UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM  i 20-F

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

For the fiscal year ended  i  i December 31,  i 2022 / 

Commission File No.:  i 001-39674

 i G Medical Innovations Holdings Ltd.

(Exact name of registrant as specified in its charter)

Translation of registrant’s name into English: Not applicable

 i Dr. Yacov Geva

President and Chief Executive Officer

+972 8 958 4777

 i Yacovg@Gmedinnovations.com

 i 5 Oppenheimer,

 i Rehovot  i 7670105,  i Israel

(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:

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

Number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2022:  i 1,532,794 Ordinary Shares.

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

Yes ☐  i 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 Exchange Act of 1934.

Yes ☐  i 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 Exchange Act 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.

 i 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 during the preceding 12 months.

 i 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.

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 7(a)(2)(B) of the Securities Act.  i ☐

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.  i ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which 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.

Yes ☐ No  i  i ☒ / 

TABLE OF CONTENTS 

INTRODUCTION

We are a next-generation mobile health, or mHealth, and digital health company that develops and markets clinical and consumer medical-grade health monitoring solutions and offers end-to-end support for remote monitoring and telemedicine projects. With extensive experience in the field of medical devices, digital health and patients monitoring, we are committed to raising the global level of healthcare by empowering caregivers and patients to better monitor, manage and improve clinical and personal health outcomes. We believe that we are at the forefront of the digital health revolution in developing the next generation of mobile technologies and services that are designed to empower consumers, patients, and providers to better monitor, manage and improve clinical and personal health outcomes, especially for those who suffer from cardiovascular disease, or CVD, pulmonary disease and diabetes. Our business and future revenue stream can be broken down into two business areas: monitoring services and home collection kits for lab testing.

Unless the context requires otherwise, the terms “G Medical Innovations Holdings,” “we,” “us,” “our,” the “Company” and “G Medical Innovations Holdings” refer to G Medical Innovations Holdings Ltd., a Cayman Islands exempted company, and its subsidiaries: G Medical Innovations Ltd., an Israeli corporation, G Medical Innovations USA Inc., a Delaware corporation, G Medical Health and Wellness, Inc, a Delaware corporation, G Medical Health and Wellness Lab, Inc., a Delaware corporation, G Medical Innovations MK Ltd., a Macedonian corporation, G Medical Innovations Asia Limited, a Hong Kong corporation, G Medical Diagnostic Services, Inc., a Texas corporation, G Medical Mobile Health Solutions, Inc., an Illinois corporation, Telerhythmics, LLC , a company formed under the laws of the state of Tennessee, G Medical Tests and Services, Inc., a Delaware corporation, G Medical Lab Services, Inc. a Delaware corporation, G Medical Innovations UK Ltd., a UK corporation, all of which are wholly-owned subsidiaries, G-Medical Lab Services Inc., a Delaware corporation and 80%-owned subsidiary, and Guangzhou Yimei Innovative Medical Science and Technology Co., Ltd., or G Medical China, a 70%-owned subsidiary of G Medical Innovations Asia Limited.

References to “Ordinary Shares”, “warrants” and “share capital” refer to our ordinary shares, warrants and share capital, respectively, of G Medical Innovations Holdings.

Our reporting currency and functional currency is the U.S. dollar. Unless otherwise expressly stated or the context otherwise requires, references in this annual report to “dollars” or “$” mean U.S. dollars, and references to “A$” are to Australian dollars. Unless derived from our consolidated financial statements or otherwise indicated, U.S. dollar translations of A$ amounts presented in this annual report are translated using the rate of A$1.469 to $1.00, based on the exchange rates certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2022.  References to “Ordinary Shares” are to our ordinary shares, par value $3.15 per share. We report under International Financial Reporting Standards (or IFRS), as issued by the International Accounting Standards Board (or the IASB). None of the financial statements were prepared in accordance with generally accepted accounting principles in the United States.

Our shareholders have approved three reverse stock splits since 2020: on October 29, 2020, our shareholders approved, at an extraordinary general shareholders meeting, a one-for-18 consolidation (the “October 2020 Reverse Stock Split”) of our Ordinary Shares pursuant to which holders of our Ordinary Shares received one Ordinary Share for every 18 Ordinary Shares held; on March 25, 2021, our shareholders approved, at an extraordinary general shareholders meeting, a one-for-five consolidation (the “March 2021 Reverse Stock Split”) of our Ordinary Shares pursuant to which holders of our Ordinary Shares received one Ordinary Share for every five Ordinary Shares held; and on November 15, 2022, our shareholders approved, at an extraordinary general shareholders meeting, a 35-for-one consolidation of our Ordinary Shares pursuant to which holders of our Ordinary Shares received one Ordinary Share for every 35 Ordinary Shares held which took effect on November 16, 2022 (the “November 2022 Reverse Stock Split”). Unless the context expressly dictates otherwise, all reference to share and per share amounts referred to herein reflect the October 2020 Reverse Stock Split, the March 2021 Reverse Stock Split and the November 2022 Reverse Stock Split.

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” within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. 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, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.

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

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

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

You should not put undue reliance on any forward-looking statements. Any forward-looking statements in this annual report on Form 20-F are made as of the date hereof and are expressly qualified in their entirety by the cautionary statements included in this annual report. 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.

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 sources and other sources that we have not independently verified.

EXPLANATORY NOTE

Market data and certain industry data and forecasts used throughout this annual report on Form 20-F were obtained from internal company surveys, market research, publicly available information, reports of governmental agencies and industry publications and surveys. Industry surveys, publications and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. However, this information may prove to be inaccurate because of the method by which some of the data for the estimates is obtained or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. As a result, the market and industry data and forecasts included or incorporated by reference in this annual report, and estimates and beliefs based on that data, may not be reliable. We have relied on certain data from third-party sources, including internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry. However, we have not ascertained the underlying economic assumptions relied upon therein. Forecasts are particularly likely to be inaccurate, especially over long periods of time. In addition, we do not necessarily know what assumptions regarding general economic growth were used in preparing the forecasts we cite. Statements as to our market position are based to the best of our knowledge on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this annual report, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this annual report.

Statements made in this annual report on Form 20-F concerning the contents of any agreement, contract or other document are summaries of such agreements, contracts or documents and are not a complete description of all of their terms. If we filed any of these agreements, contracts or documents as exhibits to this Report or to any previous filing with the Securities and Exchange Commission (or the SEC), you may read the document itself for a complete understanding of its terms.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. 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 and uncertainties described below are those significant risk factors, currently known and specific to us, that we believe are relevant to an investment in our securities. Additional risks and uncertainties not currently known to us or that we now deem immaterial may also harm us. If any of these risks materialize our business, results of operations or financial condition could suffer, and the price of our Ordinary Shares could decline substantially.

Summary Risk Factors

Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this annual report summary. You should read these risks before you invest in the Securities. In particular, our risks include, but are not limited to, the following:

Risks Related to Our Financial Condition and Capital Requirements

We have identified material weaknesses in our internal control over financial reporting that could, if not remediated, result in material misstatements in our financial statements. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our Ordinary Shares.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures are designed to prevent fraud. Our management will be required to assess the effectiveness of our internal controls and procedures and disclose changes in these controls on an annual basis. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act (or Section 404).

Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Ordinary Shares.

We have identified material weaknesses in our internal control over financial reporting as of December 31, 2022. As defined in Regulation 12b-2 under the Exchange Act, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual financial statements will not be prevented or detected on a timely basis. Specifically, we determined that the material weaknesses are related to having an insufficient number of financial reporting personnel with an appropriate level of knowledge, experience and training in the application of IFRS and SEC rules and regulations commensurate with our reporting requirements.

We have taken action toward remediating these material weaknesses by providing enhanced training to existing financial and accounting employees on related IFRS issues. In addition, to remediate these material weaknesses, we are implementing measures and developing, communicating, and implementing an accounting policy manual for our financial reporting personnel for recurring transactions, period-end closing processes and policy relating to segregation of duties.

If we are unable to certify that our internal control over financial reporting is effective and in compliance with Section 404, we may be subject to sanctions or investigations by regulatory authorities, such as the SEC or stock exchanges, and we could lose investor confidence in the accuracy and completeness of our financial reports, which could hurt our business, the price of our Ordinary Shares and our ability to access the capital market.

We have a limited operating history on which to assess the prospects for our business, have generated little revenue from sales of our products, and have incurred losses since inception. We anticipate that we will continue to incur significant losses until we are able to successfully commercialize our products and services globally.

Since inception, we have devoted substantially all of our financial resources to develop our products and their related services. We have financed our operations primarily through the issuance of equity securities and loans, have incurred losses since inception including net losses of approximately $25.1 million in 2022 and $14.9 million in 2021 and $12.7 million in 2020. Our accumulated deficit as of December 31, 2022 was $115,263 thousand. We have financed our operations primarily through the issuance of equity securities. We have generated little revenue from the sale of our products to date and have incurred significant losses. The amount of our future net losses will depend, in part, on on-going development of our products and their related services, the success of our new home testing kit related business, the rate of our future expenditures and our ability to obtain funding through the issuance of our securities, strategic collaborations or grants. We expect to continue to incur significant losses until we are able to successfully commercialize our products and services globally. We anticipate that our expenses will increase substantially if and as we:

We expect that we will need to raise substantial additional funding before we can expect to become profitable from sales of our products and services. This additional financing may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

As of December 31, 2022, we had approximately $0.295 million in cash and cash equivalents and an accumulated deficit of $115,263 thousands. Based upon our currently expected level of operating expenditures, we expect that our current existing cash and cash equivalents, future fund raisings and the Company’s major shareholder commitment to continue and support the Company’s ongoing operation for the foreseeable future (if other sources of funding would not be available to the Company and under certain conditions) will be sufficient to fund our current operations for the foreseeable future. We will require substantial additional capital to fund our current operation and to grow our business and commercialize our products and services. In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned.

We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our Ordinary Shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or products or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

Raising additional capital would cause dilution to holders of our equity securities, and may affect the rights of existing holders of equity securities.

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 issuance of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a holder of the Ordinary Shares.

Risks Related to Our Business

We may not succeed in completing the development and commercialization of our products and services and generating significant revenues.

While we recently expanded our business to provide home test kits related services, including hormones, sexual transmitted diseases, nutrition, colon cancer, food sensitivity and allergies testing, since commencing our operations, we have focused on the research and development and limited clinical trials of our products and services. Some of our products and services are not approved for commercialization and have never generated any revenues. Our ability to generate revenues and achieve profitability depends on our ability to successfully complete the development of these products and services, obtain regulatory approvals and generate significant revenues. The future success of our business cannot be determined at this time, and we do not anticipate generating revenues from some of our products and services for the foreseeable future. In addition, we have limited experience in commercializing our products and services and we may face several challenges with respect to our commercialization efforts, including, among others, that:

If we are unable to meet any one or more of these challenges successfully, our ability to effectively commercialize our products and services could be limited, which in turn could have a material adverse effect on our business, financial condition and results of operations.

The expansion of our home testing kit business presents important challenges to our ability to manage our business.

In July 2022, we launched our home testing kit related business with seven types of at home testing kits. In October 2022, we expanded our business to offer an additional 24 different at-home health tests kits. Since the COVID-19 pandemic, there has been an increase in home testing for medical conditions and there is existing competition in the home testing kit market and we expect new entrants to enter the market, and these competitors may cause price declines or reduced market share for us. We expect this competition to intensify in the future. We face competition from a variety of sources, including, among others, an increasing number of companies seeking to develop and commercialize, or who have developed and commercialized home testing kit services, such as specialty and reference laboratories, and established and emerging healthcare, information technology and service companies that may develop and sell competitive products or services. There can be no assurance that our investments in our home testing kit business and capabilities will result in desirable returns, and if our operating results continue to decline as a result of decreased demand, our stock price could decline.

We may be subject to liability and our insurance may not be sufficient to cover damages.

Our business exposes us to potential liability risks that are inherent in the marketing and sale of testing kits and diagnostics. The use of our products may expose us to professional and product liability claims and possible adverse publicity. We may be subject to claims resulting from incorrect results of analysis with respect to our products and services. Litigation of such claims could be costly. Further, if a court were to require us to pay damages to a plaintiff, the amount of such damages could be significant and severely damage our financial condition. Although we have public and product liability insurance coverage under broad form liability and professional indemnity policies, the level or breadth of our coverage may not be adequate to fully cover any potential liability claims. In addition, we may not be able to obtain additional liability coverage in the future at an acceptable cost. A successful claim or series of claims brought against us in excess of our insurance coverage and the effect of professional and/or product liability litigation upon the reputation and marketability of our technology and products, together with the diversion of the attention of key personnel, could negatively affect our business.

Our success depends upon market acceptance of our products and services, our ability to develop and commercialize new products and services and generate revenues and our ability to identify new markets for our technology.

We have developed, and are engaged in the development of, mobile and e-health solutions and services using our suite of devices and software solutions. Our success will depend on the acceptance of our products and services in the healthcare market. We are faced with the risk that the marketplace will not be receptive to our products and services over competing products and that we will be unable to compete effectively. Factors that could affect our ability to successfully commercialize our current and any potential future products and services include:

We cannot assure that our current products or any future products, and services, will gain broad market acceptance. If the market for our current products in development fails to develop or develops more slowly than expected, or if any of the services and standards supported by us do not achieve or sustain market acceptance, our business and operating results would be materially and adversely affected.

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

The market for monitoring services and products is characterized by rapid technological change, medical advances, changing consumer requirements, short device lifecycles and evolving industry standards. Any one of these factors could reduce the demand for our services and devices or require substantial resources and expenditures for research, design and development to avoid technological or market obsolescence.

Our success will depend on our ability to enhance our current technology, services and systems and develop or acquire and market new technologies to keep pace with technological developments and evolving industry standards, while responding to changes in customer needs. A failure to adequately develop or acquire device enhancements or new devices that will address changing technologies and customer requirements adequately, or to introduce such devices on a timely basis, may have a material adverse effect on our business, financial condition and results of operations.

We might have insufficient financial resources to improve existing devices, advance technologies and develop new devices at competitive prices. Technological advances by one or more competitors or future entrants into the field may result in our present services or devices becoming non-competitive or obsolete, which may decrease revenues and profits and adversely affect our business and results of operations.

We will encounter significant competition across our product lines and in each market in which we will sell our products and services from various companies, some of which may have greater financial and marketing resources than we do. Our primary competitors include Biotelemetry, Inc., iRhythm Technologies, Preventice Solutions, Inc., Bardy Diagnostics, Inc. and other arrhythmia service providers, as well as a wide range of medical device companies that sell a single or limited number of competitive products and services, such as Teledoc Health, Inc., DarioHealth Corp. and Itamar Medical, Inc., or participate in only a specific market segment.

We will be dependent upon success in our customer acquisition strategy.

Our business will be dependent upon success in our customer acquisition strategy. If we fail to maintain a high quality of service or a high quality of device technology, we may fail to retain existing users or add new users. If users decrease their level of engagement, our revenue, financial results and business may be significantly harmed. Our future success depends upon building a commercial operation in the United States and China, as well as entering additional markets to commercialize our products and services. We believe that our expanded growth will depend on the further development, regulatory approval and commercialization of our products and services, which we anticipate that can be used by nearly all targeted individuals. If we fail to expand the use of our product and services in a timely manner, we may not be able to expand our markets or to grow our revenue, and our business may be adversely impacted. The size of our user base and our users’ level of engagement are critical to our success. Our financial performance will be significantly determined by our success in adding, retaining and engaging active users. If people do not perceive our products or services to be useful, reliable and trustworthy, we may not be able to attract or retain users or otherwise maintain or increase the frequency and duration of their engagement. A decrease in user retention, growth or engagement could render less attractive to developers, which may have a material and adverse impact on our revenue, business, financial condition and results of operations.

Any number of factors could negatively affect user retention, growth and engagement, including:

We have recently invested significant capital in our COVID-19 related services, including the purchase of COVID-19 testing kits, however, the future of COVID-19 related services is uncertain and we have stopped operations in our COVID-19 testing related business, which has led to the write off of inventory and fixed assets in our fiscal year ended December 31, 2022.

