Capital | 81
B. | Memorandum and Articles of Association | 81
C. | Material Contracts | 82
D. | Exchange Controls | 82
E. | Taxation | 82
F. | Dividends and Paying Agents | 95
G. | Statements by Experts | 95
H. | Documents on Display | 95
I. | Subsidiary Information | 95
Item 11. | Quantitative and Qualitative Disclosures About Market Risk | 96
Item 12. | Description of Securities Other Than Equity Securities | 96
A. | Debt Securities | 96
B. | Warrants and Rights | 96
C. | Other Securities | 96
D. | American Depositary Shares | 96
| Part II |
Item 13. | Defaults, Dividend Arrearages and Delinquencies | 98
Item 14. | Material Modifications to the Rights of Security Holders and Use of proceeds | 98
Item 15. | Controls and Procedures | 98
Item 16 | Reserved | 99
Item 16A. | Audit Committee Financial Expert | 99
Item 16B. | Code of Ethics | 99
Item 16C. | Principal Accountant Fees and Services | 99
Item 16D. | Exemptions from the Listing Standards for Audit Committees | 100
Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 100
Item 16F. | Change in Registrant’s Certifying Accountant | 100
Item 16G. | Corporate Governance | 100
Item 16H. | Mine Safety Disclosure | 100
Item 16I. | Disclosure regarding foreign jurisdictions that prevent inspections | 100
| Part III |
Item 17. | Financial Statements | 101
Item 18. | Financial Statements | 101
Item 19. | Exhibits | 102
Signatures | 104

ii

INTRODUCTION

Certain Definitions

In this annual report, unless the context otherwise requires:

| ● | references to “ADS” refer to American Depositary Shares, each representing twenty (20) Ordinary Shares.
| ● | references to “Charging Robotics” refer to Charging Robotics Ltd., a company incorporated under the laws of the State of Israel, a wholly owned subsidiary of the Company
| ● | references to the “Companies Law” refer to the Israeli Companies Law, 5759-1999, as amended.
| ● | references to “endoscopy” refer to a medical procedure which is used to diagnose or treat various diseases using an endoscope (a flexible tube which contains lighting features, imaging features and a system used to direct the endoscope within bodily systems).
| ● | references to “Eventer” refer to Eventer Technologies Ltd., a company incorporated under the laws of the State of Israel, majority subsidiary of the Company.
| ● | references to “Fuel Doctor” refer to Fuel Doctor holdings Inc., a company incorporated under the laws of the State of Delaware, a minority owned entity of the Company.
| ● | references to “GERD IP” refer to GERD IP, Inc., a corporation incorporated under the laws of the State of Delaware, majority owned subsidiary of the Company
| ● | references to “Gix” refer to Gix Internet Ltd. (formerly known as Algomizer Ltd.), a public company incorporated under the laws of the State of Israel, a minority owned subsidiary of the Company.
| ● | references to “Gix Media” refer to Gix Media Ltd. (formerly known as Linkury Ltd.), a company incorporated under the laws of the State of Israel, a minority owned entity of the Company.
| ● | references to “Group” refer to the Company and its consolidated subsidiaries, which are Jeffs’ Brands, Charging Robotics, GERD IP and Eventer.
| ● | references to “Jeffs’ Brands” to Jeffs’ Brands Ltd., a company incorporated under the laws of the State of Israel, majority owned subsidiary of the Company.
| ● | references to “Medigus,” the “Company,” the “Registrant,” “us,” “we” and “our” refer to Medigus Ltd., an Israeli company.
| ● | references to “MUSE™” refer to the Medigus Ultrasonic Surgical Endostapler, the trade name of an endoscopy system developed by the Company which is intended as a minimally invasive treatment for Gastroesophageal Reflux Disease, or GERD.
| ● | references to “NIS” refer to New Israeli Shekels, the Israeli currency.
| ● | references to “Ordinary Shares,” “our shares” and similar expressions refer to the Company’s ordinary shares, of no par value per share.
| ● | references to “Polyrizon” refer to Polyrizon Ltd., a company incorporated under the laws of the State of Israel, minority owned entity of the Company.
| ● | references to “Pro” refer to Smart Repair Pro, Inc., a corporation incorporated under the laws of the State of California, majority owned subsidiary of the Company.
| ● | references to “Purex” refer to Purex, Corp., a corporation incorporated under the laws of the State of California, majority owned subsidiary of the Company.
| ● | references to the “SEC” refer to the United States Securities and Exchange Commission.
|  | references to “ScoutCam” refer to ScoutCam Inc., a company incorporated under the laws of State of Nevada, minority owned subsidiary of the Company.
| ● | references to “ScoutCam™” refer to the trade name of a range of micro CMOS and CCD video cameras which are suitable to both medical and industrial applications.
| ● | references to “MUSE™” refer to the Medigus Ultrasonic Surgical Endostapler, the trade name of an endoscopy system developed by the Company which is intended as a minimally invasive treatment for Gastroesophageal Reflux Disease, or GERD.

iii

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

| ● | recent material changes in our strategy;
| ● | We have a history of operating losses, we may incur additional losses in the future and our ability to grow sales and achieve profitability are unpredictable

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

| ● | ScoutCam’s commercial success in commercializing the ScoutCam™ system;

| ● | Jeffs’ Brands commercial success;
| ● | Eventer’s commercial success;
| ● | Gix’s future performance;
| ● | our ability to sell or license our MUSE™ technology

| ● | projected capital expenditures and liquidity;

| ● | the overall global economic environment as well as the impact of the coronavirus strain COVID-19;

| ● | the impact of competition and new technologies;

| ● | general market, political, reimbursement and economic conditions in the countries in which we operate;

| ● | government regulations and approvals;

| ● | litigation and regulatory proceedings; and

| ● | those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects”, as well as in this annual report on Form 20-F generally.

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

In addition, the section of this annual report on Form 20-F entitled “Item 4. Information on the Company” contains information obtained from independent industry and other sources that we have not independently verified. You should not put undue reliance on any forward-looking statements. Any forward-looking statements in this annual report are made as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

iv

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. Selected financial data

Reserved.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

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.

1

Risks Related to Our Business

Starting 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 materially changed our business model, adjusted our exclusive focus on the medical device industry to include other industries, abandoned our strategy to commercialize the MUSE™ system, transferred our ScoutCam™ activity into our subsidiary, ScoutCam Ltd., and consummated a securities exchange agreement in relation to ScoutCam Ltd. As a result of these changes, we have acquired substantial stakes in a number of ventures, including but not limited to online business activities such as ad-tech, 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 grow sales and achieve profitability are unpredictable.

As of December 31, 2021, we had an accumulated deficit of 73.9 million and incurred total operating loss of approximately $9.8 million in the year ended on December 31, 2021 and total operating losses of approximately $7.4 million and 14.2 million in the years ended December 31, 2020 and 2019, respectively. 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:

| ● | successfully implementing our business strategy;

| ● | increasing revenues; and

| ● | controlling costs

There can be no assurance that we will be able to successfully implement our business plan, meet our challenges and become profitable in the future.

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

During the year ended December 31, 2021, the Group incurred income of $4 million mainly due to deconsolidation of ScoutCam from our consolidated financial reports and an operating loss of approximately 9 million and a negative cash flow from operating activities of approximately $5.2 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 $74.2 million as of December 31, 2021.

As of December 31, 2021, we had a total cash and cash equivalents balance of approximately $24 million. Our management expects that we will continue to generate operating losses. Our management plans to continue to fund its operations primarily through utilization of its financial resources. In addition, we may raise additional capital or realize some of our investments in other entities in order to fund our operating needs. Our management is of the opinion that based on our 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 anticipate that we are likely to continue to incur significant losses for at least the next year. There is no assurance 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 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.

2

The COVID-19 (coronavirus) may adversely affect our operating results in a material manner

The COVID-19 pandemic, including the efforts to combat it, has had and may continue to have a widespread effect on our business.

For example, travel restrictions have adversely affected our ability to timely achieve certain milestones included in our Golden Grand Agreement and has delayed the recognition revenues deriving therefrom. These travel restrictions have also impacted our sales and marketing efforts and those of our subsidiaries.

In addition, a substantial portion of Eventer’s business relates to leisure event management, the scope of which was greatly reduced as a result of governmental policies and measures tailored to address to spread of COVID-19. To the extent that these measures remain in place, Eventer’s business and result of operations could be harmed.

Furthermore, as a consequence of the COVID-19 outbreak, Jeffs’ Brands have experienced occasional supply constraints, primarily in the form of delays in shipment of inventory. Jeffs’ Brands have also experienced increases in the cost of certain products, as well as a decrease in promotions by some manufacturers. While we consider such events to be relatively minor and temporary, continued supply chain disruptions could lead to delayed receipt of, or shortages in, inventory and higher costs, and negatively impact sales in fiscal year 2022 and beyond.

Additionally, concerns over the economic impact of the pandemic have caused extreme volatility in financial markets, which has adversely impacted and may continue to adversely impact our share price and our ability to access capital markets. To the extent the pandemic or any worsening of the global business and economic environment as a result adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this annual report.

Our ability to freely operate our business is 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 each rely on key employees and highly skilled personnel, and, if they are unable to attract, retain or motivate qualified personnel, they may not be able to operate its business effectively.

The success of 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.

3

We, and our subsidiaries, are subject to stringent and changing laws, regulations, standards, and contractual obligations related to privacy, data protection, and data security. The actual or perceived failure to comply with such obligations could harm our business.

Our subsidiaries and we receive, collect, store, process, transfer, and use personal information and other data relating to users of our products, our employees and contractors, and other persons. We have legal and contractual obligations regarding the protection of confidentiality and appropriate use of certain data, including personal information. We are subject to numerous federal, state, local, and international laws, directives, and regulations regarding privacy, data protection, and data security and the collection, storing, sharing, use, processing, transfer, disclosure, and protection of personal information and other data, the scope of which are changing, subject to differing interpretations, and may be inconsistent among jurisdictions or conflict with other legal and regulatory requirements. We are also subject to certain contractual obligations to third parties related to privacy, data protection and data security. We strive to comply with our applicable policies and applicable laws, regulations, contractual obligations, and other legal obligations relating to privacy, data protection, and data security to the extent possible. However, the regulatory framework for privacy, data protection and data security worldwide is, and is likely to remain for the foreseeable future, uncertain and complex, and it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that we do not anticipate or that is inconsistent from one jurisdiction to another and may conflict with other legal obligations or our practices. Further, any significant change to applicable laws, regulations or industry practices regarding the collection, use, retention, security or disclosure of data, or their interpretation, or any changes regarding the manner in which the consent of users or other data subjects for the collection, use, retention or disclosure of such data must be obtained, could increase our costs and require us to modify our services and features, possibly in a material manner, which we may be unable to complete, and may limit our ability to store and process user data or develop new services and features.

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

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

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

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

4

In addition, failure to comply with the Israeli Privacy Protection Law 5741-1981, and its regulations as well as the guidelines of the Israeli Privacy Protection Authority, may expose us to administrative fines, civil claims (including class actions), and in certain cases, criminal liability. Current pending legislation may result in a change in the current enforcement measures and sanctions.

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

Risks Related to ScoutCam’s, ScoutCam™ Business

Because of its limited operating history, ScoutCam may not be able to successfully operate its business or execute its business plan.

Given the limited operating history, it is hard to evaluate ScoutCam’s proposed business and prospects. ScoutCam’s proposed business operations is subject to numerous risks, uncertainties, expenses and difficulties associated with early-stage enterprises. Such risks include, but are not limited to, the following

| ● | the absence of a lengthy operating history;
| ● | expected continual losses for the foreseeable future;
| ● | operating in multiple currencies;
| ● | our ability to anticipate and adapt to a developing market(s);
| ● | acceptance of our products by the medical and industrial (I4.0) markets (and the non-medical community) and consumers;
| ● | limited marketing experience;
| ● | limited experience in developing and implementing full platform solutions including AI and cloud;
| ● | insufficient capital to fully realize our operating plan;
| ● | a competitive environment characterized by well-established and well-capitalized competitors;
| ● | the ability to identify, attract and retain qualified personnel; and
| ● | operating in an environment that is highly regulated by a number of agencies.

5

If ScoutCam is unable to establish sales, marketing and distribution capabilities or enter into successful relationships with business targets and third parties to perform these services, ScoutCam may not be successful in commercializing its products and technology.

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

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

Factors that may inhibit ScoutCam’s efforts to commercialize any future products on our own include:

| ● | ScoutCam’s inability to recruit, train, and retain adequate numbers of effective sales and marketing personnel;
| ● | the inability of sales personnel to obtain access to potential customers;
| ● | the lack of complementary products to be offered by sales personnel or lack of product-market fit, which may put ScoutCam at a competitive disadvantage relative to companies with more extensive product lines; and
| ● | unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If ScoutCam is unable to establish our own sales, marketing, and distribution capabilities or enter into successful arrangements with third parties to perform these services, ScoutCam’s revenues and profitability may be materially adversely affected.

In addition, ScoutCam may not be successful in entering into arrangements with third parties to sell, market, and distribute our products inside or outside of the United States or may be unable to do so on terms that are favorable to ScoutCam. ScoutCam likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If ScoutCam doesn’t establish sales, marketing, and distribution capabilities successfully, either on its own or in collaboration with third parties, ScoutCam will not be successful in commercializing our technologies or any future products we may develop.

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

ScoutCam’s cash and short-term deposit balance as of December 31, 2021 was $19.6 million. ScoutCam may require additional funding to fund and grow its operations and to develop certain products. There can be no assurance that financing will be available in amounts or on terms acceptable to ScoutCam, if at all. In the event ScoutCam required additional capital, the inability to obtain such capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If ScoutCam is required and is unable to obtain additional financing, ScoutCam will likely be required to curtail ScoutCam’s development plans. In that event, current stockholders would likely experience a loss of most or all of their investment in ScoutCam. Additional funding that ScoutCam does obtain may be dilutive to the interests of existing stockholders.

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Our failure to effectively manage growth could impair our business.

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

ScoutCam’s commercial success depends upon the degree of market acceptance by the medical community as well as by other prospective markets and industries.

ScoutCam’s current business model is that of a B2B approach in which ScoutCam seeks to identify target businesses interested in integrating its technology, or commissioning individual projects using its technology. Any product that ScoutCam commission or that is brought to the market may or may not gain market acceptance by prospective customers. The commercial success of our technologies, commissioned products, and any future product that ScoutCam may develop depends in part on the medical community as well as other industries for various use cases, depending on the acceptance by such industries of our commissioned products as a useful and cost-effective solution compared to current technologies. During 2021, ScoutCam commenced proactive market penetration into industries other than the biomedical sector. If ScoutCam’s technology or any future product that it may develop does not achieve an adequate level of acceptance, or does not garner significant commercial appeal, we may not generate significant revenue and may not become profitable. The degree of market acceptance will depend on a number of factors, including:

| ● | the cost, safety, efficacy/performance, perceived value and convenience of our technology and any commissioned product and any future product that ScoutCam may develop in relation to alternative products;

| ● | the ability of third parties to enter into relationships with ScoutCam without violating their existing agreements;
| ● | the effectiveness of ScoutCam’s sales and marketing efforts;
| ● | the strength of marketing and distribution support for, and timing of market introduction of, competing technology and products; and
| ● | publicity concerning our technology or commissioned products or competing technology and products.

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

ScoutCam’s reliance on third-party suppliers for most of the components of our products, including miniature video sensors which are suitable for our CMOS technology products mainly in the medical domain, could harm its ability to meet demand for its products in a timely and cost-effective manner.

ScoutCam relies on its third-party suppliers to obtain an adequate supply of quality components on a timely basis with favorable terms to manufacture its commissioned products. Some of those components that ScoutCam sells are provided to it by a limited number of suppliers. ScoutCam will be subject to disruptions in its operations if its sole or limited supply contract manufacturers decrease or stop production of components or do not produce components and products of sufficient quantity or quality. Alternative sources for its components will not always be available.

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

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ScoutCam is also subject to other risks inherent in the manufacturing of its products and their supply chain, including industrial accidents, natural disasters (including as a result of climate change), environmental events, strikes, and other labor disputes, capacity constraints, disruptions in material or packaging supplies, as well as global shortages, disruptions in supply chain or information technology, loss or impairment of key manufacturing sites or suppliers, product quality control, safety, increase in commodity prices and energy costs, licensing requirements and other regulatory issues, as well as other external factors over which we have no control. If such an event were to occur, it could have an adverse effect on ScoutCam’s business, financial condition, and results of operations. In addition, ScoutCam may experience interruptions with our suppliers and other supply chain disruptions as a result of the COVID-19 pandemic, or any other international disorder. In recent months, global supply chain disruptions have slowed receipt of some of our supplies and delayed some of ScoutCam’s deliveries, although as yet not materially, and increased some of ScoutCam’s product costs. Although such cost increases have been fully covered by ScoutCam’s customers to date, there is no assurance that this will continue in the future.

In addition, if ScoutCam cannot supply commissioned products or future potentially developed products due to a lack of components, or are unable to utilize other components in a timely manner, ScoutCam’s business will be significantly harmed. If inventory shortages occur, they could be expected to have a material and adverse effect on our future revenues and ability to effectively project future sales and operating results.

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

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

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

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

ScoutCam’s current manufacturing capabilities may not reach the required production levels necessary in order to meet growing demands for any products we may commission or future products we may develop. There can be no assurance that our commissioned products can be manufactured at its desired commercial quantities, in compliance with our requirements, and at an acceptable cost. Any such failure could delay or prevent us from shipping said products and marketing our technologies in accordance with our target growth strategies.

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 have 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.

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

| ● | manage inventory effectively;

| ● | successfully develop, retain and expand our consumer product offerings and geographic reach;

| ● | compete effectively;

| ● | anticipate and respond to macroeconomic changes;

| ● | effectively manage growth;

| ● | hire, integrate and retain talented people at all levels of organization;

| ● | avoid interruptions in Jeffs’ Brands business from information technology downtime, cybersecurity breaches or labor stoppages;

| ● | maintain the quality of technology infrastructure; and

| ● | develop new features to enhance functionality.

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.

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Potential growth of Jeffs’ Brands is based on international expansion, making Jeffs’ Brands susceptible to risks associated with international sales and operations.

Jeffs’ Brands historically mainly sold products in the U.S., and in 2021 also began selling products in the United Kingdom and Germany. Jeffs’ Brands intend to expand their operations to reach new markets and localities. For example, Jeffs’ Brands expect to increase sales in the United Kingdom and Germany and have completed the requisite processes in order to offer certain of their products through the Amazon marketplace in other major European countries, Singapore and Australia. Jeffs’ Brands may not be successful in increasing sales in the United Kingdom and Germany and currently do not have an estimated starting date for sales in these other major European countries, Australia and Singapore. Conducting international operations subjects us to certain risks, which include localization of solutions and products and adapting them to local practices and regulatory requirements, exchange rate fluctuations and unexpected changes in tax, trade laws, tariffs, governmental controls and other trade restriction. To the extent that Jeffs’ Brands do not succeed in expanding our operations internationally and managing the associated legal and operational risks, their results of operations may be adversely affected.

Jeffs’ Brands operating results are subject to seasonal fluctuations.

The e-commerce business is seasonal in nature and the fourth quarter is a significant period for Jeffs’ Brands operating results due to the holiday season. As a result, revenue generally declines and loss from operations generally increases in the first quarter sequentially from the fourth quarter of the previous year. Any disruption in our ability to process and fulfill customer orders during the fourth quarter could have a negative effect on Jeffs’ Brands quarterly and annual operating results. For example, if a large number of customers purchase Jeffs’ Brands products in a short period of time due to increased holiday demand, inefficient management of Jeffs’ Brands inventory may prevent Jeffs’ Brands from efficiently fulfilling orders, which may reduce sales and harm Jeffs’ Brands’ brands.

Risks Related to of Eventer’s Business

If Eventer fails to maintain and improve the quality of its platform, it may not be able to attract clients seeking to manage their online and offline events or facilitate ticket sales for events.

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

It is difficult to predict the problems Eventer may encounter in introducing new features to its platform. Eventer may need to devote significant resources to creating, supporting, and maintaining these features. Eventer provides no assurance that its initiatives to improve the user experience will be successful. Eventer also cannot predict whether users will well receive any new features or whether improving its platform will be successful or sufficient to offset the costs incurred to offer these new features. If Eventer is unable to improve or maintain its platform’s quality, its business, prospects, financial condition, and results of operations could be materially and adversely affected.

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Eventer’s business is highly sensitive to public tastes. It is dependent on its ability to secure popular artists and other live music events. Eventer’s ticketing clients may be unable to anticipate or respond to consumer preferences changes, which may result in decreased demand for its services.

Eventer’s business is highly sensitive to rapidly changing public tastes and is dependent on the availability of popular artists and events. Eventer’s live entertainment business depends on its ability to anticipate the tastes of consumers and offer events that appeal to them. Since Eventer relies on unrelated parties to create and perform at live music events as well as online events, any lack of availability of popular artists could limit its ability to generate revenue. If artists do not choose to perform, or if Eventer cannot secure performances and events to be managed and ticketed through its platform, Eventer’s business would be adversely affected. Furthermore, Eventer’s business could be adversely affected if artists utilizing its platform do not tour or perform as frequently as anticipated, or if such tours or performances are not as widely attended by fans as anticipated due to changing tastes, general economic conditions or otherwise.

Eventer faces intense competition in the online and offline event and ticketing industries. It may not be able to maintain or increase its current revenue, which could adversely affect its business, financial condition, and operations results.

Eventer is active in highly competitive industries, and it may not be able to maintain or increase its current revenue due to such competition. Online and offline leisure events compete with other entertainment forms for consumers’ discretionary spending and within this industry, Eventer faces competition from other promoters and venue operators. Eventer’s competitors compete for relationships with popular music artists and other service providers who have a history of being able to book artists for concerts and events. These competitors may engage in more extensive development efforts, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to existing and potential artists. Due to increasing artist influence and competition to attract and maintain artist clients for events managed on Eventer’s platform, it may enter into agreements on terms that are less favorable to it, which could negatively impact the number of commissions collected from ticket sales which may adversely affect its financial results. Eventer’s competitors may develop services and advertising options equivalent to or superior to those they provide or achieve greater market acceptance and brand recognition than it achieves. Across the live music and entertainment industry, it is possible that new competitors may emerge and rapidly acquire significant market share.

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

If our Eventer subsidiary fails to offer high-quality customer service, their brand and reputation could suffer.

Eventer’s clients rely on the platform to plan and manage online and offline events and expect a high level of user experience and customer service relating to both the event management functions of the platform as well as ticket sales. Providing such quality service is imperative for ensuring customer success, sustaining sales growth, and developing Eventer’s business. To the extent that Eventer cannot provide real-time support for users of its platforms, the platform may become less attractive to potential users, and its results of operations may be harmed.

The success of Eventer’s event management and ticketing solutions and other operations depends, in part, on the integrity of its systems and infrastructure, as well as affiliate and third-party computer systems, Wi-Fi, and other communication systems. System interruption and the lack of integration and redundancy in these systems and infrastructure may have an adverse impact on its business, financial condition, and operations results.

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

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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.

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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:

| ● | Eventer may be held liable for the unauthorized use of a credit card or bank account number by ticket purchasers and be required by card issuers or banks to pay a chargeback or return fee, and if chargeback or return rate becomes excessive, credit card networks may also require Eventer to pay fines or other fees;

| ● | Eventer may be subject to additional risk and liability exposure, including negligence, fraud or other claims, if employees or third-party service providers misappropriate user information for their own gain or facilitate the fraudulent use of such information; and

| ● | Eventer may suffer reputational damage as a result of the occurrence of any of the above.

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.

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

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

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

Risks Related to Gix’s Business and Industry

Gix’s advertising customers as well as exchanges through which ad inventory is sold may reduce or terminate their business relationship with Gix at any time. If customers or exchanges representing a significant portion of Gix’s revenue reduce or terminate their relationship with Gix, it could have a material adverse effect on Gix’s business, its results of operations and financial condition.

Gix generally does not enter into long-term contracts with its advertising customers, and such customers do business with Gix on a non-exclusive basis. In most cases, Gix’s customers may terminate or reduce the scope of their agreements with little or no penalty or notice. Accordingly, Gix’s business is highly vulnerable to adverse economic conditions, market evolution, development of new or more compelling offerings by Gix’s competitors and development by Gix’s advertising customers of in-house replacement services. Any reduction in spending by, or loss of, existing or potential advertisers by Gix would negatively impact Gix’s revenue and operating results.

Due to rapid changes in the Internet and the nature of services, it is difficult to accurately predict Gix’s future performance and may be difficult to increase revenue or profitability.

As the digital advertising ecosystem is dynamic, seasonal and challenging, it is hard to predict Gix’s future performance and make predictions, particularly regarding the effect of Gix’s efforts to aggressively increase the distribution and profitability of its services and products. If Gix is unable to continuously improve its systems and processes, adapt to the changing and dynamic needs of its customers and align its expenses with the revenue level, it will impair Gix’s ability to structure its offerings to be compelling and profitable.

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Increased availability of advertisement-blocking technologies could limit or block the delivery or display of advertisements by Gix solutions, which could undermine Gix’s business’s viability.

Advertisement-blocking technologies, such as mobile apps, anti-virus software or browser extensions that limit or block the delivery or display of advertisements, are currently available for desktop and mobile users. Furthermore, new browsers and operating systems, or updates to current browsers or operating systems, offer native advertisement-blocking technologies to their users. The more such technologies become widespread, Gix’s ability to serve advertisements to users may be impeded, and its business financial condition and results of operations may be adversely affected.

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

Google and Facebook are substantial players in the digital advertising market and account for a large portion of the digital advertising budgets, along with other smaller players. Such high concentration subjects Gix to unilateral changes with respect to advertising on their respective platforms, which may be more lucrative than alternative methods of advertising or partnerships with other publishers that are not subject to such changes. Furthermore, Gix could have limited ability to respond to, and adjust for, changes implemented by such players.

These companies, along with other large and established Internet and technology companies, may also leverage their power to make changes to their web browsers, operating systems, platforms, networks or other products or services in a way that impacts the entire digital advertising marketplace.

The consolidation among participants within the digital advertising market could have a material adverse impact on Gix and accordingly, its business and results of operations.

The digital advertising industry has experienced substantial evolution and consolidation in recent years and Gix expects this trend to continue, increasing the capabilities and competitive posture of larger companies, particularly those that are already dominant in various ways, and enabling new or stronger competitors to emerge. This consolidation could adversely affect Gix’s business in a number of ways, including: (i) Gix’s customers or partners could acquire or be acquired by Gix’s competitors causing them to terminate their relationship with Gix; (ii) Gix’s competitors could improve their competitive position or broaden their offerings through strategic acquisitions or mergers.

The advertising industry is highly competitive. If Gix cannot compete effectively in this market, Gix’s revenues are likely to decline.

Gix faces intense competition in the marketplace. Gix operates in a dynamic market that is subject to rapid development and introduction of new technologies, products and solutions, changing branding objectives, evolving customer demands and industry guidelines, all of which affect Gix’s ability to remain competitive. There are a large number of digital media companies and advertising technology companies that offer products or services similar to Gix’s and that compete with Gix for finite advertising budgets and for limited inventory from publishers. There is also a large number of niche companies that are competitive with Gix, as they provide a subset of the services that Gix provides. Some of Gix’s existing and potential competitors may be better established, benefit from greater name recognition may offer solutions and technologies that Gix does not offer or that are more evolved than Gix, and may have significantly more financial, technical, sales, and marketing resources than Gix does. In addition, some competitors, particularly those with a larger and more diversified revenue base and a broader offering, may have greater flexibility than Gix does to compete aggressively on the basis of price and other contract terms as well as respond to market changes. Additionally, companies that do not currently compete with Gix in this space may change their services to be competitive if there is a revenue opportunity, and new or stronger competitors may emerge through consolidations or acquisitions. If Gix’s digital advertising platform and solutions are not perceived as competitively differentiated or Gix fails to develop adequately to meet market evolution, Gix could lose customers and market share or be compelled to reduce Gix’s prices and harm Gix’s operational results.

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If the demand for digital advertising does not continue to grow or customers do not embrace Gix’s solutions, this could have a material adverse effect on Gix’s business and financial condition.

If customers do not embrace Gix’s solutions, or if Gix’s integration with advertising networks is not successful, or if there is a reduction in general demand for digital advertising, in spend for certain channels or solutions, or the demand for Gix’s specific solutions and offerings is decreased, Gix’s revenues could decline or otherwise, Gix’s business may be adversely affected.

Gix’s business is susceptible to seasonality, unexpected changes in campaign size, and prolonged cycle time, which could affect its business, results of operations and ability to repay indebtedness when due.

The revenue of Gix’s advertising business is affected by a number of factors, and, as a result, Gix’s profit from these operations is seasonal, including:

| ● | Product and service revenues are influenced by political advertising, which generally occurs every two years;

| ● | In any single period, product and service revenues and delivery costs are subject to significant variation based on changes in the volume and mix of deliveries performed during such period;

| ● | Revenues are subject to the changes in brand marketing trends, including when and where brands choose to spend their money in a given year;

| ● | Advertising customers generally retain the right to supplement, extend, or cancel existing advertising orders at any time prior to their completion, and Gix has no control over the timing or magnitude of these revenue changes; and

| ● | Relative complexity of individual advertising formats, and the length of the creative design process.

Gix’s advertising business depends on Gix’s ability to collect and use data, and any limitation on the collection and use of this data could significantly diminish the value of Gix’s solutions and cause Gix to lose customers, revenue and profit.

In most cases, when Gix delivers an advertisement, Gix is often able to collect certain information about the content and placement of the ad, the relevancy of such ad to a user, and the interaction of the user with the ad, such as whether the user viewed or clicked on the ad or watched a video. As Gix collects and aggregates data provided by billions of ad impressions and third-party providers, Gix analyzes the data in order to measure and optimize the placement and delivery of Gix’s advertising inventory and provide cross-channel advertising capabilities.

Gix publishers or advertisers might decide not to allow Gix to collect some or all of this data or might limit Gix’s use of this data. Gix’s ability to either collect or use data could be restricted by new laws or regulations, including the General Data Protection Regulation (the “GDPR”), in the European Union, which entered into effect in May 2018, and presumably broaden the definition of personal data to include location data and online identifiers, which are commonly used and collected parameters in digital advertising, and impose more stringent user consent requirements, changes in technology, operating system restrictions, requests to discontinue using certain data, restrictions imposed by advertisers and publishers, industry standards or consumer choice.

If this happens, Gix may not be able to optimize ad placement for the benefit of Gix’s advertisers and publishers, which could render Gix’s solutions less valuable and potentially result in loss of clients and a decline in revenues. For more information on privacy regulation and compliance, see also – “We are subject to stringent and changing laws, regulations, standards, and contractual obligations related to privacy, data protection, and data security. Our or our subsidiaries’ actual or perceived failure to comply with such obligations could harm our business”.

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Risks related to our MUSE™ Technology Business

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

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

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

| ● | potential purchasers’ or licensee perception on the cost, safety, efficacy, and convenience of the MUSE™ system in relation to alternative treatments and products;

| ● | publicity concerning our products, including MUSE™, or competing products and treatments;

| ● | patients suffering from adverse events while using the MUSE™ system; and

| ● | competition from the pharmaceutical sector, which could harm the ability to market and commercialize the MUSE™ system and, as a result, impact the attractiveness of the MUSE™ system in the eyes of potential purchasers.

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

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

We have entered into a Licensing and Sale Agreement with Shanghai Golden Grand-Medical Instruments Ltd. (“Golden Grand”) for the know-how licensing and sale of goods relating to the Medigus Ultrasonic Surgical Endostapler (MUSE™) system in China with a substantial amount of the consideration subject to milestone achievements.

We entered into a Licensing and Sale Agreement with Shanghai Golden Grand, or Golden Grand Agreement, for the know-how licensing and sale of goods relating to the Medigus Ultrasonic Surgical Endostapler (MUSE™) system in China, Hong Kong, Taiwan and Macao. The payment of a substantial amount of the consideration is contingent on achievement of certain milestones such as establishing a MUSE™ assembly line in China. In the event that we are not able to meet such milestones, due to various factors including natural disasters, public health crises, political crises and trade wars which are not under our control, our entitlement to the aggregate consideration under the agreement may be impaired. During 2021 we recognized revenues of $2.4 million due to completion 80% of the milestones.

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

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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.

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Disruptions to the Group’s information technology systems due to cyber-attacks or the Group’s failure to upgrade and adjust our information technology systems, may materially impair the Group’s 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 the Group’s 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 the Group’s management information systems or respond to changes in our business needs, we may not be able to effectively manage the Group’s 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 the Group’s 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 the Group’s IT systems or to manage the IT systems of third parties to accommodate these changes. We have experienced and expect to continue to experience actual or attempted cyber-attacks of our IT networks. Although none of these actual or attempted cyber-attacks has had a material adverse impact on our operations or financial condition, we cannot guarantee that any such incidents will not have such an impact in the future.

Risks Related to Regulatory Compliance

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

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.

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

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

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

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

| ● | design, development and manufacturing;

| ● | testing, labeling and storage;

| ● | clinical trials;

| ● | product safety;

| ● | marketing, sales and distribution;

| ● | premarket clearance or approval;

| ● | record keeping procedures;

| ● | advertising and promotions; and

| ● | product recalls and field corrective actions.

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

Our medical device products and operations are also subject to regulation by the Medical Devices and Accessories Division in the Israeli Ministry of Health, or AMAR, which is responsible for the registration of medical devices in Israel, issuance of import licenses and monitoring marketing of medical equipment. We have received an AMAR approval in Israel. If we fail to comply with the extensive government regulations relating to our business, we may be subject to fines, injunctions and other penalties that could harm our business.

Risks Related to Our Operations in Israel

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

Our employees, including management members operate from our offices that are located in Israel. In addition, a number of our officers and directors are residents of Israel. Accordingly, political, economic, and military conditions in Israel and the surrounding region may directly affect our business and operations. In recent years, Israel has been engaged in sporadic armed conflicts with Hamas, an Islamist terrorist group that controls the Gaza Strip, with Hezbollah, an Islamist terrorist group that controls large portions of southern Lebanon, and with Iranian-backed military forces in Syria. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations.

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our business.

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In addition, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial condition and results of operations.

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

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

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

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

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

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

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

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

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

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

In addition, the products may be manufactured outside Israel by us or by another entity only if prior approval is received from IIA (such approval is not required for the transfer outside of Israel of less than 10% of the manufacturing capacity in the aggregate, and in such event only a notice to IIA is required). As a condition for obtaining approval to manufacture outside Israel, we would be required to pay increased royalties, which usually amount to 1% in addition to the standard royalties rate, and also the total amount of our liability to IIA will be increased to between 120% and 300% of the grants we received from IIA, depending on the manufacturing volume that is performed outside Israel (less royalties already paid to IIA). This restriction may impair our ability to outsource manufacturing rights abroad, however, it does not restrict export of our products that incorporate IIA funded know-how.

A company also has the option of declaring in its IIA grant application its intention to exercise a portion of the manufacturing capacity abroad, thus avoiding the need to obtain additional approval. Such declaration may affect the increased royalties cap.

The restrictions under the Innovation Law (such as with respect to transfer of manufacturing rights abroad or the transfer of IIA funded know-how and related intellectual property rights abroad) will continue to apply even our liabilities to IIA in full and will cease to exist only upon payment of the redemption fee described above.

Furthermore, in the event that we undertake a transaction involving the transfer to a non-Israeli entity of technology developed with IIA funding pursuant to a merger or similar transaction, the consideration available to our shareholders may be reduced by the amounts we are required to pay to IIA. Any approval, if given, will generally be subject to additional financial obligations. Failure to comply with the requirements under the Innovation Law may subject us to mandatory repayment of grants received by us (together with interest and penalties), as well as expose us to criminal proceedings.

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In May 2017, IIA issued new rules for licensing know how developed with IIA funding outside of Israel, or the Licensing Rules, allowing us to enter into licensing arrangements or grant other rights in know-how developed under IIA programs outside of Israel, subject to the prior consent of IIA and payment of license fees to IIA, calculated in accordance with the Licensing Rules. The payment of the license fees will not discharge us from the obligations to pay royalties or other payments to IIA.

We were members of an IIA-related consortium, in which certain of our technologies were developed. We are required to provide licenses to the other members of the consortium to use such technologies for no consideration, which could reduce our profitability.

Certain of our miniaturized imaging equipment may be based on technological models developed as part of the Bio Medical Photonic Consortium in the framework of Magnet program of the IIA. We received $2.3 million from IIA in the framework of the Consortium. The property rights in and to “new information” (as such term is defined therein) which has been developed by a member of the Consortium, in the framework of a research and development program conducted as part of the Consortium, belongs solely to the Consortium member that developed it. The developing member is obligated to provide the other members in the Consortium a non-sublicensable license to use of the “new information” developed by such member, without consideration, provided that the other members do not transfer such “new information” to any entity which is not a member of the Consortium, without the consent of such member. No royalties from this funding are payable to the Israeli government, however, the provisions of the Innovation Law and related regulations regarding, inter alia, the restrictions on the transfer of know-how outside of Israel do apply, mutatis mutandis.

Provisions of Israeli law and our articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the Company’s outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of the shares does not reflect their fair market value, and petition an Israeli court to alter the consideration for the acquisition accordingly, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights, and the acquirer or the company published all required information with respect to the tender offer prior to the tender offer’s response date.

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.

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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 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.

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 Shares are governed by our 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 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.

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, will 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.

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Risks Related to an Investment Our Securities

We may be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes in 2021 or 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. There can be no assurance that we are not a PFIC in 2022 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 are a PFIC in 2022, 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 the IRS, 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. U.S. shareholders who hold or have held our securities during a period when we were or are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, 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 completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto.

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 respect to each controlled foreign corporation, or CFC, in our 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 allowed 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 statute of limitations with respect to such shareholder’s U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether we are or any of our non-U.S. subsidiaries is treated as CFC or whether any investor is treated as a 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 United States Internal Revenue Service 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.

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.

We are subject to taxation in several countries, including the United States and Israel; changes in tax laws or challenges to our tax positions could adversely affect our business, results of operations, and financial condition. As such, we are subject to tax laws, regulations, and policies of the U.S. federal, state, and local governments and of comparable taxing authorities in foreign jurisdictions. Changes in tax laws, including the U.S. federal tax legislation enacted in 2017, commonly referred to as the Tax Cuts and Jobs Act of 2017, as well as other factors, could cause us to experience fluctuations in our tax obligations and effective tax rates in the future and otherwise adversely affect our tax positions and/or our tax liabilities. There can be no assurance that our effective tax rates, tax payments, tax credits, or incentives will not be adversely affected by changes in tax laws in various jurisdictions.

The market prices of our securities are subject to fluctuation, which could result in substantial losses by our investors.

The stock market in general and the market prices of our ADSs on Nasdaq, in particular, are or will be subject to fluctuation, and changes in these prices may be unrelated to our operating performance. We anticipate that the market prices of our securities will continue to be subject to wide fluctuations. The market price of our securities is, and will be, subject to a number of factors, including:

| ● | announcements of technological innovations or new products by us or others;

| ● | announcements by us of significant acquisitions, strategic partnerships, in-licensing, out-licensing, ventures or capital commitments;

| ● | expiration or terminations of licenses, research contracts or other collaboration agreements;

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| ● | public concern as to the safety of the equipment we sell;

| ● | the volatility of market prices for shares of medical devices companies generally;

| ● | developments concerning intellectual property rights or regulatory approvals;

| ● | variations in our and our competitors’ results of operations;

| ● | changes in revenues, gross profits and earnings announced by the company;

| ● | changes in estimates or recommendations by securities analysts, if our Ordinary Shares or the ADSs are covered by analysts;
| ● | fluctuations in the stock price of our publicly traded subsidiaries;

| ● | changes in government regulations or patent decisions; and

| ● | general market conditions and other factors, including factors unrelated to our operating performance.

These factors may materially and adversely affect the market price of our securities s and result in substantial losses by our investors.

We do not know whether a market for the ADSs will be sustained or what the trading price of the ADSs will be and as a result it may be difficult for you to sell your ADSs.

Although our ADSs trade on Nasdaq, an active trading market for the ADSs may not be sustained. It may be difficult for you to sell your ADSs without depressing the market price for the ADSs. As a result of these and other factors, you may not be able to sell your ADSs. Further, an inactive market may also impair our ability to raise capital by selling ADSs and may impair our ability to enter into strategic partnerships or acquire companies or products by using our ADSs as consideration.

We do not know whether a market for our Series C Warrants will be sustained or what the trading price of the Series C Warrants will be and as a result it may be difficult for you to sell your Series C Warrants.

Even though our Series C Warrant are listed on Nasdaq, there is no assurance that a market will be sustained or maintain a high enough per warrant trading price to maintain the national exchange listing requirements in the future. Without an active market, the liquidity of the Series C Warrants will be limited.

Our Series C Warrants are speculative in nature.

The Series C Warrants do not confer any rights of ownership of ordinary shares or ADSs on their holders, such as voting rights or the right to receive dividends, but only represent the right to acquire ADSs at a fixed price for a limited period of time. Holders of the Series C Warrants may exercise their right to acquire ADSs and pay the exercise price per ADS of $3.50, subject to adjustment upon certain events, prior to five years from the date of issuance, after which date any unexercised warrants will expire and have no further value.

Future sales of our securities could reduce their market price.

Substantial sales of our securities on Nasdaq, may cause the market price of our securities to decline. Sales by us or our security holders of substantial amounts of our securities, or the perception that these sales may occur in the future, could cause a reduction in the market price of our securities.

The issuance of any additional Ordinary Shares, ADSs, warrants or any securities that are exercisable for or convertible into our Ordinary Shares or ADSs, may have an adverse effect on the market price of our securities and will have a dilutive effect on our existing shareholders and holders of ADSs.

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Holders of ADSs may not receive the same distributions or dividends as those we make to the holders of our Ordinary Shares, and, in some limited circumstances, you may not receive dividends or other distributions on our Ordinary Shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.

The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Ordinary Shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act of 1933, as amended, or the Securities Act, but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currency that was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof, which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effect a substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositary may withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes it is required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of the ADSs.

Holders of ADSs must act through the depositary to exercise their rights as shareholders of our company.

Holders of our ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying Ordinary Shares in accordance with the provisions of the Deposit Agreement. Under Israeli law and our articles of association, the minimum notice period required to convene a shareholders meeting is no less than 21 or 35 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened, holders of ADSs may not receive sufficient notice of a shareholders’ meeting to permit them to withdraw their ordinary shares to allow them to cast their vote with respect to any specific matter. In addition, the Depositary and its agents may not be able to send voting instructions to holders of ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the Depositary to extend voting rights to holders of the ADSs in a timely manner, but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the Depositary to vote their Ordinary Shares underlying the ADSs. Furthermore, the Depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of ADSs may not be able to exercise their right to vote and they may lack recourse if their Ordinary Shares underlying the ADSs are not voted as they requested. In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders’ meeting.

We incur additional increased costs as a result of the listing of the ADSs for trading on Nasdaq, and our management is required to devote substantial time to new compliance initiatives and reporting requirements.

As a public company in the United States, we incur significant accounting, legal and other expenses as a result of the listing of the ADSs on Nasdaq. These include costs associated with corporate governance requirements of the Securities Exchange Commission, or the SEC, and the Marketplace Rules of the Nasdaq, as well as requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. These rules and regulations increase our legal and financial compliance costs, introduce costs such as investor relations, stock exchange listing fees and shareholder reporting, and make some activities more time consuming and costly. Any future changes in the laws and regulations affecting public companies in the United States and Israel, including Section 404 and other provisions of the Sarbanes-Oxley Act, the rules and regulations adopted by the SEC and the rules of the Nasdaq Stock Market may result in increased costs to us as we respond to such changes. These laws, rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

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As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of applicable SEC and Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic issuers.

As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under the rules of the Nasdaq for domestic issuers. Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the Nasdaq, may provide less protection than is accorded to investors under the rules of the Nasdaq applicable to domestic issuers. For more information, see “Item 16G. Corporate Governance - Nasdaq Stock Market Listing Rules and Home Country Practices.”

In addition, as a foreign private issuer, we are exempt from the rules and regulations under the Securities Exchange Act of 1934, as amended, or the Exchange Act, related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act.

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

We are a foreign private issuer, as such term is defined in Rule 405 under the Securities Act, and therefore, we are not required to comply with all the periodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. Under Rule 405, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to us on June 30, 2022.

In the future, we would lose our foreign private issuer status if a majority of our shareholders, directors or management are U.S. citizens or residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. Although we have elected to comply with certain U.S. regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the U.S. Securities and Exchange Commission, or the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. For example, the annual report on Form 10-K requires domestic issuers to disclose executive compensation information on an individual basis with specific disclosure regarding the domestic compensation philosophy, objectives, annual total compensation (base salary, bonus, equity compensation) and potential payments in connection with change in control, retirement, death or disability, while the SEC forms applicable to foreign private issuers permit them to disclose compensation information on an aggregate basis if executive compensation disclosure on an individual basis is not required or otherwise has not been provided in the issuer’s home jurisdiction. We disclose individual compensation information, but this disclosure is not as comprehensive as that required of U.S. domestic issuers since we are not required to disclose more detailed information in Israel. We intend to continue this practice as long as it is permitted under the SEC’s rules and Israel’s rules do not require more detailed disclosure. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. We may also be required to modify certain of our policies to comply with good governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.

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If we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act as they apply to a foreign private issuer that is listing on a U.S. exchange for the first time, or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned, and our securities price may suffer.

Section 404 of the Sarbanes-Oxley Act requires a company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its subsidiaries’ internal control over financial reporting. As such, we are required to document and test our internal control procedures and our management is required to assess and issue a report concerning our internal control over financial reporting. In addition, when applicable to comply with this statute, our independent registered public accounting firm may be required to issue an opinion on the effectiveness of our internal control over financial reporting at a later date.

The continuous process of strengthening our internal controls and complying with Section 404 is complicated and time-consuming. Furthermore, as our business continues to grow both domestically and internationally, our internal controls will become more complex and will require significantly more resources and attention to ensure our internal controls remain effective overall. During the course of its testing, our management may identify weaknesses or deficiencies, which may not be remedied in a timely manner. If our management cannot favorably assess the effectiveness of our internal controls over financial reporting, or if our independent registered public accounting firm identifies material weaknesses in our internal control, investor confidence in our financial results may weaken, and the market price of our securities may suffer.

We may not satisfy Nasdaq’s requirements for continued listing. If we cannot satisfy these requirements, Nasdaq could delist our securities.

Our ADSs are listed on Nasdaq under the symbol “MDGS”. To continue to be listed on Nasdaq, we are required to satisfy a number of conditions, including, among others, a minimum bid price of at least $1.00 per ADS, a market value of our publicly held shares of at least $1 million and shareholders’ equity of at least $2.5 million. As of April 14, 2022, the last trading day of our ADSs prior to the filing of this annual report, the closing bid price of our ADSs was $1.01. Accordingly, there exists a potential risk that we will not maintain a minimum bid price of at least $1.00 per ADS.

If we are delisted from Nasdaq, trading in our securities may be conducted, if available, on the OTC Markets or, if available, via another market. In the event of such delisting, our shareholders would likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to the value of our securities, and our ability to raise future capital through the sale of our securities could be severely limited. In addition, if our securities were delisted from Nasdaq, our ADSs could be considered a “penny stock” under the U.S. federal securities laws. Additional regulatory requirements apply to trading by broker-dealers of penny stocks that could result in the loss of an effective trading market for our securities. Moreover, if our securities were delisted from Nasdaq, we will no longer be exempt from certain provision of the Israeli Securities Law, and therefore will have increased disclosure requirements.

General Risk Factors

We do not intend to pay any cash dividends on our ordinary shares in the foreseeable future and, therefore, any return on your investment in our securities must come from increases in the value and trading price of our securities.

We have never declared or paid cash dividends on our securities and do not anticipate that we will pay any cash dividends on our securities in the foreseeable future, therefore, any return on your investment in our securities must come from increases in the value and trading price of our securities.

We intend to retain our earnings to finance the development and expenses of our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, business prospects, applicable Israeli law and other factors our board of directors may deem relevant.

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Raising additional capital by issuing securities may cause dilution to existing shareholders.

We may seek additional capital through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest will be diluted, and the terms of any such offerings may include liquidation or other preferences that may adversely affect the then existing shareholders rights. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt or making capital expenditures. If we raise additional funds through collaboration, strategic alliance or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that are not favorable to us.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

The trading market for our securities will depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. There can be no assurance that analysts will cover us, or provide favorable coverage. If one or more analysts downgrade our share or change their opinion of our securities, the price of our securities would likely decline. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

The ongoing conflict in Ukraine may result in market volatility that could adversely affect our stock price.

In late February 2022, Russia invaded Ukraine, significantly amplifying already existing geopolitical tensions among Russia and other countries in the region and in the west, including the U.S. Russia’s invasion, the responses of countries and political bodies to Russia’s actions, the larger overarching tensions, and Ukraine’s military response and the potential for wider conflict may increase financial market volatility and could have severe adverse effects on regional and global economic markets.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

We were incorporated in the State of Israel on December 9, 1999, as a private company pursuant to the Israeli Companies Ordinance (New Version), 1983. In February 2006, we completed our initial public offering in Israel, and our ordinary shares traded on the TASE until January 25, 2021. In May 2015, we listed the ADSs on Nasdaq and since August 2015 the ADSs have been traded on Nasdaq under the symbol “MDGS”. Each ADS represents twenty (20) Ordinary Shares. Our Series C Warrants have been trading on Nasdaq under the symbol “MDGSW” since July 2018. Each Series C Warrant is exercisable into one ADS at an exercise price of $3.50 and will expire in July 2023.

Principal Capital Expenditures

Our Group had capital expenditures of approximately $141,000, $324,000 and $62,000 in the years ended on December 31, 2021, 2020, and 2019, respectively. Our capital expenditures are primarily for network infrastructure, computer hardware, purchase of machinery and software and leasehold improvements of our facilities. We have financed our capital expenditures from our available cash. We expect to maintain our capital expenditures in 2022 with a consistent volume.

There are no significant capital expenditures or divestitures currently in progress by the Company.

B. Business Overview

Overview

The activities carried out by us, and our subsidiaries are focused on medical-related devices and products, internet and other online-related technologies, e-commerce, safety systems for drones and the electric vehicle (EV) sector.

Our medical related activities include; innovative surgical devices with direct visualization capabilities for the treatment of Gastroesophageal Reflux Disease by the Company using Medigus Ultrasonic Surgical Endostapler, or MUSE and licensing arrangement with Polyrizon in connection with its development of biological gels designed to protect patients against biological threats and reduce intrusion of allergens and viruses through the upper airways and eye cavities.

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Our internet-related activities include ad-tech operations through our stake in Gix, and its subsidiary, Gix Media. We have also entered into agreements to acquire stakes in Eventer, an online event management and ticketing platform, in which we currently hold 47.69%.

Our e-commerce activity includes the operations of Jeffs’ Brands Ltd., a subsidiary in which we hold 50.03%, and which operates online stores for the sale of various consumer products on the Amazon online marketplace.

Our activity in the EV sector includes our full ownership of Charging Robotics and its 19.99% subsidiary Revoltz, both develop three modular EVs and wireless vehicle battery charging technology.

Our activity in the drones operations field thorough our stake in Parazero Ltd. In which we hold 40.35%.

We are also engaged in the development, production and marketing of innovative miniaturized imaging equipment, custom-tailored visualization solutions based on small and highly resistant cameras, through ScoutCam, of which we hold 27.02% on a beneficial ownership basis.

Medical Activity Overview

Our MUSE‎™‎ System

We have been engaged in the development, production and marketing of innovative surgical devices with direct visualization capabilities for the treatment of Gastroesophageal Reflux Disease, a common ailment, which is predominantly treated by medical therapy (e.g. proton pump inhibitors) or in chronic cases, conventional open or laparoscopic surgery. Our product, the MUSE™ system for transoral fundoplication is a single use innovative device for the treatment of GERD disorder. The MUSE™ system is an endoscopic, incisionless solution that is used to perform a procedure as an alternative to a surgical fundoplication.

On June 3, 2019, we entered into the Golden Grand Agreement for the know-how licensing and sale of good relating to the MUSE™ system in China, Hong Kong, Taiwan and Macao. The final milestones will be completed, and the final installment paid upon completion of a MUSE™ assembly line in China. Due to COVID-19, the implementation of certain actions required to be achieved under the milestones have been delayed and expects to be completed during 2022.

Polyrizon – Protective Biological Gels

Polyrizon is a clinical development biotech company specializing on the development of innovative nasal gels to provide preventative treatment against a wide cross section of viruses, as well as bacteria, allergens, and other toxins. Polyrizon’s proprietary Capture and Contain hydrogel platform is delivered in the form of nasal sprays, and forms a thin gel-based protective shield containment barrier in the nasal cavity.

In July 2020, we entered into an ordinary share purchase agreement with Polyrizon, and on March 9, 2021 and on September 2, 2021 we increased our stakes in Polyrizon through additional investments, pursuant to such investments we currently own 37.03% of Polyrizon’s issued and outstanding capital on a fully diluted basis.

ClearMind – Psychedelic Medicine

On February 8, 2022, we entered into a share purchase agreement with ClearMind Medicine, Inc. (“CleaqrMind”), following which we hold 5.02% of ClearMind’s share capital. ClearMind is a psychedelic pharmaceutical biotech company focused on the discovery and development of novel psychedelic-derived therapeutics to solve widespread and underserved health problems, including mental health, alcohol use disorder, binge eating and depression. ClearMind’s patent portfolio consists of four utility patent families, which includes seven approved patents and 13 pending applications.

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Internet Activity Overview

Gix– Ad-Tech and Online Advertising

Gix Media operates in the field of software development, marketing, and distribution to internet users. Gix recently announced its intention to focus its efforts on Gix Media, which is the primary source of Gix’s revenues and operations, with a goal of expanding its product portfolio in the field of technological solutions for advertising and media. On June 19, 2019, entered into a securities purchase agreement with Gix and its subsidiary Gix Media (the “Investment Agreement”).

During 2021, we exercised our right to convert Gix’s Media shares into Gix shares under the Investment Agreement. In October 2021 and February 2022 we purchased additional shares, following which we currently hold 38.03% in Gix.

On October 14, 2021, Gix Media entered into a purchase agreement with Cortex Media Group Ltd. (“Cortex”), a media-content company, following which Gix (through its holdings in Gix Media) obtained control of Cortex. As a result Gix consolidated Cortex’ financial statements as of October 14, 20201.

Eventer Technologies Ltd. – Online Event Management

Eventer is a technology company engaged in the development of unique tools for automatic creation, management, promotion, and billing of events and ticketing sales. Eventer seeks to tap the growing demand for enterprise and private online communication. As such, Eventer’s systems offer and enable advanced, user-friendly solutions for online events such as online concerts, enterprise events and online conferences, in addition to management and ticket sales for events carried out in offline venues. In addition, Eventer’s platform provides individuals with the ability to create and sell tickets to custom small-scale private or public events. Eventer’s revenues are derived from commissions from sales of tickets for online and offline events planned and managed through its platform. We acquired 47.69% of Eventer’s share capital following an investment of $750,000 on October 14, 2020 and an additional investment of $300,000 on April 8, 2021.

E-commerce Activity Overview

Jeffs’ Brands Ltd.

Jeffs’ Brands is an e-commerce consumer products goods company, operating primarily on the Amazon platform. Jeffs’ Brands is the owner of Smart Repair Pro, Inc., or Pro, Purex, Corp., or Purex, and Top Rank Ltd. that operate online stores for the sale of various consumer products on the Amazon online marketplace. On October 8, 2020, we acquired 50.01% of Pro’s and 50.03% of Purex’ issued and outstanding share capital on a fully diluted a common stock purchase agreement with Pro, Purex and their respective stockholders, and Vicky Hacmon, through a combination of cash investments in the companies and acquisition of additional shares from the then current shareholders of the two companies in consideration for the Company’s restricted ADSs and a cash component. The Company agreed to invest an aggregate amount of $1,250 thousand in Pro and Purex, pay $150 thousand in cash consideration to the current stockholders, and issue up to $500 thousand worth of restricted ADSs to the current stockholders of Pro and Purex subject to EBITDA milestones. Following the achievement of such EBITDA results, the Company issued to the stockholders of Pro and Purex $71 thousand worth of restricted ADSs in June 2021.

On May 16, 2021, we entered into a stock exchange and plan of restructuring agreement with Victor Hacmon, the other shareholder of Pro and Purex, and Jeffs’ Brands Ltd., or Jeffs’ Brands, a newly incorporated entity, following which Pro and Purex became wholly-owned subsidiaries of Jeffs’ Brands. The share exchange transaction was accounted in a manner similar to Pooling-of-Interests (“As Pooling”). To date, we invested approximately USD 5.4 million in Jeffs’ Brands and hold 50.03% of its shares.

On February 18, 2022, Jeffs’ Brands, submitted a registration statement on Form F-1 to the SEC relating to a potential initial public offering of its ordinary shares in the United States.

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Electric Vehicle Activity Overview

Charging Robotics Ltd.

Charging Robotics, our wholly owned subsidiary, which was incorporated on February 1, 2021, is a developer of an automatic wireless charging system for public parking lots. On January 7, 2021, we entered into an agreement to purchase a provisional patent filed with the United States Patent and Trademark Office and know-how relating to wireless vehicle battery charging technology in consideration for $75,000.

During 2021, we invested an additional $423,000 in Charging Robotics.

Revoltz Ltd.

On February 19, 2021, we entered into a joint venture agreement with Amir Zaid, Weijian Zhou and Charging Robotics, for the purpose of developing and commercializing three modular electric vehicle (EV) micro mobility vehicles for urban individual use and “last mile” cargo delivery. Pursuant to the terms of such agreement, Charging Robotics currently hold 19.99% of the issued and outstanding share capital of the Revoltz Ltd.

On April 12, 2021, we invested through Charging Robotics an additional $250,000 in Revoltz.

Other Activities

ScoutCam – Miniaturized Imaging Equipment

We currently hold 27.02% of ScoutCam, which is engaged in the development, production and marketing of innovative visual solutions composed of imaging equipment, cloud and software based image processing (artificial intelligence (AI), machine learning (ML), and additional algorithm methodologies). Some of ScoutCam’s products that utilize its micro ScoutCam™ technology are used in medical procedures as well as various applications in other industries. See Item 7.B “Related Party Transactions” for more information about certain of our transactions with ScoutCam.

