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As filed with the Securities and Exchange Commission on May 11, 2023

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

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For the fiscal year ended December 31, 2022

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OR

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Date of event requiring this shell company report ________

For the transition period from ________ to ________

Commission file number 001-41641

SHL TELEMEDICINE LTD.

(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English)

ISRAEL

(Jurisdiction of incorporation or organization)

90 Yigal Alon Street

Tel Aviv 67891, Israel

(Address of principal executive offices)

 Erez Nachtomy, Chief Executive Officer

Tel.: +972 (3) 561-2212

90 Yigal Alon Street

Tel Aviv 67891, 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:

*Not for trading, but only in connection with the registration of the American Depositary Shares.

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

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s class of capital or common stock as of the close of the period covered by the annual report: 14,683,844 as of December 31, 2022.

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

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Yes ☐ No ☒

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

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Yes ☐ No ☒

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

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Yes ☐ No ☒

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

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Yes ☒ No ☐

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

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

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

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:

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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.

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Item 17 ☐ Item 18 ☐

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

Yes ☐ No ☒

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CONVENTIONS USED IN THIS ANNUAL REPORT

In this Annual Report on Form 20-F, unless the context otherwise requires:

Additionally, in this Annual Report:

Our reporting currency is the U.S. dollar. In this Annual Report, unless otherwise specified, all monetary amounts are in U.S. dollars. We prepare our financial statements in accordance with IFRS as issued by the International Accounting Standards Board.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, specifically Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, including, among others, statements regarding SHL and its business, financial condition and results of operations and the industry in which it operates, are forward-looking statements. Certain of these forward-looking statements are identifiable by use of the following words and other similar expressions: “anticipates,” “believes,” “budgets,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “might,” “will,” “plans,” “predicts,” “projects,” “scheduled,” “should” or similar phrases, although the absence of such words does not necessarily mean that a statement is not forward looking.

Readers are cautioned that forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that are beyond our control and could cause actual results to differ materially from historical results or any future results expressed or implied by forward-looking statements. Factors that can cause actual results to differ from expectations and those contained in forward-looking statements include those risks described in Item 3.D. “Key Information—Risk Factors” contained in this Annual Report, including, but not limited to, our ability to operate and comply with the complex and evolving regulations in the highly regulated healthcare industry; continued development, consumer acceptance and market adoption in the relatively new, unproven and volatile and rapidly changing telehealth market; our ability to develop and introduce new products and solutions and enhancements to existing ones; the significant and increasing levels of competition in the telemedicine market; the impacts of COVID-19 and future pandemics and epidemics; our ability to continue to attract and retain key employees and personal in the highly competitive healthcare industry; the loss or breach of our proprietary rights and data security and privacy risks; political, judicial, legal, economic and military conditions in Israel and the surrounding region; global economic and financial market conditions and our ability

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to adapt to and comply with the different business and market factors, conditions, requirements and laws and regulations in the various countries in which we operate internationally; currency fluctuations; labor disputes; our ability to manage growth and integrate acquired businesses and expanding operations; our ability to obtain adequate levels of insurance to cover potential losses; our dependence on key suppliers and sub-contractors and other third parties; and other matters and risks not yet known to us or not currently considered material by us.

You should not place undue reliance on these forward-looking statements. All written and oral forward-looking statements, attributable to us, or persons acting on our behalf, are qualified in their entirety by these cautionary statements. Unless required by law, SHL undertakes no obligation to publicly update or revise any forward-looking statements.

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We depend on evolving governmental regulation in and around the health care industry and failure to comply with these and other laws and regulations could have a material adverse effect on our business, financial condition and results of operations.

As a general matter, the healthcare industry is highly regulated. Regulations are constantly evolving and tend to be highly dependent on political developments as well as developments in the health insurance industry and in public finance. We are unable to predict future regulations and governmental decisions that might impact our business in the future with any certainty. Our business, financial condition and results of operations could be adversely affected by the failure to obtain required licenses and governmental approvals, comply with applicable regulations, or comply with existing or future laws, rules or regulations or their interpretations.

We and our business customers are subject to various laws governing privacy protection, confidentiality information and security laws. Because we and the Mediton Group retain personal and medical information of patients or other persons, we are also subject to data privacy protection and security laws, which require that owners of databases containing such information to meet certain obligations such as appointing a database administrator who shall supervise the use of the information only for its original purposes.

In various countries (such as Israel) a special authorization is needed to process and store personal data, such as patient medical data. The transmission of personal medical data via telecommunications, especially cross border transfer via internet, is a relatively new development, and patient and health care industry concerns regarding the confidentiality of such information could lead to further legislation and regulations that govern the methods of transmitting and storing patient medical data. Failure to comply with these and other laws and regulations could have a material adverse effect on our business, financial condition and results of operations.

In many countries, we are also subject to laws prohibiting the corporate practice of medicine and to laws that govern financial and other arrangements between health care providers and payers which are designed to induce the referral of a patient to a particular provider for medical products and services. Although we believe that we are in compliance with these laws, there can be no assurance that certain countries’ governments will not determine that our operations comprise a violation of the prohibition on corporate practice of medicine, and force us to restructure, alter or terminate our operations in those countries.

In Israel, we operate under legislations and regulations that apply to the provision of the telemedicine services provided by us and the healthcare services provided by the Mediton Group. In addition, medical equipment laws apply to the medical devices being used by our private pay subscribers and by the Mediton Group in providing its healthcare services. These laws provide that medical equipment may only be manufactured and marketed in Israel, if it is registered as medical equipment in the “AMR register,” in accordance with the Israeli registration conditions. In addition, certain regulations and Ministry of Health procedures apply to the provision of our telemedicine services and the use, operation, calibration and maintenance of certain medical devices or equipment and pharmaceutical products being used or operated by us or by the Mediton Group. The marketing and sale of our telemedicine services to our private pay consumers in Israel are also subject to the Consumer Protection law and regulations, goal of which is to protect customers that are individuals from misleading sales methods.

Our business environment is volatile and rapidly changing.

With respect to our telehealth services, the telehealth market is still relatively new and unproven and rapidly changing, and it is uncertain whether it will achieve and sustain high levels of demand in the various markets, consumer acceptance and market adoption. Our success will depend to a substantial extent on the willingness of our clients to use, and to increase the frequency and extent of their utilization of, our solutions, as well as on our ability to demonstrate the value of telehealth to employers, health plans, government agencies and other purchasers of healthcare for beneficiaries.

We must continually develop and introduce new products, product enhancements and/or solutions and there is no guarantee that our investments in research and development will yield the desired results.

Our success depends, in large part, on our ability to anticipate future customer needs with respect to product quality, price and functionality and to continue to design, manufacture and deploy new innovative products, solutions and services along with enhancements to sustain the performance of our existing products in response to such requirements. We have made, and expect to continue to make, substantial investments in the development of our products and related solutions, software and related solutions, to address new market needs and enhance customer engagement. It is critical for our success to be able to analyze and understand our

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markets and our customers’ needs, and to maintain a roadmap for our research and development program that allows for its swift implementation.

We compete in a highly competitive market, and our competitors constantly show competitive solutions to some of our technologies and services we offer, which may adversely affect demand for our services.

In the last few years and particularly during the COVID-19 pandemic, we have experienced rapidly growing competition within the field of telemedicine services and products. Our main competitors include small companies providing focused solutions for a limited number of specific healthcare conditions, as well as larger companies providing comprehensive healthcare services. Competition from specialized software providers or device manufacturers, which may facilitate the collection of data but offer limited interpretation, feedback or guidance, and from other parties will result in continued pricing pressures, which are likely to lead to price declines in certain product segments, which could in turn negatively impact our sales, profitability and market share.

Our ability to compete effectively depends on our ability to distinguish ourselves and our services from our competitors and their products, and includes factors such as: long-term outcomes, ease of use, price, brand recognition, longer operating history, greater market penetration, established client channels and strong customer relationships, larger marketing budgets and quality of services.

There can be no assurance that we will be able to continue to sell our products and services or maintain profitability in the face of this competition. Failure to compete successfully as a result of the above factors or for other reasons would have a material adverse effect on our business, financial condition and results of operations.

The ongoing COVID-19 pandemic continues to present operational, health, labor, logistics and other challenges, and it is difficult to assess the ultimate impact of the COVID-19 pandemic on our business, financial condition and cash flows.

There are many variables and uncertainties regarding the COVID-19 pandemic, including the emergence, contagiousness and threat of new and different strains of the virus and their severity; the effectiveness of treatments or vaccines against the virus or its new strains; the extent of travel restrictions, business closures and other measures that are or may be imposed in affected areas or countries where we operate by governmental authorities; disruptions in the supply chain; an increasingly competitive labor market due to a sustained labor shortage and increased turnover caused by the COVID-19 pandemic; increased logistics costs; additional costs due to remote working arrangements, adherence to social distancing guidelines, the use of personal protective equipment, enhanced cleaning requirements and other COVID-19 related challenges. Further, there remain increased risks of cyberattacks on information technology systems used in remote working environments; increased privacy-related risks due to remote processing of health-related personal information; absence of workforce due to illness; and other factors that are currently unknown or considered immaterial. See “Risk Factors—We may encounter data security and privacy risks” below. It is difficult to assess the ultimate impact of the COVID-19 pandemic on our business, financial condition and cash flows.

Our proprietary rights may be challenged, which could have a material adverse effect on our business, financial condition and results of operations.

Our ability to compete successfully will depend, in part, on our ability to protect our proprietary rights, including the source code of our software. Although we continue implementing protective measures, including patents and trademarks, to defend our proprietary rights, these measures may not be successful, and our patents may not provide meaningful protection against potential competitors developing substantially similar products and services. Moreover, any patents issued to us may be challenged, invalidated or circumvented and the rights granted thereunder may not provide a competitive advantage to us.

We also rely on trade secrets and proprietary knowledge, which we protect, in part, through confidentiality agreements with employees, consultants and other parties. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach or that our trade secrets will not otherwise become known to, or independently developed by, competitors. If we were to be unsuccessful in defending our proprietary rights, or if our trade secrets or proprietary knowledge were breached, it could have a material adverse effect on our business, financial condition and results of operations.

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If we fail to retain our key personnel and attract and retain additional qualified healthcare and management personnel, we may not be able to pursue our growth strategy.

Our success depends to a significant degree upon the continued contributions of our management team and our technical, marketing and sales personnel, and our ability to attract and retain additional highly qualified management, and technical, marketing and sales personnel. Competition for highly skilled management, technical, marketing and sales personnel, and other employees in the healthcare industry is intense. We may not be able to attract or retain highly qualified personnel in the future. The members of our senior management are at-will employees and therefore they may terminate their employment with us at any time with no advance notice. The replacement of our key employees would likely involve significant time and costs and may significantly delay or prevent the achievement of our business objectives. If any of our key employees leave or are terminated, and we fail to attract and retain qualified and experienced professionals on acceptable terms to replace them, the loss of their services could have a material adverse effect on our business, financial condition and results of operations.

We must also attract and retain additional highly skilled healthcare personnel in order to continue to execute our growth strategy. Our ability to attract and retain qualified healthcare personnel depends on several factors, including our ability to provide competitive benefits and wages. If we do not increase benefits and wages in response to increases by our competitors, we could face difficulties attracting and retaining qualified management and healthcare personnel. In addition, if we raise wages in response to our competitors’ wage increases and are unable to pass such increases on to our clients, our margins and net profits could decline, which could adversely affect our business, financial condition and results of operations.