In December 2021 we launched our COVID-19 testing business, which entailed a significant investment of capital, including, among others, to establish several of testing facilities and laboratories throughout the state of California and the purchase of COVID-19 testing kits. We also entered into various agreements and arrangements regarding our COVID-19 testing business. The level of demand for COVID-19 testing has varied depending on, among other things, changes in the number of reported cases of COVID-19, discoveries of new variants or subvariants of the virus, different COVID-19 mitigation efforts and policies adopted by various governments or businesses, all of which are subject to change and beyond our control. Moreover, the future of COVID-19 related services may be dependent on changes to laws and regulations governing healthcare service providers, including measures to control costs, or reductions in reimbursement levels from government payors or insurance companies. These changes are difficult to predict and may also impact our revenue recognition or collecting accounts receivables. We currently have no expectations to open any new COVID-19 testing centers as the volume of COVID-19 testing has decreased significantly since April 2022. Given the decrease in COVID-19 cases, in the second half of fiscal year 2022 we decided to stop our COVID-19 testing related business and have closed all the locations performing point-of-care tests in communities in Southern and Northern California. We have incurred a write off charge of approximately $2.1 million related to our COVID-19 test inventory and fixed assets in our audited financial statements for the year ended December 31, 2022.

If we are unable to successfully integrate acquired companies and technology, we may not realize the benefits anticipated and our future growth may be adversely affected.

We have grown through acquisitions of companies and technology, including our acquisitions of CardioStaff, in November 2017 and Telerhythmics in November 2018. Acquisitions bring risks associated with our assumption of the liabilities of an acquired company, which may be liabilities that we were or are unaware of at the time of the acquisition, potential write-offs of acquired assets and potential loss of the acquired company’s key employees or customers. Physician, patient and customer satisfaction or performance problems with an acquired business, technology, service or device could also have a material adverse effect on our reputation. Additionally, potential disputes with the seller of an acquired business or its employees, suppliers or customers could adversely affect our business, operating results and financial condition. If we fail to properly evaluate and execute acquisitions, our business may be disrupted and our operating results and prospects may be harmed.

Furthermore, integrating acquired companies or new technologies into our business may prove more difficult than we anticipate. We may encounter difficulties in successfully integrating our operations, technologies, services and personnel with that of the acquired company, and our financial and management resources may be diverted from our existing operations. Offices in multiple states create a strain on our ability to effectively manage our operations and key personnel. If we elect to consolidate our facilities, we may lose key personnel unwilling to relocate to the consolidated facility, may have difficulty hiring appropriate personnel at the consolidated facility and may have difficulty providing continuity of service through the consolidation.

We are dependent upon third-party manufacturers and suppliers making us vulnerable to supply shortages and problems and price fluctuations, which could harm our business.

We do not manufacture our products in-house. Rather, we rely on a limited number of third parties to manufacture and assemble our products. Our suppliers and manufacturers may encounter problems during manufacturing for a variety of reasons, including, for example, failure to follow specific protocols and procedures, failure to comply with applicable legal and regulatory requirements, equipment malfunction and environmental factors, failure to properly conduct their own business affairs, and infringement of third-party intellectual property rights, any of which could delay or impede their ability to meet our requirements. Our reliance on these third-party suppliers also subjects us to other risks that could harm our business, including:

We expect that our Prizma device and Extended Holter Patch System will be primarily manufactured by a third party in China. However, due to the current complexities of traveling to China as a result of the COVID-19 pandemic, we use a contract manufacturer in Israel to meet our manufacturing requirements. Manufacturers in Israel are generally more expensive that in China. In the future, we may not be able to quickly establish additional or alternative suppliers and manufacturers if necessary, in part because we may need to undertake additional activities to establish such suppliers as required by the regulatory approval process. Any interruption or delay in obtaining products from our third-party suppliers, or our inability to obtain products from qualified alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and cause them to switch to competing products.

Regarding our home testing kits, our sole manufacturer is currently located in China and the current COVID-19 situation in China might pose delays on supply chain interruptions which might have an adverse effect on our revenues. We are exploring other supplier located in North America to reduce such possible delays and interruptions. In addition, government restrictions on goods originating from China and increase of import fees might lead to delays in goods delivered to the United States and adversely affect the Company’s operations and revenues.

We are dependent upon third-party service providers for the provision of certain services that we provide. Interruptions or delays in the services provided by these third-parties could impair the delivery of certain services and utility of our products, which could adversely affect the penetration of our products and services, our business, operating results and reputation.

The success of certain services that we provide are dependent upon third-party service providers. For instance, we are dependent upon third-party service providers to provide analysis of medical results. If we fail to maintain these relationships, we would be forced to seek alternative providers to provide such analyses, which we may not find available on commercially reasonable terms, or at all.

As we expand our commercial activities, an increased burden will be placed upon the quality of medical results analyses. Interruptions or delays, for any length of time, could have a material adverse effect on our business and operating results. Frequent or persistent interruptions in our ability to provide quality and timely analyses could cause permanent harm to our reputation and could cause current or potential users of our products and services, or prescribing physicians, to believe that our systems are unreliable, leading them to switch to our competitors. Such interruptions could result in liability claims and litigation against us for damages or injuries resulting from the disruption in service.

We expect to be exposed to fluctuations in currency exchange rates, which could adversely affect our results of operations.

We incur expenses in U.S. dollars, NIS, Chinese yuan (RMB), and Macedonian denars, but our financial statements are denominated in U.S. dollars. Accordingly, we face exposure to adverse movements in currency exchange rates. Our foreign operations will be exposed to foreign exchange rate fluctuations as the financial results are translated from the local currency into U.S. dollars upon consolidation. Specifically, the U.S. dollar cost of our operations in Israel is influenced by any movements in the currency exchange rate of the NIS. Such movements in the currency exchange rate may have a negative effect on our financial results. If the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions will result in increased operating expenses. Similarly, if the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions will result in decreased operating expenses. As exchange rates vary, operating results, when translated, may differ materially from our or the capital market’s expectations.

Non-U.S. governments often impose strict price controls, which may adversely affect our future profitability.

We intend to seek approval to market products and their associated services in both the United States and in non-U.S. jurisdictions. Accordingly, we are subject to rules and regulations in those jurisdictions relating to our products and services. In some countries, particularly countries of the European Union (or the EU) and those of the EEA and China, each of which has developed its own rules and regulations, pricing may be subject to governmental control under certain circumstances. In these countries, pricing negotiations with governmental agencies can take considerable time after the receipt of marketing approval for a medical device candidate. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other available products. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.

We are dependent on our employees, including notably our Chief Executive Officer, the loss of whom could have an adverse effect on our company.

As of May 15, 2023, we had 85 employees. Our future performance depends to a large extent on the continued services of members of our current management including, in particular, Dr. Yacov Geva, our Chief Executive Officer. Any of our employees and consultants may leave our company at any time, subject to certain notice periods. The loss of the services of any of our executive officers or any key employees or consultants would adversely affect our ability to execute our business plan and harm our operating results.

International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States or Cayman Islands.

We currently have significant international operations, and our business strategy incorporates additional significant international expansion, particularly in anticipated expansion of regulatory approvals of our products. Doing business internationally involves a number of risks, including but not limited to:

multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.

We face intense competition in the market, and as a result we may be unable to effectively compete in our industry.

With respect to our products and monitoring services we compete directly and primarily with arrhythmia monitoring providers such as Philips Healthcare, iRhythm Technologies and other smaller companies. These companies hold significant market share in the United States. Their dominant market position and significant control over the market could significantly limit our ability to introduce or effectively market and generate sales of our products and service offerings. We will also compete with numerous second-tier and third-tier competitors, such as Teledoc Health, Inc., DarioHealth Corp. and Itamar Medical, Inc., and may in the future face further competition from smartwatch makers such as Apple and Samsung, and app developers using the smartwatch platforms for products that will compete with our current and future products.

Many of our competitors have long histories and strong reputations within the industry. They have significantly greater brand recognition, financial and human resources than we do. They also have more experience and capabilities in researching and developing testing devices, obtaining and maintaining regulatory clearances and other requirements, manufacturing and marketing those products than we do. There is a significant risk that we may be unable to overcome the advantages held by our competition, and our inability to do so could lead to the failure of our business and the loss of your investment.

Competition in the electronic health devices and more specifically mobile health devices markets is extremely intense, which can lead to, among other things, price reductions, longer selling cycles, lower product margins, loss of market share and additional working capital requirements. To succeed, we must, among other critical matters, gain consumer acceptance for our minimally invasive solutions as compared to other solutions currently available in the market, and potential future devices incorporating our principal technology and offer better strategic concepts, technical solutions, prices and response time, or a combination of these factors, than those of other competitors. If our competitors offer significant discounts on certain products or services, we may need to lower our prices or offer other favorable terms in order to compete successfully. Moreover, any broad-based changes to our prices and pricing policies could make it difficult to generate revenues or cause our revenues to decline. Moreover, if our competitors develop and commercialize products and services that are more effective or desirable than products and services that we may develop, we may not convince our customers to use our products and services. Any such changes would likely reduce our commercial opportunity and revenue potential and could materially adversely impact our operating results.

In addition, the home kit testing market has become increasingly competitive and, following the COVID-19 pandemic, competitive home kit testing solutions have entered and may continue to enter the market. We expect this competition to intensify in the future. We face competition from a variety of sources, including, among others, an increasing number of companies seeking to develop and commercialize, or who have developed and commercialized home testing services, such as specialty and reference laboratories, and established and emerging healthcare, information technology and service companies that may develop and sell competitive products or services.

The level of our commercial success will depend in part on our ability to generate and grow sales with our sales and marketing team, strategies and partnerships, and we may be unsuccessful in these efforts.

We may not be able to market or sell our testing and services in order to drive demand sufficiently to support our desired growth. We are currently marketing our testing and services through a small internal sales team. Although we have made efforts to enhance and improve our internal sales department, it remains significantly smaller than many of our competitors’ sales teams. We have historically relied significantly on organic growth but our ability to rely on this type of interest in future periods is uncertain.

We believe our ability to maintain and grow sales volume in the future will depend in large part on our ability to further develop our sales team and create and implement effective sales and marketing strategies. We plan to focus on these objectives and to take steps to pursue them, including hiring new key members and restructuring the organization of our sales and marketing team, re-focusing our sales and marketing initiatives and strategies, and increasing the overall scope of our marketing activities. These efforts will require and involve significant time and expense. Moreover, these efforts may be unsuccessful. For instance, we may not be able to attract and hire the qualified personnel we need to grow or otherwise improve our sales and marketing team for our testing services as quickly or as successfully as we would like for various reasons, including intense competition in our industry for qualified personnel and our relative lack of experience selling and marketing our tests. Even if we are able to further develop our sales and marketing team and strategy, we may not be successful in growing our customer base or increasing testing volumes from our existing customers.

If third-party payors do not provide adequate coverage and reimbursement for the use of our products and services, our revenue will be negatively impacted.

We will be highly dependent on reimbursement by third parties in relation to our revenue streams. Such reimbursement may vary based on the particular service or device used in providing services and is based on the identity of the third-party. Our ability to maintain a leading position in the monitoring market depends on our relationships with private third parties.

We expect to engage with private third parties to allow us to receive reimbursement from insurance companies for monitoring fees. The loss of a significant number of private third-party contracts may have an adverse effect on our revenues that derives from monitoring services, which could have an adverse effect on our business, financial condition and results of operations.

Over the past few years, reimbursement rates from certain third parties have declined, in some cases significantly. There can be no assurance that this trend will not continue or apply on more third parties. In addition, there is no assurance that third parties’ reimbursement will continue to cover our monitoring services at all, or, if covered, will reimburse us at commercially viable rates.

In addition, private third parties may not reimburse any new services offered by us or reimburse those new services at commercially viable rates. The failure to receive reimbursement at adequate levels for our existing or future services may adversely affect demand for those services, our products, our revenues and expected growth. This could have an adverse effect on our business, financial condition and results of operations.

In addition, collecting revenue from third party payors can be time consuming, may be subject to delays and invoicing third parties may not lead to immediate revenue recognition in connection with tests that have been performed. The timing of invoicing and collection of payments from third party payors may have a material adverse effect on our business, financial condition and results of operations. For example, during the six month period ended June 30, 2022, we performed over 100,000 tests, for which we expected to submit approximately $5 million in invoices related to COVID-19 to collection from payors; however, as of December 31, 2022, we recorded only $200,000 in recorded revenue from COVID-19 tests performed during the period.

Risks Related to Product Development and Regulatory Approval

The regulatory clearance process which we must navigate is expensive, time-consuming, and uncertain and may prevent us from obtaining clearance for the commercialization of our current products and services in additional jurisdictions, or any future product.

We are not permitted to market our products and their associated services until we receive regulatory clearance. For example, we have applied for NMPA clearance for our Prizma device in China, but we may not commence marketing or sales activity until such time that we receive NMPA clearance.

The research, design, testing, manufacturing, labelling, selling, marketing and distribution of medical devices, such as our products and product candidates, are subject to extensive regulation by the U.S. FDA and similar foreign regulatory agencies, with regulations that differ from country to country. There can be no assurance that, even after such time and expenditures, we will be able to obtain necessary regulatory clearances or approvals for our products and product candidates. In addition, during the regulatory process, other companies may develop other technologies with the same intended use as our products.

We are also subject to numerous post-marketing regulatory requirements, which include labelling regulations and medical device reporting regulations, which may require us to report to different regulatory agencies if our device causes or contributes to a death or serious injury, or malfunctions in a way that would likely cause or contribute to a death or serious injury. In addition, these regulatory requirements may change in the future in a way that adversely affects us. If we fail to comply with present or future regulatory requirements that are applicable to us, we may be subject to enforcement action by regulatory agencies, which may include, among others, any of the following sanctions:

The occurrence of any of these events may have a material adverse effect on our business, financial condition and results of operations.

Changes in the regulatory environment may constrain or require us to restructure our operations, which may delay or prevent us from marketing our products and services and as a result harming our revenue and operating results.

Healthcare laws and regulations and review procedures change frequently and may change significantly in the future. We may not be able to adapt our operations to address every new regulation, and new regulations may adversely affect our business. For instance, although our Chinese subsidiary was granted acceptance to the “Green Channel” expedited Guangdong Provincial NMPA regulatory approval process for the Prizma device, if the process becomes more onerous, costly or time-consuming, we will need to re-evaluate our Chinese commercialization strategy and may need to invest more of our limited resources before even entering the Chinese market with our products. Our products and product candidates are also subject to the European Union Medical Device Regulations. We cannot assure you that a review of our business by courts or regulatory agencies would not result in a determination that adversely affects our revenue and operating results, or that the healthcare regulatory environment review procedures of the U.S. FDA, NMPA and EEA Notified Bodies, among other similar foreign regulatory agencies, will not change in a way delays or prevents us from marketing our products and services and as a result harming our revenue and operating results.

In addition, there is risk that the U.S. Congress may implement changes in laws and regulations governing healthcare service providers, including measures to control costs, or reductions in reimbursement levels, which may adversely affect our business and results of operations.

Government payors, such as CMS as well as insurers, have increased their efforts to control the cost, utilization and delivery of healthcare services. From time to time, the U.S. Congress has considered and implemented changes in the CMS fee schedules in conjunction with budgetary legislation. Further reductions of reimbursement by CMS for services or changes in policy regarding coverage of tests or other requirements for payment, such as prior authorization or a physician or qualified practitioner’s signature on test requisitions, may be implemented from time to time. Reductions in the reimbursement rates and changes in payment policies of other third-party payors may occur as well. Similar changes in the past have resulted in reduced payments as well as added costs and have added more complex regulatory and administrative requirements. Further changes in federal, state, local and third-party payor regulations or policies in the United States or our primary foreign markets may have a material adverse impact on our business. Actions by the U.S. FDA, CMS, and similar foreign regulatory agencies regulating insurance or changes in other laws, regulations, or policies may also have a material adverse effect on our business.

Moreover, changes in regulation associated with operation of labs, might also lead to interruptions in the operation of the Company’s lab and/or generate revenues and profit.

If we, our affiliates, manufacturers or suppliers fail to comply with the U.S. FDA’s Quality System Regulation, or QSR, or any applicable state or foreign equivalent, our operations could be interrupted and our operating results could suffer.

