SHL TELEMEDICINE LTD
As filed with the Securities
and Exchange Commission on May 15, 2025
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
20-F
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REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the fiscal year ended
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OR
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date
of event requiring this shell company report ________
For
the transition period from
________ to ________
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Commission
file number
001-41641
(Exact
name of Registrant as specified in its charter and translation of Registrant’s name into English)
(Jurisdiction
of incorporation or organization)
(Address
of principal executive offices)
Tel.:
+
972
(
3
)
561‑2212
(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:
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Title
of each class
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Trading
Symbol(s)
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Name
of each exchange
on which registered |
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N/A
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*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:
16,392,754
as of December 31, 2024.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
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No
☒
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934.
Yes
☐
No
☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate
by check mark whether 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).
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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Large
accelerated filer
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Accelerated
filer
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Emerging
growth company
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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).
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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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U.S. GAAP
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Other
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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.
Item
17
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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
☒
Table of Contents
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CONVENTIONS USED IN THIS ANNUAL
REPORT
In this Annual Report on Form 20‑F,
unless the context otherwise requires:
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“SHL,” “the company,” “us,”
“we” and “our” refer to SHL Telemedicine Ltd. and its subsidiaries;
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“SHL Telemedicine” refers only to SHL
Telemedicine Ltd., and
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“Mediton” refers to the Mediton Group
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Additionally, in this Annual
Report:
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“CHF” and “Swiss francs” refer
to the legal currency of Switzerland;
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“NIS” refers to New Israeli Shekels, the
legal currency of the State of Israel;
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“$” and “U.S. dollars” refer
to the legal currency of the United States;
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“ADSs” refers to our American Depositary
Shares, each representing one (1) of our ordinary shares;
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“IFRS” refers to International Financial
Reporting Standards as issued by the International Accounting Standards Board;
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“Ordinary shares” refers to our ordinary
shares, nominal value NIS 0.01 per share;
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“Nasdaq” refers to the Nasdaq Capital
Market;
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“SEC” refers to the United States Securities
and Exchange Commission; and
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“SIX” refers to the SIX Swiss Exchange
Ltd.
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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 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 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.
2
PART I
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ITEM
1.
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IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
AND ADVISERS
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Not applicable.
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ITEM
2.
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OFFER STATISTICS AND EXPECTED TIMETABLE
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Not applicable.
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ITEM
3.
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KEY INFORMATION
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A.
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[RESERVED]
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B.
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CAPITALIZATION AND INDEBTEDNESS
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Not applicable.
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C.
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REASONS FOR THE OFFER AND USE
OF PROCEEDS
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Not applicable.
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D.
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RISK FACTORS
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The realization
of one or more of the events described below may have a material adverse effect on our cash flows, results of operations, financial condition,
growth prospects and the trading price of our ordinary shares on the SIX and of our ADSs. You should note that the risks discussed below
are not the only risks to which we are exposed. Additional risks, which are not presently known to us or which we currently believe to
be immaterial, could likewise result in a material adverse effect on our cash flows, results of operations, financial condition or growth
prospects and the trading prices of our ADSs and ordinary shares. This section also contains forward-looking information that involves
risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result
of many factors, including the risks described below and elsewhere in this Annual Report. The order in which the following risks are presented
does not necessarily reflect the likelihood of their occurrence or the relative magnitude of their potential material adverse effects
on our cash flows, results of operations, financial condition or growth prospects or the trading prices of our ADSs and ordinary shares.
Industry-specific Risks
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.
Our ability to conduct telehealth
services and medical services is subject to a variety of laws and regulatory regimes of the countries and jurisdictions in which we operate
and provide our services, including a variety of labor laws, privacy regulations, anti-corruption, anti-competition or financial relationships
of healthcare providers with service providers. Such regulatory requirements can vary from country to country and new requirements may
be imposed on us from time to time. In a regulatory climate that is uncertain and constantly changing, our operations may be subject to
direct and indirect adoption, expansion or reinterpretation of various laws and regulations. Compliance with these laws and regulations
may require us to change our practices at an undeterminable and possibly significant initial monetary and recurring expense.
3
In addition, failure to properly
adhere to these and other applicable laws and regulations could result in investigations, the imposition of penalties or adverse legal
judgments by public or private plaintiffs, significant adverse publicity and reputational harm, suspension or revocation of licenses,
fines, civil and/or administrative penalties, criminal penalties or other disciplinary actions, which could have a material adverse effect
on our business, financial condition or results of operations.
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, the 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.
4
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 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.
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.
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.
5
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
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 and terrorist organizations active
in the region, including 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. 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.
On October 7, 2023, Hamas
terrorists infiltrated Israel’s southern border from Gaza and conducted a series of attacks on civilian and military targets. In
response, Israel’s security cabinet declared war against Hamas, and later against Hezbollah (the “Israel-Hamas-Hezbollah war”).
Hostilities subsequently escalated between Israel and a number of its other neighbors, including conflicts with Hezbollah along Israel’s
northern border with Lebanon, with Iran and with the Houthi movement in Yemen, who both launched drone and missile attacks on military
and civilian targets within Israel. In addition, the Houthi movement has disrupted international commerce by launching a number of attacks
on commercial vessels traversing the Gulf of Aden and the Red Sea. While a ceasefire between Israel and Lebanon (with respect to Hezbollah)
was recently announced, the recently announced ceasefire between Israel and Hamas did not last and hostilities could also break out in
Lebanon, and it is possible that other ongoing conflicts in the region, including cyber attacks, will eventually escalate into a greater
regional conflict, including the potential for war between Israel and Iran, and that other countries and non-state organizations will
join or escalate their involvement in such hostilities.
While, to date, we have not
experienced any material interruptions resulting from the ongoing Israel-Hamas-Hezbollah war, circumstances are evolving and the intensity
and duration of any regional hostilities is difficult to predict, as are their impacts on our business and operations. Prolonged and/or
heightened instability could adversely impact our business, financial condition and results of operations in the future.
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.
6
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.
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 as well as the Israel-Hamas-Hezbollah war, 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. In connection
with the Israeli security cabinet’s declaration of war against Hamas and possible hostilities with other organizations, the Israeli
military called up several hundred thousand of its reserves for active service. As of December 31, 2023, some of our employees in Israel
(mainly members of our healthcare staff) were called up. Additional employees, including members of management, may be called up for service
in the current or any future military conflict. Although to date our operations have not been disrupted by such call-ups, we cannot assure
that this will be the case 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. 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.
7
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.
8
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 outsource 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.
9
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.
10
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.
The
market price for our ADSs and our ordinary shares may be volatile.
The market prices of our ADSs
and our ordinary shares 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 and of our ordinary shares.
Future
sales or issuances, or the possibility or perception of future sales or issuances, of a substantial number of 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 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.
11
The
issuance of equity or other securities that are convertible into equity, including options, or the exercise of options on 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 SIX. To the extent that additional capital is raised through the issuance of 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. Out of such options, options to purchase 1,914,478 newly issued shares were exercised.
As of May 1, 2025, we also
had options outstanding for the issuance of up to 1,448,435 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 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 any of 2020-2024. 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 ordinary shares and cause them to decline.
The trading market for 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 ordinary shares, the trading prices of 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 ordinary shares to decline.
Market
conditions may cause the market price of our ordinary shares to fluctuate substantially.
The market price of our 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 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.
12
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.
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.
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.
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 instructing the depositary as described above,
you will not 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.
13
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.
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.
14
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:
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•
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are only obligated to take the actions specifically
set forth in the deposit agreement without negligence or bad faith;
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•
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are not liable if we are, or it is, prevented or delayed
by law or circumstances beyond our, or its, control from performing our or its obligations under the deposit agreement;
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•
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are not liable if we exercise or it exercises discretion
permitted under the deposit agreement;
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•
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are not liable for the inability of any holder of
the ADSs to benefit from any distribution on deposited securities that is not made available to holders of the ADSs under the terms of
the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;
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•
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have no obligation to become involved in a lawsuit
or other proceeding related to the ADSs or the deposit agreement on behalf of the holders of the ADSs or any other person;
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•
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are not liable for the acts or omissions of any securities
depositary, clearing agency or settlement system; and
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may rely upon any documents we believe or it believes
in good faith to be genuine and to have been signed or presented by the proper person.
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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.
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.
15
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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ITEM
4.
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INFORMATION ON THE COMPANY
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A.
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HISTORY AND DEVELOPMENT OF THE
COMPANY
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General
SHL Telemedicine Ltd.
was incorporated in Israel on November 7, 1986, and is a limited liability company for unlimited duration under the laws of the State
of Israel. The address of our registered office and principal executive office is Ashdar Building, 90 Yigal Alon St., Tel Aviv 6789130, Israel.
SHL’s legal name is “SHL Telemedicine Ltd.”
History
SHL was founded in Israel
by Mr. Yoram Alroy in 1986 and went public in 2000 by listing on the SIX under the ticker symbol “SHLTN.” On April 3,
2023, SHL commenced trading on the Nasdaq under the ticker symbol “SHLT”. On March 11, 2025, we announced our intention to
voluntarily delist from the Nasdaq, terminate our ADR program and deregister from, and terminate our reporting obligations under, the
Exchange Act. Our ADRs ceased trading on the Nasdaq on April 2, 2025.
Since its founding, SHL has
expanded its operations and is now 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. Since its inception, SHL’s
business has been dedicated to emergency medical services and telemedicine. For more than a quarter of a century, and with tens of thousands
of subscribers, SHL has been providing monitoring services to cardiac patients and taking care of people in need of home-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.
16
SHL expanded into Europe in
2001 by establishing a joint venture with Philips Medical Systems International B.V., providing telemedicine services 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.In February 2025, we consolidated all four companies into one entity named
SHL
Telemedizin GmbH
.
SHL introduced its unique
and patented mobile 12 lead electrocardiogram (ECG) SmartHeart
®
platform in the U.S. in 2020, and since then has entered into commercial agreements with leading U.S. 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. On March 25, 2025, we announced the acquisition of the remaining 30% stake of Mediton pursuant to a put option notice
provided by the main holders of the remaining outstanding ordinary shares of the Mediton Group. Pursuant to a determination by an arbitrator,
the purchase price is NIS 31.1 million (approximately $8.4 million) for the remaining 30% stake. On April 3, 2025, we informed the sellers
of our intention to close the purchase of the 30% stake of Mediton and pay the NIS 31.1 million by partial offset of an amount based on
alleged misrepresentations made by the sellers in the Share Purchase Agreement dated August 25, 2021, we entered into with them in connection
with our purchase of Mediton. The sellers responded by rejecting our offset claims, and as a result the transaction has not closed yet.
The sellers filed a motion to the Tel-Aviv District Court, requesting the court to approve the arbitrator’s decision and the payment
in full of the NIS 31.1 million without any offset. While we do not object to the arbitrator’s award, we responded to the motion
and objected to the remedies included in the motion. This proceeding does not affect the purchase of the first 70% in Mediton.
|
•
|
Mediton Medical Centers Chain Ltd.,
which provides private medical services, and project management in various medical fields, including the performance of surveys, medical
examinations for organizations, occupational examinations, and the operation of specialist clinics; and
|
|
•
|
Medishur Ltd. which primarily
provides medical examinations for insurance companies.
|
We believe the Mediton acquisition
provides SHL the ability to leverage synergies and cross sell its technology and services to Meriton’s customers.
Principal Capital Expenditures and Divestitures
|
|
|
2024
|
|
|
2023
|
|
|
2022
|
|
|||
|
Property and
Equipment
|
|
|
|
|
|
|
|
|
|
|||
|
Property
and Equipment
|
|
|
950
|
|
|
|
1,289
|
|
1,661*
|
|
||
|
Intangible
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
Costs
|
|
|
2,714
|
|
|
|
4,203
|
|
|
|
5,243
|
|
|
|
||||||||||||
|
|
||||||||||||
|
|
|
|
3,664
|
|
|
|
5,492
|
|
|
|
6,904
|
|
|
*
|
Includes property and equipment
of Mediton.
|
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. SHL is subject to the periodic reporting requirements of the Securities Exchange Act of 1934,
and accordingly files 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.”
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.
17
|
B.
|
BUSINESS OVERVIEW
|
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 three 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 U.S. Food and Drug Administration, or 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.
18
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
$43 million in the fiscal year ended December 31, 2024. Our European segment is our second largest segment and consists of our
German operations with revenues of approximately $13 million in the fiscal year ended December 31, 2024. Our rest of the world
segment consists of our U.S. operations with revenues of approximately $1 million in the fiscal year ended December 31, 2024.
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 NIS 84 million. On March 25, 2025, we announced the acquisition
of the remaining 30% stake of Mediton Pursuant to a put option notice provided by the main holders of the remaining outstanding ordinary
shares of the Mediton Group. Pursuant to a determination by an arbitrator, the purchase price is NIS 31.1 million (approximately $8.4
million) for the remaining 30% stake. On April 3, 2025, we informed the sellers of our intention to close the purchase of the 30% stake
of Mediton and pay the NIS 31.1 million by partial offset of an amount based on alleged misrepresentations made by the sellers in the
Share Purchase Agreement dated August 25, 2021, we entered into with them in connection with our purchase of Mediton. The sellers responded
by rejecting our offset claims, and as a result the transaction has not closed yet. The sellers filed a motion to the Tel-Aviv District
Court, requesting the court to approve the arbitrator’s decision and the payment in full of the NIS 31.1 million without any offset.
While we do not object to the arbitrator’s award, we responded to the motion and objected to the remedies included in the motion.
This proceeding does not affect the purchase of the first 70% in Mediton. .
Mediton was established
in 1993, and specializes in diagnostics, preventative healthcare and expert witness services for medical opinions, with medical centers
in several of Israel’s most populated cities, and we expect Mediton to commence also offering mobile hybrid services to such
customers in 2025. 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.
19
Mediton’s main service
lines include the following:
|
•
|
Preventative healthcare, including
annual medical check-ups that include comprehensive laboratory tests, stress ECG tests, eye exams, and more;
|
|
•
|
Expert witness services for medical
experts’ and medical committees, including for disability and workers comp, serving a wide range of institutions, such as pension
funds, the Israeli Institute of Social Security, and the Israeli Ministry of Defense;
|
|
•
|
Occupational healthcare, including
occupational safety and health regulated medical exams, exposure to hazardous materials, and occupational disability claims, as well as
assisting organizations in promoting early detection of diseases and medical conditions within the workforce by offering periodical check-ups
and specialized examinations;
|
|
•
|
Medical examinations, including
at home, for the underwriting of insurance policies for health, disability, life, or nursing home policyholders; and
|
|
•
|
Medical and psychological evaluations,
including for truck drivers, public transportation drivers and drivers of hazardous cargos.
|
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:
|
•
|
Remote
monitoring of chronic patients
: Our remote patient monitoring programs monitor and stabilize patients with chronic conditions,
including congestive heart failure, and geriatric patients at home, reducing hospitalizations and saving costs for its health insurance
fund customers.
|
|
•
|
Telehealth
hot-line services
: Remote real-time medical consultations, scheduling of doctor appointments, second opinion services, and structured
health coaching programs for cardiac conditions.
|
|
•
|
Doctors’
Virtual Visits
: A service that allows health insurance fund patients to connect on-demand with doctors for virtual video appointments.
|
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 (Gemeinsamer Bundesausschuss), or 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-B-A 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.
Main Growth Drivers in Germany:
|
1.
|
At the end of 2020, SHL entered
into an agreement with BARMER GEK, one of the largest health insurance funds in Germany (“BARMER”), to provide Doctors’
Virtual Visits in Germany. In July 2021 BARMER announced the availability of this new service to all its insured patients on a nationwide
basis. Subsequently, in September 2022, SHL won a long-term contract with BARMER to provide these services for a seven year period and
in 2023 BARMER launched marketing and communication activities for the new BARMER Teledoktor digital App which provides SHL’s Doctors’
Virtual Visits and Telehealth Services to all of BARMER’s insureds in Germany. In November 2022 SHL entered a contract with AOK
Plus, another large German health insurance fund, to provide these services to its insured patients.
|
20
|
2.
|
New
customer wins:
We believe that SHL has a strong competitive advantage and position in terms of quality, know-how and long-term
customer relationships. We invested significantly in the development of our platform, and we believe we are well positioned to gain more
market share. In November 2021, SHL was awarded a multi-year telehealth contract to provide services to geriatric patients of AOK Rheinland-Pfalz/Saarland
– Die Gesundheitskasse, a large German health insurance fund.
|
|
3.
|
Telemonitoring
for congestive heart failure patients:
Telemonitoring for congestive heart failure patients has become the standard of care since
early 2022 following the introduction of remote monitoring reimbursement by G-BA.
|
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 FDA, for use only with a prescription. SHL is in the process of seeking the 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.
Final results of the Imperial
College London TELE-ACS clinical trial, which focused on the application of SmartHeart’s 12-lead ECG technology for monitoring of
post-MI (heart attack) patients at home, were presented in April 2024 at the American College of Cardiology's 24
th
Annual Scientific Session Expo Late-Breaking Clinical Trials Sessions (ACC 24 LBCT) in Atlanta. Key findings from the study included
the following:
|
•
|
a 76% reduction in the likelihood
of hospital readmission within six months for patients using telemedicine;
|
|
•
|
a 41% decrease in the likelihood
of attending the emergency department compared to standard care recipients;
|
|
•
|
significant reductions in unplanned
coronary revascularizations; and
|
|
•
|
notable decreases in patient-reported
symptoms, including chest pain, breathlessness, and dizziness.
|
Moreover, the study was also
published in the Journal of the American College of Cardiology.
In September 2023 we also
received initial results from the HELP-MI trial conducted by the Mayo Clinic, which also focused on the application of SmartHeart’s
12-lead ECG technology for monitoring of post-MI (heart attack) patients at home. The initial results were presented at the Vulnerable
Plaque and Patient Meeting (VPM) in September 2023, and included the following:
|
•
|
the number of cardiovascular-driven
emergency department visits for patients using the SmartHeart® device in the HELP-ME trial was zero (0); and
|
|
•
|
the number of cardiovascular-driven
rehospitalization visits for patients using the device in the HELP-ME trial was also zero (0).
|
21
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.
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
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. In November 2023, we announced the soft launch of the SmartHeart® membership program in the U.S. as part
of our direct-to-consumer initiative, offering a comprehensive private-pay subscription service that delivers at-home professional cardiac
care directly to the consumer.
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 FDA approval. In Europe, many
products require the CE Marking before they can be sold in the European Union, or the EU. The regulatory approval process is lengthy (usually
approximately six 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.
22
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 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 SHI funds. 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 SHI 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 G-B-A, 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. Since 2018,
with the exception of the State of Brandenburg, the general prohibition for physicians to diagnose and treat patients solely by means
of telecommunication was 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 SHI funds. These services are
provided in cooperation with a telemedicine center and physicians qualified as specialists in internal medicine and cardiology. G-B-A
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 SHI funds.
23
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, 62 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.
Since July 2021, SHI patients
may request the use of an electronic patient file to store patient’s data. In December 2023, the German legislator resolved
that starting in 2025 use of the electronic patient file will become mandatory, unless a patient opts out of its use.
With effect from April 1, 2025,
significant changes to the “Einheitlicher Bewertungsmaßstab” (EBM) — Germany’s standardized fee schedule
for outpatient services covered by SHI — came into effect. Physicians may now generally treat a larger share of patients exclusively
via video consultation. Specifically, up to 50% of all treatment cases in the practice can be conducted as video consultations for “known”
patients (i.e., patients that have had at least one in-person contact with the physician in any of the previous three quarters), whereas
previously a general cap of 30% of all treatment cases, regardless of patient status, applied. These limits are set at the practice level,
not for individual physicians, allowing some physicians within a practice to exceed the cap as long as the practice overall stays within
limits.
While this change creates greater
flexibility, it may reduce billing opportunities for practices that provide video consultations predominantly to unknown patients. A challenge
for us is that these revisions might affect physicians’ willingness to offer video consultation slots under special care agreements
with us since such physicians typically provide video consultations under the agreements almost exclusively to new patients for whom the
30% cap on unknown patient cases is significantly lower than the previous 30% cap on all patients.
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 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 individual 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
U.S., SHL is focused on marketing and selling its unique and patented FDA-cleared mobile 12 lead ECG SmartHeart
®
platform to direct consumers, health systems, healthcare providers, payers and other healthcare business customers, including leading
healthcare providers such as the Mayo Clinic, CVS and Henry Schein.
24
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 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 U.S., our business
is primarily focused on the marketing and sale of our SmartHeart
®
platform to consumers and healthcare business customers. We engage both directly with consumers and 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 November 2023, we announced the soft
launch of the SmartHeart® membership program in the U.S. as part of our direct-to-consumer initiative, offering a comprehensive private-pay
subscription service that delivers at-home professional cardiac care directly to the consumer. 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.
Competition
In the last few years,
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.
25
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 Teleclinic, 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 U.S.
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:
|
•
|
ease of use, comfort and unobtrusiveness of the device
for the patient;
|
|
•
|
quality and clinical validation of the deep-learned
algorithms used to detect arrhythmias;
|
|
•
|
concise and comprehensive reports supporting efficient
physician interpretation;
|
|
•
|
ease of use of service workflow for physicians and
supporting clinicians;
|
|
•
|
contracted rates with third-party payors;
|
|
•
|
government reimbursement rates associated with our
products and services;
|
|
•
|
quality of clinical data and publications in peer-reviewed
journals;
|
|
•
|
size, experience, knowledge and training of sales
and marketing teams;
|
|
•
|
reputation of existing device manufacturers and service
providers; and
|
|
•
|
relationships with physicians, hospitals, administrators,
and other third-party payors.
|
26
|
C.
|
ORGANIZATIONAL STRUCTURE
|
SHL Telemedicine Ltd.
is the parent company of a group of direct and indirect subsidiaries worldwide. The following table lists our subsidiaries, their countries
of incorporation and our direct or indirect ownership interests in them.
|
Subsidiary
|
Country of
Incorporation
|
Direct/Indirect
Ownership Interest
|
|
Shahal Haifa Medical Services Ltd.
|
Israel
|
Authorized Share
Capital
: NIS 13,000 divided into 13,000 ordinary shares, par value NIS 1.00 each
Issued Share Capital
:
200 ordinary shares—100% held by SHL
|
|
Shahal Rashlatz- Rehovot Medical Services Ltd. (“Shahal
Rashlatz”, or “SHLR”)
|
Israel
|
Authorized Share
Capital
: NIS 16,600 divided into 16,600 ordinary shares, par value NIS 1.00 each
Issued Share Capital
:
100 ordinary shares—100% held by SHL
|
|
Mediton Medical Centers Chain Ltd. (“Mediton
Medical”)
|
Israel
|
Authorized Share
Capital:
NIS 22,900 divided into 22,900 ordinary shares, par value NIS 1.00 each
Issued Share Capital:
100 ordinary shares
(70% held by Shahal Rashlatz)
|
|
Medishur Ltd.
|
Israel
|
Authorized Share
Capital:
NIS 2,640 divided into 2,600 ordinary shares, par value NIS 1.00 each and 40 management shares, par value NIS 1.00 each
Issued Share Capital:
100 ordinary shares
(70% held by Shahal Rashlatz)
|
|
Mediton - Adam Ltd.
|
Israel
|
Authorized Share
Capital:
NIS 200 divided into 100 management shares, par value NIS 2.00 each, and NIS 22,800 divided into 22,800 ordinary shares,
par value NIS 1.00 each
Issued Share Capital:
100 ordinary shares, four management shares
100% (100% held by Mediton Medical)
|
|
SHL Telemedicine International Ltd. (“SHL INT”)
|
Israel
|
Authorized Share
Capital
: NIS 101,000 divided into 101,000 ordinary shares, par value NIS1.00 each
Issued Share Capital
:
10,000 ordinary shares—100% held by SHL
|
|
SHL Telemedicine B.V (“SHL BV”)
|
The Netherlands
|
Authorized Share
Capital
: EUR 75,000 divided into 300,000 ordinary shares, par value EUR 0.25 each
Issued Share Capital
:
74,043 ordinary shares—100% held by SHL INT
|
27
|
Personal Healthcare Telemedicine Services Europe B.V.
(“PHTS”)
|
The Netherlands
|
Authorized Share
Capital
: EUR 4,000,000 divided into 400,000 ordinary shares, par value EUR 10.00 each
Issued Share Capital
:
811,500 ordinary shares—100% held by SHL BV
|
|
SHL Telemedizin GmbH (“SHL Telemedizin”)
|
Germany
|
Authorized Share
Capital
: EUR 300,000 divided into 2 ordinary shares, par value EUR 25,000 and EUR 275,000
Issued Share Capital
:
2 ordinary shares—100% held by PHTS
|
|
SHL Telemedicine USA, Inc.
|
USA (Delaware)
|
Authorized Share
Capital
: $1.00 divided into 100 shares of common stock, par value $0.01 each
Issued Share Capital
:
100 shares of common stock—100% held by SHL INT
|
|
D.
|
PROPERTY, PLANTS AND EQUIPMENT
|
The following table identifies
our principal office and telemedicine center facilities, all of which are rented by us:
|
Location
|
|
Address
|
|
Description
|
|
Approximate
Size
|
|
Munich - Germany
|
|
Balanstraße 69 Munich
|
|
SHL’s German head office
and telemedicine center in Germany
|
|
1,247 sqm
|
|
|
|
|
|
|
|
|
|
Israel
|
|
90 Yigal Alon St.
Tel Aviv |
|
SHL’s Israeli head office
and telemedicine center
|
|
5,389 sqm
|
|
|
|
|
|
|
|
|
|
Israel
|
|
18 Hahashmal St. Tel Aviv*
|
|
Mediton – Medical services
|
|
2,752 sqm
|
|
*
|
We lease this property from an affiliate of the former 30%
minority shareholder of Mediton from whom we initially acquired our 70% interest in Mediton prior to our pending acquisition of the remaining
30%.
|
28
|
ITEM
4.A.
|
UNRESOLVED STAFF COMMENTS
|
|
|
Not applicable.
|
|
ITEM
5.
|
OPERATING AND FINANCIAL REVIEW
AND PROSPECTS
|
|
A.
|
OPERATING RESULTS
|
The following
discussion of our financial condition and results of operations is based upon and should be read in conjunction with the consolidated
financial statements and related notes thereto of us beginning on page F‑1 of this Annual Report. The discussion should also
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, Item 8. “Financial Information” and
Item 18. “Financial Statements.”
Certain
information included in this discussion and analysis includes forward-looking statements that are subject to risks and uncertainties,
and which may cause actual results to differ materially from those expressed or implied by such forward-looking statements. For further
information on important factors that could cause our actual results to differ materially from the results described in the forward-looking
statements contained in this discussion and analysis, see “Cautionary Note Regarding Forward-Looking Statements,” Item 3.D,
“Key Information—Risk Factors” and information elsewhere 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 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 market in Israel and Germany, providing remote medical services and patient management, with telemedicine
centers in Israel and Germany that are available 24/7, and global service of cloud-based technology, all of which results in about 3 million
interactions and data readings annually.
Today, our primary focus is
developing technologies, solutions, and advanced telemedicine services to diagnose and monitor the heart and other cardiac diseases, such
as congestive heart failure. Our key product is the SmartHeart
®
platform, a unique advanced technology that is the only full ECG 12 lead ECG that enables a hospital-quality full ECG to be performed
by a lay-person without the assistance of a healthcare professional. The SmartHeart
®
platform’s technology is FDA-cleared and patented, and SmartHeart
®
is registered as a trademark.
Basis of Presentation
We prepare our financial statements in accordance
with IFRS as issued by the International Accounting Standards Board. The reporting currency of our financial statements is the U.S. dollar.
Our material accounting policies
are described in Note 2 of our audited consolidated financial statements for the years ended December 31, 2024, 2023 and
2022 included elsewhere in this Annual Report.
29
Components of Operating Results
General
Most of our revenues and expenses
are generated in NIS. Accordingly, we consider the NIS to be our functional currency in Israel and our consolidated financial statements
are prepared in NIS.
Our reporting currency is
in U.S. Dollars. The translation of our financial statement to U.S. dollars is based on the following methods:
|
a)
|
Assets and liabilities of foreign
operations, including goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition
of said foreign operation, are translated at the closing rate at the end of the reporting period.
|
|
b)
|
Income and expenses for each
period presented in the statement of income are translated at average exchange rates for the presented periods.
|
|
c)
|
Share capital, capital reserves
and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.
|
|
d)
|
Retained earnings are translated
based on the opening balance translated at the exchange rate at that date and other relevant transactions (such as issuing a dividend)
during the period are translated as described in b) and c) above.
|
|
e)
|
All resulting translation differences
are recognized as a separate component of other comprehensive income (loss) in equity “foreign currency translation reserve”.
|
As we evaluate our growth
prospects and manage our operations for the future, we believe that we can further expand 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 2024 in order to expand our revenues:
|
•
|
Leverage synergies and cross-sell
our products and services with Mediton;
|
|
•
|
Commercial agreements with leading
U.S. healthcare providers such as the Mayo clinics and CVS;
|
|
•
|
Commercial agreements with BARMER
and other health insurance funds in Germany for doctor’s virtual visits and telehealth services;
|
|
•
|
Increased sales and marketing
activities mainly in the U.S.;
|
|
•
|
Increased research and development
investments related to the SmartHeart
®
platform; and
|
|
•
|
Continued pursuit of strategic
relationships with customers, mainly in the U.S., including the soft launch of the SmartHeart® membership program in the U.S. as
part of our direct-to-consumer initiative.
|
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.
30
Research and Development Expenses
Research and development expenses
consist primarily of salaries and related expense payments for subcontractors and overhead expenses.
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.
Financial Income (loss), Net
Financial income, net, consists
primarily of share option liability adjustments, earning or loss from marketable securities, interest earned on bank deposits, bank charges,
and gains or losses from the exchange rate differences in respect of balances and transactions in other than functional currencies.