Automax Ltd.

We currently hold approximately 5.63% of the outstanding share capital of Global Automax Ltd., or Automax (formerly known as Matomy Media Group Ltd., or Matomy), a public company listed on the TASE.

On November 9, 2020, Matomy signed a binding agreement for a merger with Automax, and on March 24, 2021 the preconditions under the merger agreement were met to complete the merger. Following the closing of the merger, Automax’ shareholders held approximately 53% of the outstanding share capital of Matomy, which amount may increase to 73% if certain milestone achievements are met.

On December 31, 2020, as a result of exercise of Matomy’s option during the year, we held 24.92% of Matomy Media Group Ltd.

On January 19, 2021 and March 9, 2021, we sold 2,300,000 and 11,000,000 shares of Matomy Ltd., respectively. Subsequently, following such sales and the merger of Matomy with Automax, our aggregate holdings in Automax decreased to 4.73% of its issued and outstanding share capital. Following several purchases made through 2021, we currently hold 5.63% of Automax.

Elbit Imaging Ltd.

On June 14, 2021, we completed a number of transactions to purchase 460,409 ordinary shares of Elbit Imaging Ltd., representing 5.04% of its issued and outstanding share capital. We currently hold approximately 5.72 % of the outstanding share capital of Elbit Imaging Ltd.

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Safee Cyber Technologies Ltd.

On October 13, 2021, we entered into a share purchase agreement with Safee Cyber Technologies Ltd., or Safee, a blockchain company, pursuant to which we invested $400,000 in exchange for approximately 2.35% of Safee’s share capital on a fully diluted basis.

Parazero Ltd.

On February 4, 2022, we entered into a share purchase agreement with Parazero Ltd., or Parazero, a company which is engaged in the field of safety systems for drones, pursuant to which we invested $1.6 million in exchange for approximately 40% of the outstanding share capital of Parazero’s share capital on a fully diluted basis. On February 28, 2022, we entered into a SAFE agreement pursuant to which we invested an additional $203,000 in Parazero.

Our Strategy

Our primary goal is to generate revenues through the activities of our consolidated subsidiaries, each in their respective market and field. In addition, we seek to generate revenues by pursuing potential opportunities to sell our MUSE™ technology, or alternatively grant a license or licenses for the use of the MUSE™ technology. Our strategy includes the following key elements:

Commercialization of the products and services provided by our consolidated subsidiaries. Our board of directors has determined that we invest in the growth, development and expansion of our consolidated subsidiaries businesses.

Sell or License MUSE‎™ technology. Our board of directors has determined to examine potential opportunities to sell our MUSE™ technology, or alternatively grant a license or licenses for the use of the MUSE™ technology.

General Pursuit of Opportunities. Our board of directors and management are constantly seeking and pursuing opportunities through which to leverage our assets and capabilities.

Substantially material portion of our revenues in 2019 and 2020 was derived from the sale of miniature cameras which is currently developed and manufactured by ScoutCam. In 2021, the material portion of revenues was derived from Jeff’s’ brands, Eventer and from the licensing and sale agreement with Golden Grand. The following data reflects our total revenue arising from the following services:

|  | Revenues |
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (Thousands of U.S. dollars) |
Sales of Miniature Cameras and related equipment |  |  | 24 |  |  |  | 491 |  |  |  | 188 |
Sales of Products on the Amazon online marketplace |  |  | 6,509 |  |  |  |  |  |  |  |  |
Development services |  |  | - |  |  |  | - |  |  |  | 85 |
Revenues from commissions |  |  | 1,185 |  |  |  | 40 |  |  |  |  |
Sales of the MUSE‎™System |  |  | 2,400 |  |  |  | - |  |  |  | - |
Total |  |  | 10,118 |  |  |  | 531 |  |  |  | 273 |

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The following data reflects our total revenue broken down by geographic region:

|  | Revenues |
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (Thousands of U.S. dollars) |
United States |  |  | 6,306 |  |  |  | 418 |  |  |  | 138 |
Europe |  |  | 128 |  |  |  | 41 |  |  |  | 69 |
China |  |  | 2,400 |  |  |  | - |  |  |  | - |
Israel |  |  | 1,183 |  |  |  | 45 |  |  |  | 22 |
Other |  |  | 101 |  |  |  | 27 |  |  |  | 44 |
Total |  |  | 10,118 |  |  |  | 531 |  |  |  | 273 |

Seasonality of Business

During the last few years we have not seen any seasonality in our sales. However, our subsidiaries experience certain effects of seasonality in their operations.

In connection with our subsidiary, Eventer, there is an increase in events scheduled during the holiday season in Israel, which typically occurs in September and October, and which corresponds to an increase in ticket sales.

In connection with our subsidiary, Jeffs’ Brands, the fourth quarter of each fiscal year typically yields significant activity due to the holiday season. As a result, revenue generally declines and loss from operations generally increases in the first quarter sequentially from the fourth quarter of the previous year.

Marketing and Distribution

Sale or License of MUSE™ System

As part of our board of directors decision to examine potential opportunities to sell our MUSE™ technology, or alternatively grant a license or licenses for the use of the MUSE™ technology, our board of directors has reexamined the efforts and resources previously invested by us in our MUSE™ technology distribution agreements as well as the revenues obtained through such agreements in order to assess their financial viability. As a result of this analysis, our board of directors resolved to terminate our distribution agreements in order to redirect our resources to securing licensing agreements, which may in turn generate significant income in the short term, reduce operating expenses and lower our company’s burn rate. On May 5, 2021 the company engaged with a contractor into service agreement, which the contractor Seek, develop, evaluate, filter and recommend suitable business opportunities for the Company in the fields of the Muse products and technology, and also Communicate and meet potential customers and introduce the Company and the Company’s products thereto, and, to the extent required by the Company from time to time, assistance and support with respect to negotiations with potential customers.

Intellectual Property

Our commercial success depends, in part, on obtaining and maintaining patent and other intellectual property protection, in the United States and internationally, for the technologies used in our products. We cannot be sure that any of our patents will be commercially useful in protecting our technology. Our commercial success also depends in part on our non-infringement of the patents or proprietary rights of third parties. The patent positions of medical device companies, including ours, can be highly uncertain and involve complex and evolving legal and factual questions. For additional information see “Item 3. Key information—D. Risk Factors—Risks Related to Our Intellectual Property.”

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We, ScoutCam, Charging Robotics and GERD IP (hereinafter in this paragraph: “We” or “Us”) own 18 U.S. patents and 1 allowed US patent application and have 4 additional pending patent applications in the U.S. and 4 U.S. Provisional Patent Applications. In addition, We own 36 patents that were granted in other countries, including 17 European patent assets, which are not valid on their own unless validated in specific European countries as indeed were validated according to our list of chosen European countries and 8 pending patent applications in such other countries. We also own three pending Paris Convention Treaty (PCT) patent applications. Following opposition proceedings initiated by a third party, the Opposition Division of the EU Patent Office decided to revoke two patents (each validated in 4 countries) of the abovementioned European patent assets and to maintain one patent (validated in 4 countries) of the abovementioned European patent assets – all these decisions are pending appeals filed by Us and the third party, which are expected to be decided in 2023.

We cannot be sure that any patents will be granted with respect to any the pending patent applications or with respect to any patent applications filed by us in the future. There is also a significant risk that any issued patents will have substantially narrower claims than those that are currently sought.

Competition

Competition with the MUSE‎™ system

We have several competitors in the medical device and pharmaceutical industries. Patients and physicians may opt for more established existing therapies to treat GERD, including PPI pharmaceutical treatment or laparoscopic fundoplication surgery. PPIs are currently being offered by several large pharmaceutical manufacturers, most of whom have significantly greater financial, clinical, manufacturing, marketing, distribution and technical resources and experience than we have.

Over the last few years a number of different medical devices and treatments have been introduced to address the “treatment gap” in GERD treatments and therapies which is found between long-term pharmaceutical therapy on one hand and surgery on the other. These devices and treatments seek to treat GERD less invasively than fundoplication and without the need for long-term use of drug therapy.

Competition related to our Subsidiary Jeffs’ Brands

The consumer goods and e-commerce market is a highly competitive environment. Jeffs’ competitive landscape consists of various types of companies such as traditional and non-traditional consumer good companies, discount stores, traditional retailers, independent retail stores, the online platforms of these traditional retail competitors and e-commerce companies. Such competitors include: Thrasio Holdings, Inc., Aterian, Inc. (Nasdaq: ATER), Amazon.com, Helen of Troy Ltd., Newell Brands (NASDAQ: NWL), Frigidaire Appliance Company, and Trademark Global Inc.

Competition related to our Subsidiary Eventer

Eventer’s competitors are traditional ticketing offices and digital ticketing companies that operate an online platform similar to Eventer’s platform and/or offer ticket marketing and distribution services. There are many companies outside of Israel that offer event management services similar to Eventer. Specifically in Israel, however, competitors that operate in the digital ticket sales platform space include Eventbuzz and TickChak Ltd., and companies that market events include Kupat and Eventim. Likewise, there are three large companies in Israel engaged in the field of marketing and distribution of events, including Leaan Tickets LTD, CTS Eventim New Co (Eventim), and Kupot Tel-Aviv Tickets and Shows LTD. Eventer also enables the sale of tickets to various attractions and activities, such as skydiving, glamping and motorsport. For these types of events and activities, Eventer competes with companies, including BUYME and Groupon, which sell vouchers to consumers and businesses and generates revenue from such sales commissions.

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Government Regulation

The healthcare industry, and, therefore, our business, is subject to extensive federal, state, local and foreign regulation. Some of the pertinent laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. In addition, these laws and their interpretations are subject to change.

Both federal and state governmental agencies continue to subject the healthcare industry to intense regulatory scrutiny, including heightened civil and criminal enforcement efforts. As indicated by work plans and reports issued by these agencies, the federal government will continue to scrutinize, among other things, the billing practices of healthcare providers and the marketing of healthcare products.

We believe that we have structured our business operations and relationships with our customers to comply with all applicable legal requirements. However, it is possible that governmental entities or other third parties could interpret these laws differently and assert otherwise. In addition, because there is a risk that our products are used off label, we believe we are subject to increased risk of prosecution under these laws and by these entities even if we believe we are acting appropriately. We discuss below the statutes and regulations that are most relevant to our business and most frequently cited in enforcement actions.

U.S. Food and Drug Administration

All of our medical device products sold in the U.S. are subject to regulation as medical devices under the FDA, as implemented and enforced by the FDA. The FDA governs the following activities that we perform or that are performed on our behalf, to ensure that medical device we manufacture, promote and distribute domestically or export internationally are safe and effective for their intended uses:

| ● | product design, preclinical and clinical development and manufacture;

| ● | product premarket clearance and approval;

| ● | product safety, testing, labeling and storage;

| ● | record keeping procedures;

| ● | product marketing, sales and distribution; and

| ● | post-marketing surveillance, complaint handling, medical device reporting, reporting of deaths, serious injuries or device malfunctions and repair or recall of products.

FDA Premarket Clearance and Approval Requirements

Unless an exemption applies, each medical device we wish to commercially distribute in the United States will require either premarket notification, or 510(k) marketing clearance or approval of a premarket approval application, or PMA, from the FDA. The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectiveness can be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the Quality System Regulation, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most class II and some class I devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device. This process is generally known as 510(k) marketing clearance. Devices deemed by the FDA to pose the greatest risks, such as life sustaining, life supporting or some implantable devices, or devices that have a new intended use for these purposes, are placed in class III and require approval of a PMA. Device without predicate to compare with, may also follow the PMA pathway.

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510(k) Marketing Clearance Pathway

To obtain 510(k) marketing clearance, we must submit a premarket notification demonstrating that the proposed device is “substantially equivalent” to a legally marketed “predicate device” that is either in class I or class II, or to a class III device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of a PMA. A Special 510(k) is an abbreviated 510(k) application which can be used to obtain clearance for certain types of device modification such as modifications that do not affect the intended use of the device or alter the device’s fundamental scientific technology. A Special 510(k) generally requires less information and data than a complete, or Traditional 510(k). In addition, a Special 510(k) application often takes a shorter period of time, which could be as short as 30 days, than a Traditional 510(k) marketing clearance application, which can be used for any type of 510(k) device. The FDA’s 510(k) marketing clearance pathway usually takes from three to twelve months, but may take significantly longer. The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence. There is no guarantee that the FDA will grant 510(k) marketing clearance for our future products and failure to obtain necessary clearances for our future products would adversely affect our ability to grow our business.

Medical devices can be marketed only for the indications for which they are cleared or approved. After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety, performance or effectiveness, or that would constitute a new or major change in its intended use, will require a new 510(k) marketing clearance or, depending on the modification, PMA approval. The FDA requires each manufacturer to determine whether the proposed changes requires submission of a 510(k) or a PMA, but the FDA can review any such decision and can disagree with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing or recall the modified device until 510(k) marketing clearance or PMA approval is obtained. Also, in these circumstances, we may be subject to significant regulatory fines or penalties. We have made product enhancements to MUSE™ system and other products that we believe do not require new 510(k) marketing clearances. We cannot be assured that the FDA would agree with any of our decisions not to seek 510(k) marketing clearance or PMA approval. For risks related to 510(k) marketing clearance, see “Item 3. Key information—D. Risk Factors – Risks Related to Regulatory Compliance.”

PMA Approval Pathway

A PMA must be submitted to the FDA if the device cannot be cleared through the 510(k) process or is not otherwise exempt from the FDA’s premarket clearance and approval requirements. A PMA must generally be supported by extensive data, including, but not limited to, technical, preclinical, clinical trials, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Also, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDA may or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a pre-approval inspection of the applicant or its third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR.

Pervasive and Continuing Regulation

After a device is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, the Medical Device Reporting, or MDR, regulations require that we report to the FDA any incident in which our products may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. See “Item 4. Information on the Company —D. Risk Factors – Risks Related to Regulatory Compliance,” for further information regarding our reporting obligations under MDR regulations. Additional regulatory requirements include:

| ● | product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;

| ● | QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all phases of the design and manufacturing process;

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| ● | labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication;

| ● | clearance of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use of one of our cleared devices;

| ● | approval of product modifications that affect the safety or effectiveness of one of our approved devices;

| ● | post-approval restrictions or conditions, including post-approval study commitments;

| ● | post-market surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectiveness data for the device;

| ● | the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and

| ● | notices of corrections or removals.

We must also register with the FDA as a medical device manufacturer and must obtain all necessary state permits or licenses to operate our business.

Failure to comply with applicable regulatory requirements, including delays in or failures to report incidents to the FDA as required under the MDR regulations, can result in enforcement action by the FDA, which may include any of the following sanctions:

| ● | warning letters, fines, injunctions, consent decrees and civil penalties;

| ● | customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;

| ● | operating restrictions or partial suspension or total shutdown of production;

| ● | refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products;

| ● | withdrawing 510(k) marketing clearances or PMA approvals that have already been granted;

| ● | refusal to grant export approval for our products; or

| ● | criminal prosecution.

In January 2016, we performed an FDA mock audit by an FDA veteran specialist, following which we implemented improvements in our quality management system. We cannot be assured that we have adequately complied with all regulatory requirements or that one or more of the referenced sanctions will not be applied to us as a result of a failure to comply.

Marketing Approvals Outside the United States

Sales of medical devices outside the United States are subject to foreign government regulations, which vary substantially from country to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.

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The European Union has adopted numerous directives and standards regulating the design, manufacture, clinical trials, labeling and adverse event reporting for medical devices. Each European Union member state has implemented legislation applying these directives and standards at the national level. Other countries, such as Switzerland, have voluntarily adopted laws and regulations that mirror those of the European Union with respect to medical devices. Devices that comply with the requirements of the laws of the relevant member state applying the applicable European Union directive are entitled to bear CE conformity marking and, accordingly, can be commercially distributed throughout the member states of the European Union and other countries that comply with or mirror these directives. The method of assessing conformity varies depending on the type and class of the product, but normally involves a combination of self-assessment by the manufacturer and a third-party assessment by a “Notified Body,” an independent and neutral institution appointed to conduct conformity assessment. This third-party assessment consists of an audit of the manufacturer’s quality system and clinical information, as well as technical review of the manufacturer’s product. An assessment by a Notified Body in one country within the European Union is required in order for a manufacturer to commercially distribute the product throughout the European Union. In addition, compliance with ISO 13845 on quality systems issued by the International Organization for Standards, among other standards, establishes the presumption of conformity with the essential requirements for a CE marking. In addition, many countries apply requirements in their reimbursement, pricing or health care systems that affect companies’ ability to market products.

We are entitled to print the CE Mark on our products, after having examined the EU Technical File for each new product.

Israeli Government Programs

Under the Encouragement of Research, Development and Technological Innovation in the Industry Law, 5744-1984, or the Innovation Law, research and development programs which meet specified criteria and are approved by a committee of the Israeli Innovation Authority of the Israeli Ministry of Economy and Industry, or IIA are eligible for grants from the IIA. The grant amounts are determined by the research committee, and are typically a percentage of the project’s expenditures. Under most programs, the grantee is required to pay royalties to the State of Israel from the sale of products developed under the program. Regulations under the Innovation Law generally provide for the payment of royalties of 3% to 6% on sales of products and services based on or incorporating technology developed using grants or know-how deriving therefrom, up to 100% of the grant, linked to the dollar and bearing interest at the LIBOR rate, is repaid. The royalty rates and the aggregate repayment amount may be higher if manufacturing rights are transferred outside of Israel, as further detailed below. The manufacturing rights of products incorporating technology developed thereunder may not be transferred outside of Israel, unless approval is received from the IIA and additional royalty payments are made to the State of Israel, as further detailed below. However, this does not restrict the export of products that incorporate the funded technology.

The United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate (LIBOR), announced that it will no longer persuade or require banks to submit rates for LIBOR after January 1, 2022. The grants received from the IIA bear an annual interest rate based on the 12-month LIBOR. Accordingly, there is considerable uncertainty regarding the publication of LIBOR beyond 2021. While it is not currently possible to determine precisely whether, or to what extent, the withdrawal and replacement of LIBOR would affect us, the implementation of alternative benchmark rates to LIBOR may increase our financial liabilities to the IIA.

The pertinent obligations under the Innovation Law are as follows:

| ● | Local Manufacturing Obligation. The terms of the grants under the Innovation Law require that we manufacture the products developed with these grants in Israel. Under the regulations promulgated under the Innovation Law, the products may be manufactured outside Israel by us or by another entity only if prior approval is received from the IIA (such approval is not required for the transfer of less than 10% of the manufacturing capacity in the aggregate, in which case a notice should be provided to the IIA). As a condition to obtaining approval to manufacture outside Israel, we would be required to pay royalties at an increased rate (usually 1% in addition to the standard rate and increased royalties cap (between 120% and 300% of the grants, depending on the manufacturing volume that is performed outside Israel). We note that a company also has the option of declaring in its IIA grant applications of its intention to exercise a portion of the manufacturing capacity abroad, thus avoiding the need to obtain additional approvals and pay the increased royalties cap with respect to the portion declared.

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| ● | Know-How transfer limitation. The Innovation Law restricts the ability to transfer know-how funded by the IIA outside of Israel. Transfer of IIA funded know-how outside of Israel requires prior approval of IIA and in certain circumstances is subject to certain payment to the IIA, calculated according to formulae provided under the Innovation Law. If we wish to transfer IIA funded know-how, the terms for approval will be determined according to the character of the transaction and the consideration paid to us for such transfer. The IIA approval to transfer know-how created, in whole or in part, in connection with a IIA-funded project to third party outside Israel where the transferring company remains an operating Israeli entity is subject to payment of a redemption fee to the IIA calculated according to a formula provided under the Innovation Law that is based, in general, on the ratio between the aggregate IIA grants to the company’s aggregate investments in the project that was funded by these IIA grants, multiplied by the transaction consideration, considering depreciation mechanism and less royalties already paid to the IIA. The transfer of such know-how to a party outside Israel where the transferring company ceases to exist as an Israeli entity is subject to a redemption fee formula that is based, in general, on the ratio between aggregate IIA grants received by the company and the company’s aggregate research and development expenses, multiplied by the transaction consideration considering depreciation mechanism and less royalties already paid to the IIA. The regulations promulgated under the Innovation Law establish a maximum payment of the redemption fee paid to the IIA under the above mentioned formulas and differentiates between two situations: (i) in the event that the company sells its IIA funded know-how, in whole or in part, or is sold as part of an M&A transaction, and subsequently ceases to conduct business in Israel, the maximum redemption fee under the above mentioned formulas will be no more than six times the amount received (plus annual interest) for the applicable know-how being transferred, or the entire amount received from the IIA, as applicable; (ii) in the event that following the transactions described above (i.e. asset sale of IIA funded know-how or transfer as part of an M&A transaction) the company continues to conduct its research and development activity in Israel (for at least three years following such transfer and maintain staff of at least 75% of the number of research and development employees it had for the six months before the know-how was transferred and keeps the same scope of employment for such research and development staff), then the company is eligible for a reduced cap of the redemption fee of no more than three times the amounts received (plus annual interest) for the applicable know-how being transferred.

| ● | Approval of the transfer of IIA funded technology to another Israeli company may be granted only if the recipient abides by the provisions of the Innovation law and related regulations, including the restrictions on the transfer of know-how and manufacturing rights outside of Israel (note that there will be an obligation to pay royalties to the IIA from the income of such sale transaction as part of the royalty payment obligation).

Approval to manufacture products outside of Israel or consent to the transfer of technology, if requested, might not be granted. Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development out of Israel.

Grants Received from the IIA (formerly the OCS)

We have received grants from the IIA as part of our participation in two programs as described below:

Membership in the Activities of the Bio Medical Photonic Consortium

The Bio Medical Photonic Consortium, or the Consortium, commenced its activities in June 2007, and concluded its activities on December 31, 2012. The purpose of the Consortium was to develop generic photonic technologies in the field of diagnostics and therapeutics in the biomedical industry in Israel, and specifically on the subject of the digestive system. The activities of the Consortium were performed under our management and the management of Given Imaging Ltd., where each would develop technological models which are based on their internal developments and on developments of the members of the Consortium.

Within the framework of the activities of the Consortium, the Company worked to develop the next generation technology of miniature cameras. The cameras were integrated, within the framework of the Consortium, in technological models for minimally invasive procedures which were developed by the members of the Consortium. The various combinations of surgical tools and advanced visual capabilities with miniature endoscopes are innovative, and we predict that the Consortium framework will continue serving as a fruitful basis for the development of innovative medical procedures through the creation of intellectual property. Additionally, we will cooperate with research groups which develop indicators for early detection of colorectal cancer, with the aim of integrating the visualization techniques and key products in this field. The Company received an amount of approximately US $2.3 from the IIA in the framework of the Consortium.

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In February 2019, the IIA approved a transfer of IIA know-how developed by the Company in the framework of the Consortium to ScoutCam Ltd., a company incorporated under the laws of the State of Israel, a wholly owned subsidiary of the Company. In November 2019, the IIA approved a transfer of the know-how from ScoutCam Ltd. back to the Company in exchange for a license to the ScoutCam Ltd. to access, and develop the know-how. Accordingly all rights and obligations to the IIA under the Innovation Law in connection with such know-how apply to both the Company and ScoutCam Ltd.

The following are details regarding the rights and obligations within the framework of our activity in the Consortium, which will apply to the Company and the indirect subsidiary notwithstanding the conclusion of the program:

| (i) | The property rights to information which has been developed belongs to the Consortium member that developed it. However, the developing entity is obligated to provide the other members in the Consortium a license for the use of the new information, without consideration, provided that the other members do not transfer such information to any entity which is not a member of the Consortium. The provision of a license or of the right to use the new information to a third party is subject to approval by the administration of the MAGNET Program at the IIA;

| (ii) | The Consortium member is entitled to register a patent for the new information which has been developed by it within the framework of its activity in the Consortium. The foregoing registration does not require approval from the administration; and

| (iii) | The know-how and technology developed under the program is subject to the restrictions set forth under the Innovation Law, including restrictions on the transfer of such know-how and any manufacturing rights with respect thereto, without first obtaining the approval of the IIA. Such approval may entail additional payments to the IIA, as determined under the Innovation Law and regulations, and as further detailed above.

Collaboration Grant for the Development of a Miniature Diameter Endoscope for Use in Dental Implants

In July 2011, the IIA approved our application for support for a joint project regarding the development of an innovative, miniature diameter endoscopic product in the field of dental surgery, or the Dental Project. In October 2012, the Company received a notice according to which approval was given for continued support for the Dental Project for a second year. The IIA support for the Dental Project concluded on July 31, 2013.

The Dental Project was performed in collaboration with Qioptiq GmbH, a German corporation, or Qioptiq, in the field of sophisticated medical micro-optics, including in the medical and life sciences sector. The collaboration between the Company and Qioptiq was performed within the framework of the Eureka organization, a Pan-European organization which includes approximately 40 member states, including the State of Israel, and which acts to coordinate and to finance research and development enterprises in and outside of Europe.

In accordance with the outline of the Dental Project, we collaborated with Qioptiq on the development of an innovative miniature-diameter endoscope, with side viewing capabilities, intended for use in various dental implant procedures, the Dental Endoscope. During the Dental Project, each of the parties developed different parts of the Dental Endoscope. In accordance with the terms of the collaboration, the intellectual property which originated from the development of the Dental Endoscope remained the exclusive property of the party which developed it. Subject to the completion of the project, the parties agreed to conduct negotiations regarding the method used to produce and market the Product. The foregoing negotiations have not been conducted. In January 2019 we have notified the IIA that the Dental Project had failed due to technological reasons and that there are no revenues to be expected from this project.

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Grants and Royalty Obligations

We received various grants from the IIA in connection with our participation in its programs. We received a grant of approximately $2.3 million in connection with our participation in the Bio Medical Photonics Consortium in the production of generic technology related to the partial development of miniature or the Consortium Grant. Under the terms of the Consortium Grant, we are not required to pay royalties. In addition, we received a grant of approximately $0.2 million in connection with a collaboration within the framework of the Eureka organization related to miniature endoscope for dental implants, or the Eureka Grant. Under the terms of the Eureka Grant, we would have to pay royalties at a rate of 3%-5% from the actual sales of the relevant device, up to the repayment of the grant, with the addition of interest and linkage. In January 2018 we have notified the IIA that the project that received the Eureka Grant has failed due to technological reasons and that there are no revenues to be expected from this project.

C. Organizational Structure

As of December 31, 2021, we have four significant subsidiaries, (i) Jeffs’ Brands, a company incorporated under the laws of the State of Israel, in which we hold 50.03%, (ii) Eventer Technologies, a company incorporated under the laws of the State of Israel in which we hold 47.69% of its outstanding share capital, (iii) ScoutCam, a company incorporated under the laws of the State of Nevada, in which we hold 27.02% of its outstanding share capital, and (iv) our wholly owned subsidiary, Charging Robotics Ltd., a company incorporated under the laws of the State of Israel.

D. Property, Plant and Equipment

Our offices and research and development facility are located at 3 HaNechoshet Street, Building B, Tel Aviv, Israel, 6971068, where we occupy approximately 45 square meters. We sub-lease our facilities from Jeffs’ Brands. While we do intend to expend our offices in the future, we believe our sub-leased facilities sufficiently meets our current needs.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this annual report on Form 20-F. In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report.

Certain information called for by this Item 5, including a discussion of the year ended December 31, 2020 compared to the year ended December 31, 2019 has been reported previously in our annual report on May 14, 2021 under Item 5 “Operating and Financial Review and Prospects”.

For the purpose of this Item 5., references to “Medigus”, the “Company”, “us”, “we” and “our” refer to Medigus and its consolidated subsidiaries.

Overview

Our legal and commercial name is Medigus Ltd. We were incorporated in the State of Israel on December 9, 1999, as a private company pursuant to the Israeli Companies Ordinance (New Version), 1983. In February 2006, we completed our initial public offering in Israel, and until January 25, 2021, our Ordinary Shares were traded on the TASE, under the symbol “MDGS”. On January 25, 2021, we delisted our Ordinary Shares from trading on TASE. In May 2015, we listed our ADSs on Nasdaq, and since August 2015 our ADSs have been traded on the Nasdaq under the symbol “MDGS”. Each ADS represents 20 Ordinary Shares. In July 2018, we listed our Series C Warrants on the Nasdaq, and since then our Series C Warrants have been traded on Nasdaq under the symbol “MDGSW”. Each Series C Warrant is exercisable into one ADS for an exercise price of $3.50, and will expire five years from the date of issuance.

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ScoutCam Ltd. was formed in Israel on January 3, 2019, as a wholly owned subsidiary of Medigus, and commenced operations on March 1, 2019. ScoutCam Ltd. was incorporated as part of the reorganization of Medigus, which was designed to distinguish ScoutCam’s miniaturized imaging business, or the micro ScoutCam™ portfolio, from Medigus’ other operations and to enable Medigus to form a separate business unit with dedicated resources focused on the promotion of such technology. In December 2019, Medigus and ScoutCam Ltd. consummated an Amended and Restated Asset Transfer Agreement, effective March 1, 2019, which transferred and assigned certain assets and intellectual property rights related to its miniaturized imaging business. On March 1, 2019, 12 employees moved from Medigus to ScoutCam. The vast majority of these employees were from the Production and R&D departments. Therefore, their transfer caused large changes in the data of these two line items in the year 2018 and 2019. Following ScoutCam’s private placement of USD 20 million in March 2021, in which we did not participate, our holdings in ScoutCam reduced to 28.06%. Accordingly ScoutCam was deconsolidated as of such date and accounted for as an equity investment as of April 1, 2021.

On October 14, 2020, we signed a share purchase agreement and a revolving loan agreement with Eventer. The Eventer transaction closed on October 26, 2020. Pursuant to the share purchase agreement, we invested $750,000 and were issued an aggregate of 325,270 ordinary shares of Eventer, representing 58.7% of Eventer’s then issued and outstanding share capital. On April 8, 2021 Eventer consummated an additional share purchase agreement with certain investors in connection with the sale and issuance of $2.25 million worth of its ordinary shares for an aggregate amount of $2.25 million. Following such round and our additional investment of $300,000 we hold approximately 47.69% of Eventer outstanding share capital.

On October 8, 2020, we entered into a common stock purchase agreement with Pro, Inc., Purex, and their respective stockholders pursuant to which we acquired 50.01% of Pro’s and 50.03% of Purex’s issued and outstanding share capital on a fully diluted basis through a combination of cash investments in the companies and acquisition of additional shares from the then current shareholders of the two companies in consideration for our restricted ADSs and a cash component. We agreed to; invest an aggregate amount of $1,250 thousand in Pro and Purex, pay $150 thousand in cash consideration to the current stockholders, and issue up to $500 thousand worth of restricted ADSs to the current stockholders of such companies subject to EBITDA milestones. Following the EBITDA results, the Company issued $71 thousand worth of restricted ADSs in June 20201. The transactions contemplated in the definitive agreements closed on January 4, 2021.

On May 16, 2021, we entered into a stock exchange and plan of restructuring agreement with Victor Hacmon, the other shareholder of Pro and Purex, and Jeffs’ Brands. Pursuant to which, among other things, we and Victor Hacmon transferred all our holdings in Pro and Purex to Jeffs’ Brands, in return for a consideration of Jeffs’ Brands ordinary shares that were issued respectively. As a result, Pro and Purex became wholly-owned subsidiaries of Jeffs’ Brands. The share exchange transaction was accounted in a manner similar to Pooling-of-Interests (“As Pooling”). To date, we invested approximately $ 5.4 million in Jeffs’ Brands and holds 50.03% of its shares.

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A. Operating results:

The following table sets forth a summary of our operating results:

|  | Year ended December 31, |
|  | 2021 |  |  | 2020 |
|  | U.S. Dollars, in thousands, except per share and weighted average shares data |
Revenues: |  |  |  |  |  |
Products |  |  | 8,933 |  |  |  | 491 |
Services |  |  | 1,185 |  |  |  | 40 |
|  |  | 10,118 |  |  |  | 531 |
Cost of revenues: |  |  |  |  |  |  |  |
Products |  |  | 4,938 |  |  |  | 988 |
Services |  |  | 379 |  |  |  | 46 |
|  |  | 5,317 |  |  |  | 1,034 |
Gross Profit (Loss) |  |  | 4,801 |  |  |  | (503 | )
Research and development expenses |  |  | 1,045 |  |  |  | 997 |
Sales and marketing expenses |  |  | 1,988 |  |  |  | 471 |
General and administrative expenses |  |  | 9,964 |  |  |  | 5,494 |
Net change in fair value of financial assets at fair value through profit or loss |  |  | (713 | ) |  |  | (797 | )
Share of net loss of associates accounted for using the equity method |  |  | 2,149 |  |  |  | 170 |
Amortization of excess purchase price of associates |  |  | 263 |  |  |  | 546 |
Operating loss |  |  | (9,895 | ) |  |  | (7,384 | )
Changes in fair value of warrants issued to investors |  |  | (484 | ) |  |  | (338 | )
Gain upon loss of control in a subsidiary |  |  | (11,465 | ) |  |  | - |
Gain from sale of an investment |  |  | (2,025 | ) |  |  | - |
Changes in fair value of commitment to issue shares |  |  | 75 |  |  |  | - |
Other income |  |  | (494 | ) |  |  | - |
Financial (income) loss net |  |  | 347 |  |  |  | (205 | )
Profit (Loss) before taxes on income |  |  | 4,151 |  |  |  | (6,841 | )
Taxes (benefit) expense |  |  | 105 |  |  |  | (9 | )
Net profit (loss) for the period |  |  | 4,046 |  |  |  | (6,850 | )
Other comprehensive income (loss) for the period |  |  | 162 |  |  |  | 35 |
Total comprehensive income (loss) for the period |  |  | 4,208 |  |  |  | (6,815 | )
Net Profit (loss) for the period is attributable to: |  |  |  |  |  |  |  |
Owners of Medigus |  |  | 6,794 |  |  |  | (4,325 | )
Non-controlling interest |  |  | (2,748 | ) |  |  | (2,525 | )
|  |  | 4,046 |  |  |  | (6,850 | )
Total comprehensive Profit (loss) for the period is attributable to: |  |  |  |  |  |  |  |
Owners of Medigus |  |  | 6,881 |  |  |  | (4,278 | )
Non-controlling interest |  |  | (2,673 | ) |  |  | (2,537 | )
|  |  | 4,208 |  |  |  | (6,815 | )
Basic Earnings (loss) per ordinary share |  |  | 0.01 |  |  |  | (0.03 | )
Diluted Earnings (loss) per ordinary share |  |  | 0.01 |  |  |  | (0.03 | )
Weighted average number of ordinary shares outstanding used to compute (in thousands): |  |  |  |  |  |  |  |
Basic income/loss per share |  |  | 460,717 |  |  |  | 133,445 |
Diluted income/loss per share |  |  | 460,717 |  |  |  | 133,445 |

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Year ended December 31, 2021 compared to year ended December 31, 2020

Revenues

Revenues for the year ended December 31, 2021 were $10,118,000 representing an increase of $9,587,000 or 1,806%, compared to total revenues of $531,000 for the year ended December 31, 2020.

The increase in revenues was primarily due to the consolidate revenues of Jeffs’ Brands, Eventer and in Medigus in connection with the Golden Grand Agreement

The tables below set forth our revenues, by region and by product for the periods presented:

U.S. dollars; in thousands

|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |
United States |  |  | 6,306 |  |  |  | 62 | % |  |  | 418 |  |  |  | 79 | %
Europe |  |  | 128 |  |  |  | 1 | % |  |  | 41 |  |  |  | 8 | %
Israel |  |  | 1,183 |  |  |  | 12 | % |  |  | 45 |  |  |  | 8 | %
China |  |  | 2,400 |  |  |  | 24 | % |  |  | - |  |  |  | - |
Other |  |  | 101 |  |  |  | 1 | % |  |  | 27 |  |  |  | 5 | %
Total |  |  | 10,118 |  |  |  | 100 | % |  |  | 531 |  |  |  | 100 | %

U.S. dollars; in thousands

|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |
Products on the Amazon online marketplace |  |  | 6,509 |  |  |  | 64 | % |  |  | - |  |  |  | - |
Products- others |  |  | 2,400 |  |  |  | 24 | % |  |  | - |  |  |  | - |
Revenues from commissions |  |  | 1,185 |  |  |  | 12 | % |  |  | 40 |  |  |  | 8 | %
Miniature camera and related equipment |  |  | 24 |  |  |  | 0 | % |  |  | 491 |  |  |  | 92 | %
Total |  |  | 10,118 |  |  |  | 100 | % |  |  | 531 |  |  |  | 100 | %

Our revenues in recent years were primarily derived from the sale of miniature camera and related equipment which we develop and manufacture and from development services. The decrease in revenues of Miniature camera and related equipment, in 2021 is primarily due to the deconsolidation of ScoutCam starting April 1, 2021.

The increase in revenues from Products on the Amazon Online Marketplace was primarily due to the sale in Amazon store by Jeffs’ Brands which was consolidated commencing January 4, 2021.

The increase in revenues from Products-others was due to revenues from the Golden Grand Agreement.

The increase in revenues from commissions derives from our subsidiary Eventer, which was consolidated commencing October 15, 2020.

Cost of revenues

Cost of revenues for the year ended December 31, 2021, were $5,317,000 representing an increase of $4,283,000, or 414%, compared to cost of revenues and of $1,034,000 for the year ended December 31, 2020. The increase was primarily due to the increase in cost of revenues related to the consolidation of Jeffs’ Brands and Eventer.

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Gross Profit (Loss)

Gross profit for the year ended December 31, 2021 was $4,801,000, representing an increase of $5,304,000 compared to gross loss of $503,000 for the year ended December 31, 2020. The gross profit increase is a result of consolidation of Jeffs’ Brands and Eventer in 2021 and revenues derived from the Golden Grand Agreement.

Research and Development Expenses

Research and development expenses for the year ended December 31, 2021, were $1,045,000, representing an increase of $48,000, or 5%, compared to $997,000 for the year ended December 31, 2020. The increase was primarily due to the consolidation of Eventer offset by the deconsolidation of ScoutCam.

Sales and Marketing Expenses

Sales and marketing expenses for the year ended December 31, 2021, were $1,988,000, representing an increase of $1,517,000, or 322%, compared to $471,000 for the year ended December 31, 2020. The increase was primarily due to the consolidation of Jeffs’ Brands and Eventer.

General and Administrative Expenses

General and Administrative expenses for the year ended December 31, 2021, were $9,964,000, representing an increase of $4,470,000, or 81%, compared to $5,494,000, for the year ended December 31, 2020. The increase was primarily due to:

| a. | The consolidation of Jeffs’ Brands and Eventer.

| b. | Increase in share - based compensation expenses due to 2021 granting.

Net change in fair value of financial assets at fair value through profit or loss

During 2021 we recognized income of $713,000 from net change in the fair value of financial assets derived from income related to Gix Media shares and conversion right, $516,000 from Polyrizon option offset by expenses from Save Foods, Inc. - warrants and shares, and from Automax shares.

Share of net loss of accounted for using the equity method

As described above the investment in Gix, Automax (until March 9, 2021), Polyrizon, Revoltz and ScoutCam (starting March 29, 2021) are accounted for using the equity method. Share of net loss of accounted for using the equity method the Company recognized at 2021 was $2,149 thousand.

Amortization of excess purchase price of an associate

In 2021 upon acquisition Fuel Doctor shares the difference between the cost of the investment and Medigus’ share of the net fair value of Fuel Doctor equity’ amounted to $263,000 and was recognized as an amortization of excess purchase price of an associate.

In 2020 upon acquisition Matomy’s shares the difference between the cost of the investment and Medigus’ share of the net fair value of Matomy’s equity’ amounted to $546,000 and was recognized as an amortization of excess purchase price of an associate.

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Operating loss

We incurred an operating loss of $9,895,000 for the year ended December 31, 2021, representing an increase of $2,511,000, or 34%, compared to operating loss of $7,384,000 for the year ended December 31, 2020. The increase in operating loss was mainly due to increase in operating expenses as mentioned above and due to increase in share of net loss associated for using the equity method of $1,979,000.

Change in Fair Value of Warrants Issued to Investors

Profit from change in the fair value of warrants issued to investors for the year ended December 31, 2021, was $484,000, representing an increase of $146,000, compared to profit of $338,000 for the year ended December 31, 2020.

Warrants issued to investors classified as either liabilities or as part of the shareholders’ equity based on the accounting guidance established in connection with the rights attached to the warrants. The warrants that were classified as liabilities due to a cashless exercise mechanism are subject to adjustment to fair value each statement of financial position cut-off date. This adjustment is presented separately within the consolidated statement of loss and other comprehensive loss.

Gain upon loss of control in a subsidiary

On March 29, 2021, ScoutCam consummated a private placement of USD 20 million. As the Company did not participate in the March 2021 funding, its interest in ScoutCam Inc. reduced to 28.06%, which resulted in loss of control in ScoutCam as of April 2021. Accordingly, ScoutCam was deconsolidated as of such date and accounted for as an equity investment, and the fair value of ScoutCam’s shares held by the Company as of such date were amounted according to the purchase price. As a result of deconsolidation of ScoutCam and initial recognition of the investment in ScoutCam using the equity method, the Company recorded a gain upon loss of control in a subsidiary of USD 11,465,000 in its statement of income.

Gain from sale of an investment

On January 19, 2021, and March 9, 2021, the Company sold 2,300,000 and 11,000,000 shares of Matomy, respectively. Subsequently, following such sales and the merger of Matomy with Automax, which is now traded on TASE (AMX.TA), the Company’s aggregate holdings in Automax decreased to 4.73% of its issued and outstanding share capital, therefore since March 9,2021 the investment was treated as fair value through profit and loss. The total gained recognized through profit and loss related to these sales sum to USD 2,025 thousand.

Financial expenses (income) in respect of deposits, bank commissions and exchange differences, net

Finance expenses, net for the year ended December 31, 2021, was $347,000, representing a decrease of $552,000, compared to finance income of $205,000 for the year ended December 31, 2020, primarily due to interest of loans and liability to third parties in Jeffs’ and Eventer.

Profit (Loss) for the year

We incurred net Profit of $4,046,000 for the year ended December 31, 2021, representing an increase of $10,896,000, or 159%, compared to loss of $6,850,000 for the year ended December 31, 2020. The increase was primarily due to increase of $11,465,000 in Gain upon loss of control in a subsidiary, increase of $2,025,000 in Gain from sale of an investment and, an increase of $494,000 in other income, offset with increase of $2,511,000 in operating loss and increase of $552,000 in financial expenses net.

Year ended December 31, 2020 compared to year ended December 31, 2019

The discussion and analysis regarding the results of operations from the fiscal years ended December 31, 2020, and December 31, 2019, is contained in our annual report on Form 20-F, filed with the SEC, on May 14, 2021.

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Effective Corporate Tax Rate

Our effective consolidated tax rate for the years ended December 31, 2021 and 2020 was almost zero percent (0%), primarily due to the fact that the Company did not record a tax asset, Eventer did not record a deferred tax asset in connection with the losses incurred in Israel, since it is not probable that we will be able to utilize such losses in the foreseeable future against taxable income. Jeffs’ Brands recorded deferred tax in connection with its losses and on cumulative net basis recorded a tax liability. Jeffs’ Brands also did not record a deferred tax asset in connection with the losses incurred since it is not probable that we will be able to utilize such losses in the foreseeable future against taxable income, but recorded a tax liability on a net basis.

Impact of Inflation, Devaluation and Fluctuation in Currencies on Results of Operations, Liabilities and Assets

We generate part of our revenues in different currencies than our functional currency (U.S. dollars), such as NIS and Euro. As a result, some of our financial assets are denominated in these currencies, and fluctuations in these currencies could adversely affect our financial results. A considerable amount of our expenses are generated in U.S. dollars, but a significant portion of our expenses such as salaries are generated in other currencies such as NIS. In addition to our operations in Israel, we are expanding our international operations in the European Union. Accordingly, we incur and expect to continue incurring additional expenses in non-U.S. dollar currencies, such as described above. Due to the mentioned, our results could be adversely affected as a result of a strengthening or weakening of the U.S. Dollar compared to these other currencies.

The inflation in Israel during the last several years was relatively immaterial and, therefore, had immaterial effect on our results of operations.

Effective January 1, 2016, we changed our functional currency to the U.S. dollar from NIS. This change was based on management’s assessment that the U.S. dollar is the primary currency of the economic environment in which we operate. Accordingly, the functional and reporting currency of our consolidated financial statements is the U.S. dollar.

B. Liquidity and Capital Resources

Liquidity

During the year ended December 31, 2021, we incurred a total comprehensive income of approximately $4.2 million and a negative cash flow used in operating activities of approximately $5.2 million. As of December 31, 2021, we incurred accumulated deficit of approximately $74.2 million.

We will need to seek additional sources of funds, including selling additional equity, debt or other securities or entering into a credit facility, take costs reduction steps or modify our current business plan to achieve profitability. If we raise additional funds through the issuance of debt securities, these securities may have rights senior to those of our ordinary shares and could contain covenants that could restrict our operations and ability to issue dividends. We may also require additional capital beyond our currently forecasted amounts. Any required additional capital, whether forecasted or not, may not be available on reasonable terms, or at all. If we are unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned research, development and commercialization activities, which could materially harm our business and results of operations.

Because of the numerous risks and uncertainties associated with the development of our products and the current economic situation, we are unable to estimate the exact amounts of capital outlays and operating expenditures necessary to complete the development of our products and successfully deliver commercial products to the market. Our future capital requirements will depend on many factors, including but not limited to the following:

| ● | the revenue generated by sales of our current and future products;
| ● | the expenses we incur in selling and marketing our products and supporting our growth;

| ● | the costs and timing of regulatory clearance or approvals for new products or upgrades or changes to our products;
| ● | the expenses we incur in complying with domestic or foreign regulatory requirements imposed on medical device companies;

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| ● | the rate of progress, cost and success or failure of on-going development activities;
| ● | the emergence of competing or complementary technological developments;
| ● | the costs of filing, prosecuting, defending and enforcing any patent or license claims and other intellectual property rights;
| ● | the terms and timing of any collaborative, licensing, or other arrangements that we may establish;
| ● | the future unknown impact of recently enacted healthcare legislation;
| ● | the acquisition of businesses, products and technologies; and
| ● | general economic conditions and interest rates.

Cash Flows

Net cash used in operating activities for the year ended December 31, 2021, was $5,067,000, compared to $6,263,000 for the year ended December 31, 2020. For the year ended December 31, 2021, the Company had net cash used in investing activities of $12,446,000 compared to net cash used in investing activities of $1,601,000 for the year ended December 31, 2020. For the year ended December 31, 2021, the Company had net cash generated from financing activities of $19,150,000 compared to $22,946,000 for the year ended December 31, 2020.

The change in our liquidity for the year ended December 31, 2021, resulted from several factors, including but not limited to:

| ● | Net cash used in operating activities consists primarily of an increase in Gain arising from deconsolidation of a subsidiary upon loss of control of $11,465,000, Gain from sale of investments of $2,026,000, offset by profit before taxes on income of $4,151,000, $2,149,000 Share of net loss of associates accounted for using the equity method, $2,362,000 Stock-based compensation in connection with options granted to employees and service providers.

| ● | Net cash used in investing activities is consist mainly of $3,252,000 upon deconsolidation of ScoutCam, $4,703,000 purchases of investments accounted as associates or measured through profit and loss, $1,236,000 loan to Gix, $5,003,000 purchase of intangible assets offset by $ 1,883,000 sale of securities of an associate.

| ● | Net generated from financing activities consists mainly of $17,336,000 Proceeds from issuance of shares and warrants by the Company, $1,388,000 Proceeds from issuance of shares and warrants by subsidiaries, $1,921,000 receipt of loans offset by $1,336,000 repayment of loans.

C. Research and Development, Patents and Licenses, etc.

Our research and development efforts are focused on continuous improvement of our products. We conduct all of our research activities in Israel.

As of December 31, 2021, our research and development team consisted of 3 employees and subcontractors for the development of our products in Eventer and Charging Robotics as needed. We have assembled an experienced team with recognized expertise in mechanical and electrical engineering, software, control algorithms and systems integration.

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The table below set forth our research and development expenses for the periods presented:

|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |
|  | (U.S. Dollars, in thousands) |
Research and development expenses |  | $ | 1,045 |  |  | $ | 997 |

From time to time we file applications for patent registration in the certain countries, some in which we are active and some which we consider as potential markets in order to protect our developed intellectual property.

D. Trend Information

The following is a description of factors that may influence our future results of operations, including significant trends and challenges that we believe are important to an understanding of our business and results of operations:

During 2020, a significant portion of our revenues was generated from the sale of our micro ScoutCam™ portfolio products, development services and the remainder from the sale of the MUSE™ system. The level of our future revenues is hard to predict as it depends on many factors, which most of them are outside of our control. For instance, future revenues from the sale of our products may be adversely affected by current general economic conditions and the resulting tightening of credit markets, which may cause purchasing decisions to be delayed, our customers may have difficulty securing adequate funding to buy our products or, in an extraordinary event, may cause our customers to experience difficulties in complying with their engagements with us. In addition, revenue growth depends on the acceptance of our technology in the market.

The healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek to manage healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. This trend may result in inadequate coverage for procedures, especially those utilizing new technology, or result in new technology not receiving reimbursement coverage, which may negatively impact utilization of our products. In addition, medical malpractice carriers are withdrawing coverage in certain states or substantially increasing premiums. If this trend continues or worsens, physicians and surgeons may discontinue using our products or may choose to not purchase it in the future due to the cost or inability to procure insurance coverage.

To date, a significant portion of our revenues was generated from the revenues of our subsidiaries, Jeffs’ Brands and Eventer.

During 2021 the e-commerce industry experienced disruptions relating to the COVID-19 pandemic, which resulted in delivery delays and increases in shipping costs. Adverse fluctuations in shipping costs, limitations on shipping and receiving capacity, and other disruptions in the transportation and shipping infrastructure at important shipping and delivery points for Jeffs’ Brands products, could materially adversely affect Jeffs’ Brands business, financial condition and results of operations.

Additionally, The COVID-19 pandemic has impacted companies in Israel and around the world, and as its trajectory remains highly uncertain, we cannot predict the duration and severity of the outbreak and its containment measures. See also “Item 3.D. – Risk Factors– The global outbreak of COVID-19 (coronavirus) may negatively impact the global economy in a significant manner for an extended period of time, and also adversely affect our operating results in a material manner.

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E. Critical Accounting Estimates

Application of critical accounting policies and estimates

Our significant accounting policies and their effect on our financial condition and results of operations are more fully described in our audited consolidated financial statements included elsewhere in this Annual Report. We have prepared our financial statements in conformity with International Financial Reporting Standards or IFRS, which requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. These estimates are prepared using our best judgment, after considering past and current events and various other assumptions. While management believes the factors evaluated provide a meaningful basis for establishing and applying sound accounting policies, management cannot guarantee that the estimates will always be consistent with actual results. In addition, certain information relied upon by us in preparing such estimates includes internally generated financial and operating information, external market information, when available, and when necessary, information obtained from consultations with third parties. Actual results may differ from these estimates. We believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because it included matters that were highly uncertain at the time, we were making our estimate or the assumption is material due to the levels of subjectivity and judgment involved, and (2) changes in the estimate could have a material impact on our financial condition or results of operations.

Warrants/options assets

Warrants/options assets, which measured as fair value through profit and loss, are subsequently measured using the Black-Scholes option-pricing model as follow:

The Black-Scholes option-pricing model requires us to make a number of assumptions, including the value of ordinary shares, expected volatility, expected term, risk-free interest rate and expected dividends.

Expected volatility of private company warrants was calculated based on the implied volatilities from market comparisons of certain publicly traded companies and other factors. Expected volatility for traded company warrants was calculated based upon their share prices. Share price as of the cut-off date for private company’s relies on the last finance round.

The risk-free interest rate was based on the U.S. treasury bonds yield with an equivalent term or Israel treasury bonds yield. There is no foreseeable plans to pay dividends. Future expense amounts for any period could be affected by changes in our assumptions and market conditions. In case there is alternative option the future value could be affected by management of the company which issue those options/warrants probability for occurrence of each case (non-IPO/IPO). In connection with Polyrizon warrants an increase/decrease of the probability for the occurrence of IPO would have increase/decrease in the fair value of the Polyrizon warrants by $93 thousands.

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Gix Anti-dilution rights

Anti-dilution rights are measured as fair value through profit and loss, are subsequently measured using the Black-Scholes option-pricing model as follow:

The Black-Scholes option-pricing model requires us to make a number of assumptions, including the value of ordinary shares, expected volatility, expected term, risk-free interest rate and expected dividends.

Expected volatility was calculated based upon GIX share price.

There is no foreseeable plans to pay dividends.

The risk-free interest rate was based on the Israel treasury bonds yield.

The value could be affected by management of the company which issue those Anti-dilution rights probability to occur. An increase/decrease of the probability for the occurrence of qualifying event by 10% would have increase/decrease in the fair value of Anti-dilution by $188 thousands.

Business Combinations

The results of an acquired business in a business combination are included in the Company’s consolidated financial statements from the date of acquisition according to IFRS 3R, “Business Combinations.” The Company allocates the purchase price, which is the sum of the consideration provided and may consist of cash, equity or a combination of the two, to the identifiable assets and liabilities of the acquired business at their fair values as of the acquisition date. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. The non-controlling interest are measured upon the date of the business combination in the amount of their share at the fair value of assets, liabilities and contingent liabilities of the acquired acquisition other than their share in goodwill.

The estimated fair values and useful lives of identifiable intangible assets are based on many factors, including estimates and assumptions of future operating performance and cash flows of the acquired business, the nature of the business acquired and the specific characteristics of the identified intangible assets. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions and competition.

Contingent consideration incurred in a business combination is included as part of the acquisition price and recorded at a probability weighted assessment of the fair value as of the acquisition date. The fair value of the contingent consideration is re-measured at each reporting period, with any adjustments in fair value recognized in earnings under general and administrative expenses.

Acquisition related costs incurred by the Company are not included as a component of consideration transferred but are accounted for as an expense in the period in which the costs are incurred.

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Share-Based Compensation

We account for share-based compensation in accordance with IFRS 2, “Share-based Payment.” Share based awards are mainly granted to employees, service providers and members of our board of directors and measured at fair value at each grant date. We calculate the fair value of share-based compensation options, on the date of grant using the Black-Scholes option-pricing model and the expense is recognized over the requisite service period using the accelerated basis method.

We recognize forfeitures as they occur.

The requisite service period for share-based compensation options is generally 3 years and vesting equally on quarterly basis.

The Black-Scholes option-pricing model requires us to make a number of assumptions, including the value of our ordinary shares, expected volatility, expected term, risk-free interest rate and expected dividends.

We evaluate the assumptions used to value share-based compensation options upon grant date.

Expected volatility for share-based compensation options was calculated based upon the Company’s share prices.

The risk-free interest rate was based on the U.S. treasury bonds yield with an equivalent term. We have not paid dividends and have no foreseeable plans to pay dividends.

As it relates to the fair value estimate of equity awards granted by our subsidiaries, the assumptions with respect to the underlying share price are primarily based on recent financing rounds, and the assumptions with respect to volatility of the share price is based on comparable companies. In cases equity awards granted by our subsidiaries have contractual terms that dependents on the successful completion of an IPO, our fair value estimate with respect to these awards includes assumption with respect to the probability of occurrence of an IPO event.

Future expense amounts for any particular period could be affected by changes in our assumptions or market conditions.

Recent Accounting Pronouncements

Please see Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report for information regarding recent accounting pronouncements.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The following table lists the names and ages of our directors and senior management as of April 14, 2022:

Name |  | Age |  | Position(s)
Liron Carmel |  | 38 |  | Chief Executive Officer
Eliyahu Yoresh(1)(3)(4) |  | 52 |  | Chairman of the Board of Directors
Ronen Rosenbloom(1)(2)(4) |  | 50 |  | Director
Eli Cohen(1)(2)(3)(4) |  | 53 |  | Director
Kineret Tzedef(2)(4) |  | 42 |  | Director
Tali Dinar |  | 50 |  | Chief Financial Officer

(1) | Member of the audit committee.
(2) | Member of the compensation committee.
(3) | Member of the investment committee.
(4) | Indicates independent director under Nasdaq Stock Market rules.

Liron Carmel has been serving as our Chief Executive Officer since April 2019. Mr. Carmel has vast experience in business and leadership across multiple industries, including bio pharma, internet technology, oil & gas exploration & production, real estate and financial services. In addition he serves as chairman of the Israel Tennis Table Association. Mr. Carmel also currently serves as a member of the board of directors of several of our subsidiaries including Gix (TASE: GIX), beginning June 2021, Elbit Imagining Ltd., beginning August 2021, Polyrizon Ltd., beginning July 2020, Jeffs’ Brands Ltd. beginning January 2021 and as the chairman of the board of directors of Eventer Technologies Ltd. beginning October 2020.

Eliyahu Yoresh has been serving as a member of our Board since September 2018 and as our Chairman of the board since February 2020. Mr. Yoresh serves as chief financial officer of Foresight Autonomous Holdings Ltd. (Nasdaq, TASE: FRSX). In addition, Mr. Yoresh serves as a director of Gix (TASE: GIX) and has previously served as a director of Nano Dimension Ltd. (Nasdaq: NNDM) and as a director of Geffen Biomed Investments Ltd. and Greenstone Industries Ltd. Mr. Yoresh served as the chief executive officer of Tomcar Global Holdings Ltd., a global manufacturer of off-road vehicles, from 2005 to 2008. Mr. Yoresh is an Israeli Certified Public Accountant. Yoresh acquired a B.A. in business administration from the Business College, Israel and an M.A. in Law Study from Bar-Ilan University, Israel.

Ronen Rosenbloom has been serving as a member of our Board since September 2018. Mr. Rosenbloom is an independent lawyer working out of a self-owned law firm specializing in white collar offences. Mr. Rosenbloom serves as chairman of the Israeli Money Laundering Prohibition committee and the Prohibition of Money Laundering Committee of the Tel Aviv District, both of the Israel Bar Association. Mr. Rosenbloom previously served as a police prosecutor in the Tel Aviv District. Mr. Rosenbloom holds an LL.B. from the Ono Academic College, an Israeli branch of University of Manchester.