We, our affiliates, manufacturers and suppliers must, unless specifically exempt by regulation, follow the QSR and, to the extent required, the equivalent regulation enacted in other foreign jurisdictions, such as the EU (and if necessary, the regulations of its member states) and China, regarding the manufacturing process. If we, our affiliates, our manufacturers or suppliers are found to be in significant non-compliance or fail to take satisfactory corrective action in response to adverse QSR inspectional findings, or to findings of similar foreign regulatory agencies, the U.S. FDA and these other similar foreign regulatory agencies could take enforcement actions against us, our affiliates, manufacturers and suppliers which could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands. Accordingly, our operating results could suffer.

Product and services liability suits, whether or not meritorious, could be brought against us. These suits could result in expensive and time-consuming litigation, payment of substantial damages and an increase in our insurance rates.

If any of our current or future products and services that we make or sell (including items that we source from third-parties) are defectively designed or manufactured contain defective components, are misused, have safety or quality issues, have inadequate operating guidelines, or if someone claims any of the foregoing, whether or not meritorious, we may become subject to substantial and costly litigation. Misusing our devices or their services or failing to adhere to the operating guidelines could cause significant harm to patients, including death. The foregoing events could lead to recalls or safety alerts, result in the removal of a product or service from the market and result in product liability or similar claims being brought against us.

Any product liability claims brought against us could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us. While we maintain product liability insurance, we may not have sufficient insurance coverage for all future claims. Any product liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, could harm our reputation in the industry and could reduce revenue. Product and services liability claims in excess of our insurance coverage would be paid out of cash reserves harming our financial condition and adversely affecting our results of operations.

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

Healthcare reforms, changes in healthcare policies and changes to third-party coverage and reimbursements, including legislation enacted reforming the U.S. healthcare system, and any future changes to such legislation, may affect demand for our products and services and may have a material adverse effect on our financial condition and results of operations. There can be no assurance that current levels of reimbursement will not be decreased in the future, or that future legislation, regulation, or reimbursement policies of third-parties will not adversely affect the demand for our products and services or our ability to sell products and provide services on a profitable basis. The adoption of significant changes to the healthcare system in the United States, Europe, the EEA or other jurisdictions in which we may market our products and services, could limit the prices we are able to charge for our products and services or the amounts of reimbursement available for our products and services, could limit the acceptance and availability of our products and services, reduce medical procedure volumes and increase operational and other costs. President Trump has stated that he intends to “repeal and replace” the Affordable Care Act, and Congress has taken initial steps to repeal the law. In December 2017, Congress passed and the President signed into law tax reform legislation that made significant changes to the Affordable Care Act including the repeal of the “individual mandate” that was in place to strongly encourage broad participation in the health insurance markets. Given these changes and other statements of political leaders, we cannot predict the ultimate impact on the Affordable Care Act and the subsequent effect on our business at this time. While we are unable to predict what changes may ultimately be enacted, to the extent that future changes affect how our products and services are paid for and reimbursed by government and private payers our business could be adversely impacted.

We cannot predict whether future healthcare initiatives will be implemented at the federal or state level or internationally, or the effect that any future legislation or regulation will have on us. The expansion of government’s role in any country’s healthcare industry may result in decreased profits to us, lower reimbursements by third-parties for procedures in which our products and services are used, and reduced medical procedure volumes, all of which may adversely affect our business, financial condition and results of operations.

We are or may be subject to federal, state and foreign healthcare fraud and abuse laws and regulations.

Many federal, state and foreign healthcare laws and regulations apply to medical devices. We are or may be subject to certain federal and state regulations, including the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, offering, receiving, or paying any remuneration, directly or indirectly, in cash or in kind, to induce or reward purchasing, ordering or arranging for or recommending the purchase or order of any item or service for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid; HIPAA which imposes criminal and civil liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of, or payment for, healthcare benefits, items or services; the federal Civil Monetary Penalties Law, which authorizes the imposition of substantial civil monetary penalties against an entity that engages in activities including, among others (1) knowingly presenting, or causing to be presented, a claim for services not provided as claimed or that is otherwise false or fraudulent in any way; (2) arranging for or contracting with an individual or entity that is excluded from participation in federal healthcare programs to provide items or services reimbursable by a federal healthcare program; (3) violations of the federal Anti-Kickback Statute; or (4) failing to report and return a known overpayment; the federal False Statements Statute, which prohibits knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry, in connection with the delivery of or payment for healthcare benefits, items, or services; the federal civil False Claims Act (or FCA) which prohibits, among other things, knowingly presenting, or causing to be presented claims for payment of government funds that are false or fraudulent, or knowingly making, using or causing to be made or used a false record or statement material to such a false or fraudulent claim, or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government; and other federal and state false claims laws. The FCA prohibits anyone from knowingly presenting, conspiring to present, making a false statement in order to present, or causing to be presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services, including medical devices, that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. This law also prohibits anyone from knowingly underpaying an obligation owed to a federal program. Increasingly, U.S. federal agencies are requiring nonmonetary remedial measures, such as corporate integrity agreements in FCA settlements. The U.S. Department of Justice announced in 2016 its intent to follow the “Yates Memo,” taking a far more aggressive approach in pursuing individuals as FCA defendants in addition to the corporations.

The majority of states also have statutes similar to the federal anti-kickback law and false claims laws that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, that apply regardless of whether the payer is a government entity or a private commercial entity. The Federal Open Payments, or Physician Payments Sunshine Act, program requires manufacturers of products for which payment is available under Medicare, Medicaid or the State Children’s Health Insurance Program, to track and report annually to the federal government (for disclosure to the public) certain payments and other transfers of value made to physicians and teaching hospitals as well as disclosure of payments and other transfers of value provided to physicians and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations. Our failure to appropriately track and report payments to the government could result in civil fines and penalties, which could adversely affect the results of our operations. In addition, several U.S. states and localities have enacted legislation requiring medical device companies to establish marketing compliance programs, file periodic reports with the state, and/or make periodic public disclosures on sales, marketing, pricing, clinical trials, and other activities. Other state laws prohibit certain marketing-related activities including the provision of gifts, meals or other items to certain healthcare providers. Many of these laws and regulations contain ambiguous requirements that government officials have not yet clarified. Given the lack of clarity in the laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinent federal and state laws and regulations.

The medical device industry has been under heightened scrutiny as the subject of government investigations and enforcement actions involving manufacturers who allegedly offered unlawful inducements to potential or existing customers in an attempt to procure their business, including arrangements with physician consultants. If our operations or arrangements are found to be in violation of such governmental regulations, we may be subject to civil and criminal penalties, damages, fines, exclusion from the Medicare and Medicaid programs and the curtailment of our operations. All of these penalties could adversely affect our ability to operate our business and our financial results.

The operation of our monitoring centers is subject to rules and regulations governing IDTF and state licensure requirements; failure to comply with these rules could prevent us from receiving reimbursement from Medicare and some commercial payors.

We operate two monitoring centers in the United States that receive and analyze the data obtained from our patient monitors and generate preliminary reports that are delivered to physicians. To receive reimbursement from Medicare and some commercial payors, our monitoring centers must be certified as IDTFs. As a certified IDTF, we must adhere to strict regulations governing how our monitoring centers operate, and how our technicians are trained and certified on analyzing the data received from our monitors. These rules and regulations are subject to change, and vary from location to location. Changes may require modifications at our monitoring centers, which could increase our costs significantly. If we fail to maintain IDTF certification, our services may no longer be reimbursed by Medicare and some commercial payors, which could have a material adverse impact on our business.

Audits or denials of our claims by government agencies and private payors could reduce our revenue and have an adverse effect on our results of operations.

Our business operations submit claims on behalf of patients to, and receive payments from, Medicare, Medicaid and other third-party payors. We must submit reimbursement claims under appropriate codes and maintain certain documentation to support our claims. Medicare contractors and Medicaid agencies periodically conduct reviews and other audits of claims and are under increasing pressure to more closely scrutinize health care claims and supporting documentation. Such reviews and similar audits of our claims could result in material delays in payment, as well as material recoupments or denials, which would reduce our net sales and profitability, or may result in our exclusion from participation in the Medicare or Medicaid programs. We are also subject to similar review and audits from private payors, which may result in material delays in payment and material recoupments and denials. In addition, state agencies may conduct investigations or submit requests for information relating to claims data submitted to private payors.

Losing a payor would impact our sales and adversely affect our business and operating results.

Our three largest payors in the aggregate accounted for approximately 50% of our monitoring service revenue for the year ended December 31, 2022. Our contracts with commercial payors may allow either party to terminate the agreement by providing between 60 and 120 days’ prior written notice to the other party at any time following the end of the initial term of the contract. Commercial payors may choose to terminate or not renew their contracts with us for any reason and, in some instances, can change the reimbursement rates they agree to pay. A commercial payor who terminates or does not renew their contract with us may, or may not, alter their coverage of our services. In the event any of our key commercial payors terminate their agreements with us, elect not to renew or enter into new agreements with us upon expiration of their current agreements, or do not renew or establish new agreements on terms as favorable as are currently contracted, our business, operating results and prospects would be adversely affected.

If we are found to have violated laws protecting the confidentiality and privacy of patient health information, we could be subject to civil or criminal penalties, which could increase our liabilities and harm our reputation or our business.

As part of our clinical trials and the use of our products, we may have access to medical data of patients. There are a number of federal and state laws protecting the confidentiality and privacy of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. In particular, the U.S. Department of Health and Human Services promulgated patient privacy and security rules under the HIPAA. These privacy and security rules protect medical records and other personal health information by limiting their use and disclosure, giving individuals the right to access, amend and seek accounting of their own health information and limiting most use and disclosures of health information to the minimum amount reasonably necessary to accomplish the intended purpose. We may face difficulties in holding such information in compliance with applicable law. If we are found to be in violation of the privacy and security rules under HIPAA, we could be subject to civil or criminal penalties, which could increase our liabilities, harm our reputation and have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Intellectual Property

If we are unable to obtain and maintain effective patent rights for our products and services, we may not be able to compete effectively in our markets. If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us.

We have applied for various patents, in different territories. We presently have seven patents that have been granted or allowed and four patent applications which are still pending. In addition to the protection afforded by any patents that may be granted, historically, we have relied on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes that are not easily known, knowable or easily ascertainable, and for which patent infringement is difficult to monitor and enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data, trade secrets and intellectual property by maintaining physical security of our premises and physical and electronic security of our information technology systems. Agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets and intellectual property may otherwise become known or be independently discovered by competitors.

Also, there is a risk that the patent applications that were submitted by us with regards to our technologies will not be granted. In the event of failure to obtain granted patents, our developments will not be proprietary, subject to publication, which might allow other entities to manufacture our products or develop our methods of use as services and compete with our products, technologies, and/or services, which could leave us at a competitive disadvantage.

Further, there is no assurance that all potentially relevant prior art relating to our patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our products or services, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patent applications and any future patents may not adequately protect our products or services and provide patent exclusivity for our new products or services, or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

If we cannot obtain and maintain effective patent rights for our products and services, we may not be able to compete effectively, and our business and results of operations would be harmed.

We cannot provide any assurances that our trade secrets and other confidential proprietary information will not be disclosed in violation of our confidentiality agreements or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Also, misappropriation or unauthorized and unavoidable disclosure of our trade secrets and intellectual property could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets and intellectual property are deemed inadequate, we may have insufficient recourse against third parties for misappropriating any trade secret.

Intellectual property rights of third parties could adversely affect our ability to commercialize our products and services, and we might be required to litigate or obtain licenses from third parties in order to develop or market our product candidates. Such litigation or licenses could be costly or not available on commercially reasonable terms.

It is inherently difficult to conclusively assess our freedom to operate without infringing on third-party rights. Our competitive position may be adversely affected if existing patents or patents resulting from patent applications issued to third parties or other third-party intellectual property rights are held to cover our products or services or elements thereof, or our manufacturing or uses relevant to our development plans. In such cases, we may not be in a position to develop or commercialize products or services or our product candidates (and any relevant services) unless we successfully pursue litigation to nullify or invalidate the third-party intellectual property right concerned, or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms. There may also be pending patent applications that if they result in issued patents, could be alleged to be infringed by our new products or services. If such an infringement claim should be brought and be successful, we may be required to pay substantial damages, be forced to abandon our new products or services or seek a license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at all.

It is also possible that we have failed to identify relevant third-party patents or applications. For example, U.S. patent applications filed before November 29, 2000 and certain U.S. patent applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our new products or services could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our services, our new products or the use of our new products. Third-party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in pursuing the development of and/or marketing our new products or services. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our new products or services that are held to be infringing. We might, if possible, also be forced to redesign our new products so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing new products and services. As our industries expand and more patents are issued, the risk increases that our products and services may be subject to claims of infringement of the patent rights of third parties.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, designs or methods of manufacture related to the use or manufacture of our products or services. There may be currently pending patent applications or continued patent applications that may later result in issued patents that our products or services may infringe. In addition, third parties may obtain patents or services in the future and claim that use of our technologies infringes upon these patents.

If any third-party patents were held by a court of competent jurisdiction to cover aspects of our processes for designs, or methods of use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtain a license or until such patent expires or is finally determined to be invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our products or services. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or services, or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of any patents that may issue from our patent applications, or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. We therefore cannot be certain that we were the first to file the invention claimed in our owned and licensed patent or pending applications, or that we or our licensor were the first to file for patent protection of such inventions. Assuming all other requirements for patentability are met, in the United States prior to March 15, 2013, the first to make the claimed invention without undue delay in filing, is entitled to the patent, while generally outside the United States, the first to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act (or the Leahy-Smith Act) enacted on September 16, 2011, the United States has moved to a first to file system. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted and may also affect patent litigation. In general, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents, all of which could have a material adverse effect on our business and financial condition.

We may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming, and unsuccessful.

Competitors may infringe our intellectual property. If we were to initiate legal proceedings against a third-party to enforce a patent covering one of our new products or services, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the United States Patents Trademarks Office (or USPTO), or made a misleading statement, during prosecution. Under the Leahy-Smith Act, the validity of U.S. patents may also be challenged in post-grant proceedings before the USPTO. The outcome following legal assertions of invalidity and unenforceability is unpredictable.

Derivation proceedings initiated by third parties or brought by us may be necessary to determine the priority of inventions and/or their scope with respect to our patent or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our new products or services to market.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of the Ordinary Shares.

We may be subject to claims challenging the inventorship of our intellectual property.

We may be subject to claims that former employees, collaborators or other third parties have an interest in, or right to compensation, with respect to our current patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our products or services. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. 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.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, and defending patents on products and services, as well as monitoring their infringement in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products or services and may also export otherwise infringing products or services to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products or services may compete with our products or services. Future patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, which could make it difficult for us to stop the marketing of competing products or services in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to monitor and enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Risks Related to Cayman Law and Our Incorporation in the Cayman Islands

We are a Cayman Islands exempted company with limited liability. The rights of our shareholders may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.

We are a Cayman Islands exempted company with limited liability. Our corporate affairs are governed by our Amended and Restated Memorandum and Articles of Association adopted by special resolution passed on February 16, 2023 (or the Amended and Restated Memorandum and Articles of Association) and by the laws of the Cayman Islands. The rights of shareholders and the responsibilities of members of our board of directors may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. In the performance of its duties, the board of directors of a solvent Cayman Islands exempted company is required to consider that company’s interests, and the interests of its shareholders as a whole, which may differ from the interests of one or more of its individual shareholders.

Our shareholders may face difficulties in protecting their interests because we are a Cayman Islands exempted company.

Our corporate affairs are governed by our Amended and Restated Memorandum and Articles of Association, by the Companies Act (as amended) of the Cayman Islands (or the Cayman Islands Companies Act) and the common law of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under the laws of the Cayman Islands are not as clearly defined as under statutes or judicial precedent in existence in jurisdictions in the United States. Therefore, you may have more difficulty protecting your interests than would shareholders of a corporation incorporated in a jurisdiction in the United States, due to the comparatively less formal nature of Cayman Islands law in this area.

While Cayman Islands law allows a dissenting shareholder to express the shareholder’s view that a court-sanctioned reorganization of a Cayman Islands company would not provide fair value for the shareholder’s shares, Cayman Islands statutory law does not specifically provide for shareholder appraisal rights in connection with a merger or consolidation of a company. This may make it more difficult for you to assess the value of any consideration you may receive in a merger or consolidation or to require that the acquirer gives you additional consideration if you believe the consideration offered is insufficient. However, Cayman Islands statutory law provides a mechanism for a dissenting shareholder in a merger or consolidation to apply to the Grand Court of the Cayman Islands (or the Grand Court) for a determination of the fair value of the dissenter’s shares if it is not possible for the company and the dissenter to agree on a fair price within the time limits prescribed.