Results of Operations
|
|
Year ended December 31,
|
|||||||||||
|
|
2024
|
2023
|
2022
|
|||||||||
|
|
(in thousands)
|
|||||||||||
|
Revenue
|
$
|
56,779
|
$
|
57,075
|
58,998
|
|||||||
|
Cost of revenue
|
30,986
|
31,814
|
31,809
|
|||||||||
|
Gross profit
|
25,793
|
25,261
|
27,189
|
|||||||||
|
Operating Expenses:
|
||||||||||||
|
Research and development
|
5,357
|
5,260
|
3,788
|
|||||||||
|
Sales and marketing
|
10,450
|
10,581
|
11,403
|
|||||||||
|
General and administrative
|
17,052
|
16,228
|
16,748
|
|||||||||
|
Other expenses
|
19,727
|
2,198
|
416
|
|||||||||
|
Total operating expenses
|
52,586
|
34,267
|
32,355
|
|||||||||
|
Operating (loss)
|
(26,793
|
)
|
(9,006
|
)
|
(5,166
|
)
|
||||||
|
Financial income (expense), net
|
(21
|
)
|
3,042
|
6,478
|
||||||||
|
Profit (loss) before income taxes
|
(26,814
|
)
|
(5,964
|
)
|
1,312
|
|||||||
|
Tax expenses
|
939
|
891
|
1,097
|
|||||||||
|
Net profit (loss)
|
$
|
(27,753
|
)
|
$
|
(6,855
|
)
|
$
|
215
|
||||
31
|
|
Year ended
|
|||||||||||
|
|
December 31,
|
|||||||||||
|
|
2024
|
2023
|
2022
|
|||||||||
|
Revenue
|
100
|
%
|
100
|
%
|
100
|
%
|
||||||
|
Cost of revenue
|
55
|
56
|
54
|
|||||||||
|
Gross profit
|
45
|
44
|
46
|
|||||||||
|
Operating Expenses:
|
||||||||||||
|
Research and development
|
9
|
9
|
6
|
|||||||||
|
Sales and marketing
|
18
|
19
|
19
|
|||||||||
|
General and administrative
|
30
|
28
|
28
|
|||||||||
|
Other expenses
|
35
|
4
|
1
|
|||||||||
|
Total operating expenses
|
93
|
60
|
55
|
|||||||||
|
Operating (loss)
|
(47
|
)
|
(16
|
)
|
(9
|
)
|
||||||
|
Financial income (expense), net
|
-
|
5
|
11
|
|||||||||
|
Profit (loss) before income taxes
|
(47
|
)
|
(11
|
)
|
2
|
|||||||
|
Tax expenses
|
2
|
1
|
2
|
|||||||||
|
Net profit (loss)
|
(49
|
)
|
(12
|
)%
|
0
|
%
|
||||||
Year Ended
December 31, 2024 Compared to Year Ended December 31, 2023
Revenue:
|
|
Individuals
|
Institutions
|
||||||||||||||
|
|
and
|
and
|
||||||||||||||
|
|
Communities
|
payers
|
Others
|
Total
|
||||||||||||
|
|
(in thousands)
|
|||||||||||||||
|
Year ended
December 31, 2024:
|
||||||||||||||||
|
|
||||||||||||||||
|
Europe
|
$
|
-
|
12,673
|
-
|
12,673
|
|||||||||||
|
Israel
|
$
|
20,325
|
23,126
|
-
|
43,451
|
|||||||||||
|
USA
|
$
|
-
|
-
|
655
|
655
|
|||||||||||
|
|
||||||||||||||||
|
Total revenues
|
$
|
20,325
|
35,799
|
655
|
56,779
|
|||||||||||
|
|
Individuals
|
Institutions
|
||||||||||||||
|
|
and
|
and
|
||||||||||||||
|
|
Communities
|
payers
|
Others
|
Total
|
||||||||||||
|
|
(in thousands)
|
|||||||||||||||
|
Year ended
December 31, 2023:
|
||||||||||||||||
|
|
||||||||||||||||
|
Europe
|
$
|
-
|
$
|
14,067
|
$
|
-
|
$
|
14,067
|
||||||||
|
Israel
|
20,913
|
21,179
|
-
|
42,092
|
||||||||||||
|
USA
|
-
|
-
|
916
|
916
|
||||||||||||
|
|
||||||||||||||||
|
Total revenues
|
$
|
20,913
|
$
|
35,246
|
$
|
916
|
$
|
57,075
|
||||||||
Revenues
In each of 2024 and 2023,
our revenues were approximately $57 million. In Israel revenues increased by approximately $1.4 million mainly due to an increase in sales
in our B2B segment. In Germany revenues decreased by approximately $1.4 million mainly due to reduced sales in the cardio segment and
in the U.S. revenues decreased by $0.3 million.
32
Cost of Revenues
In 2024, cost of revenues
was approximately $31.0 million compared to $31.8 million in 2023.
In 2024, gross margin was
45% compared to 44% in 2023.
The following table provides
our operating costs and expenses in 2024 and 2023:
|
|
Year ended
|
|||||||
|
|
December 31,
|
|||||||
|
|
2024
|
2023
|
||||||
|
|
(in thousands)
|
|||||||
|
Research and development costs,
net
|
$
|
5,357
|
$
|
5,260
|
||||
|
Selling and marketing expenses
|
10,450
|
10,581
|
||||||
|
General and administrative expenses
|
17,052
|
16,228
|
||||||
|
Other expenses
|
19,727
|
2,198
|
||||||
|
|
||||||||
|
Total operating expenses
|
$
|
52,586
|
$
|
34,267
|
||||
Research and Development costs, net
Research and development costs
were approximately $5.4 million in each of 2024 and similar in2023. Research and development gross expenses in 2024 were $5.3 million,
of which $2.7 million was capitalized, compared to $6.7 million, of which $4.2 million was capitalized, in 2023. Amortization of development
costs was $2.8 million in each of 2024 and 2023.
Selling and Marketing Expenses
Selling and marketing expenses
for 2024 were $10.5 million, a slight decrease compared to $10.6 million in 2023.
General and Administrative Expenses
General and administrative
expenses for 2024 were $17.1 million, compared to $16.2 million in 2023. The increase was mainly due to one-time income related to reduction
of expenses in Germany in 2023.
Other Expenses
Other expenses for 2024 were
$19.7 million, compared to $2.2 million in 2023. Such expenses included an impairment loss of $13.5 million in respect of goodwill allocated
to the cash generating unit of Germany related to lower-than-expected business performance in the German market combined with an ongoing
need to continue investing in adjusting the IT service platform.
In
addition
,
we recognized an impairment loss of $2.8 million in respect
of capitalized development costs, which related mainly to service applications we previously developed and that are not in use any more
or are not advanced or efficient enough to be used in a profitable way, as well $3.4 million in additional extraordinary costs.
Financial income (expenses), net
|
|
Year ended
|
|||||||
|
|
December 31,
|
|||||||
|
|
2024
|
2023
|
||||||
|
|
(in thousands)
|
|||||||
|
Share options
|
$
|
(144
|
)
|
$
|
1,712
|
|||
|
Exchange rate differences
|
161
|
991
|
||||||
|
Gain (loss) from marketable securities, net
|
558
|
848
|
||||||
|
Interest, net
|
(399
|
)
|
(241
|
)
|
||||
|
|
||||||||
|
Others
|
(197
|
)
|
(268
|
)
|
||||
|
|
||||||||
|
Financial expenses, net
|
$
|
(21
|
)
|
$
|
3,042
|
|||
33
Financial expenses net for
2024 was approximate $21 thousand compared to financial income, net of $3.0 million in 2023. The decrease was attributable to income from
investor options modifications of approximately $1.8 million and favorable exchange rate differences of approximately $1.0 million that
we experienced in 2023.
Financial income 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, (b) expected volatility and (c) the
expected average life of the share options.
In 2024, income from exchange
rate differences mainly related to strengthening of the U.S. dollar versus the NIS by 0.1%. This resulted in an exchange rate difference
of $0.2 million in respect of $14.0 million held by the Company in U.S. dollar deposits, since the functional currency of our financial
statements is the NIS.
The strengthening of the U.S.
dollar versus the NIS by 0.1% resulted in other comprehensive loss of approximately $1.1 million in the twelve months ended December 31,
2024 due mainly to
the translation of the financial statements of entities of our consolidated
group from their functional currency in NIS to the presentation currency in US dollar.
In 2023, income from exchange
rate differences mainly related to the effect of the strengthening of the U.S. dollar versus the Israeli Shekel by 3.1%. This resulted
in exchange rate income of $1.0 million in respect of $14.0 million held in U.S. dollar deposits.
Taxes on Income
For each of 2024 and 2023,
tax expenses were $0.9 million.
Year Ended
December 31, 2023 Compared to Year Ended December 31, 2022
For a comparison of our
results for the years ended December 31, 2023 and 20212, please refer to Item 5 in our Annual Report on Form 20-F/A for the year ended
December 31, 2023, filed with the SEC on July 24, 2024.
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 U.S. 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 and 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.
34
Effective Corporate Tax Rate
As of January 1, 2018, Israeli
resident companies are 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
totalling approximately $119.7 million ($66.6 million in Israel, $33.4 million in Europe, and $19.7 million in the U.S.) as of December
31, 2024 and $109.8 million ($62 million in Israel, $32.5 million in Europe, and $15.3 million in the U.S.) as of December 31, 2023. 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.
|
B.
|
LIQUIDITY AND CAPITAL RESOURCES
|
We have financed our operations
through cash generated from operations, and the proceeds from our private equity offerings, including the exercise of options issued in
the private equity offerings. Cash and cash equivalents and short-term bank deposits on December 31, 2024 and December 31, 2023 were
approximately $18.0 million and $26.0 million, respectively.
For our material cash requirements,
including commitments for capital expenditures, as of December 31, 2024, please see “Item 4.A. – Principal
Capital Expenditures and Divestitures.” In addition, we received cash in the amount of approximately $20.3 million with respect
to the exercise requests received from the exercise of the investors’ options in January and February of 2023.
The
sources of funds for such capital expenditure requirements have been cash generated from operations, the proceeds from our private equity
offering, including the exercise of options issued in the private equity offerings, and in the case of the Mediton acquisition, our long-term
credit facility.
35
We believe that our existing
capital resources and cash flows from operations will be adequate to satisfy our expected capital expenditures and liquidity requirements
through the next twelve months. Without derogating from the foregoing estimate regarding our existing capital resources and cash
flows from operations, we may decide to raise additional funds in the future. We believe that, if required, we will be able to raise additional
capital or reduce discretionary spending to provide the required liquidity beyond the next twelve months. There can be no guarantee
that financing will be available on commercially acceptable terms or at all. Debt financing, if available, could impose additional cash
payment obligations, additional covenants and operating restrictions. Future equity financings could result in the dilution of our existing
shareholders. In addition, any of the items discussed in detail under “Risk Factors” elsewhere in this Annual Report may also
significantly impact our liquidity.
Cash Flow Discussions
Fiscal Year
Ended December 31, 2024 Compared to Fiscal Year Ended December 31, 2023 and Fiscal Year Ended December 31, 2022
The following tables reflect
the changes in cash flows for the comparative periods:
|
|
For fiscal
year ended December 31,
|
|||||||||||
|
|
2024
|
2023
|
Change
|
|||||||||
|
|
US$
|
US$
|
US$
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
Cash flow data
|
||||||||||||
|
Net cash (used in) operating activities
|
(0.4
|
)
|
(1.5
|
)
|
1.1
|
|||||||
|
Net cash provided by (used in) investing activities
|
6.0
|
(9.3
|
)
|
15.3
|
||||||||
|
Net cash provided by (used in) financing activities
|
(4.9
|
)
|
13.7
|
(18.6
|
)
|
|||||||
|
|
For fiscal
year ended December 31,
|
|||||||||||
|
|
2023
|
2022
|
Change
|
|||||||||
|
|
US$
|
US$
|
US$
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
Cash flow data
|
||||||||||||
|
Net cash (used in) operating activities
|
(1.5
|
)
|
(0.1
|
)
|
(1.7
|
)
|
||||||
|
Net cash (used in) investing activities
|
(9.3
|
)
|
(6.4
|
)
|
(2.9
|
)
|
||||||
|
Net cash provided by (used in) financing activities
|
13.7
|
(2.3
|
)
|
16.0
|
||||||||
Cash Flows Provided By/Used In Operating Activities
Cash used in operating activities
for the year ended December 31, 2024, was $0.4 million, and primarily related to a decrease in trade receivables.
Cash used in operating activities
for the year ended December 31, 2023, was $1.5 million, and primarily related to our operating loss in 2023.
Cash used in operating activities
for the year ended December 31, 2022, was $0.1 million, 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.
36
Cash Flows Provided By/Used In Investing Activities
Cash provided by investing
activities during the year ended December 31, 2024, was $6.0 million, including $10 million from short-term deposit sales offset
by $4 million in capital expenditures, which consisted of $3.0 million in intangible asset development (compared to $4.2 million in 2023)
and $1.0 million in fixed asset investments (compared to $1.3 million in 2023).
Cash used in investing activities
during the year ended December 31, 2023, was $9.3 million, primarily related to the capitalization of development costs of $4.2
million, $1.3 million for the purchase of property and equipment and $3.8 million from investment in short-term deposit.
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 Flows Provided By/Used In Financing Activities
Cash used in financing activities
during the year ended December 31, 2024, was $4.8 million (including $2.5 million in lease payments, $2.0 million for long-term
loan repayment and a dividend in the amount of $0.3 million paid to non-controlling interests), compared to $13.7 million provided in
2023. The difference was primarily due to $20.0 million raised in 2023 from exercises of options by investors.
Cash provided by financing activities during the year ended
December 31, 2023, was $13.7 million, primarily related to the exercise of options by investors in a net amount of $20.0 million,
offset by lease payments of $2.7 million and repayment of long-term loan of $2.1 million.
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.
Financial Arrangements
On January 7, 2021, a
special general meeting of the company approved 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-month 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, 2024, the number of units granted to the placement agents was 155,720. These units, if fully exercised, entitle
the placement agent to 233,580 ordinary shares.
37
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 seven years and nine 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 nine 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, 2024, 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.
Long-Term Lease
The Company has long-term
lease liabilities repayable in monthly equal installments until June 2029. The total aggregate contractual undiscounted payments
for these long-term lease liabilities, including interest, amounts to approximately $5.9 million.
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
We are a leading developer
of advanced telemedicine technologies that is 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 $5.3 million in 2024, $6.7 million in 2023 and $7.2 million in 2022.
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:
|
Owned
Patent
|
Jurisdiction
|
Expiration
Date
|
|
Patent #229482 – An
Electrocardiographic Monitoring System and Method (Utility Patent)
|
Israel; China; Europe
|
In Israel, patent in force until
May 21, 2026, and set to expire on May 21, 2032.
|
|
Device for Obtaining a Standard
12‑Lead Electrocardiogram and a Rhythm Strip – Grant Number 09215998 (Utility Patent)
|
United States
|
June 1, 2032
|
38
Status of Trademarks filed through WIPO in various
countries
|
Trademark
Number/Status
|
Trademark
Name
|
Type
of
Trademark
|
Validity
of
Trademark
(until
the following dates)
|
Owner
|
Country
of
Registration
|
|
7478308
|
ramified heart symbol
|
10, 38, 44
|
12/18/2028
|
SHL Intern.
|
Europe
(Community Trademark) |
|
77638118
|
ramified heart symbol
|
35, 38, 44
|
12/22/2028
|
SHL Intern.
|
U.S.A.
|
|
234343
|
CCM
(Logo CCM – Hebrew)
|
9, 10, 38, 44
|
12/13/2030
|
SHL Intern.
|
Israel
|
|
234810
|
HEART SMART
|
9, 10, 38, 44
|
01/02/2031
|
SHL Intern.
|
Israel
|
|
1096059
|
HEART SMART
|
9, 10, 38, 44
|
06/27/2031
|
SHL Intern.
|
WIPO
|
|
Trademark
Number
|
Trademark
Name
|
Type
of
Trademark
|
Validity
of
Trademark
(until the
following
dates)
|
Company
|
Country
of
Registration
|
|
T1116147A
Registered after rejection and
appeal
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Singapore
|
|
4204156
|
SMART HEART
|
9, 10, 38, 44
|
09/11/2032
|
SHL Intern.
|
U.S.A.
|
|
8‑8‑2012‑001246089
Registered after rejection and
appeal
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
South Korea
|
|
2011‑360491
Registered after rejection and
appeal
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Japan
|
|
1459720
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Australia
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Norway
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Switzerland
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Island
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
China
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Turkey
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Croatia
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Russia
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Ukraine
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Moldova
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Serbia
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Georgia
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Montenegro
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Belarus
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Monaco
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
Lichtenstein
|
|
1096059
Registered
|
SMART HEART
|
9, 10, 38, 44
|
06/21/2031
|
SHL Intern.
|
European Union
|
39
Status of Trademarks filed in Germany
|
Trademark
Number*
|
Trademark
Name
|
Type
of
Trademark
|
Validity
of
Trademark
(until the
following
dates)
|
Company
|
Country
of
Registration
|
|
302021116844
|
TELECOR
|
44
|
Pending final approval
|
SHL Telemedizin GmbH
|
Germany
|
|
*
|
Where an international registration
number is listed, such number serves as the only registration number in the indicated country
.
|
| D. |
TREND INFORMATION
See Item 4. “Information on the company.”
|
|
E.
|
CRITICAL ACCOUNTING ESTIMATES
|
The preparation of these financial
statements requires management to make estimates and assumptions that have an effect on the application of the accounting policies and
on the reported amounts of assets, liabilities, revenues and expenses. In determining its accounting estimates, management relies on past
experience, various underlying facts, external factors and reasonable assumptions, based on the relevant circumstances. These estimates
and underlying assumptions are reviewed regularly. Changes in accounting estimates are reported in the period of the change in estimate.
The key assumptions made in
the financial statements concerning uncertainties at the end of the reporting period and the critical estimates computed by the company
that may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed
below.
Impairment of goodwill
The company reviews goodwill
for impairment at least once a year. This requires management to make an estimate of the projected future cash flows from the continuing
use of the cash-generating unit to which the goodwill is allocated and also to choose a suitable discount rate for those cash flows.
Deferred tax assets
Deferred tax assets are recognized
for unused carry forward tax losses and temporary differences to the extent that it is probable that taxable profit will be available
against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that
can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
40
|
ITEM
6.
|
DIRECTORS, SENIOR MANAGEMENT AND
EMPLOYEES
|
|
A.
|
DIRECTORS AND SENIOR MANAGEMENT
|
The following table sets forth
certain information about our directors and executive officers as of the date of this Annual Report. Unless otherwise stated, the address
of each of our executive officers and directors is c/o SHL Telemedicine Ltd., Yigal Alon 90, Tel Aviv 67891, Israel.
|
Name
|
|
|
|
Dr. Itamar Offer
|
65
|
Chairman of the Board of Directors
|
|
Prof. Amir Lerman
(1)(2)(3)
|
69
|
Director
|
|
Yehoshua (Shuky) Abramovich
(1)(2)(3)
|
65
|
External Director
|
|
Orna Carni
(1)(2)(3)
|
52
|
External Director
|
|
Ido Nouberger
|
60
|
Director
|
|
Nir Rotenberg
|
63
|
Director
|
|
David Arnon
|
55
|
Chief Executive Officer
(4)
|
|
Lior Haalman
(4)
|
58
|
Chief Financial Officer
|
|
Bernd Altpeter
|
60
|
Managing Director, SHL Telemedizin, Germany
|
|
(1)
|
Member of Audit Committee
and Financial Statements Committee.
|
|
(2)
|
Member of Compensation Committee.
|
|
(3)
|
Independent director under
SEC independence standards.
|
|
(4)
|
Mr. Haalman commenced serving as Chief Financial
Officer of the Company in March 2025.
|
Dr.
Itamar Offer
has served as Chairman of our Board of Directors since September 2024. Dr. Offer served as President and Chairman
of the Board of Directors and previously CEO of Sabar Health since 2018 and has extensive experience in managing and leading companies
in the field of advanced medical services outside of hospitals. Previously he served as CEO of the Herzliya Medical Center Private Hospital
from 2011 to 2016, headed a hospital project in India as CEO of Elbit India Healthcare Ltd. from 2007 to 2011, and served as the Medical
Director of the Tel Aviv-Jaffa District in Clalit health fund from 2004 to 2007. Dr. Offer is the founder of the WHAHC community (the
first international community for a hospital at home), a specialist in pediatrics and medical administration and was formerly the deputy
director of Schneider Children's Hospital from 1999 to 2004. He holds a Doctor of Medicine (MD) degree from Tel-Aviv University and a
Masters in Public Administration (MPA) degree from Harvard Kennedy School.
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 has published more than 500 manuscripts, book chapters and reviews; the NIH, AHA and several foundations support his research.
41
Yehoshua
(Shuky) Abramovich
joined our Board of Directors in June 2017. Mr. Abramovich has held key positions in the Israeli capital
market for over 25 years. He serves as the chairman of the board of Imed Infinity Medical, chairman of Atrade, member of the board
of directors and chairman of the investment committee of I.D.I. Insurance Company, a member of the board of directors of each of the public
companies Brimag Digital, Modiin Energy and GoTo and as a director in other high-tech, real estate and energy companies. Mr. Abramovich
was the CEO of Clal Finance, one of Israel’s largest financial institutions, which provided a broad array of financial services
ranging from portfolio management to brokerage and underwriting services. Clal Finance owned and managed mutual funds, an in-house hedge
fund, and offered individually tailored structured products to clients. Prior to that, he served in various positions in Clal Group, including
Deputy CEO of Clal Insurance Enterprises Holdings. He served on the board of directors of the Tel Aviv Stock Exchange until September 2008,
and he is a member of the board of trustees of the Academic Track of the College of Management. He has an M.B.A. and a B.A. in Economics
Business Management from Tel Aviv University.
Orna
Carni
joined our Board of Directors in December 2024. Since 2022 she has served as a Managing Partner at FinTLV Ventures,
a global venture capital fund. Previously, she held executive positions at AIG Israel, including VP Strategy, Business Development and
Chief Innovation Officer from 2016-2022 and VP, Head of Life and Health Insurance from 2013-2016. Prior to her roles at AGI, she was focused
on business development at Clal Insurance and Finance from 2008-2013 and the Davidoff Group from 2006-2008, and managed the health insurance
at Migdal Insurance from 1995-2006. Ms. Carni is a member of the board of directors of Maccabi Health Services and an external director
of Shlomo Insurance Company Ltd. She has a B.A. in Management from the Open University of Israel, an M.B.A. in Finance and Marketing from
the University of Manchester and an LLB from Ono Academic College, and attended the Private Equity and Venture Capital Foundations program
at Harvard Business School.
Ido
Nouberger
has served on our Board of Directors since February 2024. Mr. Nouberger has served as the CEO of Value Base since its
inception in 2013. He also holds the position of chairman of the board or board member of Value Base’s various subsidiaries. Prior
to that, he served as CEO and a director or various Israeli companies. Mr. Nouberger holds a M.A. and B.A, both in Economics, from
Tel Aviv University.
Nir
Rotenberg
has served on our Board of Directors since February 2024. Mr. Rotenberg is the Chairman of the Board of Danbar Finance Ltd., a private
investment group, and has served there as a director and partner since 2000. Prior to that, he served as a manager and director of
certain public companies in the Danbar group of companies from 1994 until 2000 and from 1990-1993 served as chief investment officer in
Migdal Insurance Company. Mr. Rotenberg holds a M.B.A. in business management and B.A in Economics from Tel Aviv University.
David
Arnon
has served as our Chief Executive Officer since August 2024. Prior to joining SHL, Mr. Arnon worked at Doral Group (TASE:DORL),
a prominent company in renewable energy, where he served as CEO of DORAL MEA from March 2023 to July 2024. From 2018 to 2022, he was the
Deputy CEO and Head of the Health Division and Customer Strategy at Clal Insurance and Finance, a subsidiary of Clal Insurance Enterprises
Holdings (TASE:CLIS), one of Israel's leading insurance groups. Between 2007 and 2018, David held various executive roles at Harel Insurance
Investments and Financial Services (TASE:HARL), Israel's largest insurance group. His final role at Harel was as CEO of Standard Insurances,
a leading insurance agency within the group, overseeing more than 500 employees. David holds a B.A. from the University of Maryland and
an M.B.A. from Cornell University.
Lior
Haalman
has served as our Chief Financial Officer since March 2025. Mr. Hai. Prior to joining SHL, Mr. Hallman was served
as CFO of Rekah Pharmaceutical Industry (REKA, TASE). Previously, Lior Haalman spent nine years as CFO of Infinya (formerly Hadera Paper),
where he was a dominant partner in an impressively successful turnaround and value creation process for both, public shareholders, and
the controlling shareholder. Prior to that, Lior Haalman served as CFO of Hot Mobile, during which time he led the sale of MIRS (from
Motorola) to HOT company and its transformation into Hot Mobile. From 2000 to 2007, he was a member of the management of Mey Eden and
was involved in the expansion of the company's operations in Europe. He holds an MBA and a bachelor’s degree in Economics with honors
and an MBA, both from Tel Aviv University.
42
Bernd
Altpeter
serves as Managing Director of SHL Telemedizin, Germany and served as Co-Managing Director from April 4, 2023, until
September 2023. Mr. Altpeter has significant experience in the German healthcare and telemedicine market. Prior to joining SHL Telemedizin,
Germany, Mr. Altpeter was Global Head of Digital Products and Projects with Boehringer Ingelheim Vetmedica GmbH from July 2021 to
April 2023. Before that, Mr. Alpeter founded the Digital Health Group in 2013 serving as its Chief Executive Officer. The Digital
Health Group consisted of several companies focusing on digital chronic care management programs and health contract management, providing
solutions and services to health insurance companies, physicians and pharma companies. The group was acquired in 2020 by Fresenius SE.
Previously, Mr. Altpeter held executive level positions in international organizations in the field of sales and marketing consulting.
Mr. Altpeter is a Business Administration graduate from the Technische Universität Berlin, and management training from INSEAD
and Duke University.
| B. |
COMPENSATION
|
Aggregate Compensation of Office Holders
The aggregate compensation
expenses to our directors and executive officers for the year ended December 31, 2024, was approximately $1.2 million. This
amount includes social benefits and car leasing costs. The amount does not include the expense of share-based compensation.
As of May 1, 2025, we have
issued outstanding options to purchase up to 867,124 ordinary shares granted to our executive officers and directors under our 2021 Executive
and Key Employee Israeli Share Incentive Plan (the “Share Option Plan”) at a weighted average exercise price of CHF8.17 per
ordinary share.
43
Individual Compensation of Office Holders
The table and summary below
outline the compensation granted to our directors and executive officers with respect to the year ended December 31, 2024. Our
Compensation Policy, Share Option Plan and the terms of the share options granted to our directors and executive officers are described
below
Year-end
December 31, 2024
|
|
Share
|
Weighted
|
||||||||||||||||||
|
|
Base
|
Options
|
Average
|
|||||||||||||||||
|
|
Compensation
|
Granted
|
exercise price
|
|||||||||||||||||
|
|
and Fringe
|
Cash
|
or
|
of Options
|
||||||||||||||||
|
Name and Offices Held
|
Benefits
|
Bonus
|
exercised (1)
|
Granted
|
Total
|
|||||||||||||||
|
Dr. Itamar Offer
(2)
|
$
|
9,103
|
—
|
—
|
—
|
9,103
|
||||||||||||||
|
Chairman of the Board of Directors
Yariv Alroy
(3)
|
$
|
200,357
|
—
|
—
|
—
|
200,357
|
||||||||||||||
|
Former Active Co-Chairman of the
Board of Directors
|
||||||||||||||||||||
|
Ehud Barak
(4)
|
$
|
27,661
|
—
|
—
|
—
|
27,661
|
||||||||||||||
|
Former Active Co-Chairman of the
Board of Directors
|
||||||||||||||||||||
|
David Salton
(5)
|
$
|
2,122
|
—
|
—
|
—
|
2,122
|
||||||||||||||
|
Former Director
|
||||||||||||||||||||
|
Prof. Amir Lerman
|
$
|
44,024
|
—
|
—
|
—
|
44,024
|
||||||||||||||
|
Director
|
||||||||||||||||||||
|
Yehoshua (Shuky) Abramovich
|
$
|
72,432
|
—
|
—
|
—
|
72,432
|
||||||||||||||
|
External Director
|
||||||||||||||||||||
|
Dvorah Kimhi
(6)
|
$
|
45,028
|
—
|
—
|
—
|
45,028
|
||||||||||||||
|
Former External Director
|
||||||||||||||||||||
|
Orna Carni
(7)
|
$
|
2,513
|
—
|
—
|
—
|
2,513
|
||||||||||||||
|
External Director
|
||||||||||||||||||||
|
Erez Alroy
(5)
|
$
|
2,122
|
—
|
—
|
—
|
2,122
|
||||||||||||||
|
Former Director
|
||||||||||||||||||||
|
Erez Nachtomy
(5)
|
$
|
267,903
|
—
|
—
|
—
|
267,903
|
||||||||||||||
|
Former Chief Executive Officer
and Director
|
||||||||||||||||||||
|
David Arnon
(8)
Chief Executive Officer
|
$
|
165,924
|
51,216
|
—
|
389,219
|
606,359
|
||||||||||||||
|
Ami Hai
(9)
|
$
|
275,557
|
48,652
|
—
|
—
|
324,209
|
||||||||||||||
|
Former Chief Executive Officer
|
||||||||||||||||||||
|
(1)
|
The options are exercisable on
a net exercise basis method. The expiration dates of the options granted are as follows:
|
44
|
Weighted Average
|
Expiration date of the
|
|||||
|
exercise price of Options Granted
|
options
|
Number of Options
|
||||
|
CHF 17.02
|
6/9/2025
|
18,000
|
||||
|
CHF 19.33
|
8/4/2025
|
80,000
|
||||
|
CHF 9.88
|
8/4/2025
|
13,124
|
||||
|
CHF 17.02
|
12/9/2027
|
18,000
|
||||
|
CHF 17.02
|
12/9/2027
|
18,000
|
||||
|
CHF 5.34
|
9/5/2030
|
200,000
|
||||
|
CHF 7.12
|
9/5/2030
|
200,000
|
||||
|
CHF 5.34
|
2/13/2031
|
160,000
|
||||
|
CHF 7.12
|
2/13/2031
|
160,000
|
||||
|
(2)
|
Dr. Offer commenced serving as the Chairman of
the Board effective September 2024.
|
| (3) |
Mr. Alroy served as the Co-Chairman of the Board
and ceased to serve in such capacity and as a member of our Board of Directors in August 2024.
|
| (4) |
Mr. Barak served as the Co-Chairman of the Board
and ceased to serve in such capacity and as a member of our Board of Directors in February 2024.
|
| (5) |
Each of Messrs. David Salton,
Erez Alroy and Erez Nachtomy served as a member of our Board of Directors during the year ended December 31, 2023, and ceased to serve
in such capacities in February 2024. On March 14, 2024, Mr. Nachtomy announced that he would be resigning as Chief Executive Officer of
the Company effective mid-June 2024.
|
| (6) |
Ms. Kimhi served as an External
Director member of our Board of Directors and ceased to serve in such capacity in December 2024.
|
| (7) |
Ms. Carni commenced serving
as an External Director in December 2024.
|
| (8) |
Mr. Arnon commenced serving
as Chief Executive Officer in August 2024.
|
| (9) |
Mr. Hai served as Chief Financial
Officer and ceased to serve in such capacity in March 2025.
|
Compensation Policy for Executive Officers and
Directors
Israeli
Companies Law
Pursuant to the Israeli Companies
Law, an Israeli public company is required to adopt a compensation policy with respect to the terms of engagement of its office holders
(as such term is defined under the Israeli Companies Law) (a “Compensation Policy”), including directors and controlling shareholders
engaged as company officers, subject to limited exceptions which do not apply to us. The adoption of a Compensation Policy requires shareholder
approval, further to approval by the Board of Directors, which must consider the recommendations of the Compensation Committee. The shareholder
approval must consist of a simple majority of all votes cast, and either (i) the approval of a majority of the shareholders’
voting power represented at the meeting in person or by proxy and voting thereon who are neither controlling shareholders nor have a personal
interest in approving the Compensation Policy (disregarding abstentions), or (ii) the total vote against adoption of the Compensation
Policy by shareholders who do not have a personal interest in approving the Compensation Policy does not represent more than 2% of the
voting rights in the company.
Any shareholder participating
in the vote on the adoption of the Compensation Policy must inform the company prior to the relevant vote as to whether the shareholder
has a personal interest in the matter. Votes of shareholders who did not notify the company as to whether or not they have a personal
interest are not counted.
As a general rule, pursuant
to the Israeli Companies Law, remuneration to office holders which is inconsistent with the Compensation Policy requires, in addition
to the approval of the Compensation Committee and of the Board of Directors, the approval of a special majority in the general meeting
of shareholders, as described above.
The Board is required to examine
from time to time whether any amendments to the Compensation Policy are necessary in light of changing circumstances or for any other
reason. Similarly, the Compensation Committee issues recommendations to the Board in this respect from time to time. At least once every
three years, the Compensation Policy must be submitted to shareholders for renewed approval, incorporating any amendments that the
Compensation Committee and Board deem appropriate.
Our prior Compensation Policy
was adopted by the Special General Meeting of the shareholders of the Company held in September 2020 following the recommendation and
earlier approval of the Compensation Committee and of the Board. The Compensation Policy expired in 2023, and at our special general meeting
of shareholders held on May 9, 2024, our shareholders approved a new Compensation Policy.