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Eli Cohen has been serving as a member of our Board since September 2018. Mr. Cohen is an independent lawyer working out of a self-owned firm. He serves as chairman of Univo Pharmaceuticals Ltd., as director of Europe Hagag Ltd., and has previously served as director of Hagag Group Ltd., Multimatrixs Ltd., Matrat Mizug Ltd. and User Trend-M Ltd. Mr. Cohen also serves as a director of several private companies. Mr. Cohen holds an economics degree, an LL.B. and an LL.M. in Commercial Law from Tel-Aviv University, as well as an MBA from the Northwestern University and Tel-Aviv University joint program.

Kineret Tzedef has been serving as member of our Board since June 2019. Ms. Tzedef also serves as a director of sports division and served in other positions at Hapoel Organization (Israeli Sport Federation) since 2007. Ms. Tzedef is the president of Israeli Gymnastics Federation since 2018. Ms. Tzedef serves as an external director at Chiron Refineries Ltd. (TASE: CHR), and as an external director of Biomedico Hadarim Ltd. (TASE: BIMCM). Ms. Tzedef is admitted to the Israel Bar Association since 2014. Ms. Tzedef acquired a LL.B from the Academic Center for Law and Science, Israel and a B.Ed. in Law Study from the Academic College at Wingate, Israel.

Tali Dinar has been serving as our Chief Financial Officer since June 8, 2021. Ms. Dinar also serves as Chief Financial Officer of Novomic Ltd., a private company since 2019. Ms. Dinar also currently serves as a member of the board of directors of Jeffs’ Brands, beginning September 30, 2021, and Parazero Ltd. beginning February 13, 2022. She has also served as a member of the board of directors of Micronet Ltd. (TASE: MCRNT) since 2016 Between 2019 and 2020, Ms. Dinar served as the Chief Financial Officer of TechCare Corp. (currently Citrine Global Corp.) (OTCQB: CTGL). Between 2009 and 2019, Ms. Dinar worked at the MICT group and served in various positions, including as Chief Financial Officer of MICT Inc. (Nasdaq: MICT) and as Chief Financial Officer of MICT Telematics Ltd. From 2002 until 2006, Ms. Dinar served as the chief controller of I.T.L. Optronics Ltd. From 1997 until 2000, Ms. Dinar worked in the audit department of Ernst & Young Global. Ms. Dinar is a certified public accountant in Israel and holds a B.A. degree in Accounting and Business Management from The College of Management, Israel.

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Family Relationships

There are no family relationships between any members of our executive management and our directors.

Arrangements for Election of Directions and Members of Management

There are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive management or our directors were appointed.

B. Compensation

Compensation of Executive Officers

In accordance with the provisions of the Companies Law, the compensation of our directors and officer holders must generally comply with the terms and conditions of our compensation policy, as approved by our compensation committee, board of directors and general meeting of our shareholders, subject to certain exceptions under the Companies Law.

The table below reflects the compensation granted to our six most highly compensated office holders (as defined in the Companies Law) during or with respect to the year ended December 31, 2021.

Name and Position |  | Salary |  |  | Bonus |  |  | Equity-Based Compensation |  |  | Total |
| U.S. Dollars in thousands |
Liron Carmel Chief Executive Officer |  |  | 201 |  |  |  | 68 |  |  |  | 247 |  |  |  | 516 |
Eliyahu Yoresh Chairman of the Board of Directors(3) |  |  | 143 |  |  |  | 51 |  |  |  | 235 |  |  |  | 429 |
Eli Cohen Director |  |  | 35 |  |  |  | - |  |  |  | 81 |  |  |  | 116 |
Ronen Rosenbloom Director |  |  | 35 |  |  |  | - |  |  |  | 81 |  |  |  | 116 |
Kineret Tzedef Director |  |  | 34 |  |  |  | - |  |  |  | 77 |  |  |  | 111 |
Tali Dinar(1)(4) Chief Financial Officer |  |  | 77 |  |  |  | - |  |  |  | 65 |  |  |  | 142 |

(1) | Salary includes gross salary plus payment of social benefits made by us on behalf of such office holder. Such benefits may include, to the extent applicable to the office holder, payments, contributions and/or allocations for savings funds (such as managers’ life insurance policy), education funds (referred to in Hebrew as “keren hishtalmut”), pension, severance, risk insurances (e.g., life, or work disability insurance), payments for social security and tax gross-up payments, vacation, medical insurance and benefits, convalescence or recreation pay and other benefits and perquisites consistent with our policies.

(2) | Represents the equity-based compensation expenses recorded in the Company’s consolidated financial statements for the year ended December 31, 2021, based on the option’s fair value, calculated in accordance with accounting guidance for equity-based compensation.

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(3) | Mr. Yoresh has been serving as a member of our board of directors since September 2018 and as our Chairman of the board of directors since February 2020.

(4) | Ms. Dinar’s employment with the Company commenced on June 8, 2021.

The aggregate compensation paid by us to our office holders, as defined in the Companies Law, for the year ended December 31, 2021 was approximately $1.4 million, which includes six persons. This amount includes, when applicable, set aside or accrued to provide pension, severance, retirement or similar benefits or expenses, car expenses and value of the ordinary shares underlying the options representing accounting expenses, but does not include business travel, relocation, professional and business association dues and expenses reimbursed to officers, and other benefits commonly reimbursed or paid by companies in Israel.

Compensation of Directors

Under the Companies Law and the rules and regulations promulgated thereunder, our directors are entitled to fixed annual compensation, up to the limits set forth in the compensation policy. We currently pay Mr. Ronen Rosenbloom, Ms. Kineret Tzedef and Mr. Eli Cohen an annual fee of NIS 396,000.

Each of our non-executive directors were also granted options to purchase 2,000,000 Ordinary shares under the Plan (as defined herein). Such options were granted on June 29, 2021. The options shall vest over a period of three (3) years commencing on April 1, 2021, with 1/12 of such options vesting at the end of each subsequent three-month period following the grant, (ii) the term of the options will be of six (6) years from the grant date, unless they have been exercised or cancelled in accordance with the terms of and conditions of the applicable incentive plan of the Company, (iii) unless previously exercised or cancelled, the options may be exercised until 180 days from the termination of the tenure of a director, (iv) the exercise price per share of the options will be equal to the average share price of the 30 days prior to the date of grant, (v) the options grant will be in accordance and pursuant to Section 102 of the Income Tax Ordinance [New Version] (“Tax Ordinance”), if applicable, and (vi) the options will be accelerated upon the closing of a material transaction, resulting in change of control of the Company.

On April 27, 2021 and on May 4, 2021, our compensation committee and board of directors approved new compensation terms for Mr. Eliyahu Yoresh in connection with his services as an active chairman of the board of directors. For his services, Mr. Yoresh is entitled to receive a monthly payment of NIS45,000 plus VAT, which constitutes the sole and complete compensation. In addition, Mr. Yoresh is entitled to an annual, target based bonus and an additional overachievement bonus of up to 6 monthly salaries, each. The weight afforded to each target and overachievement component, is to be decided by our board of directors and compensation committee in accordance with the following weights: (a) 35% Company performance measures of strategic goals and related objectives; (b) 25% Company performance measures of material transaction or material profitability/revenues; (c) 20% Company performance measures of revenues and/or loss reduction; and (d) 20% Company performance measures of achieving commercialization of Company’s technology. The aforementioned compensation terms are consistent with our current compensation policy.

Following the approval of the annual general meeting of our shareholders held on August 30, 2021, Mr. Yoresh was granted with a one-time grant of options to purchase 6,000,000 Ordinary Shares in accordance with the terms of the Plan. The options shall vest over a period of three (3) years commencing on April 1,2021, with 1/12 of such options vesting at the end of each subsequent three-month period following the grant, (ii) the term of the options will be of six (6) years from the grant date, unless they have been exercised or cancelled in accordance with the terms of and conditions of the applicable incentive plan of the Company, (iii) unless previously exercised or cancelled, the options may be exercised until 180 days from the termination of Mr. Yoresh’ tenure as a chairman, (iv) the exercise price per share of the options will be equal to the average share price of the 30 days prior to the date of grant, (v) the options grant will be in accordance and pursuant to Section 102 of the Tax Ordinance, if applicable, and (vi) the options will be accelerated upon the closing of a material transaction, resulting in change of control of the Company.

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Equity Based Compensation of our Executive Officers and Directors

As of April 14, 2022, options to purchase 24,250,000 of our Ordinary Shares were outstanding and held by current executive officers and directors (consisting of 6 persons) with an average exercise price of NIS 0.31 per ordinary share, of which, options to purchase 10,291,667 of our ordinary shares are currently exercisable or exercisable within 60 days as of April 14, 2022. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership” in this annual report on Form 20-F.

Agreements with our Executive Officers

We have entered into written agreements with each of our executive officers. All of these agreements contain customary provisions regarding non-competition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition provisions may be limited under applicable law. In addition, we have entered into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them to the fullest extent permitted by law to the extent that these liabilities are not covered by directors and officers insurance.

Our office holders are generally eligible for bonuses each year. The bonuses are established and granted in accordance with our compensation policy and are generally payable upon meeting objectives and targets that are approved by our compensation committee and board of directors (and if required by our shareholders).

Consulting Agreement with Mr. Carmel

On July 25, 2019, our shareholders approved that as of April 2, 2019, our company would enter into a consulting agreement with Mr. Carmel, who serves as our Chief Executive Officer. The term is for an indefinite period, however the agreement may be terminated by either party by giving 60 days advance notice, or shorter periods in some cases, such as termination for “cause”. During the notice period, Mr. Carmel will be entitled to consulting fees only to the extent that he provides services to the Company during the notice period. The agreement also includes customary covenants regarding confidentiality, IP assignment, non-competition and non-solicitation.

Mr. Carmel’s monthly consulting fee is NIS 60,000 plus VAT, effective as of May 2021, as approved by our shareholders at our annual general meeting held on August 30, 2021. In addition, Mr. Carmel is entitled to an annual target based bonus and an additional overachievement bonus of up to 6 monthly salaries each, subject to a performance matrix to be approved by the Company’s compensation committee and board of directors on an annual basis, while up to 30% of such annual bonus may be discretionary and not subject to measurable performance indexes. The annual target bonus may be reduced by our board of directors according to our financial position and Mr. Carmel’s performance, and must be returned by Mr. Carmel if it is later shown to be granted in error which shall be restated in our financial statements.

In addition, Mr. Carmel was granted with options to purchase up to 1,250,000 Ordinary Shares of the Company (the “Options”), in accordance with the following terms: (i) the Options shall vest over a period of four (4) years commencing April 1, 2019, 25% of the Options shall vest on the first anniversary (i.e., April 1, 2020), and 75% of the Options shall vest on a quarterly basis over a period of three (3) years thereafter; (ii) the term of the Options shall be of six (6) years from the date of grant, unless they have been exercised or cancelled in accordance with the terms of and conditions of the applicable incentive plan of the Company, (iii) unless previously exercised or cancelled, the Options may be exercised until 180 days from the date of termination of the service, (iv) the exercise price per share of the Options shall be NIS 0.59, (v) the Options’ grant shall be in accordance and pursuant to Section 102 of the Income Tax Ordinance [New Version], and (vi) the Options shall be accelerated upon the closing of a material transaction, resulting in change of control of the Company.

At the annual general meeting of our shareholders held on August 30, 2021, Mr. Carmel was granted with additional grant of options to purchase 6,000,000 Ordinary Shares. The options shall vest over a period of three (3) years commencing on April 1, 2021, with 1/12 of such options vesting at the end of each subsequent three-month period following the grant, (ii) the term of the options will be of six (6) years from the grant date, unless they have been exercised or cancelled in accordance with the terms of and conditions of the applicable incentive plan of the Company, (iii) unless previously exercised or cancelled, the options may be exercised until 180 days following the termination of the engagement, (iv) the exercise price per share of the options will be equal to the average share price of the 30 days prior to the date of grant, (v) the options grant will be in accordance and pursuant to Section 102 of the Tax Ordinance, if applicable, and (vi) the options will be accelerated upon the closing of a material transaction, resulting in change of control of the Company.

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C. Board Practices

Introduction

Under the Companies Law and our articles of association, the management of our business is vested in our board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers are responsible for our day-to-day management and have individual responsibilities established by our board of directors.

Under our articles of association, our board of directors must consist of at least three and not more than 12 directors, not including two external directors appointed as required under the Companies Law. Our board of directors currently consists of four members, none of which are external directors, including our chairman of the board of directors, which is also appointed by the general meeting of our shareholders. Our directors are nominated by our independent directors and elected at the annual general meeting of our shareholders by a simple majority. Because our Ordinary Shares do not have cumulative voting rights in the election of directors, the holders of a majority of the voting power represented at a shareholders meeting have the power to elect all of our directors. The general meeting of our shareholders may resolve, at any time, by an ordinary majority resolution prior to the termination of his respective term of service and it may appoint another director in his place, provided that the director was given a reasonable opportunity to state his case before the general meeting.

In addition, if a director’s office becomes vacant, the remaining serving directors may continue to act in any manner, provided that their number is of the minimal number specified in our articles of association. If the number of serving directors is lower than three, then our board of directors will not be permitted to act, other than for the purpose of convening a general meeting of the Company’s shareholders for the purpose of appointing additional directors. In addition, the directors may appoint, immediately or of a future date, additional director(s) to serve until the subsequent annual general meeting of our shareholders, provided that the total number of directors in office do not exceed twelve directors (not including external directors).

Pursuant to the Companies Law and our articles of association, a resolution proposed at any meeting of our board of directors at which a quorum is present is adopted if approved by a vote of a majority of the directors present and eligible to vote. A quorum of the board of directors requires at least a majority of the directors then in office who are lawfully entitled to participate in the meeting.

According to the Companies Law, the board of directors of a public company must determine the minimum number of board members that should have financial and accounting expertise while considering, among other, the nature of the company, its size, the scope and complexity of its operations and the number of directors stated in the articles of association. Our board of directors resolved that the minimum number of board members that need to have financial and accounting expertise is one, and that Mr. Eliyahu Yoresh has accounting and financial expertise as required under the Companies Law.

External Directors

Under the Companies Law, companies incorporated under the laws of the State of Israel that are “public companies,” including companies with shares listed on the Nasdaq Capital Market, are required to appoint at least two external directors. External directors must meet certain independence criteria to ensure that they are unaffiliated with the company and its controlling shareholder, as well certain other criteria. External directors are elected for three-year terms in accordance with specific rules set forth in the Companies Law and the regulations promulgated thereunder and may be removed from office only under limited circumstances. Under the Companies Law, each committee of a company’s board of directors that is authorized to exercise powers of the board of directors is required to include at least one external director, and all external directors must be members of the company’s audit committee and compensation committee.

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Pursuant to regulations promulgated under the Companies Law, companies with shares traded on a U.S. stock exchange, including the Nasdaq Capital Market, may, subject to certain conditions, “opt out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of the board of directors. In accordance with these regulations, effective as of June 28, 2017, we have “opted out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of the board of directors.

Under these regulations, the exemptions from such Companies Law requirements will continue to be available to us so long as: (i) we do not have a “controlling shareholder” (as such term is defined under the Companies Law), (ii) our shares are traded on a U.S. stock exchange, including the Nasdaq Capital Market, and (iii) we comply with the director independence requirements, the audit committee and the compensation committee composition requirements, under U.S. laws (including applicable Nasdaq Rules) applicable to U.S. domestic issuers. We believe that Mr. Eli Cohen, Mr. Eliyahu Yoresh, Mr. Ronen Rosenbloom and Ms. Kineret Tzedef are “independent” for purposes of the Nasdaq Stock Market rules.

Alternate directors

Our articles of association provide, as allowed by the Companies Law, that any director may, by written notice to us, appoint another person who is qualified to serve as a director to serve as an alternate director and to terminate such appointment. Under the Companies Law, a person who is not qualified to be appointed as a director, a person who is already serving as a director or a person who is already serving as an alternate director for another director, may not be appointed as an alternate director. Nevertheless, a director who is already serving as a director may be appointed as an alternate director for a member of a committee of the board of directors as long as he or she is not already serving as a member of such committee.

Board committees

The board of directors may, subject to the provisions of the Companies Law, delegate any or all of its powers to committees, each consisting of one or more directors (except the audit and compensation committees, as described below), and it may, from time to time, revoke such delegation or alter the composition of any such committees. Unless otherwise expressly provided by the board of directors, the committees will not be empowered to further delegate such powers. The composition and duties of our audit committee and compensation committee are described below.

Audit committee

Our audit committee is currently comprised of Mr. Eli Cohen, Mr. Eliyahu Yoresh, and Mr. Ronen Rosenbloom. Mr. Eli Cohen acts as the chairperson of our audit committee.

Companies Law Requirements

Under the Companies Law, our board of directors is required to appoint an audit committee, which is responsible, among others, for:

| (i) | determining whether there are deficiencies in the business management practices of our Company, including in consultation with our internal auditor or the independent auditor, and making recommendations to our board of directors to improve such practices;

| (ii) | determining the approval process for transactions that are ‘non-negligible’ (i.e., transactions with a controlling shareholder that are classified by the audit committee as non-negligible, even though they are not deemed extraordinary transactions), as well as determining which types of transactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by the audit committee;

| (iii) | determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest and whether such transaction is extraordinary or material under Companies Law. See “— Fiduciary duties and approval of specified related party transactions and compensation under Israeli law.”;

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| (iv) | where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board of directors and proposing amendments thereto;

| (v) | examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities;

| (vi) | examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors or shareholders, depending on which of them is considering the appointment of our auditor; and

| (vii) | establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided to such employees.

Nasdaq requirements

Under the Nasdaq corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, all of whom are financially literate and one of whom has accounting or related financial management expertise. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq corporate governance rules. Our board of directors has determined that Mr. Eliyahu Yoresh is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the Nasdaq Marketplace Rules.

Each of the members of the audit committee is required to be “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is different from the general test for independence of board and committee members. Our board of directors has determined that each member of our audit committee is independent as such term is defined in Rule 10A-3(b)(1) of the Exchange Act.

Audit committee role

Our board of directors has adopted an audit committee charter setting forth the responsibilities of the audit committee consistent with the rules of the SEC and the Nasdaq Rules, which include, among others:

| ● | retaining and terminating our independent auditors, subject to the ratification of the board of directors, and in the case of retention, to that of the shareholders;

| ● | pre-approving of audit and non-audit services and related fees and terms, to be provided by the independent auditors;

| ● | overseeing the accounting and financial reporting processes of our company and audits of our financial statements, the effectiveness of our internal control over financial reporting and making such reports as may be required of an audit committee under the rules and regulations promulgated under the Exchange Act;

| ● | reviewing with management and our independent auditor our annual and quarterly financial statements prior to publication or filing (or submission, as the case may be) to the SEC;

| ● | recommending to the board of directors the retention and termination of the internal auditor, and the internal auditor’s engagement fees and terms, in accordance with the Companies Law as well as approving the yearly or periodic work plan proposed by the internal auditor;

| ● | reviewing with our general counsel and/or external counsel, as deem necessary, legal and regulatory matters that could have a material impact on the financial statements;

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| ● | identifying irregularities in our business administration, inter alia, by consulting with the internal auditor or with the independent auditor, and suggesting corrective measures to the board of directors; and

| ● | reviewing policies and procedures with respect to transactions (other than transactions related to the compensation or terms of services) between the company and officers and directors, or affiliates of officers or directors, or transactions that are not in the ordinary course of the company’s business and deciding whether to approve such acts and transactions if so required under the Companies Law.

The audit committee charter states that in fulfilling its obligations, the committee is entitled to demand from the Company any document, file, report or any other information that is required for the fulfillment of its roles and duties and to interview any of our employees or any employees of our subsidiaries in order to receive more details about his or her line of work or other issues that are connected to the roles and duties of the audit committee.

Compensation Committee

Our compensation committee is currently comprised of Mr. Ronen Rosenbloom, Mr. Eli Cohen and Ms. Kineret Tzedef. Mr. Ronen Rosenbloom acts as the chairperson of our compensation committee.

Companies Law requirements

Under the Companies Law, the board of directors of a public company must appoint a compensation committee which roles are, among others, as follows:

| ● | to recommend to the board of directors the approval of compensation policy for directors and officers in accordance with the requirements of the Companies Law;

| ● | to oversee the development and implementation of such compensation policy and recommending to the board of directors regarding any amendments or modifications that the compensation committee deems appropriate;

| ● | to determine whether to approve transactions concerning the terms of engagement and employment of office holders that require approval of the compensation committee; and

| ● | to resolve whether to exempt a transaction with a candidate for chief executive officer from shareholder’s approval.

Nasdaq requirements

Our board of directors has adopted a compensation committee charter setting forth the responsibilities of the committee consistent with the Nasdaq Rules, which include among others:

| ● | recommending to our board of directors for its approval a compensation policy in accordance with the requirements of the Companies Law as well as other compensation policies, incentive-based compensation plans and equity-based compensation plans, and overseeing the development and implementation of such policies and recommending to our board of directors any amendments or modifications to the committee deems appropriate, including as required under the Companies Law;

| ● | reviewing and approving the granting of options and other incentive awards to our chief executive officer and other executive officers, including reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer and other executive officers, including evaluating their performance in light of such goals and objectives;

| ● | approving and exempting certain transactions regarding office holders’ compensation pursuant to the Companies Law; and

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| ● | administer our equity-based compensation plans, including without limitation to approve the adoption of such plans, to amend and interpret such plans and the awards and agreements issued pursuant thereto, and to make awards to eligible persons under the plans and determine the terms of such awards.

The compensation committee is also authorized to retain and terminate compensation consultants, legal counsel or other advisors to the committee and to approve the engagement of any such consultant, counsel or advisor, to the extent it deems necessary or advisable.

Our board of directors has determined that each member of our compensation committee is independent under the Nasdaq Rules, including the additional independence requirements applicable to the members of a compensation committee.

Compensation policy

Under the Companies Law, companies incorporated under the laws of the State of Israel, whose shares are listed for trading on a stock exchange or have been offered to the public in or outside of Israel, such as us, are required to adopt a policy governing the compensation of “office holders” (as defined in the Companies Law). Following the recommendation of our compensation committee and approval by our board of directors, our shareholders approved a new compensation policy for directors and officers on August 30, 2021. Our compensation policy must be approved at least once every three years, first, by our board of directors, upon recommendation of our compensation committee, and second, by a simple majority of the ordinary shares present, in person or by proxy, and voting at a shareholders meeting, provided that either:

| ● | such majority includes at least a majority of the shares held by shareholders who are not controlling shareholders and shareholders who do not have a personal interest in such compensation policy; or

| ● | the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the compensation policy and who vote against the policy, does not exceed 2% of the company’s aggregate voting rights.

Such majority determined in accordance with the majority requirement described above is hereinafter referred to as the Compensation Special Majority Requirement.

To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting or by the Compensation Special Majority Requirement, the board of directors of a company may override the resolution of the shareholders following a re-discussion of the matter by the board of directors and the compensation committee and for specified reasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is in the best interest of the company. A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure once every three years.

The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors, including advancement of the company’s objectives, the company’s business plan and its long-term strategy, and creation of appropriate incentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations; and with respect to variable compensation, the contribution of the office holder towards the achievement of the company’s long-term goals and the maximization of its profits, all with a long-term objective and according to the position of the office holder. The compensation policy must furthermore consider the following additional factors:

| ● | the education, skills, experience, expertise and accomplishments of the relevant office holder;

| ● | the office holder’s position and responsibilities; and

| ● | prior compensation agreements with the office holder;

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| ● | the ratio between the cost of the terms of employment of an office holder and the cost of the employment of other employees of the company, including employees employed through contractors who provide services to the company, in particular the ratio between such cost to the average and median salary of such employees of the company, as well as the impact of disparities between them on the work relationships in the company;

| ● | the terms of employment include variable components — the possibility of reducing variable components at the discretion of the board of directors and the possibility of setting a limit on the value of non-cash variable equity-based components; and

| ● | if the terms of employment include severance compensation — the term of employment or office of the office holder, the terms of the office holder’s compensation during such period, the company’s performance during such period, the office holder’s individual contribution to the achievement of the company goals and the maximization of its profits and the circumstances under which he or she is leaving the company.

The compensation policy must also include the following principles:

| ● | with regards to variable components;

| ● | with the exception of office holders who report to the chief executive officer, a means of determining the variable components on the basis of long-term performance and measurable criteria; provided that the company may determine that an immaterial part of the variable components of the compensation package of an office holder shall be awarded based on non-measurable criteria, or if such amount is not higher than three months’ salary per annum, taking into account such office holder’s contribution to the company;

| ● | the ratio between variable and fixed components, as well as the limit of the values of variable components at the time of their payment, or in the case of equity-based compensation, at the time of grant;

| ● | a condition under which the office holder will return to the company, according to conditions to be set forth in the compensation policy, any amounts paid as part of the office holder’s terms of employment, if such amounts were paid based on information later to be discovered to be wrong, and such information was restated in the company’s financial statements;
| ● | the minimum holding or vesting period of variable equity-based components to be set in the terms of office or employment, as applicable, while taking into consideration long-term incentives; and
| ● | a limit to retirement grants.

Our compensation policy is designed to promote retention and motivation of directors and executive officers, incentivize superior individual excellence, align the interests of our directors and executive officers with our long-term performance and provide a risk management tool. To that end, a portion of our executive officer compensation package is targeted to reflect our short and long-term goals, as well as the executive officer’s individual performance. On the other hand, our compensation policy includes measures designed to reduce the executive officer’s incentives to take excessive risks that may harm us in the long-term, such as limits on the value of cash bonuses and equity-based compensation, limitations on the ratio between the variable and the total compensation of an executive officer and minimum vesting periods and performance based vesting for equity-based compensation.

Our compensation policy also addresses our executive officers’ individual characteristics (such as their respective position, education, scope of responsibilities and contribution to the attainment of our goals) as the basis for compensation variation among our executive officers and considers the internal ratios between compensation of our executive officers and directors and other employees. Pursuant to our compensation policy, the compensation that may be granted to an executive officer may include: base salary, annual bonuses and other cash bonuses (such as a signing bonus and special bonuses with respect to any special achievements, such as outstanding personal achievement, outstanding personal effort or outstanding company performance), equity-based compensation, benefits and retirement and termination of service arrangements. All cash bonuses are limited to a maximum amount linked to the executive officer’s base salary.

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An annual cash bonus may be awarded to executive officers upon the attainment of pre-set periodic objectives and individual targets. The annual cash bonus that may be granted to our executive officers other than our Chief Executive Officer will be based on performance objectives and a discretionary evaluation of the executive officer’s overall performance by our Chief Executive Officer and subject to minimum thresholds. The annual cash bonus that may be granted to executive officers other than our Chief Executive Officer may alternatively be based entirely on a discretionary evaluation. Furthermore, our Chief Executive Officer will be entitled to approve performance objectives for executive officers who report to him.

The measurable performance objectives of our Chief Executive Officer will be determined annually by our compensation committee and board of directors. A non-material portion of the Chief Executive Officer’s annual cash bonus, as provided in our compensation policy, may be based on a discretionary evaluation of the Chief Executive Officer’s overall performance by the compensation committee and the board of directors.

The equity-based compensation under our compensation policy for our executive officers (including members of our board of directors) is designed in a manner consistent with the underlying objectives in determining the base salary and the annual cash bonus, with its main objectives being to enhance the alignment between the executive officers’ interests with our long-term interests and those of our shareholders and to strengthen the retention and the motivation of executive officers in the long term. Our compensation policy provides for executive officer compensation in the form of share options or other equity-based awards, such as restricted shares and restricted share units, in accordance with our equity incentive plan then in place. The equity-based compensation shall be granted from time to time and be individually determined and awarded according to the performance, educational background, prior business experience, qualifications, role and the personal responsibilities of the executive officer.

In addition, our compensation policy contains compensation recovery provisions which allow us under certain conditions to recover bonuses paid in excess, enable our Chief Executive Officer to approve an immaterial change in the terms of employment of an executive officer who reports directly him (provided that the changes of the terms of employment are in accordance with our compensation policy) and allow us to exculpate, indemnify and insure our executive officers and directors to the maximum extent permitted by Israeli law subject to certain limitations set forth therein.

Our compensation policy also provides for compensation to the members of our board of directors either (i) in accordance with the amounts provided in the Companies Regulations (Rules Regarding the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange Outside of Israel) of 2000, as such regulations may be amended from time to time, or (ii) in accordance with the amounts determined in our compensation policy.

Investment Committee

Our investment committee is comprised of Mr. Eli Yoresh and Mr. Eli Cohen. The investment committee is authorized to approve certain investments in accordance with the Company’s investment policy approved by the board of directors. The investment committee monitors the management of the portfolio for compliance with the investment policies and guidelines and considers the merits of time sensitive investments that could be beneficial to the Company.

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Internal auditor

Under the Companies Law, the board of directors of a public company must appoint an internal auditor based on the recommendation of the audit committee. Under the Companies Law, each of the following may not be appointed as internal auditor:

| ● | a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;

| ● | a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;

| ● | an office holder (including a director) of the company (or a relative thereof); or

| ● | a member of the company’s independent accounting firm, or anyone on his or her behalf.

The role of the internal auditor is, among other things, to examine whether a company’s actions comply with applicable law and orderly business procedure. The audit committee is required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. Our internal auditor is Daniel Spira, Certified Public Accountant (Isr.).

Fiduciary duties and approval of specified related party transactions and compensation under Israeli law

Fiduciary duties of office holders

The Companies Law imposes fiduciary duties on all office holders of a company comprised of a duty of care and a duty of loyalty.

The duty of care requires an office holder to act in the same degree of proficiency with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of care includes, among other things, a duty to use reasonable means, in light of the circumstances, to obtain:

| ● | information on the business advisability of a given action brought for his or her approval or performed by virtue of his or her position; and

| ● | all other important information pertaining to such action.

The duty of loyalty requires an office holder to act in good faith and for the benefit of the company, and includes, among other things, the duty to:

| ● | refrain from any act involving a conflict of interest between the performance of his or her duties in the company and his or her other duties or personal affairs;

| ● | refrain from any activity that is competitive with the business of the company;

| ● | refrain from exploiting any business opportunity of the company for the purpose of gaining a personal advantage for himself or herself or others; and

| ● | disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder.

Under the Companies Law, we may approve an act specified above, provided that the office holder acted in good faith, the act or its approval does not harm the company’s best interest, and the office holder discloses his or her personal interest a sufficient time before the approval of such act, including any relevant document.

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Disclosure of personal interests of an office holder and approval of transactions

The Companies Law requires that an office holder promptly disclose to the company any personal interest that he or she may have and all related material information or documents relating to any existing or proposed transaction by the company. An interested office holder’s disclosure must be made promptly and, in any event, no later than the first meeting of the board of directors at which the transaction is considered. Under the Companies Law, once an office holder complies with the above disclosure requirement, the board of directors at which the transaction is considered. An office holder is not obliged to disclose such information if the personal interest of the office holder derives solely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction.

Under the Companies Law, a company may approve a transaction between the company and the office holder or a third party in which the office holder has a personal interest only if the office holder has complied with the above disclosure requirement, provided, however, that a company may not approve a transaction or action that is not to the company’s benefit.

Under the Companies Law, unless the articles of association of a company provide otherwise, a transaction with an office holder or with a third party in which the office holder has a personal interest, which is not an extraordinary transaction, requires approval by the board of directors. Our articles of association do not state otherwise. If the transaction considered with an office holder or third party in which the office holder has a personal interest is an extraordinary transaction, then the audit committee’s approval is required prior to approval by the board of directors. For the approval of compensation arrangements with directors and executive officers, see “Item 6. Directors, Senior Management and Employees —C. Board Practices—Compensation of directors and executive officers.”

Any person who has a personal interest in the approval of a transaction that is brought before a meeting of the board of directors or the audit committee may not be present at the meeting or vote on the matter. However, if the chairperson of the board of directors or the chairperson of the audit committee has determined that the presence of an office holder with a personal interest is required, such office holder may be present at the meeting for the purpose of presenting the matter. Notwithstanding the foregoing, a director who has a personal interest may be present at the meeting and vote on the matter if a majority of the directors or members of the audit committee have a personal interest in the approval of such transaction’ provided, however, that if a majority of the directors at a board of directors meeting have a personal interest in the approval of the transaction, such transaction also requires the approval of the shareholders of the company.

A “personal interest” is defined under the Companies Law as the personal interest of a person in an action or in a transaction of the company, including the personal interest of such person’s relative or the interest of any other corporate body in which such person and/or such person’s relative is a director or general manager, a 5% shareholder or holds 5% or more of the voting rights, or has the right to appoint at least one director or the general manager, but excluding a personal interest stemming solely from the fact of holding shares in the company. A personal interest also includes (1) a personal interest of a person who votes according to a proxy of another person, including in the event that the other person has no personal interest, and (2) a personal interest of a person who gave a proxy to another person to vote on his or her behalf regardless of whether the discretion of how to vote lies with the person voting or not.

An “extraordinary transaction” is defined under the Companies Law as any of the following:

| ● | a transaction other than in the ordinary course of business;

| ● | a transaction that is not on market terms; or

| ● | a transaction that may have a material impact on the company’s profitability, assets or liabilities.

An extraordinary transaction in which an office holder has a personal interest requires approval of the company’s audit committee followed by the approval of the board of directors.

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Disclosure of personal interests of a controlling shareholder and approval of transactions

The Companies Law also requires that a controlling shareholder promptly disclose to the company any personal interest that he or she may have and all related material information or documents relating to any existing or proposed transaction by the company. A controlling shareholder’s disclosure must be made promptly and, in any event, no later than the first meeting of the board of directors at which the transaction is considered. The following require the approval of each of (i) the audit committee (or the compensation committee with respect to the terms of engagement of the controlling shareholder or relative thereof with the company related for the provision of service, including among others as an office holder or employee of the company), (ii) the board of directors and (iii) the shareholders (in that order): (a) extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest (including a private placement in which a controlling shareholder has a personal interest), (b) the engagement with a controlling shareholder or his or her relative, directly or indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative as an office holder, and (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred as Transaction with a Controlling Shareholder). In addition, the shareholder approval must fulfill one of the following requirements:

| ● | at least a majority of the shares held by shareholders who have no personal interest in the transaction and are voting at the meeting must be voted in favor of approving the transaction, excluding abstentions; or
| ● | the shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more than two percent (2%) of the voting rights in the company.

In addition, any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest with a term of more than three years requires the abovementioned approval every three years, however, unless, with respect to certain transactions the audit committee determines that such longer term is reasonable under the circumstances.

Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative thereof, or with a director, that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the audit committee and board of directors.

The Companies Law requires that every shareholder that participates, in person, by proxy or by voting instrument, in a vote regarding a transaction with a controlling shareholder, must indicate in advance or in the ballot whether or not that shareholder has a personal interest in the vote in question. Failure to so indicate will result in the invalidation of that shareholder’s vote.

Approval of the compensation of directors and executive officers

The compensation of, or an undertaking to indemnify, insure or exculpate, an office holder who is not a director requires the approval of the company’s compensation committee, followed by the approval of the company’s board of directors, and, if such compensation arrangement or an undertaking to indemnify or insure is inconsistent with the company’s stated compensation policy, or if the said office holder is the chief executive officer of the company (apart from a number of specific exceptions), then such arrangement is subject to the approval of our shareholders, subject to the Compensation Special Majority Requirement.

Directors. Under the Companies Law, the compensation of our directors requires the approval of our compensation committee, the subsequent approval of the board of directors and, unless exempted under the regulations promulgated under the Companies Law, the approval of the general meeting of our shareholders. If the compensation of our directors is inconsistent with our stated compensation policy, then, provided that those provisions that must be included in the compensation policy according to the Companies Law have been considered by the compensation committee and board of directors, shareholder approval will also be required to be approved by the Compensation Special Majority Requirement.

Executive officers other than the chief executive officer. The Companies Law requires the approval of the compensation of a public company’s executive officers (other than the chief executive officer) in the following order: (i) the compensation committee, (ii) the company’s board of directors, and (iii) if such compensation arrangement is inconsistent with the company’s stated compensation policy, the company’s shareholders by the Compensation Special Majority Requirement. However, if the shareholders of the company do not approve a compensation arrangement with an executive officer that is inconsistent with the company’s stated compensation policy, the compensation committee and board of directors may override the shareholders’ decision if each of the compensation committee and the board of directors provide detailed reasons for their decision.

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Chief executive officer. Under the Companies Law, the compensation of a public company’s chief executive officer is required to be approved by: (i) the company’s compensation committee; (ii) the company’s board of directors, and (iii) the company’s shareholders by the Compensation Special Majority Requirement. However, if the shareholders of the company do not approve the compensation arrangement with the chief executive officer, the compensation committee and board of directors may override the shareholders’ decision if each of the compensation committee and the board of directors provide a detailed reasoning for their decision. The approval of each of the compensation committee and the board of directors must be in accordance with the company’s stated compensation policy; however, under special circumstances, the compensation committee and the board of directors may approve compensation terms of a chief executive officer that are inconsistent with the company’s compensation policy provided that they have considered those provisions that must be included in the compensation policy according to the Companies Law and that shareholder approval was obtained by the Compensation Special Majority Requirement. In addition, the compensation committee may resolve that the shareholder approval is not required for the approval of the engagement terms of a candidate to serve as the chief executive officer, if the compensation committee determines that the compensation arrangement is consistent with the company’s stated compensation policy, that the chief executive officer did not have a prior business relationship with the company or a controlling shareholder of the company, and that subjecting the approval to a shareholder vote would impede the company’s ability to attain the candidate to serve as the company’s chief executive officer.

Duties of shareholders

Under the Companies Law, a shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an acceptable manner in exercising its rights and performing its obligations to the company and other shareholders, including, among other things, when voting at meetings of shareholders on the following matters:

| ● | an amendment to the articles of association;

| ● | an increase in the company’s authorized share capital;

| ● | a merger; and

| ● | the approval of related party transactions and acts of office holders that require shareholder approval.

A shareholder also has a general duty to refrain from discriminating against other shareholders.

The remedies generally available upon a breach of contract will also apply to a breach of the shareholder duties mentioned above, and in the event of discrimination against other shareholders, additional remedies are available to the injured shareholder.

In addition, any controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under a company’s articles of association, has the power to appoint or prevent the appointment of an office holder, or any other power with respect to a company, is under a duty to act with fairness towards the company. The Companies Law does not describe the substance of this duty except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness, taking each shareholder’s position in the company into account.

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Approval of private placements

Under the Companies Law and the regulations promulgated thereunder, a private placement of securities does not require approval at a general meeting of the shareholders of a company; provided however, that in special circumstances, such as a private placement completed in lieu of a special tender offer or a private placement which qualifies as a related party transaction (See “Item 6. Directors, Senior Management and Employees —C. Board Practices—Fiduciary duties and approval of specified related party transactions and compensation under Israeli law”), for which approval at a general meeting of the shareholders of a company is required.

Exemption, Insurance and Indemnification of Directors and Officers

Under the Companies Law, a company may not exculpate an office holder from liability for a breach of a fiduciary duty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpate in advance a director from liability arising out of a prohibited dividend or distribution to shareholders.

Under the Companies Law and the Securities Law, 5738-1968, or the Securities Law, a company may indemnify an office holder in respect of the following liabilities, payments and expenses incurred for acts performed by him or her as an office holder, either in advance of an event or following an event, provided its articles of association include a provision authorizing such indemnification:

| ● | a monetary liability incurred by or imposed on the office holder in favor of another person pursuant to a court judgment, including pursuant to a settlement confirmed as judgment or arbitrator’s decision approved by a competent court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking will detail the abovementioned foreseen events and amount or criteria;

| ● | reasonable litigation expenses, including reasonable attorneys’ fees, which were incurred by the office holder as a result of an investigation or proceeding filed against the office holder by an authority authorized to conduct such investigation or proceeding, provided that such investigation or proceeding was either (i) concluded without the filing of an indictment against such office holder and without the imposition on him of any monetary obligation in lieu of a criminal proceeding; (ii) concluded without the filing of an indictment against the office holder but with the imposition of a monetary obligation on the office holder in lieu of criminal proceedings for an offense that does not require proof of criminal intent; or (iii) in connection with a monetary sanction;

| ● | reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or which were imposed on the office holder by a court (i) in a proceeding instituted against him or her by the company, on its behalf, or by a third party, (ii) in connection with criminal indictment of which the office holder was acquitted, or (iii) in a criminal indictment which the office holder was convicted of an offense that does not require proof of criminal intent;

| ● | a monetary liability imposed on the office holder in favor of a payment for a breach offended at an Administrative Procedure (as defined below) as set forth in Section 52(54)(a)(1)(a) to the Securities Law;

| ● | expenses incurred by an office holder or certain compensation payments made to an injured party that were instituted against an office holder in connection with an Administrative Procedure under the Securities Law, including reasonable litigation expenses and reasonable attorneys’ fees; and

| ● | any other obligation or expense in respect of which it is permitted or will be permitted under applicable law to indemnify an office holder, including, without limitation, matters referenced in Section 56H(b)(1) of the Securities Law.

An “Administrative Procedure” is defined as a procedure pursuant to chapters H3 (Monetary Sanction by the Israeli Securities Authority), H4 (Administrative Enforcement Procedures of the Administrative Enforcement Committee) or I1 (Arrangement to prevent Procedures or Interruption of procedures subject to conditions) to the Securities Law.

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Under the Companies Law and the Securities Law, a company may insure an office holder against the following liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:

| ● | a breach of a fiduciary duty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;

| ● | a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder;

| ● | a monetary liability imposed on the office holder in favor of a third party;

| ● | a monetary liability imposed on the office holder in favor of an injured party at an Administrative Procedure pursuant to Section 52(54)(a)(1)(a) of the Securities Law; and

| ● | expenses incurred by an office holder in connection with an Administrative Procedure, including reasonable litigation expenses and reasonable attorneys’ fees.

Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:

| ● | a breach of fiduciary duty, except for indemnification and insurance for a breach of the fiduciary duty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

| ● | a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;

| ● | an act or omission committed with intent to derive illegal personal benefit; or

| ● | a civil or administrative fine, monetary sanction or forfeit levied against the office holder.

Under the Companies Law, exculpation, indemnification and insurance of office holders must be approved by the compensation committee and the board of directors and, with respect to directors or controlling shareholders, their relatives and third parties in which such controlling shareholders have a personal interest, also by the shareholders.

Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by law. On February 18, 2021, our board of directors approved a new directors’ and officers’ liability insurance policy, following the recent amended of our compensation policy approved by our shareholders on February 12, 2021.

Employment and consulting agreements with executive officers

We have entered into written employment or service agreements with each of our executive officers. See “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions – Employment Agreements” for additional information.

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Directors’ service contracts

There are no arrangements or understandings between us, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their employment or service as directors of our company.

D. Employees

Number of Employees

As of December 31, 2021, we employed 26 employees, including those employed by our subsidiaries Jeffs’ Brands, Charging Robotics and Eventer, which include our chief executive officer that is engaged by the Company as a consultant.

As of December 31, 2020, we employed 39 employees in Israel including those employed by our indirect subsidiaries ScoutCam Ltd. and Eventer.

As of December 31, 2019, we had 20 full-time employees, none of which were located in the United States and the rest were located in Israel.

Distribution of Employees

The following is the distribution of our employees (including those employed by our indirect subsidiary ScoutCam Ltd.in 2020 and 2019), Eventer’s employees in 2021 and 2020 including Jeffs’ Brands and Charging Robotics employees in 2021 by areas of engagement and geographic location:

|  | As of December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Numbers of employees by category of activity |  |  |  |  |  |  |  |  |
Management and administrative |  |  | 20 |  |  |  | 21 |  |  |  | 4 |
Research and development |  |  | 3 |  |  |  | 9 |  |  |  | 4 |
Operations |  |  | - |  |  |  | - |  |  |  | 6 |
Sales and marketing |  |  | 3 |  |  |  | 1 |  |  |  | 1 |
Production |  |  | - |  |  |  | 8 |  |  |  | 5 |
Total workforce |  |  | 26 |  |  |  | 39 |  |  |  | 20 |
Numbers of employees by geographic location |  |  |  |  |  |  |  |  |  |  |  |
Israel |  |  | 26 |  |  |  | 39 |  |  |  | 20 |
United States |  |  | - |  |  |  | - |  |  |  | - |
Total workforce |  |  | 23 |  |  |  | 39 |  |  |  | 20 |
Numbers of employees by employer |  |  |  |  |  |  |  |  |  |  |  |
Medigus Ltd. |  |  | 6 |  |  |  | 3 |  |  |  | 3 |
Eventer |  |  | 15 |  |  |  | 9 |  |  |  |  |
Jeff Brands |  |  | 4 |  |  |  |  |  |  |  |  |
ScoutCam Ltd. |  |  | - |  |  |  | 27 |  |  |  | 17 |
Charging Robotics |  |  | 1 |  |  |  | - |  |  |  | - |
|  |  | 26 |  |  |  | 39 |  |  |  | 20 |

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During the years covered by the above table, we did not employ a significant number of temporary employees. We consider our relations with our employees excellent and have never experienced a strike or work stoppage. None of our employees is represented by a labor union.

In Israel we are subject to certain labor statutes and national labor court precedent rulings, as well as to certain provisions of the collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations including the Industrialists’ Associations. These provisions of collective bargaining agreements are applicable to our Israeli employees by virtue of extension orders issued in accordance with relevant labor laws by the Israeli Ministry of Economy and Industry, and which apply such agreement provisions to our employees even though they are not directly part of a union that has signed a collective bargaining agreement. The laws and labor court rulings that apply to our employees principally concern the minimum wage laws, length of the work day and workweek, overtime payment, procedures for dismissing employees, determination of severance pay, leaves of absence (such as annual vacation or maternity leave), sick pay and other conditions for employment. The general extension orders which apply to our employees principally concern mandatory contributions to a pension fund or managers’ insurance, annual recreation allowance, travel expenses payment and other conditions of employment. We generally provide our employees with benefits and working conditions beyond the required minimums.

Israeli law generally requires severance pay upon a dismissal of an employee by the employer without “cause” (as defined in the law), which equal to the employee’s latest monthly salary multiplied by the number of years of continuous employment with the same employer or at the same employment facilities (the “Statutory Severance Pay”). The severance pay is usually funded by the employer allocating monthly payments to employees’ managers’ insurance and/or pension fund described below, on account of the Statutory Severance Pay. The monthly payments to the managers’ insurance and/or pension fund in respect of severance pay usually amount to 8.33% or 6% of an employee’s monthly wages. Upon an event that entitles an employee to severance pay, the employer will generally release in favor of the employee the amounts accrued in the severance fund, as described above and will complete any shortfall amount between the Statutory Severance Pay and the amounts accrued in the severance fund. An alternative, and commonly used, pension and severance contribution scheme is known as the Section 14 Arrangement under the General Approval issued under the Severance Pay Law (the “Section 14 Arrangement”). Where the Section 14 Arrangement is properly applied, the amounts accrued in the severance fund are in lieu of the Statutory Severance Pay and the employer’s sole obligation with respect to severance pay would be to release the amounts accrued in the severance and pension funds in any event of termination of employment (dismissal or resignation), without the need to complete any amounts on account the Statutory Severance Pay. Furthermore, Israeli employees and employers are required to pay predetermined sums to the National Insurance Institute, which is similar to the United States Social Security Administration. Such amounts also include payments for national health insurance.

E. Share Ownership

Share ownership by Directors and Executive Officers

For information regarding ownership of our ordinary shares by our directors and executive officers, see Item 7. “Major Shareholders and Related Party Transactions — A. Major Shareholders.”

2013 Share Option and Incentive Plan

In August 2013, our board of directors approved and adopted our 2013 Share Option and Incentive Plan, or the Plan, which expires in August 2023. The Plan provides for the issuance of shares and the granting of options, restricted shares, restricted share units and other share-based awards to employees, directors, officers, consultants, advisors, and our and Medigus U.S.’s service providers. The Plan provides for awards to be issued at the determination of our board of directors in accordance with applicable law.

The Plan provides for the grant to residents of Israel of options that qualify under the provisions of Section 102 Tax Ordinance, as well as for the grant of options that do not qualify under such provisions. The 2013 Plan was submitted to the ITA, as required by applicable law. The Plan also provides for the grant of options to U.S. resident employees that are “qualified”, i.e., incentive stock options, under the U.S. Internal Revenue Code of 1986, as amended, or the Code, and options that are not qualified. In addition to the grant of awards under the relevant tax regimes of the United States and Israel, the Plan allows for the grant of awards to grantees in other jurisdictions, with respect to which our board of directors is empowered to make the requisite adjustments in the plan.

Options granted under the Plan which are currently outstanding generally may not expire later than six years from the date of grant, unless otherwise specified. Unvested awards that are cancelled and/or forfeited go back into the plan.

See Item 6.B. “Compensation” for a description of awards granted under the Incentive Plan to our directors and officers in 2021.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of April 14, 2022 (unless otherwise noted below), the beneficial ownership of our ordinary shares by:

| ● | each person, or group of affiliated persons, known to us to be the beneficial owner of more than 5% of our voting securities;
| ● | each of our directors and executive officers individually; and

| ● | all of our executive officers and directors as a group.

The beneficial ownership of our ordinary shares is determined in accordance with the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. For purposes of the table below, we deem ordinary shares issuable pursuant to options that are currently exercisable or exercisable within 60 days as of April 14, 2022, if any, to be outstanding and to be beneficially owned by the person holding the options or warrants for the purposes of computing the percentage ownership of that person, but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. The percentage of ordinary shares beneficially owned is based on 477,002,560 ordinary shares outstanding as of April 14, 2022.

Except where otherwise indicated, we believe, based on information furnished to us by such owners, that the beneficial owners of the ordinary shares listed below have sole investment and voting power with respect to such shares. In addition, none of our shareholders will have different voting rights from other shareholders. To the best of our knowledge, we are not owned or controlled, directly or indirectly, by another corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

As of April 14, 2022, there was one shareholder of record of our ordinary shares. The number of record holders is not representative of the number of beneficial holders of our ordinary shares, as the shares of all shareholders for a publicly traded company such as our ordinary shares underlying our ADSs are recorded in the name of our transfer agent, Computershare Trust Company, N.A.

Unless otherwise noted below, each beneficial owner’s address is Medigus Ltd., 3 HaNechoshet Street, building B, Tel Aviv, Israel, 6971068.

Our principal shareholders do not have different or special voting rights.

Holders of more than 5% of our voting securities |  | Number of Shares Beneficially Owned(1) |  |  | Percentage of Shares Beneficially Owned(2) |
Directors and executive officers(1) |  |  |  |  |  |
Kineret Tzedef(3) |  |  | 1,104,167 |  |  |  | * |
Liron Carmel(4) |  |  | 2,967,500 |  |  |  | * |
Ronen Rosenbloom(5) |  |  | 1,416,667 |  |  |  | * |
Eliyahu Yoresh(6) |  |  | 2,916,600 |  |  |  | * |
Eli Cohen(7) |  |  | 1,416,667 |  |  |  | * |
Tali Dinar(8) |  |  | 666,667 |  |  |  | * |
All directors and executive officers as a group (six persons)(1) |  |  | 10,488,267 |  |  |  | 2.19 | %

* | less than 1%.
(1) | Beneficial ownership is determined in accordance with the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person, even if not the record owner, has or shares the underlying benefits of ownership. These benefits include the power to direct the voting or the disposition of the securities or to receive the economic benefit of ownership of the securities. A person also is considered to be the “beneficial owner” of securities that the person has the right to acquire within 60 days by option or other agreement. Beneficial owners include persons who hold their securities through one or more trustees, brokers, agents, legal representatives or other intermediaries, or through companies in which they have a “controlling interest,” which means the direct or indirect power to direct the management and policies of the entity.

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(2) | The percentages shown are based on 477,002,560 Ordinary Shares issued and outstanding as of April 14, 2022.

(3) | Includes options to purchase (i) 437,500 Ordinary Shares at an exercise price of NIS 0.448 per share, and (ii) 666,667 Ordinary Shares at an exercise price of NIS 0.29 per share that are exercisable within 60 days of April 14, 2022. In addition, Ms. Tzedef holds (i) options to purchase 312,500 Ordinary Shares that are not exercisable within 60 days of April 14, 2022, which have expiration date of July 8, 2026 and an exercise price of NIS 0.448, and (ii) options to purchase 1,333,333 Ordinary Shares that are not exercisable within 60 days of April 14, 2022, which have expiration date June 29, 2027 and an exercise price of NIS 0.29.
(4) | Includes 30,000 Ordinary Shares and options to purchase (i) 937,500 Ordinary Shares at an exercise price of NIS 0.59 per share that are exercisable within 60 days of April 14, 2022, and (ii) options to purchase 2,000,000 Ordinary Shares at an exercise price of NIS 0.29 per share that are exercisable within 60 days of April 14, 2022. In addition, Mr. Carmel holds options to purchase (i) 312,500 Ordinary Shares that are not exercisable within 60 days of April 14, 2022, which have an expiration date of July 25, 2025 and an exercise price of NIS 0.59, and (ii) options to purchase 4,000,000 Ordinary Shares that are not exercisable within 60 days of April 14, 2022, which have expiration date of June 29, 2027 and an exercise price of NIS 0.29.
(5) | Includes options to purchase (i) 750,000 Ordinary Shares at an exercise price of NIS 0.59 per share that are exercisable within 60 days of April 14, 2022, which have an expiration date of January 9, 2025 and (ii) 666,667 Ordinary Shares at an exercise price of NIS 0.29 per share that are exercisable within 60 days of April 14, 2022., In addition, Mr. Rosenbloom holds options to purchase 1,333,333 Ordinary Shares that are not exercisable within 60 days of April 14, 2022, which have an expiration date of June 29, 2027 and an exercise price of NIS 0.29.
(6) | Includes 166,600 Ordinary Shares and options to purchase 750,000 Ordinary Shares at an exercise price of NIS 0.59 per share that are exercisable within 60 days of April 14, 2022, which have an expiration date of January 9, 2025, and (ii) 2,000,000 Ordinary Shares at an exercise price of NIS 0.29 per share that are exercisable within 60 days of April 14, 2022. In addition, Mr. Yoresh holds options to purchase 4,000,000 Ordinary Shares that are not exercisable within 60 days of April 14, 2022, which have an expiration date of June 29, 2027 and an exercise price of NIS 0.29.
(7) | Includes options to purchase 750,000 Ordinary Shares at an exercise price of NIS 0.59 per share that are exercisable within 60 days of April 14, 2022. which have an expiration date of January 9, 2025, and (ii) 666,667 Ordinary Shares at an exercise price of NIS 0.29 per share that are exercisable within 60 days of April 14, 2022., In addition, Mr. Cohen holds options to purchase 1,333,333 Ordinary Shares that are not exercisable within 60 days of April 14, 2022, which have an expiration date of June 29, 2027 and an exercise price of NIS 0.29.
(8) | Includes options to purchase 666,667 Ordinary Shares at an exercise price of NIS 0.29 per share that are exercisable within 60 days of April 14, 2022. In addition, Ms. Dinar holds options to purchase 1,333,333 Ordinary Shares that are not exercisable within 60 days of April 14, 2022, which have an expiration date of June 29, 2027, and an exercise price of NIS 0.29.

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Significant Changes in Percentage Ownership by Major Shareholders

Over the course of 2021 and as of April 14, 2022, there were no changes in the percentage ownership of our major shareholders.

Over the course of 2020, there were no increases in the percentage ownership of our major shareholders. On the other hand, there were decreases in the percentage ownership of our former significant shareholders; (i) Citadel Securities LLC from 0.01% to 0.01%; (ii) Empery Asset Master Ltd. from 9.99% to 0.99%; and (iii) Sabby Volatility Warrant Master Fund, Ltd. from 6.78% to 0.34%, which percentages are based exclusively on the relevant section 13 reports filed with the SEC by the foregoing shareholders.

Over the course of 2020, there were no increases in the percentage ownership of our major shareholders. On the other hand, there were decreases in the percentage ownership of our former significant shareholders: (i) L.I.A. Pure Capital Ltd., from 6.02% to 3.68%; (ii) Sabby Management, LLC, from 6.78% to 0.34%; (iii) Hal Mintz, from 6.78% to 0.34%; (iv) Ryan M. Lane from 9.99% to 0.99%; and (v) Martin D. Hoe from 9.99% to 0.99%.

Over the course of 2020, there were decreases in the percentage of ownership held by Gix Internet Ltd. (formerly known as Algomizer Ltd.) from more than 5% to below 5%.

Over the course of 2019, there were no increases in the percentage ownership of our major shareholders. On the other hand, there were decreases in the percentage ownership of our former significant shareholders (i) Sabby Volatility Warrant Master Fund, Ltd. from 6.83% to 6.78%; (ii) Sabby Management, LLC, from 6.83% to 6.78%; and (iii) Hal Mintz, from 6.83% to 6.78%.

B. Related Party Transactions

Agreements with our Executive Officers

We have entered into written agreements with each of our executive officers. All of these agreements contain customary provisions regarding non-competition, confidentiality of information and assignment of inventions. However, the enforceability of the non-competition provisions may be limited under applicable law. In addition, we have entered into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them to the fullest extent permitted by law to the extent that these liabilities are not covered by directors and officers insurance.

Our office holders are generally eligible for bonuses each year. The bonuses are established and granted in accordance with our compensation policy and, are generally payable upon meeting objectives and targets that are approved by our compensation committee and board of directors (and if required by our shareholders).

Directors and Officers Insurance Policy and Indemnification Agreements

Our articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the Companies Law.

We have entered into agreements with each of our current director and officers exculpating them from a breach of their duty of care to us to the fullest extent permitted by law, subject to limited exceptions, and undertaking to indemnify them to the fullest extent permitted by law, to the extent that these liabilities are not covered by insurance. This indemnification is limited, with respect to any monetary liability imposed in favor of a third party, to events determined as foreseeable by the board of directors based on our activities. The maximum aggregate amount of indemnification that we may pay to our directors and officers based on such indemnification agreement is equal to 25% of our shareholders’ equity pursuant to our latest audited or unaudited consolidated financial statements, as applicable, as of the date of the indemnification payment. Such indemnification amounts are in addition to any insurance amounts. Each director or officer who agrees to receive this letter of indemnification also gives his approval to the termination of all previous letters of indemnification that we have provided to him or her in the past, if any.