Shareholders of Cayman Islands exempted companies (such as ours) have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders. This may make it more difficult for you to obtain information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

Under Cayman Islands’ law, a minority shareholder may bring a derivative action against the board of directors only in very limited circumstances, or seek to wind up the company on the just and equitable ground. Class actions are not recognized in the Cayman Islands, but groups of shareholders with identical interests may bring representative proceedings, which are similar.

Under Cayman Islands statutory law, a transferee to a scheme or contract involving the transfer of shares in a Cayman Islands company, which has been approved by holders of not less than 90% in value of the shares affected, has the power to compulsorily acquire the shares of any dissenting shareholders. An objection to such acquisition can be made to the Grand Court by any dissenting shareholder but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion. A Cayman Islands company may also propose a compromise or arrangement with its shareholders or any class of them. If a majority in number, representing at least 75% in value, of shareholders agrees to the compromise or arrangement then, subject to Grand Court approval of the same, it is binding on all of the shareholders. A shareholder may appear at the Grand Court hearing by which the company seeks the Grand Court’s approval of the compromise or arrangement to oppose it.

United States civil liabilities and certain judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands exempted company and substantially all of our assets are located outside the United States. In addition, the majority of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons is located outside the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. It may also be difficult to enforce in judgments obtained in U.S. courts based on the civil liability provisions of U.S. federal securities laws against us and our officers and directors who are not resident in the United States.

Further, it is unclear if original actions predicated on civil liabilities based solely upon U.S. federal securities laws are enforceable in courts outside the United States, including in the Cayman Islands. Courts of the Cayman Islands may not, in an original action in the Cayman Islands, recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the securities laws of the United States or any state of the United States on the grounds that such provisions are penal in nature. Although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, courts of the Cayman Islands will recognize and enforce a foreign judgment of a court of competent jurisdiction if such judgment is final, for a liquidated sum, provided it is not in respect of taxes or a fine or penalty, is not inconsistent with a Cayman Islands’ judgment in respect of the same matters, and is not impeachable under Cayman Islands law for fraud, being in breach of public policy of the Cayman Islands or being contrary to natural justice. In addition, a Cayman Islands court may stay proceedings if concurrent proceedings are being brought elsewhere.

Risks Related to Conducting Business in China

We expect that our Prizma will be manufactured by a third party in China. Operating in the Chinese market subjects us to the following and similar risks:

Changes in the Chinese government’s macroeconomic policies or its public policy could have a negative effect on our business and results of operations.

The Chinese government has implemented various measures to control the rate of economic growth in China. Some of these measures may have a negative effect on us over the short or long term. Previously, to cope with high inflation and financial imbalances, the Chinese government sharply tightened monetary policy and, in addition, enacted a series of social programs and anti-inflationary measures. These measures have, in conjunction, increased the costs on the financial and manufacturing sectors, destabilized the real estate sector and significantly slowed down the rate of economic growth in China. The Chinese government may be forced to engage in further macroeconomic policy shifts in order to limit instability and/or damage to certain business models or markets, or engage other, new practices in order to re-stimulate the rate of economic growth in China. The Chinese government’s continued attempts at managing the Chinese economy through a variety of macroeconomic policies, even if effected properly, or new practices, which the Chinese government does not have experience with, may further slow China’s economy growth and/or cause great social unrest, all of which would have a negative effect on our business and results of operations.

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.

China has recently only permitted provincial and local economic autonomy and private economic activities. The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its economic policies and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure compliance with such regulations or interpretations.

Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest of any interest we hold in Chinese properties or joint ventures.

Uncertainties with respect to the Chinese legal system could adversely affect us.

The Chinese legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. Since these laws and regulations are relatively new and the Chinese legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and the enforcement of these laws, regulations and rules involves uncertainties.

In 1979, the Chinese government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since Chinese administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.

Risks Related to Our Operations in Israel

We maintain material operations in Israel, which subjects us to the following and similar risks:

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 in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on our officers and directors and these experts.

The vast majority of our executive officers and directors and the Israeli experts named in this annual report are located in Israel. All of our assets and most of the assets of these persons are located in Israel. Therefore, a judgment obtained against us, or any of these persons, including a judgment 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 also may be difficult to affect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, 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. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court.

Potential political, economic and military instability in the State of Israel, where our management team and our research and development facilities are located, may adversely affect our results of operations.

Our operating subsidiary, along with our management team and our research and development facilities are located in Israel. In addition, the vast majority 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. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring Arab countries, the Hamas militant group and the Hezbollah. 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. Ongoing and revived hostilities or other Israeli political or economic factors, such as, an interruption of operations at the Tel Aviv airport, could prevent or delay our regular operation, product development and delivery of products. If continued or resumed, these hostilities may negatively affect business conditions in Israel in general and our business in particular. In the event that hostilities disrupt the ongoing operation of our facilities and our operations may be materially adversely affected.

In addition, since 2010 political uprisings and conflicts in various countries in the Middle East, including Egypt and Syria, are affecting the political stability of those countries. It is not clear how this instability will develop and how it will affect the political and security situation in the Middle East. This instability has raised concerns regarding security in the region and the potential for armed conflict. In Syria, a country bordering Israel, a civil war is taking place. In addition, it is widely believed that Iran, which has previously threatened to attack Israel, has been stepping up its efforts to achieve nuclear capability. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza and Hezbollah in Lebanon. Additionally, the Islamic State of Iraq and Levant, a violent jihadist group, is involved in hostilities in Iraq and Syria. The tension between Israel and Iran and/or these groups may escalate in the future and turn violent, which could affect the Israeli economy in general and us in particular. Any potential future conflict could also include missile strikes against parts of Israel, including our offices and facilities. Such instability may lead to deterioration in the political and trade relationships that exist between the State of Israel and certain other countries. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions, could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business may sometimes decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. Several countries, principally in the Middle East, still restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases. Similarly, Israeli companies are limited in conducting business with entities from several countries. For instance, the Israeli legislature passed a law forbidding any investments in entities that transact business with Iran. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.

Our employees and consultants in Israel, including members of our senior management, may be obligated to perform one month, and in some cases longer periods, of military reserve duty until they reach the age of 40 (or older, for citizens who hold certain positions in the Israeli armed forces reserves) and, in the event of a military conflict or emergency circumstances, may be called to immediate and unlimited active duty. In the event of severe unrest or other conflict, individuals could be required to serve in the military for extended periods of time. 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 similar large-scale military reserve duty call-ups in the future. Our operations could be disrupted by the absence of a significant number of our officers, directors, employees and consultants related to military service. Such disruption could materially adversely affect our business and operations. Additionally, the absence of a significant number of the employees of our Israeli suppliers and contractors related to military service or the absence for extended periods of one or more of their key employees for military service may disrupt their operations.

Our insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East or for any resulting disruption in our operations. Although the Israeli government has in the past covered the reinstatement value of direct damages that were caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred and the government may cease providing such coverage or the coverage might not suffice to cover potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions generally and could harm our results of operations and product development.

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 conditions or the expansion of our business. Similarly, Israeli corporations are limited in conducting business with entities from several countries.

Additionally, the newly elected Israeli government has announced plans to significantly reduce the Israeli Supreme Court’s judicial oversight, including reducing its ability to strike down legislation that it deems unreasonable, and plans to increase political influence over the selection of judges. These plans have prompted protests of Israeli citizens and criticism of leading Israeli business leaders as well as some foreign leaders. If such government plans are eventually enacted, they may cause operational challenges for us since we are headquartered in Israel and almost all of our employees are located in Israel. In addition, if foreign policy is negatively impacted with regard to Israel, this could impact our business with suppliers and customers which could in turn adversely impact our reputation, results of operations or financial condition.

We may be required to pay monetary remuneration to our Israeli employees for their inventions, even if the rights to such inventions have been duly assigned to us.

We enter into agreements with our Israeli employees pursuant to which such individuals agree that any inventions created in the scope of their employment are assigned to us or owned exclusively by us, depending on the jurisdiction, without the employee retaining any rights. A significant portion of our intellectual property has been developed by our Israeli employees during the course of their employment for us. Under the Israeli Patent Law, 5727-1967 (or the Patent Law) inventions conceived by an employee during the scope of his or her employment with a company, and as a consequence of such employment, are regarded as “service inventions,” which belong to the employer by default, absent a specific agreement between the employee and employer giving the employee ownership rights. The Patent Law also provides that if there is no agreement between an employer and an employee, regarding the remuneration for the service inventions, even if the ownership rights were assigned to the employer, the Israeli Compensation and Royalties Committee (or the Committee), a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for these inventions. The Committee has not yet determined the method for calculating this Committee-enforced remuneration. While it has been held that an employee may waive his or her rights to remuneration, and that a waiver of such rights may be concluded like any other agreement, in writing, orally or by conduct, pending litigation in the Israeli labor court is questioning whether such waiver under an employment agreement is enforceable. Although our Israeli employees have agreed that any rights related to their inventions are owned exclusively by us, we may face claims demanding remuneration in consideration for employees’ service inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.

Risks Related to the Ownership of our Ordinary Shares

Failure to meet Nasdaq’s continued listing requirements could result in the delisting of our Ordinary Shares, negatively impact the price of our Ordinary Shares and negatively impact our ability to raise additional capital.

On November 22, 2022, we received deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market (or the Staff) notifying us that, based on our shareholders’ deficit of $1,240 thousand as of June 30, 2022, as reported in our Report of Foreign Private Issuer on Form 6-K on November 18, 2022, we were no longer in compliance with the minimum shareholders’ equity requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain shareholders’ equity of at least $2.5 million. We had 45 calendar days, or until January 6, 2023, to submit a plan to regain compliance. We submitted our compliance plan on January 6, 2023 and made a subsequent submission on January 19, 2023.

On February 16, 2023, we received a letter from the Staff of the Nasdaq notifying us that Nasdaq had determined to delist our Ordinary Shares and tradeable warrants from Nasdaq based on (i) our non-compliance with the minimum $2,500,000 stockholders’ equity requirement for continued listing set forth in Nasdaq Listing Rule 5550(b) and (ii) providing the Staff a submission of information that contained material misrepresentations, in violation of Nasdaq Listing Rule 5250(a)(1), in relation to our extraordinary general meeting of shareholders, which was adjourned on February 9, 2023 and ultimately held and concluded on February 16, 2023. On February 23, 2023, we requested a hearing before a Nasdaq Hearings Panel (or the Panel), which stays any delisting or suspension action pending the hearing and the expiration of any additional extension period granted by the Panel following the hearing.

On May 11, 2023, the Panel granted the request for continued listing on Nasdaq subject to the requirement that we, by no later than August 4, 2023 (or the Exception Period), provide the Panel with unaudited interim financial statements for the second quarter of 2023 and demonstrate to the Panel that we continue to meet the equity requirement. Upon review of our interim financial statements for the second quarter of 2023, the Panel will decide if we demonstrated an ability to maintain compliance with the continued listing requirements on a long-term basis. In addition, from May 11, 2023 until the end of the Exception Period, the Panel reserves the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make the continued listing of our securities on Nasdaq inadvisable or unwarranted. Until the end of the Exception Period, we are required to provide prompt notification to the Panel of any significant events that may affect our compliance with Nasdaq requirements.

In addition, on May 15, 2023 we received a written notice from the Staff indicating that we were no longer in compliance with the minimum bid price requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1.00 per share. Under Nasdaq Listing Rule 5810(c)(3)(A), we have been granted a period of 180 calendar days, which can be extended by Nasdaq, to regain compliance with the minimum bid price requirement.

There can be no assurance that we will ultimately regain compliance with all applicable requirements for continued listing on the Nasdaq Capital Market in the future. If our Ordinary Shares are delisted from Nasdaq, it will have material negative impact on the actual and potential liquidity of our securities, as well as material negative impact on our ability to raise future capital.

If, for any reason, Nasdaq should delist our Ordinary Shares from trading on its exchange and we are unable to obtain listing on another national securities exchange or take action to restore our compliance with the Nasdaq continued listing requirements, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our shareholders:

Further, we would likely become a “penny stock”, which would make trading of our Ordinary Shares much more difficult.

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

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

We have never paid cash dividends on our share capital, and we do not anticipate paying any cash dividends in the foreseeable future.

We have never declared or paid cash dividends, and we do not anticipate paying cash dividends in the foreseeable future. Therefore, you should not rely on an investment in Ordinary Shares as a source for any future dividend income. Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.

Our principal shareholders, officers and directors currently beneficially own approximately 14.7 %  of our Ordinary Shares . They will therefore be able to exert significant control over matters submitted to our shareholders for approval. 

As of the date of this annual report, our principal shareholders, officers and directors beneficially own approximately 14.7% of our Ordinary Shares. This significant concentration of share ownership may adversely affect the trading price for our Ordinary Shares because investors often perceive disadvantages in owning shares in companies with controlling shareholders. As a result, these shareholders, if they acted together, could significantly influence or even unilaterally approve matters requiring approval by our shareholders, including the election of directors and the approval of mergers or other business combination transactions. The interests of these shareholders may not always coincide with our interests or the interests of other shareholders.

The market price of our Ordinary Shares may be highly volatile and such volatility could cause you to lose some or all of your investment and also subject us to litigation.

The market price of our Ordinary Shares may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:

Furthermore, in recent years, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, including medical device related technology companies in particular. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our Ordinary Shares.

In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could also harm our business.

The JOBS Act will allow us to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC, which could undermine investor confidence in our company and adversely affect the market price of the Ordinary Shares.

For so long as we remain an “emerging growth company” as defined in the JOBS Act, we intend to take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies” including:

We intend to take advantage of these exemptions until we are no longer an “emerging growth company.” We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of our first sale of common equity securities pursuant to an effective registration statement under the Securities Act, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We cannot predict if investors will find our securities less attractive because we may rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for the Ordinary Shares, and our market prices may be more volatile and may decline.

As a “foreign private issuer” we are subject to less stringent disclosure requirements than domestic registrants and are permitted, and may in the future elect to follow certain home country corporate governance practices instead of otherwise applicable SEC and Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. registrants.

As a foreign private issuer and emerging growth company, we may be subject to different disclosure and other requirements than domestic U.S. registrants and non-emerging growth companies. For example, as a foreign private issuer, in the United States, we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act, including the requirements to prepare and issue quarterly reports on Form 10-Q or to file current reports on Form 8-K upon the occurrence of specified significant events, the proxy rules applicable to domestic U.S. registrants under Section 14 of the Exchange Act or the insider reporting and short-swing profit rules applicable to domestic U.S. registrants under Section 16 of the Exchange Act. In addition, we intend to rely on exemptions from certain U.S. rules which will permit us to follow Cayman Islands legal requirements rather than certain of the requirements that are applicable to U.S. domestic registrants.

We follow Cayman Islands laws and regulations that are applicable to Cayman Islands companies. However, Cayman Islands laws and regulations applicable to Cayman Islands companies do not contain any provisions comparable to the U.S. proxy rules, the U.S. rules relating to the filing of reports on Form 10-Q or 8-K or the U.S. rules relating to liability for insiders who profit from trades made in a short period of time, as referred to above.

Furthermore, foreign private issuers are required to file their annual report on Form 20-F within 120 days after the end of each fiscal year, while U.S. domestic registrants that are non-accelerated filers are required to file their annual report on Form 10-K within 90 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information, although we will be subject to Cayman Islands laws and regulations having substantially the same effect as Regulation Fair Disclosure. As a result of the above, even though we are required to file reports on Form 6-K disclosing the limited information which we have made or are required to make public pursuant to Cayman Islands law, or are required to distribute to shareholders generally, and that is material to us, you may not receive information of the same type or amount that is required to be disclosed to shareholders of a U.S. registrant. These exemptions and leniencies will reduce the frequency and scope of information and protections to which you are entitled as an investor.

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, 2023. 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. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic registrant may be significantly higher.