Risks Related to Our Operations in Israel

Service of process upon our directors and officers may be difficult to effect in non-Israeli jurisdictions such as the United States.

Service of process upon our directors and officers, most of whom reside in Israel, may be difficult to effect in a non-Israeli jurisdiction such as the United States.

Foreign judgments against us and our directors or officers may not be enforceable.

We are incorporated in Israel and substantially all of our assets are located outside the United States. Substantially all of our directors and officers are non-U.S. citizens and most of their assets are also located outside of the United States. Accordingly, the enforceability of judgments against us and our directors and officers may be limited outside Israel. Specifically, Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors. Israeli courts will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.

Conditions in Israel and relations between Israel and other countries could adversely affect our business.

Many of our employees and suppliers, including most of the members of our management team, are located in Israel. In addition, a number of our officers and directors are residents of Israel. Accordingly, military instability in Israel and the political, economic and military conditions in Israel and the surrounding region may directly affect our business and operations.

Since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. In recent years, Israel has been engaged in sporadic armed conflicts with Hamas, an Islamist terrorist group that controls the Gaza Strip, with Hezbollah, an Islamist terrorist group that controls large portions of southern Lebanon, and with Iranian-backed military forces in Syria. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. In addition, in the event that our facilities are damaged as a result of hostile action or hostilities otherwise disrupt the ongoing operation of its facilities, our ability to continue our operations could be materially adversely affected.

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Furthermore, the Israeli government has recently been pursuing legislative changes that, if adopted, would alter the current state of separation of powers among the three branches of government, and that have sparked considerable political debate. These changes could have negative consequences on the business and economic conditions in Israel that may include, among others, a downgrade in Israel’s sovereign credit rating, increased interest rates, currency fluctuations, inflation, civil unrest and volatility in securities markets, which could have an adverse effect on our business.

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.

Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition and the expansion of our business. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts, divestment and sanctions have been undertaken against Israel, which could also adversely impact our business.

Many of our employees and independent contractors in Israel are required to perform military reserve duty, which may disrupt their work for us.

Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, particularly if such call-ups include members of our management, and given the current shortage of highly qualified personnel in our industry in Israel due to the recent acceleration of activity in startups, especially in the technology space. Such disruption could materially and adversely affect our business, financial condition and results of operations.

The rights and responsibilities of our shareholders are governed by Israeli law, which differ in certain respects from the rights and responsibilities of shareholders of U.S. corporations.

Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our Articles of Association as in effect from time to time and Israeli law. These rights and responsibilities differ in certain respects from the rights and responsibilities of shareholders of U.S. corporations. In particular, shareholders of Israeli companies have a duty to act in good faith and in a customary manner in exercising their rights and performing their obligations towards their and other shareholders and to refrain from abusing their power in the companies, including, among other things, in voting at general meetings of shareholders on certain matters, such as amendments to their articles of association, an increase of companies’ authorized share capital, mergers and approval of related party transactions. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of an office holder in the company has a duty to act in fairness towards the company. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.

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

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to mergers and acquisition transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital.

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Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the company’s outstanding shares. In addition, shareholders, including those who indicated their acceptance of a tender offer, may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of their shares does not reflect their fair market value, and petition an Israeli court to alter the consideration for the acquisition accordingly, unless the acquirer stipulated in its tender offer that shareholders accepting the offer may not seek such appraisal rights, and the acquirer or the company published all required information with respect to the tender offer prior to the tender offer’s response date.

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

These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.

Due to our listing on the SIX Swiss Exchange, Swiss takeover law applies, which could also restrict or discourage mergers, acquisition and change of control of us. For respective provisions affecting mergers, acquisitions and changes of control applicable to us as a result of our SIX Swiss Exchange listing, see Item 10.B. “Memorandum and Articles of Association – Swiss Laws Applicable with Respect to Our ordinary shares”.

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

The ability of an Israeli company to pay dividends is governed by Israeli law, which provides that cash dividends may be paid only out of retained earnings or earnings derived over the two most recent fiscal years, whichever is higher, as determined for statutory purposes in Israeli currency, provided that there is no reasonable concern that payment of a dividend will prevent a company from satisfying its existing and foreseeable obligations as they become due. In the event of a devaluation of the Israeli currency against the U.S. dollar, the amount in U.S. dollars available for payment of cash dividends out of prior years’ earnings will decrease.

Operational Risks

The global nature of our operations exposes us to a variety of risks resulting from organizational, logistical, legal, political and cultural as well as other related challenges.

Our international business is subject to risks resulting from differing legal and regulatory requirements, political, social and economic conditions and unforeseeable developments in a variety of jurisdictions. Our international operations are subject to particular risks in addition to those faced by our domestic operations, including the following: the need to localize and adapt our solutions for specific countries, requirements of foreign laws and other governmental controls over our services (including employment, healthcare, tax, privacy and data protection laws and regulations), new and different sources of competition, local business and cultural factors that differ from our normal standards and practices, adverse tax consequences, fluctuations in currency exchange rates which could make our solutions more expensive or increase our costs of doing business in certain countries, limitations on future growth or inability to maintain current levels of revenues from international sales, difficulties in staffing, managing and operating our international operations, difficulties in coordinating the activities of our geographically dispersed and culturally diverse operations and political unrest, war, pandemics, terrorism or regional natural disasters, all of which could adversely affect our business, financial condition and results of operations.

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Labor disputes may disrupt our operations or lead to higher labor costs.

Employee costs represent a significant cost for our business. Such costs could increase following wage negotiations. Our personnel in certain countries benefit from more favorable laws. In the event our relationships with our personnel, workers, representatives and unions deteriorate or labor laws become more stringent, we could face strikes or similar interruptions to our business as well as significantly increased wage and non-wage labor costs.

Significant growth may challenge our operations.

We may expand significantly in the coming years. Our successful growth will be dependent on our ability to manage our rapidly expanding operations, including, among other things, our ability to integrate new personnel on a timely basis, to improve continually our financial and management controls, reporting systems and procedures and to outsource a substantial portion of our manufacturing successfully. This growth could place significant strain on our operations. If our controls, systems or procedures, or the sub-contractors to whom we outsources our production, prove inadequate to support our operations, we may be unable to achieve our goals for growth. Any failure to manage growth effectively would have a material adverse effect upon our business, financial condition and results of operations.

Acquisitions, substantial investments or absence of suitable acquisitions may negatively affect our financial performance.

We may acquire or make substantial investments in complementary businesses, distribution channels, technologies or products in the future. Any such acquisition or investment would entail various risks, including the difficulty of assimilating the technologies, operations and personnel of the acquired business, the potential disruption of our ongoing business and, generally, our potential inability to obtain the desired financial and strategic benefits from the acquisition or investment. Future acquisitions and investments could also result in substantial cash expenditures, potentially dilutive issuances of equity securities, the incurrence of additional debt and contingent liabilities, and amortization expenses related to goodwill and other intangible assets, which could adversely affect our business, financial condition or results of operations.

We may be negatively affected by the failure of key suppliers and sub-contractors.

We believe that the expansion of our manufacturing capabilities and the manufacturing of component parts can be most effectively accomplished through outside sources. Because of our dependence on manufacturers and suppliers, we may experience logistical problems in our supply chain, including long lead times for receipt of products or components, inventory shortages or related difficulties. Moreover, third party manufacturers and suppliers may fail to produce products or components that meet our quality standards or to deliver such products or components in a timely manner.

We may be unable to locate a sufficient number of additional qualified manufacturers or suppliers to meet the demand for our products. Although we believe that we can find alternative manufacturers and suppliers for these externally sourced components, there is no guarantee that we will be able to find alternative manufacturers and suppliers or make cost-effective alternative arrangements in a timely manner. Any failure of outside manufacturers or suppliers to meet our needs could have a material adverse effect on our business, financial condition and results of operations.

We may be affected by other third-party risks.

In providing our services, we use third parties for certain services, such as cloud services and external data hosting services. Although we engage in due diligence, closely scrutinizing our third-party providers, sometimes these third parties may not perform as contractually required or expected. This may adversely impact our services and may lead to client attrition and could have a material adverse effect on our business, financial condition, results of operations and reputation.

We may encounter data security and privacy risks.

We are heavily dependent on critical, complex and interdependent information technology systems, including Internet-based systems, to support our business processes. In addition, we gather information, which can include personal sensitive information. We are also increasingly seeking to develop technology-based products to improve patient welfare in a variety of ways, which could also result in us gathering personal information about patients and others electronically.

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Our technology systems may be exposed to external or internal security incidents, breakdowns, malicious intrusions, cyberattacks and cybercrimes, including state-sponsored cybercrimes, malware, misplaced or lost data, programming or human errors, or other similar events. Like other companies, we have been the subject of cyberattacks in the past. As the external cyber-attack threat keeps growing, impacting globally and across different industries, we expect to be subject to additional cyberattacks in the future. Although cyberattacks have not had a material adverse impact on the Company to date and the Company has invested, and continues to invest, in improved cybersecurity processes and technology designed to protect against such attacks, we may not be able to prevent future breakdowns or breaches of our systems and we may not be able to prevent such events from having a material adverse effect on our business, financial condition, results of operations or reputation.

Our financial results may be affected by fluctuations in exchange rates.

Our functional currency in Israel is the NIS and our reporting currency is the U.S. dollar. An important part of our revenues and expenses are currently paid in NIS, euros and U.S. dollars. As a result, our business is generally exposed to transactional and translational currency exchange risks caused by fluctuations in exchange rates among those different currencies. We do not currently engage in foreign currency hedging transactions to manage foreign currency exchange risks.

Liability may arise that may not or, not fully, be covered by insurance.

We are not insured against all risks and our insurance could prove insufficient to cover certain losses. Generally, health care companies are subject to claims alleging negligence, product liability, breach of warranty or malpractice that may involve large claims and significant defense costs whether or not such liability is imposed.

While we have been able to obtain liability insurance in the past, there is no guarantee that such insurance will be available in the future on terms acceptable to us, if at all. Moreover, a successful claim in excess of the limits of our insurance coverage could have a material adverse effect on our business, financial condition and results of operations. Such claims, regardless of their merit or eventual outcome, may also have a material adverse effect on our reputation.

Other Risks

Recent global events caused volatility and disruption of financial markets could affect our access to credit.

The current economic market environment has caused contraction in the availability of credit in the marketplace. This could potentially reduce our sources of liquidity. While there have not been changes to date regarding our ability to access credit, future volatility could have a negative impact on our financial position and performance which could put us in default of the credit conditions and impact our ability to access credit. Additionally, future volatility and financial market disruptions could impact lenders’ ability to provide new loans or honor the terms of credit agreements.

We must comply with tax laws in several jurisdictions.

We conduct operations in multiple tax jurisdictions, and the tax laws of those jurisdictions generally require that the transfer prices between affiliated companies shall be the same as those between unrelated companies dealing at arm’s length, and that such prices are supported by contemporaneous documentation. While we believe that we operate in compliance with applicable tax laws (including transfer pricing laws) and we intend to continue to do so, if tax authorities in any of these jurisdictions were to successfully challenge our tax policies, they could require us to make adjustments to our tax policies, which could result in a higher overall tax liability to us, and possibly interest and penalties, and could adversely affect our business, results of operations and financial condition.