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Our current compensation policy determines, among others, that we may provide our directors and officers, including those serving in any of our subsidiaries from time or time and those who are controlling shareholders, with liability insurance policies provided that the engagement is in the ordinary course of business, in market terms and is not expected to materially influence our profits, properties and undertakings. The coverage limit is of up to the greater of $50 million or 50% of the Company’s shareholders equity based on the most recent financial statements of the Company at the time of approval of the insurance policy by our compensation committee.

On March 21, 2022, our compensation committee approved a new directors’ and officers’ liability insurance policy. The new directors’ and officers’ liability insurance policy provides total coverage of $7 million for the benefit of all of our directors and officers, in respect of which we are charged a twelve-month premium of $452 thousands, and which includes a deductible of half a million per claim, other than securities related claims filed in the United States or Canada, for which the deductible will not exceed $2.5 million.

Agreements with our Subsidiaries

We entered into an Intercompany Services Agreement, or the Intercompany Agreement, with ScoutCam Ltd., as of May 30, 2019, for provision of services by Medigus to ScoutCam Ltd. On April 19, 2020, the Intercompany Agreement was amended such that ScoutCam Ltd. shall provide us with services, including usage of ScoutCam Ltd. office space in consideration for a fee determined based on the actual usage by Medigus. On March 22, 2022, ScoutCam Ltd. provided us prior written notice to of termination of the Intercompany Agreement effective May 21, 2022.

On December 1, 2019, we and ScoutCam Ltd. consummated an A&R Transfer Agreement. Under the A&R Transfer Agreement, we transferred two patent families in exchange for, among other things, a license in connection with the marketing and sale of the Medigus Ultrasonic Surgical Endostapler. In addition, we granted to ScoutCam Ltd. a license to access, use, improve, develop, market and sell licensed intellectual property, including the right to any future versions, enhancements, improvements and derivative works of such licensed intellectual property in connection with the development and commercialization of the ScoutCam Ltd. miniature video technology. On July 27, 2020, we amended the A&R Transfer Agreement and assigned 3 additional patent families to ScoutCam Ltd. subject to the IIA approval which was granted on August 30, 2020.

On October 14, 2020, we signed a share purchase agreement and a revolving loan agreement with Eventer (the “Revolving Loan Agreement”). As part of the share purchase agreement and the revolving loan agreement, we invested $750,000, and following the completion thereof we held 58.7% of Eventer’s issued and outstanding share capital.

On April 8, 2021, Eventer consummated a share purchase agreement for an aggregate amount of $2.25 million out of which we invested $300,000. As a result, we currently hold approximately 47.69% of Eventer’s share capital.

In November, 2021 we agreed with Eventer that the repayment of the initial advance under the Revolving Loan Agreement will occur on the earlier of (i) six months following the maturity date of the initial advance; or (ii) immediately following an initial public offering of Eventer.

On April 12, 2022, we mended the Revolving Loan Agreement, such that the repayment of the initial advance will occur at the earlier of (i) twelve months following the Maturity Date of the Initial Advance; or (ii) immediately following an initial public offering of Eventer.

On April 19, 2020, we entered into an Asset Transfer Agreement, effective January 20, 2020, with our majority owned subsidiary GERD IP. Pursuant to the Asset Transfer Agreement, we transferred certain of our patents in consideration for seven capital notes issued to us by GERD IP, of $2,000,000 each.

On February 2, 2021, we entered into two loans and pledges agreements with Jeffs’ Brands and its other stockholder, to finance Smart Repair Pro’s additional purchases of three new brands on the Amazon online marketplace. Pursuant to the forgoing agreements, the Company extended a USD 4 million loans, with an annual interest of 4%, to be repaid on the fifth anniversary of the effective date.

On May 20, 2021, we entered into a sublease agreement with Jeffs’ Brands pursuant to which we sublease office space of approximately 97 square meters to Jeffs’ Brands.

C. Interests of Experts and Counsel

Not applicable.

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ITEM 8. FINANCIAL INFORMATION4

A. Consolidated Statements and Other Financial Information.

See “Item 18. Financial Statements.”

Export Sales

The following table presents total export sales for each of the fiscal years indicated ($, in thousands):

|  | For the year ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Total export sales* |  |  | 8,935 |  |  |  | 481 |  |  |  | 242 |
as a percentage of total revenues |  |  | 85 | % |  |  | 82 | % |  |  | 89 | %

* | Export sales, as presented, are defined as sales to customers located outside of Israel.

Legal Proceedings

From time to time we may assert or be subject to various asserted or unasserted legal proceedings and claims. Any such claims, regardless of merit, could be time-consuming and expensive to defend and could divert management’s attention and resources from our operations. While the management believes that we have adequate insurance coverage and we accrue loss contingencies for all known matters that are probable and can be reasonably estimated, we cannot assure that the outcome of all current or future litigation will not have a material adverse effect on us and our results of operations.

Dividends

We have never paid cash dividends on our Ordinary Shares and do not anticipate that we will pay any cash dividends on our ordinary shares or ADSs in the foreseeable future.

We intend to retain our earnings to finance the development and expenses of our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, business prospects, applicable Israeli law and other factors our board of directors may deem relevant.

B. Significant Changes

No significant change, other than as otherwise described in this annual report, has occurred in our operations since the date of our consolidated financial statements included in this annual report.

ITEM 9. THE OFFER AND LISTING

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A. Offer and Listing Details

Our ordinary shares were traded on the TASE under the symbol “MDGS” from February 2006 to January 25, 2021 when we delisted our ordinary shares from TASE. In August 2015, our ADSs commenced trading on Nasdaq under the symbol “MDGS.” Each ADS currently represents 20 Ordinary Shares.

For a description of the ADSs, see “Item 12. Description of Securities Other Than Equity Securities – D. American Depositary Shares.”

Our Series C Warrants have been trading on Nasdaq under the symbol “MDGSW” since July 2018. Each Series C Warrant is exercisable into one ADS for an exercise price of $3.50 and will expire five years from the date of issuance.

On February 12, 2021, following the approval of our shareholders at an extraordinary general meeting of the shareholders, we amended our articles of association to eliminate the par value of our ordinary shares, such that the authorized share capital of our company following the amendment consists of 1,000,000,000 Ordinary Shares of no par value.

B. Plan of Distribution

Not Applicable.

C. Markets

Our Ordinary Shares are no longer listed on TASE. Our ADSs are traded on Nasdaq under the symbol “MDGS.” Our Series C Warrants are traded on the Nasdaq under the symbol “MDGSW”.

D. Selling Shareholders

Not Applicable.

E. Dilution

Not Applicable.

F. Expenses of the Issue

Not Applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not Applicable.

B. Memorandum and Articles of Association

A copy of our amended and restated articles of association is attached as Exhibit 1.1 to this annual report on Form 20-F. The information called for by this Item is set forth in Exhibit 2.3 to this annual report on Form 20-F and is incorporated by reference into this annual report on Form 20-F.

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C. Material Contracts

The following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which we are or have been a party, for the two years immediately preceding the date of this annual report on Form 20-F:

| ● | Share Purchase Agreement by and between Medigus Ltd. and Jeffs’ Brands Ltd., dated June 14, 2021, filed as Exhibit 4.7 to this annual report on Form 20-F, and incorporated herein by reference. See Item 4.B “Business Overview” for more information about this document.

D. Exchange Controls

There are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our securities or the proceeds from the sale of our securities, except or otherwise as set forth in this section and under “Item 10E. Additional Information — Taxation.” However, legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.

The ownership or voting of our ordinary shares by non-residents of Israel, except with respect to citizens of countries that are in a state of war with Israel, is not restricted in any way by our articles or by the laws of the State of Israel.

E. Taxation

The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.

Israeli Tax Considerations and Government Programs

The following is a summary of the material Israeli tax laws applicable to us, and some Israeli Government programs benefiting us. This section also contains a discussion of some Israeli tax consequences to persons owning our ordinary shares. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of this kind of investor include traders in securities or persons that own, directly or indirectly, 10% or more of our outstanding means of control, all of whom are subject to special tax regimes not covered in this discussion. Some parts of this discussion are based on a new tax legislation which has not been subject to judicial or administrative interpretation. The discussion should not be construed as legal or professional tax advice and does not cover all possible tax considerations.

SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE ISRAELI OR OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY FOREIGN, STATE OR LOCAL TAXES.

General Corporate Tax Structure in Israel

Israeli resident companies are generally subject to corporate tax on their taxable income at the rate of 23% of a company’s taxable income. However, the effective tax rate payable by a company that derives income from a Benefited Enterprise, a Preferred Enterprise, a Special Preferred Enterprise, a Preferred Technological Enterprise or a Special Preferred Technology Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli resident company are generally subject to tax at the prevailing corporate tax rate.

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Law for the Encouragement of Industry (Taxes), 5729-1969

The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax benefits for “Industrial Companies.”

The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel which was incorporated in Israel, which has 90% or more of its income in the tax year, other than income from certain government loans, derived from an “Industrial Enterprise” owned by it and located in Israel or in the “Area”, in accordance with the definition under section 3A of Tax Ordinance (New Version) 1961 (the “Tax Ordinance”). An “Industrial Enterprise” is defined as an enterprise whose principal activity in any given tax year is industrial activity.

The following corporate tax benefits, among others, are available to Industrial Companies:

| ● | Amortization over an eight-year period commencing on the year in which such rights were first exercised, of the cost of purchased patents, rights to use a patent and know-how which are used for the development or advancement of the Industrial Enterprise;
| ● | Under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies controlled by it; and
| ● | Under certain conditions, expenses related to a public offering are deductible in equal amounts over a three years period commencing on the year of the offering.

We may qualify as an Industrial Company and may be eligible for the benefits described above.

Tax Benefits and Grants for Research and Development

Israeli tax law allows, under certain conditions, a tax deduction for research and development expenditures, including capital expenditures, over three-years period. Expenditures are deemed related to scientific research and development projects, if:

| ● | The expenditures are approved by the relevant Israeli government ministry, determined by the field of research;
| ● | The research and development must be for the promotion of the company; and
| ● | The research and development is carried out by or on behalf of the company seeking such tax deduction.

The amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects. No deduction under these research and development deduction rules is allowed if such deduction is related to an expense invested in an asset depreciable under the general depreciation rules of the Tax Ordinance. Expenditures not so approved are deductible in equal amounts over three years.

From time to time, we may apply the Israel Innovation Authority (previously known as the Israeli Office of the Chief Scientist) (the “IIA”) for approval to allow a tax deduction for all research and development expenses during the year incurred. There can be no assurance that such application will be accepted.

Law for the Encouragement of Capital Investments, 5719-1959

The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives for capital investments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).

The Investment Law has been amended several times over the recent years, with the three most significant changes effective as of April 1, 2005 (referred to as the 2005 Amendment), as of January 1, 2011 (referred to as the 2011 Amendment) and as of January 1, 2017 (referred to as the 2017 Amendment).

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Tax Benefits Subsequent to the 2005 Amendment

The 2005 Amendment applies to investment programs commencing after 2004, but does not apply to investment programs approved prior to April 1, 2005. The 2005 Amendment provides that terms and benefits included in any certificate of approval that was granted before the 2005 Amendment became effective (April 1, 2005) will remain subject to the provisions of the Investment Law as in effect on the date of such approval. Pursuant to the 2005 Amendment, the Israeli Authority for Investments and Development of the Israeli Ministry of Economy (referred to as the Investment Center) will continue to grant Approved Enterprise status to qualifying investments. The 2005 Amendment, however, limits the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as an Approved Enterprise, such as provisions generally requiring that at least 25% of the Approved Enterprise’s income be derived from exports. An enterprise that qualifies under the new provisions is referred to as a “Beneficiary Enterprise”, rather than “Approved Enterprise”. The 2005 Amendment provides that Approved Enterprise status will only be necessary for receiving cash grants. As a result, it was no longer necessary for a company to obtain Approved Enterprise status in order to receive the tax benefits previously available under the alternative benefits track. Rather, a company may claim the tax benefits offered by the Investment Law directly in its tax returns, provided that its facilities meet the criteria for tax benefits set forth in the 2005 Amendment. Such a position may be subject to a future tax audit. Companies are entitled to approach the Israeli Tax Authority for a pre-ruling regarding their eligibility for benefits under the Investment Law, as amended.

Tax benefits are available under the 2005 Amendment to production facilities (or other eligible facilities) which are generally required to derive 25% or more of their business income from export to specific markets with a population of at least 14 million in 2012 (such export criteria will further be increased in the future by 1.4% per annum). In order to receive the tax benefits, the 2005 Amendment states that a company must make an investment which meets all of the conditions, including exceeding a minimum investment amount specified in the Investment Law. Such investment allows a company to receive “Benefited Enterprise” status, and may be made over a period of no more than three years that will end at the year in which the company requested to have the tax benefits apply to its Benefited Enterprise. The benefits period under the Beneficiary Enterprise status is limited to 12 years from the year the company chose to have its tax benefits apply. Where the company requests to apply the tax benefits to an expansion of existing facilities, only the expansion will be considered to be a Benefited Enterprise and the company’s effective tax rate will be the weighted average of the applicable rates. In this case, the minimum investment required in order to qualify as a Benefited Enterprise is required to exceed a certain percentage of the value of the company’s production assets before the expansion.

The extent of the tax benefits available under the 2005 Amendment to qualifying income of a Benefited Enterprise depend on, among other things, the geographic location in Israel of the Benefited Enterprise. The location will also determine the period for which tax benefits are available. Such tax benefits include an exemption from corporate tax on undistributed income for a period of between two to ten years, depending on the geographic location of the Benefited Enterprise in Israel, and a reduced corporate tax rate of between 10% to 25% for the remainder of the benefits period, depending on the level of foreign investment in the company in each year. The benefits period is limited to 12 or 14 years from the year the company first chose to have the tax benefits apply, depending on the location of the company within Israel.

A company qualifying for tax benefits under the 2005 Amendment which pays a dividend out of income derived by its Benefited Enterprise during the tax exemption period will be subject to corporate tax in respect of the gross amount of the dividend, or a lower rate in the case of a qualified FIC which is at least 49% owned by non-Israeli residents. Dividends paid out of income attributed to a Benefited Enterprise (or out of dividends received from a company whose income is attributed to a Benefited Enterprise) are generally subject to withholding tax at source at the rate of 15% or such lower rate as may be provided in an applicable tax treaty. The reduced rate of 15% is limited to dividends and distributions out of income attributed to a Benefited Enterprise during the benefits period and actually paid at any time up to 12 years thereafter except with respect to a qualified Foreign Investment Company (as such term is defined in the Investment Law), in which case the 12-year limit does not apply.

The benefits available to a Benefited Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and its regulations. If a company does not meet these conditions, it may be required to refund the amount of tax benefits, as adjusted by the Israeli consumer price index, and interest, or other monetary penalties.

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We applied for tax benefits as a “Benefited Enterprise” with 2005 as a “Year of Election”. In addition, the Company elected that years 2009 and 2012 be “years of election” for expansion of the benefited enterprise. We may be entitled to tax benefits under this regime once we are profitable for tax purposes and subject to the fulfillment of all the relevant conditions. If we do not meet these conditions, the tax benefits may not be applicable, which would result in adverse tax consequences to us. Alternatively, and subject to the fulfillment of all the relevant conditions, we may elect in the future to irrevocably waive the tax benefits available for Benefited Enterprise and claim the tax benefits available to Preferred Enterprise under the 2011 Amendment (as detailed below).

Tax Benefits under the 2011 Amendment

The Investment Law was significantly amended as of January 1, 2011 (the “2011 Amendment”). The 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment.

The 2011 Amendment introduced new tax benefits for income generated by a “Preferred Company” through its “Preferred Enterprise,” in accordance with the definition of such term in the Investments Law. A “Preferred Company” is defined as either: (i) a company incorporated in Israel which is not wholly owned by a governmental entity, or (ii) a limited partnership that: (a) was registered under the Israeli Partnerships Ordinance and; (b) all of its limited partners are companies incorporated in Israel, but not all of them are governmental entities; which has, among other things, Preferred Enterprise status and is controlled and managed from Israel.

A Preferred Company is entitled to a reduced flat tax rate with respect to the income attributed to the Preferred Enterprise, at the following rates:

Tax Year |  | Development Region “A” |  |  | Other Areas within Israel |
2011 – 2012 |  |  | 10 | % |  |  | 15 | %
2013 |  |  | 7 | % |  |  | 12.5 | %
2014 |  |  | 9 | % |  |  | 16 | %
2017 onwards(1) |  |  | 7.5 | % |  |  | 16 | %

(1) | In December 2016, the Israeli Parliament (the Knesset) approved an amendment to the Investment Law pursuant to which the tax rate applicable to Preferred Enterprises in Development Region “A” would be reduced to 7.5% as of 2017.

Dividends distributed from income which is attributed to a “Preferred Enterprise” will be subject to withholding tax at source at the following rates: (i) Israeli resident corporations — 0%, (ii) Israeli resident individuals — 20%, and (iii) non-Israeli residents — 20% or a reduced tax rate under the provisions of an applicable double tax treaty, subject to the receipt in advance of a valid certificate from the Israel Tax Authority (“ITA”) allowing for a reduced tax rate.

Under the 2011 Amendment, a company located in Development Region “A” may be entitled to cash grants and the provision of loans under certain conditions, if approved. The rates for grants and loans shall not be fixed, but up to 20% of the amount of the approved investment (may be increased with additional 4%). In addition, a company owning a Preferred Enterprise under the Grant Track may be entitled also to the tax benefits which are prescribed for a Preferred Company.

The 2011 Amendment also provided transitional provisions to address companies already enjoying current benefits under the Investment Law. These transitional provisions provide, among other things, that unless an irrevocable request is made to apply the provisions of the Investment Law as amended in 2011 with respect to income to be derived as of January 1, 2011: (i) the terms and benefits included in any certificate of approval that was granted to an Approved Enterprise, which chose to receive grants, before the 2011 Amendment became effective, will remain subject to the provisions of the Investment Law as in effect on the date of such approval, and subject to certain conditions;. (ii) the terms and benefits included in any certificate of approval that was granted to an Approved Enterprise, that had participated in an alternative benefits program, before the 2011 Amendment became effective will remain subject to the provisions of the Investment Law as in effect on the date of such approval, provided that certain conditions are met; and (iii) a Beneficiary Enterprise can elect to continue to benefit from the benefits provided to it before the 2011 Amendment came into effect, provided that certain conditions are met.

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The tax benefits under the 2011 Amendment also include accelerated depreciation and amortization for tax purposes.

The termination or substantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.

As the Company does not have taxable income as of today, it does not use tax benefits under the said regime.

New Tax benefits under the 2017 Amendment that became effective on January 1, 2017

The 2017 Amendment provides new tax benefits for two types of Technology Enterprises, as described below, and is in addition to the other existing tax beneficial programs under the Investment Law.

The 2017 Amendment provides that a technology company satisfying certain conditions will qualify as a Preferred Technology Enterprise and will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as Preferred Technology Income, as defined in the Investment Law. The tax rate is further reduced to 7.5% for a Preferred Technology Enterprise located in development zone A. In addition, a Preferred Technology Company will enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain Benefited Intangible Assets (as defined in the Investment Law) to a related foreign company if the Benefited Intangible Assets were acquired from a foreign company on or after January 1, 2017 for at least NIS 200 million, and the sale receives prior approval from the IIA.

The 2017 Amendment further provides that a technology company satisfying certain conditions will qualify as a “Special Preferred Technology Enterprise” (an enterprise for which, among others, total consolidated revenues of its parent company and all subsidiaries exceed NIS 10 billion) and will thereby enjoy a reduced corporate tax rate of 6% on Preferred Technology Income regardless of the company’s geographic location within Israel. In addition, a Special Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain “Benefited Intangible Assets” to a related foreign company if the Benefited Intangible Assets were either developed by the Special Preferred Technology Enterprise or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval from IIA. A Special Preferred Technology Enterprise that acquires Benefited Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these benefits for at least ten years, subject to certain approvals as specified in the Investment Law.

Dividends distributed by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, paid out of Preferred Technology Income, are generally subject to withholding tax at source at the rate of 20% or such lower rate as may be provided in an applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). However, if such dividends are paid to an Israeli company, no tax is required to be withheld. If such dividends are distributed to a foreign company that holds solely or together with other foreign companies 90% or more in the Israeli company and other conditions are met, the withholding tax rate will be 4% or a lower rate under a tax treaty, if applicable subject to the receipt in advance of a valid certificate from the ITA.

Taxation of Our Shareholders

Capital Gains

Capital gain tax is imposed on the disposition of capital assets by an Israeli resident, and on the disposition of such assets by a non-Israeli resident if those assets are either (i) located in Israel; (ii) are shares or a right to a share in an Israeli resident corporation, or (iii) represent, directly or indirectly, rights to assets located in Israel, unless a tax treaty between Israel and the seller’s country of residence provides otherwise. The Tax Ordinance distinguishes between “Real Capital Gain” and the “Inflationary Surplus.” Real Capital Gain is the excess of the total capital gain over Inflationary Surplus computed generally on the basis of the increase in the Israeli Consumer Price Index or, in certain circumstances, a foreign currency exchange rate between the date of purchase and the date of disposition. Inflationary Surplus is not subject to tax in Israel if accrued after 1993.

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Generally, Real Capital Gain accrued by individuals on the sale of our ordinary shares will be taxed at the rate of 25%. However, if the individual shareholder is a “Controlling Shareholder” (i.e., a person who holds, directly or indirectly, alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, 10% or more of one of the Israeli resident company’s means of control (including, among other things, the right to receive profits of the company, voting rights, the right to receive the company’s liquidation proceeds, the right to appoint a director or an executive officer and order someone who holds any of the aforesaid rights how to act, regardless of the source of such right) at the time of sale or at any time during the preceding 12 months period, such gain will be taxed at the rate of 30%.

Real Capital Gain derived by corporations will be generally subject to a corporate tax rate of 23% (in 2022).

Individuals and corporate shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income — 23% for corporations as of 2022 and a marginal tax rate of up to 47% in 2022 for individuals, unless the benefiting provisions of an applicable treaty applies.

Notwithstanding the foregoing, capital gains derived from the sale of our ordinary shares by a non-Israeli shareholder may be exempt under the Tax Ordinance from Israeli taxation provided that the following cumulative conditions are met: (i) the shares were purchased upon or after the registration of the securities on the stock exchange (ii) the seller does not have a permanent establishment in Israel to which the derived capital gain is attributed, (iii) neither the shareholder nor the particular capital gain is otherwise subject to the Israeli Income Tax Law (Inflationary Adjustments) 5745-1985), (iv) if the seller is a corporation, no more than 25% of its means of control are held, directly and indirectly, by an Israeli resident shareholders, and there is no Israeli Resident that is entitled to 25% or more of the revenues or profits of the corporation directly or indirectly. In addition, such exemption would not be available to a person whose gains from selling or otherwise disposing of the securities are deemed to be business income.

In addition, the sale of shares may be exempt from Israeli capital gain tax under the provisions of an applicable tax treaty. For example, the U.S.-Israel Double Tax Treaty exempts a U.S. resident from Israeli capital gain tax in connection with such sale, provided that (i) the U.S. resident owned, directly or indirectly, less than 10% of an Israeli resident company’s voting power at any time within the 12 month period preceding such sale; (ii) the seller, being an individual, is present in Israel for a period or periods of less than 183 days in the aggregate at the taxable year; and (iii) the capital gain from the sale was not derived through a permanent establishment of the U.S. resident in Israel; (iv) the capital gain arising from such sale, exchange or disposition is not attributed to real estate located in Israel; (v) the capital gains arising from such sale, exchange or disposition is not attributed to royalties; and (vi) the shareholder is a U.S. resident (for purposes of the U.S.-Israel Treaty) is holding the shares as a capital asset. Under the U.S.-Israel Double Tax Treaty, a U.S. resident would be permitted to claim a credit for the Israeli tax against the U.S. federal income tax imposed with respect to the sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign tax credits. The U.S-Israel Double Tax Treaty does not provide such credit against any U.S. state or local taxes.

Regardless of whether our shareholders (including non-Israeli shareholders) may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale. Specifically, the ITA may require shareholders who are not liable for Israeli tax to sign declarations in forms specified by this authority, provide documentation (including, for example, a certificate of residency) or to obtain a specific exemption from the ITA to confirm their status as non-Israeli resident, and, in the absence of such declarations or exemptions, may require the purchaser of the shares to withhold taxes at source.

At the sale of securities traded on a stock exchange a detailed return, including a computation of the tax due, must be filed and an advanced payment must be paid on January 31 and July 31 of every tax year in respect of sales of securities made within the previous six months. However, if all tax due was withheld at source according to applicable provisions of the Tax Ordinance and regulations promulgated thereunder the aforementioned return need not be filed and no advance payment must be paid. Capital gain is also reportable on the annual income tax return.

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Dividends

We have never paid any cash dividends. A distribution of a dividend by our company from income attributed to a Benefited Enterprise will generally be subject to withholding tax in Israel at a rate of 15% unless a reduced tax rate is provided under an applicable tax treaty and provided that a withholding tax certificate providing for such a reduced rate was obtained from the ITA. A distribution of dividend by our company from income attributed to a Preferred Enterprise (if the company will be entitled to tax benefits of a Preferred Enterprise) will generally be subject to withholding tax in Israel at the following tax rates: Israeli resident individuals — 20%; Israeli resident companies — 0%; Non-Israeli residents — 20% (subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, if the dividend is distributed from income attributed to Preferred Enterprise or Preferred Technology Enterprise), or such lower rate as may be provided in an applicable tax treaty, subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate.

A distribution of dividends from income, which is not attributed to a Preferred Enterprise or a Benefited Enterprise to an Israeli resident individual, will generally be subject to withholding tax at a rate of 25%. However, a 30% tax rate will apply if the dividend recipient is a “Controlling Shareholder” (as defined above) at the time of distribution or at any time during the preceding 12 months period. If the recipient of the dividend is an Israeli resident corporation, such dividend will be exempt from withholding tax provided the income from which such dividend is distributed was derived or accrued within Israel and was subject to tax in Israel. An average rate will be set in case the dividend is distributed from mixed types of income (regular and preferred income).

The Tax Ordinance provides that a non-Israeli resident (either individual or corporation) is generally subject to an Israeli income tax on the receipt of dividends at the rate of 25% (30% if the dividends recipient is a “Controlling Shareholder” (as defined above), at the time of distribution or at any time during the preceding 12 months period); those rates are subject to a reduced tax rate under the provisions of an applicable double tax treaty (subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate). Thus, under the U.S.-Israel Double Tax Treaty the following rates will apply in respect of dividends distributed by an Israeli resident company to a U.S. resident: (i) if the U.S. resident is a corporation which holds during that portion of the taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), at least 10% of the outstanding shares of the voting share capital of the Israeli resident paying corporation and not more than 25% of the gross income of the Israeli resident paying corporation for such prior taxable year (if any) consists of certain type of interest or dividends — the tax rate is 12.5% The aforementioned rates under the Israel U.S. Double Tax Treaty will not apply if the dividend income was derived through a permanent establishment of the U.S. resident in Israel.

A non-Israeli resident who receives dividends from which tax was withheld is generally exempt from the obligation to file tax returns in Israel with respect to such income, provided that (i) such income was not generated from business conducted in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return is required to be filed, and (iii) the taxpayer is not obligated to pay excess tax (as further explained below)..

Payers of dividends on our ordinary shares, including the Israeli stockbroker effectuating the transaction, or the financial institution through which the securities are held, are generally required, subject to any of the foregoing exemptions, reduced tax rates and the demonstration of a shareholder regarding his, her or its foreign residency, to withhold tax upon the distribution of dividend at the rate of 25%, so long as the shares are registered with a nominee company.

Excess Tax

Subject to the provisions of an applicable tax treaty, individuals who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at a rate of 3% on annual income (including, but not limited to, income derived from dividends, interest and capital gains) exceeding NIS 663,240 for 2022, which amount is linked to the annual change in the CPI.

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Foreign Exchange Regulations

Non-residents of Israel who hold our ordinary shares are able to receive any dividends, and any amounts payable upon the dissolution, liquidation and winding up of our affairs, repayable in non-Israeli currency at the rate of exchange prevailing at the time of conversion. However, Israeli income tax is generally required to have been paid or withheld on these amounts. In addition, the statutory framework for the potential imposition of currency exchange control has not been eliminated, and may be restored at any time by administrative action.

Estate and Gift Tax

Israeli law presently does not impose estate or gift taxes.

U.S. Federal Income Tax Consequences

The following discussion describes certain material U.S. federal income tax consequences to U.S. Holders (as defined below) under present law of an investment in our ordinary shares. This discussion applies only to U.S. Holders that hold our ordinary shares as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”), that have acquired their ordinary shares or ADSs and that have the U.S. dollar as their functional currency.

This discussion is based on the tax laws of the United States, including the Code, as in effect on the date hereof and on U.S. Treasury regulations as in effect or, in some cases, as proposed, on the date hereof, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below. There can be no assurances that the IRS will not take a different position concerning the tax consequences of the acquisition, ownership and disposition of our ordinary shares or ADSs or that such a position would not be sustained. This summary does not address any estate or gift tax consequences, the alternative minimum tax, the Foreign Account Tax Compliance Act or any state, local, or non-U.S. tax consequences.

The following discussion neither deals with the tax consequences to any particular investor nor describes all of the tax consequences applicable to persons in special tax situations such as:

| ● | banks;

| ● | certain financial institutions;

| ● | insurance companies;

| ● | regulated investment companies;

| ● | real estate investment trusts;

| ● | broker-dealers;

| ● | traders that elect to mark to market;

| ● | certain former citizens or residents of the United States;

| ● | tax-exempt entities;

| ● | persons holding our ordinary shares or ADSs as part of a straddle, hedging, constructive sale, conversion or integrated transaction;

| ● | persons that actually (directly or indirectly) or constructively own 10% or more of our total voting power or value;

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| ● | persons that are residents or ordinarily resident in or have a permanent establishment in a jurisdiction outside the United States;

| ● | persons who acquired our ordinary shares or ADSs pursuant to the exercise of any employee share option or otherwise as compensation; or

| ● | S-corporation and partnerships, including entities classified as partnerships for U.S. federal income tax purposes.

INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES OR ADSs.

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are the beneficial owner of our ordinary shares or ADSs and you are, for U.S. federal income tax purposes,

| ● | an individual who is a citizen or resident of the United States;

| ● | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia;

| ● | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

| ● | a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

If an entity or other arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. A person that would be a U.S. Holder if it held our ordinary shares or ADSs directly and that is a partner of a partnership holding our ordinary shares or ADSs is urged to consult its own tax advisor.

Ownership of ADSs

For U.S. federal income tax purposes, a holder of ADSs generally will be treated as the owner of the ordinary shares represented by such ADSs. Gain or loss will generally not be recognized on account of exchanges of ordinary shares for ADSs, or of ADSs for ordinary shares. References to ordinary shares in the discussion below are deemed to include ADSs, unless context otherwise requires.

Passive Foreign Investment Company

Based on our anticipated income and the composition of our income and assets, there is a significant risk that we will be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes at least until we start generating a substantial amount of active revenue. However, because PFIC status is a factual determination based on actual results for the entire taxable year, our U.S. counsel expresses no opinion with respect to our PFIC status. A non-U.S. entity treated as a corporation for U.S. federal income tax purposes will generally be a PFIC for U.S. federal income tax purposes for any taxable year after applying certain look-through rules with respect to the income and assets of subsidiaries if either:

| ● | at least 75% of its gross income for such year is passive income (such as interest income); or

| ● | at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income.

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Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions, the excess of gains over losses from the disposition of assets which produce passive income, and includes amounts derived by reason of the temporary investment of funds raised in offerings of our shares.

For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other entity treated as a corporation for U.S. federal income tax purposes in which we own, directly or indirectly, 25% or more (by value) of the stock.

A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ordinary shares, our PFIC status may depend in part on the market price of our ordinary shares, which may fluctuate significantly. In addition, there may be certain ambiguities in applying the PFIC test to us. No rulings from the U.S. Internal Revenue Service, or IRS, however, have been or will be sought with respect to our status as a PFIC. If we are a PFIC for any taxable year during which you hold our ordinary shares, we generally will continue to be treated as a PFIC with respect to your investment in our ordinary shares for all succeeding years during which you hold our ordinary shares, unless we cease to be a PFIC and you make a “deemed sale” election with respect to our ordinary shares. If such election is made, you will be deemed to have sold our ordinary shares you hold at their fair market value on the last day of the last taxable year in which we were a PFIC, and any gain from such deemed sale would be subject to taxation under the excess distribution regime described below. After the deemed sale election, your ordinary shares with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC.

For each taxable year that we are treated as a PFIC with respect to you, you will be subject to special tax rules with respect to any “excess distribution” (as defined below) you receive and any gain you realize from a sale or other disposition (including a pledge) of our ordinary shares, unless you make a valid “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for our ordinary shares will be treated as an excess distribution. Under these special tax rules:

| ● | the excess distribution or gain will be allocated ratably over your holding period for our ordinary shares;

| ● | the amount allocated to the current taxable year, and any taxable years in your holding period prior to the first taxable year in which we were a PFIC, will be treated as ordinary income; and

| ● | the amount allocated to each other taxable year will be subject to the highest tax rate in effect for individuals or corporations, as applicable, for each such year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to taxable years prior to the year of disposition or excess distribution cannot be offset by any net operating losses, and gains (but not losses) realized on the sale of our ordinary shares cannot be treated as capital gains, even if you hold our ordinary shares as capital assets.

If we are treated as a PFIC with respect to you for any taxable year, to the extent any of our subsidiaries are also PFICs, you may be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned by us in that proportion which the value of our ordinary shares you own bears to the value of all of our ordinary shares, and you may be subject to the adverse tax consequences described above with respect to the shares of such lower-tier PFICs you would be deemed to own. As a result, you may incur liability for any excess distribution described above if we receive a distribution from our lower-tier PFICs or if any shares in such lower-tier PFICs are disposed of  (or deemed disposed of). You should consult your tax advisor regarding the application of the PFIC rules to any of our subsidiaries.

A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed above. If you make a valid mark-to-market election for our ordinary shares, you will include in income for each year that we are treated as a PFIC with respect to you an amount equal to the excess, if any, of the fair market value of our ordinary shares as of the close of your taxable year over your adjusted basis in such ordinary shares. You will be allowed a deduction for the excess, if any, of the adjusted basis of our ordinary shares over their fair market value as of the close of the taxable year. However, deductions will be allowable only to the extent of any net mark-to-market gains on our ordinary shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of our ordinary shares, will be treated as ordinary income. Ordinary loss treatment will also apply to the deductible portion of any mark-to-market loss on our ordinary shares, as well as to any loss realized on the actual sale or disposition of our ordinary shares, to the extent the amount of such loss does not exceed the net mark-to-market gains for such ordinary shares previously included in income. Your basis in our ordinary shares will be adjusted to reflect any such income or loss amounts. If you make a mark-to-market election, any distributions we make would generally be subject to the rules discussed below under “— Taxation of dividends and other distributions on our ordinary shares,” except the lower rates applicable to qualified dividend income would not apply.

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The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. We expect our ordinary shares will be listed on Nasdaq. Because a mark-to-market election cannot be made for equity interests in any lower-tier PFICs we own, you generally will continue to be subject to the PFIC rules with respect to your indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. The Nasdaq is a qualified exchange, but there can be no assurance that the trading in our ordinary shares will be sufficiently regular to qualify our ordinary shares as marketable stock. You should consult your tax advisor as to the availability and desirability of a mark-to-market election, as well as the impact of such election on interests in any lower-tier PFICs. Alternatively, if a non-U.S. entity treated as a corporation is a PFIC, a holder of shares in that entity may avoid taxation under the PFIC rules described above regarding excess distributions and recognized gains by making a “qualified electing fund” election to include in its income, on a current basis: (1) as ordinary income, its pro rata share of the “ordinary earnings” of the qualified electing fund; and (2) as long-term capital gain, its pro rata share of the “net capital gain” of the qualified electing fund. However, you may make a qualified electing fund election with respect to your ordinary shares only if we furnish you annually with certain tax information, and we currently do not intend to prepare or provide such information.

A U.S. Holder of a PFIC may be required to file an IRS Form 8621. The failure to file this form when required could result in substantial penalties. If we are a PFIC, you should consult your tax advisor regarding any reporting requirements that may apply to you. You are urged to consult your tax advisor regarding the application of the PFIC rules to the acquisition, ownership and disposition of our ordinary shares.

YOU ARE STRONGLY URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE IMPACT OF OUR BEING A PFIC ON YOUR INVESTMENT IN OUR ORDINARY SHARES AS WELL AS THE APPLICATION OF THE PFIC RULES AND THE POSSIBILITY OF MAKING A MARK-TO-MARKET ELECTION.

Taxation of Dividends and Other Distributions on our Ordinary Shares

Subject to the PFIC rules discussed above, the gross amount of any distributions we make to you (including the amount of any tax withheld) with respect to our ordinary shares generally will be includible in your gross income as dividend income on the date of receipt by the holder, but only to the extent the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). The dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations. To the extent the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), such excess amount will be treated first as a tax-free return of your tax basis in your ordinary shares, and then, to the extent such excess amount exceeds your tax basis in your ordinary shares, as capital gain. We currently do not, and we do not intend to, calculate our earnings and profits under U.S. federal income tax principles. Therefore, you should expect that a distribution will generally be reported as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.

With respect to certain non-corporate U.S. Holders, including individual U.S. Holders, dividends may be taxed at the lower capital gain rates applicable to “qualified dividend income,” provided (1) our ordinary shares are readily tradable on an established securities market in the United States (such as Nasdaq), (2) we are neither a PFIC nor treated as such with respect to you (as discussed above) for either the taxable year in which the dividend was paid or the preceding taxable year, (3) certain holding period requirements are met and (4) you are not under an obligation to make related payments with respect to positions in substantially similar or related property. As discussed above under “Passive Foreign Investment Company,” there is a significant risk that we will be a PFIC for U.S. federal income tax purposes, and, as a result, the qualified dividend rate may be unavailable with respect to dividends we pay.

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The amount of any distribution paid in a currency other than U.S. dollars will be equal to the U.S. dollar value of such currency on the date such distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars at that time. If the foreign currency is converted into U.S. dollars on the date of receipt, a U.S. Holder generally will not be required to recognize foreign currency gain or loss in respect of the distribution. A U.S. Holder may have foreign currency gain or loss if the foreign currency is converted into U.S. dollars after the date of receipt, depending on the exchange rate at the time of conversion. Any gains or losses resulting from the conversion of foreign currency into U.S. dollars generally will be treated as ordinary income or loss, as the case may be, and generally will be treated as U.S. source. In addition, proposed Treasury regulations (which taxpayers may rely upon pending publication of final regulations) issued on December 18, 2017, provide that certain taxpayers may elect to ‘mark to market’ gain or loss resulting from exchange rate fluctuations. The proposed regulations are complex, and you should consult your tax advisor regarding the availability of the proposed regulations in your particular circumstances. The amount of any distribution of property other than cash will be equal to the fair market value of such property on the date of distribution.

Any dividends will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will in general be limited to the gross amount of the dividend, multiplied by the reduced tax rate applicable to qualified dividend income and divided by the highest tax rate normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to our ordinary shares will generally constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.”

If Israeli withholding taxes apply to any dividends paid to you with respect to our ordinary shares, subject to certain conditions and limitations, such withholding taxes may be treated as foreign taxes eligible for credit against your U.S. federal income tax liability. Instead of claiming a credit, you may elect to deduct such taxes in computing taxable income, subject to applicable limitations. If a refund of the tax withheld is available under the applicable laws of Israel or under the Israel-U.S. income tax treaty, or the Treaty, the amount of tax withheld that is refundable will not be eligible for such credit against your U.S. federal income tax liability (and will not be eligible for the deduction against your U.S. federal taxable income). The rules relating to the determination of the foreign tax credit are complex, and you should consult your tax advisor regarding the availability of a foreign tax credit in your particular circumstances, including the effects of the Treaty.

Taxation of Disposition of Ordinary Shares

Subject to the PFIC rules discussed above, upon a sale or other disposition of ordinary shares, you will generally recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized (including the amount of any tax withheld) and your tax basis in such ordinary shares. If the consideration you receive for our ordinary shares is not paid in U.S. dollars, the amount realized will be the U.S. dollar value of the payment received determined by reference to the spot rate of exchange on the date of the sale or other disposition. However, if our ordinary shares are treated as traded on an “established securities market” and you are either a cash basis taxpayer or an accrual basis taxpayer that has made a special election (which must be applied consistently from year to year and cannot be changed without the consent of the IRS), you will determine the U.S. dollar value of the amount realized in a non-U.S. dollar currency by translating the amount received at the spot rate of exchange on the settlement date of the sale. If you are an accrual basis taxpayer that is not eligible to or does not elect to determine the amount realized using the spot rate on the settlement date, you will recognize foreign currency gain or loss to the extent of any difference between the U.S. dollar amount realized on the date of sale or disposition and the U.S. dollar value of the currency received at the spot rate on the settlement date. In addition, proposed Treasury regulations (which taxpayers may rely upon pending publication of final regulations) issued on December 18, 2017 provide that certain taxpayers may elect to “mark to market” gain or loss resulting from exchange rate fluctuations. The proposed regulations are complex, and you should consult your tax advisor regarding the availability of the proposed regulations in your particular circumstances.

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Your tax basis in our ordinary shares generally will equal the cost of such ordinary shares. If you are a non-corporate U.S. Holder, capital gain from the sale, exchange or other disposition of shares is generally eligible for a preferential rate of taxation applicable to capital gains, if your holding period determined at the time of such sale, exchange or other disposition for such shares exceeds one year (i.e., such gain is long-term capital gain). The deductibility of capital losses is subject to significant limitations.

As mentioned above, to the extent that, the sale, exchange or disposition of our ordinary shares would be subject to Israeli tax, the U.S holder would be permitted to claim a credit for any such taxes incurred against U.S. federal income tax imposed on any gain from such sale, exchange or disposition, under the circumstances and subject to the limitations specified in the Treaty and U.S. domestic law applicable to foreign tax credit.

Information Reporting and Backup Withholding

Dividend payments with respect to ordinary shares and proceeds from the sale, exchange or redemption of ordinary shares may be subject to information reporting to the IRS and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder that furnishes a correct taxpayer identification number and makes any other required certification or that is otherwise exempt from backup withholding. U.S. Holders that are required to establish their exempt status generally must provide such certification on IRS Form W-9. You should consult your tax advisor regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS and furnishing any required information in a timely manner.

Information with respect to Net Investment Income Tax

Certain U.S. Holders who are individuals, estates or trusts may be required to pay an additional 3.8% Net Investment Income Tax, or NIIT, on, among other things, dividends and capital gains from the sale or other disposition of our shares. For individuals, the additional NIIT tax applies to the lesser of (i) “net investment income” or (ii) the excess of “modified adjusted gross income” over $200,000 ($250,000 if married and filing jointly or $125,000 if married and filing separately). “Net investment income” generally equals the taxpayer’s gross investment income reduced by the deductions that are allocable to such income. U.S. Holders will likely not be able to credit foreign taxes against the 3.8% NIIT.

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Information with respect to Reporting Requirements

Certain U.S. Holders may be required to file IRS Form 926, Return by U.S. Transferor of Property to a Foreign Corporation and IRS Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, reporting transfers of cash or other property to us and information relating to the U.S. Holder and us. Substantial penalties may be imposed upon a U.S. Holder that fails to comply.

Certain U.S. Holders owning “specified foreign financial assets” may be required to file IRS Form 8938, or Statement of Specified Foreign Financial Assets, with respect to such assets with their tax returns. “Specified foreign financial assets” generally include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities. The IRS has issued guidance exempting “specified foreign financial assets” held in a financial account from reporting under this provision (although the financial account itself, if maintained by a foreign financial institution, may remain subject to this reporting requirement). The failure to file this form when required could result in substantial penalties. You are urged to consult your tax advisors regarding the application of these requirements to your ownership of our shares.

In addition, certain U.S. Holders may be required to report additional information relating to an interest in our ordinary shares, subject to certain exceptions. You are urged to consult your tax advisors regarding your information reporting obligations, if any, with respect to your ownership and disposition of our ordinary shares.

Backup Withholding Tax

Generally, information reporting requirements will apply to distributions on our ordinary shares or proceeds on the disposition of our ordinary shares paid within the United States (and, in certain cases, outside the United States) to U.S. Holders other than certain exempt recipients, such as corporations. Furthermore, backup withholding may apply to such amounts if the U.S. Holder fails to (i) provide a correct taxpayer identification number, (ii) report interest and dividends required to be shown on its U.S. federal income tax return, or (iii) make other appropriate certifications in the required manner. U.S. Holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9.

Backup withholding is not an additional tax. Amounts withheld as backup withholding from a payment may be credited against a U.S. Holder’s U.S. federal income tax liability and such U.S. Holder may obtain a refund of any excess amounts withheld by timely filing the appropriate claim for refund with the IRS and furnishing any required information in a timely manner.

THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT ABOVE IS FOR GENERAL INFORMATIONAL PURPOSES ONLY. INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

H. Documents on Display

You may read and copy this annual report on Form 20-F, including the related exhibits and schedules, and any document we file with the SEC through the SEC’s website at www.sec.gov.

As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. In addition, we are not be required under the Exchange Act to file annual or other reports and consolidated financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. Instead, we must file with the SEC, within 120 days after the end of each fiscal year, or such other applicable time as required by the SEC, an annual report on Form 20-F containing consolidated financial statements audited by an independent registered public accounting firm. We also intend to furnish certain other material information to the SEC under cover of Form 6-K.

We maintain a corporate website at www.medigus.com. Information contained on, or that can be accessed through, our website does not constitute a part of this annual report on Form 20-F. We have included our website address in this annual report on Form 20-F solely as an inactive textual reference.

I. Subsidiary Information

Not applicable.

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss related to changes in market prices, including interest rates and foreign exchange rates, of financial instruments that may adversely impact our consolidated financial position, results of operations or cash flows.

Risk of Interest Rate Fluctuation

Currently, our investments consist primarily of cash and cash equivalents and short-term bank deposits. We follow an investment policy that was set by our board of directors, pursuant to which we currently invest in tradable short term Israeli government loans or bank deposits. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. However, given the low levels of interest rates worldwide, our interest income is not material and a further reduction in interest rates would not cause us a significant reduction in the absolute amounts of interest income to us. We manage this exposure by performing ongoing evaluations of our investments. Due to the short-term maturities of our investments to date, their carrying value has always approximated their fair value. It is be our current policy to hold investments to maturity in order to limit our exposure to interest rate fluctuations.

Foreign Currency Exchange Risk

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

To date, we have not engaged in hedging transactions, however we hold our investments in both NIS and US dollars. In the future, we may enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.

Our interest rate risk exposure is in respect to bank deposits, which expose us to risk due to change in fair value interest rates. As of December 31, 2021, these deposits carried relatively low interest rates and under these low interest rates, reasonable changes in interest rates are expected have negligible impact on the fair value of these assets.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A. Debt Securities.

Not applicable.

B. Warrants and rights.

Not applicable.

C. Other Securities.

Not applicable.

D. American Depositary Shares

General

The following is a summary description of the ADSs and does not purport to be complete. Each ADS represents 20 Ordinary Shares (or a right to receive 20 ordinary shares) deposited with the principal Tel Aviv office of either of Bank Hapoalim or Bank Leumi, as custodian for the Bank of New York Mellon as the Depositary. Each ADS also represents any other securities, cash or other property which may be held by the Depositary. The Depositary’s office at which the ADSs will be administered is located at 101 Barclay Street, New York, New York 10286.

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The form of the deposit agreement for the ADSs and the form of American Depositary Receipt (ADR) that represents an ADS as filed as exhibits to the Company’s registration statement on Form F-6 with the SEC on May 7, 2015, as amended on October 26, 2020. Copies of the deposit agreement are available for inspection at the principal office of the Bank of New York Mellon, located at 101 Barclay Street, New York, New York 10286.

Fees and Expenses

Persons depositing or withdrawing shares or ADS holders must pay: |  | For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) |  | ● | Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
|  | ● | Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
$0.05 (or less) per ADS |  | ● | Any cash distribution to ADS holders
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs |  | ● | Distribution of securities distributed to holders of deposited securities which are distributed by the Depositary to ADS holders
$0.05 (or less) per ADS per calendar year |  | ● | Depositary services
Registration or transfer fees |  | ● | Transfer and registration of shares on our share register to or from the name of the Depositary or its agent when you deposit or withdraw shares
Expenses of the Depositary |  | ● | Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)
|  | ● | converting foreign currency to U.S. dollars
Taxes and other governmental charges the Depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes |  | ● | As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities |  | ● | As necessary

The Depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The Depositary may collect any of its fees by deduction from any cash distribution payable to ADS holders that are obligated to pay those fees. The Depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

From time to time, the Depositary may make payments to us to reimburse and/or share revenue from the fees collected from ADS holders, or waive fees and expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance of the ADS program. In performing its duties under the deposit agreement, the Depositary may use brokers, dealers or other service providers that are affiliates of the Depositary and that may earn or share fees or commissions.

Payment of Taxes

You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The Depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until such taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the Depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.

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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There are no defaults, dividend arrangements or delinquencies that are required to be disclosed.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

(a) Disclosure controls and procedures

We performed an evaluation of the effectiveness of our disclosure controls and procedures that are designed to ensure that information required to be disclosed on Form 20-F and filed with the Securities and Exchange Commission is recorded, processed, summarized and reported timely within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act, is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within the company to disclose information otherwise required to be set forth in our reports. Nevertheless, our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives.

Based on our evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d) - 15(e) of the Exchange Act, were effective at such reasonable assurance level as of the end of the period covered by this annual report on Form 20-F.

(b) Management report on internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission as of the end of the period covered by this report. Based on this evaluation, management concluded that our internal control over financial reporting as of December 31, 2021 was effective.

(c) Attestation Report of the Registered Public Accounting Firm

Not applicable.

(d) Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Mr. Eliyahu Yoresh is an audit committee financial expert as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaq Stock Market rules.

ITEM 16B. CODE OF ETHICS

In March 2016, we adopted a written code of ethics and business conduct, which applies to all our directors, officers and employees, including without limitation our, Chief Executive Officer, Chief Financial Officer, and controller, or persons performing similar functions. This code of ethics is posted on our website, www.medigus.com.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees and services

Brightman Almagor Zohar and Co., Certified Public Accountant (Isr.), a firm in the Deloitte Global Network, has served as our principal independent registered public accounting firm for the year ended December 31, 2021 and 2020.

The following table provides information regarding consolidated fees related to Brightman Almagor Zohar and Co., for all services, including audit services, for the year ended December 31, 2021 and for the year ended December 31, 2020,:

|  | Year Ended December 31, 2021 |  |  | Year Ended December 31, 2020 |
|  | (USD in thousands) |
Audit fees(1) |  |  | 721 |  |  |  | 236 |
Audit-Related Fees(2) |  |  | 369 |  |  |  | 182 |
Tax fees(3) |  |  | 33 |  |  |  | 6 |
Total |  |  | 1,123 |  |  |  | 424 |

(1) | Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements. This category also includes services that generally the independent accountant provides, such as consents and assistance with and review of documents filed with the SEC. For the year ended December 31, 2021, audit fee included are for Medigus, ScoutCam, Eventer, Gix Internet and Jeffs’ Brands. For the year ended December 31, 2020, audit fee included are for Medigus, ScoutCam and Eventer (for the fourth quarter of 2020).
(2) | Includes mainly offering costs and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant’s financial statements. For the year ended December 31, 2021, audit related fee included for Medigus, Scoutcam, Jeffs’ Brands, and Eventer. For the year ended December 31, 2020, audit related fee included for Medigus.
(3) | Represents fees for professional services rendered by our independent registered public accounting firm for tax compliance and tax advice on actual or contemplated transactions.

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Audit committee’s pre-approval policies and procedures

Our audit committee’s specific responsibilities in carrying out its oversight of the quality and integrity of the accounting, auditing and reporting practices of our company include the approval of audit and non-audit services to be provided by the external auditor. The audit committee approves in advance the particular services or categories of services to be provided to us during the following yearly period and also sets forth a specific budget for such audit and non-audit services. Additional non-audit services may be pre-approved by the audit committee

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

None.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G. CORPORATE GOVERNANCE

Nasdaq Stock Market Listing Rules and Home Country Practices

As a foreign private issuer, we are permitted to follow Israeli corporate governance practices instead of Nasdaq Marketplace rules, provided that we disclose which requirements we are not following and the equivalent Israeli requirement. We rely on this “foreign private issuer exemption” with respect to the following items:

| ● | Quorum. While the Marketplace Rules of the Nasdaq Stock Market require that the quorum for purposes of any meeting of the holders of a listed company’s common voting stock, as specified in the company’s bylaws, be no less than 33 1/3% of the company’s outstanding common voting stock, under Israeli law, a company is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at a shareholders meeting. Our Articles of Association provide that a quorum of two or more shareholders holding at least 10% of the voting rights in person or by proxy is required for commencement of business at a general meeting. However, the quorum set forth in our Articles of Association with respect to an adjourned meeting consists of any number of shareholders present in person or by proxy.

| ● | Approval of Related Party Transactions. All related party transactions are approved in accordance with the requirements and procedures for approval of interested party acts and transactions, set forth in sections 268 to 275 of the Companies Law, and the regulations promulgated thereunder, which require the approval of the audit committee, the compensation committee, the board of directors and shareholders, as may be applicable, for specified transactions, rather than approval by the audit committee or other independent body of our board of directors as required under the Listing Rules of the Nasdaq Stock Market.

| ● | Equity Compensation Plans. We do not necessarily seek shareholder approval for the establishment of, and amendments to, stock option or equity compensation plans (as set forth in Nasdaq Listing Rule 5635(c)), as such matters are not subject to shareholder approval under Israeli law. We will attempt to seek shareholder approval for our stock option or equity compensation plans (and the relevant annexes thereto) to the extent required in order to ensure they are tax qualified for our employees in the United States. However, even if such approval is not received, then the stock option or equity compensation plans will continue to be in effect, but we will not be able to grant options to our U.S. employees that qualify as Incentive Stock Options for U.S. federal tax purpose. Our stock option or other equity compensation plans are also available to our non-U.S. employees, and provide features necessary to comply with applicable non-U.S. tax laws.

Otherwise, we comply with the rules generally applicable to U.S. domestic companies listed on the Nasdaq Stock Market. We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other Nasdaq Marketplace Rules related to corporate governance. We also comply with Israeli corporate governance requirements under the Israeli Companies Law applicable to public companies.

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not Applicable.

100

PART III

ITEM 17. FINANCIAL STATEMENTS

Not applicable.

ITEM 18. FINANCIAL STATEMENTS

The consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20-F beginning on page F-1.

101

MEDIGUS LTD.

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm | F-2 to F-5
(Firm Name: Brightman Almagor Zohar & Co / PCAOB ID No. 1197) |
(Firm Name: Kesselman & Kesselman / PCAOB ID No. 1309 ) |
Consolidated Statements of Financial Position | F-6 to F-7
Consolidated Statements of Income/Loss and Other Comprehensive Income/Loss | F-8
Consolidated Statements of Changes in Equity | F-9 to F-11
Consolidated Statements of Cash Flows | F-12 to F-13
Notes to Consolidated Financial Statements | F-16 to F-115

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Medigus Ltd.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Medigus Ltd. and its subsidiaries (the "Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income (loss) and other comprehensive income (loss), changes in equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the each of the two years in the period ended December 31, 2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

F-2

Eventer Revenue – Refer to Note 2n and Note 16 to the financial statements

Critical Audit Matter Description

The Company, through its subsidiary Eventer, generates revenues from commissions paid by producers for onboarding events to its platform. The Company recorded services revenue from commissions of $1,185 thousand, for the year ended December 31, 2021 as well as a liability to event producers of $1,556 thousand as of December 31, 2021. Eventer's performance obligation is to provide services for using the event production platform in exchange for paying a commission from the sale of tickets for events. Eventer recognizes revenue for its commissions and other services at a point of time when the client's event occurs, on a net basis.

Auditing the timing and measurement of the Company's revenue recognition was especially challenging and required significant audit effort in performing audit procedures and in evaluating audit evidence relating to the occurrence of events and the measurement of commissions earned by Eventer. This required extensive audit effort due to the revenue recording process and IT systems involved.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s revenue recognition and related liability to event producers included the following, among others:

● | We tested Eventer's reconciliation of services revenue from commissions to cash collected from credit card companies, by recalculation and by agreeing cash collection amounts to their respective bank statements and credit card billing statements.

● | We tested the accuracy of information underlying Eventer's revenue and related liability to event producers, generated from Eventer's platform, by inspecting, on a sample basis, agreements with producers, as well as other documents related to the calculation of commissions.

● | We tested the completeness of information underlying Eventer's revenue and related liability to event producers, generated from Eventer's platform, by tracing, on a sample basis, cash disbursements from Eventer's bank statement to their respective events.

● | We tested the timing of revenue recognition by tracing events, on a sample basis, to on-line publications made by event producers.

/s/ Brightman Almagor Zohar & Co.

Certified Public Accountants

A Firm in the Deloitte Global Network

Tel Aviv, Israel

April 29, 2022

We have served as the Company's auditor since 2020.

F-3

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Medigus Ltd.

Opinion on the Financial Statements

We have audited the consolidated statements of income/loss and other comprehensive income/loss, of changes in equity and of cash flows of Medigus Ltd. and its subsidiaries (the “Company”) for the year ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2019 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We did not audit the financial statements of Gix Internet Ltd. (formerly known as Algomizer Ltd.), a 8% equity investment of the Company, which is reflected in the consolidated financial statements of the Company as a loss from equity investment of $216 thousand for the year ended December 31, 2019. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for Gix Internet Ltd. (formerly known as Algomizer Ltd.) for the year ended December 31, 2019, is based solely on the report of the other auditors.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1(b) (not presented herein) to the consolidated financial statements, the Company has suffered recurring losses from operations and has cash outflows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1(b) (not presented herein). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit and the report of other auditors provide a reasonable basis for our opinion.

/s/ Kesselman & Kesselman

Certified Public Accountants (Isr.)