Board of Directors Compensation
Israeli
Companies Law
Pursuant to the Israeli Companies
Law, except under limited circumstances, the compensation to be paid to the directors in their capacity as such, as well as the terms
of employment (including the terms and conditions of the directors’ and officers’ insurance and indemnification) of any of
the directors in any other position, require the approval of the Compensation Committee, the Board and the shareholders (by a simple majority),
and the approvals of the Compensation Committee and the Board must be made in accordance with the Compensation Policy in effect (subject
to a limited exception). Further, pursuant to the Israeli Companies Law, approval by the shareholders of the terms of engagement of a
controlling shareholder, which for this purpose also includes any shareholder or group of shareholders that holds at least 25% of the
company’s voting power, provided that there is no other shareholder that holds more than 50% of the company’s voting rights
as an office holder (including as a director) or employee generally requires either (i) that the majority vote in favor of the resolution
shall include the approval of a majority of the voting power represented at the shareholders meeting in person or by proxy and voting
thereon of shareholders who have no personal interest in approving the resolution (disregarding abstentions), or (ii) that the total
vote against the resolution by shareholders who have no personal interest in approving the resolution do not represent more than 2% of
the voting rights in the company.
45
Pursuant to the provisions
of the Israeli Companies Law, as a general rule, any person that has a personal interest in a transaction (including approval of the terms
of office of a director) may not participate or vote at the relevant Board, Audit Committee or (with respect to the approval of engagement
terms) Compensation Committee meeting where the transaction is discussed;
provided
that office
holders who have a personal interest in a transaction may be present for the purpose of presenting such transaction, if the Chairman of
the Audit Committee, the Chairman of the Board or the Chairman of the Compensation Committee, as the case may be, determined that such
presence is required. In addition, if the majority of the members of the Board of Directors, the Audit Committee or the Compensation Committee,
as applicable, have a personal interest in the terms of office of such a director, then the relevant director may be present during the
deliberations and may vote on his terms of office, and in such event, shareholder approval is also required.
As noted above, our Compensation
Policy stipulates that with respect to our directors, compensation shall be subject to the limitations set forth in the Compensation Policy
and shall be in accordance with the Director Compensation Regulations. The Director Compensation Regulations specify the annual fee and
the participation fee to be paid to external directors, depending on the company’s shareholders’ equity. The Director Compensation
Regulations also allow for an alternative payment method, according to which the remuneration paid to external directors will be the same
as the remuneration received by the other directors of the company who are not employed by the company and are not controlling shareholders
thereof (proportionate remuneration). Further, we are also entitled to pay to our directors share-based compensation (subject to applicable
law and the restrictions applicable thereto in general under our Compensation Policy), but in any event the aggregate fair value of the
share-based compensation, measured at the time of a new grant, for all of our directors, as a group, shall not exceed a fair value of
$800,000 per year of vesting.
Currently, all directors receive
NIS 2,500 for each meeting attended in person, NIS 1,500 for each meeting attended electronically and NIS 1,250 for each written consent.
Our external directors receive NIS 3,991 for each meeting attended in person, NIS 2,395 for each meeting attended electronically and NIS
1,996 for each written consent. None of our directors has a service contracts with the Company relating to their service as a director,
and none of the directors will receive benefits upon termination of their position as a director.
Share Option Plan
Our Share Option Plan will
be in effect until terminated by the Board, pursuant to an amendment to the Share Option Plan which was approved by the Board on October 31,
2021. Pursuant to the Share Option Plan, options may be granted to executives, directors and key employees of SHL or its subsidiaries.
The Board of Directors has full discretion to determine the specific grantees from time to time.
The maximum number of ordinary
shares which may be issued under the Share Option Plan and under any other SHL share incentive option plan is 4,077,346, subject to adjustments
as provided in the Share Option Plan. As of May 1, 2025, 1,677,309 shares remain available for grant.
Pursuant to the Share Option
Plan, the exercise price shall be the closing price for an ordinary share on the last trading day prior to the grant, unless determined
otherwise by our Board of Directors in its discretion. However, with respect to all option grants since May 2010, the Board of Directors
determined in each case that the exercise price for such option grants shall be the average share price in the thirty (30) trading days
preceding the date of grant. The foregoing has also been stipulated as the exercise price applicable to any grants of share-based compensation
to our officers pursuant to our Compensation Policy. Further, pursuant to a resolution of the Board as of November 7, 2010, all options
issued under the Share Option Plan are exercised by way of the net exercise method.
Options granted under the
Share Option Plan shall vest, unless determined otherwise by the Board, one-third (1/3) on each of the first, second and third anniversary
of the date of grant, so that all options shall be fully vested and exercisable on the first business day following the lapse of thirty
six (36) months from the date of grant, contingent upon the achievement of certain market and performance conditions which, unless
determined otherwise by the Board, shall be based on the rate of the increase in the market price of the shares and of our earnings per
share. The Board may in its discretion reduce the relevant performance targets to zero, and has done so in all instances since June 2011.
The options shall expire six
(6) years from the date of grant (unless expired earlier under the terms of the Share Option Plan or the relevant award agreement).
With respect to option grants to our officers, our Compensation Policy provides a minimum vesting period, as follows: (i) first cliff
after one (1) year from the date of grant; and (ii) full vesting shall occur no earlier than 36 months from the date of
such grant.
46
The grant of share options
to our employees, directors and consultants is in the sole discretion of the Board, which may determine from time to time and subject
to the provisions of the Share Option Plan, additional grantees of options under and any matter related to the administration of the Share
Option Plan.
Option grant is done pursuant
to the Board’s full discretion pursuant to the general rules set forth under our Compensation Policy. Option grants to vice
presidents are usually based on the CEO’s recommendations, and to the CEO based on the Board’s recommendations, and are sometimes
the outcome of negotiations with the relevant employee.
Notwithstanding the aforesaid,
pursuant to the provisions of the Israeli Companies Law, should such options be granted to the directors or a controlling shareholder
as part of their compensation, such grant shall require the approval of the Compensation Committee, the Board and the shareholders, and
with respect to office holders who are not directors, the CEO or our controlling shareholders or their relatives, such grant shall require
approval by the Compensation Committee, followed by approval by the Board, all of the foregoing approvals of the Compensation Committee
and the Board to be made in accordance with the Compensation Policy.
|
C.
|
BOARD PRACTICES
|
Our Articles of Association
provide that our Board of Directors consists of not less than three (3) and not more than nine (9) directors, including two
(2) external directors, until otherwise determined by ordinary resolution of our shareholders. Our Board currently consists of six directors,
each of whom was elected at our annual general meeting of shareholders held on February 4, 2024, to serve until our next annual general
meeting of shareholders, except that Yehoshua (Shuky) Abramovich, one of our external directors, was reelected for a second three-year
term commencing on June 28, 2023, at our special general meeting of shareholders held on June 22, 2023, and Orna Carni, our
other external director, was elected for a three-year term at our special general meeting of shareholders held on December 10, 2024.
See Item 6.A, “Directors, Senior Management and Employees—Directors and Senior Management” for further details
regarding the periods of service of each of our current directors.
Under the Israeli Companies
Law and the company’s Articles of Association, directors are elected by the general meeting of shareholders. Pursuant to our
articles of association, our directors, except the two (2) external directors, who are elected as described below under “—Director
Service Contracts – Board Independence – External Directors”, pursuant to the provisions of the Israeli Companies
Law, are elected individually at the annual general meeting by the vote of the holders of a simple majority of the voting power represented
at such meeting in person or by proxy and voting on the election of directors. The directors so elected hold office until the next annual
general meeting. The holders of a simple majority of the voting power represented at a general meeting and voting thereon are entitled
to remove any director(s) from office, to elect directors in place of director(s) so removed or to fill any vacancy, however
created, on the board of directors. A shareholder desiring to propose a candidate for election to the board of directors or to remove
a director from his position, as a condition to such proposal being considered, is required to advise the company of the identity of such
candidate or serving director at least two (2) weeks prior to the date of the general meeting at which such resolution is to be considered
(or such shorter period as may be determined by the board of directors). Prior to his or her election, each nominee is required to provide
the Company with an executed declaration that he or she possesses the requisite skills and has the availability to carry out his or her
duties. Additionally, the nominee must provide details of such skills, and demonstrate an absence of any limitation under the Israeli
Companies Law that may prevent his or her election and affirm that all of the required election-information is provided to us.
Terms of Office
Our current Board of Directors
is comprised of Dr. Itamar Offer (Chairman), Prof. Amir Lerman, Mr. Ido Nouberger, Mr. Nir Rotenberg, Mr. Yehoshua (Shuky) Abramovich
(external director) and Ms. Orna Carni (external director). The terms of office of Yariv Alroy, Prof. Amir Lerman, Ido Nouberger
and Nir Rotenberg will expire at our 2025 annual general meeting, which is scheduled to be held on May 28, 2025. The term of office of
Orna Carni will expire on December 10, 2027, and the term of office of Yehoshua (Shuky) Abramovich will expire on June 27, 2026.
None of our directors have service contracts with the company relating to their service as a director, and none of the directors will
receive benefits upon termination of their position as a director. For a description of our compensation of directors see Item 6.B,
“Directors, Senior Management and Employees—Compensation.”
47
Board Independence
External
Directors
Israeli companies that have
offered securities to the public in or outside of Israel are required to elect at least two external directors under the provisions of
the Israeli Companies Law, who must meet rigid standards of independence to ensure that they are unaffiliated with us and our controlling
shareholder. An external director must also have either financial and accounting expertise or professional qualifications, as defined
in the regulations promulgated under the Israeli Companies Law, and at least one of the external directors is required to have financial
and accounting expertise. An external director is entitled to reimbursement of expenses and compensation as provided in the regulations
promulgated under the Israeli Companies Law but is otherwise prohibited from receiving any other compensation from us, directly or indirectly,
during his or her term and for two years thereafter.
Under the Israeli Companies
Law, external directors must be elected at a shareholders’ meeting by a simple majority of all votes cast, and either (i) the
approval of a majority of the shareholders’ voting power represented at the meeting in person or by proxy and voting thereon who
are neither controlling shareholders nor have a personal interest in the election of the director (other than a personal interest that
does not result from the voting shareholder’s relationship with the controlling shareholder, and disregarding abstentions), or (ii) the
total vote against the election of the director by shareholders who are neither controlling shareholders nor have a personal interest
in the election of the director (other than a personal interest that does not result from the voting shareholder’s relationship
with the controlling shareholder) does not represent more than 2% of the voting rights in the company
External directors serve for
up to three terms of three years each, and our shareholders may nominate them for additional terms. A term of an external director
may be terminated prior to expiration only by a shareholder vote, by the same threshold required for election, or by a court, but in each
case only if the external director ceases to meet the statutory qualifications for election or if the external director violates his or
her duty of loyalty to us. If at the time of election of an external director all of the members of the board of directors (excluding
controlling shareholders or relatives of controlling shareholders) are of the same gender, the external director to be elected must be
of the other gender.
Under the Israeli Companies
Law, each committee of a company’s board of directors that is authorized to exercise powers of the board of directors is required
to include at least one external director, and all external directors must be members of the company’s audit committee and compensation
committee.
Independence
under SEC Standards
Each of our two external directors,
Mr. Yehoshua (Shuky) Abramovich and Ms. Orna Carni, is considered “independent” under SEC independence standards
in addition to the Israeli Companies Law. Prof. Amir Lerman is also considered “independent” under SEC independence standards.
48
Board Committees and Internal Auditor
Under the Israeli Companies
Law, with respect to companies that have offered securities to the public in or outside of Israel, each committee of the Board of Directors
authorized to exercise the powers of the Board of Directors is required to include at least one external independent director, and the
Board of Directors of a public company is required to appoint an Audit Committee and a Compensation Committee, which must be comprised
of at least three (3) directors, including all of the external directors.
Our Board of Directors has
established an Audit Committee, Compensation Committee, Investment Committee, MA Committee, Cyber Committee, and Executive Committee.
We previously also had a Financial
Statements Committee under Israeli law from March 18, 2015, until its functions were transferred to our Audit Committee and it was
dissolved in January 2023. The task of the Financial Statements Committee was to examine our financial statements prior to their
approval by the Board of Directors.
Audit Committee
Pursuant to the Israeli Companies
Law, the Audit Committee must be comprised of at least three (3) directors, including all of the external directors, and a majority
of its members must be independent directors within the meaning of the Israeli Companies Law (i.e., including the external directors).
The following persons may
not be members of the Audit Committee:
|
•
|
the Chairman of the Board;
|
|
•
|
any director employed by us;
|
|
•
|
any director employed by a controlling
shareholder of us or an entity under the control of such controlling shareholder;
|
|
•
|
any director who provides services,
on a regular basis, to us, a controlling shareholder or an entity under the control of a controlling shareholder;
|
|
•
|
a director whose main livelihood is based on a controlling
shareholder; and
|
|
•
|
a controlling shareholder or any of its relatives.
|
Subject to limited exceptions,
any person who could not be a member of the Audit Committee may not be present at its meetings. The Chairman of the Audit Committee shall
be an independent (external) director not serving for more than nine (9) years.
The legal quorum for any meeting
of the Audit Committee shall be a majority of its members, provided that the majority of those present shall be independent directors,
and
provided further
that at least one (1) independent (external) director shall be present.
The Audit Committee currently
consists of Mr. Yehoshua (Shuky) Abramovich, Ms. Orna Carni and Prof. Amir Lerman. The Audit Committee consists exclusively
of members of our board of directors who are financially literate. Our Board of Directors has determined that Mr. Abramovich is the
financial expert under the SEC definition and all members of the Audit Committee satisfy the “independence” requirements set
forth in Rule 10A‑3 under the Exchange Act. The members of the Audit Committee are appointed by our Board of Directors.
The role of the Audit Committee
is, among other things, to:
|
•
|
examine flaws in our business management, in consultation
with our internal auditor and the external auditors, and to propose remedial measures to the Board;
|
|
•
|
determine whether an interested party transaction
is an ordinary or extraordinary transaction (where extraordinary transactions are subject to special approval requirements);
|
|
•
|
approve interested party transactions, where so required
under the Israeli Companies Law; and
|
49
|
•
|
examine our existing internal control measures and
the functioning of our internal auditor.
|
The Audit Committee is also
charged with:
|
•
|
prescribing with respect to transactions
with controlling shareholders or another person in which a controlling shareholder has a personal interest (even if they are determined
by the Audit Committee not to be extraordinary transactions), as well as with respect to the engagement terms of controlling shareholders
and their relatives, the obligation to conduct either (i) a competitive process under the supervision of either the Audit Committee or
who else the Audit Committee may determine in respect thereof pursuant to the criteria set by it; or (ii) other processes as determined
by the Audit Committee, prior to the relevant transaction, and all in accordance with the type of transaction in question, and the Audit
Committee may set the relevant criteria therefore once a year in advance;
|
|
•
|
determining the manner of approval
of transactions with controlling shareholders or another person in which a controlling shareholder has a personal interest and to determine
kinds of such transactions which require the approval of the Audit Committee, all with respect to such transactions which pursuant to
the determination of the Audit Committee are not extraordinary transactions but also not negligible – the Audit Committee may so
determine with respect to types of transactions according to criteria it may set one a year in advance; and
|
|
•
|
determining whether a director
or candidate for director fulfills the requirements for being classified as an independent director within the meaning of the Israeli
Companies Law.
|
Neither the Israeli Companies
Law nor our Articles of Association prescribe a certain frequency at which meetings of the Audit Committee are to take place. Accordingly,
the Audit Committee meets from time to time when deemed necessary. Pursuant to the Israeli Companies Law, our internal auditor may request
the chairperson of the Audit Committee to convene a meeting and the chairperson shall then convene such meeting if it deems it fit. In
addition, should the Audit Committee find that there is a material flaw in our business management, it shall hold at least one meeting
with respect to such material flaw in the presence of the internal or external auditor, as the case may be, without any office holders
that are not members of the committee present; provided that an office holder may be present for the purpose of presenting an opinion
with respect to a matter which is in his/her field of responsibility. The duration of the meetings varies in accordance with the topics
discussed.
Compensation
Committee
Pursuant to the Israeli Companies
Law, an Israeli public company is obligated to appoint a Compensation Committee, which shall be comprised of at least three (3) members,
including all of the external directors, and a majority of its members must be external directors. The remaining members of the Compensation
Committee shall be such whose engagement terms correspond to the rules of compensation set forth under applicable regulations under
the Israeli Companies Law with respect to external directors.
Persons who may not be members
of the Audit Committee (as described above) may also not be members of the Compensation Committee. The Chairman of the Compensation Committee
shall be an external director not serving for more than nine (9) years. The Audit Committee and the Compensation Committee may have
identical members and an Audit Committee fulfilling the above requirements may at the same time also serve as the Compensation Committee.
The Compensation Committee
currently consists of Mr. Yehoshua (Shuky) Abramovich, Ms. Orna Carni and Prof. Amir Lerman. Our Board of Directors has determined
that all members of the Compensation Committee satisfy the “independence” requirements under the SEC’s standards. The
members of the Compensation Committee are appointed by our Board of Directors.
The role and authority of
the Compensation Committee shall include:
|
•
|
the issuance of a recommendation to the Board of Directors
regarding the Compensation Policy;
|
|
•
|
issuance of a recommendation to the Board of Directors
once every three (3) years regarding the extension of the Compensation Policy;
|
|
•
|
recommendation to the Board of Directors from time
to time regarding any amendments to the Compensation Policy, as well as examination regarding its implementation;
|
50
|
•
|
approval of transactions with office holders (including
controlling shareholders) regarding the terms of their engagement with the company as required under the Israeli Companies Law; and
|
|
•
|
exemption of certain transactions from the shareholder
approval requirement which may otherwise apply pursuant to the Israeli Companies Law.
|
Neither the Israeli Companies
Law nor our Articles of Association prescribe a certain frequency at which meetings of the Compensation Committee are to take place. Accordingly,
the Compensation Committee meets from time to time when deemed necessary. The duration of the meetings varies in accordance with the topics
discussed.
Investment
Committee
Although not mandatory under
the provisions of the Israeli Companies Law, the Board of Directors has voluntarily appointed an investment committee as of February 21,
2019 (the “Investment Committee”). The task of the Investment Committee is to determine the investment policy of the Company’s
cash proceeds that are not required for its ongoing operations as will be from time to time. The members of the Investment Committee as
of the date of this Annual Report are Mr. Yehoshua (Shuky) Abramovich (chairman), Mr. Nouberger and Mr. Rotenberg..
Executive
Committee
Although not mandatory under
the provisions of the Israeli Companies Law, the Board voluntarily appointed an advisory executive committee as of May 17, 2020 (“Executive
Committee”). The task of the Executive Committee is to assist the CEO and the Company in operating its ongoing business. The members
of the Executive Committee as of the date of this Annual Report are Dr. Offer, Mr. Yehoshua (Shuky) Abramovich, Mr. Nouberger and
Mr. Rotenberg.
Internal
Auditor
Pursuant to the Israeli Companies
Law, the Board of a public company shall appoint an internal auditor. Such appointment is made upon recommendation of the Audit Committee.
Neither an interested party nor an officer of the company, any relatives of the foregoing or the external auditor or anyone on its behalf
may serve in such position.
The role of the internal auditor
is to examine, among other things, whether our activities comply with the law and orderly business procedure. Pursuant to the Israeli
Internal Audit Law, 5752‑1992, together with the Israeli Companies Law, the internal auditor is authorized to demand and receive
any kind of document and/or information that is in our or our employees’ possession, which he deems necessary for the performance
of his role, and he is to have access to all of our databases or data processing programs. Pursuant to the Israeli Companies Law, the
Chairman of the Board or the Chairman of the Audit Committee may order the internal auditor to conduct an internal audit on matters where
an urgent need for examination arose. In addition, the internal auditor shall receive notices of the meetings of the Audit Committee and
may participate in such meetings.
51
The internal auditor has no
decision-making powers. Pursuant to the Israeli Companies Law and our Articles of Association, the internal auditor has to submit a work
program to the Audit Committee for approval. Mr. Michael Gilinsky was appointed as our internal auditor in May 2021.
Board Diversity Matrix
|
Board Diversity
Matrix (As of May 1, 2025)
|
||||
|
Country of Principal Executive Offices:
|
Israel
|
|||
|
Foreign Private Issuer
|
Yes
|
|||
|
Disclosure Prohibited under Home Country Law
|
No
|
|||
|
Total Number of Directors
|
6
|
|||
|
|
Female
|
Male
|
Non-Binary
|
Did Not Disclose
Gender
|
|
Part I: Gender Identity
|
|
|||
|
Directors
|
1
|
3
|
0
|
2
|
|
Part II: Demographic Background
|
|
|||
|
Underrepresented Individual in Home Country Jurisdiction
|
0
|
|||
|
LGBTQ+
|
0
|
|||
|
Did not disclose demographic background
|
0
|
|||
|
Directors who are Jewish people
|
6
|
|||
|
Directors with disabilities
|
0
|
|||
|
D.
|
EMPLOYEES
|
As of December 31, 2024,
we had approximately 526 full-time employees. The total number of full-time employees as of the end of financial years 2023 and 2022
was approximately 583 and 402. A breakdown of such employees by country and division as of December 31, 2024, is below.
|
|
|
Israel
|
|
|
Germany
|
|
|
U.S.A.
|
|
|
Total
|
|
||||
|
Operation
|
|
|
284
|
88
|
-
|
372
|
|
|||||||||
|
Research Development
|
|
|
16
|
16
|
-
|
32
|
|
|||||||||
|
Sales Marketing
|
|
|
39
|
8
|
3
|
50
|
|
|||||||||
|
General Administrative
|
|
|
52
|
19
|
1
|
72
|
|
|||||||||
In addition to the applicable
laws and regulations, including jurisdiction-specific labor legislation, our employees in Germany are members of a “work council”
that regulates different employment aspects, including operational, compensation, and benefit structure, while some of our employees in
Israel are parties to collective bargaining agreements and are represented by a union.
In addition to the above,
we engage, from time to time, with independent contractors and external professional consultants for certain services to perform our operations
and business. Such contractors and consultants are subject to confidentiality and non-compete undertakings towards us.
52
| E. |
SHARE OWNERSHIP
|
The following table sets forth
the share ownership of our directors and officers as of May 1, 2025:
|
Name
|
Total
Shares
Beneficially
Total Shares
Owned
|
Number of Options
|
Percentage
of Ordinary Shares
|
|||||||||
|
Dr. Itamar Offer
|
—
|
—
|
—
|
|||||||||
|
Ido Nouberger
|
1,406,236
|
**
|
8.6
|
%
|
||||||||
|
Nir Rotenberg
|
791,405
|
***
|
4.9
|
%
|
||||||||
|
Prof. Amir Lerman
|
5,694
|
18,000
|
*
|
|||||||||
|
Yehoshua (Shuky) Abramovich
|
16,961
|
18,000
|
*
|
|||||||||
|
Orna Carni
|
—
|
—
|
—
|
|||||||||
|
David Arnon
|
—
|
400,000
|
2.4
|
%
|
||||||||
|
Lior Haalman
|
—
|
320,000
|
1.9
|
%
|
||||||||
|
Bernd Altpeter
|
—
|
100,000
|
*
|
|||||||||
|
*
|
Represents less than one percent.
|
|
**
|
Represents ownership of our ordinary
shares by Value Base Ltd., a private investment group located in Israel (“Value Base”), together with its subsidiaries and
its controlling shareholders Ido Nouberger and Victor Shamrich. Mr. Nouberger has served as the CEO of Value Base since its inception
in 2013, and he also holds the position of chairman of the board or board member of Value Base’s various subsidiaries. Mr. Nouberger
disclaims beneficial ownership of the securities beneficially owned by Value Base except to the extent of his pecuniary interest therein.
|
|
***
|
Represents ownership of our ordinary
shares by Danbar Finance Ltd., a private investment group located in Israel (“Danbar”), of which Mr. Rotenberg is the Chairman
of the Board and has served there as a director and partner since 2000. Mr. Rotenberg disclaims beneficial ownership of the securities
beneficially owned by Danbar except to the extent of his pecuniary interest therein.
|
The options in the above table
are exercisable according to the “Net Exercise” method to our ordinary shares. The aggregate number of ordinary shares underlying
such options is up to 949,124. The exercise price of the options ranges from CHF 5.34 to CHF 19.33 and the weighted average exercise price
of the options is CHF 8.17. The expiration dates of the options range from June 6, 2025 to February 13, 2031.
Our officers and directors
have the same voting rights with respect to their shares as our other shareholders.
| F. |
DISCLOSURE OF A
REGISTRANT’S ACTION TO ERRONEOUSLY AWARDED COMPENSATION
Not applicable.
|
53
|
ITEM
7.
|
MAJOR SHAREHOLDERS AND RELATED
PARTY TRANSACTIONS
|
| A. |
MAJOR SHAREHOLDERS
|
The following table sets forth
certain information regarding the beneficial ownership of our outstanding ordinary shares as of May 1, 2025 by each person or entity who
we know beneficially owns 3% or more of our outstanding ordinary shares (including ordinary shares represented by ADSs), in line with
Article 120 of the Swiss Financial Market Infrastructure Act (the “FMIA”), or otherwise known to us to beneficially own
more than 5% of the outstanding ordinary shares. The FMIA requires us and other persons who directly, indirectly (as beneficial owners)
or in concert with other parties, acquire or dispose of our ordinary shares or purchase or sale rights or obligations relating to our
ordinary shares, and thereby exceed or fall below a threshold of 3%, 5%, 10%, 15%, 20%, 25%, 33⅓%, 50% or 66⅔% of our voting
rights (whether exercisable or not), to notify us and the Disclosure Office of the SIX of such acquisition or disposal using appropriate
forms available on the website of the SIX Disclosure Office. The table below has been prepared based on the disclosure notices published
on the platform of the SIX Disclosure Office pursuant to the FMIA. Market transactions of shareholders which have not triggered a disclosure
notification are not reflected in the numbers.
Beneficial ownership is determined
in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess
sole or shared voting power or investment power with respect to those securities and include shares issuable upon the exercise of options
that are immediately exercisable or exercisable within 60 days. Accordingly, for purposes of the table below, we deem ordinary shares
issuable pursuant to share options that are currently exercisable or exercisable within 60 days of May 1, 2025 to be outstanding
and to be beneficially owned by the person holding the share options for the purposes of computing the percentage ownership of that
person, but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. Percentage
ownership calculations are based on 16,392,754 ordinary shares issued and outstanding as of May 1, 2025. Unlike the disclosure notices
published on the platform of the SIX Disclosure Office pursuant to the FMIA, the table below does not separately indicate other purchase
or sale positions (in terms of derivatives such as call or put options).
|
|
|
|
|
|
Share Options
|
|
|
Percent of
|
|
|||
|
Identity of Person or Group
|
|
Amount Owned
|
|
|
Current
|
|
|
Class
|
|
|||
|
Mrs. Mengke Cai (Zhuhai, China) and Kun Shen (Hong Kong, China)
(1)
|
|
|
5,969,413
|
|
|
|
|
|
|
36.4
|
%
|
|
|
More Provident Funds (Ramat Gan, Israel)
|
|
|
2,111,576
|
(2)
|
|
|
|
|
|
12.9
|
%
|
|
|
Value Base Group (Tel Aviv, Israel)
(2)
|
|
|
1,406,236
|
(3)
|
|
|
|
|
|
8.6
|
%
|
|
|
Yariv Alroy (Herzliya, Israel)
|
|
|
801,456
|
|
|
|
|
|
|
4.9
|
%
|
|
|
Danbar Finance Ltd. (Tel Aviv, Israel)
(4)
|
|
|
791,405
|
(5)
|
|
|
|
|
|
|
4.8
|
%
|
|
Sphera Funds Management (Tel Aviv, Israel)
|
|
|
632,456
|
(6)
|
|
|
|
|
|
|
3.9
|
%
|
|
(1)
|
Shareholder group consisting
of Mrs. Mengke Cai and Mrs. Kun Shen. Pursuant to a decision of the Swiss Takeover Board, Mengke Cai, Kun Shen and their related
entities have been prohibited from acquiring further shares or acquisition or disposal rights relating to SHL, including suspension of
the voting rights attached to their current shares.
|
| (2) |
Based on
the
Schedule 13G/A filed by More Provident Funds with the SEC on November 13, 2024
.
|
|
(3)
|
Shareholder group consisting
of the following beneficial owners (as defined by the FMIA): Value Base (23 Yehuda Halevy St., Tel Aviv, Israel), Harmony Base LP
(23 Yehuda Halevy St., Tel Aviv, Israel), Ido Nouberger (Tel Aviv, Israel), one of our directors, and Victor Shamrich (Tel
Aviv, Israel). Messrs. Nouberger and Shamrich serve as the controlling shareholders of Value Base. Mr. Nouberger has served as the
CEO of Value Base since its inception in 2013, and he also holds the position of chairman of the board or board member of Value Base’s
various subsidiaries. Each of Messrs. Nouberger and Shamrich disclaims beneficial ownership of the securities beneficially owned by Value
Base except to the extent of his respective pecuniary interest therein
|
|
(4)
|
Based on the Schedule 13D/A filed
by Value Base with the SEC on February 12, 2024.
|
|
(5)
|
Shareholder group consisting
of the following beneficial owners (as defined by the FMIA): Danbar (94 Yigal Alon Street, Tel Aviv, Israel), Matan Wulkan (94 Yigal Alon
Street, Tel Aviv, Israel) and Nir Rotenberg (94 Yigal Alon Street, Tel Aviv, Israel), one of our directors. Mr. Rotenberg is the Chairman
of the Board of Danbar and has served there as a director and partner since 2000. Mr. Rotenberg disclaims beneficial ownership of the
securities beneficially owned by Danbar except to the extent of his pecuniary interest therein
|
|
(6)
|
Based on the Schedule 13D/A filed
by Danbar with the SEC on February 14, 2024.
|
|
(7)
|
Based on the Form 13F-HR filed
by Sphera Funds Management with the SEC on February 14, 2024.
|
There have been no significant
changes in the percentage ownership held by any major shareholder during the past three years other than those resulting from
our capital raises described in Section 5.B. “Liquidity and Capital Resources – Financial Arrangement.”
54
Except for Mrs. Mengke
Cai and Kun Shen, as disclosed in footnote (1) to the table above, none of our shareholders have different voting rights from other
shareholders.
As of May 1, 2025, ADRs evidencing
1,419,516 ordinary shares were outstanding. The 1,419,516 ordinary shares represented by those ADRs (approximately 8.6% of SHL’s
outstanding ordinary shares) were registered in the name of UBS Switzerland AG, the custodian for the Depositary. We believe that most
or all of these ADRs were held of record by persons outside the United States. As of May 1, 2025, based on the list of the registered
holders of our ordinary shares, there were no registered holders of our ordinary shares showing as residing in the United States. Since
certain of SHL’s ADRs and ordinary shares are held by brokers or other nominees, the number of ADRs and ordinary shares held of
record may not be representative of the number of beneficial holders resident in the United States.
Under an agreement between
us and SIX SIS AG (“SIS”), SIS acts as a nominee on behalf of any person registered in the share register maintained by Computershare
Schweiz AG, and SIS is registered as the shareholder of record of the issued and outstanding ordinary shares. As a result, the number
of record holders is not representative of the number of beneficial holders of our ordinary shares.