We may be a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes in the current taxable year or may become one in any subsequent taxable year. There generally would be negative tax consequences for U.S. taxpayers that are holders of the Ordinary Shares if we are or were to become a PFIC.

Based on the projected composition of our income and valuation of our assets, we do not expect to be a PFIC for 2022, and we do not expect to become a PFIC in the future, although there can be no assurance in this regard.  The determination of whether we are a PFIC is made on an annual basis and will depend on the composition of our income and assets from time to time. 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 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. The tests for determining PFIC status are applied annually, and it is difficult to make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend in part on the market value of the Ordinary Shares. Accordingly, there can be no assurance that we currently are not or will not become a PFIC in the future. If we are a PFIC in any taxable year during which a U.S. taxpayer holds the Ordinary Shares, such U.S. taxpayer would be subject to certain adverse U.S. federal income tax rules. In particular, if the U.S. taxpayer did 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 the U.S. taxpayer, and any gain realized on the sale or other disposition of the Ordinary Shares by the U.S. taxpayer: (1) would be allocated ratably over the U.S. taxpayer’s holding period for the Ordinary Shares; (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. taxpayer to make a timely QEF or mark-to-market election. U.S. taxpayers that have held the Ordinary Shares during a period when we were 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. taxpayer who made a timely QEF or mark-to-market election. A U.S. taxpayer can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. We do not intend to notify U.S. taxpayers that hold the Ordinary Shares if we believe we will be treated as a PFIC for any taxable year in order to enable U.S. taxpayers to consider whether to make a QEF election. In addition, we do not intend to furnish such U.S. taxpayers annually with information needed in order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. U.S. taxpayers that hold the Ordinary Shares are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to the Ordinary Shares in the event that we are a PFIC (see “Item 10.E. Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Companies” for additional information).

We may be subject to securities litigation, which is expensive and could divert management attention.

In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or the Ordinary Shares, our share price and trading volume could decline.

The trading market for the Ordinary Shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the Ordinary Shares, or provide more favorable relative recommendations about our competitors, the price of our Ordinary Shares would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our Ordinary Shares or trading volume to decline.

Future sales of our Ordinary Shares could reduce the market price of our Ordinary Shares.

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

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

Other General Risk Factors

If we are not able to attract and retain highly skilled managerial, scientific and technical personnel, we may not be able to implement our business model successfully.

We believe that our management team must be able to act decisively to apply and adapt our business model in the rapidly changing markets in which we will compete. In addition, we will rely upon technical and scientific employees or third-party contractors to effectively establish, manage and grow our business. Consequently, we believe that our future viability will depend largely on our ability to attract and retain highly skilled managerial, sales, scientific and technical personnel. In order to do so, we may need to pay higher compensation or fees to our employees or consultants than we currently expect and such higher compensation payments would have a negative effect on our operating results. Competition for experienced, high-quality personnel is intense and we cannot assure that we will be able to recruit and retain such personnel. We may not be able to hire or retain the necessary personnel to implement our business strategy. Our failure to hire and retain such personnel could impair our ability to develop new products and services and manage our business effectively.

We will need to expand our organization and we may experience difficulties in recruiting needed additional employees and consultants, which could disrupt our operations.

As our development and commercialization plans and strategies develop and because we are so leanly staffed, we will need additional managerial, operational, sales, marketing, financial, legal and other resources. The competition for qualified personnel in the medical device industry is intense. Due to this intense competition, we may be unable to attract and retain qualified personnel necessary for the development of our business or to recruit suitable replacement personnel.

Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or patients, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

In the ordinary course of our business, we and certain of our third-party service providers, collect, process, and store sensitive data, including intellectual property, personal and medical information about our patients and our proprietary business information. The secure maintenance and transmission of this information is critical to our operations and business strategy. We rely on commercially available systems, software, tools and domestically available monitoring to provide security for processing, transmitting and storing this sensitive data.

In the event that patients authorize or enable us to sell their personal data to third-parties and/or access their data on our systems, we cannot ensure the complete integrity or security of such data in our systems as we would not control that access. Third-parties may also attempt to fraudulently induce our employees, patients or physicians who use our technology, into disclosing sensitive information. Third-parties may also otherwise compromise our security measures in order to gain unauthorized access to the information we store. This could result in significant legal and financial exposure, a loss in confidence in the security of our services, interruptions or malfunctions in our services, and, ultimately, harm to our future business prospects and revenue.

A security breach or privacy violation that leads to disclosure or modification of, or prevents access to, patient information, including protected health information, could harm our reputation, compel us to comply with disparate state breach notification laws, require us to verify the correctness of database contents and otherwise subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue. If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures in a timely manner, the market perception of the effectiveness of our security measures could be harmed, our operations could be disrupted, our brand could be adversely affected, demand for our products and services may decrease, we may be unable to provide the our service, we may lose sales and customers, and we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information, including sensitive patient data. We may be required to expend significant capital and financial resources to invest in security measures, protect against such threats or to alleviate problems caused by breaches in security. In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm. Although we have invested in our systems and the protection of our data to reduce the risk of an intrusion or interruption, and we monitor our systems on an ongoing basis for any current or potential threats, we can give no assurances that these measures and efforts will prevent all intrusions, interruptions, or breakdowns.

Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched, we may be unable to anticipate these techniques or to implement adequate preventive measures.

With respect to medical information, we follow HIPAA guidelines and, among others, separate personal information from medical information, and further employ additional encryption tools to protect the privacy of our patients and medical data. However, hackers may attempt to penetrate our computer systems, and, if successful, misappropriate personal or confidential business information. In addition, an associate, contractor or other third-party with whom we do business may attempt to circumvent our security measures in order to obtain such information, and may purposefully or inadvertently cause a breach involving such information. While we continue to implement additional protective measures to reduce the risk of and detect cyber incidents, cyber-attacks are becoming more sophisticated and frequent, and the techniques used in such attacks change rapidly.

Also, our information technology networks and infrastructure may still be vulnerable to damage, disruptions or shutdowns due to attack by hackers or breaches, employee error or malfeasance, power outages, computer viruses, telecommunication or utility failures, systems failures, natural disasters or other catastrophic events. Any such compromise could disrupt our operations, damage our reputation and subject us to additional costs and liabilities, any of which could adversely affect our business.

Depending on the nature of the information compromised, in the event of a data breach or other unauthorized access to or acquisition of our user data, we may also have obligations to notify users about the incident and we may need to provide some form of remedy for the individuals affected by the incident. A growing number of legislative and regulatory bodies have adopted consumer notification requirements in the event of unauthorized access to or acquisition of certain types of personal data. Such breach notification laws continue to evolve and may be inconsistent from one jurisdiction to another. Complying with these obligations could cause us to incur substantial costs and could increase negative publicity surrounding any incident that compromises user data. In addition, the interpretation and application of consumer, health-related and data protection laws, rules and regulations in the United States, Europe and elsewhere are often uncertain, contradictory and in flux. It is possible that these laws, rules and regulations may be interpreted and applied in a manner that is inconsistent with our practices or those of our distributors and partners. If we or these third parties are found to have violated such laws, rules or regulations, it could result in government-imposed fines, orders requiring that we or these third parties change our or their practices, or criminal charges, which could adversely affect our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices, systems and compliance procedures in a manner adverse to our business.

Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional medical device products. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize medical device products and services and compete effectively will depend, in part, on our ability to effectively manage any future growth.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

Our legal and commercial name is G Medical Innovations Holdings Ltd. We were incorporated in the Cayman Islands in 2014 as an exempted company with limited liability. Our principal offices are located at 5 Oppenheimer Street, Rehovot 7670105, Israel, and our telephone number in the United States is +1.800.595.2898. Our internet address is http://gmedinnovations.com/. None of the information on our website is incorporated by reference herein. G Medical Innovations USA Inc. serves as our agent for service of process in the United States for certain limited matters, and its address is 12708 Riata Vista Cir Ste A-103, Austin, TX 78727.

We use our website (http://gmedinnovations.com/) as a channel of distribution of Company information. The information we post on our website may be deemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website are not, however, a part of this annual report.

We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. While we currently qualify as an “emerging growth company” under the JOBS Act, we will cease to be an emerging growth company on or before June 25, 2026. As such, we are eligible to, and intend to, take advantage of certain exemptions from reporting requirements that generally apply to public companies, including the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, compliance with new standards adopted by the Public Company Accounting Oversight Board which may require mandatory audit firm rotation or auditor discussion and analysis, exemption from say on pay, say on frequency, and say on golden parachute voting requirements, and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.235 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement (i.e. June 25, 2026), (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt, or (iv) the date on which we are deemed a “large accelerated filer” as defined in Regulation S-K under the Securities Act, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior June 30th.

As a foreign private issuer, we are exempt from certain rules and regulations under the Exchange Act that are applicable to other public companies that are not foreign private issuers. For example, although we intend to report our financial results on a quarterly basis, we will not be required to issue quarterly reports, proxy statements that comply with the requirements applicable to U.S. domestic reporting companies, or individual executive compensation information that is as detailed as that required of U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual report with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. Our senior management, directors, and principal shareholders will be exempt from the requirements to report transactions in our equity securities and from the short-swing profit liability provisions contained in Section 16 of the Exchange Act. As a foreign private issuer, we will also not be subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act.

Our capital expenditures for December 31, 2022, 2021 and 2020 amounted to $2,121,000, $550,000, and $507,000, respectively. Our purchases of fixed assets primarily include laboratory equipment and establishment of our production site in Rehovot, Israel. We financed these expenditures primarily from cash on hand.

B. Business Overview

Overview

We are a next-generation mobile health (mHealth) and digital health company that develops and markets clinical and consumer medical-grade health monitoring solutions and offers end-to-end support for remote monitoring and telemedicine projects. With extensive experience in the field of medical devices, digital health and patients monitoring, we are committed to raising the global level of healthcare by empowering caregivers and patients to better monitor, manage and improve clinical and personal health outcomes. We believe that we are at the forefront of the digital health revolution in developing the next generation of mobile technologies and services that are designed to empower consumers, patients, and providers to better monitor, manage and improve clinical and personal health outcomes, especially for those who suffer from CVD, pulmonary disease and diabetes. Our business and future revenue stream can be broken down into two business areas: monitoring services and home collection kits for lab testing.

Monitoring Services

We possess innovative MCT monitors purchased from third parties that utilize sophisticated Deep Neural Network based Artificial Intelligence (AI) backend ECG processing software--Cardiologs, which we use as a powerful secondary analysis tool once the monitoring session ends. This dual analysis approach is not offered by most of our competitors. Further, we have two CMS-approved IDTFs, each staffed with experienced clinical staff and billing teams, nationwide insurance contracts, and a full portfolio of diagnostic monitoring tools, including the G-Patch devices for extended holter (AECG), the Spider device for mobile cardiac telemetry (MCT), and the Prizma device for remote patient monitoring (RPM).

As medicine and technology become integrated, we believe we are well positioned to capture market share and grow in this business area. Our product line consists of our Prizma medical device, a clinical grade device that can transform a smartphone into a medical monitoring device, enabling both healthcare providers and individuals to monitor, manage and share a wide range of vital signs and biometric indicators. In addition, we are developing a Wireless Vital Signs Monitoring System, which is expected to provide full, continuous, and real time monitoring of a wide range of vital signs and biometrics. The monitoring services include Independent Diagnostic Testing Facility monitoring services and private monitoring services.

Home Collection Kits for Lab Testing

In the second half of 2022, we took a strategic decision to divert to more comprehensive home testing solutions as an expansion of our patient services and as part of our vision to move towards a home-based health care system. On July 13, 2022, we announced that our wholly owned subsidiary, G Medical Health and Wellness, Inc., has developed seven different at-home tests to collect samples of blood, saliva, stool, urine or a vaginal swab which we expect will be available to be purchased privately by the user in a retail store or online. Once purchased, the user will be able to collect the sample in the privacy and comfort of his or her home and send the sample to our CLIA certified lab for analysis. Once it arrives at the lab, the sample will be analyzed, and results typically will be available to the customer within days in our secured and HIPAA compliant portal. In addition, on October 6, 2022, we introduced a Monkeypox consumer home health test kit, along with 23 additional new direct to consumer home collection kits with 24 to 48 hours results, all of which are expected to be available to consumers the third quarter of 2023 through popular big-box retailers, pharmacies and online. The collection kits are developed for testing health issues related to hormones, sexual transmitted disease, nutrition, colon cancer, food sensitivity, and allergies, with results going directly to the user within days. The entire data, from both vital signs and laboratory tests, is collected, and managed under one database, and give the user the ability to create, manage and control their EMR, with the ability to retrieve and share it with third parties anywhere and anytime. The prices for our at-home testing kits will range from $49 to $259.

During the first half of 2022, we operated six locations performing point-of-care tests in communities in Southern and Northern California. The volume of COVID-19 testing has decreased significantly since April 2022.  Given the decrease in COVID-19 cases, in the second half of fiscal year 2022 we decided to discontinue our COVID-19 related business activities. We have written off inventory and fixed assets related to our COVID-19 business for the fiscal year ended December 31, 2022.

Our management team is led by individuals with over 25 years of experience in developing mobile embedded medical sensors and software, algorithms and ambulatory medical devices, and with extensive experience filing for, and obtaining approval from, the FDA for medical devices, including devices approved when the members of our management team were employed at other companies. Our management has proven their ability to execute our go-to-market strategy as described below, with a proven track record medical device development and commercialization experience in the United States, China, Europe, Australia, South Africa, Japan, the Asia Pacific region and Brazil.

Our Products and Product Candidates

Our product platforms are positioned to reduce inefficiencies in healthcare delivery, improve access, reduce costs, increase quality of care and make healthcare more personalized and precise. We believe that early detection and diagnosis, as well as accessibility for all patients and providers, will positively impact the direction and cost of healthcare today.

Our current product lines consist of our Prizma device, the G-Patch for extended holter, the Spider for MCT as well as our new Patch which has received an Emergency Use Authorization (or EUA) from the FDA  for QT analysis . In addition, we are developing our VSMS.

Prizma Medical Device

The innovative Prizma is a “plug-and-play” medical device that measures vital signs with electronic medical records functionality and clinical grade reporting standards. Our Prizma can transform almost any smartphone into a medical monitoring device using wireless Bluetooth connection. Prizma presents a comprehensive health profile of the user, measuring a wide range of vital signs and biometrics including ECG, oxygen saturation, temperature, heart rate, pain levels and stress levels. Blood pressure, body weight and blood glucose measurements may be entered via Bluetooth connection to the Prizma from an external device or manually entered and tracked on the Prizma app. All of the measurements are saved and tracked on the Prizma app and on the cloud portal. Users may generate reports and share with third-parties (i.e., medical providers, family members).

The Prizma device has been designed as an invaluable tool to help manage an individuals’ health and wellness, and allow healthcare providers to analyze the collected data in order to make better treatment decisions for conditions such as diabetes and heart disease, and vital signs functions for users with a range of health management needs. The Prizma app is available for download on the Apple Store and on Google Play. Prizma is powered by an independent battery, and activated by the user when needed, making usage and transport efficient and comfortable. The user simply places his or her index fingers on sensors embedded on the Prizma device, and the software seamlessly analyzes the data using various measurement methods and algorithms. Prizma can be used on almost any mobile phone, allowing us to quickly adapt the application to new smartphones.

Along with our Prizma device, we offer a remote patient monitoring service (or RPM) for chronic patients. The Prizma device can record various vital signs as frequently as needed on the go and such recordings are being analyzed and presented on a monthly report for physicians to keep track of their patients’ vitals. This service can be provided as a monthly recurring service as long as prescribed by the physician. Prizma is reimbursed monthly per patient under CPT code 99453, 99454, 99457 and additional codes, at a onetime rate of approximately $17 and a monthly rate of approximately $50 to the Company.

The Prizma is capable of monitoring the following:

ECG	Body temperature	Heart rate	Sp02	Stress	Blood pressure	Weight	Blood glucose

The Prizma device is currently available as a standalone model, as pictured below.

The Prizma platform provides clients with a one-stop, multi-function and multi-account platform providing secure access to a private cloud healthcare solution powered from a remote cloud infrastructure. The portal syncs all Prizma device measurements to the doctor’s dashboard automatically and notifies of any abnormalities. Patient reports can be generated and downloaded to integrate seamlessly within the physician’s Electronic Health Record. Prizma is compatible with iOS 11.0 or above, Android 6.0 or above and Smartphone Bluetooth BT SIG 4.2.