A member firm of PricewaterhouseCoopers International Limited

Tel-Aviv, Israel

April 21, 2020

We served as the Company’s auditor from 1999 to 2020.

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Gix Internet Ltd. (formerly known as Algomizer Ltd.)

Opinion on the Financial Statements

We have audited the consolidated statements of comprehensive loss, stockholders’ equity and cash flows of Gix Internet Ltd. (formerly known as Algomizer Ltd.) and its subsidiaries (the “Company”) for the period from September 4, 2019 through December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the results of the Company's operation and its cash flow for the period from September 4, 2019 through December 31, 2019, in conformity International Financial Reporting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Brightman Almagor Zohar & Co.

Certified Public Accountants

A Firm in the Deloitte Global Network

Tel Aviv, Israel

April 21, 2020

F-5

(Concluded) - 1

MEDIGUS LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

|  |  |  |  | December 31, |
|  | Note |  |  | 2021 |  |  | 2020 |
|  |  |  |  | USD in thousands |
Assets |  |  |  |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 5 |  |  |  | 24,025 |  |  |  | 22,363 |
Non-current assets held for sale |  |  | 3 | B1 |  |  | - |  |  |  | 547 |
Trade accounts receivable |  |  |  |  |  |  | 408 |  |  |  | 96 |
Inventory |  |  | 7 |  |  |  | 1,227 |  |  |  | 243 |
Loan to an associate |  |  | 15 | b2 |  |  | 1,265 |  |  |  | - |
Related party prepaid expenses |  |  | 15 | b1 |  |  | 999 |  |  |  | - |
Financial assets at fair value through profit or loss |  |  | 4 |  |  |  | 3,315 |  |  |  | - |
Other current assets |  |  | 6 |  |  |  | 415 |  |  |  | 796 |
|  |  |  |  |  |  | 31,654 |  |  |  | 24,045 |
NON-CURRENT ASSETS: |  |  |  |  |  |  |  |  |  |  |  |
Contract fulfillment assets |  |  | 16 | b |  |  | - |  |  |  | 1,130 |
Property and equipment, net |  |  | 8 |  |  |  | 77 |  |  |  | 345 |
Right-of-use assets, net |  |  |  |  |  |  | - |  |  |  | 104 |
Investments accounted for using the equity method |  |  | 3 | B1 |  |  | 17,240 |  |  |  | 1,663 |
Intangible assets |  |  | 9 |  |  |  | 8,321 |  |  |  | 495 |
Deferred offering costs |  |  | 3D, 3E |  |  |  | 836 |  |  |  | - |
Retirement benefit assets, net |  |  |  |  |  |  | - |  |  |  | 23 |
Financial assets at fair value through profit or loss |  |  | 4 |  |  |  | 1,602 |  |  |  | 4,530 |
|  |  |  |  |  |  | 28,076 |  |  |  | 8,290 |
TOTAL ASSETS |  |  |  |  |  |  | 59,730 |  |  |  | 32,335 |

The accompanying notes are an integral part of these consolidated financial statements.

F-6

(Concluded) - 2

MEDIGUS LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

|  |  |  | December 31, |
|  | Note |  | 2021 |  |  | 2020 |
|  |  |  | USD in thousands |
Liabilities and equity |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |
Trade accounts payable |  | 11 |  |  | 702 |  |  |  | 140 |
Short term loans |  | 3E |  |  | 816 |  |  |  | - |
Short term related party loan |  | 3E |  |  | 111 |  |  |  | - |
Current portion of long-term related party payable |  | 15b4,3D |  |  | 506 |  |  |  | - |
Lease liabilities |  |  |  |  | - |  |  |  | 60 |
Warrants at fair value |  | 4, 12, 3E |  |  | 692 |  |  |  | 1,039 |
Contract liabilities |  | 17C |  |  | 108 |  |  |  | 69 |
Liability to event producers |  | 16d |  |  | 1,556 |  |  |  | 539 |
Related parties |  | 15b3 |  |  | 616 |  |  |  | 139 |
Accrued expenses and other current liabilities |  | 11 |  |  | 1,532 |  |  |  | 1,528 |
|  |  |  |  | 6,639 |  |  |  | 3,514 |
NON-CURRENT LIABILITIES: |  |  |  |  |  |  |  |  |  |
Lease liabilities |  |  |  |  | - |  |  |  | 47 |
Contract liabilities |  | 17C |  |  | - |  |  |  | 2,580 |
Loans from related parties |  | 15b4 |  |  | 689 |  |  |  | - |
Long-term related party payable |  | 15b4,3D |  |  | 711 |  |  |  |  |
Deferred tax liability |  | 10 |  |  | 236 |  |  |  | - |
Retirement benefit obligation, net |  |  |  |  | 22 |  |  |  | - |
|  |  |  |  | 1,658 |  |  |  | 2,627 |
TOTAL LIABILITIES |  |  |  |  | 8,297 |  |  |  | 6,141 |
EQUITY: |  | 12 |  |  |  |  |  |  |  |
Share capital – ordinary shares with no par value: authorized – December 31,2021 and December 31,2020 – 1,000,000,000 shares; issued and outstanding - December 31, 2021 – 477,002,560 shares December 31, 2020 – 316,442,738 shares |  |  |  |  | - |  |  |  | 93,021 |
Share premium |  |  |  |  | 110,562 |  |  |  | - |
Other capital reserves |  |  |  |  | 12,619 |  |  |  | 10,725 |
Warrants |  |  |  |  | 197 |  |  |  | 197 |
Accumulated deficit |  |  |  |  | (74,188 | ) |  |  | (80,982 | )
Equity attributable to owners of Medigus Ltd. |  |  |  |  | 49,190 |  |  |  | 22,961 |
Non-controlling interests |  | 3 |  |  | 2,243 |  |  |  | 3,233 |
|  |  |  |  | 51,433 |  |  |  | 26,194 |
TOTAL LIABILITIES AND EQUITY |  |  |  |  | 59,730 |  |  |  | 32,335 |

The accompanying notes are an integral part of these consolidated financial statements.

F-7

MEDIGUS LTD.

CONSOLIDATED STATEMENTS OF INCOME/LOSS AND OTHER COMPREHENSIVE INCOME/LOSS

|  |  |  | Year Ended December 31, |
|  | Note |  | 2021 |  |  | 2020 |  |  | 2019 |
|  |  |  | USD in thousands |
Revenues: |  | 16 |  |  |  |  |  |  |  |  |
Products |  |  |  |  | 8,933 |  |  |  | 491 |  |  |  | 188 |
Services |  |  |  |  | 1,185 |  |  |  | 40 |  |  |  | 85 |
|  |  |  |  | 10,118 |  |  |  | 531 |  |  |  | 273 |
Cost of revenues: |  | 14 |  |  |  |  |  |  |  |  |  |  |  |
Products |  |  |  |  | 4,938 |  |  |  | 988 |  |  |  | 370 |
Services |  |  |  |  | 379 |  |  |  | 46 |  |  |  | 85 |
|  |  |  |  | 5,317 |  |  |  | 1,034 |  |  |  | 455 |
Gross profit (loss) |  |  |  |  | 4,801 |  |  |  | (503 | ) |  |  | (182 | )
Research and development expenses |  | 14 |  |  | 1,045 |  |  |  | 997 |  |  |  | 609 |
Sales and marketing expenses |  | 14 |  |  | 1,988 |  |  |  | 471 |  |  |  | 326 |
General and administrative expenses |  | 14 |  |  | 9,964 |  |  |  | 5,494 |  |  |  | 3,081 |
Net change in fair value of financial assets at fair value through profit or loss |  | 4 |  |  | (713 | ) |  |  | (797 | ) |  |  | (92 | )
Share of net loss of associates accounted for using the equity method |  | 3 |  |  | 2,149 |  |  |  | 170 |  |  |  | 216 |
Amortization of excess purchase price of associates |  | 3L,3G |  |  | 263 |  |  |  | 546 |  |  |  | - |
Listing expenses |  | 14 |  |  | - |  |  |  | - |  |  |  | 10,098 |
Operating profit (loss) |  |  |  |  | (9,895 | ) |  |  | (7,384 | ) |  |  | (14,420 | )
Gain upon loss of control in a subsidiary |  | 3C |  |  | (11,465 | ) |  |  | - |  |  |  | - |
Gain from sale of an investment |  | 3G |  |  | (2,025 | ) |  |  | - |  |  |  | - |
Other income |  | 3N |  |  | (494 | ) |  |  | - |  |  |  | - |
Changes in fair value of warrants issued to investors |  | 4 |  |  | (484 | ) |  |  | (338 | ) |  |  | (142 | )
Changes in fair value of commitment to issue shares |  | 3E |  |  | 75 |  |  |  | - |  |  |  | - |
Financial (income) loss net |  |  |  |  | 347 |  |  |  | (205 | ) |  |  | (99 | )
Profit (Loss) before taxes on income |  |  |  |  | 4,151 |  |  |  | (6,841 | ) |  |  | (14,179 | )
Tax benefit (expense) |  | 10 |  |  | (105 | ) |  |  | (9 | ) |  |  | 1 |
Net profit (loss) for the period |  |  |  |  | 4,046 |  |  |  | (6,850 | ) |  |  | (14,178 | )
Other comprehensive income (loss) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Items that may be reclassified to profit or loss |  |  |  |  |  |  |  |  |  |  |  |  |  |
Share of other comprehensive income (loss) of consolidated subsidiaries and associates accounted for using the equity method |  |  |  |  | 191 |  |  |  | 8 |  |  |  | (28 | )
Items that will not be reclassified to profit or loss |  |  |  |  |  |  |  |  |  |  |  |  |  |
Share of other comprehensive income (loss) of consolidated subsidiaries and associates accounted for using the equity method |  |  |  |  | (29 | ) |  |  | 27 |  |  |  | (13 | )
Other comprehensive income (loss) for the period |  |  |  |  | 162 |  |  |  | 35 |  |  |  | (41 | )
Total comprehensive income (loss) for the period |  |  |  |  | 4,208 |  |  |  | (6,815 | ) |  |  | (14,219 | )
Net profit (loss) for the period is attributable to: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owners of Medigus |  |  |  |  | 6,794 |  |  |  | (4,325 | ) |  |  | (14,178 | )
Non-controlling interests |  |  |  |  | (2,748 | ) |  |  | (2,525 | ) |  |  | - |
|  |  |  |  | 4,046 |  |  |  | (6,850 | ) |  |  | (14,178 | )
Total comprehensive income (loss) for the period is attributable to: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owners of Medigus |  |  |  |  | 6,881 |  |  |  | (4,278 | ) |  |  | (14,219 | )
Non-controlling interests |  |  |  |  | (2,673 | ) |  |  | (2,537 | ) |  |  | - |
|  |  |  |  | 4,208 |  |  |  | (6,815 | ) |  |  | (14,219 | )
Earnings (Loss) per ordinary share attributed to Medigus ltd |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | 16 |  |  | 0.01 |  |  |  | (0.03 | ) |  |  | (0.18 | )
Diluted |  | 16 |  |  | 0.01 |  |  |  | (0.03 | ) |  |  | (0.18 | )

F-8

MEDIGUS LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

|  |  |  |  |  |  | Equity attributable to owners of Medigus Ltd. |  |  |  |  |  |  |
|  | Note |  | Ordinary shares |  |  | Share premium |  |  | Capital reserves from equity awards |  |  | Other reserves |  |  | Capital reserves from transactions with non- controlling interest |  |  | Currency translation differences |  |  | Warrants |  |  | Accumulated deficit |  |  | Total |  |  | Non- controlling interests |  |  | Total equity |
BALANCE AS OF JANUARY 1, 2021 |  |  |  |  | 93,021 |  |  |  | - |  |  |  | 1,450 |  |  |  | 545 |  |  |  | 9,848 |  |  |  | (1,118 | ) |  |  | 197 |  |  |  | (80,982 | ) |  |  | 22,961 |  |  |  | 3,233 |  |  |  | 26,194 |
Income (Loss) for the period |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,794 |  |  |  | 6,794 |  |  |  | (2,748 | ) |  |  | 4,046 |
Other comprehensive income |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (29 | ) |  |  | - |  |  |  | 116 |  |  |  | - |  |  |  | - |  |  |  | 87 |  |  |  | 75 |  |  |  | 162 |
TOTAL COMPREHENSIVE LOSS FOR THE YEAR |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (29 | ) |  |  | - |  |  |  | 116 |  |  |  | - |  |  |  | 6,794 |  |  |  | 6,818 |  |  |  | (2,673 | ) |  |  | 4,208 |
TRANSACTIONS WITH SHAREHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Issuance of shares and warrants (Note 12) |  |  |  |  | 49,398 |  |  |  | (32,062 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 17,336 |  |  |  | - |  |  |  | 17,336 |
Cancellation of par value (Note 12) |  |  |  |  | (142,419 | ) |  |  | 142,419 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Consolidation of Jeffs’ Brands ltd (Note 3E) |  |  |  |  | - |  |  |  | 71 |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 71 |  |  |  | 1,156 |  |  |  | 1,227 |
Exercise of warrants issued by ScoutCam Inc. (Note 3C) |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 264 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 264 |  |  |  | 518 |  |  |  | 782 |
Issuance of shares by Eventer (Note 3D) |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 717 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 717 |  |  |  | 1,138 |  |  |  | 1,855 |
Loss of control in ScoutCam Inc. (Note 3C) |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,760 | ) |  |  | (2,760 | )
Deemed contributions to Jeffs’ Brands ltd (Note 3E) |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 108 |  |  |  | (421 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (313 | ) |  |  | 529 |  |  |  | 216 |
Deemed contribution to an affiliate (Note 3F) |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 10 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 10 |  |  |  | - |  |  |  | 10 |
Expiration of options |  |  |  |  | - |  |  |  | 74 |  |  |  | (74 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Subsidiaries’ share-based compensation to employees and service providers (Note 3C, 3I, 3E, 3D) |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,102 |  |  |  | 1,102 |
Share based compensation to employees and service providers (Note 12) |  |  |  |  | - |  |  |  | 60 |  |  |  | 1,203 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,263 |  |  |  | - |  |  |  | 1,263 |
TOTAL TRANSACTIONS WITH SHAREHOLDERS |  |  |  |  | (93,021 | ) |  |  | 110,562 |  |  |  | 1,129 |  |  |  | 118 |  |  |  | 560 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 19,348 |  |  |  | 1,683 |  |  |  | 21,031 |
BALANCE AS OF DECEMBER 31, 2021 |  |  |  |  | - |  |  |  | 110,562 |  |  |  | 2,579 |  |  |  | 634 |  |  |  | 10,408 |  |  |  | (1,002 | ) |  |  | 197 |  |  |  | (74,188 | ) |  |  | 49,190 |  |  |  | 2,243 |  |  |  | 51,433 |

The accompanying notes are an integral part of these consolidated financial statements.

F-9

MEDIGUS LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Continued) - 2

|  |  |  |  |  |  | Equity attributable to owners of Medigus Ltd. |  |  |  |  |  |  |
|  | Note |  | Ordinary shares |  |  | Share premium |  |  | Capital reserves from options granted |  |  | Other reserves |  |  | Capital reserves from transactions with non- controlling interest |  |  | Currency translation differences |  |  | Warrants |  |  | Accumulated deficit |  |  | Total |  |  | Non- controlling interests |  |  | Total equity |
BALANCE AS OF JANUARY 1, 2020 |  |  |  |  |  | 22,802 |  |  |  | 47,873 |  |  |  | 1,351 |  |  |  | 525 |  |  |  | 11,761 |  |  |  | (1,145 | ) |  |  | 197 |  |  |  | (76,657 | ) |  |  | 6,707 |  |  |  | 1,424 |  |  |  | 8,131 |
Loss for the period |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (4,325 | ) |  |  | (4,325 | ) |  |  | (2,525 | ) |  |  | (6,850 | )
Other comprehensive income |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 20 |  |  |  | - |  |  |  | 27 |  |  |  | - |  |  |  | - |  |  |  | 47 |  |  |  | (12 | ) |  |  | 35 |
TOTAL COMPREHENSIVE LOSS FOR THE YEAR |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 20 |  |  |  | - |  |  |  | 27 |  |  |  | - |  |  |  | (4,325 | ) |  |  | (4,278 | ) |  |  | (2,537 | ) |  |  | (6,815 | )
TRANSACTIONS WITH SHAREHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase of a subsidiary |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 381 |  |  |  | 381 |
Issuance of shares and warrants |  |  | 14(b) |  |  | 53,278 |  |  |  | (35,369 | ) |  |  | - |  |  |  | - |  |  |  | (3,766 | ) |  |  | - |  |  |  | 3,632 |  |  |  | - |  |  |  | 17,775 |  |  |  | - |  |  |  | 17,775 |
Exercise of warrants |  |  |  |  |  | 16,941 |  |  |  | (12,596 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,632 | ) |  |  | - |  |  |  | 713 |  |  |  | - |  |  |  | 713 |
Issuance of shares and warrants by the Subsidiary |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,956 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,956 |  |  |  | 2,632 |  |  |  | 4,588 |
Conversion into shares and warrants of loan granted to the Subsidiary |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (136 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (136 | ) |  |  | 136 |  |  |  | - |
Share in capital reserve of an associate |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 33 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 33 |  |  |  | - |  |  |  | 33 |
Stock-based compensation in connection with options granted to employees and service providers |  |  | 14(c) |  |  | - |  |  |  | - |  |  |  | 191 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 191 |  |  |  | 1,197 |  |  |  | 1,388 |
Expiration of options |  |  |  |  |  | - |  |  |  | 92 |  |  |  | (92 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
TOTAL TRANSACTIONS WITH SHAREHOLDERS |  |  |  |  |  | 70,219 |  |  |  | (47,873 | ) |  |  | 99 |  |  |  | - |  |  |  | (1,913 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 20,532 |  |  |  | 4,346 |  |  |  | 24,878 |
BALANCE AS OF DECEMBER 31, 2020 |  |  |  |  |  | 93,021 |  |  |  | - |  |  |  | 1,450 |  |  |  | 545 |  |  |  | 9,848 |  |  |  | (1,118 | ) |  |  | 197 |  |  |  | (80,982 | ) |  |  | 22,961 |  |  |  | 3,233 |  |  |  | 26,194 |

The accompanying notes are an integral part of these consolidated financial statements.

F-10

MEDIGUS LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

|  |  |  |  |  |  | Equity attributable to owners of Medigus Ltd. |  |  |  |  |  |  |
|  | Note |  | Ordinary shares |  |  | Share premium |  |  | Capital reserves from options granted |  |  | Other reserves |  |  | Capital reserves from transactions with non- controlling interest |  |  | Currency translation differences |  |  | Warrants |  |  | Accumulated deficit |  |  | Total |  |  | Non- controlling interests |  |  | Total equity |
BALANCE AS OF JANUARY 1, 2019 |  |  |  |  |  | 20,924 |  |  |  | 48,942 |  |  |  | 1,271 |  |  |  | 538 |  |  |  | - |  |  |  | (1,117 | ) |  |  | - |  |  |  | (62,479 | ) |  |  | 8,079 |  |  |  | - |  |  |  | 8,079 |
Loss for the period |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (14,178 | ) |  |  | (14,178 | ) |  |  | - |  |  |  | (14,178 | )
Other comprehensive loss |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (13 | ) |  |  | - |  |  |  | (28 | ) |  |  | - |  |  |  | - |  |  |  | (41 | ) |  |  | - |  |  |  | (41 | )
TOTAL COMPREHENSIVE LOSS FOR THE YEAR |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (13 | ) |  |  | - |  |  |  | (28 | ) |  |  | - |  |  |  | (14,178 | ) |  |  | (14,219 | ) |  |  | - |  |  |  | (14,219 | )
TRANSACTIONS WITH SHAREHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Issuance of shares and warrants |  |  | 12(b)(4) |  |  | 1,878 |  |  |  | (1,248 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 197 |  |  |  | - |  |  |  | 827 |  |  |  | - |  |  |  | 827 |
Transactions with non-controlling interest |  |  | 4 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 11,714 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 11,714 |  |  |  | 1,424 |  |  |  | 13,138 |
Share in capital reserve of an associate |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 47 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 47 |  |  |  | - |  |  |  | 47 |
Stock-based compensation in connection with options granted to employees and service providers |  |  | 12(c) |  |  | - |  |  |  | - |  |  |  | 259 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 259 |  |  |  | - |  |  |  | 259 |
Expiration of options |  |  |  |  |  | - |  |  |  | 179 |  |  |  | (179 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
TOTAL TRANSACTIONS WITH SHAREHOLDERS |  |  |  |  |  | 1,878 |  |  |  | (1,069 | ) |  |  | 80 |  |  |  | - |  |  |  | 11,761 |  |  |  | - |  |  |  | 197 |  |  |  | - |  |  |  | 12,847 |  |  |  | 1,424 |  |  |  | 14,271 |
BALANCE AS OF DECEMBER 31, 2019 |  |  |  |  |  | 22,802 |  |  |  | 47,873 |  |  |  | 1,351 |  |  |  | 525 |  |  |  | 11,761 |  |  |  | (1,145 | ) |  |  | 197 |  |  |  | (76,657 | ) |  |  | 6,707 |  |  |  | 1,424 |  |  |  | 8,131 |

The accompanying notes are an integral part of these consolidated financial statements.

F-11

(Continued) - 1

MEDIGUS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

|  | For the year ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | USD in thousands |
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |  |  |  |  |
Cash flows used in operations (see Appendix A) |  |  | (5,067 | ) |  |  | (6,263 | ) |  |  | (2,757 | )
Interest received |  |  | 7 |  |  |  | 17 |  |  |  | 75 |
Dividend received |  |  | - |  |  |  | 120 |  |  |  | - |
Interest paid |  |  | (53 | ) |  |  | (8 | ) |  |  | (5 | )
Income tax paid |  |  | (137 | ) |  |  | (9 | ) |  |  | (8 | )
Net cash flow used in operating activities |  |  | (5,250 | ) |  |  | (6,143 | ) |  |  | (2,695 | )
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |  |  |  |  |  |  |  |
Payments for purchase of property and equipment |  |  | (141 | ) |  |  | (324 | ) |  |  | (62 | )
Payment for acquisitions of associates and financial assets at fair value through profit or loss (see note 3 and note 4) |  |  | (4,703 | ) |  |  | (1,818 | ) |  |  | (4,057 | )
Deconsolidation of ScoutCam Inc. upon loss of control (see Appendix C and note 3C) |  |  | (3,252 | ) |  |  | - |  |  |  | - |
Consolidation of Jeffs’ Brands upon gain of control (see Appendix E and note 3E) |  |  | 240 |  |  |  | - |  |  |  | - |
Purchase of intangible assets (Note 9 and supplement disclosure of cash flow information) |  |  | (5,003 | ) |  |  | - |  |  |  | - |
Consolidation of Eventer ltd upon gain of control (see Appendix B and note 3D) |  |  | - |  |  |  | 541 |  |  |  | - |
Exercise of warrants issued by an associate (see note 3C) |  |  | (234 | ) |  |  | - |  |  |  | - |
Loan extended to an associate (see note 3F) |  |  | (1,236 | ) |  |  | - |  |  |  | - |
Proceeds from sale of financial assets at fair through profit of loss and securities of an associate (see note 3G) |  |  | 1,883 |  |  |  | - |  |  |  | - |
Net cash flow used in investing activities |  |  | (12,446 | ) |  |  | (1,601 | ) |  |  | (4,119 | )
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from issuance of shares and warrants by a subsidiary, net of issuance costs (see note 4B, 4A) |  |  | 1,388 |  |  |  | 4,587 |  |  |  | - |
Receipt of short-term loans (see note 3E) |  |  | 981 |  |  |  | - |  |  |  | - |
Repayment of loans (see note 3E) |  |  | (1,336 | ) |  |  | - |  |  |  | - |
Receipt of long-term loans (see note 3E) |  |  | 940 |  |  |  | - |  |  |  | - |
Repayment of related party debt (Note 3D) |  |  | (159 | ) |  |  | - |  |  |  | - |
Transaction with non-controlling interest (see Appendix D and note 4) |  |  | - |  |  |  | - |  |  |  | 3,202 |
Principal elements of lease liability |  |  | - |  |  |  | (46 | ) |  |  | (46 | )
Proceeds from issuance of shares and warrants and from exercise of warrants, net of issuances costs (see note 12) |  |  | 17,336 |  |  |  | 18,405 |  |  |  | - |
Net cash flow generated from financing activities |  |  | 19,150 |  |  |  | 22,946 |  |  |  | 3,156 |
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |  |  | 1,454 |  |  |  | 15,202 |  |  |  | (3,658 | )
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |  |  | 22,363 |  |  |  | 7,036 |  |  |  | 10,625 |
GAINS (LOSSES) FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS |  |  | 208 |  |  |  | 125 |  |  |  | 69 |
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR |  |  | 24,025 |  |  |  | 22,363 |  |  |  | 7,036 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |  |  |  |  |  |  |  |  |  |  |  |
Right of use assets obtained in exchange for lease liabilities |  |  | - |  |  |  | - |  |  |  | 174 |
Non-cash investment in the Gix Group and issuance of ADS (note 3F) |  |  | 4,417 |  |  |  | - |  |  |  | 827 |
Issuance of shares in exchange for media and advertising services rights (Note 3D) |  |  | 1,250 |  |  |  | - |  |  |  | - |
Purchase a software license on credit - Screenz Cross Media Ltd (Note 3D, Note 9) |  |  | 1,346 |  |  |  | - |  |  |  | - |
Increase in Screenz payable balance due to modification into a debt (Note 3D, Note 9) |  |  | 115 |  |  |  | - |  |  |  | - |
Increase in loan balance following terms modification (Note 3E) |  |  | 14 |  |  |  | - |  |  |  | - |
Deferred offering costs included in other current liabilities |  |  | 423 |  |  |  | - |  |  |  | - |
Unpaid Recapitalization Transaction costs |  |  | - |  |  |  | - |  |  |  | 89 |

The accompanying notes are an integral part of these consolidated financial statements.

F-12

(Continued) - 2

MEDIGUS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

APPENDIX A TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS:

|  | For the year ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | USD in thousands |
NET CASH USED IN OPERATIONS: |  |  |  |  |  |  |  |  |
Income (Loss) for the period before taxes on income |  |  | 4,151 |  |  |  | (6,841 | ) |  |  | (14,179 | )
Adjustment in respect of: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 320 |  |  |  | 167 |  |  |  | 75 |
Net loss (income) from change in the fair value of financial assets at fair value through profit or loss |  |  | (714 | ) |  |  | (797 | ) |  |  | (92 | )
Changes in fair value of warrants issued to investors |  |  | (484 | ) |  |  | (338 | ) |  |  | (142 | )
Change in fair value of commitment to issue shares |  |  | 75 |  |  |  | - |  |  |  | - |
Gain (loss) from exchange differences on cash and cash equivalents |  |  | (208 | ) |  |  | (125 | ) |  |  | (69 | )
Gain (loss) from exchange differences other than cash and cash equivalents |  |  | 59 |  |  |  | - |  |  |  | - |
Share of net loss of associates accounted for using the equity method |  |  | 2,149 |  |  |  | 170 |  |  |  | 216 |
Finance expenses |  |  | 321 |  |  |  | 8 |  |  |  | 5 |
Finance income |  |  | (70 | ) |  |  | - |  |  |  | - |
Amortization of excess purchase price of associates |  |  | 263 |  |  |  | 546 |  |  |  | - |
Listing expenses |  |  | - |  |  |  | - |  |  |  | 10,098 |
Dividend received |  |  | - |  |  |  | (120 | ) |  |  | - |
Interest received |  |  | (7 | ) |  |  | (17 | ) |  |  | (75 | )
Share based compensation to employees and service providers |  |  | 2,362 |  |  |  | 1,388 |  |  |  | 259 |
Gain arising from deconsolidation of a subsidiary upon loss of control (see note 4A) |  |  | (11,465 | ) |  |  | - |  |  |  | - |
Gain from sales of securities of an investment (see note 4E) |  |  | (2,026 | ) |  |  | - |  |  |  | - |
Impairment of intangible asset |  |  | 89 |  |  |  | - |  |  |  | - |
CHANGES IN OPERATING ASSET AND LIABILITY ITEMS: |  |  |  |  |  |  |  |  |  |  |  |
Decrease (increase) in trade accounts receivable |  |  | (239 | ) |  |  | (74 | ) |  |  | 2 |
Decrease (increase) in other current assets |  |  | 231 |  |  |  | (440 | ) |  |  | 83 |
Increase (decrease) in trade accounts payables |  |  | 1,033 |  |  |  | 602 |  |  |  | (115 | )
Increase (decrease) in accrued compensation expenses |  |  | 18 |  |  |  | (28 | ) |  |  | (74 | )
Increase (decrease) in contract liability |  |  | (1,069 | ) |  |  | (346 | ) |  |  | 1,953 |
Decrease (increase) in contract fulfillment assets |  |  | (240 | ) |  |  | - |  |  |  | - |
Increase (decrease) in accrued expenses and other liabilities |  |  | 809 |  |  |  | 455 |  |  |  | 117 |
Increase (decrease) in liability to event producers |  |  | 962 |  |  |  | - |  |  |  | - |
Decrease (increase) in deferred offering costs |  |  | (836 | ) |  |  | - |  |  |  | - |
Decrease (increase) in inventory |  |  | (551 | ) |  |  | (473 | ) |  |  | (819 | )
NET CASH USED IN OPERATIONS |  |  | (5,067 | ) |  |  | (6,263 | ) |  |  | (2,757 | )

The accompanying notes are an integral part of these consolidated financial statements.

F-13

APPENDIX B TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS:

|  | As of October 15, 2020 |
|  | USD in thousands |
Consolidation of Eventer Ltd upon gain of control: |  |  |
Other receivables |  |  | 35 |
Property and equipment |  |  | 1 |
Goodwill |  |  | 296 |
Technology - net |  |  | 199 |
Trade payable |  |  | (2 | )
Liability to event producers |  |  | (689 | )
Non-controlling interest |  |  | (381 | )
Cash obtained in connection with acquisition - Eventer |  |  | (541 | )

APPENDIX C TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS:

|  | As of March 31, 2021 |
|  | USD in thousands |
Deconsolidation of ScoutCam Inc. upon loss of control: |  |  |
Working capital other than cash |  |  | 340 |
Property and equipment, net |  |  | (370 | )
Lease liability- long term |  |  | 144 |
ScoutCam investment in fair value |  |  | 11,843 |
ScoutCam warrants |  |  | 97 |
Derecognition of non-controlling interests |  |  | 2,760 |
Gain arising from deconsolidation upon loss of control |  |  | (11,562 | )
Net cash deconsolidated upon loss of control |  |  | 3,252 |

F-14

APPENDIX D TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS:

Consolidation of ScoutCam Inc. upon gain of control:

|  | As of December 31, 2019 |
|  | USD in thousands |
Assets acquired (liabilities assumed): |  |  |
Current assets excluding cash and cash equivalents |  |  | - |
Current liabilities |  |  | (73 | )
Transaction costs |  |  | (89 | )
Effect on equity items |  |  | (3,040 | )
Cash obtained in connection with transaction with non-controlling interest |  |  | 3,202 |

APPENDIX E TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS:

|  | As of January 04, 2021 |
|  | USD in thousands |
Consolidation of Jeffs’ Brands Ltd. upon gain of control: |  |  |
Assets acquired (liabilities assumed): |  |  |
Net working capital other than cash and inventory |  |  | (1,576 | )
Intangible assets |  |  | 1,312 |
Related party loans fair value adjustment |  |  | 98 |
Inventory |  |  | 778 |
deferred tax liability |  |  | (188 | )
Non-controlling interests |  |  | (1,156 | )
Non-cash consideration |  |  | (71 | )
Goodwill |  |  | 563 |
Cash obtained in connection with acquisition |  |  | (240 | )

F-15

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL:

| a. | Medigus Ltd. (the “Company” or “Medigus”) was incorporated in Israel on December 9, 1999. The Company’s registered office and principal place of business are located in Israel. The address of its registered office is Hanehoshet 3, 5th Floor, Building B, Tel-Aviv POB 6971068, Israel. The Company, together with its subsidiaries and associates, operates in the technology sector, focusing on medical-related devices and products (through its associates Polyrizon Ltd. and ScoutCam Inc.), on internet related activity (through its subsidiary Eventer Ltd. and its associate Gix Internet Ltd.), on e-commerce (through its subsidiary Jeffs' Brands Ltd.) and on the electric vehicle sector (through its subsidiary Charging Robotics Ltd.). Additionally, through its corporate, the Company is engaged in the licensing of intellectual property relating to its legacy product, the Medigus Ultrasonic Surgical Endostapler ("MUSE"), to Golden Grand Medical Instruments Ltd., a china based medical services provider (refer to Note 16c(*)), and in the investment of its excess cash resources, primarily in equity securities. “Group” - the Company together with Jeffs’ Brands Ltd., Charging Robotics Ltd., GERD IP Inc., and Eventer Technologies Ltd. “Subsidiaries” – entities under the control of the Company. ScoutCam On January 3, 2019, the Company established a wholly owned subsidiary in Israel under the name ScoutCam Ltd. (“ScoutCam”). ScoutCam was incorporated as part of a reorganization of the Company aimed at distinguishing the Company’s miniaturized imaging business, or the micro ScoutCam™ portfolio, from the other operations of the Company and enabling the Company to form a separate business unit with dedicated resources focused on the promotion of such technology. ScoutCam is engaged in the development, production and marketing of innovative miniaturized imaging equipment known as micro ScoutCam™ portfolio for use in medical procedures as well as various industrial applications. In addition, ScoutCam used the technological platform it developed for the purpose of additional special systems and products that are suitable for both medical and industrial applications. On September 16, 2019, ScoutCam entered into a Securities Exchange Agreement (the “Exchange Agreement”), with ScoutCam Inc., formerly known as Intellisense Solutions (“Intellisense”). Pursuant to the Exchange Agreement the Company assigned, transferred and delivered 100% of its holdings in ScoutCam to ScoutCam Inc., in exchange for shares of common stock of ScoutCam’s Inc. representing 60% of its issued and outstanding share capital. ScoutCam has executed a number of capital raising transactions during 2020 and 2021, of which the last was a private placement that occurred on March 22, 2021. The aforementioned private placement diluted the Company’s holdings in ScoutCam and lead to a deconsolidation of ScoutCam. and the remaining holdings were accounted for under the equity method. For additional information, see note 3C. GERD IP, Inc. On January 13, 2020, together with the Company’s advisor Mr. Kfir Zilberman, the Company formed a subsidiary in Delaware, of which the Company holds 90% of the stock capital, under the name GERD IP, Inc. (“GERD IP”). The Company transferred certain of its patents in consideration for seven capital notes issued to the Company by GERD IP in the amount of USD 2,000 thousand each. On December 26, 2021, the Company’s board of directors approved to convert the seven capital notes from liability to equity of GERD IP. For additional information see note 3N.

Eventer

On October 14, 2020, the Company signed a share purchase agreement and a revolving loan agreement with Eventer, a technology company engaged in the development of tools for automatic creation, management, promotion, and billing of events and ticketing sales. Pursuant to the share purchase agreement, the Company was issued shares representing 58.7% of the issued and outstanding share capital of Eventer and gained control over Eventer. As of December 31, 2021, the Company holds approximately 47.69% of the issued and outstanding share capital of Eventer (see note 3D).

F-16

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL: (continued):

Gix Internet Ltd.

On September 3, 2019, the Company acquired 8.45% of the issued shares of Gix Internet Ltd. (“Gix”) and 9.34% of the issued shares of Gix Media Ltd. (formerly known as “Linkury Ltd.” (“Gix Media”, and together with Gix Internet, “Gix Group”) as pursuant to an investment.

As of December 31, 2021, the Company owns 34.58% in Gix (see note 3F)

Charging Robotics Ltd.

On January 7, 2021, the Company entered into an agreement to purchase a provisional patent filed with the United States Patent and Trademark Office and know-how relating to wireless vehicle battery charging technology. Furthermore, the Company entered into a collaboration agreement with the seller, whereby the Company committed to invest in a newly incorporated wholly owned subsidiary of the Company, Charging Robotics Ltd. (“Charging Robotics”), incorporated on February 1, 2021, which will focus on the Company’s new electric vehicle and wireless charging activities. On February 19, 2021, the Company entered into a venture agreement with Amir Zaid, Weijian Zhou and Charging Robotics, under which the Company formed a venture, under the name Revoltz Ltd., or Revoltz, to develop and commercialize three modular electric vehicle (EV) micro mobility vehicles for urban individual use and “last mile” cargo delivery (see note 3I).

Polyrizon Ltd.

In July 2020, the Company entered into an ordinary share purchase agreement with Polyrizon Ltd. (“Polyrizon”), pursuant to which the Company purchased 19.9% of Polyrizon’s issued and outstanding capital stock on a fully diluted basis for aggregate gross proceeds of USD 104 thousand. Polyrizon did not have significant operations in the period before the purchase. As of December 31, 2021, the Company owns 37.03% in Polyrizon. For additional information, see note 3H.

Jeffs’ Brands Ltd.

On October 8, 2020, the Company entered into a common stock purchase agreement with Smart Repair Pro, Inc. (“Pro”), Purex, Corp. (“Purex”), and their respective stockholders (the “Pro and Purex SPA”). Pro and Purex both are in the e-Commerce field and operate online stores for the sale of various consumer products on the Amazon online marketplace.

The transactions contemplated in the Pro and Purex SPA closed on January 4, 2021. On May 16, 2021, the Company entered into a stock exchange and plan of restructuring agreement with Victor Hacmon, the other shareholder of Pro and Purex, and Jeffs’ Brands Ltd. (“Jeffs’ Brands”), a newly incorporated entity, pursuant to which, among other things, the Company and Victor Hacmon transferred all their holdings in Pro and Purex to Jeffs’ Brands, in return for a consideration of Jeffs’ Brands ordinary shares that were issued respectively. As a result, Pro and Purex became wholly owned subsidiaries of Jeffs’ Brands. The share exchange transaction was accounted for as a reorganization of entities under common control. Accordingly, the carrying values of Purex and Pro were retained through the transaction.

F-17

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL: (continued):

As of December 31, 2021, the Company owns 50.03% in Jeffs’ Brands, which operates in the e-Commerce field and operate online stores for the sale of various consumer products on the Amazon online marketplace. For additional information, see note 3E.

Interest in other entities

As of December 31, 2021, the Company also owns 35.06% in Fuel Doctor Holding Inc. (“Fuel Doctor”) (see note 3L), 11.18% in ABI Energy Ltd., 5.63% in Automax Ltd. (formerly known as Matomy Ltd.) (see note 3G), 5.72% in Elbit Imaging Ltd. (“Elbit Imaging” see note 3J), 4.85% in SciSparc Ltd. (see note 3K), 2.09% in Maris-Tech Ltd. ( “Maris”), 0.47% in Safe Foods, Inc. ( “SAFO”), 2.35% in Safee Cyber Technologies Ltd. (hereinafter – “Safee”) (see note 3M), and 2.29% in Tondo smart Ltd. ( “Tondo”).

The Company’s ordinary shares were listed on the Tel Aviv Stock Exchange Ltd. (“TASE”) from February 2006 to January 25, 2021, when the Company voluntarily delisted its shares from trading on the TASE. As of May 20, 2015, the Company’s American Depository Shares (“ADSs”) evidenced by American Depositary Receipts (“ADRs”) are listed on the Nasdaq Capital Market. The Company’s depositary agent for the ADR program is the Bank of New York Mellon. The Company’s Series C Warrants have been traded on Nasdaq Capital Market since July 2018.

| b. | As of the approval date of these financial statements, the Company had cash and cash equivalents in the amount of USD 15.9 million. The Company anticipates such cash and cash equivalents will provide sufficient liquidity for more than a twelve-month period from the date of these financial statements.
|  | However, since inception, the Company’s activities have been funded mainly by its shareholders. Furthermore, in the recent years the Company has suffered recurring losses from operations, negative cash flows from operating activities, and has an accumulated deficit as of December 31, 2021. As such, the Company’s ability to continue operating may be dependent on several factors, amongst which is its ability to raise sufficient additional funding, which funding may not necessarily be available to the Company, obtained on terms favorable to the Company, or provide the Company with sufficient funds to meet its objectives.

| c. | Effect of coronavirus

The COVID-19 pandemic, including the efforts to combat it, has had and may continue to have a widespread effect on the Company’s business. In response to the pandemic, public health authorities and local and national governments have implemented measures that have and may continue to impact the Company’s business, including voluntary or mandatory quarantines, restrictions on travel and orders to limit the activities of non-essential workforce personnel. As of the date of this annual report, the COVID-19 (coronavirus) pandemic had made a significant impact on global economic activity, with governments around the world, including Israel, having closed office spaces, public transportation and schools, and restricting travel. These closures and restrictions, if continued for a sustained period, could trigger a global recession that could negatively impact the Company’s business in a material manner.

F-18

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL: (continued):

The Company is actively monitoring the pandemic and the Company is taking any necessary measures to respond to the situation in cooperation with the various stakeholders.

In light of the evolving nature of the pandemic and the uncertainty it has produced around the world, the Company does not believe it is possible to precisely predict the pandemic’s cumulative and ultimate impact on the Company’s future business operations, liquidity, financial condition and results of operations. For example, travel restrictions have adversely affected the Company’s ability to timely achieve certain milestones included in the Company Agreement with Golden Grand and has delayed the recognition of revenues deriving therefrom. These travel restrictions have also impacted the Group sales and marketing efforts and those of the Company subsidiaries. In addition, a substantial portion of Eventer’s business relates to leisure event management, the scope of which was greatly reduced in the past as a result of governmental policies and measures tailored to address to spread of COVID-19.

The extent of the impact of the pandemic on the Company business and financial results will depend largely on future developments, including the duration of the spread of the outbreak and any future “waves” of the outbreak, globally and specifically within Israel and the United States. In addition, the extent of the impact on capital and financial markets, foreign currencies exchange and governmental or regulatory orders that impact the Company business are highly uncertain and cannot be predicted. If economic conditions generally or in the industries in which the Company operate specifically, worsen from present levels, the Company results of operations could be adversely affected and the Company financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new government actions or restrictions, new information that may emerge concerning the severity, longevity and impact of the COVID-19 pandemic on economic activity.

Additionally, concerns over the economic impact of the pandemic have caused extreme volatility in financial markets, which has adversely impacted and may continue to adversely impact the Company share price and the Company ability to access capital markets. To the extent the pandemic or any worsening of the global business and economic environment as a result adversely affects the Company business and financial results, it may also have the effect of heightening many of the other risks described in this annual report.

F-19

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:

| a. | Basis for preparation of the financial statements:

The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IFRS 16, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 Inventories or value in use in IAS 36 Impairment of Assets.

The consolidated financial statements were authorized for issue by the Board of Directors on April 26, 2022.

The significant accounting policies set out below have been consistently applied to in the preparation of these consolidated financial statements for all years presented, unless otherwise stated.

Deferred offering costs

The Group capitalizes certain legal and other third-party fees that are directly related to the Group’s in-process equity financing until such financing is consummated. After the consummation of such equity financing, these costs are recorded as a reduction of the respective gross proceeds. Should a planned equity financing be abandoned, terminated, or significantly delayed, the deferred offering costs are written off to operating expenses. As of December 31, 2021, there were USD 836 thousands of deferred offering costs included in other non-current assets on the consolidated statements of financial position.

| b. | Principles of consolidation

Subsidiaries

Subsidiaries are all entities over which the Group has control. Control is achieved when the Company has all the following:

| ● | Power over the investee;

| ● | Exposure, or rights, to variable returns from its involvement with the investee; and

| ● | The ability to use its power over the investee to affect the amounts of the investor’s returns.

F-20

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ends when the Company loses control over the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated statements of income/loss and other comprehensive income/loss from the date on which the Company obtains control until the date when the Company loses control over the subsidiary.

Business combinations

The results of an acquired business in a business combination are included in the Company’s consolidated financial statements from the date of acquisition according to IFRS 3R, “Business Combinations.” The Company allocates the purchase price, which is the sum of the consideration provided and may consist of cash, equity or a combination of the two, to the identifiable assets and liabilities of the acquired business at their fair values as of the acquisition date. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. The non-controlling interest are measured upon the date of the business combination in the amount of their share at the fair value of assets, liabilities and contingent liabilities of the acquired acquisition other than their share in goodwill.

A contingent consideration incurred in a business combination is included as part of the acquisition price and recorded at a probability weighted assessment of the fair value as of the acquisition date. The fair value of the contingent consideration is re-measured at each reporting period, with any adjustments in fair value recognized in earnings under general and administrative expenses.

Acquisition related costs incurred by the Company are not included as a component of consideration transferred but are accounted for as an expense in the period in which the costs are incurred.

Asset Acquisitions

The Company accounted for the Polyrizon Ltd. transaction as an asset acquisition under the amended guidance set forth under IFRS 3, Business Combinations, as substantially all of the fair value of the gross assets acquired was concentrated in a group of similar identifiable assets (See note 3H).

Principles of consolidation

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of loss and other comprehensive loss, statement of changes in equity and statements of financial position, respectively.

F-21

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

Changes in ownership interests

The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognized in a separate reserve within equity attributable to the owners of the Company.

When the Group ceases to consolidate an investee upon a loss of control, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognized in profit or loss. Amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This means that amounts previously recognized in other comprehensive income will not be reclassified to profit or loss.

| c. | Principles of equity accounting and change in ownership interest

Associates

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee. The Group is presumed to have significant influence when it holds 20 percent or more of the voting rights of an investee, unless it can be clearly demonstrated that this is not the case. The Group does not control its associates. Investments in associates are accounted for using the equity method of accounting, as defined in IAS 28, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5.

Goodwill and other purchased intangible assets

Goodwill and other purchased intangible assets have been recorded in the Company’s financial statements as a result of business combinations and asset acquisition transactions. Goodwill represents the excess of the aggregate fair value of the consideration transferred in a business combination over the fair value of the assets acquired, net of liabilities assumed. Goodwill is not amortized, but rather is subject to impairment test.

Intangible assets that are considered to have definite useful life are amortized using the straight-line basis over their estimated useful lives, which ranges from 5 to 7 years. The carrying amount of these assets is reviewed whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

For the year ended December 31, 2021, the Group recorded impairment related to Brand name of USD 87 thousand. No impairment was recorded for the years ended December 31, 2020 and 2019.

Equity method

Under the equity method, an investment in an associate is recognized initially in the consolidated statements of financial position at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. Dividends received or receivable from associates are recognized as a reduction in the carrying amount of the investment. When the Group’s share of losses of an associate or exceeds the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in these entities. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group.

The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in note 2(f).

F-22

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

Changes in ownership interests

When the Group ceases to account for an investment under the equity method because of a loss of significant influence or in a case a control was gained, any retained interest in the entity is measured to its fair value, with the change in carrying amount recognized in profit or loss. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income are reclassified to profit or loss where appropriate.

| d. | Translation of foreign currency balances and transactions:

The functional currency and the presentation currency

The reporting and functional currency of the Company and each of its subsidiaries, GERD IP, ScoutCam (deconsolidated on March 31, 2021), Charging Robotics and Jeffs’ Brands is USD while Eventer is NIS.

The consolidated financial statements are presented in USD and rounded to the nearest thousand.

The consolidation of Eventer’s financial statements is accounted for as a foreign operation using IAS 21, the Effects of Changes in Foreign Exchange Rates.

Transactions and balances

In preparing the financial statements of the Group entities, transactions in currencies other than the entity’s functional currency (“Foreign Currencies”) are recognized at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in Foreign Currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in Foreign Currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognized in profit or loss in the period in which they arise.

Foreign Operations

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

| ● | assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

| ● | income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used; and

| ● | Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in a foreign exchange translation reserve (attributed to non-controlling interests as appropriate).

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing date.

F-23

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

| e. | Property and equipment

Property and equipment are initially recognized at purchased cost. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of replaced items is derecognized. All other repairs and maintenance are charged to income or loss during the financial period in which they are incurred.

Property and equipment are measured at cost less accumulated depreciation.

Depreciation is calculated using the straight-line method over the estimated useful life of the asset as follows:

| Machinery and equipment |  | 6 – 10 years (primarily 10)
| Leasehold improvements and furniture |  | 7 – 14 years
| Computers and programs |  | 3 years

Leasehold improvements are depreciated using the straight-line method over the shorter of the term of the lease or the estimated useful lives of the assets.

The assets’ residual values, their useful lives and the depreciation method are reviewed, and adjusted if appropriate, at the end of each year.

Gains or losses with respect to disposals are determined by comparing the net proceeds with the carrying amount and recognized in the consolidated statements of loss and other comprehensive loss when occurred.

| f. | Impairment of non-monetary assets

Non-monetary assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less selling costs and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels of identifiable cash flows (cash-generating units). Non-monetary assets that were impaired are reviewed for possible reversal of the impairment recognized at each statement of financial position date.

F-24

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

| g. | Financial instruments:

Financial assets and financial liabilities are recognized on the group’s consolidated statements of financial position when the Group becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

Classification

The Group classifies its financial assets in the following measurement categories:

| ● | those to be measured subsequently at fair value through profit or loss, and

| ● | those to be measured at amortized cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will be recorded in profit or loss.

Recognition

Regular way purchases and sales of financial assets are recognized on trade date, being the date on which the Group commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (“FVTPL”), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

F-25

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

Debt instruments

Subsequent measurement of investments in debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are two measurement categories into which the Group classifies its investments in debt instruments:

| ● | Amortized cost: Financial assets are measured at amortized cost if both of the following conditions are met:

| - | the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

| - | the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses.

| ● | Fair value through profit and loss: A gain or loss on a debt investment that is subsequently measured at FVTPL is recognized in profit or loss and presented net within other gains/(losses) in the period in which it arises.

Equity instruments

The Group subsequently measures investments in equity instruments at fair value through profit and loss except when the Group has control or significant influence. Dividends from such investments continue to be recognized in profit or loss as other income when the Group’s right to receive payments is established.

Changes in the fair value of financial assets at FVTPL are recognized in “net change in fair value of financial assets at fair value through profit or loss” in the Consolidated statements of loss and other comprehensive loss, as applicable.

Impairment

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost.

At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. If the financial instrument is determined to have a low credit risk at the reporting date, the Company assumes that the credit risk on a financial instrument has not increased significantly since initial recognition.

The Group measures the loss allowance for expected credit losses on trade receivables and on financial instruments for which the credit risk has increased significantly since initial recognition based on lifetime expected credit losses. Otherwise, the Group measures the loss allowance at an amount equal to 12-month expected credit losses at the current reporting date.

F-26

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

Financial liabilities

Financial liabilities are initially recognized at their fair value minus, in the case of a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the issue of the financial liability.

Financial liabilities are subsequently measured at amortized cost, except for derivative financial instruments, which are subsequently measured at fair value through profit or loss.

The Group has early adopted the narrow-scope amendment to IAS 1 as described in note 2(q). Accordingly, financial liabilities are classified as non-current if the Group has a substantive right to defer settlement for at least 12 months at the end of the reporting period, otherwise, they are classified as current liabilities.

The Group’s financial liabilities at amortized cost are included in accounts payable, accrued expenses, other current liabilities, payable in respect of the intangible asset and lease liabilities.

The derivative financial instruments represent warrants that confer the right to net share settlement.

The Group derecognizes a financial liability (or a part of a financial liability) when, and only when, it is extinguished (when the obligation specified in the contract is discharged, cancelled or expired).

| h. | Inventory

Inventories in 2020 and 2019 include raw materials and finished products and are valued at the lower of cost or net realizable value.

The cost is determined on the basis of “first in-first out” basis. Cost of purchased raw materials and inventory in process includes costs of design, raw materials, direct labor, other direct costs and fixed production overheads. Materials and other supplies held for use in the production of inventories are not written down if the finished products in which they will be incorporated are expected to be sold at or above cost.

The Group regularly evaluates its ability to realize the value of inventory based on a combination of factors including the following: forecasted sales or usage, estimated current and future market values.

Inventories in 2021 are stated at the lower of cost and net realizable value. Cost comprises direct materials and, where applicable, direct labor costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average cost method. Net realizable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. The Group periodically evaluates the condition and age of inventories and makes provisions for slow moving inventories accordingly.

| i. | Trade receivables

The balance of trade receivables includes amounts due from customers for products sold or services rendered in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for loss allowance.

F-27

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

| j. | Cash and cash equivalents

Cash and cash equivalents include cash on hand and deposits held at call with banks with original maturities of three months or less.

| k. | Current and deferred taxes

Tax expenses for the reported years include current taxes. The taxes are recognized in the consolidated statements of Income/Loss and other comprehensive Income/Loss.

The amount that was recorded as current taxes, is calculated based on the tax laws that have been enacted or substantively enacted at the statement of financial position date, in countries in which the Company and its Subsidiary operate and generate taxable income. The Group’s management periodically evaluates the tax implications applicable to the taxable income, in accordance with the relevant tax laws, and creates provisions in accordance with the amounts expected to be paid to the tax authorities.

The Group recognizes deferred taxes using the liability method, for temporary differences between the amounts of assets and liabilities included in the financial statements, and the amounts for tax purposes. Deferred taxes are not recognized, if the temporary differences arise at the initial recognition of the asset or liability which at the time of the transaction has no effect on profit or loss, whether for accounting or tax reporting. The amount of deferred taxes is determined using the tax rates (and laws) which are expected to apply when the related deferred tax assets is realized or the deferred tax liabilities will be settled.

Deferred tax liabilities and assets are not recognized for temporary differences between the carrying amount and tax bases of investments in subsidiaries where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for temporary differences that are tax deductible, up to the amount of the differences that are expected to be utilized in the future, against taxable income.

No deferred tax assets have been recorded in the Group’s books and records with respect to accumulated losses since it is not probable that the Group will be able to utilize such losses in the foreseeable future against taxable income.

Deferred tax assets and liabilities are offset only if:

| - | There is a legally enforceable right to offset current tax assets against current tax liabilities; and

| - | Deferred income tax assets and liabilities relate to income taxes imposed by the same taxation authority on the same taxable entity.

F-28

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

In the event of a dividend distribution originating from tax exempted “benefited enterprises”, tax will be levied on the amount distributed using the tax rate that would have been applicable to Company had it not been exempted from tax. In the event of such a distribution, the amount of tax will be recognized as an expense in the consolidated statement of Income/loss and other comprehensive Income/loss.

| l. | Employee benefits

| 1) | Pension and severance pay obligations

Israeli labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. Pursuant to Section 14 of the Severance Compensation Act, 1963 (“Section 14”), all of the Company’s employees in Israel are entitled a monthly contribution, at a rate of 8.33% of their monthly salary, made in their name with insurance companies. Contributions under Section 14 relieve the Company from any future severance payment obligation with respect to those employees. The aforementioned contributions are not recorded as an asset on the Company’s consolidated statements of financial position, and there is no liability recorded as the Company does not have a future obligation to make any additional payments.

The asset and the liability for severance pay presented in the consolidated statements of financial position reflects employees that began employment prior to automatic application of Section 14.

The severance pay liability of the Company to its employees that began employment prior to automatic application of Section 14 based upon the number of years of service and the latest monthly salary and is partly covered by regular deposits with recognized pension funds and deposits with severance pay funds. Under labor laws, these deposits are in the employees’ names and, subject to certain limitations, are the property of the employees. The Company records the obligation as if it were payable at each statement of financial position date on an undiscounted basis.

| 2) | Vacation and recreation pay

Under the Israeli law, each employee is legally entitled to vacation and recreation benefits. The entitlement is based on term of employment. The Group records such obligations as incurred.

| 3) | Bonus plans

The Group record bonus obligation when a contractual or constructive obligation exists. Such bonus obligation is record in the amount expected to be paid, to the extent that the Group can reliably estimate the amount expected to be paid.

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

| m. | Share based Compensation

The Group account for share-based compensation in accordance with IFRS 2, “Share-based Payment.” The Group granted stock options to the Group’s employees and other service providers in connection with their service to the Group. The Group measures and recognizes compensation expense for its equity classified stock-based awards. The Group calculates the fair value of option awards on the grant date using the Black-Scholes option pricing model. The Black-Scholes option-pricing model requires a number of assumptions, of which the most significant are the stock price volatility and the expected option term. The volatility was based on the historical stock volatility of the Company. The Group’s expected dividend rate is zero since the Group does not currently pay cash dividends on its stocks and does not anticipate doing so in the foreseeable future. Each of the above factors requires the Company to use judgment and make estimates in determining the percentages and time periods used for the calculation. The Group recognizes stock-based compensation cost for option awards on an accelerated basis over the employee’s requisite service period. The requisite service period for share options is generally three years. The Group recognizes forfeitures as they occur. The Group recognizes the fair value of Restricted Share Units (“RSU”) on the grant date based on the market value of the underlying share and the expense is recognized over the requisite service period

| - | The fair value excludes the effect of non-market-based vesting conditions. Details regarding the determination of the fair value of stock options are set out in note 12(c).

| - | Non-market vesting conditions are included among the assumptions in connection with the estimate level of stock options vesting period. The total expense is recognized during the vesting period, which is the period over which all of the specified vesting conditions of the stock option awards are to be satisfied. The fair value determined at the grant date of the stock options is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the number of stock options that will eventually vest. At each reporting date, the Group revises its estimate of the number of stock options expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves. When the stock options are exercised, the Group issues new shares. The proceeds, less directly related transaction costs, are reflected in the share capital (at par value) and in share premium.

| n. | Revenue recognition

| a) | Revenue measurement The Group’s revenues are measured according to the amount of consideration that the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties, such as sales taxes. Revenues are presented net of VAT.

| b) | Revenue recognition

The Group recognizes revenue when or as a customer obtains control over promised goods or services. For each performance obligation, the Group determines at contract inception whether it satisfies the performance obligation over time or satisfies the performance obligation at a point in time.

Identifying the contract

The Group accounts for a contract with a customer only when the following conditions are met:

| (a) | The parties to the contract have approved the contract (in writing, orally or according to other customary business practices) and they are committed to satisfying the obligations attributable to them.

| (b) | The Group can identify the rights of each party in relation to the goods or services that will be transferred.

| (c) | The Group can identify the payment terms for the goods or services that will be transferred.

| (d) | The contract has a commercial substance (i.e. the risk, timing and amount of the entity’s future cash flows are expected to change as a result of the contract); and

| (e) | It is probable that the consideration, to which the Group is entitled to in exchange for the goods or services transferred to the customer, will be collected.