Additionally, the integrated nature of our worldwide operations can produce conflicting claims from tax authorities in different countries as to the profits to be taxed in the individual countries. The majority of the jurisdictions in which we operate have double tax treaties with other foreign jurisdictions, which provide a framework for mitigating the impact of double taxation on our revenues and capital gains. However, mechanisms developed to resolve such conflicting claims are largely untested and can be expected to be very lengthy.

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Risks Related to our ADSs and Ordinary Shares

Restrictions on the shares held by certain principal shareholders may be removed which could mean such principal shareholders may have a significant influence on decisions by our shareholders.

In January 2018 the Swiss Takeover Board found that Mengke Cai, Xiang Xu, Himalaya (Cayman Islands) TMT Fund, Himalaya Asset Management Ltd. and Kun Shen, who in the aggregate hold approximately 36.4% of the issued shares of SHL as of May 5, 2023, were acting in concert and should have published a tender offer for all of the SHL shares in accordance with Swiss law governing companies traded on the SIX. Subsequently, the relevant Swiss authorities suspended all of these shareholders’ voting rights and prohibited them from disposing of their shares without the court’s prior approval or from purchasing any additional shares until they make a tender offer for all of the SHL shares. Although we are not aware of any intention by the relevant authorities in Switzerland to overturn this decision, if they were to do so, these shareholders would regain all of the rights associated with their shares and would have a significant influence on decisions by our shareholders.

An active trading market for the ADSs may fail to develop and continue after the Nasdaq listing and the market prices for our ADSs and our ordinary shares may be volatile.

There was no public market for our securities in the United States prior to the listing of our ADSs on Nasdaq. An active trading market may not develop now that our ADSs are listed on the Nasdaq. If an active trading market for the ADSs fails to develop and continue, you may not be able to resell your ADSs quickly or at the market price you expect due to lack of sufficient liquidity.

The market prices of our ADSs on Nasdaq and our ordinary shares on the SIX may be highly volatile and could also be negatively influenced by adverse developments affecting the general economic or investment climate. In addition, geopolitical factors such as war, pandemics or acts of terrorism may indirectly adversely affect the market prices of our ADSs on Nasdaq and of our ordinary shares on the SIX.

Our securities are traded on more than one market or exchange and this may result in price variations.

Our ADSs were listed for trading on Nasdaq on April 3, 2023. Our ordinary shares have been trading on the SIX since November 15, 2000. Trading in our ADSs and ordinary shares on these markets takes place in different currencies (U.S. dollars on Nasdaq and Swiss francs on the SIX), and at different times (resulting from different time zones, trading days, and public holidays in the United States and Switzerland). The trading prices of our ADSs and ordinary shares on these two markets may differ due to these and other factors. Any decrease in the price of our ordinary shares on the SIX could cause a decrease in the trading price of our ADSs on Nasdaq. In addition, the current price of our ADSs may have little or no relationship to the historical sales prices of our ordinary shares on the SIX. The trading price of our ADSs may also fluctuate over time, particularly given our recent initial listing on Nasdaq.

Future sales or issuances, or the possibility or perception of future sales or issuances, of a substantial number of ADSs or ordinary shares or other securities that are convertible into our equity securities could cause the market prices of our ADSs or ordinary shares to fall.

The market prices of our ADSs and ordinary shares could decline as a result of sales of a large number of ADSs or ordinary shares in the public markets in the future or the possibility or perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to issue equity securities in the future at a time and price that we deem appropriate.

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The issuance of equity or other securities that are convertible into equity, including options, or the exercise of options on ADSs or ordinary shares could immediately and substantially dilute the ownership interest and rights of our shareholders.

We may choose to raise additional capital in the future, depending on market conditions or strategic considerations and subject to any applicable shareholder approval or other requirements under Israeli law or the listing rules of Nasdaq or the SIX. To the extent that additional capital is raised through the issuance of ADSs, ordinary shares or other securities that are convertible into our equity, the issuance of these securities will dilute the proportional holding of our ADSs and ordinary shares by our investors, and the terms may include liquidation or other preferences that adversely affect the rights of our shareholders. The Board of Directors has granted and may in the future grant options to investors and employees, consultants, directors and officers of the company and other third parties to acquire ADSs and ordinary shares. For example, in January and February 2021, in connection with a private placement of 3,588,889 ordinary shares mainly to Israel based institutional investors, we issued options to purchase 1,944,444 ordinary shares, exercisable until January 20, 2023 and February 16, 2023, respectively, at an exercise price of CHF 11.00. As of May 5, 2023, 1,914,478 of the options had been exercised for 1,914,478 newly issued shares.

As of May 5, 2023, we also had options outstanding for the issuance of up to 1,212,433 ordinary shares under our Share Option Plan. Pursuant to our Share Option Plan, all option exercises are on a net cash basis (i.e., require cashless exercise). For further information please refer to Item 6.B. “Compensation – Share Option Plan”.

Sales of substantial numbers of our ADSs and ordinary shares and changes in our shareholder structure may adversely affect the price of our ADSs and ordinary shares as well as the position of our shareholders.

Certain of our shareholders hold a significant number of our ordinary shares, as further described under Item 6.E, “Directors, Senior Management and Employees—Share Ownership.” Block sales of significant shareholdings and other changes in our shareholder structure may adversely affect the trading prices of our ADSs and our ordinary shares, may result in a change of control and may adversely impact the trading price of our ADSs and ordinary shares.

Whether we will pay dividends to our shareholders is uncertain.

We do not have a dividend policy. Our Board declared a dividend in 2019, but did not declare a dividend in 2018, 2020, 2021 or 2022. There can be no assurance that our Board will declare a dividend in any given financial year. If we do not declare dividends, capital appreciation, if any, of our ADSs and ordinary shares will be your sole source of gain.

Analyst reports and recommendations may impact the trading price and volume of our ADSs and ordinary shares and cause them to decline.

The trading markets for our ADSs and our ordinary shares will likely be influenced by the equity research and reports that industry or security analysts publish about us or our industry after our listing. We do not control these analysts. If one or more of the analysts who cover us downgrade their recommendation regarding our ADSs or ordinary shares, the trading prices of our ADSs and our ordinary shares would likely decline. In addition, if one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the market, which could, in turn, cause the trading volume or the trading prices of our ADSs and our ordinary shares to decline.

Market conditions may cause the market price of our ADSs and ordinary shares to fluctuate substantially.

The market price of our ADSs and ordinary shares may experience high volatility. Our year-end operating results, changes in general conditions in the economy or the financial markets and other developments affecting us or our competitors could cause the market price of our ADSs and ordinary shares to fluctuate substantially. The capital markets have experienced extreme volatility and disruption over the past years. In some cases, trading markets have produced downward pressure on stock prices for certain issuers seemingly without regard to those issuers’ underlying financial strength.

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As a foreign private issuer, we are exempt from certain public disclosure requirements, which may afford less protection to the holders of our ADSs and ordinary shares than they would enjoy if we were a domestic U.S. company.

We are a foreign private issuer and are not subject to the same disclosure and other requirements that are imposed upon U.S. domestic issuers by the SEC. As a foreign private issuer, we will be exempt from the rules and regulations under the Exchange Act, related to the furnishing and content of proxy statements, and our officers, directors, and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Furthermore, as a foreign private issuer we are not required to disclose the compensation of our five most highly compensated officers on an individual basis as is required of U.S. domestic reporting companies. In addition, we will not be required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic reporting companies whose securities are registered under the Exchange Act. Moreover, we will not be required to comply with Regulation FD, which restricts the selective disclosure of material information. These exemptions and leniencies will reduce the frequency and scope of information and protections to which you may otherwise have been eligible in relation to a U.S. domestic issuer.

If we cease to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We would lose our foreign private issuer status if a majority of our shares are owned by U.S. residents and a majority of our directors or executive officers are U.S. citizens or residents or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status.

As a foreign private issuer, we are permitted to rely on exemptions from certain corporate governance standards.

While our ADSs are listed on Nasdaq, we are permitted to follow certain home country corporate governance practices instead of certain Nasdaq corporate governance standards. We are required to provide a brief description of the significant differences between our corporate governance practices and the corporate governance practices required to be followed by domestic U.S. companies listed on Nasdaq. The standards applicable to us are considerably different than the standards applied to domestic U.S. issuers. For instance, under our home country rules, we are not required to maintain a majority of independent directors and a compensation committee comprised of independent directors, and the charters of our board committees do not necessarily contain all of the Nasdaq charter requirements for such committees of U.S. domestic companies.

We have relied on and intend to continue to rely on some of these exemptions. As a result, as a holder of our ADSs or ordinary shares, you may not be provided with the benefits of certain Nasdaq corporate governance standards.

We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies may make our ADSs and ordinary shares less attractive to investors and, as a result, adversely affect the price of our ADSs and ordinary shares and result in a less active trading market for our ADSs and ordinary shares.

We are an “emerging growth company” as defined in the U.S. Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. For example, we have elected to rely on an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, relating to internal control over financial reporting, and we will not provide such an attestation from our auditors. We cannot predict whether investors will find our ADSs and ordinary shares less attractive because of our reliance on some or all of these exemptions. If investors find our ADSs and ordinary shares less attractive, it may adversely affect the price of our ADSs and ordinary shares and there may be a less active trading market for the ADSs.

ADS holders do not have the same rights as our shareholders.

ADS holders do not have the same rights as our shareholders. For example, ADS holders may not attend shareholders’ meetings or directly exercise the voting rights attaching to our ordinary shares. ADS holders may vote only by instructing the depositary to vote on their behalf. If we request the depositary to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’ meeting and send or make voting materials available to you. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary. The depositary will try, as far as practical, subject to the laws of Israel and the provisions of our Articles of Association or similar documents, to vote or to have its agents vote the deposited ordinary shares as instructed by ADS holders. If we do not request the depositary to solicit your voting instructions, the depositary is not required to do so. Except by

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instructing the depositary as described above, you won’t be able to exercise voting rights unless you surrender your ADSs and withdraw the ordinary shares. However, you may not know about the meeting enough in advance to withdraw the ordinary shares. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ordinary shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise voting rights and there may be nothing you can do if your ordinary shares are not voted as you requested. In addition, ADS holders have no right to call a shareholders’ meeting unless ADS holders cancel their ADS and hold the ordinary shares underlying such ADSs directly.

The deposit agreement may be amended or terminated without the ADS holder’s consent.

We and the depositary may amend or terminate the deposit agreement without your consent. Holders of the ADSs are entitled to a prior notice in the event of a materially prejudicial amendment or termination thereof or if the amendment adds or increases fees or charges. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended.

The deposit agreement may be terminated at any time upon prior written notice to holders of the ADSs. Upon the termination of the deposit agreement, our company will be discharged from all obligations under the deposit agreement except for its obligations to the depositary thereunder. At any time after the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. After the termination date and before the depositary sells all of the securities, the depositary may refuse to accept a surrender of ADSs by a holder for the purpose of withdrawing deposited securities if it would interfere with the selling process. During this time, the depositary will not be required to register any transfer or ADSs or distribute any dividends or other distributions, give any notices or perform any other duties under the deposit agreement.