We are not aware of any arrangement
that may, at a subsequent date, result in a change of control of SHL.
| B. |
RELATED PARTY TRANSACTIONS
|
In September 2024, our shareholders,
following the approval of the Compensation Committee and the Board, approved Mr. David Arnon’s terms of office as Chief Executive
Officer. Pursuant to the employment terms, Mr. Arnon entitled,
inter alia
, to a monthly salary
in the amount of NIS 90,000, and a grant of options to purchase 90,000 ordinary shares under the Share Incentive Plan. The exercise price
for options to purchase up to 200,000 Ordinary Shares is $8.00 (7.12 CHF) per share, and for the remaining options to purchase 200,000
ordinary shares will be $6.00 (5.34 CHF) per share, but in any event not less than the average closing price of the ordinary shares on
the SIX during the thirty (30) trading day period preceding the date of such grant. The options will vest over a four-year period in equal
annual installments, provided the Mr. Arnon is still serving as our CEO as of each such vesting date. For the avoidance of doubt, the
options with the different exercise prices (as described above) will vest simultaneously on a pro-rata basis. In the event of a “Change
of Control” (defined as a transaction as a result of which a shareholder or a group of shareholders acting jointly will hold over
40% of the voting rights in the Company) and the termination of Mr. Arnon’s employment by the Company, all unvested Options will
immediately become fully vested and exercisable.
Mr. Arnon
is
also eligible to receive an annual bonus in an amount equal to up to twelve (12) monthly salaries, determined as a percentage of certain
minimum pre-set “profit before tax” levels achieved by the Company during 2024 and 2025.
Mr.
Arnon’s employment agreement may be terminated by either party upon 120 days’ advance notice to the other party
.
We
also make contribution on Mr. Arnon’s behalf into a pension and manager’s insurance policy (including an insurance policy
for the loss of work ability) and study fund as customary in Israel.
We
also provide Mr. Arnon with a car leased or bought by the Company with a value up to NIS 250,000.
In June 2022, our shareholders,
following the approval of the Compensation Command the Board, approved Mr. Erez Nachtomy’s amended terms of office as Acting
Chief Executive Officer. Pursuant to the amended employment terms, Mr. Nachtomy was entitled,
inter alia
,
to a service fee in the amount of NIS 93,600 commencing on June 29, 2022, and upon meeting the terms set forth in Section 9
to the company’s Compensation Policy (Special Cash Bonus) a bonus equivalent to three monthly fees, provided, however, that
said bonus could be received only once in one given year and further provided that the accumulated amount of the annual cash bonus
for the CEO and the special cash bonus could not exceed twelve (12) times the CEO monthly fee in one given year.
On August 11, 2022, our
shareholders, following the approval of the Compensation Committee and the Board, approved (i) a consulting agreement with Mr. Ehud
Barak, the Company’s then-Active Co-Chairman of the Board of Directors, pursuant to which Mr. Barak could be actively involved
in a strategic agreement on behalf of the company outside of Israel, and would be entitled to a monthly management fee of $13,800.
In the event of Mr. Barak’s involvement, he would be entitled, subject to the closing of said transaction, to a transaction
bonus in an amount equal to twice the monthly management fee (
i.e.,
$27,600), which special
bonus would not exceed in any calendar year a sum equal to eight times the monthly management fee; (ii) exculpation agreements
with the company’s current and future directors and officers, including the CEO and other officers and directors who may be deemed
controlling shareholders; and (iii) amendments to the CEO terms of office, as described above.
55
As noted above, the office
space leased by our Mediton business in Israel is owned by an affiliate of a former shareholder in Mediton. The monthly rent amount
under the lease is approximately $43,000. The term of the lease runs until 2035.
|
C.
|
INTERESTS OF EXPERTS AND COUNSEL
|
|
|
Not applicable.
|
|
ITEM
8.
|
FINANCIAL INFORMATION
|
|
A.
|
CONSOLIDATED STATEMENTS AND OTHER
FINANCIAL INFORMATION
|
Consolidated
Financial Statements
See Item 18, “Financial
Statements” for a list of the financial statements filed as part of this Annual Report.
Legal Proceedings
We are, from time to time,
party to various claims and disputes associated with our ongoing business operations. We are not currently involved in pending or contemplated
claims or disputes that we expect, either individually or in the aggregate, to have significant effects on our financial position or profitability.
We may become involved in material legal proceedings in the future. Regardless of the outcome, litigation can have an adverse impact on
us because of defense and settlement costs, diversion of management resources and other factors.
Dividend
Policy
We declared a dividend of
$1.00 per ordinary share on March 18, 2019, which was paid on April 16, 2019. The aggregate amount paid was approximately $10.5
million. We did not pay a dividend in any of 2020-2024.
We do not have a dividend
policy. All decisions related to dividend distribution (including specific dividend total aggregate amount and dividend amount per share)
are made by the Board in accordance with applicable law and are based on a number of findings, including, among others, our fiscal condition,
results of operations, capital instrument needs and plans and prospects. Please see Item 10.B., “Additional Information—Memorandum
and Articles of Association—Liquidation and Dividend Rights.”
|
B.
|
SIGNIFICANT CHANGES
|
No significant change has
occurred since December 31, 2024, except as otherwise disclosed in this Annual Report.
|
ITEM
9.
|
THE OFFER AND LISTING
|
|
A.
|
OFFER AND LISTING DETAILS
|
Our ordinary shares have been
traded on the SIX under the symbol “SHLTN” since November 15, 2000. Our ADSs were listed for trading on the Nasdaq Capital
Market under the symbol “SHLT” since April 3, 2023. On March 11, 2025, we announced our intention to voluntarily delist
from the Nasdaq Capital Market, terminate our ADR program and deregister from, and terminate our reporting obligations under, the Exchange
Act. Our ADRs ceased trading on the Nasdaq Capital Market on April 2, 2025.
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B.
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PLAN OF DISTRIBUTION
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Not applicable.
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C.
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MARKETS
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See Item 9.A. above.
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D.
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SELLING SHAREHOLDERS
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Not applicable.
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E.
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DILUTION
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Not applicable.
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F.
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EXPENSES OF THE ISSUE
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Not applicable.
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ITEM
10.
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ADDITIONAL INFORMATION
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A.
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SHARE CAPITAL
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Not applicable.
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B.
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MEMORANDUM AND ARTICLES OF ASSOCIATION
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The information set forth
under Item 10.B “Additional Information – Memorandum and Articles of Association” contained in Amendment No. 2
to our Registration Statement on Form 20‑F (File No. 001‑41641), as amended, filed with the SEC on March 8,
2023, is incorporated herein by this reference.
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C.
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MATERIAL CONTRACTS
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Not applicable.
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D.
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EXCHANGE CONTROLS
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Non-residents of Israel who
purchase our ordinary shares outside of Israel with U.S. dollars or other foreign currency will be able to convert dividends (if any)
thereon, and any amounts payable upon the dissolution, liquidation or winding up of our affairs, into freely repatriable dollars, at a
rate of exchange prevailing at the time of conversion,
provided
that Israeli income tax has been
withheld by us with respect to such amounts. In addition, the statutory framework for the potential imposition of currency exchange controls
has not been eliminated, and these controls may be restored at any time by administrative action.
57
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E.
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TAXATION
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The following is a summary
of the material Israeli and United States federal tax consequences, Israeli foreign exchange regulations and certain Israeli government
programs affecting us. To the extent that the discussion is based on new tax or other legislation that has not been subject to judicial
or administrative interpretation, there can be no assurance that the views expressed in the discussion will be accepted by the tax or
other authorities in question. The discussion is not intended, and should not be construed, as legal or professional tax advice, is not
exhaustive of all possible tax considerations and should not be relied upon for tax planning purposes. POTENTIAL INVESTORS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE ISRAELI TAX, UNITED STATES FEDERAL INCOME TAX AND OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF OUR ADSS OR ORDINARY SHARES, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY FOREIGN, STATE OR LOCAL TAXES.
Israeli Tax Considerations and Government Programs
The following is a brief summary
of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income tax consequences
concerning the ownership and disposition of our ADSs and ordinary shares. This summary does not discuss all the aspects of Israeli tax
law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors
subject to special treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities who are
subject to special tax regimes not covered in this discussion.
General
corporate tax structure in Israel
Israeli resident companies
are generally subject to corporate tax on both ordinary income and capital gains, currently at the rate of 23% of a company’s taxable
income.
Taxation
of our shareholders
Israeli law generally imposes
a capital gains tax on the sale of any capital asset by Israeli residents, as defined for Israeli tax purposes. Israeli law also generally
imposes a capital gains tax on the sale of capital assets located in Israel, including shares in Israeli companies, by both Israeli residents
and non-residents of Israel, unless a specific exemption is available or unless a tax treaty between Israel and the shareholder’s
country of residence provides otherwise. The Israeli Income Tax Ordinance (New Version), 5721‑1961 (the “Ordinance”)
distinguishes between real gain and inflationary surplus. The inflationary surplus is a portion of the total capital gain equivalent to
the increase of the relevant asset’s purchase price attributable to an increase in the Israeli consumer price index, or, under certain
conditions, a foreign currency exchange rate, between the date of purchase and the date of sale. Inflationary surplus is currently not
subject to tax in Israel. The real gain is the excess of the total capital gain over the inflationary surplus.
Capital
Gains Taxes Applicable to Non-Israeli Resident Shareholders
. A non-Israeli resident who derives capital gains from the sale of
shares in an Israeli resident company that were purchased after the company was listed for trading on a stock exchange outside of Israel
will be exempt from Israeli tax if, among other conditions, the shares were not held through a permanent establishment that the non-resident
maintains in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents: (i) alone,
or together with such Israeli residents’ related party or another person who collaborates with such Israeli resident on a permanent
basis, hold, directly or indirectly, more than 25% of the means of control in such non-Israeli corporation, or (ii) are the beneficiaries
of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. Additionally,
such exemption is not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed to be business income.
58
Additionally, a sale of securities
by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example,
under the United States-Israel Tax Treaty, the sale, exchange or other disposition of shares by a shareholder who is a United States resident
(for purposes of the treaty) holding the shares as a capital asset and who is entitled to claim the benefits afforded to such a resident
by the United States-Israel Tax Treaty (a “U.S. Resident”) is generally exempt from Israeli capital gains tax unless, among
other things, (i) the capital gain arising from such sale, exchange or disposition is attributed to real estate located in Israel;
(ii) the capital gain arising from such sale, exchange or other disposition is attributed to royalties; (iii) the capital gain
arising from such sale, exchange or disposition is attributed to a permanent establishment in Israel, under certain conditions; (iv) such
U.S. Resident holds, directly or indirectly, shares representing 10% or more of the voting capital during any part of the 12‑month
period preceding the disposition, subject to certain conditions; or (v) such U.S. Resident is an individual and was present in Israel
for 183 days or more in the aggregate during the relevant taxable year. In any such case, the sale, exchange or disposition
by the U.S. Resident would be subject to Israeli tax, unless exempt under Israeli domestic law as described above. However, under the
United States-Israel Tax Treaty, such U.S. Resident should be permitted to claim a credit for such taxes against U.S. federal income tax
imposed on any gain from such sale, exchange or disposition, under the circumstances and subject to the limitations specified in the United
States-Israel Tax Treaty or in the United States federal income tax laws applicable to foreign credits.
In some instances where our
shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the
withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains
in order to avoid withholding at source at the time of sale (i.e., provide resident certificate and other documentation).
A detailed return, including
a computation of the tax due, must be filed and an advance payment must be paid by January 31 and July 31 of each tax year
for sales of securities traded on a stock exchange made during the last six months of the preceding year or during the first
six months of the current year, respectively. However, if all tax due was withheld at source according to applicable provisions
of the Ordinance and the regulations promulgated thereunder, the return does not need to be filed provided that (i) such income was
not generated from business conducted in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources of income in Israel
with respect to which a tax return is required to be filed and an advance payment does not need to be made, and (iii) the taxpayer
is not obligated to pay surtax (as further explained below). Capital gains are also reportable on an annual income tax return.
Taxation
of Non-Israeli Shareholders on Receipt of Dividends
. Non-Israeli residents (whether individuals or corporations) generally will
be subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25%, or 30% if the recipient of
the dividends is a “substantial shareholder” at the time of distribution or at any time during the preceding 12‑month
period, which tax will be withheld at source, unless relief is provided in a treaty between Israel and the shareholder’s country
of residence (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate).
Such dividends are generally subject to Israeli withholding tax at a rate of 25% if the shares are registered with a nominee company (whether
or not the recipient is a substantial shareholder).
A different rate may be provided
in a treaty between Israel and the shareholder’s country of residence. In this regard, under the United States-Israel Tax Treaty,
the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our ADSs or ordinary shares who is a United States
resident (for purposes of the United States-Israel Tax Treaty) is 25%. However, generally, the maximum rate of withholding tax on dividends
that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout the tax year in which
the dividend is distributed as well as during the previous tax year, is 12.5%,
provided
that
not more than 25% of the gross income for such preceding year consists of certain types of dividends and interest. We cannot assure
you that we will designate the profits that we may distribute in a way that will reduce shareholders’ tax liability.
A foreign resident who had
income from a dividend that was accrued from Israeli source, from which the full tax was deducted, will generally be exempt from filing
a tax return in Israel, provided that (1) such income was not generated from business conducted in Israel by the foreign resident,
(ii) the foreign resident has no other taxable sources of income in Israel with respect to which a tax return is required to be filed
and (iii) the foreign resident is not liable to surtax (see below) in accordance with Section 121B of the Ordinance.
Capital
Gains Taxes Applicable to Israeli Resident Shareholders.
An Israeli resident corporation that derives capital gains from the sale
of shares in an Israeli resident company will generally be subject to tax on the real capital gains generated on such sale at the corporate
tax rate of 23% (in 2024). An Israeli resident individual will generally be subject to capital gains tax at the rate of 25%. However,
if the individual shareholder claims deduction of interest expense and linkage differences in connection with the purchase and holding
of such shares or is a “substantial shareholder” at the time of the sale or at any time during the preceding 12‑month
period, such gain will be taxed at the rate of 30%. A “substantial shareholder” is generally a person who alone, or together
with such person’s related party or another person who collaborates with such person on a permanent basis, holds, directly or indirectly,
at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right
to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds any
of the aforesaid rights how to exercise these rights, regardless of the source of such right. Individual holders dealing in securities
in Israel for whom the income from the sale of securities is considered “business income” as defined in Section 2(1) of
the Ordinance are taxed at the marginal tax rates applicable to business income (up to 47% in 2023) plus an additional surtax of 3% as
described below. Certain Israeli institutions that are exempt from tax under Section 9(2) or Section 129C(a)(1) of
the Ordinance (such as exempt trust funds and pension funds) may be exempt from capital gains tax from the sale of the shares.
59
Taxation
of Israeli Shareholders on Receipt of Dividends.
An Israeli resident individual is generally subject to Israeli income tax on the
receipt of dividends that may be paid on our ordinary shares at the rate of 25%. With respect to a person who is a “substantial
shareholder” at the time of receiving the dividend or at any time during the preceding 12‑month period, the applicable tax
rate is 30%. Individuals may also be required to pay surtax with respect to dividends received, as further explained below. Such dividends
are generally subject to Israeli withholding tax at a rate of 25% if the shares are registered with a nominee company (whether the recipient
is a substantial shareholder or not). If the recipient of the dividend is an Israeli resident corporation, such dividend income will be
exempt from tax provided the income from which such dividend is distributed was derived or accrued within Israel and was received directly
or indirectly from another corporation that is subject to Israeli corporate tax. An exempt trust fund, pension fund or other entity that
is exempt from tax under Section 9(2) or Section 129(C)(a)(1) of the Ordinance is exempt from tax on dividends.
Surtax.
Subject to the provisions of an applicable tax treaty, individuals who are subject to tax in Israel (whether or not Israeli residents)
are subject to a surtax at a rate of 3% of annual taxable income (including, but not limited to, dividends, interest and capital gain)
in excess of NIS 721,560 (for each of years 2025 through 2027 (the “Threshold Amount”). Commencing as of January 1, 2025,
an additional tax at a rate of 2% applies to capital income (including dividends, interest and capital gains) exceeding the Threshold
Amount
Estate and Gift Tax
Israeli law presently does
not impose estate or gift taxes.
Material United States Federal Income Tax Considerations
The following summary describes
the material U.S. federal income tax consequences to “U.S. Holders” (as defined below) relating to the acquisition, ownership
and disposition of our ADSs or ordinary shares. This discussion applies to U.S. Holders who acquire and hold the ordinary shares or ADSs
as “capital assets” (generally, assets held for investment purposes).
This summary is based on the
Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury Regulations promulgated thereunder, administrative pronouncements
and rulings of the United States Internal Revenue Service (the “IRS”) and judicial decisions, all as of May 5, 2023,
and all of which are subject to change (possibly with retroactive effect) or different interpretations. Except as specifically set forth
below, this summary does not discuss applicable income tax reporting requirements. This summary does not describe any state, local or
foreign tax law considerations, or any aspect of U.S. federal tax law other than income taxation (e.g., estate or gift tax). U.S. Holders
should consult their own tax advisers regarding such matters.
As used herein, the term “U.S.
Holder” means a beneficial owner of ADSs or ordinary shares that is for U.S. federal income tax purposes:
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•
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an individual who is either a U.S. citizen or a resident
of the United States for U.S. federal income tax purposes;
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•
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a corporation or other entity taxable as a corporation
for U.S. federal income tax purposes created or organized in or under the laws of the United States or any political subdivision thereof;
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•
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an estate the income of which is subject to U.S. federal
income tax regardless of the source of its income; and
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•
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a trust, if (a) a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions
of the trust, or (b) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person.
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60
This summary does not consider
all aspects of U.S. federal income taxation that may be relevant to particular U.S. Holders by reason of their particular circumstances.
In addition, this summary does not address the considerations that may be applicable to U.S. Holders that may be subject to special tax
rules including, without limitation, the following:
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•
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U.S. expatriates;
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•
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banks, thrifts and other financial institutions;
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•
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regulated investment companies and real estate investment
trusts;
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•
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pension funds and retirement plans;
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•
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insurance companies;
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•
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broker-dealers or traders in securities, commodities
or currencies;
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•
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tax-exempt entities or organizations;
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•
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grantor trusts;
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•
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partnerships (including entities classified as partnerships
for U.S. federal income tax purposes) or other pass-through entities, and holders that will hold our ADSs or ordinary shares in partnerships
or other pass-through entities;
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•
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holders whose functional currency is not the dollar;
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•
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persons that generally mark their securities to market
for U.S. federal income tax purposes;
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•
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persons liable for alternative minimum tax;
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•
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holders who hold our ADSs or ordinary shares as part
of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or integrated
investment;
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•
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holders selling our ADSs or ordinary shares short;
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•
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holders deemed to have sold our ADSs or ordinary shares
in a “constructive sale;”
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•
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holders required to accelerate the recognition of
any item of gross income with respect to our ADSs or ordinary shares as a result of such income being recognized on an applicable financial
statement;
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•
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corporations that accumulate earnings to avoid U.S.
federal income tax;
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•
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holders that are resident or ordinarily resident in
or have a permanent establishment in a jurisdiction outside the United States or hold our shares in connection with a trade or business
conducted outside the United States; and
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•
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holders, directly, indirectly or through attribution,
of 10% or more (by vote or value) of our outstanding stock.
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If a partnership (or any other
entity treated as a partnership for U.S. federal income tax purposes) holds our ADSs or ordinary shares, the U.S. federal income tax consequences
relating to an investment in our ADSs or ordinary shares will depend in part upon the status of the partner and the activities of the
partnership. Such a partner or partnership should consult its tax advisor regarding the U.S. federal income tax consequences of acquiring,
owning and disposing of our ADSs or ordinary shares in its particular circumstances.
No ruling from the IRS has
been requested, or will be obtained, regarding the U.S. federal income tax consequences of the ownership or disposition of our ADSs or
ordinary shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and
contrary to, the positions taken in this summary. In addition, because the authorities on which this summary is based are subject to different
interpretations, the IRS and U.S. courts could disagree with one or more of the positions taken in this summary.
61
In general, for U.S. federal
income tax purposes, U.S. Holders of our ADSs will be treated as owning the underlying ordinary shares represented by those ADSs. Accordingly,
exchanges of ordinary shares for ADSs, and ADSs for ordinary shares will not be subject to U.S. federal income tax.
This summary
is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our
ADSs or ordinary shares and should not be considered as income tax advice or relied upon for tax planning purposes. Each prospective U.S.
Holder should consult with its own tax advisor as to the particular tax consequences to it of the ownership and disposition of our ADSs,
including the effects of applicable tax treaties, state, local, foreign or other tax laws and possible changes in the tax laws.
Distributions With Respect
to Our ADSs
Subject to the discussion
below under “
Passive Foreign Investment Company Status
,” a U.S. Holder that receives
a distribution with respect to ADSs or ordinary shares generally will be required to include the gross amount, including the amount of
any Israeli taxes withheld on such distribution, in gross income as a dividend when actually or constructively received to the extent
of the U.S. Holder’s pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income
tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder’s pro
rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but
not below zero) the adjusted tax basis of the U.S. Holder’s ADSs or ordinary shares. To the extent the distribution exceeds the
adjusted tax basis of the U.S. Holder’s ADSs or ordinary shares, the remainder will be taxed as capital gain recognized on a sale
or exchange of the ADSs or ordinary shares (as discussed below under “
Sale, Exchange or Other Taxable
Disposition of ADSs or ordinary shares
”). However, because we do not account for our earnings and profits in accordance with
U.S. federal income tax principles, U.S. Holders should expect all distributions to be reported to them as dividends. Dividends on our
ADSs or ordinary shares will not be eligible for the “dividends received” deduction generally allowed to corporate shareholders
with respect to dividends received from U.S. corporations. U.S. Holders are urged to consult their own tax advisors regarding the U.S.
federal income tax consequences of their receipt of any distributions with respect to our ADSs or ordinary shares.
Dividends paid by a “qualified
foreign corporation” to individuals and certain non-corporate U.S. Holders are treated as “qualified dividend income”
and are eligible for taxation at a reduced capital gains rate rather than the marginal tax rates generally applicable to ordinary income
provided that certain requirements are met. A non-United States corporation (other than a corporation that is classified as a PFIC for
the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified
foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary
of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information
provision, or (b) with respect to any dividend it pays on ADSs or ordinary shares that are readily tradable on an established securities
market in the United States. We believe that we qualify as a resident of Israel for purposes of, and are eligible for the benefits of,
the income tax treaty between the United States and Israel, which the IRS has determined is satisfactory for purposes of the qualified
dividend rules. Further, our ADSs will generally be considered to be readily tradable on an established securities market in the United
States if they are listed on Nasdaq Capital Market. Therefore, subject to the discussion below under “
Passive
Foreign Investment Company Status
,” we expect that dividends paid on ADSs or ordinary shares will generally be “qualified
dividend income” in the hands of individuals and certain other non-corporate U.S. Holders,
provided
that certain conditions are met, including conditions relating to holding period and the absence of certain risk reduction transactions.
Each U.S. Holder is advised
to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances.
The amount of a distribution
paid to a U.S. Holder in a foreign currency will be the dollar value of the foreign currency calculated by reference to the spot exchange
rate on the day the U.S. Holder receives the distribution, regardless of whether the foreign currency is converted into U.S. dollars at
that time. Any foreign currency gain or loss a U.S. Holder realizes on a subsequent conversion of foreign currency into U.S. dollars will
be U.S. source ordinary income or loss. If dividends received in foreign currency are converted into U.S. dollars on the day they are
received, a U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend.
Distributions on ADSs or ordinary
shares that are treated as dividends generally will constitute income from sources outside the United States for foreign tax credit purposes
and generally will constitute passive category income. Subject to certain conditions and limitations, Israeli tax withheld on dividends
may be credited against the U.S. Holder’s U.S. federal income tax liability, or deducted from taxable income, but only if the U.S.
Holder elects to deduct all foreign income taxes in such year. However, Israeli income taxes that are withheld in excess of
the rate applicable under the Israel-U.S. income tax treaty or that are refundable under Israeli law will not be eligible for credit against
a U.S. Holder’s federal income tax liability (and will not be eligible for the deduction against U.S. federal taxable income). In
addition, special rules may apply to the computation of foreign tax credits relating to qualified dividend income.
62
The rules governing the
treatment of foreign taxes imposed on a U.S. Holder and foreign tax credits are complex, and U.S. Holders should consult their tax advisors
about the impact of these rules in their particular situations.
Sale, Exchange
or Other Taxable Disposition of ADSs or ordinary shares
Subject to the discussion
below under “
Passive Foreign Investment Company Status
,” a U.S. Holder generally will
recognize capital gain or loss for U.S. federal income tax purposes upon the sale, exchange or other disposition of ADSs or ordinary shares
in an amount equal to the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any
property received) on the sale, exchange or other disposition (without reduction for any Israeli taxes withheld) and such U.S. Holder’s
adjusted tax basis in the ADSs or ordinary shares. A U.S. Holder’s initial tax basis in shares generally will equal the cost of
such shares. Such capital gain or loss generally will be long-term capital gain taxable at a reduced rate for non-corporate U.S. Holders
or long-term capital loss if, on the date of sale, exchange or other disposition, the ADSs or ordinary shares were held by the U.S. Holder
for more than one year. Any capital gain of a non-corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income
rates. The deductibility of capital losses is subject to limitations. Any gain or loss recognized from the sale or other disposition of
ADSs or ordinary shares will generally be gain or loss from sources within the United States for U.S. foreign tax credit purposes. Because
gain on the sale or other disposition of our ADSs or ordinary shares generally will be treated as United States source income, and U.S.
Holders may use foreign tax credits against only the portion of United States federal income tax liability that is attributed to foreign
source income in the same category, a U.S. Holder’s ability to utilize a foreign tax credit with respect to the Israeli tax imposed
on any such sale or other disposition, if any, may be significantly limited. In addition, if a U.S. Holder is eligible for the benefit
of the income tax convention between the United States and the State of Israel (the “U.S. – Israel Income Tax Treaty”)
and the U.S. Holder pays Israeli tax in excess of the amount applicable to such U.S. Holder under such convention or if the Israeli tax
paid is refundable, the U.S. Holder will not be able to claim any foreign tax credit or deduction with respect to such Israeli tax. U.S.
Holders should consult their tax advisors as to whether the Israeli tax on gains may be creditable or deductible in light of their particular
circumstances, including the new “attribution requirement” under final Treasury Regulations issued on January 4, 2022,
and their ability to apply the provisions of the U.S. – Israel Income Tax Treaty to treat any gain recognized from the sale
or other disposition of ADSs or ordinary shares as foreign source income for foreign tax credit purposes.
If the consideration (or a
distribution) received by a U.S. Holder is not paid in U.S. dollars, the amount realized generally will be the U.S. dollar value of the
payment received. If the ADSs or ordinary shares are considered to be traded on an established securities market when the U.S. Holder
sells or otherwise disposes of the ADSs or ordinary shares, the amount realized will be, in the case of cash basis and electing accrual
basis taxpayers, determined by reference to the spot rate of exchange on the settlement date. An accrual basis U.S. Holder that is not
eligible to or does not elect to determine the amount realized using the spot rate on the settlement date will recognize U.S. source foreign
currency gain or loss to the extent of any difference between the U.S. dollar amount realized on the date of sale or disposition and the
U.S. dollar value of the currency received at the spot rate on the settlement date. A U.S. Holder will have a tax basis in the currency
received equal to the U.S. dollar value of the currency received at the spot rate on the settlement date. Any currency gain or loss realized
on the settlement date or the subsequent sale, conversion, or other disposition of the non-U.S. currency received for a different U.S.
dollar amount generally will be U.S.-source ordinary income or loss, and will not be eligible for the reduced tax rate applicable to long-term
capital gains. If an accrual basis U.S. Holder makes the election described in the second sentence of this paragraph, it must be applied
consistently from year to year and cannot be revoked without the consent of the IRS. A U.S. Holder should consult its own tax
advisors regarding the treatment of any foreign currency gain or loss realized with respect to any currency received in a sale or other
disposition of the Offered Shares.
Medicare Tax
Certain U.S. Holders that
are individuals, estates or trusts and whose income exceeds certain thresholds generally are subject to a 3.8% tax on all or a portion
of their net investment income, which may include their gross dividend income and net gains from the disposition of ADSs or ordinary shares.
If you are a United States person that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the
applicability of this Medicare tax to your income and gains in respect of your investment in our ADSs or ordinary shares.
63
Passive Foreign Investment
Company Status
In general, a corporation
organized outside the United States will be treated as a passive foreign investment company (a “PFIC”) for any taxable year
in which either (1) at least 75% of its gross income is “passive income” (the “income test”) or (2) on
average at least 50% of the value of its assets, determined on a quarterly basis, are assets that produce passive income or are held for
the production of passive income (the “asset test”). Passive income for this purpose generally includes, among other things,
dividends, interest, royalties, rents, and gains from the sale or exchange of property that gives rise to passive income. Generally, in
determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns,
directly or indirectly, at least a 25% interest (by value) is taken into account.
We do not believe we were
a PFIC for our 2024 taxable year. While we also do not believe we will be a PFIC for the current taxable year, because PFIC
status is determined on an annual basis and generally cannot be determined until the end of the taxable year, there can be no assurance
that we will not be a PFIC for the current taxable year or in future taxable years. Because we may hold a substantial amount
of cash and cash equivalents, and because the calculation of the value of our assets may be based in part on the value of ordinary shares
and ADSs, which may fluctuate considerably, we may be a PFIC in the current or future taxable years under the PFIC asset test. Even
if we determine that we are not a PFIC for a taxable year, there can be no assurance that the IRS will agree with our conclusion
and that the IRS would not successfully challenge our position. Our status as a PFIC is a fact-intensive determination made on an annual
basis, and our status in future years will depend on our income, assets, market capitalization and activities in those years.
There can be no assurance that we will not be considered a PFIC for any taxable year.
If we are a PFIC in any taxable year
during which a U.S. Holder owns ADSs or ordinary shares, the U.S. Holder could be liable for additional taxes and interest charges under
the PFIC rules upon (1) a distribution paid during a taxable year that is greater than 125% of the average annual distributions
paid in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding period for the ADSs or ordinary shares,
and (2) any gain recognized on a sale, exchange or other disposition, including a pledge, of the ADSs or ordinary shares, whether
or not we continue to be a PFIC. Under the PFIC rules, the tax on such excess distribution or gain would be determined by allocating the
excess distribution or gain ratably over the U.S. Holder’s holding period for ADSs or ordinary shares. The amount allocated to the
current taxable year (i.e., the year in which the distribution occurs or the gain is recognized) and any year prior to
the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current taxable year. The amount
allocated to other taxable years will be taxed at the highest marginal rates in effect for individuals or corporations, as applicable,
to ordinary income for each such taxable year, and an interest charge, generally applicable to underpayments of tax, will be added
to the tax. In addition, our dividends on ADSs or ordinary shares will not be treated as qualified dividend income subject to preferential
tax rates for non-corporate U.S. Holders, as described above, if we are classified as a PFIC in the last year prior to the year
in which such dividend is paid or the year in which such dividend is paid.
If we are a PFIC for any year
during which a U.S. Holder holds ADSs or ordinary shares, we must generally continue to be treated as a PFIC by that holder for all succeeding years
during which the U.S. Holder holds the ADSs or ordinary shares, unless we cease to meet the requirements for PFIC status and the U.S.
Holder makes a “deemed sale” election with respect to the ADSs or ordinary shares. If the election is made, the U.S. Holder
will be deemed to sell the ADSs or ordinary shares it holds at their fair market value on the last day of the last taxable year in
which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC rules described above.
After the deemed sale election, the U.S. Holder’s ADSs or ordinary shares would not be treated as shares of a PFIC unless we subsequently
become a PFIC.
If we are a PFIC for any taxable year
during which a U.S. Holder holds ADSs or ordinary shares and any of the non-U.S. corporate entities in which we own equity is also a PFIC
(i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier
PFIC and would be taxed under the PFIC excess distribution regime on distributions by the lower-tier PFIC and on gain from the disposition
of shares of the lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions or dispositions. Each
U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to our non-U.S. subsidiaries.
If we are a PFIC, a U.S. Holder
will not be subject to tax under the PFIC rules on distributions or gain recognized on ADSs or ordinary shares if such U.S. Holder
makes a valid “mark-to-market” election for our ADSs or ordinary shares. A mark-to-market election is available to a U.S.