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

For the purpose of section (e) the Group examines, inter alia, the percentage of the advance payments received, past experience with the customer and the status and existence of sufficient collateral.

If a contract with a customer does not meet all of the above criteria, consideration received from the customer is recognized as a liability until the criteria are met or when one of the following events occurs: the Group has no remaining obligations to transfer goods or services to the customer and any consideration promised by the customer has been received and cannot be returned; or the contract has been terminated and the consideration received from the customer cannot be refunded.

Identifying performance obligations

On the contract’s inception date, the Group assesses the goods or services promised in the contract with the customer and identifies as a performance obligation any promise to transfer to the customer one of the following:

| (a) | Goods or services (or a bundle of goods or services) that are distinct; or

| (b) | A series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer.

The Group identifies goods or services promised to the customer as being distinct when the customer can benefit from the goods or services on their own or in conjunction with other readily available resources and the Group’s promise to transfer the goods or services to the customer is separately identifiable from other promises in the contract. In order to examine whether a promise to transfer goods or services is separately identifiable, the Group examines whether it is providing a significant service of integrating the goods or services with other goods or services promised in the contract into one integrated outcome that is the purpose of the contract.

Performance obligations are satisfied over time if one of the following criteria is met:

(a) the customer simultaneously receives and consumes the benefits provided by the Group’s performance; (b) the Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (c) the Group’s performance does not create an asset with an

alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

If a performance obligation is not satisfied over time, a Group satisfies the performance obligation at a point in time.

F-31

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

Determining the Transaction Price

The transaction price is allocated to each distinct performance obligations on a relative standalone selling price (“SSP”) basis and revenue is recognized for each performance obligation when control has passed. In most cases, the Group is able to establish SSP based on the observable prices of services sold separately in comparable circumstances to similar customers and for products based on the Group’s best estimates of the price at which the Group would have sold the product regularly on a stand-alone basis. The Group reassesses the SSP on a periodic basis or when facts and circumstances change.

Costs deferred in respect of deferral of revenues are recorded as contract fulfilment assets on the Group’s consolidated statements of financial position and are written down to the extent the contract is expect to incur losses.

Product Revenue

Revenues from product sales of miniature cameras through ScoutCam is recognized when the customer obtains control of the Group’s product, typically upon shipment to the customer. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.

Revenues from sales products of Jeffs’ Brands, conducted directly to customers through Jeffs’ Brands own online Amazon stores.

For sales of goods to retail customers, revenue is recognized when control of the goods has transferred, being at the point that the goods are delivered. Payment of the transaction price is due immediately at the point the customer purchases the goods.

Under Jeffs’ Brands standard contract terms, customers have a right of return within 30 days. Jeffs’ Brands uses its accumulated historical experience to estimate the number of returns on a portfolio level using the expected value method. It is considered highly probable that a significant reversal in the cumulative revenue recognized will not occur given the consistent level of returns over previous years.

Service Revenue

The Group also generates revenues from development services. Revenues from development services through ScoutCam are recognized over the period of the applicable service contract. To the extent development services are not distinct from the performance obligation relating to the subsequent mass production phase of the prototype under development, revenue from these services is deferred until commencement of the production phase of the project.

There are no long-term payment terms or significant financing components of the Group’s contracts.

The Group’s contract payment terms for product and services vary by customer. The Group assesses collectability based on several factors, including collection history.

Revenues from commissions through Eventer

The Group provides through the subsidiary Eventer services for using the event production platform in exchange for a commission from the sale of tickets for events. These services constitute a performance obligation that is fulfilled at one point in time and therefore the Group recognizes revenues at the time of the event.

F-32

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

The essence of the Group’s promise to the customer is to arrange for the consideration for the tickets to be provided by another party, therefore the Group’s revenues from these transactions are presented on a net basis.

| o. | Leases

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognizes a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

On 31 March 2021, the IASB published ‘Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)’ that extends, by one year, the May 2020 amendment that provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. The amendment is effective for annual reporting periods beginning on or after 1 April 2021. The amendment have no impact on the Company’s financial position or results of operations.

Discount rate:

The lease payments are discounted using the lessee’s incremental borrowing rate, since the interest rate implicit in the lease cannot be readily determined. The lessee’s incremental borrowing rate is the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

The Group is using the practical expedient of accounting together a portfolio of leases with similar characteristics provided that it is reasonably expected that the effects on the financial statements of applying this standard to the portfolio would not differ materially from applying this Standard to the individual leases within that portfolio. And using a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar remaining lease term for a similar class of underlying asset in a similar economic environment). The weighted average of lessee’s incremental annual borrowing rate applied to the lease liabilities was 10%.

Lease liabilities measurement:

Lease liabilities were initially measured on a present value basis of the following lease payments:

| ● | fixed payments (including in-substance fixed payments), less any lease incentives receivable

| ● | variable lease payment that are based on an index or a rate (such as CPI).

| ● | lease payments (principal and interest) to be made under reasonably certain extension options

F-33

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

The lease liability is subsequently measured according to the effective interest method, with interest costs recognized in the Consolidated statements of loss and other comprehensive loss as incurred. The amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.

The Group is exposed to potential future changes in lease payments based on linkage to the CPI index, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Principal elements of the lease payments are presented in the statement of cash flows under the cash used in financing activities. Finance cost of the lease payments are presented in the statement of cash flows under the operating activities.

Right-of-use assets measurement:

Right-of-use assets were measured at cost comprising the following:

| ● | the amount of the initial measurement of lease liability;

| ● | any lease payments made at or before the commencement date and;

| ● | any initial direct costs (except for initial application).

After the commencement date, the Group measures the right-of-use asset applying the cost model, less any accumulated depreciation and any accumulated impairment losses and adjusted for any remeasurement of the lease liability.

The right-of-use assets are presented as a separate line in the consolidated statements of financial position.

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the ‘Property and Equipment’ policy.

Right-of-use assets are depreciated by the straight-line method over the estimated useful lives of the right of use assets or the lease period, which is shorter:

|  | Years |
Property |  |  | 1-2 |
Motor vehicles |  |  | 3 |

| p. | Loss (Earning) per share

Loss (Earning) per share is based on the loss (earning) that is attributed to the shareholders holding ordinary shares, divided by the weighted average number of ordinary shares in issue during the period.

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

For purposes of the calculation of the diluted loss (earning) per share, the Company adjusts the loss (earning) that is attributed to the holders of the Company’s ordinary shares, and the weighted average number of ordinary shares in issue, to assume conversion of all of the dilutive potential shares.

The potential shares are taken into account only if their effect is dilutive (increases loss/ decrease earning per share).

| q. | Classification of liabilities:

The IASB issued a narrow-scope amendment to IAS 1 to clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. The amendment could affect the classification of liabilities, particularly for entities that previously considered management’s intentions to determine classification and for some liabilities that can be converted into equity. Inter alia, the amendment requires the following:

| ● | Liabilities are classified as non-current if the entity has a substantive right to defer settlement for at least 12 months at the end of the reporting period. The amendment no longer refers to unconditional rights. The assessment determines whether a right exists, but it does not consider whether the entity will exercise the right.

| ● | ‘Settlement’ is defined as the extinguishment of a liability with cash, other economic resources or an entity’s own equity instruments. There is an exception for convertible instruments that might be converted into equity, but only for those instruments where the conversion option is classified as an equity instrument as a separate component of a compound financial instrument.

The amendment should be applied retrospectively for annual periods beginning on or after January 1, 2022. Earlier application is permitted.

The Group early adopted the narrow-scope amendment to IAS 1 on January 1, 2019. Accordingly, the Group classified in the consolidated statements of financial position warrants as part of current liabilities.

F-35

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

| r. | Non-current assets held for sale:

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable, and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

| s. | Intangible assets acquired:

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in the Consolidated statements of income/loss and other comprehensive income/loss as profit/loss when the asset is derecognized.

At each reporting date, the Company reviews the carrying amounts of its intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with an indefinite useful life are tested for impairment at least annually and whenever there is an indication at the end of a reporting period that the asset may be impaired.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the Consolidated statements of income/loss and other comprehensive income/loss as profit/loss.

| t. | Segments:

The Group reports financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria as defined in IFRS 8, Operating Segments.

Operating segments are distinguishable components of an entity for each of which a separate financial information is available and is reported in a manner consistent with the internal reporting provided to the entity’s Chief Operating Decision Maker (“CODM”) in making decisions about how to allocate resources and in assessing performance.

F-36

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (continued):

When the Group is committed to a sale plan involving disposal of an investment in an associate or, a portion of an investment in an associate, the investment, or the portion of the investment in the associate that will be disposed of is classified as held for sale when the criteria described above are met.

The Group then ceases to apply the equity method in relation to the portion that is classified a held for sale. Any retained portion of an investment in an associate that has not been classified as held for sale continues to be accounted for using the equity method.

Recent accounting pronouncement (not yet adopted):

On 14 May 2020, the IASB issued ‘Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16)’ regarding proceeds from selling items produced while bringing an asset into the location and condition necessary for it to be capable of operating in the manner intended by management. The amendments are effective for annual reporting periods beginning on or after 1 January 2022. The Company does not currently anticipate the adoption will have a material impact on the financial position or results of operations.

In February 2021, the IASB issued amendments to IAS 8, in which it introduces a new definition of accounting estimates. The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates. Effective for annual periods beginning on or after 1 January 2023. The Company is currently evaluating the potential effect of the adoption on the financial position and results of operations.

On 12 February 2021, the IASB issued ‘Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)’ with amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial statements. The amendments are effective for annual periods beginning on or after 1 January 2023. The adoption will not have any impact on the financial position or results of operations.

In May 2021, the Board issued amendments to IAS 12, which narrow the scope of the initial recognition exception under IAS 12, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences. Effective for annual periods beginning on or after 1 January 2023. The Company does not currently anticipate the adoption will have a material impact on the financial position or results of operations.

F-37

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES:

| A. | Investments in subsidiaries:

| 1. | Additional information about subsidiaries held by the Company:

General information

|  |  |  | Ownership rights held by non-controlling interest |
|  | Main place of the business |  | % |
December 31, 2021 |  |  |  |  |
Jeffs’ Brands Ltd. |  | Israel |  |  | 49.97 | %
Eventer Ltd. |  | Israel |  |  | 52.31 | %
Charging Robotics Ltd. |  | Israel |  |  | - |
GERD IP Inc |  | USA |  |  | 10 | %
December 31, 2020 |  |  |  |  |  |
Eventer Ltd. |  | Israel |  |  | 41.3 | %
ScoutCam Inc. |  | Israel |  |  | 40 | %

| 2. | Summarized financial information of subsidiaries:

ScoutCam Inc.

Summarized statements of financial position:

|  | December 31, 2021 |  |  | December 31, 2020 |
|  | USD in thousands |
Current assets |  |  | 20,212 |  |  |  | 4,029 |
Non-current assets |  |  | 3,334 |  |  |  | 1,866 |
Current liabilities |  |  | 1,309 |  |  |  | 772 |
Non-current liabilities |  |  | 2,621 |  |  |  | 1,159 |
Equity |  |  | 19,616 |  |  |  | 3,964 |

F-38

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Summarized statement of comprehensive income:

|  | Nine months ended December 31, 2021 (*) |  |  | Three months ended March 31, 2021 (*) |  |  | Year ended December 31, 2020 |  |  | Year ended December 31, 2019 |
|  | USD in thousands |
Revenue |  |  | 363 |  |  |  | 24 |  |  |  | 491 |  |  |  | 309 |
Net Loss for the period |  |  | (7,381 | ) |  |  | (1,606 | ) |  |  | (4,667 | ) |  |  | (11,927 | )

(*) ScoutCam was deconsolidated on March 31, 2021, and is accounted for as a material equity investee beginning on April 1, 2021 (refer to note 3C).

Summarized statement of cash flows:

|  | Three months ended March 31, 2021 |  |  | Year ended December 31, 2020 |  |  | Year ended December 31, 2019 |
|  | USD in thousands |
Cash flow used in operating activities |  |  | (774 | ) |  |  | (4,187 | ) |  |  | (1,799 | )
Cash flow used in investing activities |  |  | (117 | ) |  |  | (276 | ) |  |  | (55 | )
Cash flow from financing activities |  |  | 10,281 |  |  |  | 4,506 |  |  |  | 5,104 |
Net increase in cash and cash equivalents |  |  | 9,378 |  |  |  | 43 |  |  |  | 3,250 |

Eventer Ltd.

Summarized statement of financial position:

|  | December 31, 2021 |  |  | December 31, 2020 |
|  | USD in thousands (*) |
Current assets |  |  | 3,469 |  |  |  | 1,335 |
Non-current assets |  |  | 1,521 |  |  |  | 5 |
Current liabilities |  |  | 4,282 |  |  |  | 1,078 |
Equity |  |  | 708 |  |  |  | 262 |

(*) | translated at the closing rate at the date of each statement of financial position.

F-39

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Summarized statement of comprehensive income:

|  | Year ended December 31, 2021 |  |  | October 15, 2020 - December 31, 2020 |
|  | USD in thousands (**) |
Revenue |  |  | 1,185 |  |  |  | 40 |
Net loss for the period |  |  | (2,612 | ) |  |  | (490 | )

Summarized statement of cash flows:

|  | Year ended December 31, 2021 |  |  | Year ended December 31, 2020 |
|  | USD in thousands (**) |
Cash flow used in operating activities |  |  | 407 |  |  |  | (347 | )
Cash flow used in investing activities |  |  | (370 | ) |  |  | 52 |
Cash flow from financing activities |  |  | 703 |  |  |  | 1,032 |
Net increase in cash and cash equivalents |  |  | 740 |  |  |  | 737 |

| (**) | translated at average exchange rates for each period.

F-40

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Jeffs’ Brands Ltd.

Summarized statement of financial position:

|  | December 31, 2021 |
|  | USD in thousands |
Current assets |  |  | 2,022 |
Non-current assets |  |  | 5,390 |
Current liabilities |  |  | 2,211 |
Non-current liabilities |  |  | 3,948 |
Equity |  |  | 1,253 |

Summarized statement of comprehensive income:

|  | Year ended December 31, 2021 |
|  | USD in thousands |
Revenue |  |  | 6,509 |
Net Profit (Loss) for the period |  |  | (1,540 | )

F-41

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Summarized statement of cash flows:

|  | Year ended December 31, 2021 |
|  | USD in thousands |
Cash flow used in operating activities |  |  | (863 | )
Cash flow used in investing activities |  |  | (4,730 | )
Cash flow from financing activities |  |  | 5,695 |
Net increase in cash and cash equivalents |  |  | 102 |

3. | Information related to Non-controlling interest:

Balance of Non-controlling interest:

|  | December 31, 2021 |  |  | December 31, 2020 |
|  | USD in thousands |
ScoutCam |  | - |  |  | 3,055 |
Eventer |  |  | 1,136 |  |  |  | 178 |
Jeffs’ Brands |  |  | 965 |  |  |  | - |
Charging Robotics |  |  | 91 |  |  |  |  |
Gerd IP |  |  | 51 |  |  |  | - |
|  |  | 2,243 |  |  |  | 3,233 |

F-42

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Profit (loss) attributed to non-controlling interest:

|  | Year ended December 31, 2021 |  |  | Year ended December 31, 2020 |
|  | USD in thousands |
ScoutCam |  |  | (892 | ) |  |  | (2,323 | )
Eventer |  |  | (1,112 | ) |  |  | (202 | )
Jeff Brands |  |  | (795 | ) |  |  | - |
Gerd IP |  |  | 51 |  |  |  | - |
|  |  | (2,748 | ) |  |  | (2,525 | )

4. | Consequences of changes in ownership rights:

ScoutCam

|  | Three months ended March 31, 2021 |  |  | Year ended December 31, 2020 |
|  | USD in thousands |
Change in capital attributed to the owner of ScoutCam as a result of: |  |  |  |  |  |
Issuance shares and warrants |  |  | - |  |  |  | 1,956 |
Loan conversion |  |  | - |  |  |  | (136 | )
Exercise of warrants |  |  | 264 |  |  |  | - |
|  |  | 264 |  |  |  | 1,820 |

F-43

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Eventer

|  | Year ended December 31, 2021 |  |  | Year ended December 31, 2020 |
|  | USD in thousands |
Change in capital attributed to the owner of Eventer as a result of: |  |  |  |  |  |
Recognition of non-controlling interests upon consolidation |  |  | - |  |  |  | (370 | )
Issuance of shares |  |  | 717 |  |  |  | - |
Currency translation |  |  | 41 |  |  |  | - |
|  |  | 758 |  |  |  | (370 | )

Jeffs’ Brands

|  | Year ended December 31, 2021 |  |  | Year ended December 31, 2020 |
|  | USD in thousands |
Change in capital attributed to the owner of Jeffs’ Brands as a result of: |  |  |  |  |  |
Recognition of non-controlling interests upon consolidation |  |  | (1,156 | ) |  |  | - |
Non-cash consideration upon consolidation |  |  | (71 | ) |  |  | - |
Non-controlling interest share of intercompany financial expenses |  |  | 126 |  |  |  | - |
Capital reserve - other loans (note 3E) |  |  | 108 |  |  |  | - |
Capital reserve – intercompany loan (note 3E) |  |  | (421 | ) |  |  | - |
|  |  | (1,414 | ) |  |  | - |

F-44

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

5. | Information related to loss of control in subsidiary:

On March 22, 2021, ScoutCam Inc. undertook to issue to certain investors (the “Investors”) 22,222,223 units (the “Units”) in exchange for an aggregate purchase price of USD 20 million. As a result, the Company’s holdings were diluted and ScoutCam Inc. was deconsolidated. For additional information see note 3C.

6. | Additional information:

The Company consolidated Eventer Ltd., which its holding in voting right is less than 50%, because the Company has exclusive rights according to agreement regarding determination of a business plan and budget, to appoint or dismiss the CEO and determine his compensation package and declaration or payment of any dividend or distribution of cash, securities and other assets. Additionally, the Company has the power to appoint or remove half of the members of the board.

F-45

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

| B. | Investment according to the equity method:

| 1. | This table summarize the total investment according to the equity method:

|  | December 31, 2021 |  |  | December 31, 2020 |
|  | USD in thousands |
ScoutCam (see note 3C) |  |  | 10,735 |  |  |  | - |
Automax (formerly “Matomy”) (see note 3G) |  |  | - |  |  |  | 547 |
Gix Internet (see note 3F) |  |  | 4,867 |  |  |  | 1,013 |
Polyrizon (see note 3H) |  |  | 447 |  |  |  | 103 |
Elbit imaging (see note 3J) |  |  | 975 |  |  |  | - |
Fuel Doctor holdings Inc. (see note 3L) |  |  | - |  |  |  | - |
Revoltz (see note 3I) |  |  | 216 |  |  |  | - |
Total |  |  | 17,240 |  |  |  | 1,663 |

F-46

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

2. | General information:

|  |  |  | Company rights in share capital and voting rights |
|  | Main place of the business |  | % |
December 31, 2021 |  |  |  |  |
Gix |  | Israel |  |  | 34.58 | %
Automax |  | Israel |  |  | 5.63 | %
Polyrizon |  | Israel |  |  | 36.81 | %
ScoutCam |  | Israel |  |  | 27.02 | %
Elbit Imaging |  | Israel |  |  | 5.72 | %
Fuel Doctor |  | Israel |  |  | 35.06 | %
Revoltz |  | Israel |  |  | 19.9 | %
December 31, 2020 |  |  |  |  |  |
Gix |  | Israel |  |  | 8.22 | %
Automax |  | Israel |  |  | 24.92 | %
Polyrizon |  | Israel |  |  | 19.9 | %
ScoutCam |  | Israel |  |  | 60 | %

3. | Summarized financial information of material investments:

ScoutCam

See information in note 3C.

F-47

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Gix internet

Summarized statement of financial position:

|  | December 31, 2021 |  |  | December 31, 2020 |
|  | USD in thousands (*) |
Current assets |  |  | 23,145 |  |  |  | 11,515 |
Non-current assets |  |  | 19,191 |  |  |  | 7,405 |
Current liabilities |  |  | 26,832 |  |  |  | 8,748 |
Non-current liabilities |  |  | 6,543 |  |  |  | 2,865 |
Equity |  |  | 8,960 |  |  |  | 7,307 |
Equity attributable to Gix shareholders |  |  | 4,130 |  |  |  | 2,994 |
Non-controlling interests |  |  | 4,830 |  |  |  | 4,312 |

(*) | translated at the closing rate at the date of the statement of financial position

Summarized statement of comprehensive income:

|  | Year ended December 31, 2021 |  |  | Year ended December 31, 2020 |
|  | USD in thousands (**) |
Revenue |  |  | 44,827 |  |  |  | 38,155 |
Loss for the period |  |  | (1,510 | ) |  |  | (3,153 | )
Other comprehensive loss |  |  | (396 | ) |  |  | (652 | )
Total comprehensive loss |  |  | (1,905 | ) |  |  | (1,095 | )

(**) | translated at average exchange rates for each period

F-48

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Automax Ltd. (formerly known as Matomy Ltd.):

Summarized statement of financial position:

|  | December 31, 2020 |
|  | USD in thousands (*) |
Current assets |  |  | 7,641 |
Current liabilities |  |  | 3,191 |
Non-current liabilities |  |  | 59 |
Net assets |  |  | 4,391 |

(*) | translated at the closing rate at the date of the statement of financial position

Summarized statement of comprehensive income:

|  | March 24, 2020 - December 31, 2020 |
|  | USD in thousands (**) |
Operating loss |  |  | (1,122 | )
Net income |  |  | 153 |

(**) | translated at average exchange rates for each period

4. | Fair value of investments in material affiliated companies for which there is a market price on the stock exchange:

|  | December 31, 2021 |  |  | December 31, 2020 |
|  | Carrying amount |  |  | Quoted fair value |  |  | Carrying amount |  |  | Quoted fair value |
|  | USD in thousands |
ScoutCam |  |  | 10,735 |  |  |  | 15,397 |  |  |  | - |  |  |  | - |
Automax (formerly “Matomy”) |  |  | - |  |  |  | - |  |  |  | 547 |  |  |  | 4,363 |
Gix Internet |  |  | 4,867 |  |  |  | 5,854 |  |  |  | 1,013 |  |  |  | 927 |

F-49

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

| C. | ScoutCam Inc.

On January 3, 2019, the Company established a wholly owned subsidiary in Israel under the name ScoutCam Ltd., or ScoutCam. ScoutCam was incorporated as part of a reorganization of the Company intended to distinguish the Company’s miniaturized imaging business, or the micro ScoutCam™ portfolio, from the other operations of the Company and to enable the Company to form a separate business unit with dedicated resources focused on the promotion of such technology.

In addition, ScoutCam used the technological platform it developed for the purpose of additional special systems and products that are suitable for both medical and industrial applications.

On September 16, 2019, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”), with ScoutCam Inc., formerly known as Intellisense Solutions Inc., pursuant to which the Company assigned, transferred and delivered 100% of its holdings in ScoutCam to ScoutCam Inc., in exchange for consideration consisting of shares of ScoutCam Inc.’s common stock representing 60% of the issued and outstanding share capital of ScoutCam Inc. immediately upon the closing of the Exchange Agreement (the “Closing”).

The Closing occurred on December 30, 2019 (the “Closing Date”). Pursuant to the Exchange Agreement, Intellisense issued to Medigus 1,792,328 shares of common stock. Upon such share issuance, ScoutCam became a wholly owned subsidiary of Intellisense. On December 31, 2019, Intellisense Solutions Inc. changed its name to ScoutCam Inc. Additionally, if ScoutCam achieves USD 33 million in sales in the aggregate within the first three years following December 30, 2019, the consummation date of the exchange agreement, ScoutCam will issue shares of Common Stock to the Company representing 10% of the issued and outstanding share capital as of December 30, 2019.

While ScoutCam Inc. was the legal acquirer, ScoutCam Ltd. was treated as the acquiring company for accounting purposes as the Exchange Agreement was accounted for as a reverse recapitalization conducted at ScoutCam Ltd.’s level. Accordingly, the accounting treatment is equivalent to the issuance of 1,194,885 shares by ScoutCam Ltd, for the net monetary assets of ScoutCam Inc. The net acquired assets of the ScoutCam Inc. as of the Closing Date was USD 3,040 thousand. There were no fair value adjustments necessary to perform as the carrying values of the net acquired assets approximated fair value. Further, given the nature of the operations of ScoutCam Inc. prior to the Closing Date, there were no intangible assets, including goodwill, recognized as a result of the Exchange Agreement.

The reverse recapitalization transaction conducted at ScoutCam Ltd.’s level was accounted for in the Group’s consolidated financial statements as a transaction with non-controlling interest in which the Company consolidated ScoutCam Inc.’s net assets in consideration equal to the fair value of the shares ScoutCam Inc. had to issue to Medigus as part of the reverse recapitalization transaction. The fair value could not be determined based on ScoutCam Inc.’s stock market value as there is currently no trading market for ScoutCam Inc.’s common stock and there is no assurance that a regular trading market will ever develop. The Company concluded to determine the fair value based on a pre-money valuation attributed to ScoutCam Inc. as part of the Issuance of Units to External Investors as mentioned above. In accordance, an amount of USD 10,098 thousand was listed in the consolidated statements of loss and comprehensive loss as listing expenses in 2019. Furthermore, the Company recorded a capital reserve of USD 11,714 thousand resulting from the transaction with non-controlling interest.

F-50

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Also, on the Closing Date, 379,257 units, each comprised of two shares of common stock, one Warrant A (as defined below) and two Warrants B (as defined below), were issued to investors by ScoutCam Inc. as part of the financing transaction that ScoutCam Inc. was obligated to secure prior to the Closing Date. The immediate gross proceeds from the issuance of the units amounted to approximately USD 3.3 million (the “Issuance of Units to External Investors”). Each Warrant A is exercisable into one share of common stock of ScoutCam Inc. at an exercise price of USD 5.355 per share during the 12-month period following the allotment. Each Warrant B is exercisable into one share of common stock of ScoutCam Inc. at an exercise price of USD 8.037 per share during the 18-month period following the allotment. The Company didn’t participate in this finance round.

In addition, Shrem Zilberman Group Ltd. (the “Consultant”) was entitled to receive the amount representing 3% of any exercise price of each Warrant A or Warrant B that may be exercised in the future. In the event the total proceeds received as a result of exercise of Warrants will be less than USD 2 million at the time of their expiration, the Consultant will be required to invest USD 250 thousand in ScoutCam Inc. As of December 31, 2021, holders of the foregoing warrants have exercised in excess of USD 2 million and, accordingly, the Consultant was not required to invest USD 250 thousands in ScoutCam Inc.

On March 3, 2020, ScoutCam issued in a private issuance a total of 108,862 units at a purchase price of USD 8.712 per unit. Each unit was comprised of two shares of common stock par value USD 0.001 per share, one Warrant A and two Warrants B. The March Warrants have the same characteristics as Warrants A and Warrants B, respectively, which were issued on December 30. The immediate proceeds (gross) from the issuance of all securities offered amounted to approximately USD 948 thousand. After deducting closing costs and fees, ScoutCam received proceeds of approximately USD 909 thousand, net of issuance expenses. The Company didn’t participate in this finance round.

On May 18, 2020, ScoutCam issued in a private issuance a total of 229,568 units at a purchase price of USD 8.712 per unit. Each unit was comprised of two shares of common stock par value USD 0.001 per share, one Warrant A and two Warrants B with the same period and exercise price as the warrants issued on December 30, 2019. The immediate gross proceeds from the issuance of all securities offered amounted to approximately USD 2 million. After deducting closing costs and fees, ScoutCam received proceeds of approximately USD 1.9 million, net of issuance expenses. The Company didn’t participate in this finance round.

On June 23, 2020, the Company and ScoutCam entered into a Conversion Side Letter, pursuant to which the Company converted USD 381 thousand worth of outstanding credit previously extended to ScoutCam, including interest, into (a) 87,497 shares of ScoutCam common stock, (b) warrants to purchase 43,749 shares of ScoutCam common stock at an exercise price of USD 5.355, and (c) warrants to purchase 87,497 shares of ScoutCam common stock at an exercise price of USD 8.037.

F-51

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

On January 20, 2021, ScoutCam Inc.’s board of directors approved an increase of the authorized share capital of ScoutCam Inc., by an additional 25,000,000 shares of its common stock par value USD 0.001 per share, such that the authorized share capital of ScoutCam Inc. following such increase shall consist of 33,333,333 shares of common stock.

On March 22, 2021, ScoutCam Inc. undertook to issue to certain investors (the “Investors”) 2,469,136 units (the “Units”) in exchange for an aggregate purchase price of USD 20 million. Each Unit consists of (i) one share of ScoutCam Inc.’s common stock, and (ii) one warrant to purchase one share of ScoutCam Inc. common stock with an exercise price of USD 10.35 per share (the “Warrant” and the “Exercise Price”). Each Warrant is exercisable until the close of business on March 31, 2026. Pursuant to the terms of the March 2021 Warrant, following April 1, 2024, if the closing price of ScoutCam’s common stock equals or exceeds 135% of the Exercise Price (subject to appropriate adjustments for stock splits, stock dividends, stock combinations and other similar transactions after the issue date of the Warrants) for any thirty (30) consecutive trading days, ScoutCam may force the exercise of the Warrants, in whole or in part, by delivering to the Investors a notice of forced exercise.

As the Company did not participate in the March 2021 funding, its interest in ScoutCam Inc. reduced to 28.06%, which resulted in loss of control in ScoutCam as of April 2021. Accordingly, ScoutCam was deconsolidated as of such date and accounted for using the equity method, with the purchase price being the fair value of ScoutCam’s shares held by ScoutCam as of such date. As a result of deconsolidation of ScoutCam and initial recognition of the investment in shares of ScoutCam at fair value, the Company recorded a gain of USD 11,465 in the consolidated statement of income/loss and other comprehensive income/loss. Additionally, the Company recognized its holdings in ScoutCam’s warrants as financial asset through profit and loss and recorded an additional gain of USD 97 thousand (see note 4).

On August 9, 2021, ScoutCam amended its Articles of Incorporation to effect a 9 to 1 reverse stock split of ScoutCam’s outstanding Common Stock. As a result of the reverse stock split, every 9 shares of ScoutCam’s outstanding Common Stock prior to the effect of that amendment was combined and reclassified into one share of the Company’s Common Stock. No fractional shares were issued in connection with or following the reverse split. The number of authorized capital of the Company’s Common Stock and par value of the shares remained unchanged. All share and stock option information related to ScoutCam, have been adjusted to reflect the stock split on a retroactive basis.

During February and June 2021, the Company exercised 37,349 and 43,749 Warrants A, respectively, for a total exercise price of USD 234 thousand. In addition, 185,271 Warrants B were exercised by others.

During November 2021, 192,220 Warrants A were exercised.

During 2021, 878,462 Warrants B were forfeited.

As of December 31, 2021, all Warrants A were exercised and 459,137 Warrants B still remained to exercise until May 18, 2022.

As of December 31, 2021, the Company owns approximately 27.02% of the outstanding common stock of ScoutCam.

F-52

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Purchase price allocation upon deconsolidation and initial measurement under the equity method:

|  | March 31, 2021 |
|  | USD in thousands |
Fair value of investment |  |  | 11,843 |
Total consideration |  |  | 11,843 |
ScoutCam’s Equity as of March 31, 2021 |  |  | 22,338 |
Adjustments to Equity |  |  | (5,445 | )
Equity As adjusted |  |  | 16,893 |
Groups share in % |  |  | 28.06 | %
|  |  | 4,740 |
Excess cost to allocate: |  |  | 7,103 |
Technology |  |  | 1,672 |
Deferred tax liability |  |  | (385 | )
Total intangible assets identified |  |  | 1,287 |
Excess purchase price to allocate to goodwill |  |  | 5,816 |

F-53

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued)

Activity in investment account:

|  | April 1, 2021 - December 31, 2021 |
|  | USD in thousands |
Investment as of April 1, 2021 |  |  | 11,843 |
Group share in losses |  |  | (2,044 | )
Excess cost Amortization-technology |  |  | (96 | )
Share based compensation |  |  | 540 |
Exercise of warrants by the Group |  |  | 234 |
Group share in exercise warrants by others |  |  | 218 |
Group share in forfeited options |  |  | 32 |
Additional investment allocated to goodwill |  |  | 8 |
Investment as of December 31, 2021 |  |  | 10,735 |

F-54

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued)

Reconciliation to carrying amounts:

|  | December 31, 2021 |
|  | USD in thousands |
Equity attributable to ScoutCam shareholders’ as of December 31, 2021 |  |  | 19,615 |
Adjustments to Equity |  |  | (4,883 | )
Equity As adjusted as of December 31, 2021 |  |  | 14,732 |
Groups share in % |  |  | 27.02 | %
Group share |  |  | 3,981 |
Balance of excess cost: |  |  |  |
Technology, net of deferred tax |  |  | 1,146 |
Goodwill |  |  | 5,608 |
Balance as of December 31, 2021 |  |  | 10,735 |

F-55

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

| D. | Eventer

On October 14, 2020, the Company signed a share purchase agreement and a revolving loan agreement with Eventer, a technology company engaged in the development of unique tools for automatic creation, management, promotion, and billing of events and ticketing sales. Pursuant to the share purchase agreement, the Company invested USD 750 thousand and were issued an aggregate of 325,270 ordinary shares of Eventer, representing 58.7% of the issued and outstanding share capital (50.01% of Eventer’s issued and outstanding share capital on a fully diluted basis). The share purchase agreement provides that the Company will invest an additional USD 250 thousand in a second tranche, subject to Eventer achieving certain post-closing EBITDA based milestones during the fiscal years 2021 through 2023, or the “Milestones”. The Milestone will be examined in each of the years 2021 through 2023. The fair value of the earn-out was calculated by using a Monte Carlo Simulation. According to this model, the fair value of the earn-out was NIS 233 thousand (USD 69 thousand) as of October 14, 2020. In addition, the Company granted a loan to Eventer in the amount of USD 250 thousand (“Initial Advance”), and the loan was valued at USD 204 thousand. According to the loan agreement, the Company committed to lend up to USD 1,250 thousand to Eventer through advances of funds upon Eventer’s request and subject to the Company approval. The Company extended the Initial Advance on account of its commitment to lend up to USD 1,250 thousand. Advances extended under the Loan Agreement may be repaid and borrowed, in part or in full, from time to time. The Initial Advance should be repaid in twenty-four equal monthly installments, commencing on the first anniversary of the Loan Agreement. Other advances extended under the Loan Agreement will be repaid immediately following, and in no event later than thirty days following the completion of the project or purpose for which they were made. Outstanding principal balances on the advances will bear interest at a rate equal to the higher of (i) 4% per year, or (ii) the interest rate determined by the Israeli Income Tax Ordinance [New Version] 5721-1961 and the rules and regulation promulgated thereunder. Interest payments will be made on a monthly basis.

Additionally, on October 14, 2020, the Company entered the Exchange Agreement with Eventer’s shareholders, pursuant to which, during the period commencing on the second anniversary of the Exchange Agreement and ending fifty-four (54) months following the date of the Exchange Agreement, Eventer’s shareholders may elect to exchange all of their Eventer shares for ordinary shares of the Company. The number of ordinary shares of the Company to which Eventer’s shareholders would be entitled pursuant to an exchange will be calculated by dividing the fair market value of each Eventer’s ordinary share, as mutually determined by The Company and the shareholders, by the average closing price of an ordinary share of the Company on the principal market on which its ordinary shares or ADSs are traded during the sixty days prior to the exchange date rounded down to the nearest whole number. The Company board of directors may defer exchange’s implementation in the event it determines in good faith that doing so would be materially detrimental to the Company and its shareholders. In addition, the exchange may not be affected for so long as USD 600 thousand or greater remains outstanding under the Loan Agreement, or if an event of default under the Loan Agreement has occurred. The Company treated the Exchange Agreement at the date of the business combination from accounting perspective as recognition of non-controlling interests, in addition to the recognition of a liability in respect of a derivative (exchange options) which will be measured at fair value at each cut-off date and will be revalued. The changes in the fair value at each cut-off date will be recorded as a financial income/expense. The Company concluded that the fair value of this derivative is immaterial, as this is an exchange of Eventer shares held by the other party a fixed number in consideration for a variable number of the Company’s shares whose total value is equal to the value of the Eventer shares exchanged.

On March 25, 2021, Eventer completed a finance round of an approximately USD 2,250 thousand (approximately NIS 7,300 thousand) from a group of 7 investors, in exchange for 146,637 shares, representing 20% of Eventer’s outstanding shares after consummation of the investment. As part of the investment agreement, Keshet Holdings LP (“Keshet”), one of the 7 investors, committed to provide Eventer with advertising services for USD 1,250 thousand (approximately NIS 4,000 thousand), over a period of 1 year, until June 30, 2022. The agreement further provided the investment proceeds to be paid by Keshet are to be netted by the USD 1,250 thousand to be paid as consideration of the above-mentioned advertising services. Accordingly, the net amount Eventer raised in finance round amounted to USD 1,000 thousand, with advertising services recorded as prepaid expense in the amount of USD 1,250 thousand. Eventer is not entitled to a refund in the event these advertising services are unutilized through the entire period until June 30, 2022. Consequently, the Company holds approximately 47.69% of Eventer issued and outstanding share capital. The transaction was accounted for in the Group’s consolidated financial statements as a transaction with non-controlling interest.

F-56

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

During November 2021, the Company and Eventer agreed that the Initial Advance loan will be repaid the earlier of (i) Six months following the Maturity Date of the Initial Advance; or (ii) immediately following an initial public offering of Eventer. The Company concluded the change in terms does not constitute a material modification of the loan. Accordingly, the loan’s carrying value was retained and no profit or loss outcome was recorded as a result of the change in terms.

On November 2021, the Company loaned an amount of USD 250 thousands to Eventer which shall be repaid 6 months starting the loan received by Eventer. The loan will bear 4% interest per year.

Agreement with Screenz Cross Media Ltd.

On February 4, 2021, Eventer signed an addendum to the agreement with Screenz Cross Media Ltd. (a company indirectly controlled and managed by Eli Uzan who serves as Eventer ’s President) (hereafter “Screenz”). The agreement was signed during November 2020 for the purpose of collaborating in the field of virtual conferences. According to the provisions of the addendum to the agreement, Eventer will receive an exclusive license for using the broadcasting system of Screenz with respect to the field of virtual conferences and development services, and in exchange will pay Screenz an amount of USD 1,500 thousand (approximately NIS 4,280 thousand) over a period of eight months, as well as 8% from the revenues earned from using the broadcasting system in the field of virtual conferences.

On December 30, 2021, the Board of Directors approved an amendment to the agreement between Eventer and Screenz effective September 30, 2021 (the “Effective Date”). As per the amendment, instead of USD 1,500, Eventer will pay in exchange for the license an aggregate amount of USD 1,800 thousand, and the repayment term is to be extended to a period of three years, in monthly installments of approximately USD 50 each. Eventer evaluated the change in the terms of the commitment in accordance with IFRS 9 and concluded that the change was material. As of the Effective Date Eventer’s debt to Screenz was USD 1,300 thousand. The fair value of the debt as of September 30, 2021, was valued at USD 1,415 thousands. The difference between the carrying value of the payable balance immediately prior to the effective date and the fair value of the debt amounted to USD 115 thousands and recorded as finance loss.

As of December 31, 2021, the balance of the Eventer’s debt to Screenz for the license is a total of USD 1,217 thousand. For additional information see note15b4.

Deferred offering costs

During 2021 Eventer recorded USD 470 thousands as deferred offering costs.

Share based compensation grants

On March 30, 2021, Eventer’s Board of Directors approved a contractual agreement with Eventer’s CEO. The date of the commencement of the agreement is January 1, 2021. The CEO will be entitled to a salary of NIS 33 thousand. In addition, Eventer granted the CEO 29,944 options to purchase one share at an exercise price of 0.001 NIS per share. The options shall vest over a period of three years commencing from the engagement date with 1/12 of such options vesting at the end of each subsequent three-month period following the grant. The fair value of the option granted is estimated on the grant date, using the Black-Scholes Model using the following inputs: (a) risk-free interest rate– 0.15%; (b) expected dividend – 0%; (c) expected volatility – 47.02%; (d) forecasted life – 10 years.

The value of this grant was estimated at approximately NIS 1,668 thousand. For the year ended December 31, 2021, approximately NIS 1,123 thousand were recognized and recorded as expenses.

F-57

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

On March 30, 2021, Eventer’s Board of Directors approved a contractual agreement with Round Robin Ltd. which one of the founding partners of Eventer. The date of the commencement of the agreement is January 1, 2021. Under the agreement, Round Robin Ltd. will provide Eventer with 12 monthly hours of technological consulting, and in exchange, Eventer will grant Round Robin Ltd. 29,944 options to purchase one share at exercise price of 0.001 NIS per share. The options shall vest over a period of three years commencing the engagement date with 1/12 of such options vesting at the end of each subsequent three-month period following the grant. The fair value of the option granted is estimated on the grant date, using the Black-Scholes Model, according to the following parameters: (a) risk-free interest rate – 0.15%; (b) expected dividend – 0%; (c) expected volatility – 47.02%; (d) forecasted life – 10 years.

The value of this grant was estimated at approximately NIS 1,668 thousand. For the year ended December 31, 2021, approximately NIS 1,123 thousand were recognized and recorded as expenses.

On February 4, 2021, Eventer’s Board of Directors approved a contractual agreement with Mr. Roee Grinblat as Eventer’s Chief Business Manager. According to the agreement, the engagement between the Eventer and Mr. Greenblatt commenced on January 1, 2021. The monthly professional fee will be approximately NIS 20 thousand. In addition to the professional fee, Eventer will grant a quantity of shares that will constitute approximately 2% of Eventer’s issued and outstanding capital immediately after the public offering is completed as options grant. The options shale vest over a period of three years commencing the engagement date with 1/12 of such options vesting at the end of each subsequent three-month period following the grant. The exercise price of 50% of the options will be equal to the public offering and 50% will equal the share price of the capital raising round that preceded the public offering price. The fair value of the options as at the grant date was estimated on the grant date, using the Black-Scholes Model, according to the following parameters: (a) risk-free interest rate– 0.49%; (b) expected dividend – 0%; (c) expected volatility – 47.02%; (d) forecasted life – 5 years.

The value of this grant was estimated at approximately NIS 277 thousand. As of the date of the report approximately NIS 186 thousand were recognized and recorded as expenses.

On February 4, 2021, the Eventer’s Board of Directors approved a contractual agreement with Mr. Liron Carmel as the Chairman of the Board of Directors of Eventer. According to the agreement, the engagement between Eventer and Mr. Carmel commenced on January 1, 2021. The monthly professional fee will be approximately NIS 20 thousand. In addition to the professional fee, Eventer granted options to purchase a quantity of ordinary shares that will constitute approximately 2% of the Eventer’s issued and outstanding ordinary shares immediately after the public offering is completed as options grant. The options shall vest over a period of three years, commencing the engagement date. The exercise price of 50% of the options granted will be equal the public offering price, and 50% will equal the share price of the capital raising round that preceded the public offering price. The fair value of the options granted is estimated on the grant date, using the Black-Scholes Model, according to the following parameters: (a) risk-free interest rate – 0.49%; (b) expected dividend – 0%; (c) expected volatility – 47.02%; (d) forecasted life – 5 years.

The value of this grant was estimated at approximately NIS 277 thousand. As of the date of the report approximately NIS 186 thousand were recognized and recorded as expenses.

On February 4, 2021, Eventer’s Board of Directors approved a contractual agreement with Mr. Eli Uzan as Eventer’s President and Director. According to the agreement, the engagement between Eventer and Mr. Uzan commenced on January 1, 2021. The monthly professional fee will be approximately NIS 20 thousand. In addition to the professional fee, Eventer granted options to purchase a quantity of ordinary shares that will constitute approximately 2% of Eventer issued and outstanding ordinary shares immediately after the public offering is completed as options grant. The options shall vest over a period of three years commencing the engagement date with 1/12 of such options vesting at the end of each subsequent three-month period following the grant. The exercise price of 50% of the options granted will be equal to the public offering price, and 50% will equal the share price of the capital raising round that preceded the public offering. The fair value of the option granted is estimated on the grant date, using the Black-Scholes Model, according to the following parameters: (a) risk-free interest rate – 0.49%; (b) expected dividend – 0%; (c) expected volatility – 47.02%; (d) forecasted life – 5 years.

The fair value of this grant was estimated at approximately NIS 219 thousand. For the year ended December 31, 2021, approximately NIS 147 thousand were recognized and recorded as expenses.

F-58

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Eventer price allocation summary:

|  | 15 October, 2020 |
|  | USD in thousands |
Cash consideration invested in Eventer |  |  | 750 |
Fair value of earn-out |  |  | 69 |
Difference between fair value and par value of loan extended to Eventer |  |  | 46 |
Total consideration |  |  | 865 |
Less: |  |  |  |
Value acquired: |  |  |  |
Fair value of net tangible assets acquired |  |  | 1,090 |
Non-controlling interest |  |  | (521 | )
Total acquired |  |  | 569 |
Goodwill |  |  | 296 |

| E. | Jeffs’ Brands Ltd.:

On October 8, 2020, the Company entered into the Pro and Purex SPA. Pro and Purex (as defined in note 1) both are in the e-Commerce field and operate online stores for the sale of various consumer products on the Amazon Online Marketplace. Pursuant to the Pro and Purex SPA, the Company acquired 50.01% of Pro’s and 50.03% of Purex’ issued and outstanding share capital on a fully diluted basis through a combination of cash investments in the companies and acquisition of additional shares from the current shareholders of the two companies in consideration for the Company’s ADSs and a cash component. The Company agreed to invest an aggregate amount of USD 1,250 thousand in Pro and Purex, pay USD 150 thousand in cash consideration to the former stockholders, and issue up to USD 500 thousand worth of ADSs to the former stockholders of such companies subject to EBITDA milestones. On July 2021, and Following EBITDA results the Company issued USD 71 thousand worth of ADSs.

In addition, the companies’ former shareholders are entitled to additional milestone issuances of up to an aggregate USD 750 thousand in ADSs subject to the achievement by Pro and Purex of certain milestones throughout 2021. The transactions contemplated in the definitive agreements closed on January 4, 2021. Also, the Company agreed to financing arrangements including (i) providing financing by way of a stockholder loan of a principal amount equal to USD 250 thousand which may be extended up to an aggregate cap of USD 1 million of which the Company will finance 60% with the remaining 40% to be financed by the other Pro’s and Purex’ stockholders; and (ii) additional financing of up to a principal amount of USD 1 million, to finance the acquisition of additional online Amazon stores provided that such acquisition financing will constitute 80% of the applicable acquisition cost, with the remaining 20% to be financed by the other Pro’s and Purex’ stockholders. Subsequently, according to the terms of the Pro and Purex SPA, The Company entered into a loan and pledge agreement, effective January 5, 2021, with its majority owned subsidiaries Pro and Purex.

Pursuant to this loan and pledge agreement, the Company extended a USD 250 thousand loan, with an annual interest of 4%, to be repaid on the second anniversary of the effective date.

Loans extended subsequent to the business combination consummation date:

On February 2, 2021, the Company entered into a loan and pledge agreement (the “Pro Loan and Pledge Agreement”) with Pro and Pro’s other shareholder, to finance Pro’s additional purchases of three new brands on the Amazon Online Marketplace. Pursuant to the Pro Loan and Pledge Agreement, the Company and Pro’s other shareholder extended a USD 3.76 million and a USD 940 thousand loans, respectively, with an annual compound interest of 4%, to be repaid on February 2, 2026.

The Company concluded the stated interest is materially lower than its market price. Accordingly, the difference between the fair value and face value of the loan attributable to the Company was recorded as deemed contribution by the Company to Jeffs’ Brands. Similarly, the difference between the fair value and face value of the loan attributable to the non-controlling interest was recorded as deemed contribution by the non-controlling interest to Jeffs’ Brands.

The loans are subsequently measured at amortized cost.

F-59

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

On May 10, 2021, the Company entered into a stock exchange and plan of restructuring agreement with Victor Hacmon, the other shareholder of Pro and Purex, and Jeff’s’ Brands, a newly incorporated entity, Pursuant to which, among other things, the Company and Victor Hacmon transferred all holdings in Pro and Purex to Jeff’s’ Brands, in return for a consideration of Jeffs’ Brands ordinary shares issued respectively. As a result, Pro and Purex became wholly owned subsidiaries of Jeffs’ Brands. The share exchange transaction was accounted in a manner similar to Pooling-of-Interests (“As Pooling”), such that the carrying values of the assets and liabilities of Pro and Purex were retained through the transaction. To date, the Company invested approximately USD 5.4 million in Jeffs’ Brands and holds 50.03% of its shares.

On July 23, 2021, the Company granted Mr. Victor Hacmon, the CEO of Jeffs’ Brands, 32,967 ADSs at fair value of USD 60,000 as a special bonus for his achievements in the six months period ended June 30, 2021. The grant was recorded as an expense in the Consolidated statements of income/loss and other comprehensive income/loss.

Short term loans:

|  | December 31, 2021 |  |  | December 31, 2020 |
|  | USD in thousands |
Amazon Loans |  |  | 101 |  |  |  | - |
Related parties |  |  | 111 |  |  |  | - |
Third parties loans |  |  | 715 |  |  |  | - |
|  |  | 927 |  |  |  | - |

Amazon Loans

On April 8, 2021, Pro entered into a Loan Agreement with Amazon.com. Pursuant to such loan agreement, Pro received from Amazon.com an aggregate amount of USD 78 thousands. The loan matures within 12 months and bears an annual interest at a rate of 10.99% per year. In order to secure the loan, Pro pledged its financial balances on its Amazon account on Amazon.com and its inventories held in Amazon’s warehouses, in favor of Amazon.com. On September 2021, the loan was fully repaid.

On September 22, 2021, Pro entered into a Loan Agreement with Amazon.com. Pursuant to the loan agreement, Pro received from Amazon.com an aggregate amount of USD153 thousands, of which USD14 thousands of such amount offset from the received amount on the account of repayment of previous Amazon loan balance. The loan matures within 9 months and bears an annual interest at a rate of 9.99% per year. In order to secure the loan, Pro pledged its financial balances on its Amazon account on Amazon.com and its inventories held in Amazon’s warehouses, in favor of Amazon.

Third parties’ loans

July 1, 2021, loan:

On July 1, 2021, Pro entered into a loan agreement (hereafter - “loan”) with a third party (hereafter – “lender”). The loan bears annual interest rate of 10% and was payable on March 31, 2023, and may be paid in NIS or USD at Jeffs’ Brands’ discretion. Pro was entitled to extend the loan by an additional sixty days, with additional interest of 1% per month. In addition, pursuant to the loan agreement, in the event of an IPO of Jeffs’ Brands, the lender will be entitled to Ordinary Shares of Jeffs’ Brands at an aggregate value of USD 125 thousand, with a conversion price based on the IPO price per share. On July 6, 2021, the loan principal of USD 375 thousand was received.

Jeffs’ Brands determined that the right to issue a variable number of shares represents a liability recorded at FVTPL in accordance with IAS 32. The proceeds from the lender were first allocated to the liability to issue a variable number of shares based on its fair value at the date of issuance, with a corresponding discount recorded on the third-party loan.

The fair value of the option liability as of the commencement date was USD 31 thousands. The Group recorded USD 37.5 thousands in connection to the revaluation of the liability during 2021. See note 4.

F-60

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

On November 23, 2021, the loan agreement was amended to extend the maturity date of the loan to the earlier of (i) March 31, 2023, or (ii) the closing of an IPO of the Company. Based on Jeffs’ Brands management’s assessment, the amendment resulted in a significant modification to the loan in accordance with IFRS 9. As a result of the debt extinguishment, Jeffs’ Brands recorded a financial gain in the amount of USD 7 thousand.

July 5, 2021, loan:

On July 5, 2021, Pro entered into a loan agreement (hereafter - “loan”) with a third party (hereafter – “lender”). The loan bears annual interest rate of 10% and was payable on March 31, 2023, and may be paid in NIS or USD at Jeffs’ Brands’ discretion. Pro was entitled to extend the loan by an additional sixty days, with additional interest of 1% per month. In addition, pursuant to the loan agreement, in the event of an IPO of Jeffs’ Brands, the lender will be entitled to Ordinary Shares of Jeffs’ Brands at an aggregate value of USD 125 thousand, with a conversion price based on the IPO price per share. On July 9, 2021, the loan principal of USD 375 thousand was received.

Jeffs’ Brands determined that the right to issue a variable number of shares represents a liability recorded at FVTPL in accordance with IAS 32. The proceeds from the lender were first allocated to the liability to issue a variable number of shares based on its fair value at the date of issuance, with a corresponding discount recorded on the third-party loan.

The fair value of the option liability as of the commencement date was USD 31 thousands. The Group recorded USD 37.5 thousands in connection to the revaluation of the liability during 2021. See note 4.

On November 23, 2021, the loan agreement was amended to extend the maturity date of the loan to the earlier of (i) March 31, 2023, or (ii) the closing of an IPO of the Company. Based on Jeffs’ Brands management’s assessment, the amendment resulted in a significant modification to the loan in accordance with IFRS 9. As a result of the debt extinguishment, Jeffs’ Brands recorded a financial gain in the amount of USD 7 thousand.

Deferred offering costs

During 2021 Jeffs’ Brands recorded USD 366 thousands as deferred offering costs.

Related parties’ loans

For more information on related parties’ transactions see note 15.b.4.

F-61

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

The table set forth below summarizes the estimates of the fair value of assets acquired and liabilities assumed. In addition, the following table summarizes the allocation of the purchase price as of the acquisition date:

|  | January 4, 2021 |
|  | USD in thousands |
Cash consideration invested in Jeffs’ Brands |  |  | 1,650 |
Non- cash consideration invested in Jeffs’ Brands |  |  | 71 |
Total consideration |  |  | 1,721 |
Less: |  |  |  |
Fair value of net assets acquired |  |  | 2,314 |
Non-controlling interest |  |  | (1,156 | )
Total acquired |  |  | 1,158 |
Goodwill |  |  | 563 |

F-62

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

| F. | Gix Internet Ltd:

On June 19, 2019, the Company signed an agreement with Gix Internet and its then wholly-owned subsidiary Gix Media, for an investment of approximately USD 5 million in Gix Group (the “Investment Agreement”). The investment was subject to certain pre-conditions, which were met on September 3, 2019 (“Closing Date”). As part of the investment:

| a. | Medigus received 2,168,675 ordinary shares of Gix Internet (Gix shares). The interests of this holdings was treated as equity investment.
| b. | Medigus received 729,508 ordinary shares of Gix Media. The interests of this holdings was treated as fair value. See also note 4.
| c. | Medigus received 2,898,183 warrants to purchase 2,898,183 Gix Internet shares at an exercise price of NIS 5.25 per share (“Gix Warrants”), expected term of 3 years following the issuance date. The warrants are measured at fair value profit and loss using Black-Scholes model. See also note 4.
| d. | Medigus’ investment in Gix Internet and Gix Media was based on a projection that Gix Media’s net profit for 2019 will be at least NIS 15 million otherwise, Medigus would be issued additional ordinary shares of Gix, which issuance would be adjusted pursuant to Gix Media’s actual net profit for 2019, thereby compensating Medigus for the difference between the actual net profit and the target net profit for 2019 (“Reverse earn out”). On September 24, 2020, Gix Internet announced, pursuant to discussions with the Company, that Gix Media issued 63,940 ordinary shares to the Company in consideration for waive of further claims against Gix Internet in connection to the conditions stated in this section. The Reverse earn out was measured at fair value through profit and loss, See also note 4.
| e. | Medigus was also entitled, for a period of three years following the closing of the investment, to convert any and all of its Gix Media’s shares into Gix shares with a 20% discount over the average share price of Gix Internet on TASE within the 60 trading days preceding the conversion (“Conversion Right”). The Conversion Right is measured at fair value through Internet profit and loss using Black-Scholes model. Medigus exercised this right in two steps on March 31, 2021 and June 28, 2021. See also note 4.
| f. | In the event, during the three year period following the closing of the investment, that Gix shall issue, or under take to issue ordinary shares with a price per share or exercise per share lower than NIS 4.15 (the “Reduced Per Share Purchase Price”), Gix Internet shall be allocated immediately with such amounts of additional ordinary shares (and the Gix Warrant shall be adjusted accordingly) equal to the difference of (x) the amount of ordinary shares actually received by the Company under the Investment Agreement, and (y) the amount which Medigus would have otherwise received should the Reduced Per Share Purchase Price was applied (“Anti-dilution”). The anti-dilution is measured at fair value profit and loss using Black-Scholes model. See also note 4.

F-63

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

In consideration of the Investment Agreement as described above the Company:

| a. | Paid NIS 14,400 thousand in cash (approximately USD 4,057 thousands).

| b. | Issued to Gix Internet 333,334 ADS representing 6,666,680 ordinary shares.

| c. | Issued to Gix Internet 333,334 warrants to purchase 333,334 ADS representing 6,666,680 ordinary shares at an exercise price of USD 4 per warrant.

Pursuant to the agreement, on September 3, 2019, the Company acquired 8.45% of the issued shares of Gix Internet and 9.34% of the issued shares of Gix Media.

On September 24, 2020, Gix Internet announced, pursuant to discussions with the Company, that Gix Media issued 63,940 ordinary shares to the Company in consideration for waive further claims against Gix Internet in connection to the conditions stated in this section. See also note 4

As of December 31, 2020, the Company holdings in Gix Internet reduced to 8.22% as employees of Gix Internet exercised options into shares.

On March 31, 2021, the Company exercised part of its right to convert Gix Media’s shares to Gix Internet shares and was issued 5,903,718 ordinary shares of Gix Internet such that following the conversion, the Company owns24.99% of Gix Internet.

The increase in 16.77% was accounted for as additional purchase, using the “step by step” method, with the purchase price being the fair value of Gix Media shares and the fair value to the conversion option as of the conversion option exercise date.

F-64

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Purchase price allocation summary following an exercise of 60% of the Conversion Right on March 31, 2021:

|  | March 31, 2021 |
|  | USD in thousands |
Purchase price |  |  | 2,586 |
Adjusted Company’s Equity |  |  | (665 | )
Excess to Allocation |  |  | 1,921 |
Excess purchase price to allocate to customer relationship, net of deferred tax |  |  | 602 |
Excess purchase price to allocate to technology, net of deferred tax |  |  | 890 |
Goodwill |  |  | 429 |
|  |  | 1,921 |

On June 28, 2021, the Company exercised all of its rights to convert Gix Media’s shares to Gix Internet shares and was issued 3,954,980 additional ordinary shares of Gix Internet such that following the conversion, the Company owns 33.17% of Gix Internet.