Holders of ADSs may be subject to limitations on transfer of their ADSs.

Your ADSs will be transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement.

You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in certain limited circumstances, you may not receive dividends or other distributions on our ordinary shares, if it is illegal or impractical to make them available to you.

The depositary for the ADSs has agreed to pay to you the cash dividends and other distributions it or its custodian receives on ordinary shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary is not required to pay such cash dividends and other distributions if it determines that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act, that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currency that was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, a government or agency thereof, which may be unobtainable. In these cases, the depositary may determine not to distribute such property, or a portion thereof, and hold such property as “deposited securities” or it may seek to affect a substitute dividend or distribution, including of the net cash proceeds from the sale of the dividends that the depositary deems to be an equitable and practicable substitute. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities distributed by us. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or any other property distributed on our ordinary shares to holders of ADSs.

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In addition, the depositary may deduct from any dividends or distributions by us its fees and may withhold an amount on account of taxes or other governmental charges to the extent the depositary believes it is required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in certain limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of the ADSs.

Holders or beneficial owners of our ADSs have limited recourse if we or the depositary fail to meet our respective obligations under the deposit agreement or if they wish us or the depositary to participate in legal proceedings.

The deposit agreement expressly limits our obligations and liability and those of the depositary. We and the depositary:

These provisions of the deposit agreement limit the ability of holders of the ADSs to obtain recourse if we or the depositary fail to meet our respective obligations under the deposit agreement or if they wish us or the depositary to participate in a legal proceeding.

ADS holders have limited choice of forum, which could increase your cost and limit your ability to bring a claim in a judicial forum that you find favorable for disputes against the depositary, us or the depositary’s or our respective directors, officers or employees, and may discourage such lawsuits.

The deposit agreement governing our ADSs provides that by holding or owning an ADS or an interest therein, holders and owners of ADSs irrevocably agree that any legal suit, action or proceeding against or involving the depositary and/or us brought by holders or owners of ADSs, arising out of or based upon the deposit agreement or the ADSs or the transactions contemplated thereby, including, without limitation, claims under the Securities Act of 1933, may be only instituted in the United States District Court for the Southern District of New York (or in the state courts of New York County in New York if either (i) the United States District Court for the Southern District of New York lacks subject matter jurisdiction over a particular dispute or (ii) the designation of the United States District Court for the Southern District of New York as the exclusive forum for any particular dispute is, or becomes, invalid, illegal or unenforceable). Any person or entity purchasing or otherwise acquiring any of our ADSs, whether by transfer, sale, operation of law or otherwise, shall be deemed to have notice of and have irrevocably agreed and consented to this choice of forum provision.

This forum provision may increase your cost and limit your ability to bring a claim in a judicial forum that you find favorable for disputes with the depositary or us, or the depositary’s or our respective directors, officers or employees, which may discourage such lawsuits against the depositary, us and the depositary’s and our respective directors, officers or employees. However, it is possible that a court could find this choice of forum provision to be inapplicable or unenforceable. The enforceability of similar choice of forum provisions has been challenged in legal proceedings. It is possible that a court could find this type of provisions to be inapplicable or unenforceable.

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To the extent that any such claims may be based upon federal law claims, Section 27 of the Securities Exchange Act of 1934 creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Securities Exchange Act of 1934 or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act of 1933 creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act of 1933 or the rules and regulations thereunder. Actions by owners and holders of our ADSs to enforce any duty or liability created by the Securities Exchange Act of 1934, the Securities Act of 1933 or the respective rules and regulations thereunder must be brought in the United States District Court for the Southern District of New York. Holders of our ADSs will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.

ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable results to the plaintiff(s) in any such action.

The deposit agreement governing our ADSs provides that holders and beneficial owners of ADSs irrevocably waive the right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including claims under federal securities laws, against us or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court, and holders of the ADSs are not able to waive our or the depositary’s compliance with U.S. federal securities laws or the rules and regulations promulgated thereunder. However, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, by a court of the State of New York or a federal court, which have non-exclusive jurisdiction over matters arising under the deposit agreement, applying such law. In determining whether to enforce a jury trial waiver provision, New York courts and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one that is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim (as opposed to a contract dispute), none of which we believe are applicable in the case of the deposit agreement or the ADSs. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of the federal securities laws. If you or any other holder or beneficial owner of ADSs brings a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may augur different results than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims, and the venue of the hearing.

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based medical support. SHL’s ethos is to provide its subscribers professional medical care digitally when its subscribers need it. SHL monitors its subscribers’ health and wellbeing to reduce the need for emergency intervention and hospitalization. SHL’s aim is to increase its users’ chances of survival if a heart attack strikes and generally improve users’ quality of life following such medical events.

SHL expanded into Europe in 2001 by establishing a joint venture with Philips Medical Systems International B.V., providing telemedicine servies based on SHL’s proprietary technology. In 2004, SHL acquired Philips’ equity interest in the joint venture. Over the years, SHL has strategically acquired local private companies in Germany such as Almeda GmbH, Gesellschaft für Patientenhilfe DGP mbH, and Jumedi GmbH, and is currently one of the leading companies in providing telehealth services and remote patient monitoring services of chronic patients for health insurance funds in Germany.

SHL introduced its unique and patented mobile 12 lead electrocardiogram (ECG) SmartHeart^® platform in the US in 2020, and since then has entered into commercial agreements with leading US healthcare providers, including the Mayo Clinic, CVS, and Henry Schein.

During January and February 2021, SHL issued 3,588,889 ordinary shares (and sold 300,000 Treasury shares) to certain investors in a private placement for approximately CHF 35 million to support the growth of its business operations in Germany, expand its business in the U.S., enhance SHL’s supply chain and accelerate research and development activities.

On August 31, 2021, a subsidiary of SHL acquired 70% of the share capital of Mediton Group, a leading B2B healthcare services provider in Israel for NIS 84 million. The Mediton Group is comprised of the following entities, all of which provide medical services to he institutional and payer markets:

We believe the Mediton acquisition provides SHL the ability to leverage synergies and cross sell its technology and services to Meriton’s customers. For further information, please see Item 10.C. below.

Public Information

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, at http://www.sec.gov. Upon effectiveness of this registration under Section 12 of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act of 1934”), SHL will be subject to the periodic reporting requirements of the Securities Exchange Act of 1934, and, accordingly will file certain reports with the SEC. These reports can be inspected and retrieved through the SEC’s EDGAR system on the SEC’s Internet website referred to above. See Item 10.H, “Additional Information—Documents on Display.”

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Our website is http://www.shl-telemedicine.com. No information contained on our website is intended to be included as part of, or incorporated by reference in, this Annual Report.

Overview

SHL is an international group specializing in telemedicine services, including the provision and development of advanced personal telemedicine solutions, with operations in Israel, Germany and the United States. Personal telemedicine is the transmission of medical data by an individual from a remote location to a telemedicine center or healthcare provider via telecommunication networks and the subsequent data reading and provision of medical assessment or services to the individual via electronic and telecommunication technologies. Our personal telemedicine systems are designed to improve quality of care and life for people suffering from various health conditions ranging from the high-risk and chronically ill to ordinary users of healthcare products and services who wish to take a more active role in managing their own health.

We are a leader with a long history in the telemedicine markets in Israel and Germany, providing remote medical services and patient management with telemedicine centers available 24/7, and global service of cloud-based technology, all of which results in approximately 3 million interactions and data readings annually.

SHL’s primary focus is the development of technologies, solutions, and advanced telemedicine services to assess and monitor acute and chronic heart health and cardiac diseases, such as congestive heart failure, among others. In the U.S., SHL’s primary offering is its SmartHeart^® platform, the only 12 lead ECG that enables a full, hospital-quality ECG to be performed by a lay-person without the assistance of a healthcare professional. SHL’s SmartHeart^® technology is patented and FDA-cleared.

We believe SHL’s personal telemedicine systems have strategically positioned the company to meet the increasing demand for virtual healthcare, which is more efficient and less expensive than healthcare provided in traditional clinical environments. As patients, healthcare providers and third-party payers seek new ways to deliver cost effective healthcare services without adversely affecting quality, we believe they will increasingly turn to those products that enable quality care to be delivered primarily outside the costly hospital and outpatient clinical environments.

Telemedicine Market overview

Telemedicine is one of several segments in the healthcare market. Telemedicine is the distribution and provision of health-related services and information via electronic and telecommunication technologies for the purpose of improving health care. The goals of telemedicine are to improve interaction between patients and healthcare service providers, ensure a speedy and secure transmission of data, and provide better processing and storage of large amounts of data. Telemedicine also improves cost-efficiencies by delivering patient data and medical care virtually outside the traditional more expensive clinical environment.

Sub-segments of telemedicine include electronic patient records, remote telemonitoring, expert systems, ambient assisted living and virtual reality (VR) in medicine. We believe telemedicine is a particularly interesting segment of the healthcare market, due to its growth potential. Telemedicine offers diagnostic, ongoing monitoring and assessment and therapy measures that make use of telecommunications to bridge the distance and time intervals between doctors and their patients, or between consulting doctors.

Telemedicine goes beyond the saving and processing of data extending to testing, the secure transfer of vital signs and electronic monitoring of the state of a patient’s condition. Other applications of telemedicine include medical care services that are supplied independently of the location of service providers, patients and records of care or medical devices.

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SHL’s Geographic Operations

We operate in three geographic segments for financial reporting purposes: Israel, Europe and the Rest of the World. Israel is our largest segment with revenues of approximately $45.1 million in the fiscal year ended December 31, 2022. Our European segment is our second largest segment and consists of our German operations with revenues of approximately $13.4 million in the fiscal year ended December 31, 2022. Our rest of the world segment consists of our U.S. operations with revenue of approximately $0.5 million in the fiscal year ended December 31, 2022.

Israel

Our primary and largest operation is in Israel where SHL has developed a successful telemedicine service offering for individuals and communities. In Israel, SHL provides personal telemedicine services and telemedicine center services to its private pay subscribers based on its proprietary medical technology which enables the users to remotely perform and transmit a full 12 lead ECG at home. SHL’s 24/7 telemedicine center is staffed with an experienced medical team that handles subscriber’s calls. SHL also provides and facilitates immediate assistance to its subscribers in emergency cases, offering home visits by professional medical staff and mobile intensive care ambulance services in certain coverage areas.

We have conducted several clinical studies that indicate that our 12 lead ECG product and cardiac telemedicine services offer a higher quality of care to cardiac patients as measured by post myocardial infraction hospitalization mortality and readmission rates. Specifically, a clinical study published in the Telemedicine and e-HEALTH Journal (tmj) in 2009 found the one year post acute myocardial infraction (“AMI”) mortality rate of SHL Telemedicine subscribers in Israel to be 4.4% compared to 9.7% for patients in the Acute Coronary Syndrome in Israel Survey (ACSIS) 2004, a biannual survey of all 26 intensive cardiac care units operating in Israel. Similarly, in a clinical study published in the Telemedicine and e-HEALTH Journal (tmj) in 2014, SHL Telemedicine subscribers hospitalized for AMI in Israel experienced 30-day post-hospitalization readmission rates of 5.8% compared to 30-day post-AMI readmission rates ranging from 11.3% to 28.1% in a number of previous studies published in leading medical journals.