Holder only for “marketable stock.” Our ADSs or ordinary shares will be marketable stock if our ADSs or ordinary shares are
“regularly traded” on a “qualified exchange.” The Nasdaq Capital Market is a qualified exchange for this purpose.
Our ADSs or ordinary shares will be treated as regularly traded if they are traded, other than in de minimis quantities, on at least 15 days
during each calendar quarter. There can be no assurance that trading volumes will be sufficient to permit a mark-to-market election.
64
If a mark-to-market election
is in effect, a U.S. Holder generally would take into account, as ordinary income each year, the excess of the fair market value
of ADSs or ordinary shares held at the end of such taxable year over the adjusted tax basis of such ADSs or ordinary shares. The
U.S. Holder would also take into account, as an ordinary loss each year, the excess of the adjusted tax basis of such ADSs or ordinary
shares over their fair market value at the end of the taxable year, but only to the extent of the excess of amounts previously included
in income over ordinary losses deducted as a result of the mark-to-market election. The U.S. Holder’s tax basis in ADSs or ordinary
shares would be adjusted to reflect any income or loss recognized as a result of the mark-to-market election. Any gain from a sale, exchange
or other disposition of ADSs or ordinary shares in any taxable year in which we are a PFIC would be treated as ordinary income and
any loss from such sale, exchange or other disposition would be treated first as ordinary loss (to the extent of any net mark-to-market
gains previously included in income) and thereafter as capital loss.
A mark-to-market election
will not apply to ADSs or ordinary shares for any taxable year during which we are not a PFIC, but will remain in effect with respect
to any subsequent taxable year in which we become a PFIC. Such election, however, will not apply to any non-U.S. subsidiaries that
we currently own, may organize or acquire in the future. Accordingly, a U.S. Holder may continue to be subject to tax under the PFIC rules with
respect to any lower-tier PFICs that we currently own, may organize or acquire in the future notwithstanding the U.S. Holder’s mark-to-market
election for the ADSs or ordinary shares.
In some cases, a shareholder
of a PFIC can avoid the interest charge and the other adverse PFIC consequences described above by making a “qualified electing
fund” (“QEF”) election to be taxed currently on its share of the PFIC’s undistributed income. In order for a U.S.
Holder to be able to make a QEF election, the company would be required to provide the U.S. Holder with certain information. However,
the company has no current plans to provide to U.S. Holders the required information. Therefore, prospective investors should assume that
a QEF election will not be available.
U.S. Holders should consult
their tax advisors as to the availability and desirability of a mark-to-market election, as well as the impact of such election on interests
in any lower-tier PFICs.
Each U.S. person that is an
investor of a PFIC is generally required to file an annual information return on IRS Form 8621 containing such information as the
U.S. Treasury Department may require. The failure to file IRS Form 8621 could result in the imposition of penalties and the extension
of the statute of limitations with respect to U.S. federal income tax.
The U.S. federal income tax
rules relating to PFICs are very complex. Prospective U.S. Holders are strongly urged to consult their own tax advisors with respect
to the impact of PFIC status on the purchase, ownership and disposition of ADSs or ordinary shares, the consequences to them of an investment
in a PFIC, any elections available with respect to the ADSs or ordinary shares and the IRS information reporting obligations with respect
to the purchase, ownership and disposition of ADSs or ordinary shares of a PFIC.
Information Reporting and Backup
Withholding
U.S. backup withholding tax
and information reporting requirements may apply to certain payments to certain U.S. Holders of ADSs or ordinary shares. Information reporting
generally will apply to payments of dividends on, and to proceeds from the sale or redemption of, our ADSs or ordinary shares made within
the United States, or by a U.S. payor or U.S. middleman, to a U.S. Holder of our ADSs or ordinary shares, other than an exempt recipient.
A payor will be required to withhold backup withholding tax from any payments of dividends on, or the proceeds from the sale or redemption
of, ADSs or ordinary shares within the United States, or by a U.S. payor or U.S. middleman, to a U.S. Holder, other than an exempt recipient,
if such holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption
from, such backup withholding tax requirements. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding
rules will be allowed as a credit against the beneficial owner’s U.S. federal income tax liability, if any, and any excess
amounts withheld under the backup withholding rules may be refunded,
provided
that the required
information is timely furnished to the IRS.
U.S. Holders should consult
their own tax advisors regarding the backup withholding tax and information reporting rules.
Foreign Asset Reporting
U.S. Holders may be required
to file certain U.S. information reporting returns with the IRS with respect to an investment in ADSs or ordinary shares, including, among
others, IRS Form 8938 (Statement of Specified Foreign Financial Assets). As described above under “
Passive
Foreign Investment Company Status
,” each U.S. Holder who is a shareholder of a PFIC must file an Annual Report containing
certain information. In addition, U.S. Holders paying more than $100,000 for ADSs or ordinary shares may be required to file IRS Form 926
(Return by a U.S. Transferor of Property to a Foreign Corporation) reporting this payment. Substantial penalties may be imposed upon a
U.S. Holder that fails to comply with the required information reporting.
65
EACH PROSPECTIVE
INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO THE INVESTOR OF AN INVESTMENT IN OUR ADSS OR ORDINARY SHARES
IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
|
F.
|
DIVIDENDS AND PAYING AGENTS
|
|
|
Not applicable.
|
|
G.
|
STATEMENT BY EXPERTS
|
|
|
Not applicable.
|
|
H.
|
DOCUMENTS ON DISPLAY
|
Our website is http://www.shl-telemedicine.com.
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required
to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20‑F within 120 days
of the end of each fiscal year. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements,
and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer,
we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements,
and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained
in Section 16 of the Exchange Act. We will make available, free of charge, on our website (under the heading “Investor Relations”)
our Annual Reports on Form 20‑F, Reports on Form 6‑K and amendments to those reports as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the SEC. No information contained on our website is intended to be
included as part of, or incorporated by reference into, this Annual Report.
|
I.
|
SUBSIDIARY INFORMATION
|
|
|
Not applicable.
|
|
J.
|
ANNUAL REPORT TO SECURITY HOLDERS
|
We will submit our Annual
Report to our security holders when required in response to the requirements of Form 6‑K, in electronic format in accordance
with the EDGAR Filer Manual.
|
ITEM
11.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
|
The main risks arising from
our financial instruments are credit risk, foreign currency risk, interest rate risk, market risk and liquidity risk. The Board of Directors
reviews and agrees on policies for managing each of these risks, which are summarized below.
|
a.
|
Concentration of credit risks:
|
Financial instruments that
potentially subject us to concentrations of credit risk consist principally of cash, cash equivalents, and trade receivables. Cash and
cash equivalents are deposited with major banks. We believe that the financial institutions that hold the company’s investments
are financially sound, and, accordingly, minimal credit risk exists with respect to these investments.
Our trade receivables are
mainly derived from sales to customers in Germany and Israel. We have adopted credit policies and standards intended to accommodate industry
growth and inherent risk. We believe that credit risks are moderated by the diversity of our end customers. We perform ongoing credit
evaluations of our customers’ financial condition and require collateral as deemed necessary. An estimate for doubtful accounts
is made when collection of the full amount is no longer probable.
66
|
b.
|
Foreign currency risk:
|
We are subject to foreign
exchange risk as we hold cash and cash equivalents and short-term investments in foreign currency as we purchase our devices in foreign
currency. We regularly monitor our foreign exchange risk and attempt to limit such risks by making adequate decisions regarding cash and
credit positions.
Foreign currency sensitivity analysis:
The following table demonstrates
the sensitivity test to a reasonably possible change in U.S. Dollars and EUR exchange rates, with all other variables held constant. The
impact on our profit before tax is due to changes in the fair value of monetary assets discussed above. Our exposure to foreign currency
changes related to all other currencies is not material to the company’s financial results.
|
|
Change in
|
|||||||
|
|
U.S.
|
|||||||
|
|
Dollars
|
Effect on
|
||||||
|
|
rate
|
profit tax
|
||||||
|
2024
|
+5
|
%
|
(159
|
)
|
||||
|
|
-5
|
%
|
159
|
|||||
|
|
||||||||
|
2023
|
+5
|
%
|
(721
|
)
|
||||
|
|
-5
|
%
|
721
|
|||||
|
|
||||||||
|
2022
|
+5
|
%
|
(320
|
)
|
||||
|
|
-5
|
%
|
320
|
|||||
|
|
Effect on
|
|||||||
|
|
Change in
|
profit
|
||||||
|
|
EUR rate
|
before tax
|
||||||
|
2024
|
+5
|
%
|
(32
|
)
|
||||
|
-5
|
%
|
32
|
||||||
|
2023
|
+5
|
%
|
(66
|
)
|
||||
|
|
-5
|
%
|
66
|
|||||
|
|
||||||||
|
2022
|
+5
|
%
|
(38
|
)
|
||||
|
|
-5
|
%
|
38
|
|||||
67
As of December 31, 2024, we
had bank deposits of $2 million in U.S. Dollars. As of December 31, 2023, we had bank deposits of $14 million and $1.5 million in U.S.
Dollars and EUR, respectively. As of December 31, 2022, we had bank deposits of $6.2 million and $0.8 million in U.S. Dollars and
EUR, respectively. The amounts presented in the above table represent the effect on profit before tax of a potential increase/decrease
of 5% in the exchange rates between NIS and U.S. Dollars and EUR.
We closely monitor our foreign
currency risk. Pursuant to the tables above, we do not believe that our foreign currency risk could have a material impact on the results
of our business at this time. However, to the extent we believe that our foreign currency risk would materially impact our business, the
company would consider entering into foreign currency hedging transactions, such as currency swaps or forwards, in order to mitigate that
risk.
|
c.
|
Market risk:
|
We have investments in marketable
financial instruments that are classified as financial assets at fair value through profit or loss in respect of which we are exposed
to risk of fluctuations in the security price that is determined by reference to the quoted market price (level 1 of the fair value hierarchy).
As of December 31, 2024, 2023 and 2022, the balance of these investments is $9,843, $8,978 and $8,517, respectively.
The following table demonstrates
the sensitivity to a reasonably possible change in the market price with all other variables held constant, of our profit before tax (due
to changes in the carrying amount of marketable securities).
|
|
Increase/
|
Effect on
|
||||||
|
|
decrease in
|
profit
|
||||||
|
|
price
|
before tax
|
||||||
|
2024
|
+5
|
%
|
492
|
|||||
|
-5
|
%
|
(492
|
)
|
|||||
|
2023
|
+5
|
%
|
449
|
|||||
|
|
-5
|
%
|
(449
|
)
|
||||
|
|
||||||||
|
2022
|
+5
|
%
|
426
|
|||||
|
d.
|
Fair value of financial instruments not measured at
fair value:
|
The carrying amounts of cash
and cash equivalents, trade and other receivables, short-term credit from banks, trade payables and other accounts payable approximate
their fair value due to the short-term maturity of such instruments. The carrying amount of long-term bank loan approximates the fair
value as the interest rate is variable.
We believe that the carrying
amount of long-term deposits approximate their fair value.
|
e.
|
Interest rate risk:
|
Our exposure to the risk of
changes in market interest rates relates primarily to our floating rate debt obligation. Specifically, during August 2021, we signed
an agreement with a bank in Israel to obtain a long-term loan in the amount of approximately $18.3 million for a period of seven years
and nine months. The loan is denominated in NIS and bears an annual interest rate of prime + 1.05% (2.65% as of the signing date).
The loan is being repaid in 28 quarterly installments following an initial moratorium period of nine months.
68
As it relates to the loan,
we do not believe that the effect of a reasonably possible increase of 5% on the interest rate would have a material impact on our profit
before tax. While we do not currently have any type of hedging instrument in place related to the loan, the company would consider entering
into an interest rate swap in order to mitigate the interest rate risk related to the floating rate debt obligation if it believed an
increase in interest rates would materially impact its business. Furthermore, in accordance with the terms of the loan, the company has
the right to prepay the loan (without penalty) if needed.
In addition to our floating
rate debt obligation, we also had cash and cash equivalents and short-term investments of approximately $17.5 and $26.0 million as of
December 31, 2024, and December 31, 2023, respectively. Our cash and cash equivalents and short-term investments are held primarily
for short term operating capital purposes. Further, our cash and cash equivalents are held primarily in bank deposits and marketable securities.
Due to the short-term nature of these instruments, we do not believe that the effect of a reasonably possible increase of 5% of the interest
rate would have a material impact on our profit before tax.
|
f.
|
Liquidity risk:
|
We monitor our risk to a shortage
of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial investments and financial assets
and projected cash flows from operations.
|
ITEM
12.
|
DESCRIPTION OF SECURITIES OTHER
THAN EQUITY SECURITIES
|
| A. |
DEBT SECURITIES
|
|
|
Not applicable.
|
|
B.
|
WARRANTS AND
RIGHTS
|
|
|
Not applicable.
|
| C. |
OTHER SECURITIES
|
|
|
Not applicable.
|
| D. |
AMERICAN DEPOSITARY
SHARES
|
Below
we provide the information required by Item 12.D.3 and Item 12.D.4 Form 20‑F. The remainder of the information required
by this Item is incorporated by reference as Exhibit 2.3 to this Annual Report on Form 20‑F and is incorporated hereunder
by reference. The form of the deposit agreement and the Form of the ADR are incorporated by reference as Exhibits 2.1 and 2.2 to
this Annual Report on Form 20‑F and are incorporated herein by reference
69
Fees and Expenses
|
Persons
depositing or withdrawing shares or ADS holders must pay
:
|
For
:
|
|
|
|
|
|
|
$5.00 (or less) per 100 ADSs
(or portion of 100 ADSs)
|
Issuance of ADSs, including issuances resulting
from a distribution of shares or rights or other property
Cancellation of ADSs for the purpose of withdrawal,
including if the deposit agreement terminates
|
|
|
|
|
|
|
$.05 (or less) per ADS
|
Any cash distribution to ADS holders
|
|
|
|
|
|
|
A fee equivalent to the fee that
would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs
|
Distribution of securities distributed to holders
of deposited securities (including rights) that are distributed by the depositary to ADS holders
|
|
|
|
|
|
|
$.05 (or less) per ADS per calendar year
|
Depositary services
|
|
|
|
|
|
|
Registration or transfer fees
|
Transfer and registration of shares on our share
register to or from the name of the depositary or its agent when you deposit or withdraw shares
|
|
|
|
|
|
|
Expenses of the depositary
|
Cable (including SWIFT) and facsimile transmissions
(when expressly provided in the deposit agreement)
Converting foreign currency to U.S. dollars
|
|
|
|
|
|
|
Taxes and other governmental
charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or
withholding taxes
|
As necessary
|
|
|
|
|
|
|
Any charges incurred by the depositary
or its agents for servicing the deposited securities
|
As necessary
|
The depositary collects its
fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or
from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the
amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary
services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants
acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of
securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to
provide fee-attracting services until its fees for those services are paid.
From time to time, the depositary
may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program,
waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. In performing
its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that
are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.
The depositary may convert
currency itself or through any of its affiliates, or the custodian or we may convert currency and pay U.S. dollars to the depositary.
Where the depositary converts currency itself or through any of its affiliates, the depositary acts as principal for its own account and
not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction
spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate
assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying
or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained by it
or its affiliate in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the
time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s
obligation to act without negligence or bad faith. The methodology used to determine exchange rates used in currency conversions made
by the depositary is available upon request. Where the custodian converts currency, the custodian has no obligation to obtain the most
favorable rate that could be obtained at the time or to ensure that the method by which that rate will be determined will be the most
favorable to ADS holders, and the depositary makes no representation that the rate is the most favorable rate and will not be liable for
any direct or indirect losses associated with the rate. In certain instances, the depositary may receive dividends or other distributions
from us in U.S. dollars that represent the proceeds of a conversion of foreign currency or translation from foreign currency at a rate
that was obtained or determined by us and, in such cases, the depositary will not engage in, or be responsible for, any foreign currency
transactions and neither it nor we make any representation that the rate obtained or determined by us is the most favorable rate and neither
it nor we will be liable for any direct or indirect losses associated with the rate.
70
PART II
|
ITEM
13.
|
DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES
|
|
|
None.
|
|
ITEM
14.
|
MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY HOLDERS AND USE OF PROCEEDS
|
Material modifications to the rights of the security
holders.
|
|
There have been no material modifications to the rights of securities holders.
|
Use of Proceeds.
|
|
Not applicable.
|
|
ITEM
15.
|
CONTROLS AND PROCEDURES
|
(a) Disclosure Controls and Procedures.
Disclosure controls and procedures
refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under
the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the
SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including
our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions
regarding our required disclosure.
As required by Rules 13a‑15
and 15d‑15 promulgated under the Exchange Act, our management, including our Chief Executive Officer and our Chief Financial Officer,
evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated
under the Exchange Act, as of the end of the period covered by this Annual Report. Based on that evaluation, our management, including
our Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2024, our disclosure controls and procedures
were not effective due to the material weaknesses in our internal control over financial reporting described in Item 15(b) below.
(b) Management’s annual report on internal
control over financial reporting.
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined
in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. Our management conducted an assessment of the effectiveness of our
internal control over financial reporting as of December 31, 2024, based on the criteria set forth in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management concluded
that our internal control over financial reporting was not effective as of December 31, 2024, due to material weaknesses in our Information
Technology General Controls ("ITGC") described below. As defined in Rule 12b-2 promulgated under the Exchange Act, a “material weakness”
is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility
that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely
basis.
The material weaknesses we
identified in our ITGC include a lack of documentation of the performance of controls related to management of access, segregation of
duties and management of program changes. We did not fully design, implement and monitor general information technology (“IT”)
controls in the areas of user access and program change-management for systems supporting all of our internal control processes. Specifically,
management did not design and maintain (1) sufficient user access controls to ensure appropriate segregation of duties and adequately
restrict user and privileged access to financial applications, programs and data to appropriate Company personnel and (2) program change
management controls to ensure that IT program and data changes affecting financial information technology applications and underlying
accounting records were authorized, tested and implemented appropriately. As a result, business process controls (automated and IT-dependent
manual controls) that were dependent on our ITGCs, or that used data produced from systems impacted by our ITGCs, were deemed not effective
as of December 31, 2024.
In light of these material
weaknesses, we are required to perform additional procedures to ensure that our financial statements are prepared in accordance with IFRS,
including, among other things, reviewing operating systems that are interfaces to the financial systems, monitoring new accounts, and
reviewing key performance indicators, all on a monthly basis, and to control manual general entries. Accordingly, management believes
that the financial statements included in this Annual Report on Form 20-F present fairly in all material respects our financial position,
results of operations and cash flows for the periods presented.
We currently are implementing
or have implemented several items, as described below, to remediate the material weaknesses described above. Management is committed to
ensuring that our internal control over financial reporting is designed and operating effectively. For example, we are replacing important
elements of our ITGCs as they relate to financial reporting and are incorporating them into the design of our processes and controls within
a new enterprise resource planning system, which is expected to be effective prior to the end of 2025.
Our remediation plan includes,
but is not limited to, the following:
|
•
|
implementing new IT systems related to our financial reporting;
|
|
•
|
reviewing our financial statements on a monthly basis to evaluate results, observe adherence to policies and agree on remedial actions
(if necessary);
|
|
•
|
implementing improved IT-change management policies and procedures, control activities, and tools impacting financial reporting to
ensure changes affecting financial IT applications are identified, authorized, tested and implemented appropriately;
|
|
•
|
implementing improved processes for requesting, authorizing and reviewing user access to key systems that impact our financial reporting,
including identifying access to roles where manual business process controls may be required;
|
|
•
|
implementing appropriate segregation of duties in relevant systems that impact internal control over financial reporting;
|
|
•
|
increasing resources dedicated to monitoring ITGCs related to financial reporting to ensure compliance with policies and procedures;
and
|
|
•
|
implementing additional training to ensure a clear understanding of risk assessment and monitoring activities related to automated
processes and IT systems and ITGCs related to financial reporting.
|
(c) Attestation report of the registered public
accounting firm.
This Annual Report does not
include an attestation report of our Registered Public Accounting firm because we are an emerging growth company under the JOBS Act and
accordingly are exempt from the requirement to provide such report.
71
(d) Changes in internal control over financial
reporting.
During the period covered
by this Annual Report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting, except for the material weaknesses and remediation activities
described in Item 15(b) above.
|
ITEM
16.
|
[RESERVED]
|
|
ITEM
16.A.
|
AUDIT COMMITTEE FINANCIAL EXPERT
|
Our board has determined that
Mr. Yehoshua (Shuky) Abramovich is an “audit committee financial expert” serving on our audit committee, as such term
is defined in Item 16A(b) of Form 20‑F by the Securities and Exchange Commission’s rules.
|
ITEM
16.B.
|
CODE OF ETHICS
|
On March 6, 2023, we
adopted a Code of Ethics for all directors, officers and employees that complies with the Nasdaq rules and the definition of a “code
of ethics” set forth in Section 406(c) of the Sarbanes-Oxley Act of 2002, as amended. Our Code of Ethics is incorporated
by reference as Exhibit 11.1 to this Annual Report. A copy of our Code of Ethics is posted on the “Corporate Governance”
page of our website at https://www.shl-telemedicine.com/corporate-governance/. We expect that any amendment to our Code of Ethics,
or any waivers of its requirements, will be disclosed on our website. We will also provide to any person a copy of our Code of Ethics
without charge, upon request. Such request can be submitted to SHL Telemedicine, 90 Yigal Alon Street, Tel Aviv 67891, Israel, Attention:
Amir Hai, Chief Financial Officer.
|
ITEM
16.C.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
Or Kost Forer Gabbay Kasierer, a Member of EY Global
has served as our independent registered public accountant for each of last two fiscal years for which audited statements appear
in this Annual Report.
The following table shows
the aggregate fees for professional services and other services rendered by Ernst and Young and the various member firms of Ernst and
Young to us, including some of our subsidiaries, in fiscal years 2024 and 2023
|
|
2024
|
2023
|
||||||
|
Particulars
|
(US$)
|
(US$)
|
||||||
|
Audit fees (audit and review of financial statements
and offerings)
|
439
|
460
|
||||||
|
Audit-related fees
|
—
|
—
|
||||||
|
Tax fees
|
—313
|
—
|
||||||
|
All other fees
|
—
|
—
|
||||||
|
Total
|
752
|
460
|
||||||
The policy of our audit committee
is to pre-approve all audit and non-audit services provided by Ernst and Young, including audit services, audit-related services and tax
services. We have a written policy on the engagement of an external auditor.
72
|
ITEM
16.D.
|
EXEMPTIONS FROM THE LISTING STANDARDS
FOR AUDIT COMMITTEES
|
|
|
Not applicable.
|
|
ITEM
16.E.
|
PURCHASES OF EQUITY SECURITIES
BY THE ISSUER AND AFFILIATED PURCHASERS
|
|
|
Not applicable.
|
|
ITEM
16.F.
|
CHANGE IN REGISTRANT’S CERTIFIED
ACCOUNTANT
|
|
|
Not applicable.
|
|
ITEM
16.G.
|
CORPORATE GOVERNANCE
|
|
|
Not applicable.
|
|
ITEM
16.H.
|
MINE SAFETY DISCLOSURE
|
|
|
Not applicable.
|
|
ITEM
16.I.
|
DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS
|
|
|
None.
|
73
|
ITEM 16J.
|
INSIDER
TRADING POLICIES
|
Not
applicable.
|
ITEM 16K.
|
CYBERSECURITY
|
As
a global leader in telemedicine technologies and services, cyber security is a top priority in all our business activities. Our solutions
are designed to protect patient data from unauthorized access, use, or disclosure. We have appointed an external dedicated Chief Information
Security Officer reporting to our Chief Information Officer.
We
also
developed
and implemented policies, procedures and infrastructures that support our data security for sensitive information, disaster recovery and
business continuity for different systems and system durability
. Our information security policy is based on the standards
and regulations in the healthcare industry (ISO 27001, ISO 27799, and HIPAA compliance).
We
follow and implement the Israel Cyber Defense Doctrine 2.0 (ICDM 2.0), a methodology for managing cyber risks in organizations. In accordance
with these guidelines, we have adopted several ISO standards, including the above-mentioned ISO 27001 and ISO 27799, to provide a foundation
for our cybersecurity governance and risk management strategy.
We
also have a comprehensive privacy policy that addresses the protection of personal data that includes general guidelines for data protection,
a policy for customers regarding personal data collection, retention and sharing information with
third
parties
, and an approval form for usage of medical devices using or transmitting customer data.
74
In
2023, we conducted a comprehensive risk assessment to identify the cybersecurity risks that are most relevant to our organization. All
risks are managed in the cybersecurity workplan for 2024. In general, we use a variety of tools and techniques to identify, assess, and
analyze our cybersecurity risks on a constant basis. These tools and techniques include technical assessments, formal risk assessments,
and threat modeling. We have also a comprehensive cybersecurity strategy and action plan in place that fully addresses the risks identified
in our risk assessment. This plan is regularly reviewed and updated to ensure tit remains effective.
Although
not mandatory under the provisions of the Israeli Companies Law, our Board established the Cyber Committee as of February 10, 2020. The
task of the Cyber Committee is to recommend to the Board actions and measures to be taken in connection with the Company’s information
technology, including, among other things, developing, maintaining and promoting the security of the Company’s systems, networks
and data, as well as supervising and monitoring the implementations of all such actions and measures. The Cyber Committee meets
from time to time when necessary.
PART III
|
ITEM
17.
|
FINANCIAL
STATEMENTS
|
We
have furnished the financial statements and related information specified in Item 18.
|
ITEM
18.
|
FINANCIAL
STATEMENTS
|
The
consolidated financial statements and related notes required by this Item 18 are included in this Annual Report beginning on page F‑1.
75
|
ITEM
19.
|
EXHIBITS
|
The
following exhibits are filed as part of this Annual Report:
|
Exhibit
|
|
||||
|
No.
|
Document
|
||||
|
|
|
||||
|
|
|||||
|
|
|||||
|
|
|||||
|
|
|||||
| 8.1# | |||||
|
|
|||||
|
|
|||||
|
101.INS#
|
Inline
XBRL Instance Document-this instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the
Inline XBRL document
|
||||
|
|
|||||
|
101.SCH#
|
Inline
XBRL Taxonomy Extension Schema Document
|
||||
|
|
|||||
|
101.CAL#
|
Inline
XBRL Taxonomy Extension Calculation Linkbase Document
|
||||
|
|
|||||
|
101.DEF#
|
Inline
XBRL Taxonomy Extension Definition Linkbase Document
|
||||
|
|
|||||
|
101.LAB#
|
Inline
XBRL Taxonomy Extension Label Linkbase Document
|
||||
|
|
|||||
|
101.PRE#
|
Inline
XBRL Taxonomy Extension Presentation Linkbase Document
|
||||
|
|
|||||
|
104#
|
Cover
Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
|
||||
|
*
|
Incorporated
by reference to the Company’s Registration Statement on Form 20‑F (File No. 001‑41641).
|
|
**
|
English
translation from the original Hebrew language. Certain identified information has been excluded from this exhibit because the Company
does not believe it is material and is the type that the Company customarily treats as private and confidential. Redacted information
is indicated by [***].
|
|
†
|
Incorporated
by reference to the Company’s Annual Report on Form 20‑F for the fiscal year ended December 31, 2022, originally filed with
the SEC on May 11, 2023.
|
|
#
|
Filed
with this Annual Report on Form 20‑F.
|
|
##
|
Furnished
with this Annual Report on Form 20‑F.
|
76
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing on Form 20‑F and that it has duly caused and authorized
the undersigned to sign this Annual Report on Form 20‑F on its behalf.
|
|
SHL
TELEMEDICINE LTD.
|
|
|
|
|
|
|
|
By:
|
/s/
David Arnon
|
|
|
|
Name:
David Arnon
|
|
|
|
Title:
Chief Executive Officer
|
|
|
|
|
|
Date:
May 15, 2025
|
|
|
77
SHL
TELEMEDICINE LTD.
CONSOLIDATED
FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2024
U.S.
DOLLARS IN THOUSANDS
INDEX
|
Page
|
|
|
Independent
Auditors' Report
(
Kost
Forer Gabbay Kasierer - Tel-Aviv, Israel) (PCAOB
|
F-2 |
|
F-3
- F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7
- F-8
|
|
|
F-9
- F-59
|
- -
- - - - - - - - - - -
|
Kost
Forer Gabbay Kasierer
144 Menachem Begin Road,
Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and the Board of Directors of
SHL
TELEMEDICINE LTD.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of SHL Telemedicine Ltd. (the Company) as of December 31, 2024 and 2023, the
related consolidated statements of comprehensive income, changes in equity and cash flows for each of the three years in the period ended
December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December
31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024,
in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
Basis
for Opinion
These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
|
KOST
FORER GABBAY KASIERER
|
|
|
A
Member of
|
|
|
We
have served as the Company’s auditor since 1997
|
|
|
|
|
|
May
15, 2025
|
F
- 2
SHL
TELEMEDICINE LTD.
CONSOLIDATED
BALANCE SHEETS
U.S.
dollars in thousands
|
December
31,
|
|||||||||||
|
Note
|
2024
|
2023
|
|||||||||
|
ASSETS
|
|||||||||||
|
CURRENT
ASSETS:
|
|||||||||||
|
Cash
and cash equivalents
|
5
|
|
|
||||||||
|
Short-term
investments
|
6
|
|
|
||||||||
|
Trade
receivables
|
7
|
|
|
||||||||
|
Inventory
|
2e
|
|
|
||||||||
|
Other
accounts receivable
|
9
|
|
|
||||||||
|
|
|
||||||||||
|
NON-CURRENT
ASSETS:
|
|||||||||||
|
Inventory
|
2e
|
|
|
||||||||
|
Prepaid
expenses
|
8
|
|
|
||||||||
|
Call
option to non-controlling interests, net
|
17
|
|
|
||||||||
|
Long-term
deposits
|
|
|
|||||||||
|
Right-of-use
assets
|
12
|
|
|
||||||||
|
Deferred
taxes
|
19d
|
|
|
||||||||
|
|
|
||||||||||
|
PROPERTY
AND EQUIPMENT, NET
|
10
|
|
|
||||||||
|
GOODWILL
|
11
|
|
|
||||||||
|
INTANGIBLE
ASSETS, NET
|
11
|
|
|
||||||||
|
Total
assets
|
|
|
|||||||||
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 3
SHL
TELEMEDICINE LTD.