Monitoring Station:

Physician’s Portal:

User Portal:

Prizma Reports:

This Prizma platform allows our customers to enter and see all their medical information in a single platform. The information is stored on the platform and is also accessible to physicians. In addition, the system allows users to see and print reports with personal medical information and share such reports with third parties. This makes each interaction and use easy and simple.

Our Prizma device addresses the monitoring needs of many individuals, including those suffering from a wide range of diseases:

In August 2017, we received 510(k) clearance (under prescription) for our Prizma device from the U.S. FDA, and in September 2017 we received CE mark. These clearances were followed by approval received in November 2017 from the Therapeutic Goods Administration (or the TGA). In March 2020, we received registration with the Italian Health Ministry’s database of medical products. In April 2020, the U.S. FDA granted us OTC authorization based on an EUA policy which remained in force during the public health emergency related to COVID-19 until May 11, 2023, during which time we were allowed to sell the Prizma device directly to consumers without a physician’s prescription.  In April 2020, we received Taiwan FDA approval for our Prizma device. We are also preparing our application to the Chinese National Medical Products Administration (or NMPA) for our Prizma device. 

Despite the fact that regulatory clearances and approvals were received in 2017, since the Prizma device is a novel and innovative product, and due to first to market penetration, the market acceptance of the product was slow. In addition, the Current Procedural Terminology codes covering Prizma RPM were only approved by the Centers for Medicare & Medicaid Services (or CMS) in November 2019. We intend to continue our market education efforts for our Prizma device and other products, in order to enhance market acceptance.

Extended Holter Patch System

Our Extended Holter Patch System is a multi-channel patient-worn biosensor that captures ECG data continuously for up to 14 days. We believe that multi-channel ECGs can deliver higher predictive values with more actionable data, which enables a more accurate diagnosis. In addition, the Extended Holter Patch System allows patients to capture any symptomatic event by tapping a button on the recorder and documenting their activity and symptom in the patient diary. This correlates the ECG activity and provides physicians with more contextual data to make a diagnosis. Following the monitoring session, the device is returned to us and the data is uploaded to our secure cloud for analysis. A concise clinical report of preliminary findings is generated by certified cardiac technicians, validated through a quality assurance (or QA) process, and made available to the physicians on our secure physician portal.

The modular and easy-to-use patch solution utilizes a body worn sensor, a removable recorder, a secure cloud platform and a clinical reporting system. The patch has a very soft fabric format, and its water-resistant technology allows showering without removing the patch. These attributes encourage patients to wear the sensor all day long, resulting in more meaningful data, enabling more accurate diagnosis and timely treatment decisions. Clinical studies have demonstrated that wearable patch technologies can improve a physician’s ability to more accurately detect arrhythmia, allowing them to change the course of treatment. In November 2017, we received the CE mark for our Extended Holter Patch System, and in May 2020 we received TGA approval. In May 2021, we received emergency clearance from the U.S. FDA to use our Extended Holter Patch System for patients with suspected or identified QT prolongation syndrome.

Our Patch recorder provides up to six channels of ECG and can be used for up to 14 days of ECG monitoring. The Patch records and transmits the ECG data to a smartphone which acts as a gateway to our call center. The base line ECG signal, system and electrode status are verified before starting the enrollment process. The frequency of transmissions can be set by the healthcare provider while the default setting of the device is to record and transmit 10 minutes of ECG data every hour. The data is saved and wirelessly transmitted by the user’s smartphone to our monitoring call center for QT prolongation syndrome detection capabilities analysis. The call center in turn sends the report to the prescribing physician at the hospital.

In May 2020, the U.S. FDA approved under EUA the use of our Patch in order to detect QT prolongation syndrome in a hospital setting for remote monitoring of the QT interval prolongation of an ECG. The EUA policy remained in force during the public health emergency related to COVID-19 until May 11, 2023.

Our Market Opportunity

Telemedicine and Mobile Health Market Opportunity

In 2019, health care spending in the United States topped $3.8 trillion—nearly 18% of the gross domestic product, or GDP—as projected by the CMS Office of the Actuary. Prior to the COVID-19 pandemic, Deloitte projected health spending would continue to grow at a rate of 5.3% a year, reaching nearly $6.2 trillion by 2028. If those increases were to continue unabated over the next 20 years, health spending could reach a staggering $11.8 trillion by 2040. Although the pandemic caused people to defer care throughout much of 2020, a rebound and then continuation of the trends beyond 2021 would drive health care spending to historic levels in the coming years.

According to data published by the American Hospital Association, in 2020 there were approximately 33 million admissions in all U.S. hospitals. The total expenses for all U.S. hospitals were approximately $1 trillion.

According to data published by the Centers for Disease Control and Prevention, in 2019 there were approximately 147 million hospital visits and approximately 884 million doctor visits in the United States alone, and an equal number of diagnostic data sets collected. Healthcare providers require diagnostic data to evaluate patients before, during and after medical interactions. A standard set of health diagnostics data is routinely collected at each healthcare interaction, including patients’ temperature, blood pressure, weight, heartrate, SPO2, blood glucose, ECG and stress.

Telemedicine provides potential answers to major healthcare challenges, including improved productivity and efficiency, and better utilization of centralized assets and scarce talent resources. A recent report by the OECD states that several elements must be in place to ensure the widespread delivery of teleconsultations and other telemedicine applications:

Recent developments in the COVID-19 pandemic enabled the breaking of some of the barriers associated with the use of telemedicine technologies, and we believe that telemedicine is recognized as an essential instrument in healthcare by patients and healthcare providers and it is now widely believed that there will be a significant increase in the use of telemedicine services. While prior to COVID-19, patients and healthcare providers often preferred in-person meetings and expressed hesitation to the use of telemedicine as a substitute, the situation created following the spread of COVID-19, has demonstrated that telemedicine enables safe, efficient and cost-effective treatment and monitoring. Telemedicine services have the potential to facilitate medical care for both confirmed COVID-19 patients and non-COVID-19 patients, while protecting patients and healthcare providers. According to a consumer survey from McKinsey & Company from April 2020, consumer adoption of telehealth products has skyrocketed in light of COVID-19, from 11% of U.S. consumers using telehealth in 2019 to 46% of consumers using telehealth after April 2020. In addition, it is estimated that approximately $250 billion, which represents approximately 20% of all Medicare, Medicaid, and Commercial outpatient, office, and home health spend, could potentially be virtualized.

Even before COVID-19, mHealth was a fast-growing market, and data suggests this trend is going to continue. The World Health Organization (or WHO) defines mHealth as “medical and public health practice supported by mobile devices such as mobile phones, patient monitoring devices, personal digital assistants, and other wireless devices.” According to a report published by research2guidnace, mHealth is projected to have the highest positive impact on reducing costs associated with:

With the growing penetration of smartphones and internet connectivity, the adoption of mHealth technologies by physicians and patients has increased considerably. According to research by Grand View Research, the global mHealth market size was valued at $56.8 billion in 2022 and is expected to expand at a compound annual growth rate of 10.8% from 2023 to 2030. The mHealth apps segment dominated the market for mHealth and accounted for the largest revenue share of 76.5% in 2022, that was a result of increasing penetration of the internet and smartphones and the growing adoption of mobile health apps by healthcare professionals and the patient.

According to a report published by Precedence Research in August 2022, the IoT healthcare market (meaning the market for interrelated computing devices and mechanical and digital machines targeting healthcare such as our products) is projected to reach approximately $261.7 billion by 2023 and $960 billion by 2030. According to SEC filings made by Fitbit, Inc., it was able to sell 16 million of its devices in 2019 alone. We believe that a rising adoption of wearable technology and a growing geriatric population coupled with the rising prevalence of chronic conditions, which affects six in ten Americans, are among the key factors driving the market expansion.

With the growing penetration of smartphones and internet connectivity, the adoption of mHealth technologies by physicians and patients has increased considerably. This specially holds true for mobile healthcare apps, including fitness and medical apps, with fitness and wellness holding a significant share of the total mHealth apps market. Moreover, the healthcare industry exhibits a high growth potential for the IT industry due to supportive government initiatives across all regions.

According to a March 2020 report from MarketsandMarkets, the global telehealth market is projected to reach $55.6 billion by 2025, which is a significant increase from $25.4 billion in 2020. The growth is projected at a CAGR of 16.9% during the forecast period. According to the report, North America dominates the telehealth market by region, due to factors such as the rising prevalence of chronic conditions, the need to reduce healthcare expenditure, increasing overall and geriatric population. However, the Asia Pacific market is expected to grow at the highest rate during the forecast period, owing to the prevalence of chronic diseases and the overcrowding of hospitals.

According to a May 2020 report from McKinsey & Company, in order to realize the full potential of telehealth, the market requires, among others, increased access to remote monitoring devices for specific clinical conditions (glucose monitoring for diabetes; heartbeat and blood pressure monitors for cardiovascular conditions). Also, providers may be required to integrate these types of devices into care plans. Payers may need to offer reimbursement, and solutions may need to enable integrated access between, for example, primary care physicians, care managers, and at-home caregivers. These services could also require the deployment of supportive patient engagement tools (for example, digital coaching, care plan navigation tools), tailored to patients’ needs and integrated with communication channels to providers, care managers, and others involved in their care.

United States

According to the Deloitte 2020 Survey of US Health Care Consumers, which surveyed 4,522 consumers between February 24 and March 14, 2020, and the Health Care Consumer Response to COVID-19 Survey (together, the Deloitte Surveys), which surveyed 1,510 consumers about their health, experiences, and behavior in mid-April to early May 2020, the percentage of consumers using virtual visits increased from 19% at the beginning of 2020 to 28% in April 2020. Moreover, the data shows an increase in consumer willingness to share data in every scenario measured in the graph below.

In addition, the Deloitte surveys reveal that about a third to half of consumers are comfortable using at-home diagnostics for various reasons, as demonstrated in the graph below. Younger generations are more comfortable across the board. The largest gaps in comfort levels by generation are for genetic tests (24% of seniors as opposed to 47% of Gen Z and millennials) and at-home blood tests to track overall health (28% of seniors as opposed to 47/48% of Gen Z and millennials).

A study conducted by the Society for Cardiovascular Angiography & Intervention, that surveyed 1,068 responses from a nationally representative sample over age 30, found that more than 50% of Americans are avoiding care for medical emergencies such as heart attack, due to the fear of contracting COVID-19. Health systems, independent practices and others telehealth providers are reporting 50 to 175 times more telehealth visits compared to the number of telehealth visits pre-COVID-19. In addition, 57% of health providers view telehealth more favorably than they did before COVID-19 and 64% are more comfortable using it.

CMS have recently expanded access to Medicare telemedicine services on a temporary and emergency basis under the 1135 waiver authority and Coronavirus Preparedness and Response Supplemental Appropriations Act (Phase 1), so that beneficiaries can receive a wider range of services from their physicians without the need to attend a healthcare facility. Under the COVID-19 new guidelines, beginning March 6, 2020 and for the duration of the COVID-19 public health emergency, Medicare is able to pay for office, hospital, and other visits furnished via telemedicine across the country, including in patients’ homes.

In addition, in November 2018, CMS finalized changes to the 2019 Physician Fee Schedule and the Quality Payment Program and will now pay providers for communication technology-based services. Through the rule, CMS is also expanding the number of Medicare-covered telemedicine services to include “prolonged preventive service(s)”. CMS will pay physicians for their time when they check in with Medicare beneficiaries via telephone or another telecommunications device. Physicians will also be paid for the time it takes to review a video or image sent by a patient to assess whether a visit is needed.

China

According to a March 2020 report from Statista and data from the Organization for Economic Co-operation and Development, China is facing a significant shortage of physicians with two doctors for every 1,000 people, compared to 2.6 doctors per 1,000 people in the United States and 3.7 per 1,000 people in Australia. Accordingly, the Chinese government has made healthcare a priority.

In addition, in China the distribution of superior medical resources is extremely uneven. More than 70% of the third-level grade-A hospitals are located in the eastern region, making the potential demand for telemedicine in the central and western regions disproportionately much larger.

Data source: chyxx.com - The proportion of third-level grade-A hospitals in the three regions in 2018

According to the China Power Project, China’s population is growing old at a faster rate than almost all other countries, due to increased life expectancy and decreased birth rate as a result of China’s 36-year one-child policy. In 2017, in China, the proportion of Chinese citizens above 60 years old obtained 17.3 percent, approximately above 241 million. It is expected that China’s 65-year-old population will reach 487 million, or nearly 35 percent in 2050. China’s looming demographic shift presents considerable social and economic challenges. According to China Briefing, the changing of demographics in China have led to a population where chronic disease is more prevalent than in the past. As a result, there is a higher demand for disease management and ongoing monitoring.

In addition, a draft of China’s Law on the Promotion of Basic Medical and Health Care approved by the National People’s Congress became effective in June 2020. The draft law contemplates the promotion of telemedicine services, which has been expedited by the COVID-19 outbreak. In 2016, the government launched Healthy China 2030. There is currently a government mandate that prioritizes healthcare which AI and digital health will help to fill the gap, with telemedicine making it possible to increase the number of people receiving real time consultation.

Both local and foreign companies are investing in the development of specialized and differentiated private hospitals, along with innovative aged care. According to Research and Markets, China, the world second largest economy, is forecast to reach an estimated mHealth market size of $25.6 billion in 2027, representing a CAGR of 22.1% from 2020 through 2027.

mHealth is being driven by increase in aging population over the age of 60 and a lack of access to quality healthcare-services and limited resources that hinder a physicians’ ability to provide sufficient time beyond treatment and diagnosis.

mHealth can also be used in more rural parts of China to help resolve accessibility challenges. The current policy environment in China is playing an important role in promoting industry development and facilitating medical treatment through combining Internet technology with China’s health industry. Internet hospitals have become a service platform that integrates online appointments, consultations, prescribing and delivering medicine, and online and offline diagnosis and treatment with the help of Internet technology. Integrating physical hospitals into the platform provides strong support for Internet hospitals in conducting consultations, follow-up visits, and chronic disease management on the Internet. Remote monitoring and other mHealth solutions break through space limitations of physical hospitals but also work synergistically with physical hospitals, so people in remote areas can also have access to high-quality medical treatment.

According to a July 2020 article in the Journal of Medical Internet Research titled “The Internet Hospital as a Telehealth Model in China: Systematic Search and Content Analysis”, by January 2019, the number of registered internet hospitals expanded to approximately 130 in 25 provinces, accounting for 73.5% of all provinces or province-level municipalities in China. Internet hospitals, as a new telehealth model, are distinct but overlap with online health, telemedicine, and mobile medical.

Source: J Med Internet Res (July 2020)

The figure below, included in a September 2021 article in the Journal of Medical Internet Research titled “Running an Internet Hospital in China: Perspective Based on a Case Study”, shows the number of patients that received services from internet hospitals from October 2019 to September 2020. From January to April 2020, due to the COVID-19 epidemic, the number of patients using internet hospitals soared. Since then, the epidemic in China has been stable, and most patients have returned to offline treatment; however, the overall number has increased.

Source: Running an Internet Hospital in China: Perspective Based on a Case Study. J Med Internet Res 2021

Source: Asian Hospital & Healthcare Management. mHealth in China

Monitoring Services Market Opportunity

According to CMS, two-thirds of Medicare beneficiaries have two or more chronic conditions. Such conditions often require continuous medical monitoring. In addition, an estimated 5.86 million ambulatory ECG diagnostic tests were prescribed by physicians in the United States in 2020, which represents a $2.21 billion market opportunity. With an estimated 13% CAGR (from 2015 to 2025), this represents a very healthy market for our arrhythmia monitoring technologies and service platform. Although there is little data outside of the United States, we believe additional markets exist due to an ageing global population, unhealthy lifestyles and prevalence of Atrial fibrillation. Clinical research has also shown that traditional ambulatory cardiac monitoring tools, such as Holter and event monitors, do not collect the required amount of data for making a definitive diagnosis, as these older devices may have too short of a monitoring time, may not continuously collect ECG data, or patients will not wear the device (low patient compliance). Hospitals and physicians are also outsourcing more of their ambulatory ECG monitoring needs, in order to minimize costs and workflow burden. According to a report on Mobile Cardiac Telemetry Systems Market Size, Share and Trends by Grand View Research, the global mobile cardiac telemetry systems market size was estimated at $833.8 million in 2021 and is expected to register a compound annual growth rate (CAGR) of 12.1% from 2022 to 2030. 