Subscribers to SHL’s cardiac telemedicine services purchase our user friendly personal 12 lead ECG technology pay monthly fee for the use of these services, generating recurring revenues. SHL’s dual position both as an experienced operator of telemedicine services and as a technology developer enables it to offer solutions to healthcare payers and providers seeking a cost effective and innovative alternative to traditional healthcare delivery methods. To date, SHL has developed its expertise in the design and provision of personal telemedicine services through its extensive experience in operating the largest telemedicine center in Israel in terms of number of patient – subscribers.

Mediton Group

On August 31, 2021, SHL expanded its presence in Israel by acquiring 70% of Mediton Group for approximately $26 million. Mediton is a healthcare service provider working with institutions and payers, governmental entities, and large employer customers.

Mediton was established in 1993, and specializes in diagnostics, preventative healthcare and expert witness services for medical opinions, with medical centers in Israel’s most populated cities – Haifa, Tel Aviv, Jerusalem and Beer-Sheva. Mediton has long standing relationships with Israel’s blue-chip companies, government institutions, payers and health insurance funds. Mediton provides its services through a wide array of healthcare professionals, with whom it employs or contracts with, including physicians, physical therapists, occupational therapists, psychologists, nurses, paramedics, and technicians. Most of Mediton’s contracts are multi-year evergreen contracts, with governmental contracts being subject to Israeli mandatory tender law requirements.

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Mediton’s main service lines include the following:

SHL believes this acquisition provides it the ability to leverage synergies and cross-sell its technology and services to Mediton’s customers and Mediton’s services to SHL’s customers.

Germany

SHL is a leader with a long history in the German telemedicine market having entered into agreements with the largest German health insurance funds. These agreements are typically multi-year contracts for the provision of telehealth services to insured patients of the health insurance funds. SHL provides its services in Germany primarily from its telemedicine center in Munich.

SHL primarily provides the following services to health insurance funds in Germany:

Recent legislative initiations in Germany have promoted the increasing use of telemedicine. In the fall of 2020, German legislation introduced so-called digital health applications (DiGAs) to statutory health insurance (“SHI”) care. Other initiatives supporting the promotion of telemedicine include e-prescription as well as electronic health record initiatives.

In January 2022, the Federal Joint Committee, G-B-A, a German regulatory governmental body, introduced reimbursement for remote monitoring of patients with heart failure (RPM-HF) by German statutory health insurance funds. These services are provided in cooperation with a telemedicine center and physicians qualified as specialists in internal medicine and cardiology. G-BA reimbursement for remote patient monitoring RPM-HF provides SHL another channel to offer its remote monitoring services for chronic congestive heart failure patients in addition to its traditional agreements with German health insurance funds.

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Main Growth Drivers in Germany:

United States

SHL introduced its unique and patented FDA-cleared SmartHeart® platform to the U.S. market in 2020, providing U.S. customers the high quality technology and benefits of its mobile 12 lead ECG technology developed and sold in Israel. The SmartHeart® platform is SHL’s latest generation ECG solution which is a cloud-based technology that is the only 12 lead personal ECG enabling a full, hospital-quality ECG to be performed anywhere at any time by a lay-person without assistance from a medical professional. SHL’s SmartHeart® solution enables patients to conduct a 12 lead ECG procedure in various remote settings, including from their home. The connectivity of SHL’s SmartHeart® cloud-based platform to certified healthcare professionals allows for a prompt virtual review and interpretation of data collected on its 12 lead ECG.

SHL’s SmartHeart^® platform is currently approved by the U.S. Food and Drug Administration, or FDA; for use only with a prescription. SHL is in the process of seeking the U.S. FDA over-the-counter, or OTC, clearance for SmartHeart^® through the 510(k) pathway. Although we believe that given the FDA’s feedback to a pre-submission that we filed regarding the OTC clearance for SmartHeart^®, the materials and documentation we prepared and are contemplating to prepare will ultimately enable us to obtain OTC clearance from the FDA, the FDA approval process is highly stringent and there can be no assurance that SHL will ultimately be successful in obtaining OTC clearance from the FDA, or the length of time required to obtain any such approval. See “D. Risk Factors – We operate in a highly regulated industry and failure to comply with the complex regulations applicable to us could result in investigations, legal judgments or penalties, which could materially adversely affect our business” and “We depend on evolving governmental regulation in and around the health care industry and failure to comply with these and other laws and regulations could have a material adverse effect on our business, financial condition and results of operations.” in Item 3. Key Information.

Growth strategy

We have been at the forefront of providing and developing telemedicine services and technology for over 30 years. We have vast experience in remotely monitoring and managing acute and chronic heart patients. Our telemedicine centers review ECG transmissions and other data received directly from our customers and transmitted from a variety of devices, including the personal mobile ECG devices developed by us and provided to our customers.

Our telemedicine services for chronic heart failure patients and other chronic patients reduce hospital readmissions and the duration of hospitalizations of patients, decrease mortality and improves patients’ quality of life.

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For both our acute and chronic telemedicine services, we provide cardiac and other home-use medical monitoring technology that transmit data to our telemedicine centers. We analyze the data received and interact with our clients to monitor their wellbeing and levels of compliance with their set treatment. Clinical data is maintained in our data base in compliance with data protection rules and made securely accessible online to patients and their approved physicians.

Virtual medical services are gaining momentum, offering growth potential in both existing and new markets.

The COVID-19 pandemic has illustrated the importance and many benefits of telemedicine and the need to be able to implement comprehensive technological solutions to track, diagnose, offer treatment, and maintain ongoing care for patients remotely, as our services and products offer.

We continue to focus our efforts on driving the growth of our operations in the German and Israeli markets by addressing current customer needs and new opportunities while promoting the SmartHeart^® platform technology in the U.S. and elsewhere.

We intend to continue to seek to enhance our growth by selectively acquiring cross-selling businesses that offer synergistic product lines and complementary technologies and services, such as the Mediton acquisition. We are continuously examining potential acquisition targets, including competitors, businesses with related technologies and certain operators of telemedicine centers.

Regulations

General

In many countries and regions, most notably the U.S., Western Europe and Japan, medical device products and software such as our products are subject to legislation adopted by regulatory agencies and governments at all levels. In the U.S., medical products are subject to Food and Drug Administration, or FDA, approval. In Europe, many products require the CE Marking before they can be sold in the EU. The regulatory approval process is lengthy (usually approximately 6 to 12 months in all of the developed markets), expensive and uncertain, and any approvals or clearances that we seek may be denied. Product approvals and clearances, if issued, can be withdrawn for failure to comply with regulatory standards or the occurrence of unforeseen problems following initial marketing. The FDA, and similar regulatory authorities in other countries, also require us and any manufacturing contractors we employ to adhere to regulations setting forth requirements for Good Manufacturing Practices, or GMP, which include extensive testing, control and documentation requirements to ensure quality control. Failure to comply with applicable regulations could result in sanctions being imposed on us.

In various countries a special authorization is needed to process and store personal data, such as patient medical data. The transmission of personal medical data via telecommunications, especially cross border transfer via internet, is a relatively new development, and patient and health care industry concerns regarding the confidentiality of such information could lead to further legislation and regulations that govern the methods of transmitting and storing patient medical data. Failure to comply with these and other laws and regulations could have a material adverse effect on our business, financial condition and results of operations.

Israel

In Israel, we operate under legislations and regulations that apply to the provision of the telemedicine services provided by us and the healthcare services provided by the Mediton Group. In addition, medical equipment laws apply to the medical devices being used by our private pay subscribers and by the Mediton Group in providing its healthcare services. These laws provide that medical equipment may only be manufactured and marketed in Israel, if it is registered as medical equipment in the “AMR register,” in accordance with the Israeli registration conditions. In addition, certain regulations and Ministry of Health procedures apply to the provision of our telemedicine services and the use, operation, calibration and maintenance of certain medical devices or equipment and pharmaceutical products being used or operated by us or by the Mediton Group. The marketing and sale of our telemedicine services to our private pay consumers in Israel are also subject to Consumer Protection laws, and regulations, the goal of which is to protect individual customers from misleading sales methods.

We and our business customers are subject to various laws governing privacy protection, confidentiality information and security laws. Because we and the Mediton Group retain personal and medical information of patients or other persons, we are also subject to data privacy protection and security laws, which require that owners of databases containing such information to meet certain

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obligations such as registration with authorities and the appointment of a database administrator to supervise the use of stored information only for its original purposes.

In Germany and the United States, SHL is also subject to laws prohibiting the corporate practice of medicine and laws that govern financial and other arrangements between health care providers and payers which are designed to regulate the referral of a patient to a particular provider for medical products and services.

Germany

In Germany, we utilize a business-to-business, or B2B, model, where we work with health insurance funds to remotely monitor and stabilize patients and save costs for health insurers.

Healthcare in Germany is primarily organized by the statutory health insurance system (SHI). Approximately 90% of the population in Germany is insured within the SHI, while around 10% of the population are covered by private health insurance. Through the SHI funds, citizens have equal access to healthcare benefits from healthcare professionals who are licensed and provide healthcare services within the statutory healthcare system. Membership in the statutory health insurance system is mandatory for employees unless their income rises above an annually determined threshold.

In connection with the SHI system, the legislature creates the legal framework for the provision of medical services, and the medical self-governing bodies, such as the associations (at a federal and regional level) of SHI accredited physicians, SHI funds and the German Hospital Federation, formulate and implement in detail which healthcare services will be provided and under what conditions. The highest decision-making body in the SHI system is the Federal Joint Committee (Gemeinsamer Bundesausschuss), or G-BA, a German association representing all relevant parties of the healthcare sector such as physicians, hospitals, health insurance funds and patients. The G-BA issues directives and determines the benefit package of the SHI system. The organization of the SHI system, the responsibilities of the G-BA and the other self-governing bodies, as well as the provisions for medical care, are laid down in the Social Code Book V (SGB V).

In addition, as a main principle, SGB V sets out that patient entitlement to medical service within the system of the SHI is restricted by the “efficiency principle”, namely that the respective healthcare must be sufficient, appropriate and economically efficient, and must not exceed the extent of what is necessary. Recently, SGB V has been subject to numerous legislative changes and amendments primarily to improve, enhance, and take advantage of the opportunity provided by the digitalization of medical services with the ultimate goal of improving the quality of healthcare.

Digitalization of medicine and the pandemic have accelerated the introduction and application of telemedicine services in Germany in recent years. In 2018, with the exception of the State of Brandenburg, the general prohibition for physicians to diagnose and treat patients solely by means of telecommunication has been lifted. These prior professional rules of conduct prohibited physicians from taking on new patients without direct, physical interactions. With the exception of the State of Brandenburg, patients in all states may now be diagnosed and treated solely by means of telecommunication, provided that – in each individual case – such provision of medical care is reasonable from a physician’s perspective and it is ensured that the necessary level of care is applied. Since then, the use of video and phone consultations of physicians is allowed and is increasing. In the wake of such change, the general prohibition to advertise such remote medical services has been abolished as well. Advertisement for remote medical services is now permitted, provided that – according to the recognized medical state of art – a personal and direct contact between the physician and patient is not necessary.