CONSOLIDATED
BALANCE SHEETS
U.S.
dollars in thousands
|
December
31,
|
|||||||||||
|
Note
|
2024
|
2023
|
|||||||||
|
LIABILITIES
AND EQUITY
|
|||||||||||
|
CURRENT
LIABILITIES:
|
|||||||||||
|
Credit
from banks and others
|
13
|
|
|
||||||||
|
Current
maturities of lease liabilities
|
12
|
|
|
||||||||
|
Deferred
revenues
|
15
|
|
|
||||||||
|
Income
taxes payable
|
19
|
|
|
||||||||
|
Trade
payables
|
|
|
|||||||||
|
Liability
for acquisition of non-controlling interests
|
20
|
|
|
||||||||
|
Other
payables
|
16
|
|
|
||||||||
|
|
|
||||||||||
|
NON-CURRENT
LIABILITIES:
|
|||||||||||
|
Loans
from banks
|
14
|
|
|
||||||||
|
Deferred
taxes
|
19d
|
|
|
||||||||
|
Lease
liabilities
|
12
|
|
|
||||||||
|
Employee
benefit liabilities
|
18
|
|
|
||||||||
|
|
|
||||||||||
|
Total
liabilities
|
|
|
|||||||||
|
EQUITY:
|
23
|
||||||||||
|
Attributable
to equity holders of the Company:
|
|||||||||||
|
Issued
capital
|
|
|
|||||||||
|
Additional
paid-in capital
|
|
|
|||||||||
|
Treasury
shares
|
(
|
)
|
(
|
)
|
|||||||
|
Foreign
currency translation reserve
|
(
|
)
|
(
|
)
|
|||||||
|
Capital
reserve for options
|
|
|
|||||||||
|
Capital
reserve for remeasurement gains on defined benefit plans
|
|
|
|||||||||
|
Capital
reserve from transactions with non-controlling interests
|
(
|
)
|
|
||||||||
|
Accumulated
deficit
|
(
|
)
|
(
|
)
|
|||||||
|
|
|
||||||||||
|
Non-controlling
interests
|
|
|
|||||||||
|
Total
equity
|
|
|
|||||||||
|
Total
liabilities and equity
|
|
|
|||||||||
The accompanying notes
are an integral part of the consolidated financial statements.
|
May
15, 2025
|
/s/ Itamar Offer
|
/s/ David Arnon
|
||
|
Date
of approval of the
|
Itamar
Offer
|
David
Arnon
|
||
|
financial
statements
|
Chairman
of the Board
|
CEO
|
F
- 4
SHL
TELEMEDICINE LTD.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
U.S.
dollars in thousands (except per share data)
|
Year
ended
December
31,
|
|||||||||||||||
|
Note
|
2024
|
2023
|
2022
|
||||||||||||
|
Revenues
|
24a
|
|
|
|
|
||||||||||
|
Cost
of revenues
|
24b
|
|
|
|
|
||||||||||
|
Gross
profit
|
|
|
|
||||||||||||
|
Research
and development costs
|
24c
|
|
|
|
|
||||||||||
|
Selling
and marketing expenses
|
24d
|
|
|
|
|
||||||||||
|
General
and administrative expenses
|
24e
|
|
|
|
|
||||||||||
|
Other
expenses
|
24g
|
|
|
|
|
||||||||||
|
Operating
loss
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Financial
income
|
24f(1)
|
|
|
|
|
||||||||||
|
Financial
expenses
|
24f(2)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||
|
Profit
(loss) before taxes on income
|
(
|
)
|
(
|
)
|
|
||||||||||
|
Tax
expenses
|
19b
|
|
|
|
|
||||||||||
|
Net
profit (loss)
|
(
|
)
|
(
|
)
|
|
||||||||||
|
Other
comprehensive income:
|
|||||||||||||||
|
Other
comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods:
|
|||||||||||||||
|
Re-measurement
gain on defined benefit plans
|
18
|
|
|
|
|||||||||||
|
Other
comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:
|
|||||||||||||||
|
Foreign
currency translation reserve
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Total
other comprehensive income
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Total
comprehensive loss
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Net
profit (loss) attributable to:
|
|||||||||||||||
|
Equity
holders of the Company
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Non-controlling
interests
|
|
|
|
||||||||||||
|
(
|
)
|
(
|
)
|
|
|||||||||||
|
Comprehensive
income (loss) attributable to:
|
|||||||||||||||
|
Equity
holders of the Company
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Non-controlling
interests
|
|
|
(
|
)
|
|||||||||||
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||
|
Earnings
per share:
|
|||||||||||||||
|
Basic
loss
|
25
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
Diluted
loss
|
25
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 5
SHL
TELEMEDICINE LTD.
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY
U.S.
dollars in thousands
|
Issued
capital
|
Additional
paid-in capital
|
Treasury
shares
|
Foreign
currency translation reserve
|
Capital
reserve for options
|
Capital
reserve
for remeasurement gains on defined benefit plans
|
Capital
reserve from transactions with non-controlling interests
|
Accumulated
deficit
|
Total
|
Non-controlling
interests
|
Total
equity
|
||||||||||||||||||||||||||||||||||
|
Balance
as of January 1, 2022
|
|
|
(
|
) |
|
|
|
|
(
|
) |
|
|
|
|||||||||||||||||||||||||||||||
|
Exercise
of share options
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
|
Exercise
of Employee options
|
) |
(
|
) |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Share-based
payments
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
|
Equity
component of transaction with non-controlling interest
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
||||||||||||||||||||||||||||||||
|
Dividend
paid to non-controlling interests
|
|
|
|
|
|
|
|
|
|
(
|
) |
(
|
) | |||||||||||||||||||||||||||||||
|
PPA
Adjustments
|
|
|
|
|
|
|
|
|
|
(
|
) |
(
|
) | |||||||||||||||||||||||||||||||
|
Net
profit
|
|
|
|
|
|
|
|
(
|
) |
(
|
) |
|
|
|||||||||||||||||||||||||||||||
|
Total
other comprehensive income (loss)
|
|
|
|
(
|
) |
|
|
|
|
(
|
) |
(
|
) |
(
|
) | |||||||||||||||||||||||||||||
|
Balance
as of December 31, 2022
|
|
|
(
|
)
|
(
|
)
|
|
|
|
(
|
)
|
|
|
|
||||||||||||||||||||||||||||||
|
Exercise of share options
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
|
Exercise of Employee
options
|
|
)
|
|
)
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
Share-based
payments
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
|
Equity
component of transaction with non-controlling interest
|
|
|
|
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||||||||||||||||||
|
Dividend
paid to non-controlling interests
|
|
|
|
|
|
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||||||||
|
Net
profit (loss)
|
|
|
|
|
|
|
|
(
|
)
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||||||||||
|
Total
other comprehensive income (loss)
|
|
|
|
(
|
)
|
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||||||
|
Balance
as of December 31, 2023
|
|
|
(
|
)
|
(
|
)
|
|
|
|
(
|
)
|
|
|
|
||||||||||||||||||||||||||||||
|
Share-based
payments
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Equity
component of transaction with non-controlling interest
|
|
|
|
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||||||||||||||||||
|
Dividend
paid to non-controlling interests
|
|
|
|
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||||||
|
Acquisition
of non-controlling interests
|
|
|
|
|
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||||||
|
Net
profit (loss)
|
|
|
|
|
|
|
(
|
)
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||||||
|
Total
other comprehensive income (loss)
|
|
|
|
(
|
)
|
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||||||
|
Balance
as of December 31, 2024
|
|
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
(
|
)
|
|
|
|
|||||||||||||||||||||||||||||
*) Represents
an amount lower than $1.
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 6
SHL
TELEMEDICINE LTD.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
U.S.
dollars in thousands
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Cash
flows from operating activities:
|
||||||||||||
|
Net
profit (loss)
|
(
|
)
|
(
|
)
|
|
|||||||
|
Adjustments
required to reconcile net profit (loss) to net cash used in operating activities:
|
||||||||||||
|
Income
and expenses not involving operating cash flows:
|
||||||||||||
|
Depreciation
and amortization
|
|
|
|
|||||||||
|
Impairment
of Goodwill
|
|
|
|
|||||||||
|
Impairment
of intangible assets
|
|
|
|
|||||||||
|
Capital
loss from disposals of property and equipment
|
|
|
|
|||||||||
|
Impairment
of property, and equipment
|
|
|
|
|||||||||
|
Capital
gain from amendment of lease liabilities
|
(
|
)
|
(
|
)
|
|
|||||||
|
Change
in employee benefit liabilities, net
|
(
|
)
|
|
|
||||||||
|
Financial
income, net
|
|
(
|
)
|
(
|
)
|
|||||||
|
Valuation
loss (gain) from short-term investments
|
(
|
)
|
(
|
)
|
|
|||||||
|
Cost
of share-based payments
|
|
|
|
|||||||||
|
Tax
expenses
|
|
|
|
|||||||||
|
|
|
|
||||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||
|
Increase
in trade receivables, net
|
|
(
|
)
|
(
|
)
|
|||||||
|
Increase
in inventory
|
|
(
|
)
|
(
|
)
|
|||||||
|
Increase
in prepaid expenses
|
|
|
(
|
)
|
||||||||
|
Decrease
(increase) in other accounts receivable
|
|
|
(
|
)
|
||||||||
|
Increase
(decrease) in trade payables
|
(
|
)
|
|
|
||||||||
|
Decrease
in deferred revenues
|
|
|
(
|
)
|
||||||||
|
Increase
in other accounts payable
|
|
|
|
|||||||||
|
|
|
(
|
)
|
|||||||||
|
Cash
paid and received:
|
||||||||||||
|
Interest
received
|
|
|
|
|||||||||
|
Interest
paid
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Income
tax received
|
|
|
|
|||||||||
|
Income
taxes paid
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||
|
Net
cash used in operating activities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 7
SHL
TELEMEDICINE LTD.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
U.S.
dollars in thousands
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Cash
flows from investing activities:
|
||||||||||||
|
Purchase
of property and equipment
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Investment
in intangible assets
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Investment
in short-term deposits
|
|
(
|
)
|
(
|
)
|
|||||||
|
Proceeds
from short-term deposits
|
|
|
|
|||||||||
|
Proceeds
from sale of fixed assets
|
|
|
|
|||||||||
|
Purchase
of short-term investments
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Proceeds
from sale of short-term investments
|
|
|
|
|||||||||
|
Net
cash used in investing activities
|
|
(
|
)
|
(
|
)
|
|||||||
|
Cash
flows from financing activities:
|
||||||||||||
|
Dividend
paid to non-controlling interests
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Payment
of lease liabilities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Exercise
of share options
|
|
|
|
|||||||||
|
Payment
of long-term loans
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Payment
of liability to underwriters
|
|
(
|
)
|
|
||||||||
|
Net
cash provided by (used in) financing activities
|
(
|
)
|
|
(
|
)
|
|||||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
(
|
)
|
(
|
)
|
|||||||
|
Increase
(decrease) in cash and cash equivalents
|
|
|
(
|
)
|
||||||||
|
Cash
and cash equivalents at the beginning of the year
|
|
|
|
|||||||||
|
Cash
and cash equivalents at the end of the year
|
|
|
|
|||||||||
|
Non-cash
transactions:
|
||||||||||||
|
Right-of-use
asset recognized with corresponding lease liability
|
|
(
|
)
|
|
||||||||
|
Incurrence
of liability for acquisition of non-controlling interests
|
(
|
)
|
|
|
||||||||
|
Liability
derecognized and recorded in equity upon exercise of share options
|
|
|
|
|||||||||
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 8
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 1:- |
GENERAL
|
| a. |
SHL Telemedicine Ltd. ("SHL" and/or "the Company")
was incorporated in Israel. The registered office is located at Ashdar Building, Yigal Alon St. in Tel Aviv. Its shares are publicly traded
on the SIX Swiss Exchange under the symbol SHLTN. In April 2023 the Company started trading its American Depositary Shares (“ADRs”)
on The NASDAQ Capital Market (the “Nasdaq”), under the ticker symbol “SHLT” – see Note 27c.
|
SHL
and its subsidiaries ("the Group") develop and market advanced personal telemedicine solutions. Personal telemedicine is the transmission
of medical data by an individual, from a remote location to a medical call center via telecommunication networks. SHL's 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.
In addition, the Group provides B2B healthcare services in Israel in the field of diagnostics, preventive medicine, and medical opinions
to institutional customers.
| b. |
The effects of the October 7
th
.
War:
|
On
October 7, 2023, war broke out in Israel ("The War"). The War led to a slowdown in business activity throughout the Israeli economy, as
a result, among others, of the shutdown of enterprises in the south and north of Israel, the damage to local infrastructures, the nationwide
military reserve draft for an indefinite period and the disruption of economic activity in the entire country.
The
potential fluctuations in commodity prices, foreign currency exchange rates, availability of materials and manpower, local services and
access to local resources are all liable to affect entities whose main operations are conducted in or with Israel.
Although
Mediton's operations, which provide services that are based on a fee-for-service model, were affected by The War during the last quarter
of 2023, it was back on track in the beginning of 2024. SHL B2C cardio services in Israel had no major business adverse impact. As of
the reporting date, the Company’s activities in the Israeli market are continuing with no significant interruptions.
Following
the start of the War, at the beginning of 2024, international rating agencies such as SP, Moody’s downgraded Israel’s
credit rating. Additional downgrading was announced later during the year. The above-mentioned downgrading of the credit rating of the
State of Israel may have a potential negative impact on the Israeli economy and on the Company. It also has a possible negative impact
on interest rates, and hence of the Company’s finance costs, as well as on a potential future debt raising, if any.
Towards
the end of the reporting year, ceasefire agreements were signed in Lebanon and Gaza. However, the agreements are not being fully complied
with as of the report’s publication date. Therefore, at this stage it is impossible to assess the full effect of the War on the
Company and its results in the medium term.
F
- 9
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 1:- |
GENERAL (Cont.)
|
| c. |
Potential Impact of the new US Tariffs:
|
The
imposition of new tariffs by the Trump administration could create several challenges for an Israeli company that conducts business with
the United States.
However,
given the current very small size of Company activity in the US no significant adverse impact on the Company is expected.
| NOTE 2:- | ACCOUNTING POLICIES |
| a. |
Basis of presentation of the financial statements:
|
| 1. |
These financial statements have been prepared
in accordance with IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
|
The
Group's financial statements have been prepared on a cost basis, except for marketable securities, liability to underwriters and derivatives
(put option, and liability for share options) which are measured at fair value through profit or loss and employee benefit assets and
liabilities.
The
Group has elected to present the statement of comprehensive income using the function of expense method.
| 2. |
Consistent accounting policies:
|
The
accounting policies adopted in the financial statements have been applied consistently for all periods presented, unless otherwise stated.
| b. |
Consolidated financial statements:
|
The
consolidated financial statements comprise the financial statements of companies that are controlled by the Company (subsidiaries). Control
is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
The
consolidated financial statements are prepared using uniform accounting policies by all companies in the Group.
Non-controlling
interests in subsidiaries represent the equity in subsidiaries not attributable, directly or indirectly, to a parent. Non-controlling
interests are presented in equity separately from the equity attributable to the equity holders of the Company. Profit or loss and components
of other comprehensive income are attributed to the Company and to non-controlling interests. Losses are attributed to non-controlling
interests even if they result in a negative balance of non-controlling interests in the consolidated statement of financial position.
A change in the ownership
interest of a subsidiary, without a loss of control, is accounted for as a change in equity by adjusting the carrying amount of the non-controlling
interests with a corresponding adjustment of the equity attributable to equity holders of the Company less/plus the consideration paid
or received.
F
- 10
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
| c. |
Functional currency and presentation currency:
|
| 1. |
Functional currency and presentation currency:
|
The
presentation currency of the financial statements is the U.S. dollar.
The
functional currency, which is the currency that best reflects the economic environment in which the Company operates and conducts its
transactions, is separately determined for each Group entity and is used to measure its financial position and operating results. The
functional currency of the Company and it's subsidiaries in Israel is the NIS.
When a Group entity's
functional currency differs from the presentation currency, that entity's financial statements are translated so that they can be included
in the consolidated financial statements as follows:
| a) |
Assets and liabilities of foreign operations,
including goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition of said
foreign operation, are translated at the closing rate at the end of the reporting period.
|
| b) |
Income and expenses for each period presented
in the statement of income are translated at average exchange rates for the presented periods.
|
| c) |
Share capital, capital reserves and other changes
in capital are translated at the exchange rate prevailing at the date of incurrence.
|
| d) |
Retained earnings are translated based on the
opening balance translated at the exchange rate at that date and other relevant transactions (such as dividend) during the period are
translated as described in b) and c) above.
|
| e) |
All resulting translation differences are recognized
as a separate component of other comprehensive income (loss) in equity "foreign currency translation reserve".
|
F
- 11
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
| 2. |
Index-linked monetary items:
|
Monetary
assets and liabilities linked to the changes in the Israeli Consumer Price Index ("Israeli CPI") are adjusted at the relevant index at
the end of each reporting
period
according to the terms of the agreement. Linkage differences arising from the adjustment, as above, other than those capitalized to qualifying
assets or carried to equity in hedge transactions, are recognized in profit or loss.
| d. |
Short-term deposits:
|
Short-term
bank deposits are deposits with an original maturity of more than three months from the date of investment and which do not meet the definition
of cash equivalents. The deposits are presented according to their terms of deposit.
| e. |
Inventory:
|
Inventory
of telemedicine devices for sale is presented at the lower of cost or net realizable value. Cost is determined using the "first-in, first-out"
method.
Net
realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated
costs necessary to make the sale.
| f. |
Financial instruments:
|
| 1. |
Financial assets:
|
Financial
assets are measured upon initial recognition at fair value plus transaction costs that are directly attributable to the acquisition of
the financial assets, except for financial assets measured at fair value through profit or loss in respect of which transaction costs
are recorded in profit or loss.
Equity
instruments and other financial assets held for trading:
Investments
in equity instruments do not meet the above criteria and accordingly are measured at fair value through profit or loss.
Other
financial assets held for trading, including derivatives, are measured at fair value through profit or loss unless they are designated
as effective hedging instruments.
| 2. |
Impairment of financial assets:
|
The
Company evaluates at the end of each reporting period the loss allowance for financial debt instruments which are not measured at fair
value through profit or loss. The Company has short-term financial assets such as trade receivables in respect of which the Company applies
a simplified approach and measures the loss allowance in an amount equal to the lifetime expected credit loss.
F
- 12
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
| 3. |
Financial liabilities:
|
| a) |
Financial liabilities measured at amortized cost:
|
Financial
liabilities are initially recognized at fair value less transaction costs that are directly attributable to the issue of the financial
liability.
After
initial recognition, the Company measures all financial liabilities at amortized cost using the effective interest rate method, except
for financial liabilities at fair value through profit or loss.
| b) |
Financial liabilities measured at fair value through
profit or loss:
|
Financial
liabilities measured at fair value through profit or loss include liabilities held for trading, including derivatives, and financial liabilities
that meet certain criteria which are designated upon initial recognition to fair value through profit or loss.
At
initial recognition, the Company measures these financial liabilities at fair value. Transaction costs are recognized in profit or loss.
After
initial recognition, changes in fair value are recognized in profit or loss.
| 4. |
Issue of a unit of securities:
|
The
issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the
unit based on the following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair
value is determined for financial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined
to be the residual amount. Issue costs are allocated to each component pro rata to the amounts determined for each component in the unit.
| g. |
Leases:
|
The
Group accounts for a contract as a lease when the contract terms convey the right to control the use of an identified asset for a period
of time in exchange for consideration.
| 1. |
The Group as a lessee:
|
For
leases in which the Group is the lessee, the Group recognizes on the commencement date of the lease a right-of-use asset and a lease liability,
excluding leases whose term is up to 12 months and leases for which the underlying asset is of low value. For these excluded leases, the
Group has elected to recognize the lease payments as an expense in profit or loss on a straight-line basis over the lease term. In measuring
the lease liability, the Group has elected to apply the practical expedient in the Standard and does not separate the lease components
from the non-lease components (such as management and maintenance services, etc.) included in a single contract.
F
- 13
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
Leases
which entitle employees to a company car as part of their employment terms are accounted for as employee benefits in accordance with the
provisions of IAS 19 and not as subleases.
On
the commencement date, the lease liability includes all unpaid lease payments (excluding variable lease payments) discounted at the interest
rate implicit in the lease, if that rate can be readily determined, or otherwise using the Group 's incremental borrowing rate. After
the commencement date, the Group measures the lease liability using the effective interest rate method.
On
the commencement date, the right-of-use asset is recognized in an amount equal to the lease liability plus lease payments already made
on or before the commencement date and initial direct costs incurred. The right-of-use asset is measured applying the cost model and depreciated
over the shorter of its useful life and the lease term.
Following
are the periods of depreciation of the right-of-use assets by class of underlying asset:
|
Years
|
Mainly
|
|||||
|
Motor
vehicles
|
|
|
||||
|
Buildings
|
|
|
The
Group tests for impairment of the right-of-use asset whenever there are indications of impairment pursuant to the provisions of IAS 36.
| 2. |
Variable lease payments that depend on an index:
|
On
the commencement date, the Group uses the index rate prevailing on the commencement date to calculate the future lease payments.
For
leases in which the Group is the lessee, the aggregate changes in future lease payments resulting from a change in the index are discounted
(without a change in the discount rate applicable to the lease liability) and recorded as an adjustment of the lease liability and the
right-of-use asset, only when there is a change in the cash flows resulting from the change in the index (that is, when the adjustment
to the lease payments takes effect).
| 3. | Lease extension and termination options: |
A
non-cancellable lease term includes both the periods covered by an option to extend the lease when it is reasonably certain that the extension
option will be exercised and the periods covered by a lease termination option when it is reasonably certain that the termination option
will not be exercised.
F
- 14
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
In
the event of any change in the expected exercise of the lease extension option or in the expected non-exercise of the lease termination
option, the Group remeasures the lease liability based on the revised lease term using a revised discount rate as of the date of the change
in expectations. The total change is recognized in the carrying amount of the right-of-use asset until it is reduced to zero, and any
further reductions are recognized in profit or loss.
| 4. |
Lease modifications:
|
If
a lease modification does not reduce the scope of the lease and does not result in a separate lease, the Group remeasures the lease liability
based on the modified lease terms using a revised discount rate as of the modification date and records the change in the lease liability
as an adjustment to the right-of-use asset.
If
a lease modification reduces the scope of the lease, the Group recognizes a gain or loss arising from the partial or full reduction of
the carrying amount of the right-of-use asset and the lease liability. The Group subsequently remeasures the carrying amount of the lease
liability according to the revised lease terms, at the revised discount rate as of the modification date and records the change in the
lease liability as an adjustment to the right-of-use asset.
| h. |
Business combinations and goodwill:
|
Business
combinations are accounted for by applying the acquisition method. The cost of the acquisition is measured at the fair value of the consideration
transferred on the date of acquisition with the addition of non-controlling interests in the acquiree.
Direct
acquisition costs are carried to the income statement as incurred.
A
put option granted by the Group to non-controlling interests and concurrently a call option received by the Group from the non-controlling
interests that can be settled in cash or by the delivery of a variable number of shares
are
accounted for as a derivative financial liability or asset presented on a net basis and measured at fair value. The non-controlling interests
continue to be recognized in equity until the put or call options are exercised. See Note 20 for further information.
Goodwill
is initially measured at cost which represents the excess of the acquisition consideration and the amount of non-controlling interests
over the net identifiable assets acquired and liabilities assumed.
After
initial recognition, goodwill is measured at cost less any accumulated impairment losses. For purposes of evaluation of impairment of
goodwill, goodwill purchased in a business combination is evaluated and attributed to the cash-generating units to which it had been allocated.
F
- 15
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
| i. |
Property and equipment:
|
Property
and equipment are measured at cost, including directly attributable costs, less accumulated depreciation and accumulated impairment losses.
Depreciation
is calculated at constant annual rates on a straight-line basis over the useful life of the assets at annual rates as follows:
|
%
|
||||
|
Medical
equipment
|
|
(mainly
|
||
|
Motor
vehicles and ambulances
|
|
(mainly
|
||
|
Office
furniture and equipment
|
|
(mainly
|
||
|
Computers
and peripheral equipment
|
|
(mainly
|
||
|
Leasehold
improvements
|
see
below
|
|||
|
Telemedicine
devices on loan to customers
|
|
Leasehold
improvements are depreciated on a straight-line basis over the shorter of the lease term (including any extension option held by the Group
and intended to be exercised) and the expected life of the improvement.
| j. |
Intangible assets:
|
Intangible
assets acquired in a business combination are included at fair value at the acquisition date. After initial recognition, intangible assets
are carried at their cost less any accumulated amortization and any accumulated impairment losses. Expenditures relating to internally
generated intangible assets, excluding capitalized development costs, are recognized in profit or loss when incurred.
According
to management's assessment, intangible assets have a finite useful life. The assets are amortized over their useful life using the straight-line
method and reviewed for impairment whenever there is an indication that the asset may be impaired.
The
useful life of intangible assets is as follows:
|
Years
|
|||
|
Developments
costs
|
|
||
|
Computer
software
|
|
||
|
Contracts
|
|
||
|
Customer
relations
|
|
||
|
Information
technology
|
|
Research
and development expenditures:
Research
expenditures are recognized in profit or loss when incurred. An intangible asset arising from development or from the development phase
of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset
so that it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's
ability to use or sell the intangible asset; how the intangible asset will generate future economic benefits; the availability of adequate
technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliably the expenditure
attributable to the intangible asset during its development.
F
- 16
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
The
asset is measured at cost less any accumulated amortization and any accumulated impairment losses. Costs recognized as intangible assets
include directly attributable costs of preparing the asset for its intended use such as cost of materials, direct labor costs and overhead.
Amortization
of the asset begins when development is complete and the asset is available for use. As for the testing of impairment, see k below.
| k. |
Impairment of non-financial assets:
|
The
Group evaluates the need to record an impairment of the carrying amount of non-financial assets whenever events or changes in circumstances
indicate that the carrying amount is not recoverable. If the carrying amount of non-financial assets exceeds their recoverable amount,
the assets are reduced to their recoverable amount. The recoverable amount is the higher of fair value less costs of sale and value in
use. In measuring value in use, the expected future cash flows are discounted using a pre-tax discount rate that reflects the risks specific
to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for the cash-generating unit
to which the asset belongs. Impairment losses are recognized in profit or loss.
An
impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's
recoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above
the lower of the carrying amount that would have been determined (net of depreciation or amortization) had
no
impairment loss been recognized for the asset in prior years and its recoverable amount. The reversal of impairment loss of an asset presented
at cost is recognized in profit or loss.
The
following criteria are applied in assessing impairment of these specific assets:
| 1. | Goodwill related to subsidiaries: |
|
For the purpose of impairment
testing, goodwill acquired in a business combination is allocated, at the acquisition date, to each of the Group's cash-generating units
that is expected to benefit from the synergies of the combination.
The Company reviews goodwill
for impairment once a year or more frequently if events or changes in circumstances indicate that there is impairment.
Goodwill is tested for
impairment by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units) to which the goodwill has
been allocated. An impairment loss is recognized if the recoverable amount of the cash-generating unit (or group of cash-generating units)
to which goodwill has been allocated is less than the carrying amount of the cash-generating unit (or group of cash-generating units).
Any impairment loss is allocated first to goodwill. Impairment losses recognized for goodwill cannot be reversed in subsequent periods.
|
F
- 17
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
| 2. |
Development costs capitalized during the development
period:
|
The
impairment test is performed annually, on December 31, or more frequently if events or changes in circumstances indicate that there is
impairment.
| l. |
Taxes on income:
|
Taxes
on income in the statement of comprehensive income comprise current and deferred taxes. Current or deferred taxes are recognized in the
statement of income except to the extent that the tax arises from items which are recognized directly in other comprehensive income or
in equity. In such cases, the tax effect is also recognized in the relevant item.
| 1. |
Current taxes:
|
The
current tax liability is measured using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting
period as well as adjustments required in connection with the tax liability in respect of previous years.
| 2. |
Deferred taxes:
|
Deferred
taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributed
for tax purposes.
Deferred
taxes are measured at the tax rates that are expected to apply to the period when the taxes are reversed in profit or loss, comprehensive
income or equity, based on tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred taxes
in profit or loss represent the changes in the carrying amount of deferred tax balances during the reporting period, excluding changes
attributable to items recognized outside of profit or loss.
Deferred
tax assets are reviewed at the end of each reporting period and reduced to the extent that it is not probable that they will be utilized.
Also, temporary differences (such as carry forward losses) for which deferred tax assets have not been recognized are reassessed and deferred
tax assets are recognized to the extent that their recoverability has become probable. Any resulting reduction or reversal is recognized
in the line item, "taxes on income". Taxes that would apply in the event of the disposal of investments in investees have not been taken
into account in computing deferred taxes, as long as the disposal of the investments in investees is not probable in the foreseeable future.
Also, deferred taxes that would apply in the event of distribution of earnings by investees as dividends have not been taken into account
in computing deferred taxes, since the distribution of dividends does not involve an additional tax liability or since it is the Group's
policy not to initiate distribution of dividends that triggers an additional tax liability.
F
- 18
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
| m. | Share-based payment transactions: |
The
Company's employees are entitled to remuneration in the form of equity-settled share-based payment transactions (see details in Note 22).
Equity-settled
transactions:
The
cost of equity-settled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The
fair value is determined using a standard option pricing model, additional details are given in Note 22d
If
the Group modifies the conditions on which equity-instruments were granted, an additional expense is recognized for any modification that
increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee/other service provider
at the modification date.
| n. |
Employee benefit liabilities:
|
The
Group has several employee benefit plans:
| 1. |
Short-term employee benefits:
|
Short-term
employee benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognized
as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized when the Group
has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate
of the amount can be made. The short-term employee benefit liability in the statement of financial position is measured on an undiscounted
basis.
| 2. |
Post-employment benefits:
|
The
plans are normally financed by contributions to insurance companies or funds and classified as defined contribution plans or as defined
benefit plans.
| a) |
Defined contribution plans:
|
The
Group has defined contribution plans pursuant to section 14 to the Severance Pay Law under which the Group pays fixed contributions and
will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee
benefits relating to employee service in the current and prior periods.
Contributions
to a defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributed concurrently with
performance of the employee's services.
F
- 19
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
| b) |
Defined benefit plans:
|
The
Group operates a defined benefit plan in respect of severance pay pursuant to the Severance Pay Law in Israel. According to the Law, employees
are entitled to severance pay upon dismissal or retirement. The liability for termination of employee-employer relation is measured using
the projected unit credit method. The actuarial assumptions include rates of employee turnover and future salary increases based on the
estimated timing of payment. The amounts are presented based on discounted expected future cash flows using a discount rate determined
by reference to market yields at the reporting date on high quality corporate bonds that are linked to the Consumer Price Index with term
of the benefit obligation.
In
respect of its severance pay obligation to certain of its employees, the Group makes current deposits in pension funds and insurance companies
("the plan assets"). Plan assets comprise assets held by a long-term employee benefit fund or qualifying insurance policies. Plan assets
are not available to the Group's own creditors and cannot be returned directly to the Group.
The
liability for employee benefits presented in the balance sheet reflects the present value of the defined benefit obligation less the fair
value of the plan assets (see details in Note 18).
Remeasurements
of the net liability are recognized as other comprehensive income (loss) in the period in which they occur.
| o. |
Revenue recognition:
|
Revenue
recognition:
Revenue
from contracts with customers is recognized when the control over the goods or services is transferred to the customer. The transaction
price is the amount of the consideration that is expected to be received based on the contract terms, excluding amounts collected on behalf
of third parties (such as taxes).
Revenue
from rendering of services:
Revenue
from rendering of services is recognized over time, during the period the customer simultaneously receives and consumes the benefits provided
by the Company's performance. Revenue is recognized in the reporting periods in which the services are rendered. Revenues from the installation
fees are recognized as the installation is performed.
F
- 20
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
The
Company charges its customers based on payment terms agreed upon in specific agreements. When payments are made before or after the service
is performed, the Company recognizes the resulting contract asset (income receivable) or liability (deferred revenues) and recognizes
revenue in profit or loss when the work is performed. The Company has elected to apply the practical expedient allowed by the Standard
and does not separate the financing component in transactions in which the period between receipt of the advance payment and the performance
of the service is expected to be less than one year.
Revenue
from the sale of telemedicine devices:
Revenue
from sale of telemedicine devices is recognized in profit or loss at the point in time when the control of the goods is transferred to
the customer, generally upon delivery of the goods to the customer.
Costs
of obtaining a contract:
Costs
incurred in obtaining subscription contracts which would not have been incurred if the contract had not been obtained (incremental costs)
and which the Company expects to recover are recognized as an asset (prepaid expenses). The asset is amortized over the estimated average
service period of subscriber contracts, adjusted for cancellations.
| p. |
Interest income:
|
Interest
income on financial assets is recognized as it accrues using the effective interest method.
| q. |
Earnings per share:
|
Basic
earnings per share are calculated by dividing the net income attributable to equity holders of the Company by the weighted number of Ordinary
shares outstanding during the period.
For
diluted earnings per share, the weighted average of shares outstanding is adjusted, assuming conversion of potential dilutive shares (employee
options), except when such conversion has an anti-dilutive effect.
| r. |
Fair value measurement:
|
Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date.
Fair
value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market,
or in the absence of a principal market, in the most advantageous market.
F
- 21
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
The
fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
Fair
value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the
asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The
Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair
value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All
assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy
based on the lowest level input that is significant to the entire fair value measurement:
|
Level
1
|
-
|
quoted
prices (unadjusted) in active markets for identical assets or liabilities.
|
|
Level
2
|
-
|
inputs
other than quoted prices included within Level 1 that are observable directly or indirectly.
|
|
Level
3
|
-
|
inputs
that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data).
|
| s. |
Exchange rates and linkage basis:
|
Data
regarding Israeli CPI and exchange rates of the U.S. dollar, the Euro and the Swiss Franc in relation to the NIS is as follows:
|
Israeli
|
Exchange
rate of
|
|||||||||||||||
|
For
the year ended
|
CPI
|
€
|
U.S.
$
|
CHF
|
||||||||||||
|
Points
*)
|
NIS
|
|||||||||||||||
|
December
31, 2024
|
|
|
|
|
||||||||||||
|
December
31, 2023
|
|
|
|
|
||||||||||||
|
December
31, 2022
|
|
|
|
|
||||||||||||
|
Change
during the year
|
%
|
|||||||||||||||
|
2024
|
|
(
|
)
|
|
(
|
)
|
||||||||||
|
2023
|
|
|
|
|
||||||||||||
| *) |
The index on an average basis of 1993 = 100.
|
F
- 22
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 2:- | ACCOUNTING POLICIES (Cont.) |
| t. |
Changes in accounting policies - initial application
of new financial reporting and accounting standards and amendments to existing financial reporting and accounting standards:
|
|
Amendment to IAS 1, "Presentation of Financial
Statements":
|
In
January 2020, the IASB issued an amendment to IAS 1, "Presentation of Financial Statements" regarding the criteria for determining the
classification of liabilities as current or non-current ("the Original Amendment"). In October 2022, the IASB issued a subsequent amendment
("the Subsequent Amendment").
According
to the Subsequent Amendment:
| • |
Only financial covenants with which an entity
must comply on or before the reporting date will affect a liability's classification as current or non-current.
|
| • |
In respect of a liability for which compliance
with financial covenants is to be evaluated within twelve months from the reporting date, disclosure is required to enable users of the
financial statements to assess the risks related to that liability. The Subsequent Amendment requires disclosure of the carrying amount
of the liability, information about the financial covenants, and the facts and circumstances at the end of the reporting period that could
result in the conclusion that the entity may have difficulty in complying with the financial covenants.
|
According
to the Original Amendment, the conversion option of a liability affects the classification of the entire liability as current or non-current
unless the conversion component is an equity instrument.
The
Original Amendment and Subsequent Amendment are both applied retrospectively for annual periods beginning on January 1, 2024.
The
above Amendments did not have a material impact on the Company's consolidated financial statements.
F
- 23
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 3:- |
SIGNIFICANT ACCOUNTING
JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTS
|
Significant
accounting judgments, estimates and assumptions used in the preparation of the financial statements:
| a. |
Judgments:
|
In
the process of applying the significant accounting policies, the Group has made the following judgments which have the most significant
effect on the amounts recognized in the financial statements:
| - |
Capitalization of development costs
|
Development
costs are capitalized in accordance with the accounting policy described in Note 2k, which is based on the criteria set forth in IAS 38.
The assessment of whether development costs meet the criteria for recognition as an intangible asset requires significant management judgment,
in particular with respect to technical feasibility, generation of future economic benefits, and ability to measure reliably the costs
attributable to the intangible asset.
| b. |
Estimates and assumptions:
|
The
preparation of these financial statements requires management to make estimates and assumptions that have an effect on the application
of the accounting policies and on the reported amounts of assets, liabilities, revenues and expenses. In determining its accounting estimates,
management relies on past experience, various underlying facts, external factors and reasonable assumptions, based on the relevant circumstances.
These estimates and underlying assumptions are reviewed regularly. Changes in accounting estimates are reported in the period of the change
in estimate.
The
key assumptions made in the financial statements concerning uncertainties at the end of the reporting period and the critical estimates
computed by the Group that may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial
year are discussed below.
| - |
Impairment of goodwill:
|
The
Group reviews goodwill for impairment at least once a year. This requires management to make an estimate of the projected future cash
flows from the continuing use of the cash-generating unit to which the goodwill is allocated and also to choose a suitable discount rate
for those cash flows. Further details are given in Note 11.
F
- 24
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 3:- |
SIGNIFICANT ACCOUNTING
JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTS (Cont.)
|
| - |
Deferred tax assets:
Deferred tax assets are
recognized for unused carry forward tax losses and temporary differences to the extent that it is probable that taxable profit will be
available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax
assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
Further details are given in Notes 2m and 19c.
|
| NOTE 4:- |
DISCLOSURE OF NEW
STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION
|
| a. |
Amendments to IAS 21, "The Effects of Changes
in Foreign Exchange Rates":
|
In
August 2023, the IASB issued "Amendments to IAS 21: Lack of Exchangeability (Amendments to IAS 21, "The Effects of Changes in Foreign
Exchange Rates")" ("the Amendments") to clarify how an entity should assess whether a currency is exchangeable and how it should measure
and determine a spot exchange rate when exchangeability is lacking.
The
Amendments set out the requirements for determining the spot exchange rate when a currency lacks exchangeability. The Amendments require
disclosure of information that will enable users of financial statements to understand how a currency not being exchangeable affects or
is expected to affect the entity's financial performance, financial position and cash flows.
The
Amendments apply for annual reporting periods beginning on or after January 1, 2025. Earlier adoption is permitted, in which case, an
entity is required to disclose that fact. When applying the Amendments, an entity should not restate comparative information. Instead,
if the foreign currency is not exchangeable at the beginning of the annual reporting period in which the Amendments are first applied
(the initial application date), the entity should translate affected assets, liabilities and equity as required by the Amendments and
recognize the differences as of the initial application date as an adjustment to the opening balance of retained earnings and/or to the
foreign currency translation reserve, as required by the Amendments .
The
Company believes that the Amendments are not expected to have a material impact on its consolidated financial statements.
| b. |
Amendments to IFRS 9, "Financial Instruments",
and IFRS 7, "Financial Instruments: Disclosures":
|
On
May 30, 2024, the IASB issued "Amendments to the Classification and Measurement of Financial Instruments - Amendments to IFRS 9 and IFRS
7" ("the Amendments"). The Amendments clarify certain aspects of the classification and measurement of financial instruments.
F
- 25
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 4:- |
DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO
THEIR ADOPTION (Cont.)
|
The
Amendments address the following:
Derecognition
of a financial liability settled through an electronic transfer system
-
an entity is
permitted to make an accounting policy election to derecognize a financial liability (or part of it) that is settled in cash using an
electronic payment system before the settlement date if certain conditions are met. An entity that makes this accounting policy election
is required to apply it to all financial liabilities settled using the same electronic payment system.
Assessing
contractual cash flow characteristics for the classification of financial assets -
the Amendments clarify how to assess the characteristics
of contractual cash flows of financial assets with features linked to environmental, social and corporate governance (ESG) targets and
other similar contingent features. The Amendments also enhance the description of the term 'non-recourse' and clarify the characteristics
of contractually linked instruments (CLIs).
Disclosures
–
the Amendments to IFRS 7 introduce new disclosure requirements for financial assets and liabilities with contractual terms
that include contingent features (including ESG-related) and new disclosures for investments in equity instruments measured at fair value
through other comprehensive income (FVTOCI).
The
Amendments are to be applied retrospectively commencing from annual reporting periods beginning on or after January 1, 2026. Earlier application
is permitted subject to disclosure. An entity is permitted to early adopt only the Amendments that relate to the classification of financial
assets and the related disclosures. An entity is not required to restate prior periods, but may do so if, and only if, it is possible
to do so without the use of hindsight.
The
Amendments are not expected to have a material effect on the Company's consolidated financial statements.
| c. |
IFRS 18, "Presentation and Disclosure in
Financial Statements":
|
In
April 2024, the International Accounting Standards Board ("the IASB") issued IFRS 18, "Presentation and Disclosure in Financial Statements"
("IFRS 18") which replaces IAS 1, "Presentation of Financial Statements".
IFRS
18 is aimed at improving comparability and transparency of communication in financial statements.
IFRS
18 retains certain existing requirements of IAS 1 and introduces new requirements on presentation within the statement of profit or loss,
including specified totals and subtotals. It also requires disclosure of management-defined performance measures and includes new requirements
for aggregation and disaggregation of financial information.
IFRS
18 does not modify the recognition and measurement provisions of items in the financial statements. However, since items within the statement
of profit or loss must be classified into one of five categories (operating, investing, financing, taxes on income and discontinued operations),
it may change the entity's operating profit. Moreover, the publication of IFRS 18 resulted in consequential narrow scope amendments to
other accounting standards, including IAS 7, "Statement of Cash Flows" and IAS 34, "Interim Financial Reporting".
IFRS
18 is effective for annual reporting periods beginning on or after January 1, 2027, and is to be applied retrospectively. Early adoption
is permitted commencing from January 1, 2025, subject to disclosure.
The
Company is evaluating the effects of IFRS 18, including the effects of the consequential amendments to other accounting standards, on
its consolidated financial statements.
F
- 26
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 5:- |
CASH AND CASH EQUIVALENTS
|
|
December 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Cash in banks (mainly in NIS)
|
|
|
||||||
|
Short-term deposits (mainly in NIS)
|
|
|
||||||
|
|
|
|||||||
| NOTE 6:- |
SHORT-TERM INVESTMENTS
|
|
December 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Marketable securities:
|
||||||||
|
Financial assets at fair value through profit or loss (mainly in USD)
|
||||||||
|
Corporate bonds
|
|
|
||||||
|
Government bonds and loans
|
|
|
||||||
|
Shares
|
|
|
||||||
|
Exchange Traded Funds
|
|
|
||||||
|
|
|
|||||||
|
Short-term deposits
|
|
|
||||||
|
|
|
|||||||
F
- 27
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 7:- |
TRADE RECEIVABLES
|
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Accounts
receivable (1)
|
|
|
||||||
|
Other
|
|
|
||||||
|
Allowance
for doubtful accounts
|
|
|
||||||
|
|
|
|||||||
| ( 1) |
The terms of billed accounts receivable are generally
|
| NOTE 8:- |
PREPAID EXPENSES
|
Amortization
of prepaid expenses (costs of obtaining contracts – see Note 2o) amounted to $
746
in the year ended December 31, 2024 (2023- $
731
).
| NOTE 9:- |
OTHER ACCOUNTS RECEIVABLE
|
|
December 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Interest
receivable
|
|
|
||||||
|
Government
authorities
|
|
|
||||||
|
Advances
to supplies
|
|
|
||||||
|
Prepaid
expenses
|
|
|
||||||
|
Others
|
|
|
||||||
|
|
|
|||||||
F
- 28
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 10:- |
PROPERTY AND EQUIPMENT
|
|
Computers
and
peripheral
equipment
|
Medical
equipment
|
Office
furniture
and equipment
|
Motor
vehicles
and ambulances
|
Leasehold
improvements
|
Devices
on
loan
|
Total
|
||||||||||||||||||||||
|
Cost:
|
||||||||||||||||||||||||||||
|
Balance
as of January 1, 2023
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Additions
during the year
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Disposals
during the year
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
|
Transfer
from inventory, net
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Currency
translation differences
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||
|
Balance
as of December 31, 2023
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Additions
during the year
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Disposals
during the year
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||
|
Transfer
from inventory, net
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Currency
translation differences
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||
|
Balance
as of December 31, 2024
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Accumulated
depreciation:
|
||||||||||||||||||||||||||||
|
Balance
as of January 1, 2023
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Additions
during the year
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Disposals
during the year
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
|
Currency
translation differences
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||
|
Balance
as of December 31, 2023
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Additions
during the year
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Disposals
during the year
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||
|
Impairment
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Currency
translation differences
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||
|
Balance
as of December 31, 2024
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Depreciated
cost as of December 31, 2024
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Depreciated
cost as of December 31, 2023
|
|
|
|
|
|
|
|
|||||||||||||||||||||
F
- 29
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 11:- |
GOODWILL AND INTANGIBLE
ASSETS, NET
|
|
Development
costs
|
Contracts
and
others
|
Customer
relations
|
Information
Technology
|
Total
other
intangible assets
|
Goodwill
(1)
|
|||||||||||||||||||
|
As
of January 1, 2024, net of accumulated amortization
|
|
|
|
|
|
|
||||||||||||||||||
|
Additions
during the year
|
|
|
|
|
||||||||||||||||||||
|
Amortization
during the year
|
(
|
)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
||||||||||||||
|
Impairment,
see Note 24g
|
(
|
)
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||
|
Currency
translation differences
|
(
|
)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||
|
As
of December 31, 2024, net of accumulated amortization
|
|
|
|
|
|
|
||||||||||||||||||
|
As
of December 31, 2024:
|
||||||||||||||||||||||||
|
Cost
|
|
|
|
|
|
|
||||||||||||||||||
|
Accumulated
amortization
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|||||||||||||
|
Net
carrying amount
|
|
|
|
|
|
|
||||||||||||||||||
|
Development
costs
|
Contracts
and
others
|
Customer
relations
|
Information
Technology
|
Total
other
intangible assets
|
Goodwill
(1)
|
|||||||||||||||||||
|
As
of January 1, 2023, net of accumulated amortization
|
|
|
|
|
|
|
||||||||||||||||||
|
Additions
during the year
|
|
|
|
|
|
|
||||||||||||||||||
|
Amortization
during the year
|
(
|
)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
||||||||||||||
|
Currency
translation differences
|
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|||||||||||||||
|
As
of December 31, 2023, net of accumulated amortization
|
|
|
|
|
|
|
||||||||||||||||||
|
As
of December 31, 2023:
|
||||||||||||||||||||||||
|
Cost
|
|
|
|
|
|
|
||||||||||||||||||
|
Accumulated
amortization
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|||||||||||||
|
Net
carrying amount
|
|
|
|
|
|
|
||||||||||||||||||
| (1) |
The recoverable amount
of the cash generating units to which the goodwill mainly relates has been determined based on a calculation using cash flow projections
from financial budgets approved by senior management covering a five-year period.
|
F
- 30
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 11:- |
GOODWILL AND INTANGIBLE
ASSETS, NET (Cont.)
|
|
The
carrying amount of the goodwill has been allocated to the following cash generating units:
|
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Israel
- Telemedicine
|
|
|
||||||
|
Israel
– Mediton
|
|
|
||||||
|
Germany
|
|
|
||||||
|
|
|
|||||||
The
recoverable amount of each of the cash generating units has been determined based on calculation using cash flow projections from financial
budgets and forecasts approved by senior management covering a five-year period. The key assumptions used in the calculations are the
(i) discount rate (ii) growth rate of revenues in the 5 year forecast period subsequent to end of the reporting period, and (iii) growth
rates used to extrapolate cash flows beyond the forecast period.
|
The pre-tax discount
rate applied to cash flow projections are as follows:
|
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Israel
- Telemedicine
|
|
%
|
|
%
|
||||
|
Israel
– Mediton
|
|
%
|
|
%
|
||||
|
Germany
|
|
%
|
|
%
|
||||
|
The average growth rate
of revenues in the 5 year forecast period subsequent to the end of the reporting period, are as follows:
|
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Israel
- Telemedicine
|
|
%
|
|
%
|
||||
|
Israel
– Mediton
|
|
%
|
|
%
|
||||
|
Germany
|
|
%
|
|
%
|
||||
|
The cash flows beyond
the
|
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Israel
- Telemedicine
|
|
%
|
|
%
|
||||
|
Israel
– Mediton
|
|
%
|
|
%
|
||||
|
Germany
|
|
%
|
|
%
|
||||
F
- 31
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 11:- |
GOODWILL AND INTANGIBLE ASSETS, NET
(Cont.)
|
|
In
2024 the Group recognized in profit or loss an impairment loss of $
The
recoverable amounts of each of the other two cash generating units exceeds their carrying amounts.
As
of December 31, 2024, management of the Group believes that no reasonably possible changes in any of the above key assumptions would cause
the carrying amount of the CGUs Telemedicine and Mediton materially exceed their recoverable amounts.
In
2024 the Group recognized in profit and loss an impairment loss of $
|
| NOTE 12:- |
LEASES
|
Disclosures
for leases in which the Company acts as lessee:
The
Company has entered into leases of buildings and motor vehicles which are used for the Company's operations.
Leases
of buildings have lease terms of between
4
and
11
years
whereas leases of vehicles have lease terms of
3
years
.
Some
of the leases entered into by the Company include extension and/or termination options and variable lease payments.
During
2023, the Group reduced the scope of the lease in Germany. In addition, the Group modified the term of the lease in Germany such that
the contract will end in 2027 instead of 2029 and the monthly rent decreased. As a result of this the Group recognized a capital gain
of $
399
.
F
- 32
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 12:- |
LEASES (Cont.)
|
| a. |
Information on leases:
|
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Interest
expense on lease liabilities
|
|
|
|
|||||||||
|
Expenses
relating to short-term leases
|
|
|
|
|||||||||
|
Total
cash outflow for leases
|
|
|
|
|||||||||
| b. |
Lease extension and termination options:
|
The
Company has leases that include extension and termination options. These options provide flexibility in managing the leased assets and
align with the Company's business needs.
The
Company exercises significant judgement in deciding whether it is reasonably certain that the extension and termination options will be
exercised.
The
Company generally includes in the lease term the exercise of extension options existing in the lease agreements when it is reasonably
certain that the extension option will be exercised. In these leases, the Company usually exercises the extension option to avoid a significant
adverse impact to its operating activities in the event that an alternative asset is not available immediately upon termination of the
noncancelable lease period.
In
leases of motor vehicles, the Company does not include in the lease term the exercise of extension options since the Company does not
ordinarily exercise options that extend the lease period beyond 5 years.
Lease
terms that include termination options will include the period covered by the termination option when it is reasonably certain that the
termination option will not be exercised.
Following
are details of potential future undiscounted lease payments for periods covered by extension or termination options that were not included
in the measurement of the Company's lease liabilities:
|
More
than 5 years
|
||||||||
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Lease
payments applicable in extension option periods which as of the end of the reporting period are not reasonably certain to be exercised
|
|
|
||||||
F
- 33
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 12:- |
LEASES (Cont.)
|
| c. |
Disclosures in respect of right-of-use assets: |
|
|
Buildings
|
Motor
vehicles
|
Total
|
||||||||||
|
Cost:
|
||||||||||||
|
Balance
as of January 1, 2024
|
|
|
|
|||||||||
|
Additions
during the year:
|
||||||||||||
|
New
leases
|
|
|
|
|||||||||
|
Adjustments
for indexation
|
|
|
|
|||||||||
|
Disposals
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Currency
translation differences
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Balance
as of December 31, 2024
|
|
|
|
|||||||||
|
Accumulated
depreciation:
|
||||||||||||
|
Balance
as of January 1, 2024
|
|
|
|
|||||||||
|
Additions
during the year:
|
||||||||||||
|
Depreciation
and amortization
|
|
|
|
|||||||||
|
Disposals
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Currency
translation differences
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Balance
as of December 31, 2024
|
|
|
|
|||||||||
|
Depreciated
cost at December 31, 2024
|
|
|
|
|||||||||
|
Buildings
|
Motor
vehicles
|
Total
|
||||||||||
|
Cost:
|
||||||||||||
|
Balance
as of January 1, 2023
|
|
|
|
|||||||||
|
Additions
during the year:
|
||||||||||||
|
New
leases
|
|
|
|
|||||||||
|
Adjustments
for indexation
|
|
|
|
|||||||||
|
Disposals
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Currency
translation differences
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Balance
as of December 31, 2023
|
|
|
|
|||||||||
|
Accumulated
depreciation:
|
||||||||||||
|
Balance
as of January 1, 2023
|
|
|
|
|||||||||
|
Additions
during the year:
|
||||||||||||
|
Depreciation
and amortization
|
|
|
|
|||||||||
|
Disposals
|
(
|
)
|
|
(
|
)
|
|||||||
|
Currency
translation differences
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Balance
as of December 31, 2023
|
|
|
|
|||||||||
|
Depreciated
cost at December 31, 2023
|
|
|
|
|||||||||
F
- 34
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 13:- |
CREDIT FROM BANKS
|
|
Interest
rate
(1)
|
December
31,
|
|||||||||
| % |
2024
|
2023
|
||||||||
|
Current
maturities of long-term loans (see Note 14)
|
|
|
|
|||||||
|
|
|
|||||||||
| (1) |
The Prime rate as of December 31, 2024 –
|
| NOTE 14:- |
LONG-TERM LOANS
|
| a. |
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
|
The
loan agreement includes certain financial covenants related to the
Company's Israeli operations
,
as follows: (i) tangible equity of at least NIS 40 million; (ii) tangible equity to total tangible assets of at least 40%; and (iii) net
debt to EBITDA of 3.5 at the maximum. As of December 31, 2024 the Company is in compliance with these covenants. The Company expects that
it will be in compliance with these covenants in the next 12 months.
| b. |
Composition:
|
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Long-term
loan
|
|
|
||||||
|
Less
– current maturities
|
|
|
||||||
|
Balance
|
|
|
||||||
| NOTE 15:- |
DEFERRED REVENUES
|
Deferred
revenues are in respect of contracts in which the period between receipt of the advance payment and the performance of the service is
expected to be less than
one
year
.
F
- 35
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 16:- |
OTHER PAYABLES
|
|
December 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Employees
and payroll accruals
|
|
|
||||||
|
Accrued
expenses
|
|
|
||||||
|
Government
authorities
|
|
|
||||||
|
Accruals
restructuring
|
|
|
||||||
|
Other
|
|
|
||||||
|
|
|
|||||||
| NOTE 17:- |
FINANCIAL INSTRUMENTS
|
Financial
assets and liabilities:
|
Carrying
amount
|
||||||||
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Financial
assets at amortized cost:
|
||||||||
|
Cash
and cash equivalents
|
|
|
||||||
|
Short
term deposits
|
|
|
||||||
|
Trade
receivables
|
|
|
||||||
|
Other
accounts receivable
|
|
|
||||||
|
Long
term deposits
|
|
|
||||||
|
Total
|
|
|
||||||
|
Financial
assets at fair value through profit or loss:
|
||||||||
|
Call
option from non-controlling interests
|
|
|
||||||
|
Short
term investments
|
|
|
||||||
|
Total
|
|
|
||||||
|
Financial
liabilities at amortized cost:
|
||||||||
|
Credit
from banks and others
|
|
|
||||||
|
Trade
payables
|
|
|
||||||
|
Liability
for acquisition of non-controlling interests
|
|
|
||||||
|
Other
payables
|
|
|
||||||
|
Loans
from banks
|
|
|
||||||
|
Lease
liabilities
|
|
|
||||||
|
Total
|
|
|
||||||
The
main risks arising from the Group's financial instruments are credit risk, foreign currency risk, interest rate risk, market risk and
liquidity risk. The Board of Directors reviews and agrees on policies for managing each of these risks, which are summarized below.
F
- 36
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 17:- |
FINANCIAL INSTRUMENTS
(Cont.)
|
| a. |
Concentration of credit risks:
|
Financial
instruments that potentially subject the Group to concentrations of credit risk consist principally of cash, cash equivalents, and trade
receivables. Cash and cash equivalents are deposited with major banks. Management believes that the financial institutions that hold the
Group's investments are financially sound, and, accordingly, minimal credit risk exists with respect to these investments.
The
Group's trade receivables mainly derived from sales to customers in Germany and Israel. The Group has adopted credit policies and standards
intended to accommodate industry growth and inherent risk. Management believes that credit risks are moderated by the diversity of its
end customers. The Group performs ongoing credit evaluations of its customers' financial condition and requires collateral as deemed necessary.
An estimate for doubtful accounts is made when collection of the full amount is no longer probable.
| b. |
Foreign currency risk:
|
The
Group is subject to foreign exchange risk as it holds cash and cash equivalents and short-term investments in foreign currency as the
Group purchases its devices in foreign currency. Group management regularly monitors its foreign exchange risk and attempts to limit such
risks by making adequate decisions regarding cash and credit positions.
Foreign
currency sensitivity analysis:
The
following table demonstrates the sensitivity test to a reasonably possible change in USD and EUR exchange rates, with all other variables
held constant. The impact on the Company's profit before tax is due to changes in the fair value of monetary assets. The Company's exposure
to foreign currency changes for all other currencies is immaterial.
|
Change
in USD rate
|
Effect
on profit tax
|
|||||||
|
2024
|
+
|
%
|
(
|
)
|
||||
|
-
|
%
|
|
||||||
|
2023
|
+
|
%
|
(
|
)
|
||||
|
-
|
%
|
|
||||||
|
Change
in EUR rate
|
Effect
on profit tax
|
|||||||
|
2024
|
+
|
%
|
(
|
)
|
||||
|
-
|
%
|
|
||||||
|
2023
|
+
|
%
|
(
|
)
|
||||
|
-
|
%
|
|
||||||
F
- 37
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 17:- |
FINANCIAL INSTRUMENTS
(Cont.)
|
| c. |
Market risk:
|
The
Group has investments in marketable financial instruments that are classified as financial assets at fair value through profit or loss
in respect of which the Group is exposed to risk of fluctuations in the security price that is determined by reference to the quoted market
price (level 1 of the fair value hierarchy). As of December 31, 2024, the balance of these investments is $
9,843
(2023 - $8,978).
The
following table demonstrates the sensitivity to a reasonably possible change in the market price with all other variables held constant,
of the Group's profit before tax (due to changes in the carrying amount of marketable securities).
|
Increase/
decrease
in price
|
Effect
on
profit
before
tax
|
|||||||
|
2024
|
+
|
%
|
|
|||||
|
-
|
%
|
(
|
)
|
|||||
|
2023
|
+
|
%
|
|
|||||
|
-
|
%
|
(
|
)
|
|||||
| d. |
Fair value of financial instruments not measured
at fair value:
|
The
carrying amounts of cash and cash equivalents, trade and other receivables, short-term credit from banks, trade payables and other payables
approximate their fair value due to the short-term maturity of such instruments. The carrying amount of long-term bank loan approximates
the fair value as the interest rate is variable.
Management
believes that the carrying amount of long-term deposits approximates their fair value.
| e. |
Interest rate risk:
|
The
Group's exposure to the risk of changes in market interest rates relates primarily to the Group's debt obligations with floating interest
rates.
The
effect of reasonably possible increase of 5% of the interest rate on the Group's profit before tax is not material.
F
- 38
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 17:- |
FINANCIAL INSTRUMENTS
(Cont.)
|
| f. |
Liquidity risk:
|
The
Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its
financial investments and financial assets and projected cash flows from operations.
The
Group has long-term lease liabilities repayable in monthly equal installments until June 2029.
Total
aggregate contractual undiscounted payments including interest amounts to approximately $
5,946
.
The
table below summarizes the maturity profile of the Group's financial liabilities based on contractual undiscounted payments (including
interest payments):
December
31, 2024:
|
Less
than one year
|
1
to 2 years
|
2
to 3
years
|
3
to 4 years
|
4
to 5 years
|
5
years
|
Total
|
||||||||||||||||||||||
|
Trade
payables
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Accrued
expenses
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Liability
for acquisition of non-controlling interests
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Lease
liabilities
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Loans
from bank
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||||||
December
31, 2023:
|
Less
than one year
|
1
to 2 years
|
2
to 3
years
|
3
to 4 years
|
4
to 5 years
|
5
years
|
Total
|
||||||||||||||||||||||
|
Trade
payables
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Accrued
expenses
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
PUT
option (*)
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Lease
liabilities
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Loans
from bank
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||||||
| (*) |
Estimated gross cash outflow assuming that option
will be exercised at earliest possible date.
|
F
- 39
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 17:- |
FINANCIAL INSTRUMENTS
(Cont.)
|
| g. |
Changes in liabilities arising from financing
activities:
|
|
January
1,
2024
|
Cash
flows
|
Foreign
exchange
movement
|
Other
|
December 31,
2024
|
||||||||||||||||
|
Lease
liabilities (including current maturities)
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
|
Liability
for acquisition of non-controlling interests
|
|
|
(
|
)
|
|
|
||||||||||||||
|
Long
term bank loan
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
|
Total
liabilities from financing activities
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
|
January
1,
2023
|
Cash
flows
|
Foreign
exchange
movement
|
Other
|
December 31,
2023
|
||||||||||||||||
|
Lease
liabilities (including current maturities)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
||||||||||||
|
Liability
for underwriters
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
|
Long
term bank loan
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
|
Total
liabilities from financing activities
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
||||||||||||
F
- 40
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 17:- |
FINANCIAL INSTRUMENTS
(Cont.)
|
| h. |
Fair value:
|
Reconciliation
of fair value measurements that are categorized within Level 3 of the fair value hierarchy in financial instruments:
|
Financial
instruments
|
||||||||
|
Call
(Put) option to non-controlling interests, net
|
Total
|
|||||||
|
Balance
as of January 1, 2024
|
|
|
||||||
|
Issuance
of Share Options
|
-
|
-
|
||||||
|
Remeasurement
recognized in:
|
||||||||
|
Profit
(loss)
|
(
|
)
|
(
|
)
|
||||
|
Other
comprehensive income (loss)
|
(
|
)
|
(
|
)
|
||||
|
Exercise
of Share Options into shares
|
||||||||
|
Payment
|
|
|
||||||
|
As
of December 31, 2024
|
|
|
||||||
|
Financial
instruments
|
||||||||||||||||
|
Liability
for share options (*)
|
Liability
to underwriters
|
Call
(Put) option to non-controlling interests, net
|
Total
|
|||||||||||||
|
Balance
as of January 1, 2023
|
(
|
)
|
(
|
)
|
|
(
|
)
|
|||||||||
|
Issuance
of Share Options
|
||||||||||||||||
|
Remeasurement
recognized in:
|
||||||||||||||||
|
Profit
(loss)
|
|
(
|
)
|
(
|
)
|
|
||||||||||
|
Other
comprehensive income (loss)
|
|
|
(
|
)
|
|
|||||||||||
|
Exercise
of Share Options into shares
|
|
-
|
-
|
|
||||||||||||
|
Payment
|
|
|
|
|
||||||||||||
|
As
of December 31, 2023
|
|
|
|
|
||||||||||||
|
Presented in balance
sheet:
|
||||||||||||||||
|
Put
option
|
|
|
|
|
||||||||||||
| (*) |
See Note 22b for information on fair value measurement.
|
The
Company used the Monte Carlo option pricing model when estimating the fair value of the Put and Call Options granted in the acquisition
of Mediton Group – in 2021.