Our innovative technologies and proprietary software and algorithms have the ability to improve patient compliance, provides continuous monitoring and multiple channels of ECG, which ensures higher diagnostic yields that can deliver better clinical outcomes.

Integrated Delivery Networks

Third-party research estimates that the global healthcare big data analytics market was worth $19.6 billion in 2018 and is projected to reach a value of $47.7 billion by 2024, registering a CAGR of around 16% from 2019 to 2024. This data will be augmented by patient-generated health data (or PGHD), which is data primarily captured and recorded by the patient themselves, allowing them greater ownership over their own health. Integrating PGHD into electronic health records will help providers understand the patient experience, increase efficiency and productivity of clinical trials, improve the prediction of addressable treatment toxicities, and ultimately improve quality of care and clinical outcomes. The United States could reach a “critical mass” of physicians using PGHD from devices such as wearables by 2020, according to new research released by the Consumer Technology Association. Additionally, insurers are offering free remote monitors/wearables and cash incentives to subscribers who meet certain health goals.

Concierge Medicine

Concierge medicine can be defined as a B2B2C model. Currently, about 12,000 physicians in the United States offer concierge healthcare services. This niche market is growing due in part to organizations that recruit physicians to manage concierge practices. Concierge physicians have fewer patients, offer same-day appointments and longer office visits, and participate in email and phone communication. Studies have found that patients with concierge medicine physicians are more satisfied and have fewer visits to ERs and specialists, thus resulting fewer hospitalizations, fewer emergency department visits, and better control of hypertension and diabetes. A study published in The American Journal of Managed Care, found a 79% reduction in hospital admissions for Medicare patients in concierge medicine affiliated practices, compared with those in traditional practices.

Direct Primary Care

Direct primary care (or DPC) can also be defined as a B2C model. DPC practices have a direct financial relationship with patients and provide comprehensive care and preventive services. This is a mass-market variant of concierge medicine, with the biggest difference being that the DPC model charges a flat rate fee that often includes most or all physician services. The monthly fee typically includes basic checkups, same-day or next-day appointments, and the ability to obtain medications and lab tests at or near wholesale prices. The DPC model does not rely on insurance co-pays, deductibles or co-insurance fees. All DPC providers recommended patients have some form of insurance, or take part in a healthcare sharing plan that functions like insurance, as a patient is not protected financially if they have a health issue outside the scope of primary care.

Our Ecosystem

The following is a depiction of the ecosystem in which our products and services are intended to play a role:

We anticipate that our next generation mobile technologies will empower both users and businesses to better utilize their business processes by merging them into a coherent ecosystem. We plan to provide users (individuals or families) products and services, and collect valuable data and monetary inflows at the same time. We also plan to serve businesses (including hospitals, pharmacies, elderly care institutions, research institutions, etc.) by establishing a direct linkage using mobile technology to maximize the value of user data, which is more than ever needed by businesses.

Our Strategy

Our strategic objective is to participate in the large and growing worldwide mHealth marketplace by developing and commercializing innovative next generation telemedicine solutions and monitoring service platforms. Using our proprietary and patented suite of devices and software solutions, we are implementing a go-to-market strategy aimed at establishing and growing multiple recurring revenue streams across consumer and professional healthcare verticals, with a primary geographical focus on the United States and China. Our business activities in the United Kingdom, Europe, Australia and elsewhere in Asia have been paused to focus on the United States and China.

Our current strategic commercial activities are focused on:

We will lease the Vital Signs System to hospitals on a per day fee model. The device can then be prescribed by a physician for monitoring patients in the hospital, and in pre-admission and post discharge programs. Once a patient is discharged, we anticipate that patients may continue monitoring services by using the Prizma device.

In addition, cloud monitoring services from the Prizma device are anticipated to be offered based on a two tier program: monitoring over the cloud by sending the data and receiving automatic feedback; and monitoring with access to a professional clinical call center that can provide real time feedback to the customer and ability to triage with a healthcare professional.

Implementation of Our Strategy in the United States

Our monitoring center strategy is to be the go-to provider of innovative cardiac monitoring services in the United States. We plan to further expand by targeting all healthcare providers who can benefit from our comprehensive service offerings, which include our Extended Holter Patch System, MCT, event and traditional Holter devices. Our customers demand a wider range of offerings as one device type does not fit all needs.

To penetrate this market and drive growth, we plan to:

In addition to the 2017 acquisition of CardioStaff, in November 2018 we executed on our acquisition strategy with the purchase of Tennessee-based Telerhythmics, in the amount of $1.95 million. Founded in 1996, Telerhythmics provides on-site and remote arrhythmia-monitoring services to doctors and physicians. These services include MCT, event and Holter monitoring. The acquisition brings additional payer contracts, clinical and logistical scalability, access to additional monitoring technologies and an existing platform for launching our proprietary technologies into the important digital health space. We are working on a smooth integration and will disclose these plans in the coming months. For the foreseeable future, Telerhythmics, a wholly-owned subsidiary of G Medical Innovations USA Inc., will run operations in a separate facility, but with synergistic opportunities that will help us achieve higher profitability.

In April 2020, we entered into a distribution agreement with LiveCare Corp. (or LiveCare), a U.S.-based remote patient solutions company. Pursuant to the agreement, LiveCare will promote the sale of and distribute our Prizma device in the United States. As part of the agreement, we will work with LiveCare to integrate the Prizma device into LiveCare’s Link+ platform, which will be offered directly to consumers. The Link+ platform is a 4G smart home gateway that integrates an array of medical devices into a patient’s home using a simple, touch-free syncing process. The agreement is for an initial period of three years, unless notice of termination is provided by either party, and will automatically renew for successive one year terms thereafter, unless either party provides notice of its intent not to renew the agreement at least 30 days prior to the applicable anniversary date. There are no minimum sales commitments under the agreement.

In April 2020, we entered into a distribution agreement with All County Health Care Inc. (or All County), a Medicare certified home health company specializes in the provision of quality home-based healthcare services. Under the agreement, All County will distribute our Prizma in the United States and will offer customers certain additional Prizma related services. The agreement does not provide for a term. In addition, there are no minimum sales commitments under the agreement.

GRS Marketing Services Agreement

On September 30, 2020, we entered into a media and marketing service agreement (which we refer to as the GRS Agreement) with GRS, an affiliate of Guthy-Renker, LLC. Guthy-Renker is one of the largest and most respected direct marketing companies in the world. Since 1988, Guthy-Renker has discovered and developed dozens of consumer products in the beauty, skincare, and wellness categories.

Pursuant to the GRS Agreement, GRS will, for a three-year term, exclusively oversee all television production, radio creative and social media for our company in the United States, including our Prizma mobile medical monitor and other consumer products and services. GRS will manage all television advertising, social and radio media buying, based on approved monthly budgets.

In consideration of GRS’ marketing advisory and creative services, we shall pay to GRS a low five-digit monthly retainer and a low single digit percentage gross sales commission on all of our U.S. sales of consumer products and services, but excluding IDTF revenue. We have also agreed to issue to GRS the GRS Warrant, which is a nine year warrant exercisable for 526,338 Ordinary Shares (after giving effect to adjustments including the November 2022 Reverse Split). The GRS Warrant vested in two equal tranches, the first immediately (with such warrant having an exercise price of A$4.5 (approximately $3.15) and the second on the first anniversary of the execution of the GRS Agreement (with such warrant to have an exercise price the lesser of a fifty percent discount to the price to the public in our initial public offering or fifty percent discount to the price of our Ordinary Shares on the date of vesting).

Under the GRS Agreement, if we terminate the GRS Agreement within twelve months from signing a definitive agreement, then we will be restricted from using or buying any television, radio, digital or social media advertising in the United States for twelve months following the date of termination. Such restriction will not apply if we choose to accelerate the vesting of the GRS Warrant. In addition, such restriction will not apply if we and GRS fulfill their respective obligations under the GRS Agreement through the end of the three-year term.

We have suspended our obligations under the GRS Agreement due to a failure by GRS to fulfill its obligations. We have begun to evaluate our options for legal recourse against GRS to obtain fulfilment of GRS’s obligations or to receive amounts that were previously paid by us to GRS.

UnityPoint Health Pilot

On April 16, 2021, we were notified that the Cardiovascular Services arm of UnityPoint Health Methodist (or UnityPoint) in Peoria, Illinois was entering into a pilot program with us, for using our Prizma device on cardiac patients. We were advised that the pilot will initially include 500 patients, who will be monitored remotely to detect abnormal heart rate and conditions associated with a decrease in the oxygenation of the lungs such as worsening hear failure. As part of the pilot, our monitoring call centers will provide constant reporting and will use our device to detect any cases of emergent need for cardiac care. It is intended that in the event that an abnormality will be detected, the patient will be seen by a cardiology provider at UnityPoint’s Peoria clinic, potentially preventing unnecessary visits to the emergency room and hospitalization.

Heartbuds Collaboration

On November 30, 2021, we entered into a joint development, licensing and distribution agreement with Heartbuds AK, LLC. Heartbuds is a medical device company that developed a medical device used with a smart phone to enable doctors and others to listen to and record a patient’s heart and lungs (or HB1).

Pursuant to the joint development agreement, we and Heartbuds will jointly develop a newer, enhanced model or generation of the HB1 to be included with the sale and distribution of our Prisma (or HB2). According to the agreement, Heartbuds has the right to develop, promote, market, license, sell and distribute the HB1, the HB2 and any other newer models and generations thereafter (or collectively the HB Devices), independent of the Prisma.

In consideration for the licensing rights and distribution, we will pay to Heartbuds the following royalties with respect to each subscription, lease, sale or other similar transaction involving the Prisma that includes any HB Device: (i) a recurring $0.25 per month royalty for each lease or subscription; and (ii) a one-time royalty of $2.50 for each sale. In return, Heartbuds will pay us the following royalties with respect to each subscription, lease, sale or other similar transaction of an HB Device that does not include a Prisma unit and is with a party that is unaffiliated with our marketing or sales: (i) a recuring monthly royalty of 5% of lease or subscription fees for each lease or subscription and (ii) a one-time royalty of 5% of the sales price for each sale. In addition, on the date of the agreement, we provided Heartbuds with the following additional consideration: (i) 3,265 of our Ordinary Shares, and (ii) $1,000,000 in options to acquire our Ordinary Shares at an exercise price of $114.45 per share. From the date that the HB2 will be approved by the U.S. FDA until the last day of the 18-calendar month thereafter, the options shall vest on a pro rata basis based on the actual number of devices that Heartbuds will sell to be calculated relative to the agreed target of 20,000 devices.

Both we and Heartbuds may terminate the agreement if the U.S. FDA has not approved the HB2 on or before the third anniversary date of the agreement.

Implementation of Our Strategy in China

Since May 2018, we have been in contact with Dongtai City Internet Hospital (or the Dongtai Hospital) on several occasions. The Dongtai Hospital provides patients with various remote health services including online medical consultation, health monitoring, extension of prescriptions and more. The Dongtai Hospital has purchased 100 Prizma devices to be used as part of a pilot for their Citizen Health System Program which is aimed at connecting the clinics located in villages, district hospitals and the City Third Grade Class-A hospital together through the internet.

The Prizma devices purchased by the Dongtai Hospital will be used by nursing homes, allowing the collection of residents’ vital signs data without having them to visit a medical institution, and storing the data in the database system. The sharing of data will enable efficiency in monitoring and treatment, and will allow doctors from the lower level hospitals to consult with doctors form the higher-level hospitals at any time.

During the outbreak of COVID-19, we received positive feedback from the Dongtai Hospital team that indicated that our Prizma device may provide an efficient solution that fits their need to monitor patients’ body temperature and blood oxygen remotely. Commercialization of the project is on hold and dependent upon NMPA approval being granted.

We have commenced the process of penetrating the Chinese market. To this end, we:

Our Home Testing Kits Business

In summer 2022, we took a strategic decision to divert to more comprehensive home testing solutions as an expansion of our patient services and as part of our vision to move towards a home-based health care system. On July 13, 2022, we announced that out wholly owned subsidiary, G Medical Health and Wellness, Inc., has developed seven different at-home tests. In addition, on October 6, 2022, we introduced a Monkeypox consumer home health test kit, along with 23 additional new direct to consumer home collection kits with 24 to 48 hours results, all of which are expected to be available to consumers during the third quarter of 2023 through popular big-box retailers, pharmacies and online. The tests are developed for testing health issues related to hormones, sexual transmitted disease, nutrition, colon cancer, food sensitivity, and allergies, with results going directly to the user within days. The prices for our at-home testing kits will range from $49 to $259.

On June 27, 2022, we entered into a wholesale sales consulting agreement with Ideaology 360, LLC (“Ideaology 360”) to engage Ideaology 360 to serve as our exclusive wholesale sales representative in the United States to assist us with, among other things, developing and implementing our overall strategic plan for online and retail sales of our at-home test kits, developing marketing and advertising campaigns to create awareness and drive sales of our at-home test kits as well as educating a national sales broker team about our at-home test kits. The term of our agreement with Ideaology 360 is one year and automatically renewable for successive one year terms, unless either of us provides the other party with 60 days written notice prior to the end of the relevant term. Ideaology 360 will be paid a monthly fee plus sales commission for its services to us.

Our COVID-19 Testing and Laboratories Services

In December 2021, we launched our COVID-19 testing business in the State of California, providing four kinds of diagnostic tests –Rapid Antigen, A/B Flu, PCR and Antibody tests and operated in six locations performing point-of-care tests in communities in communities in Southern and Northern California. The volume of COVID-19 testing has decreased significantly since April 2022.  Given the decrease in COVID-19 cases, in the second half of fiscal year 2022 we decided to discontinue our COVID-19 related business activities. We have written off inventory and fixed assets related to our COVID-19 business for the fiscal year ended December 31, 2022.

Our Monitoring Services

Our monitoring services in the United States focus on two main verticals:

Independent Diagnostic Testing Facility (IDTF) Monitoring Services

Our provision of IDTF monitoring services is comprised of arrhythmia monitoring services for patients (including MCT, extended Holter and CEM), and use our Prizma device’s RPM of vital signs on a daily basis and generating reports that allow physicians to track their patients’ health condition.

The graphic below represents the workflow being done by our medical monitoring service centers, from the moment a single patient is enrolled in the service until a summary medical report is delivered to the prescribing physician.

An IDTF can sell services as a provider to physicians, hospitals and patients. All services are provided according to physician’s prescription done through the enrollment form on our proprietary website. After receiving an enrollment form, we will verify that the patient has an insurance coverage for the service requested by the physician and then will provide the patient, directly or through a physician, with the monitoring device. The patient will wear the monitoring device during the total service monitoring time, and we will monitor and support the patient and send medical notifications to the patient’s physician, according to the type of service provided. Once service is completed, we will send the physician an end-of-session report with a summary of all relevant information detected during the service period. We will also send the bill out to the relevant insurance company and collect the money according to the specific CPT code and monitoring services that were provided.

Under the IDTF umbrella, we offer four types of services for remote cardiac monitoring:

We entered the U.S. arrhythmia monitoring services industry through our December 2017 acquisition of CardioStaff, an IDTF based in Austin, Texas. The IDTF provides physicians and hospitals with 24/7 remote cardiac monitoring services which utilize our Holter, extended Holter, MCT and event monitoring devices. CardioStaff was rebranded as GMedDx and is expected to serve as a platform for introducing our innovative suite of clinical-grade products into outpatient settings, physician practices, hospitals and senior care facilities in the United States.

In November 2018, we acquired a second IDTF, Telerhythmics, based in Memphis, Tennessee. Telerhythmics operates mainly across the Southeastern United States, and provides hospitals and physicians with cardiac monitoring services including MCT, Holter and event monitoring. In addition to its traditional activities, Telerhythmics will utilize the Prizma device for RPM services.

We have entered into approximately 140 commercial payor agreements across local, regional and national markets as well as an agreement with CMS, which provides health coverage to more than 100 million people.