New legislation was introduced in Germany in 2020 that made the use of telemedicine services permissible and contained provisions designed to support and encourage their increasing usage. We believe that these favorable legislative trends will result in a significant part of the market shifting to remote medical services in the coming years, with virtual visit services and patient care becoming new standards of care. In January 2022, the G-B-A, introduced reimbursement for remote monitoring of patients with heart failure (RPM-HF) by German statutory health insurance funds. These services are provided in cooperation with a telemedicine center and physicians qualified as specialists in internal medicine and cardiology. G-BA reimbursement for remote patient monitoring RPM-HF provides SHL with another channel to offer its remote monitoring services for chronic congestive heart failure patients in addition to its traditional agreements with German health insurance funds.

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In the fall of 2020, German legislation introduced so-called digital health applications (DiGAs) to SHI care. DiGAs are class I or II medical devices, such as medical applications. Currently, 35 DiGAs are listed in a catalogue pursuant to Section 139e SGB V and may be prescribed by a treating physician. SHI patients are entitled to receive such DiGAs.

European Union

In Europe, the requirements for medical devices are established in two European regulations applicable since May 26, 2021 in all current and future member states of the European Economic Area (“EU”). The two regulations are (1) the European Union Medical Device Regulation (the “MDR”) and (2) Regulation (EU) 2017/746 of April 5, 2017, relating to in vitro diagnostic medical devices. Although the MDR is self-binding in all member states of the EU, numerous acts of the EU and of national legislation in each member state are necessary to fully implement the legal provisions. These provisions essentially include higher safety standards to be met by medical devices and, therefore, require a new conformity assessment procedure and re-certification of all medical devices regardless of whether they have already been placed on the market. During the EU EPSCO (Employment, Social Policy Health and Consumer Affairs) Council Meeting in December 2022, the council identified risks relating to the shortage of medical devices in the EU market due to the MDR. It was determined that a legislative change would be required to address this, and accordingly, on March 20, 2023, the European Commission adopted amendments to the MDR, to allow for extension of the transitional provisions contained in the MDR until the end of 2027 or 2028 depending on the classification of the device.

United States

Manufacturers of medical devices are required to register with the FDA as device manufacturers and submit listing information for devices in commercial distribution. As a manufacturer of medical devices, we are subject to requirements governing premarket approval and clearance, labelling, promotion, clinical research, medical device adverse event reporting, manufacturing practices, reporting of corrections and removals, and recordkeeping. Further, we are subject to periodic inspection by the FDA for compliance with these requirements. With respect to manufacturing, we are subject to the FDA’s Quality System Regulation (21 C.F.R. Part 820) and related FDA guidance, which requires us to manufacture products in accordance with GMP, including standards governing product design. The medical device reporting regulations and guidance require that we report to the FDA whenever we receive or become aware of information that reasonably suggests a device may have caused or contributed to a death or serious injury, or that a device has malfunctioned, and a device or similar device would be likely to cause or contribute to a death or serious injury if the malfunction were to recur. FDA regulations also may require us to conduct product recalls and take certain other corrective actions in response to potential quality issues. In addition, the FDA prohibits our products division from promoting our manufactured products for unapproved or uncleared indications or in a false or misleading manner. We are also prohibited from promoting unapproved or uncleared drugs or devices more generally. Finally, as with our pharmaceutical products, states impose additional requirements on our drug and device manufacturing and distribution activities, including requiring additional state licenses. We are subject to periodic inspections by the FDA and other authorities for compliance with these requirements.

Sales and Marketing

Sales and marketing activities are managed in each of our local territories in accordance with its main business model. In Israel, the business model is focused on marketing and selling SHL cardiac monitoring services directly to individuals consumers. Our marketing and sales activity therefore is focused on the acquisition of individual customers. Mediton’s marketing and sales are focused on providing its services to institutions and payers. In Germany, the business model is based on the B2B model, where we have agreements with German health insurance funds to provide services to insured patients of such healthcare insurance funds as well as other services such as Telehealth and Doctors’ virtual visits, and therefore marketing and sales activity in Germany is focused on the German health insurance funds’ customers. In the US, SHL is focused on marketing and selling its unique and patented FDA-cleared

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mobile 12 lead ECG SmartHeart^® platform to health systems, healthcare providers, payers and other healthcare business customers, including leading healthcare providers such as the Mayo Clinic, CVS and Henry Schein.

Customer Relationships

A key part of our business is establishing and maintaining strong collaborations with leading providers and consumers in the health industry, including top health insurers, health organizations and medical centers.

In Germany, we have various multi-year agreements, known as Section 140 agreements, for the provision of our telemedicine services, with a number of leading German SHI funds that collectively provide health insurance coverage to approximately 30% of the German population in the aggregate (amounting to approximately 25 million persons). These agreements generally contain terms ranging from four to seven years, with some containing evergreen renewal provisions.

Pursuant to these agreements, the SHI funds refer their chronic patients, including those with cardiac congestive heart failure (“CHF”) conditions, to us for remote monitoring services. We provide these patients at-home monitoring systems that enable them to transmit data to telemedicine centers on a daily basis or as needed upon presentation of symptoms. In the event of change or deviation in a patient’s data, the telemedicine center contacts the patient and provides guidance to stabilize the patient’s condition, in order to prevent further deterioration and avoid hospitalization. Payment for these services by the SHUI funds is based on a fixed amount per period for each insured patient enrolled in our service.

In addition, we also provide telehealth and virtual physician visit services to the insured patients of German SHI funds pursuant to other Section 140 agreements. Payment for these services by the SHI funds is transactional and is based on the number and type of service used by the insured.

In the US, our business is primarily focused on the marketing and sale of our SmartHeart^® platform to healthcare business customers. We engage with healthcare facilities and providers with the goal of providing them with our SmartHeart^® platform to be incorporated into their different platforms in multiple use cases and settings. In October 2020, we entered into a collaboration with the Mayo Clinic to evaluate the incidence of emergency department visits, rehospitalizations and major adverse cardiovascular events (MACE), and cost-effectiveness over a period of 90 days after the first hospitalization for a heart attack for patients using our SmartHeart^® 12 lead ECG. In October 2021, we entered into a Purchase and Service Agreement with CVS Pharmacy Inc, according to which SHL provides its SmartHeart^® 12 Lead ECG unit and technology for the delivery of ECGs and related services at select MinuteClinic locations. In March 2022, CVS Health expanded the use of our SmartHeart^® to the CVS Health Clinical Trial Services™, to be used for delivery of full 12 Lead ECGs in clinical trials.

Competition

In the last few years and particularly during the COVID-19 pandemic, we have experienced rapidly growing competition within the field of telemedicine services and products. Our main competitors include small companies providing focused solutions for a limited number of specific healthcare conditions, as well as larger companies providing comprehensive healthcare services. These companies, which may offer their services at lower prices, are continuing to develop additional products and are becoming more sophisticated and effective. In addition, large, well-financed healthcare providers and insurance carriers have in some cases developed their own platform or tools and may provide these solutions to their clients at discounted prices. Competition from specialized software providers or device manufacturers, which may facilitate the collection of data but offer limited interpretation, feedback or guidance, and from other parties will result in continued pricing pressures, which are likely to lead to price declines in certain product segments, which could negatively impact our sales, profitability and market share.

Competition in Israel

In Israel, our main competitor is Natali (a company for emergency medical services in Israel) Ltd., which provides telehealth and home care services, and Monitor - emergency medical services Ltd, a cardiac monitoring company.

Mediton competes primarily with companies providing medical services such as LMS (lotem medical services), MPT, Cardiomedix, Femi connecting healthcare, Shemer Medical Institute, and in certain cases units operated by hospitals.

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Competition in Germany

We operate in a highly competitive environment in Germany. We compete with large companies with global reach and significant experience in this market such as Philips Medical Systems and Teladoc, companies with significant national presence such as Otto Group – Medgate and Vitaphone, as well as smaller players such as 4 sigma, and MD-Medicus. We expect there will be consolidation in this market as companies seek to acquire know-how and technologies and leverage the synergies of complementary products and services and efficiencies of scale.

Competition in the US

We operate in a highly competitive and fragmented industry, subject to rapid change and significantly affected by new product introductions, results of clinical research, corporate combinations and other factors. Large competitors in the ambulatory cardiac market including GE Healthcare, Medtronic Inc., Boston Scientific Corporation, and Philips Medical Systems. Recently, there has been an increase in acquisition activity and consolidation in our industry. Many of our competitors have substantially greater financial, manufacturing, marketing and technical resources than we do. Furthermore, many of our competitors have well-established brands, widespread distribution channels, broader product offerings and an established customer base.

These competitors have also developed patch-based cardiac monitors that have received FDA and foreign regulatory clearances. We are also aware of small start-up companies entering the 12 lead ECG cardiac monitoring market, such as Heartbeam Inc. Large medical device companies may continue to acquire or form alliances with these smaller companies in order to diversify their product offering and participate in the digital health space. We believe the principal competitive factors in our market include:

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Basis of Presentation

We prepare our financial statements in accordance with IFRS as issued by the International Accounting Standards Board. The presentation currency of our financial statements is the U.S. dollar.

Our significant accounting policies are described in Note 2 of our audited consolidated financial statements for the years ended December 31, 2022, 2021, and 2020 included elsewhere in this Annual Report.

Impact of COVID-19 on Our Business and Operations

In the first quarter of 2020, the coronavirus epidemic broke out in China, and has spread to many other countries around the globe, including countries in which we operate. The World Health Organization declared that COVID-19 is a global pandemic. The COVID-19 outbreak, as well as the uncertainty regarding the spread of the virus, have led to a global economic slowdown.

SHL’s financial results were also initially negatively impacted by the COVID-19 pandemic. Specifically, in Germany, SHL’s revenues were negatively impacted as a result of longer decision making cycles of institutional customers, delays in the launch of new programs and slower recruitment of patients to our telehealth and remote chronic patient monitoring programs, as fewer patients were able to visit their physician’s office as a result of the pandemic in order to be referred to telemedicine programs.

In addition, we were required to implement various measures early in the pandemic, particularly in Israel and Germany, in order to enable us to continue to operate safely and seamlessly, and to provide protected working environments to our employees. These measures included the implementation of different operating processes, such as self-contained shifts (“capsules”) and the shift of a considerable part of our workforce to remote working, all of which needed to be supported by IT and communication solutions, and led to increased operating costs.

Certain of these measures, such as those related to improvements and modifications to facilities and IT and communications infrastructure and equipment, required one-time upfront fixed costs to implement. Other measures such as expenditure for personal protective equipment and enhanced cleaning services have resulted in increases variable costs that tend to increase and decrease based on the prevalence of COVID and state of the pandemic. Given the continued prevalence of COVID-19 and it being a rolling event with new variants evolving, even though the COVID-19 vaccine is now being administered in Israel and other territories, these operational changes are ongoing and we expect that many, if not all, may need to remain in place permanently. While the measures requiring one-time upfront fixed costs did not materially impact our 2022 financial results and are not expected to have ongoing impacts to our future expenses and profitability, we expect that, like many companies, the increased variable costs resulting from other required measures tied to COVID outbreaks and its overall prevalence of COVID at any given time may impact future profitability depending on their frequency and severity and our ability to pass the resulting increases in our variable costs on to our customers.

