X0306 4 2015-12-29 0 0001029581 Modsys International Ltd MDSY 0001166152 PRESCOTT GROUP CAPITAL MANAGEMENT, L.L.C. 1924 SOUTH UTICA, SUITE 1120 TULSA OK 74104 0 0 1 0 0001127429 FROHLICH PHIL 1924 SOUTH UTICA, SUITE 1120 TULSA OK 74014 0 0 1 0 Ordinary shares, NIS 0.04 par value 2015-12-29 4 J 0 625000 0.00 A 4017488 I See Footnote Warrants (Right to Buy) 0.01 2015-12-29 4 J 0 153689 0.00 A 2015-12-29 2018-12-29 Ordinary shares, NIS 0.04 par value 153689 153689 I See Footnote Warrants (Right to Buy) 0.01 2015-12-29 4 P 0 100000 1.3356 A 2015-12-29 2017-12-29 Ordinary shares, NIS 0.04 par value 100000 253689 I See Footnote Preferred shares, NIS 0.04 par value 0.00 2015-12-29 4 P 0 200000 1.3289 A Ordinary shares, NIS 0.04 par value 200000 200000 I See Footnote The filing of this Form 4 shall not be construed as an admission that Prescott Group Capital Management, L.L.C. ("Prescott Capital") or Phil Frohlich, the manager of Prescott Capital, is or was, for the purposes of Section 16(a) of the Securities Exchange Act of 1934, as amended, or otherwise, the beneficial owner of any of the shares of Ordinary shares, NIS 0.04 par value (the "Common Stock"), of Modsys International Ltd. (the "Issuer") purchased by Prescott Group Aggressive Small Cap Master Fund, G.P. (the "Master Fund") for the accounts of Prescott Group Aggressive Small Cap, L.P. or Prescott Group Aggressive Small Cap II, L.P. (together, the "Small Cap Funds"). Pursuant to Rule 16a-1, both Prescott Capital and Phil Frohlich disclaim such beneficial ownership. Prescott Capital holds indirectly the shares of Common Stock of the Issuer through the account of the Master Fund, of which Prescott Capital is the Investment Manager. The Master Fund holds the shares of Common Stock for the accounts of the Small Cap Funds, of which Prescott Capital is the Investment Manager. Prescott Capital receives a portion of the profits in the way of a capital allocation from, and owns a partnership interest in, the Small Cap Funds. Phil Frohlich reports the Common Stock held indirectly by Prescott Capital because, as the manager of Prescott Capital at the time of purchase, he controlled the disposition and voting of the securities. These shares of Common Stock were issued on December 29, 2015 pursuant to an aniti-dilution provision contained in the Amended and Restated Securities Purchase Agreement dated as of November 22, 2013 between the Issuer and the Reporting Persons as a result of the Issuer having been deemed to have issued shares of Common Stock or certain securities convertible into shares of Common Stock for a purchase price of less than $4.00 per share prior to November 22, 2015. These warrants vested 50% on the date of grant and will vest 50% on February 24, 2016. In the event that the Issuer has repaid in full the guaranteed amount owed pursuant to a credit agreement between Modern Systems Corporation and MS Modernization Services, Inc., a wholly owned subsidiary and a majority owned subsidiary of the Issuer, and Comerica Bank (the "Credit Agreement") to below $1,000,000 prior to February 24, 2016, the unvested portion of the warrants held by the Reporting Persons will be automatically cancelled. These warrants were issued in exchange for the Reporting Persons and certain other shareholders providing a guaranty with respect to the Credit Agreement. The convertible preferred stock is convertible into shares of Common Stock at any time on a one-for-one basis, and has no expiration date. Phil Frohlich, manager of Prescott Group Capital Management, L.L.C. 2016-01-04 /s/ Phil Frohlich 2016-01-04