The increase in additional 8.18% was accounted for as additional purchase, using the “step by step” method, with the purchase price being the fair value of Gix Media shares and the fair value to the conversion option as of the conversion option exercise date.

F-65

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Purchase price allocation summary following an exercise of 40% of the Conversion Right on June 30, 2021:

|  | June 30, 2021 |
|  | USD in thousands |
Purchase price |  |  | 1,831 |
Adjusted Company’s Equity |  |  | (859 | )
Excess to Allocation |  |  | 972 |
Excess purchase price to allocate to Customer relationship, net of deferred tax |  |  | 286 |
Excess purchase price to allocate to technology, net of deferred tax |  |  | 419 |
Goodwill |  |  | 267 |
|  |  | 972 |

During October 2021 the Company purchased an additional share of GIX for USD 222 thousands, and the interests increased by 1.41%. The increase accounted for as additional purchase, using the “step by step” method.

On October 13, 2021, the Company entered into a loan agreement with Gix Internet. Pursuant to the loan agreement, Gix Internet received an aggregate amount of USD 1,240 thousand (NIS 4,000 thousand) from the Company. The loan bears interest at a rate equivalent to the minimal interest rate recognized and attributed by the Israel Tax Authority (3.26% in 2021). As such, the interest rate may be adjusted from time to time. The interest accrues from the date of the actual disbursement of the loan through the date of the repayment in full of the loan. The interest is calculated on the basis of the actual number of days elapsed in a year consisting of 365 days. The loan will be repaid in full, together with the accrued interest, in one (1) installment upon the earliest of: (i) the closing of a rights offering by the Gix for an aggregate amount of at least NIS 12,000 thousand (approximately USD 3,858 thousand); or (ii) June 30, 2022.

The Company concluded the stated interested is materially lower than its market price. The loan was initially measured at fair value in accordance with IFRS 9, Financial Instruments. Accordingly, the difference between the fair value and face value of the loan attributable to the Company was recorded as a capital reserve. The difference between the fair value and face value of the loan attributable to Gix Internet was recorded as deemed contribution by the Company to Gix Internet.

Purchase price allocation summary following a purchase of shares on October 1, 2021:

|  | October 1, 2021 |
|  | USD in thousands |
Purchase Price |  |  | 222 |
Adjusted Company’s Equity |  |  | 58 |
Excess to Allocation |  |  | 164 |
Excess purchase price to allocate to Customer relationship, net of deferred tax |  |  | 48 |
Excess purchase price to allocate to technology, net of deferred tax |  |  | 69 |
Goodwill |  |  | 47 |
|  |  | 164 |

F-66

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Reconciliation to carrying amounts:

|  | December 31, 2021 |
|  | USD in thousands |
Equity attributable to Gix shareholders’ as of December 31, 2021 |  |  | 4,129 |
Adjustments to Equity |  |  | (566 | )
Equity As adjusted as of December 31, 2021 |  |  | 3,563 |
Groups share in % |  |  | 34.58 | %
Group share |  |  | 1,232 |
Balance of excess cost: |  |  |  |
Technology and customers relationship, net of deferred tax |  |  | 2,551 |
Goodwill |  |  | 1,084 |
Balance as of December 31, 2021 |  |  | 4,867 |

The activity in the investment account:

|  | Year ended December 31, 2021 |
|  | USD in thousands |
Balance as of January 01, 2021 |  |  | 1,013 |
Group share in losses |  |  | (298 | )
Group share in other comprehensive loss |  |  | (227 | )
Excess cost amortization |  |  | (525 | )
Exercise of the Conversion Right on March 31, 2021 |  |  | 2,586 |
Exercise of the Conversion Right on June 30, 2021 |  |  | 1,831 |
Additional purchase on October 1, 2021 |  |  | 222 |
USD/NIS translation adjustments |  |  | 265 |
Balance as of December 31, 2021 |  |  | 4,867 |

F-67

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

Reconciliation to carrying amount:

|  | December 31, 2020 |
|  | USD in thousands |
Equity attributable to Gix shareholders’ as of December 31, 2020 |  |  | 2,994 |
Adjustments to Equity |  |  | (429 | )
Equity As adjusted as of December 31, 2020 |  |  | 2,565 |
Groups share in % |  |  | 8.22 | %
Group share |  |  | 211 |
Balance of excess cost: |  |  |  |
Technology and customers relationship, net of deferred tax |  |  | 514 |
Goodwill |  |  | 288 |
Balance as of December 31, 2020 |  |  | 1,013 |

The activity in the investment account:

|  | Year ended December 31, 2020 |
|  | USD in thousands |
Balance as of January 01, 2020 |  |  | 1,149 |
Group share in income |  |  | 39 |
Group share in other comprehensive loss |  |  | (36 | )
Excess cost amortization |  |  | (219 | )
USD/NIS translation adjustments |  |  | 80 |
Balance as of December 31, 2020 |  |  | 1,013 |

Reconciliation to carrying amounts:

|  | As of December 31, 2019 |
|  | USD in thousands |
Equity attributable to Gix Internet shareholders’ as of Closing Date |  |  | 3,061 |
Loss attributable to Gix Internet shareholders’ for the period between Closing Date through December 31,2019 |  |  | (3,070 | )
Other comprehensive loss attributable to Gix shareholders’ for the period between Closing Date through December 31,2019 |  |  | (527 | )
Increase in capital reverse |  |  | 2,924 |
Equity attributable to Gix Internet shareholders’ as of December 31, 2019 |  |  | 2,388 |
Groups share in % |  |  | 8.22 | %
Group share |  |  | 196 |
Fair value adjustments |  |  | 953 |
Balance as of December 31, 2019 |  |  | 1,149 |

F-68

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

| G. | Automax Ltd. (formerly known as Matomy Ltd.):

Matomy Media Group Ltd. (“Matomy”) together with its subsidiaries offered and provided a portfolio of proprietary programmatic data-driven platforms focusing on two core activities of domain monetization and mobile digital advertising to advertisers, advertising agencies, apps developers and domain owners, primarily in the United States and Europe. In the period spanning from mid-2017 through December 2019, Matomy ceased all of its activities.

On February 18, 2020, the Company purchased 2,284,865 shares of Matomy, which represents 2.32% of its issued and outstanding share capital. On March 24, 2020, the Company completed an additional purchase of 22,326,246 shares of Matomy, raising the Company’s aggregate holdings in Matomy to 24.92% of Matomy’s issued and outstanding share capital. Consequently, the Company gained significant influence over this investment and the investment was reclassified from a financial asset at fair value through profit or loss to an associate accounted for using the equity method.

Upon completion of acquisition of the investment in Matomy, the difference between the cost of the investment and the Company’s share of the net fair value of the assets and liabilities of Matomy amounted to USD 546 thousands. The difference was recorded in the consolidated statements of profit or loss and comprehensive loss as amortization of the excess purchase price of an associate.

On September 29, 2020, Matomy announced that it had entered into a memorandum of understanding with Global Automax Ltd. (“Automax”), an Israeli private company that imports various leading car brands to Israel and Automax’ shareholders, for a proposed merger in which the shareholders of Automax would exchange 100% of their shares in Automax for shares of Matomy (the “Merger”). On November 9, 2020, Matomy signed a binding agreement for the Merger, and on March 24, 2021 the preconditions under the merger agreement were met to complete the Merger. Following the closing of the Merger, Automax shareholders held approximately 53% of the outstanding share capital of Matomy and potentially up to a maximum of 73%, due to additional share issuances which are subject to achievement of certain revenue and profit milestones by Matomy, or if the value of the Matomy’s shares reach specific values after the Merger.

Following the Company’s decision from October 2020 to sell up to 50% from her interest in Matomy in the near future, half of this investment was classified as of December 31, 2020 as an assets available for sale and half of the investment treated as equity method.

On January 19, 2021 and March 9, 2021, the Company sold 2,300,000 and 11,000,000 shares of Matomy, respectively. Subsequently, following such sales and the merger of Matomy with Automax, which is now traded on TASE (AMX.TA), the Company’s aggregate holdings in Automax decreased to 4.73% of its issued and outstanding share capital. Therefore, the investment since March 9, 2021 was treated as fair value through profit and loss. see also note 4. The total gained recognized through profit and loss related to these sales sum up to USD 2,025 thousand.

During August and October 2021 the Company purchased additional shares in the amount of USD 280 thousand and the interest in Automax increased to 5.63%.

F-69

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

The activity in the investment account of Automax during the year ended December 31, 2021 was as follows:

|  | December 31, 2021 |
|  | USD in thousands |
Investment as of January 1, 2021 Equity method |  |  | 546 |
Held for sale asset |  |  | 547 |
Total as of January 1, 2021 |  |  | 1,093 |
Sale of held for sale asset |  |  | (102 | )
Share of net profit of associate accounted for using the equity method |  |  | 275 |
Total amount as of March 9, 2021 |  |  | 1,266 |
Eliminate investment held for sale and equity as a result of transition to fair value |  |  | (1,266 | )
Fair value of the investment at the day of the transition |  |  | 1,553 |
Additional purchase |  |  | 279 |
Securities revaluation |  |  | (269 | )
Currency translation |  |  | 113 |
End of the period in Fair value |  |  | 1,676 |

Reconciliation to carrying amounts:

|  | March 24, 2020 - December 31, 2020 |
|  | USD in thousands |
Fair value as of March 24, 2020 |  |  | 137 |
Additions |  |  | 1,464 |
Amortization of excess purchase price of an associate |  |  | (546 | )
Profit for the period – through share of other comprehensive income of associates accounted for using the equity method |  |  | 38 |
Balance as of December 31, 2020 |  |  | 1,093 |
Classified to held for sale |  |  | (547 | )
Equity investment as of December 31, 2020 |  |  | 546 |

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

| H. | Polyrizon – Protective Biological Gels

Polyrizon Ltd. (“Polyrizon”) is a private company engaged in developing biological gels designed to protect patients against biological threats and reduce the intrusion of allergens and viruses through the upper airways and eye cavities.

In July 2020, the Company entered into an ordinary share purchase agreement with Polyrizon, pursuant to which the Company purchased 19.9% of Polyrizon’s issued and outstanding share capital on a fully diluted basis for aggregate gross proceeds of USD 104 thousand. Polyrizon did not have a significant operation in the period before the purchase. The Company concluded the concentration test per IFRS 3 was met, and accordingly the transaction was accounted for as an asset acquisition. As part of the agreement, the Company was granted with an option (the “Original Option”) to invest an additional amount of up to USD 1 million in consideration for 3,107,223 shares of Polyrizon. The Original Option is exercisable until the earlier of (i) April 23, 2023, or (ii) the consummation by Polyrizon of equity financing of at least USD 500 thousand based on a pre-money valuation of at least USD 10 million. The acquisition was accounted for by the equity method.

The Original Option is measured at fair value through profit and loss and was calculated using the Black & Scholes option price model. As of December 31, 2020, the total value of the options was USD 36 thousand. On December 15, 2021, the Company and Polyrizon entered into an addendum to the purchase agreement pursuant to which, the investor was granted a new option (the “Alternative Option”) to invest an amount of USD 2 million at a price per share equal to 125% the price per share at the IPO. The new option is only exercisable subject to the successful completion of an IPO and for a period of 3 years thereafter, subsequently, the original option will be terminated and become null and void. If an IPO will not occur till June 30, 2022, the Company will be entitled to exercise the original option. The Original Option and the Alternative Option was calculated based on management’s expectations for the IPO scenario. As of December 31, 2021, the total value of the options was USD 516 thousand. See also note 4.

In addition, the Company entered into an exclusive reseller agreement with Polyrizon. As part of the reseller agreement, the Company received an exclusive global license to promote, market, and resell the Polyrizon products, focusing on a unique biogel to protect from the COVID-19 virus. The term of the license is for four years, commencing upon receipt of sufficient FDA approvals for the lawful marketing and sale of the products globally. The Company also has the right to purchase the Polyrizon products on a cost-plus 15% basis for the purpose of reselling the products worldwide. In consideration of the license, Polyrizon will be entitled to receive annual royalty payments equal to 10% of the Company annualized operating profit arising from selling the products. As of December 31, 2021, Polyrizon’s products have not received the requisite FDA approvals, and therefore manufacturing and commercialization efforts have not yet commenced.

On March 9, 2021, Polyrizon entered into a securities purchase agreement with certain investors and shareholders (the “March 2021 SPA”) pursuant to which Polyrizon issued 7,688,712 ordinary shares in exchange for gross proceeds of USD 250 thousand. The Company invested USD 120.5 thousand. After this investment the Company held approximately 35.68% of Polyrizon shares.

Additionally, as part of the March 2021 SPA, Polyrizon issued 589,466 ordinary shares to the Polyrizon’s chief executive officer. Polyrizon recorded a share-based compensation expense of USD 19 in the Statements of Comprehensive Loss for the year ended December 31, 2021 in respect of the grant.

On August 25, 2021, Polyrizon entered into a securities purchase agreement with certain investors and shareholders pursuant to which Polyrizon will issue up to 14,696,340 Ordinary shares for gross proceeds of up to USD 800 thousands. Polyrizon received approximately USD 780 thousands and issued 14,328,396 Ordinary shares. The Company invested an amount of USD 297 thousands on August 25, 2021. As of December 31, 2021 the Company holds 37.03% on Polyrizon shares.

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

The activity in the investment account of Polyrizon during the year ended December 31, 2021 was as follows:

|  | For the year ended December 31, 2021 |
|  | USD in thousands |
Balance as of January 01, 2021 |  |  | 103 |
Group share in losses |  |  | (50 | )
Excess cost amortization |  |  | (24 | )
Additional purchase on March 9, 2021 |  |  | 297 |
Additional purchase on August 25, 2021 |  |  | 121 |
Balance as of December 31, 2021 |  |  | 447 |

| I. | Charging Robotics Ltd:

On January 7, 2021, the Company entered an agreement to purchase a provisional patent filed with the United States Patent and Trademark Office and know-how relating to wireless vehicle battery charging technology in consideration for USD 75 thousand. Furthermore, the Company entered a collaboration agreement with the seller, whereby the Company committed to invest USD 150 thousand in a newly incorporated wholly owned subsidiary of the Company, Charging Robotics Ltd. (hereinafter – “Charging Robotics”), incorporated on February 1, 2021, which will focus on the Company new electric vehicle and wireless charging activities. Pursuant to the collaboration agreement, the seller is entitled to a monthly consultant fee as well as options to purchase 15 shares, which represents 15% of Charging Robotics’ fully diluted share capital as of its incorporation date, at an exercise price of USD 150 thousand. The option was fully vested on July 30, 2021. The fair value of the options granted is estimated on the grant date, using the Black-Scholes Model, according to the following parameters: (a) risk-free interest rate – 0.85%; (b) expected dividend – 0%; (c) expected volatility – 85%; (d) forecasted life –4.44 years. For the year ended December 31, 2021, approximately USD 91 thousand were recognized and recorded as expenses.

During 2021 the Company invested additional amount of USD 423 thousands.

On February 19, 2021, the Company entered into the Venture Agreement, with Mr. Amir Zaid and Mr. Weijian Zhou (the founders of Emuze Ltd., a privately held company that designs and develops electric mobility micro vehicles), and Charging Robotics (the “Venture Agreement”), under which the Company formed a venture, under the name Revoltz, to develop and commercialize three modular electric vehicle (“EV”) micro mobility vehicles for urban individual use and “last mile” cargo delivery.

Under the terms of the Venture Agreement, the Company invested an initial amount of USD 250 thousand in consideration of 19,990 ordinary shares of Revoltz Ltd. (“Revoltz”), representing 19.99% of Revoltz’s issued and outstanding share capital on a fully diluted basis. The Venture Agreement requires the Company to invest an additional USD 400 thousand in a second tranche, subject to Revoltz achieving certain post-closing milestones, for 37.5% of Revoltz’s issued and outstanding share capital. As of December 31, 2021, the milestones were not achieved, therefore no additional investments occurred. The investment in Revoltz was accounted for using the equity method.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

In addition, within twelve (12) months following the completion of the second tranche (but in any event not later than December 31, 2022), the Company shall be entitled to invest an additional amount of USD 700 thousand in consideration for Revoltz’s ordinary shares which will result in the Company holding 50.1% of Revoltz’s issued and outstanding share capital. As of December 31, 2021, the second tranche did not occur.

The venture’s intended focus is to develop unique EVs that have the ability to last a full working day within a single charge suitable for heavy-duty and rigid operations and provide tailored mission-specific designs as well as Hop on -Hop off modes, off-road versions along with a low cost of operation.

On June 17, 2021, Charging Robotics signed a definitive distribution agreement with Automax (the “Distribution Agreement”). The Distribution Agreement is for an exclusive distribution of Charging Robotics’ wireless robotic charging pad in Israel and Greece for a period of five years, with an extension option for an additional five years. Automax will market the wireless robotic charging pad for electric vehicles, once fully developed by Charging Robotics, and will be responsible for obtaining all the necessary licenses, permits and approvals for the import, marketing and distribution of such product.

As part of the Distribution Agreement, Automax will pay Charging Robotics a one-time payment of USD 50 thousand for its appointment as an exclusive distributor in Israel and Greece. The payment has not been made yet and the transaction was not closed. Additionally, upon closing of the transaction, Automax will have a five-year option to purchase up to 5% of Charging Robotics’ ordinary shares at a USD 30 million pre-money valuation on a fully diluted basis, upon completion of Charging Robotics’ first financing round. Furthermore, Automax will have an additional option, for five years, to purchase ordinary shares of up to 5% of the amount of shares that Charging Robotic will issue in any subsequent round, following the first financing round, at a price per share to be determined in any such round. As of December 31, 2021, Charging Robotics did not complete any finance round.

| J. | Elbit Imaging Ltd.:

During June 2021 the Company purchased 5.12% of the outstanding shares of Elbit Imaging Ltd in total amount of USD 1.06 million.

Elbit Imaging Ltd. was incorporated in Israel. Elbit Imaging Ltd shares are listed for trading on the Stock Exchange Securities in Tel Aviv and until March 2019 were also listed in the United States (Nasdaq). Following a re-arrange plan approved in 2014 Elbit Imaging Ltd mainly repaid debt by sale of assets and continued streamlining and cost reduction measures as much as possible and currently even exploring options for reinvestment and / or Mergers.

Elbit Imaging Ltd. operates in the following principal fields of business: (i) medical industries through indirect holdings in Insightec Ltd. and Gamida Cell Ltd.; and (ii) land plots in India which are designated for sale (and which were initially designated for residential projects).

On June 30, 2021 the Company submitted a request to convene a special meeting to replace some of the directors in Elbit Imaging Ltd. The meeting took place on August 4, 2021 and the Company appointed 3 directors out of the 8 directors in Elbit Imaging Ltd. Therefore, since that date, the Company concluded to have a significant influence in Elbit Imaging Ltd. and the investment was accounted for as an equity investment.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

During July 2021, the Company invested additional amount of USD 134 Thousands and the holdings increased to 5.72%.

On October 12, 2021, the Company’s Board of Directors approved to sell all the Company’s interests in Elbit Imaging Ltd. Following one year of the meeting decision.

The activity in the investment account:

|  | Year ended December 31, 2021 |
|  | USD in thousands |
Purchase of shares during June and July 2021 |  |  | 1,200 |
Revaluation – profit and Loss till August 4, 2021 |  |  | (72 | )
Reclassification of investment to equity |  |  | 1,128 |
Group share in losses |  |  | (83 | )
Impairment |  |  | (104 | )
USD/NIS translation adjustments |  |  | 34 |
Balance as of December 31, 2021 |  |  | 975 |

| K. | SciSparc Ltd.

SciSparc Ltd. (“SciSparc”) is an Israeli company, whereby listed its American Depository Shares on the OTCQB until December 7, 2021, after which SciSparc uplisted to Nasdaq.

Buffalo Investments Ltd. (“Buffalo”), an Israeli private company, owned 150,000 options to purchase 150,000 shares of SciSparc at an exercise price of USD 5.02 per share. On December 7, 2021, the Company entered into an option purchase agreement with Buffalo (the “Buffalo Agreement”) for the purchase of the 150,000 options of in consideration for USD 0.72 per option/warrant. The Company paid USD 72 thousand in this transaction. Additionally, the Company obligated to immediately exercise all such options into shares and the Company paid USD 753 thousands in this transaction. According to the Buffalo Agreement, Buffalo undertook to purchase 85% of the shares back from the Company within 3 months following the Buffalo Agreement (the “Purchase Period”) in consideration for USD 6.05 per share. On April 27, 2022, the Buffalo Agreement was amended such that the Company extended the Purchase Period until June 7, 2021.

The Company treated the investment as follow:

| 1. | The 15% shares of SciSparc are measured at fair value through profit and loss.

| 2. | The 85% shares of SciSparc - accounted as a short term forward contract such that the difference between the quoted price and the sale price will be recognized as a provision and the difference between the total cost paid by the Company (USD 5.5 per share) and the price in the forward transaction (USD 6.05 per share) will be recognized as financing income.

The following table provides the activity in the investment:

|  | December 7, 2021 – December 31, 2021 |
|  | USD in thousands |
Cash investment |  |  | 825 |
Revaluation – capital gain |  |  | 16 |
Revaluation – Finance income |  |  | 70 |
Revaluation – Forward contract |  |  | 23 |
Provision- Forward contract |  |  | (23 | )
Investment as of December 31, 2021 |  |  | 911 |

On December 26 2021 the Company’s Board of Directors approved to sell all the interests in SciSparc Ltd. Following one year of the meeting decision, therefore the investment was classified as short-term investment. See also note 4.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INTEREST IN OTHER ENTITIES: (continued):

| L. | Fuel Doctor Holdings Inc.

On December 21, 2021, the Company purchased 90,000,000 shares of Fuel Doctor Holdings Inc. (“Fuel Doctor”), which represent 35.06% of the issued and outstanding shares of Fuel Doctor for a total consideration of USD 262.5 thousands (the “Fuel Doctor Investment”). The Company gained a significant influence over Fuel Doctor and aforementioned investment was accounted for using the equity method.

As of the purchase date Fuel Doctor has minimal liabilities (USD 5 thousand) and has no assets and a negative equity. Since the Fuel Doctor Investment is not considered a business acquisition under the IFRS-3R, from an accounting point of view the transaction should be presented as a consideration paid less Fuel Doctor equity. Because the equity is negative as of the purchase date it will be only the consideration paid. The transaction was recognized during 2021 as an expense in the consolidated statements of income/loss and other comprehensive income/loss under the item of amortization of the excess cost of an associate.

| M. | Safee Cyber Technologies Ltd.

On October 13, 2021, the Company entered into a share purchase agreement with Safee Cyber Technologies Ltd., or Safee, a technology company focused on non-fungible tokens (NFTs), pursuant to which the Company invested USD 400,000 in exchange for approximately 2.35% of Safee’s shares capital on a fully diluted basis. The investment was treated at fair value through profit and loss.

| N. | GERD IP Inc.

On May 11, 2021 Gerd IP signed a Confidential Settlement Agreement to resolve a lawsuit, concerning alleged infringement of its intellectual property, filed by GERD IP in July 2020 with the United States District Court for the District of Delaware against a US medical device company.

The claim for alleged intellectual property infringement referred to two patents issued by the United States Patent and Trademark Office, owned by GERD IP.

During 2021 Gerd IP received USD 1 million compensation related to this settlement agreement, and after reduction of legal cost the net amount received summed up to USD 494 thousands.

F-75

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT:

Financial risk management:

| 1) | Financial risk factors

The Group is exposed to a variety of financial risks such as: market risks (including currency risks, fair value interest rate risk, cash flow interest rate risk and price risk), credit risks and liquidity risks. The Group’s overall risk management plan focuses on the unpredictability of financial markets and seeks to minimize the potential adverse effects on the Group’s financial performance.

Risk management is performed by the finance department according to the policy authorized by the board of directors.

| a) | Market risk - Currency risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.

The Group operates internationally and is exposed to foreign exchange risks due to exposure to Foreign Currencies, primarily the NIS. Foreign exchange risk arises from future commercial transactions, assets or liabilities denominated in foreign currency.

The Group’s policy to reduce the exposure to changes in exchange rates is based on maintaining, where possible, the balances of current monetary assets, according to the currency of the current liabilities.

As of December 31, 2021, 2020 and 2019 if the Group’s functional (USD) had weakened/strengthened by 10% against the NIS, with all other variables held constant, the loss for the year would decrease/increase by USD 379 thousand, USD 408 thousand and USD 27 thousand, accordingly.

| b) | Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the end of the reporting year.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: (continued):

Credit risks are treated at the Group level. Credit risks arise typically from cash and cash equivalents, bank deposits and from credit exposures in connection with outstanding receivables and committed transactions.

No credit limits were exceeded during the reported periods and Group’s management does not expect any losses from non-performance of these parties.

| c) | Liquidity risk

Liquidity risk exists where the Group might encounter difficulties in meeting its financial obligations as they become due. The Group monitors its liquidity in order to ensure that sufficient liquid resources are available to allow it to meet its obligations.

Cash flow forecasting is performed by the Group’s finance department. The finance department monitors rolling forecasts of the Group’s liquidity requirements to ensure that it has sufficient cash to meet operational needs, while maintaining sufficient headroom on its undrawn committed borrowing facilities, so that the Group does not breach any of its credit facilities.

Liquidity risk arises from financial liabilities due to payable balances as of December 31, 2021, 2020 and 2019 sum up to USD 7,556 thousands, USD 2,051 thousands and USD 1,435 thousands, accordingly.

| 2) | Estimates of fair value

Below is analyzes financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

| ● | Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

| ● | Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 3).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: (continued):

Financial assets

The Company has several financial assets measured at fair value through profit or loss, which meet the level 1 and level 3 criteria as of December 31, 2020, and 2021 as follow:

During 2020 The Company invested in Safo in the amount of USD 100 thousand in respect of 91,743 warrants and shares (represent holding of 0.47% Safo issued and outstanding share capital). The investment in share meets level 1 criteria. The investment in warrants meets level 3 criteria.

During 2021 the Company sold shares of Automax and since March 2021 the investment is measured at fair value through profit or loss and meets level 1 criteria. See also note 3.F.

During 2021 the Company invested in Safee and holds of 2.35% Safee issued and outstanding share capital. The investment meets level 1 criteria.

During 2021 the Company invested in Tondo and holds of 2.29% Tondo issued and outstanding share capital. The investment meets level 1 criteria.

During 2021 the Company invested in SciSparc and holds of 4.85% SciSparc issued and outstanding share capital. The investment meets level 1 criteria. See also note 3.K.

During 2021 the Company invested in Maris-Tech an amount of USD 240 thousands to purchase 78,370 shares and warrants and holds of 2.09% Maris-Tech issued and outstanding share capital. The investment and warrants were measured according to fair value through profit or loss and meet level 3 criteria.

The following table presents the level 1 and 3 fair value financial assets as of December 31, 2020 and 2021:

|  | December 31, 2021 |  |  | December 31, 2020 |
|  | Level 1 |  |  | Level 3 |  |  | Total |  |  | Level 1 |  |  | Level 3 |  |  | Total |
|  | USD in thousands |
Gix Media’s shares (see note 3.E) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,438 |  |  |  | 2,438 |
Gix warrants (see note 3.E) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 14 |  |  |  | 14 |
Gix conversion right (see note 3.E) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,393 |  |  |  | 1,393 |
Gix anti-dilution protection (see note 3.E) |  |  | - |  |  |  | 469 |  |  |  | 469 |  |  |  | - |  |  |  | 473 |  |  |  | 473 |
ABI |  |  | - |  |  |  | 126 |  |  |  | 126 |  |  |  |  |  |  |  |  |  |  |  |  |
Safo investment |  |  | 53 |  |  |  | - |  |  |  | 53 |  |  |  | 113 |  |  |  | - |  |  |  | 113 |
Safo warrants |  |  | - |  |  |  | 34 |  |  |  | 34 |  |  |  | - |  |  |  | 98 |  |  |  | 98 |
ScoutCam warrants |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Maris investment |  |  | - |  |  |  | 303 |  |  |  | 303 |  |  |  | - |  |  |  | - |  |  |  | - |
Tondo investment |  |  | 429 |  |  |  | - |  |  |  | 429 |  |  |  | - |  |  |  | - |  |  |  | - |
Safee investment |  |  | 400 |  |  |  | - |  |  |  | 400 |  |  |  | - |  |  |  | - |  |  |  | - |
SciSparc investment |  |  | 911 |  |  |  | - |  |  |  | 911 |  |  |  | - |  |  |  | - |  |  |  | - |
Polyrizon warrants |  |  | - |  |  |  | 516 |  |  |  | 516 |  |  |  | - |  |  |  | - |  |  |  | - |
Automax (see note 3.F) |  |  | 1,676 |  |  |  | - |  |  |  | 1,676 |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  |  | 3,469 |  |  |  | 1,448 |  |  |  | 4,917 |  |  |  | 113 |  |  |  | 4,416 |  |  |  | 4,529 |

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: (continued):

The following table presents the Level 1 financial assets roll-forward:

|  | Investment in SAFO |  |  | Tondo |  |  | Safee |  |  | SciSparc ltd |  |  | Automax (Matomy) |  |  | Total |
|  | USD in thousands |
Balance as of January 1, 2021 |  |  | 113 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 113 |
Initial recognition at fair value upon dilution of equity investment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,553 |  |  |  | 1,553 |
Purchase of securities |  |  | - |  |  |  | 472 |  |  |  | 400 |  |  |  | 825 |  |  |  | 279 |  |  |  | 1,976 |
Sale of securities |  |  | - |  |  |  | (42 | ) |  |  | - |  |  |  |  |  |  |  | - |  |  |  | (42 | )
Net change in fair value of financial assets at fair value recognized through profit or loss |  |  | (60 | ) |  |  | (1 | ) |  |  | - |  |  |  | 86 |  |  |  | (156 | ) |  |  | (131 | )
Balance as of December 31, 2021 |  |  | 53 |  |  |  | 429 |  |  |  | 400 |  |  |  | 911 |  |  |  | 1,676 |  |  |  | 3,469 |

The following table presents the Level 3 financial assets roll-forward during 2021:

|  | Gix Media’s shares |  |  | Gix Warrants |  |  | ScoutCam warrants |  |  | Maris investment and warrants |  |  | Conversion Right |  |  | Polyrizon warrants |  |  | ABI |  |  | Anti-dilution |  |  | SAFO Warrants |  |  | Total |
|  | USD in thousands |
Balance as of January 1, 2021 |  |  | 2,438 |  |  |  | 14 |  |  |  | - |  |  |  | - |  |  |  | 1,393 |  |  |  | - |  |  |  | - |  |  |  | 473 |  |  |  | 98 |  |  |  | 4,416 |
Initial recognition at fair value of ScoutCam warrants upon deconsolidation (Note 3.C) |  |  | - |  |  |  | - |  |  |  | 97 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 97 |
Exercise of warrants (Note 3) |  |  | - |  |  |  | - |  |  |  | (51 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (51 | )
Initial recognition of financial asset |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 240 |  |  |  | - |  |  |  | - |  |  |  | 126 |  |  |  | - |  |  |  | - |  |  |  | 366 |
Net changes at fair value recognized through profit or loss |  |  | 373 |  |  |  | (14 | ) |  |  | (46 | ) |  |  | 63 |  |  |  | 213 |  |  |  | 516 |  |  |  | - |  |  |  | (4 | ) |  |  | (64 | ) |  |  | 1,037 |
Exercise of Conversion Right (see note 3.F) |  |  | (2,811 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,606 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (4,417 | )
Balance as of December 31, 2021 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 303 |  |  |  | - |  |  |  | 516 |  |  |  | 126 |  |  |  | 469 |  |  |  | 34 |  |  |  | 1,448 |

Total unrealized profits for the period included in profit or loss for assets held at the end of the reporting period amounted to USD 3,246 thousand.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: (continued):

The following table presents the Level 3 financial assets roll-forward during 2020:

|  | Gix Media’s shares |  |  | Gix Warrants |  |  | Reverse earn out |  |  | Conversion Right |  |  | Anti- dilution |  |  | SAFO Warrants |  |  | Total |
|  | USD in thousands |
Balance as of January 1, 2020 |  |  | 2,637 |  |  |  | 71 |  |  |  | - |  |  |  | 619 |  |  |  | 289 |  |  |  | - |  |  |  | 3,616 |
Initial recognition of financial asset |  |  | 196 |  |  |  | - |  |  |  | (196 | ) |  |  | - |  |  |  | - |  |  |  | 98 |  |  |  | 98 |
Changes in fair value recognized through profit or loss |  |  | (395 | ) |  |  | (57 | ) |  |  | 196 |  |  |  | 774 |  |  |  | 184 |  |  |  | - |  |  |  | 702 |
Balance as of December 31, 2020 |  |  | 2,438 |  |  |  | 14 |  |  |  | - |  |  |  | 1,393 |  |  |  | 473 |  |  |  | 98 |  |  |  | 4,416 |

The following table presents the Level 3 financial assets roll-forward during 2019:

|  | Linkury’s shares |  |  | Algomizer Warrants |  |  | Reverse earn out |  |  | Conversion Right |  |  | Anti- dilution |  |  | Total |
|  | USD in thousands |
Balance as of January 1, 2019 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Initial recognition of financial asset |  |  | 2,501 |  |  |  | 162 |  |  |  | 13 |  |  |  | 617 |  |  |  | 231 |  |  |  | 3,524 |
Changes in fair value recognized within profit or loss |  |  | 136 |  |  |  | (91 | ) |  |  | (13 | ) |  |  | 2 |  |  |  | 58 |  |  |  | 92 |
Balance as of December 31, 2019 |  |  | 2,637 |  |  |  | 71 |  |  |  | - |  |  |  | 619 |  |  |  | 289 |  |  |  | 3,616 |

Total unrealized profits for the period included in profit or loss for assets held at the end of the reporting period amounted to USD 105 thousand.

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: (continued):

Financial liabilities

Level 1 financial instruments:

As of December 31, 2021, and December 31,2020, the Group has financial liability measured at level 1 – Warrants C (see note 12(b)).

The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Level 3 financial instruments:

The Company has several financial liabilities measured at fair value through profit or loss, which meet the level 3 criteria as of December 31, 2021 – warrants issued to investors (see note 12(b)(1)-(2)) and commitment to issue warrants to lenders of Jeffs’ Brands upon IPO (see note 3E).

The following table presents the financial liabilities that were measured at fair value through profit or loss:

|  | December 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
|  | Level 1 |  |  | Level 3 |  |  | Total |  |  | Level 1 |  |  | Level 3 |  |  | Total |
|  | USD in thousands |  |  | USD in thousands |
Fair value of warrants |  |  | 555 |  |  |  | 137 |  |  |  | 692 |  |  |  | 1,003 |  |  |  | 36 |  |  |  | 1,039 |

The following table presents the Level 3 financial liabilities roll-forward during 2021:

|  | Warrants |
|  | USD in thousands |
Opening balance as of January 1, 2021 |  |  | 36 |
Changes in fair value of warrants issued to investors |  |  | (36 | )
Closing balance as of December 31, 2021 |  |  | - |

The following table presents the Level 3 financial liabilities roll-forward during 2020:

|  | Warrants |
|  | USD in thousands |
Opening balance as of January 1, 2020 |  |  | 40 |
Changes in fair value of warrants issued to investors |  |  | (6 | )
Closing balance as of December 31, 2020 |  |  | 36 |

The following table presents the Level 3 financial liabilities roll-forward during 2019:

|  | Warrants |
|  | USD in thousands |
Opening balance as of January 1, 2019 |  |  | 97 |
Changes in fair value of warrants issued to investors |  |  | (57 | )
Closing balance as of December 31, 2019 |  |  | 40 |

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: (continued):

Valuation processes of the Group:

Set forth below are details regarding the valuation processes of the Group as of December 31,2021:

1) | Warrants issued on December 6, 2016: as part of a registered direct offering - the Company used the Black-Scholes model, using the following principal assumptions: expected volatility of 63.32%, risk-free interest of 0.19%, expected term of 5.5 years following the grant date. The liability amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration. see Note 12(b). Warrants issued on March 29, 2017: as part of a public offering - the Company used the Black-Scholes model, using the following principal assumptions: expected volatility of 63.2%, risk-free interest of 0.19%, expected term of 5 years following the grant date. The liability amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration. For details, see Note 12(b). Warrants issued on November 28, 2017: as part of a direct offering - the Company used the Black-Scholes model, using the following principal assumptions: expected volatility of 63.2%, risk-free interest of 0.19%, expected term of 5.5 years following the grant date. The liability amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration. For details, see Note 12(b). Series C warrants - financial instruments measured at fair value through profit or loss. For details, see Note 12(b).

2) | Anti-dilution feature - the Company used the Black-Scholes model, using the following principal assumptions: share price: NIS 1.45, 25% probability for the occurrence of an anti-dilution event, expected volatility of 46.85%, risk-free interest of 0.67%, expected term of 3 years following the issuance date.

3) | ScoutCam warrants- the Company used the Black-Scholes model, using the following principal assumptions: share price of USD 6.3, expected volatility of 49.5%, risk-free interest of 0.65%, expected term of 3 years following the grant date. The asset amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration.

4) | Gix warrants - the Company used the Black-Scholes model, using the following principal assumptions: share price of NIS 1.45, expected volatility of 46.85%, risk-free interest of 0.67%, expected term of 3 years following the grant date. The asset amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration.

5) | Investment in SAFO, Tondo, SciSparc and Automax - financial instruments measured at fair value through profit or loss.

6) | Safee investment - on October 12, 2021 the Company invested in Safee. Since Safee is a small private company, which does not raise funds on a regular basis and does not have significant activity that indicates a change in fair value, the Company assumes that there is no reason to believe that there is a material change in value and that the investment value adequately represents the fair value at the reporting date. This assumption is reviewed at each cut-off date.

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: (continued):

7) | Maris investment - on March 24, 2021 the Company invested in Maris. On February 01, 2022 Maris completed initial public offering of units consisting of warrants and shares for USD 4.2 per unit and started to trade on Nasdaq at USD 3.15 per share. The Company assumed the share price as of the first trading date of Maris shares represents the fair value of Maris shares as of December 31, 2021. The fair value of the warrants was calculated using the Black & Scholes option price model, based on the following assumptions: Non-IPO scenario: share price: USD 3.15, expected volatility of 63.2%, risk-free interest of 0.24%, expected term of 2.5 years following the grant date. IPO scenario: share price: USD 3.15, expected volatility of 55.81%, risk-free interest of 0.81%, expected term of 5 years following the grant date.

8) | SAFO warrants- the Company used the Black-Scholes model, using the following principal assumptions: share price: USD 7.56, expected volatility of 78.86%, risk-free interest of 0.97%, expected term of 3 years following the grant date. The asset amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration.

9) | Polyrizon Options- the Original Option (as defined in note 3H) was measured at fair value through profit and loss and was calculated using the Black & Scholes option price model. The Original Option and the Alternative Option (as defined in note 3H) was calculated based on management’s expectations for the IPO scenario. Non-IPO scenario: share price: USD 0.0544, expected volatility of 87.86%, risk-free interest of 0.85%, expected term of 2.77 years following the grant date. IPO scenario: share price: 120% of expected IPO share price, expected volatility of 93.76%, risk-free interest of 0.97%, expected term of 3.55 years following the grant date.

10) | Options to employees and advisors. For details, see Note 12(c).

Set forth below are details regarding the valuation processes of the Group as of December 31, 2020:

1) | Warrants issued on December 6, 2016: as part of a registered direct offering - the Company used the Black-Scholes model, using the following principal assumptions: expected volatility of 80.94%, risk-free interest of 0.13%, expected term of 5.5 years following the grant date. The liability amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration. see Note 12(b)(2).

2) | Warrants issued on March 29, 2017: as part of a public offering - the Company used the Black-Scholes model, using the following principal assumptions: expected volatility of 82.35%, risk-free interest of 0.13%, expected term of 5 years following the grant date. The liability amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration. For details, see Note 12(b)(1).

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: (continued):

3) | Warrants issued on November 28, 2017: as part of a direct offering - the Company used the Black-Scholes model, using the following principal assumptions: expected volatility of 91.72%, risk-free interest of 0.23%, expected term of 5.5 years following the grant date. The liability amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration. For details, see Note 12(b)(2).

4) | Series C warrants - financial instruments measured at fair value through profit or loss. For details, see Note 12(b)(3).

5) | Investment in Safo - financial instruments measured at fair value through profit or loss.

6) | Linkury shares - the Company used the Discounted Cash Flow (DCF) model for a period of 7 years, using the following principal assumptions: weighted average cost of capital (WACC) – 21.3%. The asset amount is adjusted at each statement of financial position date based on the then relevant assumptions. A shift of the WACC by +/- 1% results in a change in fair value of Linkury shares of USD 445. For details, see Note 3.

7) | Gix warrants - the Company used the Black-Scholes model, using the following principal assumptions: expected volatility of 52.31%, risk-free interest of 0.23%, expected term of 3 years following the grant date. The asset amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration. For details, see Note 3.

8) | Anti-dilution - the Company used the Black-Scholes model, using the following principal assumptions: 25% probability for the occurrence of an anti-dilution event, expected volatility of 52.31%, risk-free interest of 0.13%, expected term of 3 years following the issuance date. An increase of the probability for the occurrence of anti-dilution event by 10% would have increased the fair value of Anti-dilution by USD 189 thousands. For details, see Note 3.

9) | Conversion right - the exercise of a replacement option will be carried out in two tranches the Company used the Monte Carlo method for a period of 3 years following the grant date, using the following principal assumptions: first beat expected volatility 66.77%, risk-free interest 0.04% second beat expected volatility 57.66%, risk-free interest 0.06%. For details, see Note 3.

10) | Options to employees and advisors. For details, see Note 12(c).

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: (continued):

Set forth below are details regarding the valuation processes of the Group as of December 31,2019:

1) | Warrants which were issued on December 6, 2016, as part of a registered direct offering - the Company used the Black-Scholes model, using the following principal assumptions: expected volatility of 82.19%, risk-free interest of 0.23%, expected term of 5.5 years following the grant date. The liability amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration.

2) | Warrants which were issued on March 29, 2017, as part of a public offering - the Company used the Black-Scholes model, using the following principal assumptions: expected volatility of 84.49%, risk-free interest of 0.19%, expected term of 5 years following the grant date. The liability amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration. For details, see Note 13(b)(1).

3) | Warrants which were issued on November 28, 2017, as part of a direct offering - the Company used the Black-Scholes model, using the following principal assumptions: expected volatility of 85.23%, risk-free interest of 0.32%, expected term of 5.5 years following the grant date. The liability amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration. For details, see Note 13(b)(2).

4) | Series C warrants - level 1 financial instruments measured at fair value through profit or loss. For details, see Note 13(b)(3).

5) | Linkury shares - the Company used the Discounted Cash Flow (DCF) model for a period of 7 years, using the following principal assumptions: weighted average cost of capital (WACC) – 20.9%. The asset amount is adjusted at each statement of financial position date based on the then relevant assumptions. A shift of the WACC by +/- 5% results in a change in fair value of Linkury shares of USD 55 thousands. For details, see Note 4.

6) | Algomizer warrants - the Company used the Black-Scholes model, using the following principal assumptions: expected volatility of 34.74%, risk-free interest of 0.24%, expected term of 3 years following the grant date. The asset amount is adjusted at each statement of financial position date based on the then relevant assumptions, until the earlier of full exercise or expiration. For details, see Note 4.

7) | Anti-dilution - the Company used the Black-Scholes model, using the following principal assumptions: 25% probability for the occurrence of an anti-dilution event, expected volatility of 34.74%, risk-free interest of 0.24%, expected term of 3 years following the issuance date. An increase of the probability for the occurrence of anti-dilution event by 10% would have increased the fair value of Anti-dilution by USD 116 thousands. For details, see Note 4.

8) | Reverse earn out - the Company used the Monte Carlo model for a period of 0.32 years following the grant date, using the following principal assumptions: expected volatility 22.9%, risk-free interest 0.12%. For details, see Note 4.

9) | Conversion right - the Company used the Monte Carlo method for a period of 3 years following the grant date, using the following principal assumptions: expected volatility 34.74%, risk-free interest 0.24%. For details, see Note 4.

10) | Options to employees and advisors. For details, see Note 12(c).

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - CASH AND CASH EQUIVALENTS:

|  | December 31 |
|  | 2021 |  |  | 2020 |
|  | USD in thousands |
Cash in banks |  |  | 24,025 |  |  |  | 22,363 |

The currencies in which the cash and cash equivalents are denominated or to which they are linked are as follows:

|  | December 31 |
|  | 2021 |  |  | 2020 |
|  | USD in thousands |
USD |  |  | 22,151 |  |  |  | 19,448 |
NIS |  |  | 1,874 |  |  |  | 2,906 |
Other currencies |  |  | - |  |  |  | 9 |
|  |  | 24,025 |  |  |  | 22,363 |

The carrying amount of cash and cash equivalents approximates their fair value.

NOTE 6 - OTHER CURRENT ASSETS:

|  | December 31 |
|  | 2021 |  |  | 2020 |
|  | USD in thousands |
Government Institutions |  |  | 79 |  |  |  | 176 |
Prepaid expenses |  |  | 126 |  |  |  | 256 |
Advances to suppliers |  |  | 18 |  |  |  | 159 |
Other |  |  | 192 |  |  |  | 205 |
|  |  | 415 |  |  |  | 796 |

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - INVENTORY:

Composed as follows:

|  | December 31 |
|  | 2021 |  |  | 2020 |
|  | USD in thousands |
Raw materials and supplies |  |  | - |  |  |  | 44 |
Finished goods |  |  | 1,227 |  |  |  | 278 |
Provision for impairment |  |  | - |  |  |  | (79 | )
|  |  | 1,227 |  |  |  | 243 |

As of December 31, 2021, the inventory is derived from Jeffs’ Brands.

As of December 31, 2020, the inventory is derived from ScoutCam.

NOTE 8 - PROPERTY AND EQUIPMENT:

| a. | Composition of property and equipment and accumulated depreciation thereon, grouped by major classifications and changes therein, and their movements during 2021:

|  | Machinery and equipment |  |  | Leasehold improvements and furniture |  |  | Computer programs |  |  | Total |
|  | USD in thousands |
Cost: |  |  |  |  |  |  |  |  |  |  |  |
Balance as of January 01, 2021 |  |  | 947 |  |  |  | 172 |  |  |  | 605 |  |  |  | 1,724 |
Additions |  |  | 99 |  |  |  | 1 |  |  |  | 39 |  |  |  | 139 |
Removal upon deconsolidation |  |  | (311 | ) |  |  | (38 | ) |  |  | (107 | ) |  |  | (456 | )
Balance as of December 31, 2021 |  |  | 735 |  |  |  | 135 |  |  |  | 537 |  |  |  | 1,407 |
Accumulated Depreciation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of January 01, 2021 |  |  | 703 |  |  |  | 149 |  |  |  | 527 |  |  |  | 1,379 |
Additions |  |  | 19 |  |  |  | 3 |  |  |  | 16 |  |  |  | 38 |
Removal upon deconsolidation |  |  | (30 | ) |  |  | (26 | ) |  |  | (31 | ) |  |  | (87 | )
Balance as of December 31, 2021 |  |  | 692 |  |  |  | 126 |  |  |  | 512 |  |  |  | 1,329 |
Property and Equipment, net, as of December 31, 2021 |  |  | 43 |  |  |  | 9 |  |  |  | 25 |  |  |  | 77 |

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - PROPERTY AND EQUIPMENT: (continued):

| b. | Composition of property and equipment and accumulated depreciation thereon, grouped by major classifications and changes therein, and their movements during 2020:

|  | Machinery and equipment |  |  | Leasehold improvements and furniture |  |  | Computer programs |  |  | Total |
|  | USD in thousands |
Cost: |  |  |  |  |  |  |  |  |  |  |  |
Balance as of January 01, 2020 |  |  | 748 |  |  |  | 135 |  |  |  | 517 |  |  |  | 1,400 |
Additions |  |  | 198 |  |  |  | 20 |  |  |  | 75 |  |  |  | 293 |
Additions related to first time consolidation |  |  | - |  |  |  | 17 |  |  |  | 14 |  |  |  | 31 |
Balance as of December 31, 2020 |  |  | 946 |  |  |  | 172 |  |  |  | 606 |  |  |  | 1,724 |
Accumulated Depreciation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of January 01, 2020 |  |  | 674 |  |  |  | 99 |  |  |  | 490 |  |  |  | 1,263 |
Additions |  |  | 29 |  |  |  | 33 |  |  |  | 17 |  |  |  | 79 |
Additions related to first time consolidation |  |  | - |  |  |  | 17 |  |  |  | 10 |  |  |  | 27 |
Balance as of December 31, 2020 |  |  | 703 |  |  |  | 149 |  |  |  | 527 |  |  |  | 1,379 |
Property and Equipment, net, as of December 31, 2020 |  |  | 243 |  |  |  | 23 |  |  |  | 79 |  |  |  | 345 |

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – GOODWILL AND INATANGIBLE ASSETS:

| A. | Composition and movements:

|  | Technology |  |  | Software license |  |  | Patent |  |  | Brand name |  |  | Goodwill |  |  | Total |
|  | USD in thousands |
Cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of January 01, 2021 |  |  | 199 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 296 |  |  |  | 495 |
Additions |  |  | 279 |  |  |  | 1,460 |  |  |  | 75 |  |  |  | 4,728 |  |  |  | 55 |  |  |  | 6,597 |
Currency translation |  |  | - |  |  |  | 46 |  |  |  | - |  |  |  | - |  |  |  | 11 |  |  |  | 57 |
Additions related to first time consolidation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,311 |  |  |  | 564 |  |  |  | 1,875 |
Balance as of December 31, 2021 |  |  | 478 |  |  |  | 1,506 |  |  |  | 75 |  |  |  | 6,039 |  |  |  | 926 |  |  |  | 9,024 |
Accumulated Amortization: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of January 01, 2021 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Additions |  |  | (69 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (69 | )
Impairment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (89 | ) |  |  | - |  |  |  | (89 | )
Additions related to first time consolidation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (545 | ) |  |  | - |  |  |  | (545 | )
Balance as of December 31, 2021 |  |  | (69 | ) |  |  | - |  |  |  | - |  |  |  | (634 | ) |  |  | - |  |  |  | (703 | )
Intangible assets, net, as of December 31, 2021 |  |  | 409 |  |  |  | 1,506 |  |  |  | 75 |  |  |  | 5,405 |  |  |  | 926 |  |  |  | 8,321 |

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – GOODWILL AND INATANGIBLE ASSETS: (continued):

|  | Technology |  |  | Software license |  |  | Patent |  |  | Brand name |  |  | Goodwill |  |  | Total |
|  | USD in thousands |
Cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of January 01, 2020 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Additions |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Additions related to first time consolidation |  |  | 199 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 296 |  |  |  | 495 |
Disposals |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Currency translation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Balance as of December 31, 2020 |  |  | 199 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 296 |  |  |  | 495 |
Accumulated amortization: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of January 01, 2020 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Additions |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Additions related to first time consolidation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Disposals |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Currency translation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  |
Balance as of December 31, 2020 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Intangible assets, net, as of December 31, 2020 |  |  | 199 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 296 |  |  |  | 296 |

| B. | Additions during the year:

on January 4, 2021, the Company closed a common stock purchase agreement with Pro, Purex and their respective stockholders (the “Pro and Purex SPA”). As of the acquisition date the Company recorded intangible assets in the amount of USD 1,311 Thousands and goodwill in the amount USD 688 thousands. For additional information see note 3E.

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MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – GOODWILL AND INATANGIBLE ASSETS: (continued):

On January 7, 2021, Charging Robotics purchased a provisional patent filed with the United States Patent and Trademark Office and know-how relating to wireless vehicle battery charging technology in consideration for USD 75 thousand. For additional information see note 3I.

On February 2, 2021, Pro entered into purchase agreement of a virtual store “Whoobli” from a third party (hereafter - the “Whoobli Seller”). As part of the agreement, Pro purchased a seller account which operates on the Amazon.com website under the name “Whoobli”, which markets a private label of basketball shooting baskets, children’s punching bags and decoration for children’s birthday parties, including the intellectual property attributed to it and including trademarks attributed to products sold on the account’s sales page, for a total of USD 4,000 thousands. In addition, in accordance with the agreement, Pro purchased from Whoobli seller the remaining inventory for a total amount of approximately USD 350 thousands, which is the cost of the inventory purchased by Whoobli seller. On the date of the acquisition, Pro fully recognized all the amount of the acquisition as an intangible asset, and in the Company’s management opinion, the useful life of the intangible asset recognized is 10 years.

On February 2, 2021, Pro entered into a purchase agreement of a virtual store “Wellted” from a third party (hereafter - the “Wellted Seller”). As part of the agreement, Pro purchased a seller account which operates on the Amazon.com website under the name “Wellted”, which markets a private label of brushes used for removing and cleaning animal body hair from fabrics, including the intellectual property attributed to it and including trademarks attributed to products sold on the account’s sales page, for a total amount of USD 250 thousands. In addition, in accordance with the agreement, Pro purchased from Wellted seller the inventory that remained in his possession for a total of approximately USD 55 thousands, which is the cost of the inventory purchased by Wellted seller. On the date of the acquisition, Smart Pro fully recognized all the amount of the acquisition as an intangible asset, and in the Company’s management opinion, the useful life of the intangible asset recognized is 10 years.

On February 3, 2021, Smart Pro entered into purchase agreement of a virtual store “Pet-evo” from a third party (hereafter - the “Pet-evo Seller”). As part of the agreement, Pro purchased a seller account which operates on the Amazon.com website under the name “Pet-evo”, which markets a private label of used car door protectors from damage caused by animals, including the intellectual property attributed to it and including trademarks attributed to products sold on the account’s sales page, for a total of USD 450 thousands. In addition, in accordance with the agreement, Pro purchased from Pet-evo seller the inventory that remained in his possession for a total of approximately USD 35 thousands, which is the cost of the inventory purchased by Pet-evo seller. On the date of the acquisition, Pro fully recognized all the amount of the acquisition as an intangible asset, and in the Company’s management opinion, the useful life of the intangible asset recognized is 10 years.

On February 4, 2021, Eventer signed an addendum to the agreement with Screenz Cross Media Ltd. (a company owned and managed by Eli Uzan who serves as the Company’s President). The agreement was signed during November 2020 for the purpose of collaborating in the field of virtual conferences. According to the provisions of the addendum to the agreement, Eventer will receive an exclusive license for using the broadcasting system of Screenz with respect to the field of virtual conferences and development services, and in exchange will pay Screenz an amount of USD 1,500 (approximately NIS 4,280) over a period of 8 months, as well as 8% from the revenues earned from using the broadcasting system in the field of virtual conferences. On December 30, 2021 the Board of Directors of Eventer approved an amendment of the agreement between Eventer and Screenz Cross-Media Ltd. As per the amendment, instead of USD 1,500, the Company will pay in exchange for the license an aggregate amount of USD 1,800, and the repayment term is to be extended to a period of three years, in monthly installments of approximately USD 50 each.

In March 2021, Purex received an update from Amazon.com (Hereafter – “Amazon”) regarding a new Environmental Protection Agency (EPA) regulation. Following the new EPA regulation, Amazon categorized the Purex’ product as a pesticide product. Amazon requires that pesticide products be filed with evidence of an EPA registration number and/or EPA Establishment number or certification that the product is exempt from EPA regulation, otherwise the existing listing (of the product) may be subject to removal. Purex examined the related costs following that requirement to comply with such regulations, and decided to write off the intangible asset balance. Therefore the Group eliminated the intangible asset related sum to the amount of USD 87 thousands.

F-91

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – GOODWILL AND INATANGIBLE ASSETS: (continued):

| C. | amortization expenses of the intangible assets are classified in profit or loss as follows:

|  | Year ended on December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | USD in thousands |
Cost of sales |  |  | - |  |  |  | - |  |  |  | - |
Sales and marketing |  |  | - |  |  |  | - |  |  |  | - |
General and administrative |  |  | 304 |  |  |  | - |  |  |  | - |
|  |  | 304 |  |  |  | - |  |  |  | - |

NOTE 10 - TAXES ON INCOME:

| a. | Corporate taxation in Israel:

The income of the Company is taxed at the standard Israeli corporate tax rate, which was 23% for 2018 and thereafter.

| b. | Taxation of the subsidiaries:

| 1. | Gerd IP was incorporated in the United States and is subject to the Federal and State tax laws established in the United States. The corporate tax rate in USA was 21% in 2021 and 2020.

| 2. | Charging Robotics was incorporated in Israel and is subject to Israeli tax laws. The corporate tax rate in Israel was 23% in 2021.
| 3. | Eventer was incorporated in Israel and is subject to Israeli tax laws. The corporate tax rate in Israel was 23% in 2021 and 2020.
| 4. | Jeffs’ Brands was incorporated in Israel and is subject to Israeli tax laws. The corporate tax rate in Israel was 23% in 2021. Jeffs’ Brands subsidiaries are taxed according to California tax laws and US federal. The corporate tax rate is 28% in 2021. Capital gains are subject to capital gain tax according to the corporate tax rate for the year during which the assets are sold.
| 5. | ScoutCam Inc. was incorporated in the United States and is subject to the Federal and State tax laws established in the United States. The corporate tax rate in USA was 21% in 2021, 2020 and 2019. ScoutCam Ltd., a subsidiary of ScoutCam Inc., was incorporated in Israel and is subject to Israeli tax laws. The corporate tax rate in Israel was 23% in 2021, 2020 and 2019. ScoutCam Inc. did not timely file its tax return for 2013-2014 and therefore during 2019 the IRS imposed penalties in the amount of USD 60 thousand (approximately USD 73 thousand including interest).

F-92

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - TAXES ON INCOME: (continued):

| c. | Encouragement laws in Israel:

Tax benefits under the Law for the Encouragement of Capital Investments-1959 (hereinafter- the “Law for the Encouragement of Capital Investments”):

| 1) | General

Under the Law for the Encouragement of Capital Investments, companies are entitled to various tax benefits by virtue of their “approved enterprise” or “benefited enterprise” status subject to the fulfillment of certain conditions. In addition, companies may be entitled to additional tax benefits as “foreign investors’ companies,” as defined by the Law for the Encouragement of Capital Investments.