At the same time, we believe the COVID-19 pandemic has served as a catalyst for the acceleration in the adoption of telemedicine and that we are well positioned to exploit future opportunities in the global telemedicine space. While the COVID-19 pandemic has subsided, enabling the resumption of in-person activities and interactions, the Company believes that demand for telehealth services is likely to continue to grow, albeit slower than it did in early 2020 following the increased adoption of telemedicine services brought on by the COVID-19 pandemic. See “D. Risk Factors – The ongoing COVID-19 pandemic continues to present operational, health, labor, logistics and other challenges, and it is difficult to assess the ultimate impact of the COVID-19 pandemic on our business, financial condition and cash flows.”

Components of Operating Results

General

Most of our revenues and expenses are generated in New Israeli Shekels (“NIS”). Accordingly, we consider the NIS to be our functional currency in Israel and our consolidated financial statements are prepared in NIS.

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Our reporting currency is in U.S. Dollars. The translation of our financial statement to U.S. dollars is based on the following methods:

As we evaluate our growth prospects and manage our operations for the future, we believe that we can further expend healthcare services in Israel and Germany and increase the worldwide distribution of SmartHeart^® platform solutions (mainly in the United States).

We followed the below sales strategy in fiscal year 2022 in order to expand our revenues:

Revenues

In general, our revenues derive from healthcare services contracts (B2C and B2B) which is recognized over time and the sale of telemedicine devices, which is recognized at the point of time when the control of the goods is transferred to customers.

Cost of revenues

The cost of revenues consists of salaries and related expenses, external services fees, cost of devices, and allocation of overhead expenses. Overhead expenses consist of a variety of costs, including rent, office IT and associated expenses.

Research and Development Expenses

Research and development expenses, consists primarily of salaries and related expense payments for subcontractors and overhead expenses.

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Sales and Marketing Expenses

Sales and marketing expenses consist primarily of salaries and related expenses, commissions and fees to third party representatives, marketing & advertising, promotional expenses, domestic and international travels, web site maintenance, and overhead expenses.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related expenses, including share-based compensation, professional fees (which include legal, audit and other consulting fees) and other general corporate expenses

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Revenues

In 2022, our revenues increased by approximately $9.4 million, compared to 2021. In Israel revenue increased by approximately $13.9 million mainly due to the full year inclusion of Mediton’s results following its acquisition in 2021. In Germany revenues decreased by approximately $4.6 million, $1.9 million of which was due to negative exchange rates between the Euro and U.S. Dollar.

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Cost of revenues

Cost of revenue for the year ended 2022 was $31.8 million compared to $25.0 million for the year ended 2021. This increase was mainly related to the full year inclusion of Mediton’s results following its acquisition in 2021, offset in part by a slight decrease from our German operations.

In fiscal year 2022, gross margin was 46% compared to 50% in fiscal year 2021. The slight decrease was mainly related to the full year consolidation of Mediton’s results for 2022.

The following table provides our operating costs and expenses in 2022 and 2021.

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Research and Development costs, net

Research and development costs increased by approximately $0.8 million in 2022 compared to 2021. The increase was primarily related to the continued development of our SmartHeart^® technology and platform, the development of AI tools, and development of a new platform in Germany. R&D gross expenses in 2022 were $7.2 million, of which $5.2 million was capitalized, compared to $4.4 million, out of which $2.6 million was capitalized, in 2021. Amortization of development costs was $1.8 million compared to $1.2 million in 2021.

Selling and Marketing Expenses

Selling and marketing expenses for fiscal year of 2022 were $11.4 million, compared to $9.5 million in fiscal year of 2021. The increase was primarily related to sales team recruitments in the US due to the ramp up of our US activities with leading customers such as the Mayo Clinic and CVS pharmacy, as well as the inclusion of Mediton’s full year results in 2022.

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Financial income net for the 2022 fiscal year were $6.5 million, compared to net financial expenses of $13.0 million in the 2021 fiscal year. The increase was mainly related to revaluation of share options issued to investors in 2021, as well as negative exchange rate differences, from share options.

Financial income/expense relating to share options arise from changes in fair value based on the valuation of these options at the end of each reporting period. SHL uses the Black Scholes option pricing model when estimating the fair value of its share options. The factors that significantly affected the valuation of share options were (a) the market price of SHL’s ordinary shares, and (b) expected volatility and (c) the expected average life of the share options.

For the twelve months ended December 31, 2022, SHL’s share price decreased and the expected volatility increased from CHF 19.10 to CHF 14.80 per share, and 34.81% - 35.16% to 32.59% - 38.24%, respectively, while the expected average life of share options decreased from 1.06 - 1.13 years to 0.06 - 0.13 years.

For the twelve months ended December 31, 2021, SHL’s share price and expected volatility increased from CHF 11.00 - CHF 11.10 to CHF 19.10 per share, and 53.67% - 53.96% to 34.81% - 35.16%, respectively, while the expected average life of share options decreased from 2 years to 1.06 - 1.13 years.

In 2022, income from exchange rate differences mainly related to the effect of the strengthening of the US Dollar versus the Israeli Shekel by 13.2%. This resulted in exchange rate income of $0.6 million in respect of $6.2 million held in U.S. dollar deposits (as the functional currency of the financial statements of SHL is the New Israeli Shekel).

The strengthening of the US dollar versus the Israeli New Israeli Shekel by 13.2% resulted in other comprehensive loss of approximately $6.3 million in the twelve months ended December 31, 2022 due mainly to the translation of the financial statements of entities of the consolidated group from their functional currency in NIS to the presentation currency in US dollar.

In 2021, expense from exchange rate differences is mainly related to bank deposits in CHF and US Dollars. The exchange rates of the CHF and the US Dollars decreased by 3.2% and 1.2%, respectively, in relation to the New Israeli Shekel which caused exchange rate expenses of approximately $0.6 million.

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Taxes on Income

For fiscal year 2022, tax expenses was $1.1 million, compared to tax expenses of $0.5 million in fiscal year 2021. The increase was mainly related to the inclusion of Mediton’s full year results in 2022 and changes in deferred tax assets.

Revenues

In 2021, our revenues increased by approximately $9.4 million, compared to 2020. In Israel revenue increased by $8.7 million mainly due to the inclusion of Mediton’s results following its acquisition in 2021. In Germany revenues increased by $0.9 million, $0.5 million of which was due to favorable exchange rates between the Euro and U.S. Dollars.

Cost of revenues

Cost of revenue for the year ended 2021 was $25.0 million compared to $19.5 million for the year ended 2020. This increase was mainly related to the inclusion of Mediton’s results following its acquisition in 2021, offset in part by a slight decrease from our German operations.

In fiscal year 2021, gross margin was 50% compared to 51% in fiscal year 2020. The slight decrease was mainly related to the inclusion of Mediton’s results following its acquisition in 2021.

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The following table provides our operating costs and expenses in 2021 and 2020.

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Research and Development costs, net

Research and development costs increased by $0.2 million compared to 2020. The increase was priority is related to the continued development of our SmartHeart^® technology and platform, the development of AI tools, and development of a new platform in Germany. R&D gross expenses in 2021 were $4.4 million, of which $2.6 million was capitalized, compared to $2.4 million, out of which $0.9 million was capitalized, in 2020. Amortization of development costs was relatively flat of $1.2 million compared to 2020.

Selling and Marketing Expenses

Selling and marketing expenses for fiscal year of 2021 were $9.5 million, compared to $7.8 million in fiscal year of 2020. The increase was primarily related to sales team recruitments in the US due to the ramp up of our US activities with leading customers such as the Mayo Clinic and CVS pharmacy, as well as the inclusion of Mediton’s results following its acquisition in 2021.

Financial expenses net for the 2021 fiscal year were $13.0 million, compared to net financial expenses of $0.3 million in the 2020 fiscal year. The increase was mainly related to revaluation of share options issued to investors in 2021, as well as negative exchange rate differences, from share options.

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Taxes on Income

For fiscal year 2021, tax expenses was $0.5 million, compared to tax income of $0.2 million in fiscal year 2020. The increase is mainly related to the inclusion of Mediton’s results following its acquisition in 2021 and changes in deferred tax assets.

Impact of Inflation and Foreign Currency Fluctuations

Our Israeli business is the most significant of our operations. As a result, the majority of our revenues and expenses are generated in NIS. Investment activities and financing activities (excluding capital raise) were made in NIS. Our business in Germany is the second largest component of our operations, the revenues and expenses of which are generated in Euros. We believe our US business will be the main growth driver going forward, however, we consider the NIS to be our functional currency. Accordingly, future additional revenues may be denominated priority in currencies other than NIS and Euros.

Because exchange rates between the NIS, Euro and U.S. dollar fluctuate continuously, exchange rate fluctuations will have an impact on our profitability and period-to-period comparisons of our results. The effects of foreign currency re-measurements of financial assets and liabilities are reported in our financial statements as financial income or expense.

We currently do not have any mechanisms in place to hedge our exposure to foreign currency an interest rate fluctuations. However, we may in the future undertake hedging or other similar transactions or invest in market risk-sensitive instruments if our management determines that it is necessary to offset risks such as foreign currency and interest rate fluctuations.

Effective Corporate Tax Rate

As of January 1, 2018, Israeli resident companies were generally subject to corporate tax at the rate of 23%. Israeli resident companies are generally subject to capital gains tax at the corporate tax rate. We have historically incurred operating losses resulting in carry forward losses for tax purposes totaling approximately $101.5 million ($67.1 million in Israel, $23.7 million in Europe, and $10.7 million in the U.S.) as of December 31, 2022 and $108.4 million ($80.2 million in Israel, $19.3 million in Europe and $8.9 million in the U.S.) as of December 31, 2021. We will be able to carry forward these tax losses to future tax years. Except for our Mediton operation, we do not expect to pay taxes in Israel on our income from operations until we utilize our carry forward tax losses. We may, however, be required to pay taxes on our passive income, if any. For more information on taxation, See “Item 10.E.— Taxation.”

Our effective corporate tax rate may exceed the Israeli tax rate. Our German and U.S. subsidiaries will generally be subject to applicable federal, state, local and foreign taxation, and we may also be subject to taxation in the other foreign jurisdictions in which we own assets, have employees or conduct business activities.

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We believe that our existing capital resources and cash flows from operations will be adequate to satisfy our expected capital expenditures and liquidity requirements through the next twelve months. Without derogating from the foregoing estimate regarding our existing capital resources and cash flows from operations, we may decide to raise additional funds in the future. We believe that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity beyond the next twelve months. There can be no guarantee that financing will be available on commercially acceptable terms or at all. Debt financing, if available, could impose additional cash payment obligations, additional covenants and operating restrictions. Future equity financings could result in the dilution of our existing shareholders. In addition, any of the items discussed in detail under “Risk Factors” elsewhere in this Annual Report may also significantly impact our liquidity.

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Cash Flows from Operating Activities

Cash used in operating activities for the year ended December 31, 2022 was 0.1 million dollars, and primarily related to non-cash adjustments of $3.5 million, including depreciation and amortization expenses of $7.1 million, partially offset by financing income of $6.7 million.

Cash provided from operating activities for the year ended December 31, 2021 was 0.2 million dollars and primarily related to net loss of $13.0 million, partially offset by non-cash adjustments of $20.3 million, including of financial expenses of $13.0 million as a result of increase in investors options valuation and depreciation and amortization expenses of $5.4 million and cost of share expenses of $1.3 million while interest and tax payments were $1.3 million and negative change of $4.9 million in our operating assets and liabilities (including inventory increase of $3.1 million).

Cash provided from operating activites for the year ended December 31, 2020 was 4.7 million dollars, and primarily related to non-cash adjustments of $5.1 million, including depreciation and amortization expenses of $4.9 million, partially offset by interest and tax payments of $0.8 million.

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Cash Flows Used In Investing Activities

Cash used in investing activities during year ended December 31, 2022 was $6.4 million, primarily related to the capitalization of development cost of $5.2 million, and $5.7 million from investment in short-term deposit, $5.6 million from investment in short-term investment and $ 1.6 million for the purchase of property and equipment, offset in part by $11.7 million from the net proceeds from short term investments.

Cash used in investing activities during year ended December 31, 2021 was $41.0 million and primarily related to subsidiary acquisition of $27.3 million, the purchase of short-term investments of $13.6 million, and the capitalization of development cost of $2.6 million.

Cash used in investing activities during year ended December 31, 2020 was $7.6 million, primarily related to the purchase of short-term investments of $6.7 million, the capitalization of development cost of $0.9 million, and $0.9 million from the purchase of property and equipment, offset in part by $0.8 million from the proceeds from short-term investments.

Cash Flows Used In Financing Activities

Cash used in financing activities during the year ended December 31, 2022 was $2.3 million and primarily related to lease payments of $2.4 million, and repayment of long term loan of $1.7 million partially offset by exercise of options of $2.0 million.

Cash provided from financing activities during the year ended December 31, 2021 was $51.1 million and primarily related to the net proceeds from the issuance of share capital of $36.9 million, $0.5 million from the exercise of options, and $18.3 million in proceeds from long term loans, offset in part by lease payments of $1.9 million and short-term bank credit repayment of $2.7 million.

Cash used in financing activities during the year ended December 31, 2020 was $0.7 million and primarily related to lease payments of $1.5 million, partially offset by short-term credit borrowings of $2.2 million.

Financial Arrangements

On January 7, 2021, a special general meeting of the company approved on the increase of the authorized share capital of the company to 25,000,000 ordinary shares of NIS 0.01 par value each.

On January 21, 2021, the company closed the first of two placements by selling 1,600,000 ordinary shares. In addition, the company issued options to purchase 800,000 ordinary shares at an exercise price of CHF 11.00 per share exercisable for a 24 months period.

On February 17, 2021, the company closed a second private placement by issuing 2,288,889 new ordinary shares. In addition, the company issued options to purchase 1,144,444 further ordinary shares at an exercise price of CHF 11.00, exercisable for a 24 month period.

The expiration dates for the options were January 20, 2023 and February 16, 2023. Upon expiration, the proceeds from the exercise of 1,914,478 options were recorded in equity.

The placement agents in these two private placements received a cash payment based on the amount of cash received in the private placements and from the exercise of the options issued in the placements. In addition, the placement agents were granted options for units at an exercise price of CHF 9.00 per unit. Each unit entitles the placement agents to receive one ordinary share together with an option to acquire 0.5 ordinary share at an exercise price of CHF 11.00 per share. The exercise period for these placement agents’ units is until March 17, 2025. As of December 31, 2022 and May 5, 2023, the number of units granted to the placement agents was 97,281 and 155,720 respectively. These units, if fully exercised, entitle the placement agent to 145,922 and 233,580 shares, respectively.

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Since the exercise price of the options issued to the investors in the placements is denominated in CHF while the functional currency of the company is NIS, these options are accounted for upon initial recognition as a financial liability at fair value through profit or loss. After initial recognition, increases and decreases in fair value in each reporting period are recognized in profit or loss as non-cash financial expenses (income).

Although these options are recognized as a liability and measured at fair value through profit or loss in each period until exercise or expiration, settlement of this option is through issuance of shares and requires no cash expenditure or liquidity. Upon exercise or upon expiration the liability will be credited to the equity of the company in addition to the proceeds received upon exercise. As a result, settlement of this option liability is not expected to have a negative impact on our future liquidity.

The option expiration dates were January 20, 2023 and February 16, 2023. As mentioned, the options were recorded in equity.

The following table presents our cash and consolidated capitalization and indebtedness as of December 31, 2022 on an actual basis and as adjusted to give pro forma effect to share options that were exercised from July 1, 2022 through May 5, 2023 as if they had occurred as of December 31, 2022. This information was prepared in accordance with IFRS and was derived from our unaudited consolidated balance sheet as of December 31, 2022 included elsewhere herein. This information should be read in conjunction with the information included and referenced in Item 3.D. “Key Information –Risk Factors,” Item 5. “Operating and Financial Review and Prospects - Results of Operations,” Item 8. “Financial Information” and Item 18. “Financial Statements,” the consolidated financial statements and related notes thereto of us beginning on page F-1 of this Annual Report.

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The impact of the exercises are as follows:

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Long term loan

On August 29, 2021, the company signed an agreement with a bank in Israel to obtain a long-term loan in the amount of NIS 59 million (approximately $18 million) for a period of 7 years and 9 months. The loan is denominated in NIS and bears interest at prime plus 1.05% (2.65% as of the signing date). The loan is required to be repaid in 28 quarterly installments following an initial moratorium period of 9 months.

The loan agreement includes certain financial covenants related to the company’s Israeli operations, including with respect to  minimum tangible equity, minimum tangible equity to total tangible assets; and net debt to EBITDA. As of December 31, 2022, the company was in compliance with these covenants.

Mediton Group Acquisition

On August 31, 2021, the company consummated an agreement, dated August 25, 2021, to acquire 70% of the Mediton Group companies, a leading provider of healthcare services in Israel in the field of diagnostics, preventative healthcare, and medical opinions to institutional customers, including Israeli blue-chip companies, government institutions such as the Israeli Social Security and the Israeli Ministry of Defense, all four healthcare funds and insurance companies.

The purchase price for the acquisition of approximately NIS 84 million (approximately $26 million) was financed from cash on hand and the NIS 59 million Israeli bank long term loan referred to above. The transaction included the grant of a put and call option over the remaining 30% interest in the Mediton Group.

Sellers Put Option

Pursuant to the Mediton SPA, the sellers have an option for one year from the day following the end of the third anniversary of the closing (“Put Option Period”), to obligate SHLR to purchase all (but not part) of the sellers’ remaining 30% holdings in both Mediton and Medishur (but not one of them), at a price based on a multiple of EBITDA of Mediton Group as defined and set out in the Mediton SPA.

The put option price may be paid in SHL ordinary shares so long as the ordinary shares remain listed on the SIX or another major exchange, with each ordinary shares valued at 90% of SHL’s share closing price on the date the put option is exercised.

As of December 31, 2022 and December 31, 2021, the estimated gross amount of cash outflow assuming the put option will be exercised at the earliest possible date was $11.3 million and $11.6 million, respectively. As discussed above, this amount may be settled in cash or through the issuance of SHL ordinary shares. The principal factor that could have a material impact on the gross amount would be a significant change in  the EBITDA of the Mediton Group in the period prior to the Put Option Period.

For financial reporting purposes, SHL has selected as an accounting policy to record the sellers’ remaining 30% holdings in both Mediton and Medishur as non-controlling interest (“NCI”) in the equity of SHL. The put and call options, which are financial derivatives, are measured at fair value through profit or loss and are presented net in the consolidated balance sheet.

The fair value of the put option to sell the remaining 30% holdings in both Mediton and Medishur represents the difference between estimated fair value of the remaining 30% holdings in both Mediton and Medishur and the exercise price discounted to its present value. As the exercise price gets closer to the fair value of the remaining 30% holdings in both Mediton and Medishur, the effect is to reduce the fair value of the put option. The same would apply in opposite direction to the fair value of the call option of SHL to acquire the remaining 30% holdings in both Mediton and Medishur, as described under the heading “Company Call Option” below.

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As of December 31, 2022 and December 31, 2021, the net fair value of the put and call options were $245  (asset) and $67 thousand (liability), respectively. See Note 5b and Note 18h to the consolidated balance sheet as of December 31, 2022 and December 31, 2021, respectively, for an explanation of the methodology and significant inputs used in order to determine the fair value.

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In order to provide information as to its liquidity position, SHL discloses in Note 18f to the consolidated balance sheet as of December 31, 2022, the estimated gross cash outflow of $11.3 million assuming the put option will be exercised at the earliest possible date.

Company Call Option

The Mediton SPA also provides SHLR the right for one year from the end of the Put Option Period to oblige the sellers to sell to SHLR all (but not part) of the sellers’ remaining 30% holdings in both Mediton and Medishur (but not one of them) for the higher of the same price as the put option price, or a consideration that reflects a value of NIS 120 million for the companies as of the closing date with such amount being linked to the Israeli Consumer Price Index, minus all dividends paid from the August 31, 2021 closing date until the date the Call Option is exercised, all as set forth in the Mediton SPA.

Long-Term Lease

The company has long-term lease liabilities repayable in monthly equal installments until March 2029. The total aggregate contractual undiscounted payments for these long-term lease liabilities, including interest, amounts to approximately $12,312.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

C.           RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Research & Development

As a leading developer of advanced telemedicine technologies the are highly focused on research and development, including predicting artificial intelligence technologies. Our research and development efforts are carried out with the Hadassah Medical Center and the Hebrew University of Jerusalem.

Our gross research and development costs, (excluding amortization and capitalization), were $7.2 million in 2022, $4.4 million in 2021, and $2.4 million in 2020.

Intellectual Property

We seek to protect our proprietary technology and intellectual property through a combination of patents, patent designs, and trademark applications, as well as trade secrets, know-how, and other contractual rights, (including confidentiality and invention assignment agreements). We hold a number of design patents and trademarks, including one of our key products and technologies, the SmartHeart^® .

The following table sets forth certain information related to the primary patents and trademarks material to our business:

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Status of Trademarks filed through WIPO in various countries

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D.           TREND INFORMATION

See Item 4. “Information on the company.”

E.           CRITICAL ACCOUNTING ESTIMATES

Not applicable.

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Erez Alroy served in various executive positions in SHL since its inception, as its Co-CEO from 2000 to January 2015 and as a director from 2008 to 2014. He is currently active in various investments and is a board member in Merhavia Holdings Ltd (TASE: MRHL). Mr. Alroy holds an MBA from the Hebrew University in Jerusalem. He is the brother of Mr. Yariv Alroy, a member of our Board of Directors, and a member of the Alroy Group, one of our principal shareholders.

Prof. Amir Lerman joined our Board of Directors in 2016. He has served as the Vice-Chair, Cardiovascular Department and the Director of the Cardiovascular Research Center at the Mayo Clinic in Rochester (USA) since 2010. He has also served as the Program Director for vascular and valve, Center for Regenerative Medicine at the Mayo Clinic since 2012. In addition, Prof. Lerman serves as the Director of the Mayo-Israeli startup company initiative as well as a faculty member at the Mirage Institute: US-Israel innovation bridge business leadership program, since 2009, in addition to various other positions held at the Mayo Clinic. Since 2001, he has also held an appointment as Professor of Medicine at the Mayo Medical School. Prof. Lerman graduated from the Technion School of Medicine in Haifa, Israel in 1985 and completed his training in internal medicine, cardiovascular diseases and invasive cardiology at the Mayo Clinic in 1994. Prof. Lerman published more than 500 manuscripts, book chapters and reviews; the NIH, AHA and several foundations support his research.