F
- 41
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 17:- |
FINANCIAL INSTRUMENTS
(Cont.)
|
The
following table lists the significant inputs to the Monte Carlo model used to determine the fair value of the Put Option net of the Call
option:
|
December 31,
2023
|
|||
|
Underlying
asset value
|
|
||
|
Expected
volatility of the share price
|
|
%
|
|
|
Discount
rate
|
|
%
|
|
|
Risk-free
interest rate
|
|
%
|
|
|
Term
of option
|
|
F
- 42
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 18:- |
EMPLOYEE BENEFIT LIABILITIES
|
| a. |
Changes in the defined benefit obligation and
fair value of plan assets:
|
2024:
|
Expenses
recognized in profit or loss
|
Gain
(loss) from remeasurement in other comprehensive income
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Balance
at January 1, 2024
|
Current
service cost
|
Net
interest expense
|
Past
service cost and effect of settlements
|
Total
expense recognized in profit or loss for the period
|
Payments
from the plan
|
Actuarial
gain (loss) arising from changes in financial assumptions
|
Actuarial
gain (loss) arising from experience adjustments
|
Total
effect
on
other comprehensive income for the period
|
Effect
of changes in foreign exchange rates
|
Contributions
by employer
|
Balance
at December 31, 202
4
|
|||||||||||||||||||||||||||||||||||||
|
Defined
benefit obligation
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||||||||||||
|
Fair
value of plan assets
|
|
|
|
|
|
(
|
)
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||||||||||||||||
|
Net
defined benefit liability (asset)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
|
|
|
|
(
|
)
|
||||||||||||||||||||||||||||||
2023:
|
Expenses
recognized in profit or loss
|
Gain
(loss) from remeasurement in other comprehensive income
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Balance
at January 1, 2023
|
Current
service cost
|
Net
interest expense
|
Past
service cost and effect of settlements
|
Total
expense recognized in profit or loss for the period
|
Payments
from the plan
|
Actuarial
gain (loss) arising from changes in financial assumptions
|
Actuarial
gain (loss) arising from experience adjustments
|
Total
effect
on
other comprehensive income for the period
|
Effect
of changes in foreign exchange rates
|
Contributions
by employer
|
Balance
at December 31, 2023
|
|||||||||||||||||||||||||||||||||||||
|
Defined
benefit obligation
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
|
|
|
(
|
)
|
|||||||||||||||||||||||||||||
|
Fair
value of plan assets
|
|
|
|
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
||||||||||||||||||||||||||||||||
|
Net
defined benefit liability (asset)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
|
|
|
(
|
)
|
|||||||||||||||||||||||||||||
F
- 43
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 18:- |
EMPLOYEE BENEFIT LIABILITIES
(Cont.)
|
| b. |
Disaggregation of the fair value of the plan assets:
|
|
Year
ended
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Insurance
contracts
|
|
|
||||||
| c. |
The principal assumptions underlying the defined
benefit plan:
|
|
2024
|
2023
|
|||||||
|
%
|
||||||||
|
Discount
rate
|
|
|
||||||
|
Expected
rate of salary increase
|
|
|
||||||
| d. |
Amount, timing and uncertainty of future cash
flows:
|
Below
are reasonably possible changes at the end of the reporting period in each actuarial assumption assuming that all other actuarial assumptions
are constant:
|
Change
in defined
benefit
obligation
|
||||||||
|
Year
ended
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Sensitivity
test for changes in the expected rate of salary increase:
|
||||||||
|
The
change as a result of:
|
||||||||
|
Salary
increase of
|
(
|
)
|
(
|
)
|
||||
|
Sensitivity
test for changes in the discount rate of the plan assets and liability:
|
||||||||
|
The
change as a result of:
|
||||||||
|
Increase
of
|
(
|
)
|
(
|
)
|
||||
|
Decrease
of
|
|
|
||||||
F
- 44
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 19:- |
TAXES ON INCOME
|
| a. |
Tax rates applicable to the income of the Group
companies:
|
| 1. |
Companies in Israel:
|
The
Israeli corporate income tax rate was
23
%
in 2024 and 2023.
The
deferred taxes are computed at the average tax rate of
23
%
based on the tax rates that are expected to apply upon realization.
| 2. |
Foreign subsidiaries:
|
The
principal tax rates applicable to the major subsidiaries whose place of incorporation is outside Israel are:
The
U.S. - tax at the rate of
21
%.
Germany
- tax at the rate of
31.4
%.
| b. |
Taxes on income included in the statements of
comprehensive income:
|
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Current
taxes
|
|
|
|
|||||||||
|
Deferred
taxes
|
|
|
|
|||||||||
|
Taxes
in respect of prior years
|
(
|
)
|
(
|
)
|
|
|||||||
|
|
|
|
||||||||||
F
- 45
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 19:- |
TAXES ON INCOME (Cont.)
|
| c. |
Deferred tax assets (liabilities):
|
Composition
and changes in deferred taxes, as presented in the consolidated balance sheet, are as follows:
|
Fixed
and
intangible
assets
|
Employee
benefit liabilities
|
Short
term investments
|
Carry-
forward
tax losses
|
Total
|
||||||||||||||||
|
Balance
at January 1, 2023
|
(
|
)
|
|
|
|
|
||||||||||||||
|
Amount
included in statement of comprehensive income
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Currency
translation differences
|
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||
|
Balance
at December 31, 2023
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
||||||||||||
|
Amount
included in statement of comprehensive income (*)
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
||||||||||||
|
Currency
translation differences
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
||||||||||||
|
Balance
at December 31, 2024
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
||||||||||||
| (*) |
$
|
| d. |
The deferred taxes are reflected in the balance
sheet as follows:
|
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Non-current
assets
|
|
|
||||||
|
Non-current
liabilities
|
|
|
||||||
|
(
|
)
|
(
|
)
|
|||||
F
- 46
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 19:- |
TAXES ON INCOME (Cont.)
|
| e. |
A reconciliation of the theoretical tax expense
assuming all income is taxed at the statutory rate applicable to the income of companies in Israel, and the actual tax expense is as follows:
|
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Income
(loss) before taxes on income
|
(
|
)
|
(
|
)
|
|
|||||||
|
Statutory
tax rate in Israel
|
|
%
|
|
%
|
|
%
|
||||||
|
Tax
computed at the statutory tax rate
|
(
|
)
|
(
|
)
|
|
|||||||
|
Increase
(decrease) in taxes resulting from:
|
||||||||||||
|
Taxes
in respect of previous years
|
(
|
)
|
(
|
)
|
|
|||||||
|
Non-deductible
expenses (non-taxable income)
|
|
|
(
|
)
|
||||||||
|
Different
tax rates
|
|
|
|
|||||||||
|
Loss
for which deferred taxes were not recognized
|
|
|
|
|||||||||
|
Capital
losses for which deferred taxes were not recognized
|
|
|
|
|||||||||
|
Total
tax expenses reported in the consolidated statements of comprehensive income
|
|
|
|
|||||||||
| f. |
Carry forward tax losses:
|
The
carry forward losses for tax purposes as of December 31, 2024 amount to NIS
242,826,000
($
66,582
)
(2023 – NIS
227,833,000
($
62,816
))
in Israel (which may be carried forward indefinitely) and EUR
32,116,000
($
33,432
)
(2023 – EUR
29,387,000
($
32,503
))
in Europe. In the U.S., SHL USA has federal and state net operating losses and credits of $
19,679
(2023 - $
15,337
),
which expire at various times.
Deferred
tax assets in the amount of $
26,188
(2023 - $
23,938
)
relating to carry forward tax losses as described above, and deductible temporary differences, are not included in the consolidated financial
statements as management presently believes that it is not probable that these deferred taxes will be realized in the foreseeable future.
F
- 47
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 19:- |
TAXES ON INCOME (Cont.)
|
| g. |
The expiry dates for carry forward tax losses
which are not recognized are as follows:
|
|
Year
ended
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
First
year
|
|
|
||||||
|
Second
year
|
|
|
||||||
|
Third
year
|
|
|
||||||
|
Fourth
year
|
|
|
||||||
|
Fifth
year
|
|
|
||||||
|
Sixth
- Fifteen
|
|
|
||||||
|
Unlimited
|
|
|
||||||
|
|
|
|||||||
| NOTE 20:- | LIABILITY FOR ACQUISITION OF NON-CONTROLLING INTERSTS |
|
In
2021 the Company acquired a
In September
2024, the NCI notified the Company of its exercise of the put option. As a result, the Company is currently accounting for the notice
of exercise as the acquisition of the NCI. The exercise price, based on the binding decision of an arbitrator in March 2025, amounts to
NIS
|
F
- 48
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 21:- |
COMPENSATION OF KEY MANAGEMENT
PERSONNEL (INCLUDING DIRECTORS)
|
|
December
31,
|
||||||||||||||
|
2024
|
2023
|
2022
|
||||||||||||
|
a.
|
Balances:
|
|||||||||||||
|
Other
accounts payable
|
|
|
|
|||||||||||
|
Year
ended
December
31,
|
||||||||||||||
|
2024
|
2023
|
2022
|
||||||||||||
|
b.
|
Transactions:
|
|||||||||||||
|
Short-term
employee benefits
|
|
|
|
|||||||||||
|
Share-based
payment benefits
|
|
|
|
|||||||||||
|
Total
|
|
|
|
|||||||||||
| NOTE 22:- |
COMMITMENTS AND CONTINGENT
LIABILITIES
|
| a. |
Charges:
|
As
collateral for the Group's liabilities, fixed charges have been placed on specific accounts receivable.
| b. |
Contingent liabilities:
|
The
Group, from time to time, is party to various claims and disputes associated with its ongoing business operations. In management's opinion,
based on the opinion of its legal counsels, none of these claims or disputes is expected, either individually or in the aggregate, to
have a material adverse effect on the Group's financial position, results of operations or cash flows - see also Note 20d.
F
- 49
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 23:- |
EQUITY
|
| a. |
Composition of share capital:
|
|
December
31, 2024
|
December
31, 2023
|
|||||||||||||||
|
Authorized
|
Issued
and outstanding*)
|
Authorized
|
Issued
and outstanding*)
|
|||||||||||||
|
Number
of shares
|
||||||||||||||||
|
Ordinary
shares of NIS
|
|
|
|
|
||||||||||||
| *) |
Net of treasury shares – see
(c).
|
| b. |
Movement in share capital:
|
During
January 2023 and February 2023, the Company received proceeds of approximately CHF
18.7
million (USD
20.3
million) from exercises of
1,703,908
share options granted in the private placements in January 2021 and February 2021 and
29,967
options were not exercised and expired.
The
following table lists the movements in Share Options:
|
Balance
on January 1, 2023
|
|
|||
|
Exercise
of share options
|
(
|
)
|
||
|
Expiration
of share options
|
(
|
)
|
||
|
Balance
on December 31, 2023
|
|
In
respect of the Capital Increases in 2021, the underwriters were also granted options to acquire
97,
222
Units of securities. Each Unit comprises
1
Ordinary share and
0.5
option to acquire
1
Ordinary share at an exercise price of CHF
11
($
11.93
).
See below for details of the changes made to the terms of these options in March 2023.
The
underwriters were also entitled to receive a cash payment derived from future cash received by the Company from the exercise of the
Share Options in 2023. In addition, the underwriters were granted options to acquire a certain number of Units of securities based on
a formula derived from the future cash payments received from the exercise of the Share Options. See below for the terms of these Units.
In
2023, the underwriters received a cash payment of approximately CHF
1.1
million (USD
1.1
million) derived from cash received by the Company from the exercise of the Share Options. The cash payment was offset from the liability
to the underwriters recorded in the balance sheet. In addition, the underwriters received options to acquire
58,498
Units of securities. Each Unit comprises
1
Ordinary share and
0.5
option to acquire 1 Ordinary share at an exercise price of CHF
11
($
11.93
).
F
- 50
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 23:- |
EQUITY (Cont.)
|
In
March, 2023, in connection with services provided in respect of the exercise of options described above, the Company signed an agreement
with the underwriter for the extension of the exercise period of the
97,
222
Units of securities previously granted in 2021 for an additional 2 years until 2025 and for change of the exercise
price to NIS
35.64
($
9.83
)
for each Unit of securities (which comprises
1
Ordinary share and
0.5
option to acquire
1
Ordinary share of the Company) and NIS
43.56
($
12.01
)
for each option included in the Unit. On March 17, 2025 all options expired.
The
Company used the Black and Scholes option pricing model when estimating the incremental fair value of the options to acquire Units after
the modifications described above. The total incremental fair value of the options to acquire Units as of the date of the modifications
was $
512
and was recorded as a deduction from Additional paid-in capital arising from the exercise of the share options in January and February
2023, as described above with a corresponding increase in the Capital reserve for options.
Issued
and outstanding share capital (net of treasury shares):
|
Number
of
shares
|
||||
|
Balance
at January 1, 2023
|
|
|||
|
Exercise
of share options
|
|
|||
|
Exercise
of employees share options
|
|
|||
|
Balance
at December 31, 2023
|
|
|||
|
Exercise
of share options
|
|
|||
|
Exercise
of employees share options
|
|
|||
|
Balance
at December 31, 2024
|
|
|||
| c. |
Treasury shares:
|
The
Company holds
1,372
shares at a total cost of $
2
as of December 31, 2024 and 2023.
| d. |
Share option plans:
|
On
January 2, 2023, the Company's Board of Directors approved the grant of
248,500
options to Managers and employees, under the Executive and Key Employee Israeli Share Incentive Plan. The options shall vest over a period
of
3
years
after appointment (
25
%
after 1 year, and
9.375
%
each quarter thereafter). The weighted average fair value of options granted is CHF
4.655
($
5.047
).
The weighted average fair value was estimated based on the binomial model using the following data and assumptions: share price - CHF
14.80
;
exercise price – CHF
15.56
;
expected volatility –
43.87
%;
risk free interest rate –
0
%;
expected dividend –
0
%;
and expected average life of options –
3.49
years.
F
- 51
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 23:- |
EQUITY (Cont.)
|
On
May 15, 2023, the Company's Board of Directors approved the grant of
145,000
options to Managers, under the Executive and Key Employee Israeli Share Incentive Plan. The options shall vest over a period of
3
years
after appointment (
25
%
after 1 year, and
9.375
%
each quarter thereafter). The weighted average fair value of options granted is CHF
3.374
($
3.76
).
The weighted average fair value was estimated based on the binomial model using the following data and assumptions: share price - CHF
9.70
;
exercise price – CHF
9.36
;
expected volatility –
46.03
%;
risk free interest rate –
0
%;
expected dividend –
0
%;
and expected average life of options –
3.43
years.
On
June 18, 2023, the Company's Board of Directors approved the grant of
30,000
options to a Senior Managers, under the Executive and Key Employee Israeli Share Incentive Plan. The options shall vest over a period
of
3
years
after appointment (
25
%
after 1 year, and
9.375
%
each quarter thereafter). The weighted average fair value of options granted is CHF
3.663
($
4.113
).
The weighted average fair value was estimated based on the binomial model using the following data and assumptions: share price - CHF
10.30
;
exercise price – CHF
9.88
;
expected volatility –
46.57
%;
risk free interest rate –
0
%;
expected dividend –
0
%;
and expected average life of options –
3.43
years.
On
June 24, 2024, the Company's Board of Directors approved the grant of
20,000
options to a consultant, under the 2021 Executive and Key Employee Israeli Share Incentive Plan. The options shall vest over a period
of
3
years
(
25
%
after 1 year, and
9.375
%
each quarter thereafter). The fair value of options granted is CHF
1.403
($
1.571
).
The fair value was estimated based on the binomial model using the following data and assumptions: share price - CHF
4.89
;
exercise price – CHF
8.50
;
expected volatility –
53.06
%;
risk free interest rate –
0.65
%;
expected dividend –
0
%;
and expected average life of options
4.6
years.
On
September 5, 2024, the Company's Board of Directors approved the grant of
400,000
options to the Company's CEO, under the Executive and Key Employee Israeli Share Incentive Plan. The options shall vest over a period
of
4
years
in equal annual installments (
100,000
options for each installment). The weighted average fair value of options granted is CHF
0.734
-
0.916
($
0.867
-$
1.082
).
The weighted average fair value was estimated based on the binomial model using the following data and assumptions: share price - CHF
3.30
;
exercise price – CHF
5.34
-
7.12
;
expected volatility –
57.77
%;
risk free interest rate –
0.48
%;
expected dividend –
0
%;
and expected average life of options –
4.5
-
4.63
years.
On
September 24, 2024, the Company's Board of Directors approved the grant of
80,000
options to a Manager, under the Executive and Key Employee Israeli Share Incentive Plan. The options shall vest over a period of
4
years
in equal annual installments (
20,000
options for each installment). The weighted average fair value of options granted is CHF
0.842
-
1.029
($
0.993
-$
1.213
).
The weighted average fair value was estimated based on the binomial model using the following data and assumptions: share price - CHF
2.99
;
exercise price – CHF
5.04
-
6.72
;
expected volatility –
57.13
%;
risk free interest rate –
0.45
%;
expected dividend –
0
%;
and expected average life of options –
4.68
-
4.82
years.
All
options are exercisable for a period of
6
years
from grant date.
F
- 52
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 23:- |
EQUITY (Cont.)
|
On
October 31, 2021, the Board of Directors approved to increase the maximum number of shares which may be issued under the Plan by
2,000,000
.
On
October 31, 2021, the Board of Directors approved to amend and rename the share options plan as "The SHL Telemedicine LTD. 2021 Executive
and Key Employee Israeli Share Incentive Plan", and to extend the term of the Plan until the Board decides otherwise.
In
the years ended December 31, 2024 and 2023, the Group recorded share-based compensation in the statements of comprehensive income
in the amount of $
366
and $
1,252
,
respectively.
| e. |
The following table illustrates the
number and weighted average exercise prices ("WAEP") of, and movements in, share options during the year.
|
|
2024
|
2023
|
|||||||||||||||
|
No.
of options
|
WAEP
(CHF)
|
No.
of options
|
WAEP
(CHF)
|
|||||||||||||
|
Outstanding
at the beginning of the year
|
|
|
|
|
||||||||||||
|
Granted
during the year
|
|
|
|
|
||||||||||||
|
Forfeited
during the year
|
(
|
)
|
|
(
|
)
|
|
||||||||||
|
Exercised
during the year *)
|
|
(
|
)
|
|
||||||||||||
|
Outstanding
at the end of the year
|
|
|
|
|
||||||||||||
|
Exercisable
at the end of the year
|
|
|
|
|
||||||||||||
| *) |
The weighted average share price at
the date of exercise of these options was CHF
|
The
weighted average remaining contractual life for the share options outstanding as of December 31, 2024 was
3.46
years (as of December 31, 2023 –
3.83
years).
| f. |
Restricted Shares of Mediton Group:
|
On
December 20, 2021, a Mediton executive was granted
256
restricted share units (“RSU”) of Mediton Group. The fair value of the RSUs in the amount of $
822
was determined based on the price that the Company paid for the acquisition of the Mediton Group shares in 2021, The RSUs shall vest over
a period of
3
years
(
33
%
after 1 year, and
16.5
%
each half year thereafter). The purchase agreement of Mediton Group includes a provision for anti-dilution protection to the Company in
respect of the grant of the RSUs.
F
- 53
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 24:- |
SUPPLEMENTARY INFORMATION
TO STATEMENTS OF COMPREHENSIVE INCOME
|
| a. |
Revenues:
|
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Revenues
for services performed during the period
|
|
|
|
|||||||||
|
Revenues
from sale of devices
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| b. |
Cost of revenues:
|
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Salaries
and related benefits
|
|
|
|
|||||||||
|
Medical
services
|
|
|
|
|||||||||
|
Rental
fees and maintenance
|
|
|
|
|||||||||
|
Depreciation
and amortization
|
|
|
|
|||||||||
|
Cost
of devices
|
|
|
|
|||||||||
|
Others
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| c. |
Research and development costs:
|
|
Salaries
and related benefits
|
|
|
|
|||||||||
|
Amortization
of development costs
|
|
|
|
|||||||||
|
Sub-contractors
and others
|
|
|
|
|||||||||
|
|
|
|
||||||||||
|
Less
- capitalization of development costs
|
|
|
|
|||||||||
|
|
|
|
F
- 54
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 24:- |
SUPPLEMENTARY INFORMATION
TO STATEMENTS OF COMPREHENSIVE INCOME (Cont.)
|
| d. |
Selling and marketing expenses:
|
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Salaries
and related benefits
|
|
|
|
|||||||||
|
Marketing
and related expenses
|
|
|
|
|||||||||
|
Depreciation
and amortization
|
|
|
|
|||||||||
|
Rental
fees and maintenance
|
|
|
|
|||||||||
|
Maintenance
of vehicles
|
|
|
|
|||||||||
|
Others
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| e. |
General and administrative expenses:
|
|
Salaries
and related benefits
|
|
|
|
|||||||||
|
Office
expenses
|
|
|
|
|||||||||
|
Professional
fees
|
|
|
|
|||||||||
|
Depreciation
and amortization
|
|
|
|
|||||||||
|
Others
|
|
|
|
|||||||||
|
|
|
|
| f. |
Financial income (expenses):
|
1.
Financial income:
|
Exchange
rate differences
|
|
|
|
|||||||||
|
Gain
on marketable securities, net
|
|
|
|
|||||||||
|
Share
options
|
|
|
|
|||||||||
|
Call+Put
options
|
|
|
|
|||||||||
|
Interest
|
|
|
|
|||||||||
|
|
|
|
2.
Financial expenses:
|
Share
options
|
|
|
(
|
)
|
||||||||
|
Exchange
rate differences
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Loss
from marketable securities, net
|
|
|
(
|
)
|
||||||||
|
Interest
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Call+Put
options
|
(
|
)
|
(
|
)
|
|
|||||||
|
Others
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
(
|
)
|
(
|
)
|
(
|
)
|
F
- 55
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 24:- |
SUPPLEMENTARY INFORMATION
TO STATEMENTS OF COMPREHENSIVE INCOME (Cont.)
|
| g. |
Other expenses:
|
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Impairment
of Goodwill
|
|
|
|
|||||||||
|
Impairment
of intangible assets
|
|
|
|
|||||||||
|
Impairment
of property and equipment
|
|
|
|
|||||||||
|
Restructuring
expenses*
|
|
|
|
|||||||||
|
Other
expenses
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| *) |
Including expenses related to employee benefits
and other direct expenditures arising from the restructuring.
|
NOTE
25:-
NET EARNINGS PER SHARE
| a. |
Details of the number of shares and net
loss used in the computation of net earnings per share:
|
|
|
Year
ended December 31,
|
||||||||||||||||
|
2024
|
2023
|
|||||||||||||||
|
Weighted
average number of shares
|
Net
loss
|
Weighted
average\
number
of shares
|
Net
loss
|
|||||||||||||
|
In
thousands
|
In
thousands
|
|||||||||||||||
|
For
the computation of basic net earnings
|
|
(
|
)
|
|
(
|
)
|
||||||||||
|
Effect
of dilution - share options
|
|
|
|
(
|
)
|
|||||||||||
|
For
the computation of diluted net earnings
|
|
(
|
)
|
|
(
|
)
|
||||||||||
| b. |
To compute diluted net earnings per share,
the following options (dilutive potential Ordinary shares), have not been taken into account since their conversion has an anti-dilutive
effect:
|
F
- 56
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 26:- |
SEGMENT INFORMATION
|
The
Group operates in three geographical segments: Israel, Europe (principally Germany) and Rest of the world (mainly USA) ("ROW").
Management
monitors the operating results of its geographical units separately for the purpose of making decisions about resource allocation and
performance assessment. Segment performance is evaluated based on segment profit. SGA Group expenses and some research and development
expenses are mostly allocated to the separate geographic units. Some corporate expenses, some research and development expenses, finance
costs and finance income and income taxes are managed on a group basis and are not allocated to the geographic segments.
Revenues
are allocated based on the location of the end customer. The Group presents disaggregated revenue information based on types of customers:
Individual customers and communities, Institutions and payers (income from service agreements with institutions, insurance companies and
HMOs), and others.
| a. |
Segment revenues:
|
|
|
Individuals
and communities
|
Institutions
and payers
|
Others
|
Total
|
|||||||||||||
|
Year
ended December 31, 2024:
|
||||||||||||||||
|
Europe
|
|
|
|
|
||||||||||||
|
Israel
|
|
|
|
|
||||||||||||
|
ROW
|
|
|
|
|
||||||||||||
|
Total
revenues
|
|
|
|
|
||||||||||||
|
Year
ended December 31, 2023:
|
||||||||||||||||
|
Europe
|
|
|
|
|
||||||||||||
|
Israel
|
|
|
|
|
||||||||||||
|
ROW
|
|
|
|
|
||||||||||||
|
Total
revenues
|
|
|
|
|
||||||||||||
|
Year
ended December 31, 2022:
|
||||||||||||||||
|
Europe
|
|
|
|
|
||||||||||||
|
Israel
|
|
|
|
|
||||||||||||
|
ROW
|
|
|
|
|
||||||||||||
|
Total
revenues
|
|
|
|
|
||||||||||||
F
- 57
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 26:- |
SEGMENT INFORMATION (cont.)
|
| b. |
Reporting on geographic segments:
|
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Segment
profit (loss):
|
||||||||||||
|
Europe
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Israel
|
|
|
|
|||||||||
|
ROW
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
|
(
|
)
|
|
|||||||||
|
Unallocated
income and expenses:
|
||||||||||||
|
Corporate,
RD and other expenses
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Other
expenses
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Operating
loss
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Financial
income, net
|
(
|
)
|
|
|
||||||||
|
Profit
(loss) before taxes on income
|
(
|
)
|
(
|
)
|
|
|||||||
| c. | Additional information: | |
|
Europe
|
Israel
|
Others
|
Total
|
|||||||||||||
|
Year
ended December 31, 2024
|
||||||||||||||||
|
Cost
of revenues (*)
|
|
|
|
|
||||||||||||
|
Depreciation
and amortization
|
|
|
|
|
||||||||||||
|
Impairment
of goodwill and intangible assets
|
|
|
|
|
||||||||||||
|
Europe
|
Israel
|
ROW
|
Unallocated
assets
|
Total
|
||||||||||||||||
|
Non-current
assets
|
|
|
|
|
|
|||||||||||||||
|
Europe
|
Israel
|
Others
|
Total
|
|||||||||||||
|
Year
ended December 31, 2023
|
||||||||||||||||
|
Cost
of revenues (*)
|
|
|
|
|
||||||||||||
|
Depreciation
and amortization
|
|
|
|
|
||||||||||||
|
Europe
|
Israel
|
ROW
|
Unallocated
assets
|
Total
|
||||||||||||||||
|
Non-current
assets
|
|
|
|
|
|
|||||||||||||||
(*)
excluding depreciation and amortization
F
- 58
SHL T ELEMEDICINE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
| NOTE 26:- |
SEGMENT INFORMATION (cont.)
|
|
Europe
|
Israel
|
Others
|
Total
|
|||||||||||||
|
Year
ended December 31, 2022
|
||||||||||||||||
|
Cost
of revenues (*)
|
|
|
|
|
||||||||||||
|
Depreciation
and amortization
|
|
|
|
|
||||||||||||
|
Europe
|
Israel
|
ROW
|
Unallocated
assets
|
Total
|
||||||||||||||||
|
Non-current
assets
|
|
|
|
|
|
|||||||||||||||
(*)
excluding depreciation and amortization
| NOTE 27:- |
SUBSEQUENT EVENTS
|
| a. |
On February 4, 2025 the Company announced that
Lior Haalman has been appointed to serve as the Chief Financial Officer, starting March 1, 2025, and replacing Amir Hai, who has been
with the Company for over 3 years.
|
| b. |
On February 13, 2025, the Company's Board of Directors
approved the grant of
|
| c. |
On March 11, 2025 the Company announced its intention
to voluntarily delist its American Depositary Receipts (“ADRs”) from the Nasdaq Capital Market (“Nasdaq”), terminate
its ADR program and deregister from, and terminate its reporting obligations under, the Securities Exchange Act of 1934, as amended (the
“Securities Exchange Act”). The delisting and termination of its ADR program and Securities Exchange Act registration and
reporting will not affect the Company’s listing on the SIX Swiss Exchange, where its ordinary shares will continue to trade. The
delisting date was April 2, 2025. As of the publication date of the financial statements, the reporting obligations are still effective
for the year 2024.
|
| d. |
In March 2025, a financial claim was filed with
the Tel Aviv Regional Labor Court against Mediton, and Dr. Haim Perlock (who held
|
The
total amount of the claim is approximately NIS
7.6
million (approximately $
2,100
).
Most of the amount is in connection with the expected completion of the Mediton transaction (see Note 20).
No
defense has yet been filed on behalf of the defendants. According to the assessment of Mediton's legal advisors and the Company management,
there are good defenses on the factual and legal levels regarding most of the amounts claimed by the plaintiff and the likelihood of the
claim being rejected, in connection with these amounts, are higher than the likelihood of being accepted (more likely than not).
The
Company has included an appropriate provision in the balance sheet as of December 31, 2024, in accordance with the opinion of its
legal advisors.
| e. |
On
April 3 2025, the Company informed Perluk – Medical Holdings Ltd., Haim Perluk, and Orna Perluk (collectively, the "Sellers") of
its intention to close the purchase of the
|
-
- - - - - - - - - - - - - - - - - -
F -
59
TABLE OF CONTENTS
Part I: Gender IdentityPart Ii: Demographic BackgroundItem 7. Major Shareholders and Related Party TransactionsItem 8. Financial InformationItem 9. The Offer and ListingItem 10. Additional InformationItem 11. Quantitative and Qualitative Disclosures About Market RiskItem 12. Description Of Securities Other Than Equity SecuritiesPart IIItem 13. Defaults, Dividend Arrearages and DelinquenciesItem 14. Material Modifications To The Rights Of Security Holders and Use Of ProceedsItem 15. Controls and ProceduresItem 16. [reserved]Item 16. A. Audit Committee Financial ExpertItem 16. AItem 16. B. Code Of EthicsItem 16. BItem 16. C. Principal Accountant Fees and ServicesItem 16. CItem 16. D. Exemptions From The Listing Standards For Audit CommitteesItem 16. DItem 16. E. Purchases Of Equity Securities By The Issuer and Affiliated PurchasersItem 16. EItem 16. F. Change in Registrant S Certified AccountantItem 16. FItem 16. G. Corporate GovernanceItem 16. GItem 16. H. Mine Safety DisclosureItem 16. HItem 16. I. Disclosure Regarding Foreign Jurisdictions That Prevent InspectionsItem 16. IItem 16J. Insider Trading Policies Not Applicable. Item 16K. CybersecurityItem 16J. Insider Trading PoliciesItem 16K. CybersecurityPart IIIItem 17. Financial StatementsItem 18. Financial StatementsItem 19. ExhibitsNote 1:- GeneralNote 1:- General (cont.)Note 2:- Accounting PoliciesNote 2:- Accounting Policies (cont.)Note 3:- Significant Accounting Judgments, Estimates and Assumptions Used in Preparation Of The Financial StatementsNote 3:- Significant Accounting Judgments, Estimates and Assumptions Used in Preparation Of The Financial Statements (cont.)Note 4:- Disclosure Of New Standards in The Period Prior To Their AdoptionNote 4:- Disclosure Of New Standards in The Period Prior To Their Adoption (cont.)Note 5:- Cash and Cash EquivalentsNote 6:- Short-term InvestmentsNote 7:- Trade ReceivablesNote 8:- Prepaid ExpensesNote 9:- Other Accounts ReceivableNote 10:- Property and EquipmentNote 11:- Goodwill and Intangible Assets, NetNote 11:- Goodwill and Intangible Assets, Net (cont.)Note 12:- LeasesNote 12:- Leases (cont.)Note 13:- Credit From BanksNote 14:- Long-term LoansNote 15:- Deferred RevenuesNote 16:- Other PayablesNote 17:- Financial InstrumentsNote 17:- Financial Instruments (cont.)Note 18:- Employee Benefit LiabilitiesNote 18:- Employee Benefit Liabilities (cont.)Note 19:- Taxes on IncomeNote 19:- Taxes on Income (cont.)Note 20:- Liability For Acquisition Of Non-controlling InterstsNote 21:- Compensation Of Key Management Personnel (including Directors)Note 22:- Commitments and Contingent LiabilitiesNote 23:- EquityNote 23:- Equity (cont.)Note 24:- Supplementary Information To Statements Of Comprehensive Income A. Revenues:Note 24:- Supplementary Information To Statements Of Comprehensive IncomeNote 24:- Supplementary Information To Statements Of Comprehensive Income (cont.)Note 25:- Net Earnings Per ShareNote 26:- Segment InformationNote 26:- Segment Information (cont.)Note 27:- Subsequent Events