According to the Economic Policy Law for 2011 and 2012 (Legislative Amendments), 2011, which was published in December 2010 also amended the Capital Investment Encouragement Law (hereinafter – the amendment).

The amendment sets alternative benefit tracks to the ones that were in place under the provisions of the Law for the Encouragement of Capital Investments, as follows: investment grants track designed for enterprises located in national development zone A and two new tax benefits tracks (preferred enterprise and a special preferred enterprise), which provide for application of a unified tax rate to all preferred income of the Company, as defined in the law.

Under the amended law, a company which qualifies for benefits under the encouragement law prior to the amendment thereof may opt for application of the amendment on each year, commencing with the first year in which the amendment became effective (2011) thereby making available to itself the tax benefits in accordance with the tracks set in the amendment subject to the fulfillment of certain conditions. A company’s election for application of the amendment is irrevocable and once it opts for application thereof, it will no longer be entitled to the tax benefits available to it under the pre-amendment regime of the Law for the Encouragement of Capital Investments. A company will be allowed to continue and enjoy the tax benefits available under the law prior to its amendment until the end of the period of benefits, as defined in the law.

In December 2016, the Economic Efficiency Law (Legislative Amendments to Achieving the Budget Goals for 2017 and -2018), 2016 was published. Under this law, two new benefit programs for high-tech industries” benefited technology enterprise “and “special benefited technology enterprise” were added.

F-93

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - TAXES ON INCOME: (continued):

| 2) | Tax benefits

The Company has not decided at this stage whether and when to elect the application of the amendment of the law. Once the Company generates taxable income, it is currently scheduled to be eligible for tax benefits available under the Law for the Encouragement of Capital Investments before it was amended in accordance with the provisions of the benefited enterprise regime, as follows:

Reduced tax rates

During the period of benefits - 10 years commencing in the first year in which the Company earns taxable income from the benefited enterprises (provided the maximum period to which it is restricted by law has not elapsed) - the income from the benefited enterprises owned by the Company is tax exempt so long as it is not distributed or deemed to be distributed. The portion of income which qualifies for tax exemption as above is based on the ratio between the turnover relating to the “benefited enterprise” and the total turnover of the Company.

In the event of a dividend distribution or deemed dividend distribution from income which was previously exempt, the Company will be subject to tax on the grossed-up amount of the (deemed) dividend, according to the tax rate which would have applied to the income were it not eligible for the exemption.

The Company has not yet utilized the tax benefits for the main plant, nor for the expansion of the plant.

| 3) | Conditions to receive the benefits

The entitlement to the above benefits is conditional upon the Company’s fulfillment of the conditions stipulated by the Law for the Encouragement of Capital Investments, and the regulations promulgated thereunder. In the event of failure to comply with these conditions, the benefits may be cancelled, and the Company may be required to refund the amount of the benefits, in whole or in part, with the addition of interest. As of the date of approval of these financial statements, the Company has met the aforementioned conditions.

F-94

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - TAXES ON INCOME: (continued):

| d. | Carry forward tax losses

Carry forward tax losses of the Company aggregate NIS 199 million (approximately USD 62 million) and NIS 200 million (approximately USD 63 million) as of December 31, 2021, and 2020, respectively. The Company did not record deferred taxes asset in respect of these losses, as the utilization thereof is not expected to occur in the foreseeable future.

Carry forward tax losses of Eventer aggregate NIS 8.6 million (approximately USD 2.7 million) and NIS 3.9 thousand (approximately USD 1.1 million) as of December 31, 2021 and 2020, respectively. Eventer did not record deferred taxes asset in respect of these losses, as the utilization thereof is not expected to occur in the foreseeable future.

Carry forward tax losses of charging robotics aggregate 1,152 thousand NIS (approximately USD 360 thousands). charging robotics did not record deferred taxes asset in respect of these losses, as the utilization thereof is not expected to occur in the foreseeable future.

Carry forward tax losses of Gerd IP. Aggregate USD 857 thousands and USD 1,430 thousands as of December 31, 2021, and 2020, respectively. Gerd IP did not record deferred taxes asset in respect of these losses, as the utilization thereof is not expected to occur in the foreseeable future.

Carry forward tax losses of Jeffs’ Brands aggregate USD 1,081 thousands and USD 0 thousands as of December 31, 2021, and 2020, respectively. Jeffs’ Brands did not record deferred taxes asset in respect of these losses, as the utilization thereof is not expected to occur in the foreseeable future.

Carry forward tax losses of Jeffs’ Brands subsidiaries As of December 31, 2021, and 2020 the operating loss carry forward were USD 49 thousands and USD 0 thousands, respectively. Jeffs’ Brands subsidiaries did not record deferred taxes asset in respect of these losses, as the utilization thereof is not expected to occur in the foreseeable future.

Carry forward tax losses of ScoutCam Ltd. aggregate NIS 16 million (approximately USD 5 million) and NIS 5 million (approximately USD 1.5 million) as of December 31, 2020, and 2019, respectively. ScoutCam Ltd. did not record deferred taxes asset in respect of these losses, as the utilization thereof is not expected to occur in the foreseeable future.

F-95

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - TAXES ON INCOME: (continued):

| e. | Taxes on income included in the Statements of Loss and Other Comprehensive Loss for the periods presented:

The following is reconciliation between the “theoretical” tax, which would apply to the Group if all of its income were taxed at the regular rate applicable to the Company in Israel (see a2 above) and the amount of tax reflected in the Consolidated Statements of Loss and other comprehensive loss for the reported year:

|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | USD in thousands |
Income (Loss) before taxes on income |  |  | 4,151 |  |  |  | (6,841 | ) |  |  | (14,179 | )
Theoretical tax expense (benefit) |  |  | 955 |  |  |  | (1,575 | ) |  |  | (3,261 | )
Disallowed deductions (tax exempt income): |  |  |  |  |  |  |  |  |  |  |  |
Gain on adjustment of warrants to fair value |  |  | (275 | ) |  |  | 86 |  |  |  | (33 | )
Share-based compensation |  |  | 539 |  |  |  | 298 |  |  |  | 60 |
Amortization of excess purchase price of an associate |  |  | 60 |  |  |  | 126 |  |  |  | 2,323 |
Profit recognized upon deconsolidation |  |  | (2,678 | ) |  |  | - |  |  |  | - |
Different tax rates applicable to subsidiaries |  |  | (85 | ) |  |  | - |  |  |  | - |
Other |  |  | - |  |  |  | 2 |  |  |  | 7 |
Tax losses and timing differences incurred in the reporting year for which deferred taxes were not created |  |  | 1,589 |  |  |  | 1,072 |  |  |  | 903 |
Taxes benefit (taxes on income) |  |  | 105 |  |  |  | 9 |  |  |  | (1 | )

NOTE 11 – ACCOUNTS PAYABLES AND OTHER CURRENT LIABILITIES:

| a. | Accounts payables are denominated in the following currencies:

|  | December 31, |
|  | 2021 |  |  | 2020 |
|  | USD in thousands |
NIS unlinked |  |  | 461 |  |  |  | 115 |
USD |  |  | 240 |  |  |  | 2 |
Euro |  |  | - |  |  |  | 15 |
Other currencies |  |  | 1 |  |  |  | 2 |
|  |  | 702 |  |  |  | 140 |

| b. | Other:

|  | December 31, |
|  | 2021 |  |  | 2020 |
|  | USD in thousands |
Employees and related institutions |  |  | 313 |  |  |  | 584 |
Accrued expenses |  |  | 933 |  |  |  | 665 |
Other |  |  | 286 |  |  |  | 279 |
|  |  | 1,532 |  |  |  | 1,528 |

F-96

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - EQUITY:

| a. | Share capital:

| 1) | Composed as follows:

|  | Number of shares |  |  | Amount |
|  | Authorized |  |  | Issued and paid |  |  | Authorized |  |  | Issued and paid |
|  | December 31, |  |  | December 31, |  |  | December 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
|  | In thousands |  |  | NIS in thousands |  |  | USD in thousands |
Ordinary shares of NIS 1.00 par value as of December 31, 2020 and no par value as of December 31, 2021. |  |  | 1,000,000 |  |  |  | 1,000,000 |  |  |  | 477,003 |  |  |  | 316,443 |  |  |  | - |  |  |  | 1,000,000 |  |  |  | - |  |  |  | 93,021 |

| 2) | The ordinary shares confer upon their holders voting rights and the right to participate in shareholders’ meetings, the right to receive dividends and the right to participate in surplus assets in the event of liquidation of the Company.

| 3) | On May 22, 2020, the Company closed a firm commitment public offering, pursuant to which the Company issued a total of 575,001 ADSs representing a total of 11,500,020 ordinary shares, at a purchase price of USD 1.5 per ADS, and pre funded warrants to purchase up to a total of 2,758,333 ADSs representing 55,166,660 ordinary shares, at a purchase price of USD 1.499 per warrant, with an exercise price of USD 0.001. The immediate gross and net of issuance expenses proceeds from such securities issuance aggregated to approximately USD 5 million and USD 4.4 million, respectively. Pre funded warrants may be exercised via a cashless exercise mechanism as defined in the agreement, whereby the number of shares the value of which equals the exercise premium in cash will be deducted from the number of shares to be issued upon exercise of the warrant. During second quarter of 2020, 1,539,000 pre funded warrants were exercised. Accordingly, 30,780,000 ordinary shares of the Company were issued. During the third quarter of 2020, 1,219,333 prefunded warrants were exercised. Accordingly, 24,386,660 ordinary shares of the Company were issued. Until the end of 2020 all the prefunded warrants were exercised.

F-97

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - EQUITY: (continued):

| 4) | On July 9,2020, the Company’s shareholders approved an increase of the authorized share capital of the Company by an additional NIS 750,000 thousand, such that the authorized share capital increased to NIS 1,000,000,000 ordinary shares.

| 5) | During 2020, 197,000 Warrants C (Note 12 (b)) were exercised. Accordingly, 3,940,000 ordinary shares of the Company were issued. The immediate net of issuance expenses proceeds from such exercise aggregated to approximately USD 0.7 million.

| 6) | On December 1, 2020, the Company entered into an underwriting agreement with Aegis Capital Corp., pursuant to which the Company agreed to sell to Aegis, in a firm commitment public offering 7,098,491 American Depositary Shares, each representing 20 ordinary shares of the Company of no par value for a public offering price of USD 1.83 per ADS. In addition, the Underwriter was granted an option to purchase additional 15 percent of the ADSs sold in the Offering solely to cover over-allotments, exercisable until 45 days followin g the date of the offering. Aegis exercised its over-allotment option in full to purchase an additional 1,064,774 ADSs, the closing of which occurred on December 16, 2020.
| 7) | On February 12, 2021, following the approval of an extraordinary general meeting of the Company shareholders held on February 12, 2021, the Company amended its articles of association to eliminate the par value of its ordinary shares, such that the authorized share capital of the Company following the amendment consists of 1,000,000,000 ordinary shares of no-par value.
| 8) | On January 11, 2021, the Company entered into an underwriting agreement with Aegis Capital Corp. (“Aegis”), pursuant to which the Company agreed to sell to Aegis, in a firm commitment public offering 3,659,735 ADSs, representing a total of 73,194,700 ordinary shares of no par value for a public offering price of USD 2.30 per ADS. In addition, the Underwriter was granted an option to purchase additional 15 percent of the ADSs sold in the Offering solely to cover over-allotments, exercisable until the earlier of 30-days or the last day of trading of the Company’s ordinary shares on the Tel-Aviv Stock Exchange. Aegis exercised its over-allotment option in full to purchase an additional 548,960 ADSs, the closing of which occurred on January 19, 2021. The total gross proceeds of the offering to approximately USD 9.68 million.

| 9) | On February 25, 2021, the Company entered into an underwriting agreement with Aegis pursuant to which the Company agreed to sell to Aegis, in a firm commitment public offering 3,258,438 ADSs for a public offering price of USD 2.60 per ADS. In addition, Aegis was granted an option to purchase additional 15 percent of the ADSs sold in the offering solely to cover over-allotments. Aegis exercised its over-allotment option in full to purchase an additional 488,765 thousand ADSs. The total gross proceeds of the offering to approximately USD 9.7 million.

F-98

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - EQUITY: (continued):

| b. | Share offering to the public and existing shareholders:

The following table summarizes warrants outstanding as of December 31,

2021
Series |  | Date of grant |  | Number of warrants conversion to equivalent ADSs |  | exercise price per warrant in USD |  | Expiration date
Series I(*) |  | December 2016 |  |  | 9,970 |  |  | 36 |  | June 06, 2022
Series J(**) |  | December 2016 |  |  | 499 |  |  | 36 |  | June 06, 2022
Warrants A(*) |  | March 2017 |  |  | 535,730 |  |  | 14 |  | March 29, 2022
Placement 03/2017(**) |  | March 2017 |  |  | 37,501 |  |  | 17.5 |  | March 29, 2022
Series L(*) |  | November 2017 |  |  | 101,251 |  |  | 9 |  | May 27, 2023
Series M(**) |  | November 2017 |  |  | 14,177 |  |  | 10 |  | November 24, 2022
Warrants C(*) |  | July 2018 |  |  | 2,640,674 |  |  | 3.5 |  | July 18, 2023
Warrants C(**) |  | July 2018 |  |  | 425,651 |  |  | 3.5 |  | July 18, 2023
HCW warrants(*) |  | July 2018 |  |  | 198,637 |  |  | 4.38 |  | July 18, 2023
Algomizer (Note 3)(**) |  | September 2019 |  |  | 333,334 |  |  | 4 |  | September 3, 2022
Total |  |  |  |  | 4,297,424 |  |  |  |  |

* | These warrants, under certain circumstances, can be exercised via a cashless exercise mechanism as defined in the warrant agreement. Therefore, the warrants were classified as financial liabilities measured at fair value through profit or loss at each reporting period. See Note 4.

| ** | Recorded in equity.

2020
Series |  | Date of grant |  | Number of warrants conversion to equivalent ADSs |  | exercise price per warrant in USD |  | Expiration date
Series H(**) |  | September 2016 |  |  | 990 |  |  | 57.5 |  | September 8, 2021
Series I(*) |  | December 2016 |  |  | 9,970 |  |  | 36 |  | June 06, 2022
Series J(**) |  | December 2016 |  |  | 499 |  |  | 36 |  | June 06, 2022
Series J(**) |  | December 2016 |  |  | 998 |  |  | 29.48 |  | December 6, 2021
Warrants A(*) |  | March 2017 |  |  | 535,730 |  |  | 14 |  | March 29, 2022
Placement 03/2017(**) |  | March 2017 |  |  | 37,501 |  |  | 17.5 |  | March 29, 2022
Series L(*) |  | November 2017 |  |  | 101,251 |  |  | 9 |  | May 27, 2023
Series M(**) |  | November 2017 |  |  | 14,177 |  |  | 10 |  | November 24, 2022
Warrants C(*) |  | July 2018 |  |  | 2,640,674 |  |  | 3.5 |  | July 18, 2023
Warrants C(**) |  | July 2018 |  |  | 425,651 |  |  | 3.5 |  | July 18, 2023
HCW warrants(*) |  | July 2018 |  |  | 198,637 |  |  | 4.38 |  | July 18, 2023
Algomizer (Note 3)(**) |  | September 2019 |  |  | 333,334 |  |  | 4 |  | September 3, 2022
Total |  |  |  |  | 4,299,412 |  |  |  |  |

| * | These warrants, under certain circumstances, can be exercised via a cashless exercise mechanism as defined in the warrant agreement. Therefore, the warrants were classified as financial liabilities measured at fair value through profit or loss at each reporting period. See Note 4.

| ** | Recorded in equity.

F-99

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - EQUITY: (continued):

| c. | Share based payments:

| 1) | In August 2013, the Company board of directors approved and adopted the Company 2013 Share Option and Incentive Plan, or the 2013 Plan, which expires in August 2023. The 2013 Plan provides for the issuance of shares and the granting of options, restricted shares, restricted share units and other share-based awards to employees, directors, officers, consultants, advisors, and service providers of us and the Company U.S. Subsidiary. The Plan provides for awards to be issued at the determination of The Company board of directors in accordance with applicable law.

| 2) | The following are the grants of options to employees and other service providers:

Date of grant |  | Number of options granted |  |  | exercise price per option to ordinary shares |  | Currency exercise | Fair value on grant date in thousands |  |  | Number of options outstanding- December 31, 2021 |  |  | Number of options exercisable at 31, December 2021 |  | Expiration date |
October 2017(***) |  |  | 763,000 |  |  |  | 1.62 |  | NIS |  | 942 NIS |  |  |  | 299,000 |  |  |  | 299,000 |  | October 17, 2023 |
January 2019(****) |  |  | 3,000,000 | (*) |  |  | 0.59 |  | NIS |  | 947 NIS |  |  |  | 2,250,000 |  |  |  | 2,250,000 |  | January 9, 2025 |
July 2019(****) |  |  | 1,250,000 | (*) |  |  | 0.59 |  | NIS |  | 325 NIS |  |  |  | 1,250,000 |  |  |  | 781,250 |  | July 25, 2025 |
June 2020(****) |  |  | 1,250,000 |  |  |  | 0.59 |  | NIS |  | 283 NIS |  |  |  | 1,250,000 |  |  |  | 625,000 |  | May 31, 2026 |
July 2020(****) |  |  | 750,000 | (*) |  |  | 0.448 |  | NIS |  | 123 NIS |  |  |  | 750,000 |  |  |  | 312,500 |  | July 8, 2026 |
October 2020(****) |  |  | 300,000 |  |  |  | 0.59 |  | NIS |  | 70 NIS |  |  |  | 300,000 |  |  |  | 100,000 |  | October 21, 2026 |
June 2021(****) |  |  | 18,000,000 | (*) |  |  | 0.0892 |  | USD |  | 1,221 USD |  |  |  | 18,000,000 |  |  |  | 4,500,000 |  | June 29, 2027 |
June 2021(****) |  |  | 5,600,000 |  |  |  | 0.0892 |  | USD |  | 380 USD |  |  |  | 5,600,000 |  |  |  | 1,400,000 |  | June 29, 2027 |
June 2021(****) |  |  | 2,000,000 |  |  |  | 0.0892 |  | USD |  | 136 USD |  |  |  | 2,000,000 |  |  |  | 333,333 |  | June 1, 2027 |
October 2021(****) |  |  | 1,800,000 |  |  |  | 0.0889 |  | USD |  | 91 USD |  |  |  | 1,800,000 |  |  |  | - |  | October 12, 2027 |
Total |  |  | 34,713,000 |  |  |  |  |  |  |  |  |  |  |  | 33,499,000 |  |  |  | 10,601,083 |  |  |

(*) | Granted to related parties.
(**) | All the exercise price in Nis are linked to the CPI as set out in the option allotment plan.
(***) | Each 10 options are exercisable into 1 ordinary share.
(****) | Each 1 option is exercisable into 1 ordinary share.

F-100

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - EQUITY: (continued):

The fair value of all of the options was calculated using the Black and Scholes options pricing model, and based on the following assumptions:

Date of grant |  | Fair value on grant date- in thousands |  |  | Share price on date of grant |  |  | Expected dividend |  | Expected volatility |  |  | Risk free interest |  |  | Vesting conditions |  | Expected term
October 2017 |  |  | 1,109 NIS |  |  |  | 1.62 NIS |  |  | None |  |  | 64 | % |  |  | 1.16 | % |  | four equal batches, following one, two, three and four years from their grant date |  | 6 years
January 2019 |  |  | 947 NIS |  |  |  | 0.506 NIS |  |  | None |  |  | 74 | % |  |  | 1.45 | % |  | will vest in 12 equals quarterly instalments over a three-year period commencing October 1, 2018 |  | 6 years
July 2019 |  |  | 325 NIS |  |  |  | 0.436 NIS |  |  | None |  |  | 75 | % |  |  | 1.12 | % |  | 25% will vest on the first anniversary of the grant date and 75% will vest on a quarterly basis over a period of three years thereafter |  | 6 years
June 2020 |  |  | 282 NIS |  |  |  | 0.397 NIS |  |  | None |  |  | 74 | % |  |  | 0.53 | % |  | will vest in 12 equals quarterly instalments over a three-year period commencing June 1, 2020 |  | 6 years
July 2020 |  |  | 124 NIS |  |  |  | 0.29 NIS |  |  | None |  |  | 74 | % |  |  | 0.37 | % |  | will vest in 12 equals quarterly instalments over a three-year period commencing July 9, 2020 |  | 6 years
October 2020 |  |  | 70 NIS |  |  |  | 0.4 NIS |  |  | None |  |  | 76 | % |  |  | 0.42 | % |  | will vest in 12 equals quarterly instalments over a three-year period commencing October 22, 2020 |  | 6 years
June 2021 |  |  | 1,737 USD |  |  |  | 0.09 USD |  |  | None |  |  | 87 | % |  |  | 0.69 | % |  | Will vest over a period of 3 years commencing on April 1, 2021(except for 2,000,000 options commencing on June 1, 2021), with 1/12 of such options vesting at the end of each subsequent three-month period following the grant |  | 6 years
October 2021 |  |  | 91 USD |  |  |  | 0.07 USD |  |  | None |  |  | 85 | % |  |  | 0.47 | % |  | Will vest over a period of 3 years commencing on October 12, 2021, with 1/12 of such options vesting at the end of each subsequent three-month period following the grant |  | 6 years

F-101

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - EQUITY: (continued):

| 3) | The changes in the number of share options and the weighted averages of their exercise prices are as follows:

|  | For the year ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | Number of options |  |  | Weighted average of exercise price per 1 ordinary share-(NIS) |  |  | Number of options |  |  | Weighted average of exercise price per 1 ordinary share-(NIS) |  |  | Number of options |  |  | Weighted average of exercise price per 1 ordinary share-(NIS) |
Outstanding at the beginning of year |  |  | 10,686,300 |  |  |  | 0.68 |  |  |  | 9,243,300 |  |  |  | 0.88 |  |  |  | 14,428,800 |  |  |  | 1.25 |
Granted |  |  | 27,400,000 |  |  |  | 0.29 |  |  |  | 3,050,000 |  |  |  | 0.56 |  |  |  | 1,250,000 |  |  |  | 0.59 |
Forfeited |  |  | (1,805,500 | ) |  |  | 0.862 |  |  |  | (777,000 | ) |  |  | 0.86 |  |  |  | (5,151,000 | ) |  |  | 3.37 |
Expired |  |  | (90,800 | ) |  |  | 20.5 |  |  |  | (830,000 | ) |  |  | 53.7 |  |  |  | (1,284,500 | ) |  |  | 0.88 |
Outstanding at year end |  |  | 36,190,000 |  |  |  | 0.35 |  |  |  | 10,686,300 |  |  |  | 0.68 |  |  |  | 9,243,300 |  |  |  | 0.88 |
Exercisable at year end |  |  | 10,601,083 |  |  |  | 0.44 |  |  |  | 5,693,383 |  |  |  | 0.80 |  |  |  | 4,490,800 |  |  |  | 1.28 |

F-102

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - EQUITY: (continued):

| 4) | The amounts of expenses that were recorded for options to employees and other service providers are USD 1,944 thousand, USD 191 thousand and USD 259 thousand for the years ended December 31, 2021, 2020 and 2019, respectively (these amounts do not include expenses of USD 79 and USD 1,107 thousand recorded in ScoutCam in Q1 2021 and 2020, respectively. The expenses recorded in Eventer in the consolidate period of 2020 are immaterial).

| 5) | The plans are intended to be governed by the terms stipulated by Section 102 to the Israeli Income Tax Ordinance (except for the options to controlling shareholders and directors).

In accordance with these general rules and the track chosen by the Company pursuant to the terms thereof, in respect of options granted to employees under the option allotment plan, the Company is not allowed to claim as an expense for tax purposes the amounts credited to employees as a benefit, including amounts recorded as salary benefits in the Company’s books, with the exception of the salary-benefit component, if exists, determined on the grant date.

NOTE 13 - EXPENSES BY NATURE:

|  | Year ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | USD in thousands |
Payroll and related expenses |  |  | 2,656 |  |  |  | 2,420 |  |  |  | 1,347 |
Professional fees |  |  | 5,990 |  |  |  | 2,963 |  |  |  | 1,945 |
Materials used and subcontracted work |  |  | 3,248 |  |  |  | 1,128 |  |  |  | 322 |
Listing expenses |  |  | - |  |  |  | - |  |  |  | 10,098 |
Preparation of patents |  |  | 471 |  |  |  | 289 |  |  |  | 249 |
Rent and office maintenance |  |  | 158 |  |  |  | 215 |  |  |  | 144 |
Depreciation and amortization |  |  | 342 |  |  |  | 116 |  |  |  | 75 |
Vehicle maintenance |  |  | 31 |  |  |  | 41 |  |  |  | 61 |
Travel |  |  | 57 |  |  |  | 41 |  |  |  | 47 |
Advertising and participation in exhibitions |  |  | 1,712 |  |  |  | 133 |  |  |  | 18 |
Other |  |  | 1,224 |  |  |  | 650 |  |  |  | 263 |
Amazon Fees |  |  | 2,426 |  |  |  | - |  |  |  | - |
Amortization of excess purchase price of an associate |  |  | 263 |  |  |  | 546 |  |  |  | - |
TOTAL COST OF REVENUES, INVENTORY IMPAIRMENT, RESEARCH AND DEVELOPMENT, SELLING AND MARKETING AND GENERAL AND ADMINISTRATIVE EXPENSES |  |  | 18,578 |  |  |  | 8,542 |  |  |  | 14,569 |

F-103

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EARNING (LOSS) PER SHARE:

Basic net earning (loss) per share is computed by dividing net earnings (loss) attributable to ordinary shareholders of Medigus Ltd. by the weighted average number of ordinary shares outstanding for the reporting periods.

Diluted net earning (loss) per share is computed by dividing the basic net loss per share including adjustment of the dilutive effect of the Company’s revaluation of warrants, by the weighted-average number of ordinary shares and the potential dilutive ordinary shares outstanding during the period. Diluted shares outstanding include the dilutive effect of in-the-money options using the treasury stock method. For the year ended December 31, 2020 the Company reported a net loss, therefore does not have dilutive securities. For the year ended on December 31, 2021, the Company reported net earnings. Nevertheless, all the warrants and options that might be exercised by others into Medigus shares are out of the money, therefore have not dilutive effect.

The following table presents the numerator and denominator of the basic and diluted net loss per share computations:

|  | Year ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Numerator (USD in thousands): |  |  |  |  |  |  |  |  |
Net earnings (loss) attributable to Medigus Ltd. |  |  | 6,794 |  |  |  | (4,325 | ) |  |  | (14,178 | )
Denominator (in thousands): |  |  |  |  |  |  |  |  |  |  |  |
Weighted average number of ordinary shares used for basic and diluted earnings (loss) per share calculation |  |  | 460,717 |  |  |  | 133,445 |  |  |  | 78,124 |
Net earnings (loss) per share attributable to Medigus Ltd. (USD): |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 0.01 |  |  |  | (0.03 | ) |  |  | (0.18 | )
Diluted |  |  | 0.01 |  |  |  | (0.03 | ) |  |  | (0.18 | )

F-104

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES:

“Related Parties” – As defined in IAS 24 – ‘Related Party Disclosures” (hereinafter- “IAS 24”)

Key management personnel of the Company - included together with other entities, in the said definition of “Related Parties” mentioned in IAS 24, include some members of senior management.

| a. | Transactions with related parties:
|  | 1):

|  | Year ended on December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | USD in thousands |
Benefits to related parties: |  |  |  |  |  |  |  |  |
Payroll and related expenses to related parties employed by the Company* |  |  | 1,241 |  |  |  | 629 |  |  |  | 389 |
Compensation to directors ** |  |  | 733 |  |  |  | 1,115 |  |  |  | 326 |
Directors’ and Officers’ insurance |  |  | 788 |  |  |  | 405 |  |  |  | 158 |
Consultant services (see 4g and 4e below) |  |  | - |  |  |  | 208 |  |  |  | 404 |
Interest and discount amortizations of loans from Jeffs’ Brands related parties *** |  |  | 172 |  |  |  | - |  |  |  | - |
Finance expense on Screenz payable balance (see note 3D) |  |  | 169 |  |  |  | - |  |  |  | - |
Eventer sales and marketing expenses to Keshet (see note 6 and note 3D) |  |  | 279 |  |  |  | - |  |  |  | - |
Eventer revenues from related parties |  |  | 23 |  |  |  | - |  |  |  | - |
Eventer general and administrative expenses to Screenz |  |  | 13 |  |  |  | - |  |  |  | - |

* | Includes granted options benefit aggregated to USD 583 thousand, USD 189 thousand and USD 61 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. As for the method used to determine the said value and the assumptions used in calculation thereof, see Note 12c.
** | Includes granted options benefit aggregated to USD 195 thousand, USD 734 thousand and USD 126 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. As for the method used to determine the said value and the assumptions used in calculation thereof, see Note 12c. Also, in 2021 and 2020 including provision for bonus and payment of bonus of approximately USD 86 thousand and USD 34 thousand, respectively.

| *** | Julia Gerasimova, and Victor Hacmon are related parties of Jeffs’ Brands. See note 3E.

F-105

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES: (continued):

| 2) | a. Compensation to key management personnel

The compensation to key management personnel for employment services they provide to the Company is as follows:

|  | Year ended on December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | USD in thousands |
For employment services: |  |  |  |  |  |  |  |  |
Payroll and other short-term benefits |  |  | 657 | * |  |  | 440 | ** |  |  | 328 | ***
Share based payments |  |  | 584 |  |  |  | 189 |  |  |  | 61 |
|  |  | 1,241 |  |  |  | 629 |  |  |  | 389 |

* | Including provision for bonus of approximately USD 118 thousand.
** | Including provision for bonus of approximately USD 53 thousand.
*** | Including provision for bonus of approximately USD 46 thousand.

| 4) | Indemnification, exemption and insurance for directors and officers of the Company

| a. | The Company provides its directors and officers with an obligation for indemnification and exemption.

| b. | The Company has a directors and officers’ liability insurance policy covering all Company’s directors and officers. The Company currently has directors’ and officers’ liability insurance providing total coverage of USD 7 million for the benefit of all of the Company directors and officers, in respect of which the Company are charged a twelve-month premium of USD 721, and which includes a deductible of up to USD 1 million per claim, other than securities related claims filed in the United States or Canada, for which the deductible will not exceed USD 2.5 million and USD 5 million in respect of claim with respect to Mergers and Acquisitions.

F-106

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES: (continued):

| 5) | Transactions

| a. | On May 30, 2019, the Company entered into an intercompany services agreement, or the Intercompany Agreement, with ScoutCam, for provision of services by the Company to ScoutCam. On April 19, 2020, the Intercompany Agreement was amended such that ScoutCam shall provide the Company with services to the Company, including usage of ScoutCam office space in consideration for a fee determined based on the actual usage by the Company. During 2021 no services have been provided under the Intercompany Agreement. On March 22, 2022, the Company received from ScoutCam Ltd. a prior written notice of termination of the Intercompany Agreement effective May 21, 2022.

| b. | On June 3, 2019, the Company executed a capital contribution on account of additional paid in capital into ScoutCam of an aggregate amount of USD 720 thousand.
| c. | On August 27, 2019, the Company provided ScoutCam with a line of credit in the aggregate amount of USD 500 thousand and, in exchange, ScoutCam agreed to grant the Company a capital note that will bear an annual interest rate of 4%. The repayment of the credit line amount shall be spread over one year in monthly payments beginning January 2020.
| d. | On July 31, 2019, ScoutCam and Prof. Benad Goldwasser entered into a consulting agreement, whereby Prof. Goldwasser agreed to serve as chairman of the board of directors of ScoutCam, effective retroactively to March 1, 2019, in consideration for, inter alia, a monthly fee of USD 10 thousand and options representing 5% of the Company fully diluted share capital as of the Closing Date (see note 14(a)(4)(f)).

F-107

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES: (continued):

| e. | During December 2019, ScoutCam entered into a consulting agreement with Shrem Zilberman Group Ltd. (the “Consultant”) in the amount of USD 165 thousand. A director of ScoutCam is related to one of the Consultant’s shareholders.
|  | In addition, the Consultant will be entitled to receive the amount representing 3% of any exercise price of each Warrant A or Warrant B that may be exercised in the future (see note 3). In the event the total proceeds received as a result of exercise of Warrants will be less than USD 2 million at the time of their expiration, the Consultant will be required to invest USD 250 thousand in ScoutCam Inc. As of December 31, 2021, holders of the foregoing warrants have exercised in excess of USD 2 million and, accordingly, the Consultant is not required to invest USD 250 thousands in ScoutCam Inc.
| f. | On February 12, 2020, ScoutCam’s Inc. Board of Directors authorized the grant of options to purchase 2,235,691 shares of Common Stock to Professor Benad Goldwasser, ScoutCam’s Inc. Chairman of the Board, and options to purchase 1,865,346 shares of Common Stock to certain officers of ScoutCam Inc. Each option is convertible into one share of common stock of ScoutCam Inc. of USD 0.001 par value at an exercise price of USD 0.29.
| g. | On May 1, 2019, the Company entered into a consulting agreement, or the Consulting Agreement, with L.I.A Pure Capital Ltd. or Pure Capital, a company owned by Kfir Zilberman for the provision of business development and strategic consulting services, including ongoing consulting to the Company, its management and its chief executive officer in the fields of M&A and investment activities. In consideration for its services, Pure Capital is entitled to a monthly fee of NIS 40 thousand (approximately USD 11 thousands), a finder’s fee of 5% of any investment of equity or debt introduced by him to the Company and reimbursement of expenses of up to USD 1 thousand per month. As part of Gix investment Pure capital received a finder fee in the amount of USD 125 thousand. On January 10, 2021, the Company and Pure Capital entered into amendment no. 2 of the Consulting Agreement. Under amendment no. 2, Pure Capital shall be entitled to a special bonus upon consummation of an offering of the Company’s securities. The special bonus will depend on the gross proceeds of such an offering. The transaction also includes granted options benefit aggregated to USD 189 thousand in 2020.
| h. | On October 15, 2020, the Company signed a share purchase agreement and a revolving loan agreement with Eventer. As part of the share purchase agreement and the revolving loan agreement, the Company invested USD 750 thousand. For additional information see note 3D. On April 8, 2021, Eventer consummated a share purchase agreement for an aggregate amount of USD 2.25 million out of which the Company invested USD 300 thousands. As a result, the Company currently holds approximately 47.69% of Eventer’s share capital. During November 2021, the Company and Eventer agreed that the Initial Advance loan will be repaid the earlier of (i) six months following the Maturity Date of the Initial Advance; or (ii) immediately following an initial public offering of Eventer. On November 11, 2021 the Company loaned additional amount of USD 250 thousands to Eventer be repaid 6 months starting the loan received by eventer. The loan will bear 4% interest per year.
| i. | On April 19, 2020, the Company entered into an Asset Transfer Agreement, effective January 20, 2020, with our majority owned subsidiary GERD IP. Pursuant to the Asset Transfer Agreement, the Company transferred certain of our patents in consideration for seven capital notes issued to us by GERD IP, of USD 2 million each.
| j. | On February, 2021, the Company entered into two loans and pledges agreements with Jeffs’ Brands and its other stockholder, to finance Smart Repair Pro’s additional purchases of three new brands on the Amazon online marketplace. Pursuant to the agreements, the Company extended a USD 4 million loans, with an annual interest of 4%, to be repaid on the fifth anniversary of the effective date.
| k. | On October 13, 2021, the Company entered into a loan agreement with Gix in the amount of USD 1.24 million (NIS 4 million). For additional information see note 3F.

F-108

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES: (continued):

b. Balances with related parties:

(1) Current Assets:

|  | December 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
|  | USD in thousands |
Related party prepaid expense - media Space from Keshet (a related party of Eventer) |  |  | 981 |  |  |  | - |
Other receivables (related party of Eventer) |  |  | 18 |  |  |  | - |
|  |  | 999 |  |  |  | - |

(2) Non-Current Assets:

|  | December 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
|  | USD in thousands |
Short term loan to a related party (loan from Medigus to Gix) |  |  | 1,265 |  |  |  | - |
|  |  | 1,265 |  |  |  | - |

(3) Current Liabilities:

|  | December 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
|  | USD in thousands |
Compensation to key management personnel |  |  | 270 |  |  |  | 139 |
Current liabilities of Jeffs’ Brands to related parties |  |  | 177 |  |  |  | - |
Other accrued expenses to related parties of Eventer |  |  | 169 |  |  |  | - |
|  |  | 616 |  |  |  | 139 |

|  | December 31, |
|  | 2021 |  |  | 2020 |
|  | USD in thousands |
Current liabilities, presented in the consolidated statements of financial position among “accrued expenses and other liabilities”: |  |  |  |  |  |
Directors’ fee |  |  | 183 |  |  |  | 33 |
Consultant services |  |  | - |  |  |  | 91 |
Payroll, provision for bonus and for termination of employment |  |  | 87 |  |  |  | 15 |
|  |  | 270 |  |  |  | 139 |

F-109

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(4) Loans:

|  | December 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
|  | USD in thousands |
Current portion of long-term payable - Screenz cross media Ltd (a related party of Eventer). See note 3D. |  |  | 506 |  |  |  | - |
Long-term payable - Screenz cross media Ltd (a related party of Eventer). See note 3D |  |  | 711 |  |  |  | - |
Short term loans of Jeffs’ Brands from related parties (*) |  |  | 111 |  |  |  | - |
Long term loans of Jeffs’ Brands from related parties (**) |  |  | 689 |  |  |  | - |

| * | Kfir Zilberman is a related party of Jeffs’ Brands.

| ** | Julia Gerasimova, Kfir Zilberman and Victor Hacmon are related parties of Jeffs’ Brands.

| c. | As to options granted to related parties, see Note 11c.

F-110

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - REVENUES:

| a. | Disaggregation of Revenues:

The following table present the Group’s revenues disaggregated by revenue type:

|  | Year ended on December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | USD in thousands |
Miniature camera and related equipment (from ScoutCam) |  |  | 24 |  |  |  | 491 |  |  |  | 188 |
Development services (from ScoutCam) |  |  | - |  |  |  | - |  |  |  | 85 |
Revenues from commissions (from Eventer) |  |  | 1,185 |  |  |  | 40 |  |  |  | - |
Products (from Jeffs’ Brands) |  |  | 6,509 |  |  |  | - |  |  |  | - |
MUSE and related equipment (from Medigus). See note 16c(*) below. |  |  | 2,400 |  |  |  | - |  |  |  | - |
|  |  | 10,118 |  |  |  | 531 |  |  |  | 273 |

Revenues from products are recognized at a point of time and revenues from services are recognized over time.

| b. | Contract fulfillment assets:

The Company’s contract fulfillment assets:

|  | December 31, |
|  | 2021 |
|  | USD in thousands |
Balance at beginning of year |  |  | 1,130 |
Increase in the period relating to ScoutCam |  |  | 240 |
De recognition upon deconsolidation of ScoutCam (Note 3) |  |  | (1,370 | )
Balance at end of year |  |  | - |

| c. | Contract liabilities:

The changes in the Company’s contract liabilities were as follows:

|  | December 31, 2021 |  |  | December 31, 2020 |
|  | USD in thousands |
Balance at beginning of year |  |  | 2,649 |  |  |  | 2,302 |
Deferred revenue relating to new sales |  |  | 1,370 |  |  |  | 735 |
De recognition upon deconsolidation of ScoutCam (Note 3) |  |  | (1,511 | ) |  |  | - |
Revenue recognition during the period |  |  | (2,400 | ) |  |  | (389 | )
Balance at end of year |  |  | 108 |  |  |  | 2,649 |

F-111

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - REVENUES: (continued):

Composition of contract liabilities:

|  | December 31, 2021 |  |  | December 31, 2020 |
|  | USD in thousands |
Current contract liabilities |  |  | 108 |  |  |  | 849 |
Non-current contract liabilities (*) |  |  | - |  |  |  | 1,800 |
|  |  | 108 |  |  |  | 2,649 |

| (*) | On June 3, 2019, the Company entered into a Licensing and Sale Agreement with Shanghai Golden Grand-Medical Instruments Ltd. (hereinafter “Golden Grand”) for the know-how licensing and sale of goods relating to MUSE system in China, Hong Kong, Taiwan and Macao. Under the agreement, the Company committed to provide a license, training services and goods to Golden Grand in consideration for USD 3 million to be paid to the Company in four milestones-based installments. As of December 31, 2021, the Company collected USD 2.4 thousands and recognized all the amount collected as revenue.

| d. | Eventer revenue

Eventer is a self-service ticketing and experience technology company engaged in the development and operation of a technology platform, based on cloud computing, for the management of ticketing sales for in-person, virtual (events which occur and are broadcast over a digital platform over the internet), and hybrid events (events that allow both in-person and virtual participation) of various types, including performances, festivals, courses, lectures and conferences.

Eventer provides services to events producers for using the event production platform in exchange for a commission from the sale of tickets for events. These services constitute a performance obligation satisfied at a point in time, and therefore the Eventer recognizes the revenue when the event takes place.

F-112

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - REVENUES: (continued):

The nature of Eventer ’s promise to the customer is to arrange that the consideration for the tickets will be provided by another party. Therefore Eventer ’s revenue from these transactions is presented on a net basis.

Eventer collects the receipts from the sale of tickets for producers. The balance of liability to event producers represents the balance of Eventer ’s liability to the producers less the commissions for which Eventer is eligible.

Liability to event producers:

|  | December 31, 2021 |  |  | December 31, 2020 |
|  | USD in thousands |
Liability to event producers |  |  | 1,556 |  |  |  | 539 |

NOTE 17- SEGMENTS:

The Group identified five operating segments as follows: Medical, E-Commerce, Online, Electric Vehicles and Corporate (see note 1a). The Company concluded that the Medical and Electric Vehicles segments are not "reportable segments" as defined in IFRS 8, Operating Segments. As such, these segments and were combined and disclosed under "Others" segment.

The CODM (see note 2t) measures and evaluates the operating performance of the Group’s segments based on operating loss (income), assets and liabilities.

The table set forth the operating results of the Group:

|  | Year ended December 31, 2021 |
|  | Corporate |  |  | E-commerce |  |  | Online |  |  | Others |  |  | Adjustments and eliminations |  |  | Total |
|  | USD in thousands |
External revenue |  |  | 2,400 |  |  |  | 6,509 |  |  |  | 1,185 |  |  |  | 24 |  |  |  | - |  |  |  | 10,118 |
Segment results - operating income (loss) |  |  | (2,271 | ) |  |  | (932 | ) |  |  | (3,229 | )* |  |  | (3,531 | )** |  |  | 68 |  |  |  | (9,895 | )
Non-operating income |  |  | 2,509 |  |  |  | - |  |  |  | - |  |  |  | 494 |  |  |  | 11,390 |  |  |  | 14,393 |
Finance income (loss) |  |  | 555 |  |  |  | (629 | ) |  |  | (206 | ) |  |  | (15 | ) |  |  | (52 | ) |  |  | (347 | )
Profit ( Loss) before taxes on income |  |  | 793 |  |  |  | (1,561 | ) |  |  | (3,435 | ) |  |  | (3,052 | ) |  |  | 11,406 |  |  |  | 4,151 |
Tax benefit (expense) on income |  |  | - |  |  |  | 21 |  |  |  | - |  |  |  | - |  |  |  | (126 | ) |  |  | (105 | )
Segment results - profit (loss) |  |  | 793 |  |  |  | (1,540 | ) |  |  | (3,435 | ) |  |  | (3,052 | ) |  |  | 11,280 |  |  |  | 4,046 |

| * | Includes equity loss of USD 823 thousands in relation to Gix. For the operating results of Gix, refer to Note 3f.

| ** | Includes equity loss of USD 1,402 thousands in relation to ScoutCam. For the operating results of Scoutcam,refer to Note 3c.

F-113

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The table set forth other information of the Group:

|  | Year ended December 31, 2021 |
|  | Corporate |  |  | E-commerce |  |  | Online |  |  | Others |  |  | Adjustments and eliminations |  |  | Total |
|  | USD in thousands |
Total segments’ assets |  |  | 33,695 |  |  |  | 7,412 |  |  |  | 9,357* |  |  |  | 11,692** |  |  |  | (2,926) |  |  |  | 59,730 |
Total segments’ liabilities |  |  | (1,571) |  |  |  | (6,159) |  |  |  | (4,282) |  |  |  | (399) |  |  |  | 4,114 |  |  |  | (8,297) |

| * | Includes an investment accounted for using the equity method of USD 4,867 thousand in relation to Gix. For additional information in relation to assets and liabilities of Gix refer to Note 3f.

| ** | Includes an investment accounted for using the equity method of USD 10,735 thousand in relation to ScoutCam. For additional information in relation to assets and liabilities of ScoutCam refer to Note 3c.

NOTE 18 - ENTITY LEVEL DISCLOSURES:

| a. | Revenues by geographical area (based on the location of customers):

|  | Year ended on December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | USD in thousands |
USA |  |  | 6,307 |  |  |  | 418 |  |  |  | 138 |
United Kingdom |  |  | 20 |  |  |  | 41 |  |  |  | 36 |
Germany |  |  | 107 |  |  |  | - |  |  |  | 28 |
Israel |  |  | 1,183 |  |  |  | 45 |  |  |  | 31 |
China |  |  | 2,400 |  |  |  | 24 |  |  |  | 13 |
Other |  |  | 101 |  |  |  | 3 |  |  |  | 27 |
|  |  | 10,118 |  |  |  | 531 |  |  |  | 273 |

| b. | All of the Group’s long-lived assets are located in Israel.

| c. | Major customers

Set forth below is a breakdown of Company’s revenue by major customers (major customer –revenues from these customers constitute at least 10% of total revenues in a certain year):

|  | Year ended on December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | USD in thousands |
Customer A |  |  | - |  |  |  | 383 |  |  |  | 85 |
Customer B |  |  | - |  |  |  | - |  |  |  | 30 |
Customer C |  |  | - |  |  |  | - |  |  |  | 40 |
Customer D |  |  | - |  |  |  | - |  |  |  | 27 |
Customer E |  |  | 2,400 |  |  |  | 24 |  |  |  | - |

F-114

MEDIGUS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19- EVENT SUBSEQUENT TO DECEMBER 31, 2021:

| 1. | On January 22, 2022, the Company entered into a share purchase agreement with Colugo Systems Ltd. (hereinafter “Colugo”) to purchase 24,920 shares of the outstanding share capital of Colugo or 0.82% in consideration for USD 400 thousands.

| 2. | On January 27, 2022, Polyrizon and several investors entered into an agreement for future equity (hereinafter “SAFE”) for total purchase amount of USD 250 thousands. The Company participated in this SAFE and invested USD 110 thousands.

| 3. | During February 2022, the Company purchased additional shares of Gix in total amount of USD 892 thousands and the Company holdings interests in Gix increased to 38.03%. the Company intent to consolidate Gix during 2022.

| 4. | On February 04, 2022, the Company entered into a share purchase agreement with Parazero Ltd (hereinafter “Parazero”), a company which is engaged in the field of safety systems for drones, pursuant to which the Company invested USD 1.6 million in exchange for 4.35% of the outstanding share capital of Parazero’s share capital on a fully diluted basis. In February and March 2022, the Company invested additional USD 203 thousand in Parazero through a SAFE agreement.

| 5. | On February 8, 2022, the Company entered into a share purchase agreement with Clearmind Medicine Inc. (CSE: CMND, FSE: CWY0, OTCMKTS: CMNDF) a psychedelic pharmaceutical biotech company. In accordance with the agreement, Medigus invested USD 1.25 million in consideration for approximately 2 million units, comprised of shares and warrants. The shares purchased represent 5.02% of Clearmind. As part of the agreement, Medigus will be issued approximately 2 million units, comprised of one share of common stock and one warrant, at a subscription price of CAD 0.80 per unit. Each warrant will be exercisable for a period of 18 months into one additional share of common stock at a price per share of CAD 2.00. USD 750 thousands of the investment amount paid in cash and USD 500 thousands of the investment amount paid through the issuance of Medigus’ American Depository Shares (ADS), at a price per ADS of USD 1.20.

In addition, Medigus will be entitled to 10% of the initial equity of a potential venture in the area of psychedelics, in connection with a research project currently conducted according to an agreement between Clearmind and the commercialization arm of a leading Israeli academic institution.

| 6. | On February 22, 2022 Jeffs’ Brands entered into a loan agreement with Bank Leumi Le-Israel (“Lender”) to provide for a line of credit in an aggregate amount of up to USD 1.0 million, which the Company may draw in two tranches at our request, but in no event after July 21, 2022. Pursuant to the loan agreement, amounts drawn bear interest at a rate of Secured Overnight Financing Rate (“SOFR”) plus 3.25% per annum. Unless otherwise provided with respect to a particular draw, any unpaid principal together with accrued and unpaid interest under the line of credit is required to be repaid no later than August 21, 2022. In order to induce the Lender to provide the loan, the Company and certain of its shareholders entered into a controlling shareholders’ comfort letter, subordination agreements and a negative pledge. On March 3, 2022, the Company drew USD 0.4 million under the line of credit. The Company intend to use a portion of the net proceeds from this offering to repay any amount outstanding under this line of credit.

| 7. | On March 11, 2022 Charging Robotics Ltd., signed a non-binding letter of intent for a planned securities exchange agreement with Fuel Doctor, Inc. (“Fuel Doctor”) The securities exchange agreement, if signed, will be subject to customary closing conditions. The transaction will result in Charging Robotics becoming a wholly owned subsidiary of Fuel Doctor, and in exchange, Medigus will receive 80% of the issued and outstanding share capital of Fuel Doctor. Upon closing, Medigus will appoint nominees as officers and directors of Fuel Doctor. As of the closing, Fuel Doctor shall have net cash in an amount of no less than USD 1.0 million, excluding Fuel Doctor’s expenses in connection with the contemplated transaction.

| 8. | On April 12, 2022, the Company and Eventer amended the loan agreement related to the Initial Advance loan such that the repayment occur the earlier of (i) twelve months following the Maturity Date of the Initial Advance; or (ii) immediately following an initial public offering of the Eventer.

| 9. | On April 13, 2022, the Company signed an agreement to invest in ABI Energy Ltd. The Company is the lead investor in an up to USD 1.4 million investment round in ABI Energy Ltd. The Company invested USD 300 thousands in cash and will issue USD 400 thousands worth of its ADS to ABI Energy Ltd.

F-115

ITEM 19. EXHIBITS

|  |  |  | Incorporation by Reference
Exhibit No. |  | Description |  | Form |  | File No. |  | Exhibit No. |  | Filing Date |  | Filed / Furnished
1.1 |  | Articles of Association of Medigus Ltd., as amended |  | 20-F |  | 001-37381 |  | 1.1 |  | May 14, 2021 |  |
2.1 |  | Form of Deposit Agreement between Medigus Ltd., The Bank of New York Mellon as Depositary, and owners and holders from time to time of ADSs issued thereunder, including the Form of American Depositary Shares |  | 20-F |  | 001-37381 |  | 2.1 |  | May 7, 2015 |  |
2.2 |  | Form of Series C Warrant Agent Agreement between the Registrant and Computershare Inc., as warrant agent, including Form of Series C Warrant |  | F-1 |  | 333-2225610 |  | 4.1 |  | July 18, 2018 |  |
2.3 |  | Description of Securities |  | 20-F |  | 001-37381 |  | 2.3 |  | May 14, 2021 |  |
4.1† |  | 2013 Share Option and Incentive Plan |  | 20-F |  | 001-37381 |  | 4.6 |  | May 7, 2015 |  |
4.2† |  | Compensation Policy of Medigus Ltd., as adopted on August 30, 2021 |  |  |  |  |  |  |  |  |  | *
4.3† |  | Form of Indemnification and Exculpation Undertaking |  | 20-F |  | 001-37381 |  | 4.15 |  | May 7, 2015 |  |
4.4 |  | Form of Warrant to purchase Ordinary Shares Represented by American Depositary Shares issued in connection with the November 30, 2016 Securities Purchase Agreements |  | 6-K |  | 001-37381 |  | 4.1 |  | December 1, 2016 |  |
4.5 |  | Form of Warrant to purchase Ordinary Shares Represented by American Depositary Shares issued in connection with the November 24, 2017, Securities Purchase Agreements |  | 6-K |  | 001-37381 |  | 4.1 |  | November 24, 2017 |  |
4.6 |  | Common Stock Purchase Agreement by and between the Registrant, Smart Repair Pro, Inc., Purex, Corp. each of Smart Repair Pro, Inc. and Purex, Corp. respective stockholders and Vicky Hacmon dated October 8, 2020*** |  | F-1 |  | 333-249797 |  | 10.4 |  | November 2, 2020 |  |
4.7 |  | Loan and Pledge Agreement by and between the Registrant, Smart Repair Pro, Inc., and its stockholder, dated February 2, 2021*** |  | 20-F |  | 001-37381 |  | 4.19 |  | May 14, 2021 |  |
4.8 |  | First Amendment to Loan and Pledge Agreement by and between the Registrant, Smart Repair Pro, Inc., and its stockholder, dated February 5, 2021*** |  | 20-F |  | 001-37381 |  | 4.20 |  | May 14, 2021 |  |

102

8.1 |  | List of Subsidiaries |  |  |  |  |  |  |  |  |  | *
12.1 |  | Certification of Chief Executive Officer as required by rule 13a-14(a)(1) |  |  |  |  |  |  |  |  |  | **
12.2 |  | Certification of Chief Financial Officer as required by rule 13a-14(a) |  |  |  |  |  |  |  |  |  | **
13.1 |  | Certification of Chief Executive Officer as required by rule 13a-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code |  |  |  |  |  |  |  |  |  | **
13.2 |  | Certification of Chief Financial Officer as required by rule 13a-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code |  |  |  |  |  |  |  |  |  | **
15.1 |  | Consent of Brightman Almagor Zohar & Co., Certified Public Accountant (Isr.), a firm in the Deloitte Global Network, independent registered public accounting firm for Medigus Ltd. |  |  |  |  |  |  |  |  |  | *
15.2 |  | Consent of Kesselman & Kesselman, Certified Public Accountant (Isr.), a member of PricewaterhouseCoopers International Limited, independent registered public accounting firm for Medigus Ltd. |  |  |  |  |  |  |  |  |  | *
15.3 |  | Consent of Brightman Almagor Zohar & Co., Certified Public Accountant (Isr.), a firm in the Deloitte Global Network, independent registered public accounting firm for Gix Internet Ltd. (formerly known as Algomizer Ltd.) |  |  |  |  |  |  |  |  |  | *
101.INS |  | Inline XBRL Instance Document |  |  |  |  |  |  |  |  |  |
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document. |  |  |  |  |  |  |  |  |  |
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |  |  |  |  |  |  |  |  |  |
101.DEF |  | Inline XBRL Taxonomy Definition Linkbase Document. |  |  |  |  |  |  |  |  |  |
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document. |  |  |  |  |  |  |  |  |  |
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document |  |  |  |  |  |  |  |  |  |
104** |  | Inline XBRL for the cover page of this Annual Report on Form 20-F(embedded within the Inline XBRL document) |  |  |  |  |  |  |  |  |  |

* | Filed herewith.

** | Furnished herewith.

*** | Certain confidential information contained in this exhibit, marked by brackets, was omitted because it is both (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. “[***]” indicates where the information has been omitted from this exhibit.

† | Indicates management contract or compensatory plan or arrangement.

Certain agreements filed as exhibits to this Annual Report contain representations and warranties that the parties thereto made to each other. These representations and warranties have been made solely for the benefit of the other parties to such agreements and may have been qualified by certain information that has been disclosed to the other parties to such agreements and that may not be reflected in such agreements. In addition, these representations and warranties may be intended as a way of allocating risks among parties if the statements contained therein prove to be incorrect, rather than as actual statements of fact. Accordingly, there can be no reliance on any such representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter of any such representations and warranties may have changed since the date of such agreements

103

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf.

| Medigus Ltd.
Date: April 29, 2022 | By: | /s/ Liron Carmel
|  | Liron Carmel
|  | Chief Executive Officer
| By: | /s/ Tali Dinar
|  | Tali Dinar
|  | Chief Financial Officer

104

73-370-4691 +972 ScoutCam was deconsolidated on March 31, 2021, and is accounted for as a material equity investee beginning on April 1, 2021 (refer to note 3C). translated at the closing rate at the date of each statement of financial position. translated at average exchange rates for each period. translated at the closing rate at the date of the statement of financial position translated at average exchange rates for each period Recorded in equity. These warrants, under certain circumstances, can be exercised via a cashless exercise mechanism as defined in the warrant agreement. Therefore, the warrants were classified as financial liabilities measured at fair value through profit or loss at each reporting period. See Note 4. Each 1 option is exercisable into 1 ordinary share. Granted to related parties. Each 10 options are exercisable into 1 ordinary share. Includes granted options benefit aggregated to USD 583 thousand, USD 189 thousand and USD 61 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. As for the method used to determine the said value and the assumptions used in calculation thereof, see Note 12c. Includes granted options benefit aggregated to USD 195 thousand, USD 734 thousand and USD 126 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. As for the method used to determine the said value and the assumptions used in calculation thereof, see Note 12c. Also, in 2021 and 2020 including provision for bonus and payment of bonus of approximately USD 86 thousand and USD 34 thousand, respectively. Julia Gerasimova, and Victor Hacmon are related parties of Jeffs’ Brands. See note 3E. Including provision for bonus of approximately USD 53 thousand. Including provision for bonus of approximately USD 46 thousand. Including provision for bonus of approximately USD 118 thousand. Julia Gerasimova, Kfir Zilberman and Victor Hacmon are related parties of Jeffs’ Brands. Kfir Zilberman is a related party of Jeffs’ Brands. On June 3, 2019, the Company entered into a Licensing and Sale Agreement with Shanghai Golden Grand-Medical Instruments Ltd. (hereinafter “Golden Grand”) for the know-how licensing and sale of goods relating to MUSE system in China, Hong Kong, Taiwan and Macao. Under the agreement, the Company committed to provide a license, training services and goods to Golden Grand in consideration for USD 3 million to be paid to the Company in four milestones-based installments. 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