In May 2019, we entered into PPAs with Prime Health Services, Inc and Ancillary Care Services, Inc. The PPAs have further and significantly increased our footprint in the healthcare delivery system of cardiac monitoring and provide more exposure to our future patient base and third-party payer populations.

We have been approved and CPT-coded with more than 150 healthcare insurance providers to be reimbursed by our services.

Private Monitoring Services

In addition to IDTF monitoring services, we will provide private monitoring services, utilizing our Prizma device. Under the private service umbrella, we offer three main lines of services:

Manufacturing

Our Prizma device and Extended Holter Patch System are expected to be manufactured by a high quality third party in China, which has all the applicable regulatory approvals. The third party also has manufacturing sites in the United States. Currently, we use contract manufacturers in Israel to meet our manufacturing requirements.

Our Home Collection Kits are expected to be manufactured by a high quality third party in China, which has all the applicable regulatory approvals in order to distribute the products in the US.

Competition and Competitive Advantages

The monitoring services industry is very competitive and characterized by rapidly advancing technologies with a strong emphasis on proprietary products and software. We recognize that our competitive success will depend upon constant investments in innovative, pioneering technological solutions. We believe that many of our competitors only offer one narrow scope of capabilities and are not perceived as convenient for all monitoring scenarios, or have not received regulatory approvals for product enhancements. We believe that our competitive advantages include:

United States Competitive Review

Our arrhythmia monitoring service primary competitors in the U.S. include iRhythm Technologies, Inc. (Nasdaq: IRTC), and  Philips Healthcare. These companies have either developed or acquired patch-based mobile cardiac monitors. iRhythm Technologies, Inc. became a public company in late 2016 with their proprietary ZIO patch, a single lead ECG wearable that is worn for up to 14 days. Several small start-ups are also trying to compete in the cardiac monitoring space, either with an MCT device or a patch-based service.

Other competitors are companies that sell standard Holter monitors and analysis systems including GE Healthcare, Philips Healthcare, Mortara Instrument, Inc., and Welch Allyn Holdings, Inc. (now part of Hill-Rom Holdings, Inc.).

We believe that the principal competitive strength of our arrhythmia monitoring service derives from the combination of several factors including: a range of monitoring modalities to meet a variety of patients’ needs; multi-lead ECG configurations that provide greater diagnostic yields; quality of our clinical staff to accurately detect and identify arrhythmias; clear and comprehensive reports for physician interpretation; contracted rates with third-party payors; government reimbursement for our products and services; experience, knowledge and availability of our account representative and customer support services; flexible workflow protocols to address account methodologies; and our relationships with physicians, hospitals, insurers, and other third-party payors.

Our competitors in the mHealth space include, among others, AliveCor (ECG only), Qardia (more geared to fitness) and Tytocare (home care device with various attachments for examining ears, throat, heart, lungs, abdomen, skin, and capturing heart rate and temperature data).

In the mHealth space, we may compete directly or indirectly with companies such as Teledoc Health, Inc., DarioHealth Corp. and Itamar Medical, Inc., however, we believe that our Prizma clinical grade solution has several differentiators that elevate its market position and our competitive advantage, including multiple measurements on one application (ECG, temperature, Sp02, stress analysis, etc.) and an easy to use platform which provides more value to a greater range of markets (consumer, medical clinics, chronic care).

China Competition Review

The graphic below represents the primary companies and their respective products that compete, or have the potential to compete, with our products and services in the Chinese market:

In China, we believe that our competitive advantage lies in our technology, products and services which offer health care providers and patients an all-inclusive solution for remote health monitoring, as opposed to only one narrow scope of capabilities. Thus, we believe that due to our strong technology and our experience and know-how in monitoring patients remotely, G Medical China is well positioned to gain a significant market share in China.

Intellectual Property

We have made significant investments in the development of our patent portfolio to protect our technologies and programs, and we intend to continue to do so. Our intellectual property portfolio consists of seven granted patents as well as five patent applications which are still pending approval by the USPTO.

Patents

The following table sets forth our patent portfolio as of the date of this annual report:

On January 30, 2023, we announced that we received a patent issue notification from the USPTO for a patent, which was issued on February 7, 2023, called “Method and System for Vital Signs Monitoring with Earpiece”, which covers the vital signs monitoring system that we are developing using multiple sensing mechanisms to be used on different body locations. This vital sign monitoring system will potentially provide physicians more versatility in patients’ monitoring and would simplify in and out-patients’ monitoring.

Other Intellectual Property

On August 4, 2016, our subsidiary, G Medical Israel, and Mennen Medical Ltd. (or Mennen) (a company incorporated in Israel), entered into a software licensing agreement pursuant to which we were granted a worldwide, perpetual, irrevocable (other than in case of breach), royalty-free, non-exclusive license to use the arrhythmia software and high risk detection application (including all existing preprocessing) and respiration module manufactured and developed by Mennen (including subject to certain conditions, any updates, upgrades, modification and customizations, if requested by us, which shall be priced separately) and to incorporate and integrate the arrhythmia software and high risk detection application with our ECG wireless devices. Pursuant to the terms of the software licensing agreement, Mennen was paid $110,000.

Trademarks

We own one U.S. trademark and one U.S. trademark application:

Trade Secrets and Know-How 

We also rely on trade secrets, know-how, and continuing innovation to develop and maintain our competitive position. We cannot be certain that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents granted to us in the future will be commercially useful in protecting our technology.

Our success depends, in part, on an intellectual property portfolio that supports future revenue streams and erects barriers to our competitors. We are maintaining and building our patent portfolio through filing new patent applications, prosecuting existing applications, and licensing and acquiring new patents and patent applications.

Despite these measures, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated. Intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive one. For more information, see “Item 3.D. Risk Factors-Risks Related to our Intellectual Property.”

Government Regulation

The principal markets that we have targeted for our medical devices are the United States, the EU, Australia, New Zealand and China. The following is an overview of the regulatory regimes in these jurisdictions.

General Overview of United States Medical Device Regulation

Under Section 201(h) of the Federal Food, Drug, and Cosmetic Act (or the FDC Act), a medical device is an article, which, among other things, is intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment or prevention of disease, in man or other animals.

Medical devices sold in the United States are subject to varying levels of regulatory control, the most comprehensive of which requires that a clinical trial may need to be conducted before a device receives clearance for commercial distribution.

Our current devices are classified as medical devices and are subject to regulation by numerous agencies and legislative bodies, including the U.S. FDA, and its foreign counterparts.

U.S. FDA regulations govern product design and development, pre-clinical and clinical testing, manufacturing, labeling, storage, pre-market clearance or approval, advertising and promotion, sales, distribution, device recalls and other similar matters.

Specifically, the U.S. FDA classifies medical devices into one of three classes:

Summary of the Medical Device Distribution Process in the United States

Unless an exemption applies, medical devices commercially distributed in the United States require a 510(k) clearance, or a 510(k)+ “de-novo” clearance, or PMA from the U.S. FDA. Our current devices fall into the classification of a Class II device.

510(k) Clearance Process. After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use or indications for use, requires a new 510(k) clearance or could even require a premarket application approval. The U.S. FDA requires each manufacturer to assess whether the proposed changes to the medical device are substantial or not; if the change is not substantial, then the manufacturer can issue an internal Letter to File (also called Memo to File) exempting the device from a new 510(k) clearance or a supplement submission, however the U.S. FDA has the right to review any such assessment. If the U.S. FDA disagrees with the determination, then the agency may retroactively require the manufacturer to seek 510(k) clearance. The U.S. FDA can also require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or premarket application approval is obtained.

De Novo Classification. If the U.S. FDA denies 510(k) clearance of a device because it is novel and because an adequate predicate device does not exist (resulting in a determination of non- substantial equivalence), then the “de novo classification” procedure can be invoked based upon reasonable assurance that the device is safe and effective for its intended use. This procedure approximates the level of scrutiny in the 510(k) process but may add several months to the clearance process. If the U.S. FDA approves the “de novo” request, then the device is permitted to enter commercial distribution in the same manner as if 510(k) clearance had been granted.

PMA Process. After the U.S. FDA approves a Class III medical device via the PMA route, a new premarket application or premarket application supplement is required in the event of a modification to the device, its labeling or its manufacturing process. The premarket application approval pathway is much more costly, lengthy and uncertain; it generally takes from one to three years or longer.

Coronavirus Disease 2019 (COVID-19) Emergency Use Authorizations for Medical Devices

On February 4, 2020, the U.S. Secretary of the Department of Health and Human Services (HHS) determined, pursuant to section 564 of the FDC, that there was a significant potential for a public health emergency that has a significant potential to affect national security or the health and security of United States citizens living abroad and that involves COVID-19. The virus which causes the illness COVID-19was named SARS-CoV-2. Based on the EUA policy, which remained in force during the public health emergency related to COVID-19, the U.S. FDA granted us OTC authorization for our Prizma device and Extended Holter Patch. On May 11, 2023, the COVID-19 public health emergency ended.

Laboratory Registration, Accreditation and Licensing Requirements

We are subject to federal and state regulation of laboratory licensure. Congress passed the CLIA, which establishes quality standards for all laboratory testing designed to ensure the accuracy, reliability and timeliness of patient test results. Under CLIA, a laboratory is any facility that performs laboratory testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease or the impairment or assessment of health. CLIA requires that we hold a certificate applicable to the type of laboratory examinations we perform and that we comply with various standards with respect to personnel qualifications, facility administration, proficiency testing, quality control and assurance and inspections. Laboratories must register and list their tests with Centers for Medicare & Medicaid Services, or CMS, the agency that oversees CLIA, and CLIA compliance and certification is a prerequisite to be eligible to bill government payors and many private payors for our tests. We are subject to survey and inspection every two years to assess compliance with CLIA’s program standards, and we are subject to additional unannounced inspections. Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. In addition, a laboratory like that is certified as “high complexity” under CLIA may obtain analyte specific reagents, which are used as the basis for diagnostic tests that are developed and validated for use in examinations the laboratory performs itself known as LDTs.

In addition, we may in the future elect to participate in the accreditation program of CAP. CMS has deemed CAP standards to be equally or more stringent than CLIA regulations and has approved CAP as a recognized accrediting organization. Inspection by CAP is performed in lieu of inspection by CMS for CAP-accredited laboratories.

General Overview of European and Non-European Medical Device Regulation

Regulatory approval and sales of medical devices outside the United States are subject to foreign regulatory requirements that may vary widely from country to country. These laws and regulations range from simple product registration requirements in some countries to complex clearance and production controls in others. As a result, the processes and time periods required to obtain foreign marketing clearance may be longer or shorter than those necessary to obtain U.S. FDA clearance.

Commercialization of medical devices in Europe is regulated by the EU. The EU presently requires that all medical products bear the CE mark, an international symbol of adherence to quality assurance standards and demonstrated clinical effectiveness. Compliance with the Medical Device Directive (or MDD), or the Active Implantable Medical Device Directive, or the In Vitro Diagnostic Medical Device Directive, as audited by an EEA Notified Body and certified by a recognized European Competent Authority, permits the manufacturer to affix the CE mark on its products. If the medical device is classified as a Class I device per the MDD, and is not provided sterile, then the manufacturer can affix the CE mark to its Class I devices by means of a self-declaration only, without the need for approval by the EEA Notified Body.

On October 1, 2016, we obtained ISO 13485 certification for our quality management system. In addition, in September 2017 we received CE mark certification for our Prizma device, and in November 2017 we received CE mark certification for the Extended Holter Patch System. CE certification allows the devices to be marketed and sold in all the member states of the EEA as well as in certain other countries worldwide. (The CE certification ended on January 9, 2022. From May 2022 we will have to comply with the Medical Device Regulation and not Medical Device Directive.)

In addition, in November 2017, we obtained regulatory clearance (TGA) to market the Prizma device in Australia. In April 2020, we received Taiwan FDA approval to market the Prizma device.

To the extent that in the future we seek to market our products outside of countries in the EEC, we may be required to comply with the applicable regulatory requirements in each such country. Such regulatory requirements vary by country and may be tedious. As a result, no assurance can be given that we will be able to satisfy the regulatory requirements to market or sell our products in any such country.

Registration of Medical Devices in China

Registration of medical devices in China is handled and approved by the NMPA. In order to apply for NMPA registration for a medical device, a non-Chinese manufacturer is required to appoint a local Chinese agent who will coordinate the NMPA device registration and assist in determining the classification of the medical device in China, using NMPA Order No. 15 and the NMPA’s classification database. Class II and III device manufacturers should also identify predicates and determine the clinical data requirements for their device and how to satisfy them. Our products fall under Class II (non-invasive) devices.

Registration in China may be a longer process than registration in other countries, as the NMPA does usually not recognize a clinical trial or device testing performed outside of China. As a result, a clinical trial and/or device testing is usually required to be performed or repeated in China. In addition, currently all regulatory documentation needs to be submitted in Chinese.

In February 2018, our subsidiary Guangzhou Yimei Innovative Medical Science and Technology Co., Ltd. was granted acceptance to the Green Channel expedited Guangdong Provincial NMPA regulatory approval process for the Prizma medial smartphone case. The special review and approval procedures for innovative medical devices ensures the safety and effectiveness of products and services for the Chinese market.

Clinical Studies in the United States

Even when a clinical study has an approved Investigational Device Exemption from the U.S. FDA under significant risk determination, and has been approved by an Institutional Review Board under non-significant risk determination and/or has been approved by a local or regional Ethics Committee, the study is subject to factors beyond a manufacturer’s control, including, but not limited to the fact that the institutional review board at a given clinical site might not approve the study, might decline to renew approval (required annually), or might suspend or terminate the study before the study has been completed. There is no assurance that a clinical study at any given site will progress as anticipated; the interim results of a study may not be satisfactory leading the sponsor or others to terminate the study, there may be an insufficient number of patients who qualify for the study or who agree to participate in the study, or the investigator at the site may have priorities other than the study. Also, there can be no assurance that the clinical study will provide sufficient evidence to assure the U.S. FDA that the product is safe, effective and performs as intended as a prerequisite for granting market clearance.

Post-Clearance Matters

Even if the U.S. FDA or other similar non-U.S. regulatory agencies clears or approves a medical device for use, the regulatory agency may limit the intended uses of the device in such a way that manufacturing and distributing the device may not be commercially feasible. After clearance or approval to market is given, the U.S. FDA and similar foreign regulatory agencies, upon the occurrence of certain events, are authorized under various circumstances to withdraw the clearance or approval or require changes to a device, its manufacturing process or its labeling or additional proof that regulatory requirements have been met.

In the United States, a manufacturer of a device approved through the premarket approval application process is not permitted to make changes to the device which affects its safety or effectiveness without first submitting a supplement application to its premarket approval application and obtaining U.S. FDA clearance for that supplement. In some instances, the U.S. FDA may require a clinical trial to support a supplement application.

A manufacturer of a device cleared through a 510(k) submission or a 510(k)+ “de-novo” submission must submit another premarket notification if it intends to make a change or modification in the device that could significantly affect the safety or effectiveness of the device, such as a significant change or modification in design, material, chemical composition, energy source or manufacturing process.

Any change in the intended uses of a premarket approval application device or a 510(k) device requires an approval supplement or cleared premarket notification. Exported devices are subject to the regulatory requirements of each country to which the device is exported, as well as certain U.S. FDA export requirements.

Mobile Medical Applications Guidance in the United States

On February 9, 2015, the U.S. FDA issued final guidance for developers of mobile medical applications, or apps, which are software programs that run on mobile communication devices and perform the same functions as traditional medical devices. The guidance outlines the U.S. FDA’s tailored approach to mobile apps. The U.S. FDA plans to exercise enforcement discretion (meaning it may choose not to enforce all requirements under the FDC Act) for the majority of mobile apps, as they pose minimal risk to consumers. The U.S. FDA currently plans to focus its regulatory oversight on a subset of mobile medical apps that present a greater risk to patients if they do not work as intended, such as mobile medical apps that:

While some features of the Prizma device are classified by the U.S. FDA as medical functions and require regulatory clearance by the U.S. FDA, other features may be classified as wellness functions following the guidelines set out in U.S. FDA Guidance document, “Multiple Function Products,” dated April 27, 2018 (draft guidance at this stage).

Ongoing Regulation by the U.S. FDA

Even after a device receives clearance or approval and is placed on the market, numerous regulatory requirements apply. These include: